Be sure to understand the risks of this type of investment. No regulatory body (not the SEC, not any state regulator) has passed upon the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any offering materials or information posted herein. That’s typical for Regulation CF offerings like this one.
Risk 1.
Special Note Regarding Forward-Looking Statements
This offering statement contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Risk Factors,” “Description of Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” above. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to:
• our dependence upon external sources for the financing of our operations;
• our ability to successfully and profitably market our products;
• the acceptance of our products by users;
• the amount and nature of competition from other competitors;
• our dependence on a limited number of suppliers;
• our ability to protect our highly technical and complex internet-based software platform from computer malware, viruses, hacking, phishing attacks and spamming that could result in security and privacy breaches and interruption in service;
• our ability to obtain and enforce patents and to protect our proprietary technology, others could use our technology to compete with us, which could create undue competition and pricing pressures; and
• our ability to maintain regulatory approvals and comply with applicable laws and regulations.
While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this offering statement describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this offering statement to conform our prior statements to actual results or revised expectations, and we do not intend to do so.
Risk 2.
Risks Related to the Company’s Business and Industry
Our auditors’ report includes a going concern paragraph.
Our financial statements include a going-concern qualification from our auditors, which expresses
substantial doubt about our ability to continue as a going concern. We have operated at a loss since
inception. Our ability to operate profitably is dependent upon, among other things, obtaining
additional financing for our operations. These factors, among others, raise substantial doubt about our
ability to continue as a going concern. The accompanying financial statements do not include any
adjustments that take into consideration the uncertainty of our ability to continue operations
Risk 3.
We are an early-stage startup, and that comes with the typical risks of a company at this stage.
We are an early-stage startup, which comes with the typical risks of a company at this stage. Relevant
risks include unstable revenues in the initial phase of revenue creation, due to external developments
in the addressed market, and new competitor entrance. This condition will limit our ability to pay
dividends until we reach financial stability.
Risk 4.
Any valuation at this stage is difficult to assess.
Any valuation at this stage is difficult to assess. The valuations for our Regulation Crowdfunding and
Regulation A offerings have been established by the Company. Unlike listed companies that are
valued publicly through market-driven stock prices, the valuation of private companies, especially
startups, is difficult to assess and you may risk overpaying for your investment.
Risk 5.
We have a small team and our future success depends on the ability of the core team to recruit key
personnel.
We have a small team and our future success depends on the ability of the core team to recruit key
personnel to face a sustainable scaling effort. Job market conditions may affect our ability to recruit
the talent we need to add new skills and competences in our company. In addition to full-time
employees and full-time contractors, we have part-time team members who are putting a limited
number of hours in the Company. This might hinder our ability to grow fast.
Risk 6.
We are dependent on general economic conditions.
We are dependent on general economic conditions. Potential customers may be less willing to invest
in innovation and forward-looking improvements if they are facing an economic downturn. This may
temporarily reduce our market size. Furthermore, a global crisis might make it harder to diversify
Risk 7.
Intense competition in the markets in which we compete could prevent us from increasing or
sustaining our revenue growth and increasing or maintaining profitability.
Intense competition in the markets in which we compete could prevent us from increasing or
sustaining our revenue growth and increasing or maintaining profitability. The business of cloud
software solutions is competitive, and we expect it to become increasingly competitive in the future.
We may also face competition from large Internet companies, any of which might launch or launched
its own cloud-based business communications services or acquire other cloud-based business
communications companies in the future.
Risk 8.
Our ability to succeed depends on how successful we will be in our fundraising efforts.
Our ability to succeed depends on how successful we will be in our fundraising efforts. We rely on
investment funds in order to use resources to build the necessary tech and business infrastructure to be
successful in the long-term. In the event of competitors being better capitalized than we are, that
would give them a significant advantage in marketing and operations.
Risk 9.
Future fundraising may affect the rights of investors.
Future fundraising may affect the rights of investors. In order to expand, the Company is raising
funds, and may raise additional funds in the future, either by offerings of securities or through
borrowing from banks or other sources. The terms of future capital raising, such as loan agreements,
may include covenants that give creditors greater rights over the financial resources of the Company
Risk 10.
The Company may never receive a future equity financing or undergo a liquidity event such as a sale
of the Company or an initial public offering, and you may not be able to sell any shares that you
purchase in this offering.
The Company may never receive a future equity financing, or undergo a liquidity event such as a sale
of the Company or an initial public offering (IPO). If a liquidity event occurs such as a sale of the
Company or an IPO, the purchasers could be left holding Company securities in perpetuity. The
Company’s securities have numerous transfer restrictions and will likely be highly illiquid, with
potentially no secondary market on which to sell them. The securities have only a minority of voting
rights and do not provide the ability to direct the Company or its actions.
Risk 11.
Our future success depends on the efforts of a small management team.
Our future success depends on the efforts of a small management team. The loss of services of the
members of the management team may have an adverse effect on the company. There can be no
Risk 12.
Major health epidemics, such as the outbreak caused by a coronavirus (COVID-19), and other
outbreaks or unforeseen or catastrophic events could disrupt and adversely affect our operations,
financial condition, and business.
Major health epidemics, such as the outbreak caused by a coronavirus (COVID-19), and other
outbreaks or unforeseen or catastrophic events could disrupt and adversely affect our operations,
financial condition, and business. The United States and other countries have experienced and may
experience in the future, major health epidemics related to viruses, other pathogens, and other
unforeseen or catastrophic events, including natural disasters, extreme weather events, power loss,
acts of war, and terrorist attacks. For example, there was an outbreak of COVID-19, a novel virus,
which has spread to the United States and other countries and declared a global pandemic. The global
spread of COVID-19 has created significant volatility and uncertainty in financial markets. There is
significant uncertainty relating to the potential impact of COVID-19 on our business. The extent to
which COVID-19 impacts our current capital raise and our ability to obtain future financing, as well
as our results of operations and financial condition, generally, will depend on future developments
which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of COVID-19 and the actions taken by governments and private businesses to
contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 continue
for an extensive period of time, our business, results of operations, and financial condition may be
materially adversely affected
Risk 13.
The market for cloud software solutions is subject to rapid technological change, and we depend on
new product and service introductions in order to maintain and grow our business.
The market for cloud software solutions is subject to rapid technological change, and we depend on
new product and service introductions in order to maintain and grow our business. We operate in an
emerging market that is characterized by rapid changes in customer requirements, frequent
introductions of new and enhanced products, and continuing and rapid technological advancement. To
compete successfully in this emerging market, we must continue to design, develop, manufacture, and
sell new and enhanced cloud software solutions products and services that provide higher levels of
performance and reliability at lower cost. If we are unable to develop new services that address our
customers’ needs, to deliver our applications in one seamless integrated product offering that
addresses our customers’ needs, or to enhance and improve our services in a timely manner, we may
not be able to achieve or maintain adequate market acceptance of our services. Our ability to grow is
also subject to the risk of future disruptive technologies. Access and use of our services is provided
via the cloud, which, itself, has been disruptive.
Risk 14.
Failure to comply with laws and contractual obligations related to data privacy and protection could
have a material adverse effect on our business, financial condition and operating results.
We are subject to the data privacy and protection laws and regulations adopted by federal, state and foreign
governmental agencies. Data privacy and protection is highly regulated and may become the subject
of additional regulation in the future. Privacy laws restrict our storage, use, processing, disclosure,
transfer and protection of personal information, including credit card data, provided to us by our
customers as well as data we collect from our customers and employees. We strive to comply with all
applicable laws, regulations, policies and legal obligations relating to privacy and data protection.
However, it is possible that these requirements may be interpreted and applied in a manner that is
inconsistent from one jurisdiction to another and may conflict with other rules or our practices.
Should this occur, we may be subject to fines, penalties and lawsuits, and our reputation may suffer.
We may also be required to make modifications to our data practices that could have an adverse
impact on our business.
Risk 15.
Inability to protect our proprietary technology would disrupt our business.
Inability to protect our proprietary technology would disrupt our business. We rely, in part, on
trademark, copyright, and trade secret law to protect our intellectual property in the United States and
abroad. Although we operate and promote an open-source environment, we have secrets that require
us to protect certain software, documentation, and other written materials under trade secret and
copyright law, which afford only limited protection. Any intellectual property rights we obtain may
not be sufficient to provide us with a competitive advantage, and could be challenged, invalidated,
infringed or misappropriated. We may not be able to protect our proprietary rights in the United
States or internationally (where effective intellectual property protection may be unavailable or
limited), and competitors may independently develop technologies that are similar or superior to our
technology, duplicate our technology or design around any patent of ours. We attempt to further
protect our proprietary technology and content by requiring our employees and consultants to enter
into confidentiality and assignment of inventions agreements and third parties to enter into
nondisclosure agreements. These agreements may not effectively prevent unauthorized use or
disclosure of our confidential information, intellectual property or technology and may not provide
an adequate remedy in the event of unauthorized use or disclosure of our confidential information,
intellectual property or technology. Litigation may be necessary in the future to enforce our
intellectual property rights, to determine the validity and scope of our proprietary rights or the rights
of others, or to defend against claims of infringement or invalidity. Such litigation could result in
substantial costs and diversion of management time and resources and could have a material adverse
effect on our business, financial condition, and operating results. Any settlement or adverse
determination in such litigation would also subject us to significant liability.
Risk 16.
Third parties might infringe upon our technology.
Third parties might infringe upon our technology. We cannot assure you that the steps we have taken
to protect our property rights will prevent misappropriation of our technology. To protect our rights
to our intellectual property, we rely on a combination of trade secrets, confidentiality agreements and
other contractual arrangements with our employees, affiliates, strategic partners and others. We may
be unable to detect inappropriate use of our technology. Failure to adequately protect our intellectual
property could materially harm our brand, devalue our proprietary content and affect our ability to
compete effectively. Further, defending any technology rights could result in significant financial
expenses and managerial resources.
Risk 17.
Third parties may claim that our services infringe upon their intellectual property rights.
Third parties may claim that our services infringe upon their intellectual property rights. Third
parties may assert that we have violated a patent or infringed a copyright, trademark or other
proprietary right belonging to them and subject us to expensive and disruptive litigation. In addition,
we incorporate licensed third-party technology in some of our products and services. In these license
agreements, the licensors have agreed to indemnify us with respect to any claim by a third party that
the licensed software infringes any patent or other proprietary right so long as we have not made
changes to the licensed software. We cannot assure you that these provisions will be adequate to
protect us from infringement claims. Any infringement claims and lawsuits, even if not meritorious,
could be expensive and time consuming to defend; divert management’s attention and resources;
require us to redesign our products, if feasible; require us to pay royalties or enter into licensing
agreements in order to obtain the right to use necessary technologies; and/or may materially disrupt
the conduct of our business.
Risk 18.
We are required to indemnify our officers and directors.
Under Delaware law, our charter documents and certain indemnification agreements, we may be
obligated to indemnify our directors, officers, employees, and agents, under certain circumstances,
against attorney’s fees and other expenses incurred by them in any litigation to which they become a
party arising from their association with or activities on our behalf. If we were called upon to
indemnify an officer or director, then the portion of our available funds expended for such purpose
would reduce the amount otherwise available for our business. This indemnification obligation and
the resultant costs associated with indemnification may also discourage us from bringing a lawsuit
against directors and officers for breaches of their fiduciary duties and may similarly discourage the
filing of derivative litigation by our stockholders against our directors and officers even though such
actions, if successful, might otherwise benefit our company and stockholders.
Risk 19.
The market size for AI services may be smaller than we have estimated.
The public data regarding the market for AI services may be incomplete. Therefore some of our
estimates and judgments are based on various sources which we have not independently verified and
which potentially include outdated information, or information that may not be precise or correct,
potentially rendering the market size for AI services smaller than we have estimated, which may
reduce our potential and ability to increase revenue. Although we have not independently verified the
data obtained from these sources, we believe that such data provide the best available information
relating to the present market for AI services, and we often use such data for our business and
planning purposes.
Risk 20.
Our business may face risks of fee non-payment, users may seek to renegotiate existing fees and
contract arrangements, and users may not accept price increases, which could result in loss of users, fee write-offs, reduced revenues and decreased profitability.
In some cases, our business may be engaged by users who are experiencing or anticipate experiencing
financial distress or are facing complex challenges, are engaged in litigation or regulatory or judicial
proceedings, or are facing foreclosure of collateral or liquidation of assets. This may be true in light
of general economic conditions; lingering effects of past economic slowdowns or recession caused by
the novel coronavirus; or business- or operations-specific reasons. Such users may not have sufficient
funds to continue operations or to pay for our services. With respect to bankruptcy cases, bankruptcy
courts have the discretion to require us to return all, or a portion of, our fees.
We may receive requests to discount our fees for our services and to agree to contract terms relative
to the scope of services and other terms that may limit the size of an engagement or our ability to
pass through costs. We consider these requests on a case-by-case basis. We may routinely receive
these types of requests and expect this to continue in the future. In addition, our users and prospective
users may not accept rate increases that we put into effect or plan to implement in the future. Fee
discounts, pressure not to increase or even decrease our rates, and less advantageous contract terms
could result in the loss of users, lower revenues and operating income, higher costs and less profitable
engagements. More discounts or write-offs than we expect in any period would have a negative
impact on our results of operations. There is no assurance that significant user engagements will be
renewed or replaced in a timely manner or at all, or that they will generate the same volume of work
or revenues or be as profitable as past engagements.
Risk 21.
Computer malware, viruses, hacking, phishing attacks and spamming that could result in security and
privacy breaches and interruption in service could harm our business and our customers.
Computer malware, viruses, physical or electronic break-ins and similar disruptions could lead to
interruption and delays in our services and operations and loss, misuse or theft of data. Computer
malware, viruses, computer hacking and phishing attacks against online networking platforms have
become more prevalent and may occur on our systems in the future. Any attempts by hackers to
disrupt our website service or our internal systems, if successful, could harm our business, be
expensive to remedy and damage our reputation or brand. Efforts to prevent hackers from entering
our systems are expensive to implement and may limit the functionality of our services. Though it is
difficult to determine what, if any, harm may directly result from any specific interruption or attack,
any failure to maintain performance, reliability, security and availability of our products and services
and technical infrastructure may harm our reputation, brand and our ability to attract users. Any
significant disruption to our internet-based software platform or internal computer systems could
result in a loss of users and could adversely affect our business and results of operations.
We may in the future experience, service disruptions, outages and other performance problems due to
a variety of factors, including infrastructure changes, third-party service providers, human or
software errors and capacity constraints. If our platform is unavailable when users attempt to access it
or it does not load as quickly as they expect, users may seek other services.
Our platform is highly technical and complex and may now or in the future contain undetected
errors, bugs, or vulnerabilities. Some errors in our code may only be discovered after the code has
been deployed. Any errors, bugs or vulnerabilities discovered in our code after deployment, inability
to identify the cause or causes of performance problems within an acceptable period of time or
difficultly maintaining and improving the performance of our platform, particularly during peak
usage times, could result in damage to our reputation or brand, loss of revenues, or liability for
damages, any of which could adversely affect our business and financial results.
We expect to continue to make significant investments to maintain and improve the availability of our
platform and to enable rapid releases of new features and products. To the extent that we do not
effectively address capacity constraints, upgrade our systems as needed and continually develop our
technology and network architecture to accommodate actual and anticipated changes in technology,
our business and operating results may be harmed.
Risk 22.
We may depend on a limited number of software providers for our service to function adequately. Failure to obtain satisfactory performance from our suppliers or loss of our existing suppliers could cause us to lose sales, incur additional costs and lose credibility in the market.
We may depend on a limited number of third-party software providers in order for our software services to function adequately. Most of our agreements with suppliers are not long-term and typically only secure suppliers’ software services for at most a one-year term. The termination of our supplier relationships or an adverse change in the terms of these arrangements could have a negative impact on our business. Our suppliers’ failure to perform satisfactorily or handle increased orders or the loss of our existing suppliers, especially our key suppliers, could disrupt our services or reduce their functionality, cause us to lose sales, incur additional costs and/or expose us to other issues. In turn, this could cause us to lose credibility in the market and damage our relationships with our users, ultimately leading to a decline in our business and results of operations. If we are not able to renegotiate these contracts on acceptable terms or find suitable alternatives, our business, financial condition or results of operations could be negatively impacted.
Risk 23.
We are subject to income taxes as well as non-income-based taxes, such as payroll, sales, use, value added, net worth, property and goods and services taxes.
Significant judgment is required in determining our provision for income taxes and other tax
liabilities. In the ordinary course of our business, there are many transactions and calculations where
the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable:
(i) there is no assurance that the final determination of tax audits or tax disputes will not be different
from what is reflected in our income tax provisions, expense amounts for non-income-based taxes
and accruals and (ii) any material differences could have an adverse effect on our financial position
and results of operations in the period or periods for which determination is made.
Risk 24.
We may be unable to generate significant revenues and may never become profitable.
We generated no revenue for the years ended December 31, 2021 and 2020 and do not currently have
any material recurring sources of revenues, making it difficult to predict when we will be profitable.
We expect to incur significant research and development costs for the foreseeable future. We may not
be able to successfully market our products and services in the future that will generate significant
revenues. In addition, any revenues that we may generate may be insufficient for us to become
profitable.
Risk 25.
If we fail to maintain proper and effective internal and disclosure controls, our ability to produce
accurate financial statements and other disclosures on a timely basis could be impaired.
We may err in the design or operation of our controls. In addition, a control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud will be detected.
We may in the future discover areas of our internal controls over financial reporting that need
improvement. If additional material weaknesses or significant deficiencies in our internal control are
discovered or occur in the future, our consolidated financial statements may contain material
misstatements and we could be required to restate our financial results. In addition, the market price
of our stock price could decline and we could be subject to sanctions or investigations by the SEC or
other regulatory authorities, which would require additional financial and management resources and
could lead to substantial additional costs for accounting and legal fees.
We may not be able to remediate any future material weaknesses, or to complete our evaluation,
testing and any required remediation in a timely fashion. If we are not able to conclude that our
internal control over financial reporting is effective, or if our auditors are unable to express an
opinion that our internal controls over financial reporting are effective investors could lose
confidence in the accuracy and completeness of our financial reports, which could harm our stock
price, and we could be subject to sanctions or investigations by SEC or other regulatory authorities.
Failure to remediate any material weakness in our internal control over financial reporting, or to
implement or maintain other effective control systems, could also restrict our future access to the
capital markets.
Risk 26.
There is no public market for our Class A Common Stock.
There is no established public trading market for our Class A Common Stock, and a market may not develop. We do not intend to apply for listing of our Class A Common Stock on any securities exchange or other trading market. Without an
active market, the liquidity of the Class A Common Stock will be limited.
Risk 27.
This offering is being conducted on a “best efforts” basis and we may not be able to execute our growth strategy if the
maximum is not sold.
If you invest in the Class A Common Stock but less than all of the offered
shares are sold, the risk of losing your entire investment will be increased. We are offering our Class
A Common Stock on a “best efforts” basis, and we can give no assurance that all of the offered Class
A Common Stock will be sold. Our officers, directors and affiliates may, but are not obligated to,
purchase Class A Common Stock in the offering. Any such purchases will be made for investment
purposes only, and not with a view toward redistribution. However, if less than all of the Class A
Common Stock shares offered are sold, we may be unable to fund all the intended uses described in
this offering statement from the net proceeds anticipated from this offering without obtaining funds
from alternative sources or using working capital that we generate. Alternative sources of funding
may not be available to us at what we consider to be a reasonable cost, and the working capital
generated by us may not be sufficient to fund any uses not financed by offering net proceeds. See
“Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Plan of Operations” for more information.
Risk 28.
We have broad discretion over the use of proceeds from securities offerings.
The Company’s management will have broad discretion with respect to the application of net
proceeds received and accepted by the Company from the sale of securities and may spend such
proceeds in ways that do not improve the Company’s results of operations or enhance the value of the
Company’s other issued and outstanding securities from time to time. For example, if we were to
acquire a company with the proceeds of this offering, the acquired company could fail to be
profitable, and therefore could cause us to incur significant losses. Any failure by management to
apply these funds effectively could result in financial losses that could have a material adverse effect
on the Company’s business or cause the price of the Company’s issued and outstanding securities to
decline.
Risk 29.
We could be adversely affected if we are unable to renegotiate equity agreements with our employees and advisors. In addition, we may be adversely affected by negotiations if such negotiations are not in line with our business plan and financial condition and we may not be able to pass on our cost increases by means of adjusting the contractual rates we charge users, which may affect our operating results.
Our negotiations regarding equity agreements with our employees and advisors are not always
in line with our business plan. Consequently, the results of the negotiations would adversely affect us.
Additionally, we might not be able to pass on cost increases due to the renegotiation of equity
agreements to the fees we charge our users, and this could have a material adverse effect on our
business
Risk 30.
The structure of our common stock has the effect of concentrating voting control with our officers and directors, and their affiliates; this will limit or preclude your ability to influence corporate matters.
We are authorized to issue two classes of common stock, Class B Common Stock and Class A
Common Stock, and six classes of preferred stock: Series A-1 Preferred Stock, Series A-2 Preferred
Stock, Series A-3 Preferred Stock, Series A-4 Preferred Stock, Series A-5 Preferred Stock, and
Series A-6 Preferred stock (the “Series A Preferred Stock”). Class A Common Stock is entitled to
one vote per share on proposals requiring or requesting stockholder approval, and Class B Common
Stock is entitled to ten votes on any such matter. Each share of Series A Preferred Stock and Class A
Common Stock has one vote on an as-converted basis on all matters for which the holders of
common stock vote at an annual or special meeting of stockholders or act by written consent, and as
otherwise required by law. In this offering, we are offering shares of Class A Common Stock. As of
the date of this offering statement, there are 17,438,505 shares of Class A Common Stock
outstanding representing voting power of 17,438,505 votes, and 3,687,994 shares of Series A
Preferred Stock outstanding representing voting power of 3,687,994 votes. Our sole executive
officer, Mr. Archil Cheishvili, owns 100%, or 27,070,462 shares, of our outstanding Class B
Common Stock, which amounts to 270,704,620 votes. Therefore, the total number of votes of both
classes of our common stock and our Series A Preferred Stock is 291,831,119 votes, of which Mr.
Cheishvili controls approximately 92.8% in overall voting power. As a result, Mr. Cheishvili controls
approximately 92.8% of the voting power before this offering. Following this offering, taking into
consideration the shares of common stock expected to be offered hereby, even if 100% of the shares
of Class A Common Stock being offered are sold, Mr. Cheishvili will retain controlling voting power
in the Company based on having approximately 85.7% of all voting rights. This concentrated
control will limit or preclude your ability to influence corporate matters including significant
business decisions for the foreseeable future and could harm the market value of your common stock.
This concentrated control will limit or preclude your ability to influence corporate matters for the
foreseeable future and could harm the market value of your common stock.
Risk 31.
Future equity financing may dilute the value of your shares.
The amount of additional financing that the Company may need will depend upon several
contingencies not foreseen at the time of this offering. Each such round of financing (whether from
the Company or other investors) is typically intended to provide the Company with enough capital to
reach the next major corporate milestone. If the funds are not sufficient, the Company may have to
raise additional capital at a price unfavorable to the existing investors. The availability of capital is at
least partially a function of capital market conditions that are beyond the control of the Company.
There can be no assurance that the Company will be able to predict accurately the future capital
requirements necessary for success or that additional funds will be available from any source. Failure
to obtain such financing on favorable terms could dilute or otherwise severely impair the value of the
investor’s Company securities.
Risk 32.
We will be subject to ongoing public reporting requirements that are less rigorous than rules for more mature public companies, and our stockholders receive less information.
We are required to file public reports on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2
issuers and under Regulation Crowdfunding. The ongoing reporting requirements under Regulation A
and Regulation Crowdfunding are more relaxed than for public companies reporting under the
Exchange Act. The differences include, but are not limited to, being required to file only annual and
semiannual reports, rather than annual and quarterly reports. Annual reports are due within 120
calendar days after the end of the issuer’s fiscal year, and semiannual reports are due within 90
calendar days after the end of the first six months of the issuer’s fiscal year.
We may elect to become a public reporting company under the Exchange Act. If we elect to do so, we will be required to
publicly report on an ongoing basis as an emerging growth company (as defined in the Jumpstart Our
Business Startups Act, or JOBS Act) under the reporting rules set forth under the Exchange Act. For
so long as we remain an emerging growth company, we may take advantage of certain exemptions
from various reporting requirements that are applicable to other Exchange Act reporting companies
that are not emerging growth companies, including but not limited to:
• not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
• being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements; and
• being exempt from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. We expect to elect to take advantage of the
benefits of this extended transition period. Our financial statements may therefore not be comparable
to those of companies that comply with such new or revised accounting standards.
We would expect to take advantage of these reporting exemptions until we are no longer an emerging growth company.
We would remain an emerging growth company for up to five years, or until the earliest of (i) the
last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date
that we become a large accelerated filer as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common shares that is held by non-affiliates exceeds $700
million as of the last business day of our most recently completed second fiscal quarter or (iii) the
date on which we have issued more than $1 billion in non-convertible debt during the preceding three
year period.
If we decide to apply for the quotation of our Class A Common Stock on the OTCQB or
OTCQX market, we will be subject to the OTC Market’s Reporting Standards, which can be satisfied
in a number of ways, including by remaining in compliance with (i) the SEC reporting requirements,
if we elect to become a public reporting company under the Exchange Act, or (ii) Regulation A
reporting requirements, if we elect not to become a reporting company under the Exchange Act.
In either case, we will be subject to ongoing public reporting requirements that are less rigorous than
Exchange Act rules for companies that are not emerging growth companies, and our stockholders
could receive less information than they might expect to receive from more mature public companies.
Risk 33.
Our Regulation A offering outside of the platform could lower the value of your shares due to the
ability of investors in that offering to make sales immediately after their shares are issued.
As of the date of this offering, we are also conducting an offering pursuant to Regulation A under the
Securities Act of 1933, as amended. This offering is outside of the Netcapital.com platform. Pursuant
to the current qualified offering circular, dated July 8, 2022, we and the selling stockholders
are offering up to 17,613,626 shares of Class A Common Stock at a fixed price of $4.25 per share.
Any shares that we or the selling stockholders sell in our concurrent Regulation A offering may
generally be freely resold by the purchasers without restriction under U.S. securities laws. Moreover,
any shares that we issue in the Regulation A offering will increase the number of shares of Class A
Common Stock available to be immediately sold. As described below, investors in this offering, on
the other hand, generally may not resell their shares for a year following their initial purchase date.
See “Risk Factors – Other Risks Related to this Offering – The securities issued by the Company will
not be freely tradable until one year from the initial purchase date. Although the securities may be
tradable under federal securities law, state securities regulations may apply, and each Investor should
consult with his or her attorney.” Sales of shares purchased in our Regulation A offering during the
one-year period following purchases in this offering, especially those that we sell, could therefore
cause the market price for the Class A Common Stock to decrease during the one-year period
following a purchase in this offering. As a result of such resales, the shares issued in this offering
could lose their value and purchasers in this offering may suffer significant losses.
Risk 34.
The U.S. Securities and Exchange Commission does not pass upon the merits of any securities
offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any
offering document or literature.
You should not rely on the fact that our Form C is accessible through the U.S. Securities and
Exchange Commission’s EDGAR filing system as an approval, endorsement or guarantee of
compliance as it relates to this offering.
Risk 35.
Neither the offering nor the securities have been registered under federal or state securities laws, leading to an absence of certain regulation applicable to the Company.
The securities being offered have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”), in reliance on exemptive provisions of the Securities Act. Similar
reliance has been placed on apparently available exemptions from securities registration or
qualification requirements under applicable state securities laws. No assurance can be given that any
offering currently qualifies or will continue to qualify under one or more of such exemptive
provisions due to, among other things, the adequacy of disclosure and the manner of distribution, the
existence of similar offerings in the past or in the future, or a change of any securities law or
regulation that has retroactive effect. If, and to the extent that, claims or suits for rescission are
brought and successfully concluded for failure to register any offering or other offerings or for acts
or omissions constituting offenses under the Securities Act, the Securities Exchange Act of 1934, as
amended, or applicable state securities laws, the Company could be materially adversely affected,
jeopardizing the Company’s ability to operate successfully.
Furthermore, the human and capital resources of the Company could be adversely affected by the
need to defend actions under these laws, even if the Company is ultimately successful in its defense.
Risk 36.
The Company has the right to extend the offering deadline, conduct multiple closings, or end the
offering early.
The Company may extend the offering deadline beyond what is currently stated herein. Your
investment may continue to be held in escrow while the Company attempts to raise the target amount
even after the offering deadline stated herein is reached. While you have the right to cancel your
investment up to 48 hours before an offering deadline, if you choose to not cancel your investment,
your investment will not be accruing interest during this time and will simply be held until such time
as the new offering deadline is reached without the Company receiving the target amount, at which
time it will be returned to you without interest or deduction, or the Company receives the target
amount, at which time it will be released to the Company to be used as set forth herein. Upon or
shortly after release of such funds to the Company, the securities will be issued and distributed to
you. If the Company reaches the target offering amount prior to the offering deadline, they may
conduct the first of multiple closings of the offering prior to the offering deadline, provided that the
Company gives notice to the investors of the closing at least five business days prior to the closing
(absent a material change that would require an extension of the offering and reconfirmation of the
investment commitment). Thereafter, the Company may conduct additional closings until the offering
deadline. The Company may also end the offering early; if the offering reaches its target offering
amount after 21-calendar days but before the deadline, the Company can end the offering with five
business days’ notice. This means your failure to participate in the offering in a timely manner, may
prevent you from being able to participate – it also means the Company may limit the amount of
capital it can raise during the offering by ending it early
Risk 37.
The securities issued by the Company will not be freely tradable until one year from the initial
purchase date. Although the securities may be tradable under federal securities law, state securities regulations may apply, and each Investor should consult with his or her attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not
be a public market for the securities. Because the securities offered in this offering have not been
registered under the Securities Act or under the securities laws of any state or non-United States
jurisdiction, the securities have transfer restrictions and cannot be resold in the United States except
pursuant to Rule 501 of Regulation Crowdfunding. It is not currently contemplated that registration
under the Securities Act or other securities laws will be affected. Limitations on the transfer of the
shares of Securities may also adversely affect the price that you might be able to obtain for the shares
of Securities in a private sale. Investors should be aware of the long-term nature of their investment
in the Company. Investors in this Offering will be required to represent that they are purchasing the
securities for their own account, for investment purposes and not with a view to resale or distribution
thereof.
Risk 38.
Investors will not be entitled to any inspection or information rights other than those required by
Regulation Crowdfunding.
Investors will not have the right to inspect the books and records of the Company or to receive
financial or other information from the Company, other than as required by Regulation
Crowdfunding. Other security holders of the Company may have such rights. Regulation
Crowdfunding requires only the provision of an annual report on Form C and no additional
information – there are numerous methods by which the Company can terminate annual report
obligations, resulting in no information rights, contractual, statutory or otherwise, owed to Investors.
This lack of information could put investors at a disadvantage in general and with respect to other
security holders.
Risk 39.
There is no present public market for these securities and we have arbitrarily set the price.
The offering price was not established in a competitive market. We have arbitrarily set the price of
the securities with reference to the general status of the securities market and other relevant factors.
The Offering price for the securities should not be considered an indication of the actual value of the
securities and is not based on our net worth or prior earnings. We cannot assure you that the securities
could be resold by you at the offering price or at any other price.
Risk 40.
Under certain conditions, we may agree to indemnify customers, investors, underwriters, placement agents and other third parties, which exposes us to substantial potential liability.
Our contracts with customers, investors and other third parties may include indemnification provisions under which we
agree to defend and indemnify them against claims and losses arising from alleged infringement,
misappropriation, or other violation of intellectual property rights, data protection violations,
breaches of representations and warranties, damage to property or persons, or other liabilities arising
from our products or solutions. In addition, we agreed to indemnify and hold Dalmore Group, LLC,
or Dalmore, its affiliates and their representatives and agents harmless from, any and all actual or
direct losses, liabilities, judgments, arbitration awards, settlements, damages and costs, resulting from
or arising out of any third party suits, actions, claims, demands or similar proceedings to the extent
they are based upon (i) a breach of our broker-dealer agreement with Dalmore, (ii) our wrongful acts
or omissions, or (iii) this offering. Our agreement with Dalmore was terminated on or around June 1,
2022, however, our indemnification obligations to Dalmore arising under the terms of the agreement
continue to be in effect. Although we attempt to limit our indemnity obligations, an event triggering
our indemnity obligations could give rise to multiple claims involving multiple customers or other
third parties. We may be liable for up to the full amount of the indemnified claims, which could
result in substantial liability or material disruption to our business or could negatively impact our
relationships with customers or other third parties, reduce demand for our products and solutions, and
adversely affect our business, financial condition, and results of operation. The market size for AI
services may be smaller than we have estimated.
Risk 41.
The sale of shares by insiders, or even the perception that they may do so, could cause our stock price to decline.
The price of our shares could decline if there are substantial sales of our common stock, particularly by our chief executive officer, Mr. Archil Cheishvili, who is selling the majority of our common stock in our concurrent Regulation A offering. Mr. Cheishvili may sell up to 5,025,695 shares in that offering, which represents approximately 18.6% of his holdings of our common stock and approximately 11.3% of the total outstanding shares of our common stock. The perception in the public market that our sole officer and director wishes to dispose of a significant amount of holdings in our company may have an adverse effect on our stock price and impair our ability to raise additional capital through the sale of securities, should we desire to do so.
Risk 42.
You will experience immediate and substantial dilution as a result of this offering.
As of December 31, 2021, our net tangible book value was $1,545,373, or approximately $0.03 per
share. The price per share of the Class A Common Stock being offered in this offering is
substantially higher than the net tangible book value per share of our common stock as of December 31, 2021. You will therefore likely suffer substantial dilution with respect to the net tangible book value of the stock you purchase in this offering. For example, based on the offering price of $4.25 per share of Class A Common Stock being sold in this offering, assuming our net tangible book value per share of approximately $0.03 per share as of December 31, 2021 is still our net tangible book value per share, after gross receipts and estimated commissions, discounts, fees and expenses from this offering, if you purchase shares of Class A Common Stock in this offering and we issue the maximum number of Class A Common Stock, you will suffer immediate and substantial dilution of approximately $4.15 per share with respect to the net tangible book value of the common stock as of December 31, 2021 on a pro forma basis. See the section titled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase securities in this offering.
In December 2021, we issued 3,687,994 shares of Series A Preferred Stock to the holders of our
SAFEs for no additional consideration pursuant to the amendment and conversion of the SAFEs.
These shares may be converted into the same number of shares of Class A Common Stock at the
option of the holders. In addition, one of our selling stockholders will be exercising options to
purchase up to 164,335 shares of Class A Common Stock at $1.106 per share in order to deliver any shares sold by the selling stockholder in this offering. Taking into account these additional shares of capital stock that were issued or expected to be issued immediately upon the closing of this offering, and the fact that all were sold or will be sold below the price per share you will be paying in this offering, the dilution in your investment will be greater than that described above and in the “Dilution” of this offering statement. See “Additional Information file” for further details about the terms of the Series A Preferred Stock.
Risk 43.
We are authorized to issue “blank check” preferred stock without
stockholder approval, which could adversely impact the rights of holders of our common stock.
Our restated certificate of incorporation authorizes us to issue up to 50,000,000 shares of blank check
preferred stock. Of these, we have authorized 13,592,029 shares of Series A Preferred Stock and
issued 3,687,994 such shares. We expect to issue an additional 8,916,640 of the remaining authorized
but unissued shares of Series A Preferred Stock if certain Simple Agreement for Future Equity, or
SAFE, instruments’ conversion terms are triggered. Each series of Series A Preferred Stock ranks
senior to all Class A Common Stock as to distribution of any asset or property of the Company upon
liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. Shares of
the Series A Preferred Stock have one vote and vote together with the holders of common stock on
an as-converted basis on all matters for which the holders of common stock vote at an annual or
special meeting of stockholders or act by written consent, and as otherwise required by law. Each
share of Series A Preferred Stock is convertible, without any payment, into a number of fully paid
and non-assessable shares of Class A Common Stock as is determined by dividing its original issue
price by the applicable conversion price. Any preferred stock that we issue in the future may also
rank ahead of our Class A Common Stock in terms of dividend priority or liquidation premiums,
may have greater voting rights than our Class A Common Stock, or have similar or greater
conversion rights and other rights that the Class A Common Stock does not have. Our current and
potential future preferred stock’s conversion provisions allowing those shares to be converted into
shares of common stock could dilute the value of common stock to current stockholders and could
adversely affect the market price, if any, of our stock. In addition, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in
control of our company. Although we have no present intention to issue any shares of authorized
preferred stock, including as to the authorized but unissued shares of Series A Preferred Stock
referred to above, there can be no assurance that we will not do so in the future.
Risk 44.
The offering is a fixed price offering and the fixed offering price may not accurately represent our
current value or our assets at any particular time. Therefore, the purchase price you pay for our
shares may not be supported by the value of our assets at the time of your purchase.
The offering is a fixed price offering, which means that the offering price for our shares of Class A Common Stock is
fixed and will not vary based on the underlying value of our assets at any time. Our board of
directors has determined the offering price in its sole discretion without the input of an investment
bank or other third party. The fixed offering price for our shares has not been based on appraisals of
any assets we own or may own, or of our company as a whole, nor do we intend to obtain such
appraisals. Therefore, the fixed offering price established for our shares of Class A Common Stock
may not be supported by the current value of our company or our assets at any particular time.
Risk 45.
We may use the proceeds of this offering in ways with which you may not agree.
While we currently intend to use the proceeds of this offering for the purposes described in “The Offering – How does
the issuer intend to use the proceeds of this offering?”, we have considerable discretion in the
application of the proceeds. You will not have the opportunity, as part of your investment decision, to
assess whether the proceeds are being used in a manner agreeable to you. You must rely on our
judgment regarding the application of these proceeds. The proceeds may be used for corporate
purposes that do not immediately improve our profitability or increase our stock price.
Risk 46.
We do not intend to pay dividends for the foreseeable future.
For the foreseeable future, we intend to retain any
earnings to finance the development and expansion of our business, and we do not anticipate paying
any cash dividends on our Class A Common Stock. Accordingly, investors must be prepared to rely
on sales of their Class A Common Stock after price appreciation to earn an investment return, which
may never occur. Investors seeking cash dividends should not purchase our Class A Common Stock.
Any determination to pay dividends in the future will be made at the discretion of our board of
directors and will depend on our results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors our board deems relevant.
Risk 47.
Short sellers of our stock may be manipulative and may drive down the market price of our common stock.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed
or intends to borrow from a third party with the intention of buying identical securities at a later date
to return to the lender. A short seller hopes to profit from a decline in the value of the securities
between the sale of the borrowed securities and the purchase of the replacement shares, as the short
seller expects to pay less in that purchase than it received in the sale. As it is therefore in the short
seller’s interest for the price of the stock to decline, some short sellers publish, or arrange for the
publication of, opinions or characterizations regarding the relevant issuer, its business prospects and
similar matters calculated to or which may create negative market momentum, which may permit
them to obtain profits for themselves as a result of selling the stock short. Issuers whose securities
have historically had limited trading volumes and/or have been susceptible to relatively high volatility
levels can be particularly vulnerable to such short seller attacks. Efforts by such short seller or by
other short sellers, whether or not they identify themselves as such, may cause precipitating decline in
the market price of our common stock, and no assurances can be made that any such effect would be
temporary or insignificant.
Risk 48.
If our common stock becomes subject to the penny stock rules, it will become more difficult to trade
our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities with a price of less than
$5.00, other than securities registered on certain national securities exchanges or authorized for
quotation on certain automated quotation systems, provided that current price and volume
information with respect to transactions in such securities is provided by the exchange or system. If
we do not obtain and retain a listing or quotation of our Class A Common Stock and if the price of
our Class A Common Stock is less than $5.00, our Class A Common Stock will be deemed a penny
stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure document containing
specified information. In addition, the penny stock rules require that before effecting any transaction
in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser and receive (i) the
purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written
agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written
suitability statement. These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our common stock, and therefore stockholders may have
difficulty selling their shares.
Risk 49.
If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our Class A Common Stock could be negatively affected.
Any trading market for our Class A Common Stock will be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If
no securities industry analysts commence coverage of us, the market price and market trading volume
of our Class A Common Stock could be negatively affected. In the event we are covered by analysts,
and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or
discontinues coverage of us, the market price and market trading volume of our Class A Common
Stock could be negatively affected.