The following risk factors should be considered in connection with an evaluation of our business as described in Plan of Operations:
In addition to other information in this Report, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, result of operations, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, if and when a trading market for our securities is established, the trading price of our securities could decline, and you may lose all or part of your investment.
THE SECURITIES ISSUED BY THE COMPANY INVOLVE A HIGH DEGREE OF RISK AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF THE ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ ALL OF THE COMPANY’S FILINGS, INCLUDING ALL EXHIBITS, AND CAREFULLY CONSIDER, AMONG OTHER FACTORS THE FOLLOWING RISK FACTORS.
You should be aware that there are substantial risks to an investment in our common stock. Carefully consider these risk factors, along with all of the other information included in this report, before you decide to invest in shares of our common stock.
If any of the following risk factors were to occur, our business, financial condition, results of operations or future prospects could be materially adversely affected. If that happens, the market price for our common stock, if any, could decline, and prospective investors would likely lose all or even part of their investment.
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Risks Related to the Business
1 .GPD has virtually no financial resources. Our independent registered auditors’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.
GPD is an early stage company and virtually no financial resources currently available to it. We had tangible assets of $114,027 and $51,746 as of March 31, 2019 and March 31, 2018, respectively. We had a negative working capital balance of $498,926 and $197,780 as of March 31, 2019 and March 31, 2018, respectively. We had a stockholders’ deficit of $464,557 and $168,787 at March 31, 2019 and March 31, 2018, respectively. Our independent registered auditors included an explanatory paragraph in their opinion on our financial statements as of and for the period ended March 31, 2019 that states that Company losses from operations raise substantial doubt about its ability to continue as a going concern. We will require additional financing beyond the amount received from the recently completed public offering. Financing sought may be in the form of equity or debt from sources yet to be identified. Through the date of this Report most our efforts have been spent on the registration statement effort with limited execution of the business plan and expansion of our business operations. With the completion of the public offering, we will begin to seek additional financing to further pursue and execute on our business operations and expansion. No assurances can be given that we will generate revenue (or any at all) or obtain the necessary working capital to continue as a going concern.
Our current resources and source of working capital primarily consists of loans from several nonaffiliated parties who are business associates or friends of our founder. These nonaffiliated financial sources we believe to be sufficient to keep our business operations functioning for the next six to 12 months. We do not have a formal agreement with our founder and CEO, nor with the nonaffiliated parties to fund our current working capital needs; Mr. Dolan’s, current plan is to perform most of the Company’s operational needs on his own without any cash compensation while he seeks additional sources of funding. This includes seeking to delay or defer payments to vendors and nonaffiliated parties. Through the date of this report, deferred payment has helped us with managing our working capital needs. The Company developed much of its initial design of its environmentally optimized growing system through the efforts of Mr. Dolan. We currently spend between $10,000 and $15,000 per month on operational expenses not directly related to our recently completed public offering. Our monthly expenditures are primarily related to consulting services that we incur for design and manufacturing and software development. Each of these firms expend approximately $6,000 to $7,000 per month in billable hours for services provided. To date we have not generated any revenues from our business, and our expenses will continue to accrue or be deferred until sufficient financing is obtained. Additional financing may be obtained from our founder or others who are familiar with our founder and loan us the funds necessary to pay for these expenses. Through this date we have received interest-free loans and deferred payment on services to fund our operations. No assurances can be given that we will be able to continue fund our operations beyond a month-to-month basis.
2. GPD is and will continue to be completely dependent on the services of our founder, president, and CEO, Robert Dolan. The loss of whose services may cause our business operations to cease. We will need to retain qualified employees and outside consultants to further implement our business strategy.
Our operations and business strategy are completely dependent upon the knowledge and business relationships of Mr. Dolan, our founder and CEO. He is under no obligation to remain employed by us. If he should choose to leave us for any reason, or if he becomes ill and is unable to work, our operations will likely fail. If we are able to find sufficient personnel, it is uncertain whether we will find someone to develop and execute our business along the lines described in this report and performed by our founder and CEO. We will certainly fail without the services of Mr. Dolan or an appropriate replacement.
We intend to purchase key-man life insurance on the life of Mr. Dolan naming the Company as the beneficiary when and if we obtain the financial resources to do so and Mr. Dolan is insurable. We have not procured such insurance, and no guarantee is certain that we will be able to obtain such key-man life insurance. Accordingly, it is important that we are able to attract, motivate and retain qualified employees or outside contractors to further our business efforts and operations.
3. Because we recently commenced business operations, we face a high risk of business failure.
We were formed on March 27, 2017. Most of our efforts to date have been related to executing our business plan and expanding business operations. Through March 31, 2019 we have had no revenues from our operations. We face a high risk of business failure. The likelihood of success must be considered in light of our expenses, complications and delays frequently encountered in connection with the establishment and expansion of a business and the competitive market in which the Company operates. There can be no assurance that revenues from sales of our intended product or services will occur or that they will be significant enough or we will be able to sell at a profit, if at all. Future revenues or profits, if any, will depend on numerous factors, including, but not limited to, initial market acceptance and the successful implementation of a sound market strategy.
The Company has not yet fully developed product or services that are saleable and available to consumers. We may not be able develop any product or services in the future because of a lack of funds or financing. In order for us to fully develop or acquire product or services, we must secure financing beyond “the recently completed direct public offering”. In the early stage of our operations, we have attempted to keep our costs at a minimum. The cost to develop product and services as currently outlined may well be in excess of $200,000 which is beyond our current capital raise plans. We have no established source of funds to fully undertake our business and expansion strategy as outlined. Until we obtain funding, if ever, we will keep our operating costs as low as possible with our founder, and CEO providing most of the administrative and other operational functions on his own without any cash compensation. We currently use the services of a technical design firm with whom we have been working with on an as “needed basis”. The technical design firm provides its services on a deferment basis enabling us to not have to pay them immediately or even in the near term. We do not expect to pay them in full or even partially for a period of time. This methodology could result in our optimized environmental grow-system development extending beyond another two to three years. If we are unable to obtain adequate funding or financing, the Company faces the likelihood of business failure. There are no assurances that we will be able to raise any funds or establish any financing for our growth.
The Company’s future profitability, if any, could be materially and adversely impacted if our product or services were to experience poor operating results. Our ability to achieve profitability will be dependent on the ability of our future product or services to generate sufficient operating cash flow to fund future growth or acquisitions. There can be no assurance that our future results of operations will be profitable or that our strategy will be successful or even begin to generate any revenues.
4. We may not have or ever have the resources or ability to implement and manage our growth strategy.
Although the Company expects to experience growth based on the ability to implement and execute our business strategy, significant operations may never occur because the business plan may never be fully implemented because of the lack of funds in order to do so. If the Company’s growth strategy is implemented, of which no assurances can be provided, a significant strain on our management, operating systems or financial resources may be imposed. Failure by the Company’s management to manage this expected growth, if it occurs, or if unexpected difficulties are encountered during this growth, could impose a material adverse impact on the Company’s results of operations or financial condition.
The Company’s ability to operate a profitable product or service line (if we are able to establish any product or service line at all) will depend upon a number of factors, including: (i) identifying an appropriate and satisfactory sales channel; (ii) generating sufficient funds from our then-existing operations or by obtaining third-party financing or additional capital to develop new products or develop new services; (iii) the success or the Company’s management team along with our financial, accounting and internal control systems; and (iv) staffing, training and retention of skilled personnel, if any at all. These factors are beyond the Company’s control and may be adversely affected by the economy or actions taken by competing businesses. Moreover, potential product or services that may meet the Company’s focus and other criteria for developing new product or services, if we are able to develop or acquire at all, are believed to be limited. There can be no assurance that the Company will be able to execute and manage a growth strategy effectively or at all.
5. We may not be successful in hiring technical personnel because of the competitive market for qualified people.
The Company's future success depends largely on its ability to attract, hire, train and retain highly qualified personnel. Competition for such personnel may be intense. There can be no assurance that the Company will be successful in attracting and retaining the specific personnel it requires to conduct and expand its operations successfully or to differentiate us from our competitors. The Company's results of operations and growth prospects could be materially adversely affected if the Company were unable to attract, hire, train and retain such qualified personnel.
6. Our reliance on referrals from outside contacts to develop business may not be effective.
The Company initially will rely on our founder and CEO, Mr. Dolan, for a majority of our business and believes that industry professionals will be an important source of business referrals. However, as is typical within the industry, there are no contractual agreements with consultants or outside reps who may represent our product and services in the marketplace. We currently have no contracts or agreements in place with outside sales reps or industry professionals. No assurances can be given that using outside sales reps or industry professionals will result in any meaningful numbers of sales leads or referrals.
7. Fluctuations in our financial results make quarterly comparisons and financial forecasting difficult.
The Company's future or projected quarterly operating results may vary and reduced levels of earnings or continued losses may be experienced in one or more quarters. Fluctuations in the Company's quarterly operating results could result from a variety of factors, including changes in revenues, size and timing of orders, changes in the mix of projects, the timing of new offerings by the Company or its competitors, new office or facilities openings by the Company, changes in pricing policies by the Company or its competitors, market acceptance of new and enhanced services offered by the Company or its competitors, changes in operating expenses, availability of qualified personnel, disruption in sources of related product and services, the effect of potential acquisitions and industry and general economic factors. The Company will have limited or no control over many of these factors. The Company's expenses we believe will be based upon, in part, on its expectation as to future or projected sales. If revenue levels are below expectations, operating results are likely to be adversely affected by these revenue levels. Because of these fluctuations and uncertainties, our future operating results may fail to meet the expectations of investors. If this happens, any trading price of our common stock could be materially adversely affected.
8. There are significant potential conflicts of interest.
Our management and employees will be required to commit substantial time to our business affairs and, accordingly, these individuals (particularly our founder and CEO) may have one or more conflicts of interest in allocating professional time among business activities. In the course of other business activities, certain key personnel (particularly our founder and CEO) may become aware of business opportunities which may be appropriate for presentation to us, as well as other businesses with which they are affiliated. As such, there may be conflicts of interest in determining to which entity a business opportunity should be presented to. We cannot provide any assurance that our efforts to eliminate the potential impact of conflicts of interest will be effective.
9. We will need to establish additional relationships with industry professionals to fully develop and market our company and its intended product or services.
We do not possess all of the resources necessary to develop our product or services on a commercial scale. We will need to design a network of third-parties that will be able to carry out our intended market penetration, as well as enhance our marketing and sales strategy through appropriate arrangements with local industry professionals and consultants to design new product and services. If we are not able to enlist the services of third-party vendors, or seek out consultants, our business will suffer.
10. Following the effective date of our registration statement we are subject to periodic reporting requirements of Section 15(d) of the Exchange Act.
Following the effective date of our registration statement we are required to file periodic reports with the Securities and Exchange Commission pursuant to the Exchange Act. In order to comply with these requirements, our independent registered public accounting firm will need to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will need to review and assist in the preparation of such reports. The costs charged by professionals for such services cannot be accurately predicted at this time. The number and type of financial transactions that we engage in and the complexity of our reports cannot be determined at this time and will affect the amount of time spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet overhead requirements and earn a profit.
However, for as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public 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, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding an annual nonbinding advisory vote on executive compensation and seeking nonbinding stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”
We will remain an “emerging growth company” for up to five years, although we would cease to be an “emerging growth company” prior to such time if we have more than $1.0 billion in annual revenue, more than $700 million in market value of our common stock is held by non-affiliates or we issue more than $1.0 billion of non-convertible debt over a three-year period.
If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
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11. Our internal controls may be inadequate, which may cause our financial reporting to be unreliable and lead to misinformation being disseminated.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Our internal controls may be inadequate or ineffective, which could cause financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.
Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.
However, our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act if we take advantage of the exemptions available to us through the JOBS Act.
12. The costs of being a public company could result in us being unable to continue as a going concern.
As a public company, we are required to comply with numerous financial reporting and legal requirements, including those pertaining to audits and internal control. The costs of maintaining our public company reporting requirements could be significant and may preclude us from seeking financing or equity investment on terms acceptable to us and our shareholders. We estimate these costs to be more than $75,000 per year and may well even be higher if our business volume or financial transactional activity increases significantly. Our current estimate does not include necessary expenses associated with compliance, documentation and specific reporting requirements of Section 404 as we will not be subject to the full reporting requirements of Section 404 until we exceed $75 million in market capitalization or we decide to opt-out of the “emerging growth company” as defined under the JOBS Act. This exemption is available to us under the JOBS Act or until we have been public for more than five years.
If our revenues are insufficient or non-existent, and/or we cannot satisfy these costs through the issuance of shares or debt, we may be unable to satisfy these costs during the normal course of business. This would certainly result in our being unable to continue as a going concern.
13. Having only one director limits our ability to establish effective independent corporate governance procedures and increases the control of our founder, president, and CEO.
We have only one director who serves as our sole officer. Accordingly, we cannot establish board committees comprised of independent members to oversee such functions as compensation or audit issues. In addition, currently a vote of the board is decided in favor of the chairman (who is our sole officer), which gives him complete control over all corporate issues.
Until we have a larger board of directors that include independent members, if ever, there will be limited oversight of our CEO’s (and founder’s) decisions and activities with little ability for minority shareholders to challenge or reverse such activities and decisions, even if they are not in the best interests of minority shareholders.
Risks Related to Our Common Stock
14. The Company sold shares without an underwriter.
Shares of common stock were offered on our behalf by Mr. Dolan, our founder and CEO, on a best-efforts basis. No broker-dealer was retained and no broker-dealer was under any obligation to purchase any shares of common stock. The sale of a small number of shares increases the likelihood that no market will ever develop for our common stock.
15. A limited number of investors purchased shares of our common stock; they may lose their entire investment without us being even able to develop a market for our shares.
A small number of shares were sold by the Company (7,500,000) to 62 investors, even with this number of individual investors we will be unable to attempt to create a public market of any kind. In such an event, it is likely that the investors’ entire investment in our common stock may be lost.
16. The offering price of our common stock was determined arbitrarily.
Our offering price was not determined by an independent financial evaluation, market mechanism or by our auditors, and was, therefore, to a large extent arbitrary. Our PCAOB-registered public accounting firm has not reviewed management's valuation and, accordingly expresses no opinion as to the fairness of the offering price. As a result, the price of our direct public offering may not reflect the value perceived by the market. There can be no assurance that the common stock offered hereby is worth the price for which it was offered, and investors may, therefore, lose a portion of, or their entire, investment.
17. Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through issuance of additional shares.