Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors before deciding whether to invest in the common stock. If any of the events discussed in the risk factors below occur, our business, financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common stock could decline, and you might lose all or part of your investment.
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Some of the principal risk factors that make an investment in the Company speculative or risky are summarized as follows:
Risks Relating to the Company
Our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing.
We have limited capital and have accumulated losses of over $9.2 million since inception. Because we do not have sufficient working capital and cash flows for continued operations for at least the next 12 months, our auditors have issued a qualified opinion. Our continued existence is dependent upon us or obtaining the necessary capital to meet our expenditures. We cannot assure you that we will be able to raise adequate capital to meet our future working capital needs.
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Because we expect to need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.
We currently need substantial working capital. The slowdown in the global economy or any subsequent or further financial hardship caused by the COVID-19 pandemic may adversely affect our ability to raise capital. If adequate additional debt and/or equity financing is not available on reasonable terms or at all, we may not be able to remain in business, and we will have to cease operations.
Even if we secure the necessary working capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future equity capital investments will dilute existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
If we are not successful, you may lose your entire investment.
Prospective investors should be aware that if we are not successful in our new business, their entire investment in the Company could become worthless. Even if the Company is successful, we can provide no assurances that investors will derive a profit from their investment. Even if we can raise sufficient capital or generate revenue, we cannot guarantee any resulting proceeds to us will be sufficient for us to grow our operations and become profitable. If we are not successful, you may lose your entire investment.
Because we have a limited operating history to evaluate our company, the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delay frequently encountered by a new company.
Since we have a limited operating history under our current business model, it is difficult for investors to evaluate our business and prospects. You must consider our prospects in light of the risks, expenses and difficulties we face as an early stage company with a limited operating history. Investors should evaluate an investment in our company in light of the uncertainties encountered by start-up companies in a highly competitive industry such as ours, which contains significant barriers to market entry. There can be no assurance that our efforts will be successful or that we will be able to attain profitability.
Because Ghost’s business plan is unproven it may not result in the generation of any revenue, material revenue or profitability.
Ghost is relying upon its U.S. patented sports equipment technology which we intend to market and sell in the U.S. and foreign athletic markets to individual players, teams and organizations interested in the Smart Shin Guard’s data collecting capabilities. We have not sold our products, and do not presently have inventory available for sale. We cannot assure you that assuming we obtain sufficient financing, we will be able to successfully market our product in any of the target countries, derive any material revenue or attain profitability. If we are not successful in marketing the Smart Shin Guard, it is likely that you will lose your entire investment.
Because our business model is new, our growth strategy may not be achievable and may not result in profitability.
We may not be able to implement our growth strategy reflected in our business plan rapidly enough as to achieve profitability. Our growth strategy is dependent on a number of factors, including market acceptance of the Smart Shin Guard. We cannot assure you that consumers and others will purchase the Smart Shin Guard or that a sufficient market demand for our product will develop for us to generate revenue or become profitable.
Among other things, implementation of our growth strategy would be adversely affected by the following:
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Our business will depend, to a large extent, upon our intellectual property.
We rely on our U.S. patent and have applied for patents in other jurisdictions to protect our Smart Shin Guard technology. This patent and any future patents we can obtain will be critical to our ability to market our product in applicable jurisdictions without the risk of reverse engineering of our technology. In the event that we are unable to secure such patents, the marketability and viability of our product could be adversely affected, including by being vulnerable to reverse engineering in any jurisdiction where the patent did not issue. While we received the U.S. patent, there can be no assurance that the other patents will be secured. In the event these patents do not issue, the value of our intellectual property and our ability to generate revenue therefrom could be materially adversely affected.
If we cannot obtain or protect intellectual property rights related to our current or future products, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our current or future products. The strength of our patent in the sports logistics and technology field involves complex legal questions and can be uncertain. Our international patent applications may fail to result in patents with claims that cover the products in the countries in which we desire to market and sell our products. There is no assurance that all of the potentially relevant prior art relating to our patent and patent applications has been found; such prior art can invalidate a patent or prevent a patent from issuing based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may cause such patents to be narrowed or invalidated. Even if unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims.
If the patent applications we hold fail to issue or if their breadth or strength of protection is threatened, it could threaten our ability to commercialize our products. Patents may not issue and issued patents may be found invalid and unenforceable or challenged by third parties. Since patent applications in the United States and most other countries are confidential for a period after filing, and some remain so until issued, we cannot be certain that we were the first to invent a patent application related to a product. Patents have a limited lifespan. In the United States, the natural expiration of a patent is 20 years after it is filed, although various extensions may be available. The life of a patent, and the protection it affords, is limited. When the patent life has expired for a product, we will become vulnerable to competition from similar products or generic versions attempting to replicate our Smart Shin Guard or other products we may develop or acquire in the future. Further, if we encounter delays in regulatory or league approvals, the time during which we will be able to market and commercialize a product candidate under patent protection could be reduced.
In addition to patent protection, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product development processes that involve proprietary know-how, information or technology not covered by patents. As a general practice, our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements. Nonetheless, our trade secrets and other confidential proprietary information may be disclosed and competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
The laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. We may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad, particularly given our present business plan to primarily focus our marketing and sales efforts on countries located outside of the United States. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.
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Third-party intellectual property infringement claims may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement on the patents and proprietary rights of third parties. There is substantial technology litigation, both within and outside the United States, involving patent and other intellectual property rights, including patent infringement lawsuits, interferences, oppositions, and reexaminations and other post-grant proceedings before the U.S. Patent and Trademark Office, and corresponding foreign patent offices. U.S. and foreign issued patents and pending patent applications, which are owned by third parties, may exist in the fields in which we are pursuing patents for our product. As the sports logistics and technology industries expand and more patents are issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, concepts, or methods of manufacture related to the use or manufacture of our products. Because patent applications can take many years to issue, there may be patent applications currently pending that may later result in patents that our products may infringe. Third parties may obtain patents in the future and claim that use of our technologies infringes on these patents. If any third-party patents were to be held by a court of competent jurisdiction to cover the manufacturing process of our products, the holders of any such patents may be able to block our ability to commercialize such products unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were to be held by a court of competent jurisdiction to cover aspects of our concepts, processes for manufacture or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.
Parties making intellectual property claims against us may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize our products. Defense of these claims, regardless of their merit, involves substantial litigation expense and would involve a substantial diversion of our management’s attention from our business. Because of the costs involved in defending patent litigation, we currently lack and may in the future lack the capital to defend our intellectual property rights. If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Because, we may need to obtain licenses to intellectual property rights from third parties, we may be unable to obtain licenses on reasonable terms or at all.
We may need to obtain licenses from third parties to allow commercialization of our products. We may fail to obtain these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize those products, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist that might be enforced against our products, resulting in either an injunction prohibiting our sales, or, with respect to our sales and other activities, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
We may be involved in lawsuits to protect or enforce our patents or other intellectual property rights, which could be expensive, time-consuming and unsuccessful.
We rely on a patent on the Smart Shin Guard to protect our intellectual property rights. In the United States, we have a patent and also have patent applications pending in international jurisdictions. If an international patent does not issue, we may be subject to significant competition. Competitors may infringe our patents or interfere with our patent applications or otherwise take action against our intellectual property rights. To counter such infringement, interference or similar adverse occurrence, we may be required to file infringement or similar claims, or we may be required to defend the validity or enforceability of our intellectual property rights, including our patents or patent applications, which can be expensive and time-consuming and may force us to divert our limited resources. In an infringement proceeding, a court may decide that either one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue because our patents do not cover that technology. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. Additionally, we may face challenges, including from competitors’ technologies, in our ability to obtain a patent in jurisdictions in which we have patent applications pending. Any difficulties or inability to obtain a patent in a jurisdiction in which we have applied or may apply for patent protection would materially adversely harm our business.
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Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions regarding our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms or at all. Our defense of litigation or interference proceedings may fail and, even if successful, may cause us to incur substantial costs and distract the attention of our management and other employees. We may not be able to prevent misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
Because of the substantial amount of discovery required in intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results to be negative, it could have a material adverse effect on the price of our securities.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
We may be subject to claims asserting that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we succeed, litigation could cause substantial cost and be a distraction to our management and other employees.
If we cannot manage our growth effectively, we may not become profitable.
Businesses, including development stage companies such as ours which often grow rapidly, tend to have difficulty managing their growth. If we are able to successfully market our product(s), we will likely need to expand our management team and other key personnel by recruiting and employing experienced executives and key employees and/or consultants capable of providing the necessary support.