SECURITIES LAW MATTERS AND OTHER IMPORTANT NOTES
We urge you to read the Offering Memorandum, Risk Factors, and all information contained herein carefully.
The information in this Offering Memorandum does not purport to be complete and reference is made to actual documents (copies of which are available at our offices) for a complete understanding of what they contain. Also, you and your representatives are entitled to ask questions and to receive answers concerning the terms and conditions of this offering and may obtain additional information necessary to verify statements in this Offering Memorandum that we can obtain without unreasonable effort or expense. You and your representatives may be required to execute a confidentiality agreement before we will make available certain information.
All such requests for additional information must be made in writing and must be acknowledged by us. Except for our response to acknowledged requests, no person is authorized to give any information or to make any statement not contained in this Offering Memorandum and any information or statement not contained herein cannot be relied upon as having been authorized by our company or our directors or officers, any affiliates thereof, or any professional advisors thereto.
You should take the opportunity to communicate directly with your own legal counsel, accountants and other professional advisors who can help you evaluate the merits and risks of the proposed investment.
You will be asked to acknowledge through your execution of the signature page to the Subscription Agreement that has been provided to you herein that you have read, understood and agreed to be bound by the Subscription Agreement.
All proceeds from the sale of the Shares will be immediately deposited into our bank account to be used by us. There is no escrow, refund or minimum funding provisions applicable to this offering.
We have prepared this Offering Memorandum. All information contained herein is provided by and is our responsibility. Any errors or omissions are our sole responsibility.
For further information please contact our Founder & CEO at:
web3 Holdings, Inc.
Ronald P. Russo, Jr.
3450 S Ocean Blvd, Ste 122
Palm Beach, FL 33480
(212) 213-5444 | firstname.lastname@example.org
This offering is being made in reliance upon the availability of an exemption from the registration provisions of the Securities Act of 1933, as amended (“Securities Act”) and applicable state securities laws for transactions not involving a public offering by an issuer. It is intended that this offering comply with the provisions of Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D adopted by the Securities and Exchange Commission (“SEC”) thereunder, and that the Shares be offered and sold to investors who are “accredited investors” within the meaning of Regulation D. You will be required to make certain representations regarding your qualifications as an accredited investor.
These securities may not be resold, transferred or otherwise disposed of by you unless, in the opinion of counsel satisfactory to us, registration under applicable federal and state securities laws is not required, or unless such disposition is made in compliance with such registration requirements.
This Offering Memorandum does not constitute an offer to sell or a solicitation of an offer to buy Shares in any jurisdiction in which such an offer or solicitation would be unlawful. Any reproduction or distribution of this Offering Memorandum or the information contained herein, in whole or in part, or the disclosure of any of its contents to unauthorized persons, without our prior written consent is expressly prohibited.
By accessing this Offering Memorandum, you agree to return it and all related offering materials to us upon request, or promptly upon making a decision not to invest in the Shares, and you agree to keep the contents hereof, and any information obtained by you in connection herewith, in strictest confidence.
No person has been authorized in connection with this Offering to give any information or to make any representations other than those contained in this Offering Memorandum and, if given or made, such information and representations must not be relied upon. Statements contained herein as to the contents of any agreement or other documents are summaries and, therefore, are necessarily selective and incomplete. Copies of the documents referred to herein may be obtained from us and are available for inspection at our offices.
No advertising or offering literature in any form may be employed in the offering of the Shares, except for this Offering Memorandum. Neither the delivery of this Offering Memorandum nor any sales made hereunder, under any circumstances, shall create an implication that there has been no change in the information contained herein since the date hereof. However, in the event of any material change, this Offering Memorandum will be amended or supplemented accordingly.
The contents of this Offering Memorandum are not to be construed as tax, legal, investment or other advice. You should consult your own counsel, accountant, or tax or business advisor as to tax, legal, and related matters concerning this investment.
Sales of the Shares can be consummated only by our acceptance of offers to purchase Shares which are tendered to us by prospective accredited investors. No solicitation of any such offer (including any solicitation which may be construed as an “offer” under federal and / or state securities laws) to such prospective investors is authorized without our prior approval. We reserve the right to revoke the offer made hereby and to reject any offer to purchase Shares by any prospective investor, in whole or in part, and any proceeds from subscriptions which are not accepted will be returned without interest or deduction.
This Offering Memorandum has been prepared for the exclusive use and benefit of prospective investors. Under no circumstances shall this Offering Memorandum constitute an offer to sell or the solicitation of an offer to buy unless (i) the prospective investor to whom this Offering Memorandum is given satisfies the suitability standards stated herein, and (ii) the prospective investor’s name and Offering Memorandum identification number are inserted in the space provided on the cover page.
NOTICE TO RESIDENTS OF ALL STATES
The Shares are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act, and applicable state securities laws, pursuant to registration or exemption therefrom. Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time.
In making an investment decision, investors must rely on their own examination of us and the terms of our offering, including the merits and risks involved. The Shares have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, no such authorities have confirmed either the accuracy or adequacy of the contents of this Offering Memorandum. Any representation to the contrary is unlawful.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Blog / News / Social Posts
The Company may disseminate advertisements, blog posts, social media posts, press releases, other messages, etc. (collectively herein the “Company’s Messaging”) containing “Forward-Looking Statements” that include statements regarding expected financial performance and growth information relating to future events.
Forward-Looking Statements include statements with respect to beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the control of the Company and its officers and managers, and which may cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such Forward-Looking Statements.
Forward-Looking Statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved.
Forward-Looking Statements are based on information available at the time they are made and / or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in, or suggested by, the Forward-Looking Statements.
Important factors that could cause these differences include, but are not limited to; inability to gain or maintain licenses, reliance on unaudited statements, the Company’s need for additional funding, governmental regulation of the Company’s related industries, the impact of competitive products and pricing, the demand for the Company’s products and services, and other risks that are detailed from time-to-time in the Company’s Messaging.
All statements other than statements of historical fact are statements that could be considered Forward-Looking Statements.
You can typically identify these Forward-Looking Statements through use of words such as “may,” “will,” “can” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential,” and other similar words and expressions of the future.
The Company expresses its expectations, beliefs and projections in good faith and believes that its expectations reflected in these Forward-Looking Statements are based on reasonable assumptions.
However, there is no assurance that these expectations, beliefs and projections will prove to have been correct.
Such statements reflect the current views of the Company with respect to its operations and future events, and are subject to certain risks, uncertainties and assumptions relating to its proposed operations, including the risk factors set forth herein.
Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, the Company’s actual results may vary significantly from those intended, anticipated, believed, estimated, expected or planned.
In light of these risks, uncertainties and assumptions, any favorable forward-looking events discussed herein might not be realized and occur.
The Company undertakes no obligation to publicly update or revise any Forward-Looking Statements, whether as a result of new information, future events, or otherwise.
This Offering Memorandum contains “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation, statements regarding:
- expectations as to market acceptance of our social media services;
- expectations as to revenue growth and earnings;
- the time by which certain objectives will be achieved;
- proposed new services;
- our ability to protect our proprietary and intellectual property rights;
- statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; and
- statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts.
Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in future tense, identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Important factors that could cause such differences include, but are not limited to:
- industry competition, conditions, performance and consolidation;
- legislative and/or regulatory developments;
- the effects of adverse general economic conditions, both within the United States and globally;
- any adverse economic or operational repercussions from recent terrorist activities, any government response thereto and any future terrorist activities, war or other armed conflicts; and
- other factors described under “Risk Factors”.
Forward-looking statements speak only as of the date the statements are made. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information except to the extent required by applicable securities laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements.
Investing in the Shares involves a high degree of risk. You should carefully consider the risks and uncertainties described herein before you purchase one or more Shares. Investing in technology carries with it inherent risks, including but not limited to technical, operational and human errors, as well as platform failures. If any of these risks or uncertainties actually occurs, our business, financial condition or results of operations could be materially adversely affected. In this event, you could lose all or part of your investment.
RISKS CONCERNING OUR BUSINESS
We are pursuing a new and unproven business model.
Our business model is unique and unproven. We do not know if there will be demand for our social media services. Even if there is such a demand, we may not be profitable.
Our lack of an operating history makes it difficult to forecast our future results.
We have very limited operating history. As a result of our limited operating history, our historical financial and operating information is of limited value in predicting our future operating results. In addition, any evaluation of our business and prospects must be made in light of the risks and difficulties encountered by companies offering products or services in new and rapidly evolving markets. The market for social media outlets in general and for the investment community in particular, is rapidly evolving and it is difficult to forecast the future growth rate, if any, or size of the market for our services. We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us and therefore, we may fail to make accurate financial forecasts. Our current and future expense levels are based largely on our investment plans and estimates of future revenue. As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which would harm our operating results.
We have historically not been profitable.
We expect to incur significant operating expenses in connection with the continued development and expansion of our business. Our expenses include intellectual property, technology development, sales and marketing expenses relating to our product and services that only recently have been made available or that will not be introduced, and will not generate revenue, until later periods, if at all. We may experience losses and negative cash flow, some of which could be significant. Results of operations will depend upon numerous factors, some of which are beyond our control, including market acceptance of our social media platform, services and competition.
Our business may be substantially hurt if we are unable to meet our future capital requirements.
Our business strategy requires substantial capital to market and promote our social media services. We plan to implement our aggressive sales and marketing plan and provide for adequate working capital to meet the projected demand for our services over the next twelve months. To do this, we will require significant capital to meet all of our goals, a significant portion of which we anticipate will come from the proceeds of this offering. If we are unable to obtain sufficient capital, we would likely be required to proportionally scale back our sales and marketing plan.
Any inability or delay in closing such financing is likely to leave us with insufficient cash to meet the requirements of our aggressive budget and impede our ability to pursue our business plan. In addition, development opportunities and other contingencies may arise, which could require additional capital. Any inability to obtain required future financing would likely have a materially adverse effect on our business and could require that we significantly reduce or suspend our operations, seek a merger partner or sell some or substantially all of our assets, in which case, any investment in our Company may be rendered valueless. We presently have no arrangements or understandings with any prospective merger partner or prospective purchaser of our assets.
If we are unable to realize substantial proceeds from this offering, additional financing may not be available when needed on terms acceptable to us or at all. If we raise funds through debt financing, we will have to pay interest and may be subject to restrictive covenants. If we cannot raise necessary additional capital on acceptable terms, we may not be able to develop or enhance our services, take advantage of future opportunities or respond to competitive pressures or unanticipated industry changes.
Certain financial statements included in this Offering Memorandum have not been audited by independent accountants.
Certain financial statements included in this Offering Memorandum, if subsequently audited, may be subject to audit adjustments which may reflect material differences in our financial condition and results of operations from those described in our unaudited financial statements. In addition, we cannot assure you that, if our financial statements were audited, that an audit report would not be qualified, including a qualification by the independent accountants about our company as a going concern.
The failure to adequately maintain the security of our websites may compromise our ability to prevent loss of sensitive information.
The security of our websites is of prime importance to our company. Without such security, we may be required to expend significant capital or other resources to protect against potential security breaches or attacks or to alleviate problems caused by such breaches or attacks. If unauthorized access to our computer systems is obtained, the potential loss to us may be significant.
Competition in our industry is intense with low barriers to entry, and we may be unable to compete successfully against existing or new competitors.
Our industry is highly competitive, and we expect competition to intensify in the future. We have many primary competitors located in the United States and Europe in the social media services industry. Additional competitors are likely to enter our industry in the future. We also face competition from the traditional investment information and networking media.
Many of our current competitors and potential competitors have longer operating histories and significantly greater financial, technical, sales and marketing resources or greater name recognition than we do. As a result, these competitors are able to devote greater resources to the development, promotion, sale and support of their products. In addition, our competitors that have large market capitalizations or cash reserves are in a better position to acquire other companies in order to gain new technologies and services that may displace our services. Any of these potential acquisitions could give our competitors a strategic advantage. In addition, some of our current competitors and potential competitors have greater brand name recognition, a more extensive customer base and broader service offerings than we do. These companies can use their broader customer base and product offerings, or adopt aggressive pricing policies, to gain market share. Increased competition in the market may result in loss of market share, any of which could harm our business.
We may not be able to retain Users.
Our business model requires a large number of customers (clients), visitors and members (collectively herein “Users”). Our Users include the exchanges, publicly traded companies, service providers, industry professionals, retail investors, etc. Our revenues are a direct result of the number of active Users we have. If we are unable to obtain a large number of Users or we experience a low retention, our business will fail.
The market for our social media advertising and marketing services is new and constantly changing. If we do not respond to changes in a timely manner, our company likely will no longer be competitive.
The market for our services is characterized by rapid technological change, new and improved services, changes in customer requirements and evolving industry standards. Our future success will depend to a substantial extent on our ability to develop, introduce and support cost-effective new services and technologies on a timely basis. If we fail to develop and deploy new cost-effective services and technologies or enhancements of existing offerings on a timely basis, or if we experience delays in the development, introduction or enhancement of our services and technologies, we will no longer be competitive and our business will suffer.
If we do not successfully establish strong brand identity in the social media markets, we may be unable to achieve widespread acceptance of our web platforms and our services.
We believe that establishing and strengthening the web3 Holdings platform and social media services is critical to achieving widespread acceptance of our offerings and to establishing key strategic relationships. The importance of brand recognition will increase as current and potential competitors enter the market with competing services. Our ability to promote and position our brand depends largely on the success of our marketing efforts and our ability to provide high quality services and customer support. These activities are expensive and we may not generate a corresponding increase in customers or revenue to justify these costs. If we fail to establish and maintain our brand, or if our brand value is damaged or diluted, we may be unable to attract new customers and compete effectively.
Future government regulation may impede our ability to fully implement our business model.
Various aspects of our businesses may become subject to federal, state, and foreign regulation. Any failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide our services, as well as the imposition of civil fines and criminal penalties.
Our success depends on our ability to maintain our professional reputation and name.
If we are unable to do so, our business would be significantly and negatively impacted. We depend on our overall reputation and name recognition to secure new clients. We will obtain and are likely to continue obtaining many of our new clients from existing clients or from referrals by those clients or vendors such as investment banking firms. A client who is dissatisfied with our work can adversely affect our ability to secure new accounts. If any factor hurts our reputation, including poor performance, we may experience difficulties in competing successfully for new accounts. Failure to maintain our professional reputation and brand name could seriously harm our business, financial condition and results of operations.
Our success depends on retaining our key personnel, the loss of whom could disrupt our operations or otherwise harm our business.
Our success depends on the continued contributions of our senior management, particularly Ronald P. Russo, Jr., our Founder & CEO. Competition for employees in our industry can be intense. We do not have key man life insurance policies covering any of our executives. In addition, a large portion of the capital stock held by the members of our management is fully vested. There can be no assurance that we will retain our key employees or be able to hire replacements. Our loss of any key employee or an inability to replace lost key employees and add new key employees as we grow could disrupt our operations or otherwise harm our business.
We rely on intellectual property laws, trade secrets and confidentiality agreements to protect our proprietary rights, which afford only limited protection.
Our success depends upon our ability to protect our proprietary rights. We rely on trademark and copyright law, trade secret protection and confidentiality and / or license agreements with our employees, customers, partners and others to protect our proprietary rights. Existing trade secret laws and confidentiality agreements afford only limited protection. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States, and policing the unauthorized use of our products is difficult. Any failure to adequately protect our proprietary rights could result in our competitors offering similar services, including delivery of content, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue. There can be no assurance that the steps taken by us to protect our proprietary rights will be adequate or that third parties will not infringe or misappropriate our copyrights, trademarks, trade dress and similar proprietary rights.
RISKS CONCERNING INVESTING IN US
There is no commitment to purchase Shares.
The Shares are being offered on a “best efforts” basis and no commitment exists by anyone to purchase all or any portion of the securities being offered. We can give no assurance that all or any portion of the securities will be sold. All proceeds of the offering will immediately be available to us even if the entire offering is not sold. To the extent that less than all of the securities are sold and absent any additional financing, our company may be prevented from implementing our business plans.
This is a best-efforts offering with no minimum amount of proceeds.
This offering is being made on a “best efforts” basis. Although we anticipate that this offering will be fully subscribed by investors, we cannot assure you that all or any specified number of the Shares will be sold and the desired capital raised through this offering. The offering has no minimum amount and all proceeds from the sale of the Shares will be immediately deposited into our bank account to be used by us. There are no escrow, refund or minimum provisions applicable to this offering. Our acceptance of investors’ subscriptions is not contingent upon full subscription of the offering, and subscriptions will not be held in escrow until full subscription is attained. We intend to utilize investors’ subscription funds immediately upon our receipt and acceptance of individual subscriptions, and we intend to proceed with our business operations utilizing whatever subscription funds may be raised in the offering.
There has been no prior public market for our common stock, and if a public market does not develop, you may have difficulty selling your shares.
Prior to this offering, there has been no public market for our common stock. We cannot assure you that an active trading market will develop or be sustained. If an active trading market for our common stock does not develop, you will likely have difficulty selling your common stock and you might have to hold these shares indefinitely.
If our stock does become publicly traded, we will likely be subject to the penny stock rules. The application of the “penny stock” rules will likely make selling your shares more difficult than if our shares were traded on a national stock exchange.
Our common stock will be a “penny stock,” under Rule 3a51-1 under the Securities and Exchange Act, unless and until:
- the shares reach a price of at least $5.00 per-share;
- we meet the financial size and volume levels for our common stock not to be considered a penny stock; or
- we register the shares on a national securities exchange.
The shares are likely to remain penny stocks for a considerable period after this offering. A “penny stock” is subject to rules that require securities broker-dealers, before carrying out transactions in any “penny stock”:
- to deliver a disclosure document to the customer describing the risks of penny stocks, and get a written receipt for that document, before selling penny stocks to that customer;
- to disclose price information about the stock;
- to disclose the compensation received by the broker-dealer or any associated person of the broker-dealer; and
- to send monthly statements to customers with market and price information about the “penny stock”.
Our common stock will also be subject to a rule which requires the broker-dealer, in some circumstances, to approve the “penny stock” purchaser’s account under standards specified in the rule and deliver written statements to the customer with information specified in the rule. These additional requirements could prevent broker-dealers from carrying out transactions in our common stock and limit your ability to sell your common stock.
If we do not qualify for OTC Markets inclusion and are not otherwise eligible for listing on a national exchange, you may have difficulty selling shares of common stock.
Should we choose to list our common stock for trading on a market or exchange, we anticipate that our common stock will be eligible for quotation on the OTC Markets. If for any reason, however, our common stock is not eligible for quotation on the OTC Markets, or a public trading market does not develop, you may have difficulty selling your common stock. If we are unable to satisfy the requirements for quotation on the OTC Markets and do not qualify for listing on a national exchange, any trading in our common stock would be conducted in the over-the-counter market in what are commonly referred to as the “pink sheets”. As a result, you may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, your common stock.
We expect our stock price to be volatile.
If our common stock does become publicly traded, the price at which our common stock will trade is likely to be highly volatile and may fluctuate substantially due to many factors, some of which are:
- actual or anticipated fluctuations in our results of operations;
- developments with respect to intellectual property rights;
- announcements of technological innovations or significant contracts by us or our competitors;
- introduction of new products by us or our competitors;
- our sale of common stock or other securities in the future;
- conditions and trends in the social media industries;
- the trading volume of our common stock;
- changes in the estimation of the future size and growth rate of our markets; and
- general economic conditions.
Any market for our common stock which does develop may be illiquid.
There may be only a limited trading market for our common stock. We expect that initially any market will be on the OTC Markets. Shares which are “thinly” traded on the OTC Markets often trade only infrequently and experience a significant spread between the market maker’s bid and asked prices. As a result, our common stock may be illiquid even if there is a market.
We arbitrarily determined the price of the Shares.
We arbitrarily determined the price of the Shares. The price is not necessarily related to our asset value, book value, financial condition or any other recognized criteria of value.
We have implemented anti-takeover provisions that could discourage a third party from acquiring us and consequently decrease the market value of your investment.
Our articles of incorporation and bylaws contain provisions that may have the effect of delaying or preventing a change of control or changes in management that a stockholder might consider favorable. Our certificate and bylaws, among other things, allow our board to designate “blank check” preferred stock and limit who may call special meetings of stockholders. These provisions may delay or impede a merger, tender offer or proxy contest involving us. Any delay or prevention of a change of control transaction or changes in management could cause the market price of our common stock to decline.
Because our executive officers’ and directors’ liabilities are limited, your rights against them in a civil lawsuit may be limited.
We will indemnify any executive officer, director or former executive officer or director, and may indemnify any other officer or employee, to the full extent permitted by Florida law. This could include indemnification for liabilities under securities laws enacted for stockholder protection, though the SEC thinks this indemnification is against public policy.
The dual class structure of our common stock has the effect of concentrating voting control with our Founder and Chief Executive Officer, which will limit or preclude your ability to influence corporate matters.
Our Class B common stock has ten votes per share and our Class A common stock, which is the stock we are offering in this offering, has one vote per share. Ronald P. Russo, Jr., our Founder & CEO, currently owns all of the Class B common stock. As a result, he will hold approximately 95% of the voting power of our outstanding capital stock following this offering, assuming the offering is fully subscribed. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock, currently Mr. Russo, will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future.
We do not expect to pay dividends on shares of common stock.
We do not anticipate paying cash dividends in the foreseeable future on shares of our common stock. We presently intend to reinvest our cash back into the company rather than paying dividends to our common stockholders. As a result, your ability to realize any return on your investment in our common stock will likely result only from your sale of some or all of these shares.
The issuance of additional shares of common stock will dilute the interests of our stockholders.
As of July 10, 2017, we had approximately 27.8 million shares of common stock and approximately 2 million common stock options outstanding. Our board has the ability, without further stockholder approval, to issue up to approximately 72.2 million additional shares of common stock. Such issuance may result in a reduction of the book value or market price of our outstanding common stock. Issuance of additional common stock will reduce the proportionate ownership and voting power of the then existing stockholders. Further, if the maximum offering is raised, we will have approximately 31.8 million shares outstanding on a fully diluted basis. Thus, the percentage of shares owned by all existing stockholders will be reduced proportionately. NEEDS EDIT
Our Board may issue preferred stock with rights and preferences senior to our common stock.
Our Board of Directors is authorized to issue, without further approval of the shareholders, preferred stock in one or more series and to fix the voting power and the designations, preferences and relative participating, optional or other rights and restrictions thereof. We may issue a series of preferred stock in the future that will have preference over the common stock with respect to the payment of dividends and upon our company’s liquidation, dissolution or winding up, or have voting or conversion rights which could adversely affect the voting power and percentage ownership of the holders of common stock.
Our management has broad discretion in application of the proceeds from this offering.
A large portion of the estimated net proceeds from this offering has been allocated for working capital and for general corporate purposes. Accordingly, we will have broad discretion as to the application of such proceeds. A portion of the net proceeds of this offering will also be used to pay salaries to our officers, directors and consultants.
Investors in this offering will incur substantial dilution.
The offering price is substantially higher than the book value per share of our common stock. Investors purchasing the Shares in this offering will therefore incur immediate substantial dilution.
We have and likely will in the future use equity to compensate our officers, directors, employees and consultants.
As a key component of our growth strategy, we offer generous equity compensation packages to our management, employees, consultants and strategic partners. We believe such compensation packages will allow us to provide substantial incentives to our executives and employees while minimizing our cash outflow. Nevertheless, we will be required to account for the fair market value of compensatory stock issuances as operating expenses. Non-cash expenses arising from future incentive transactions may materially and adversely affect our future operating results.
Use of stock as acquisition currency.
As a key component of our growth strategy, we have and will continue to acquire complementary businesses, technologies, facilities and other assets. Whenever possible, we will try to use our stock as an acquisition currency in order to conserve our available cash resources for operational needs. Future acquisitions may give rise to substantial charges for the impairment of goodwill and other intangible assets that would materially and adversely affect our reported operating results.
USE OF PROCEEDS
We estimate that if we sell all 500,000 Shares we are offering we will have net proceeds from the offering of approximately $475,000.
We anticipate using the net proceeds from this offering for advertising, sales and marketing, for working capital to support the growth of our marketing and administrative activities, to implement our business strategy and for other general corporate purposes. Additionally, we expect continued substantial expenditures on technology, web and mobile development. We may also use a portion of the net proceeds to acquire or invest in businesses, products or technologies that are complementary to our business, although we have no such specific plans at this time. We will retain broad discretion over the use of the net proceeds of this offering. The offering has no minimum amount and all proceeds from the sale of the Shares will be immediately deposited into our bank account to be used by us. There are no escrow, refund or minimum provisions applicable to this offering.
We have never declared or paid any cash dividends on our common stock. We anticipate that any earnings will be retained for development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has sole discretion to pay cash dividends based on our financial condition, results of operations, capital requirements, contractual obligations and other relevant factors.
Our competitive position depends on protection of our intellectual property.
Development and protection of our intellectual property are critical to our business. All of our intellectual property has been invented and / or developed our Founder & CEO, Ronald P. Russo, Jr. If we do not adequately protect our intellectual property, or if competitors develop technologies incorporating the same or similar technologies that already are in the public domain, those competitors may be able to practice our technologies. Our success depends in part on our ability to obtain trademark protection for our products or processes in the U.S. and other countries, protect trade secrets, and prevent others from infringing on our proprietary rights.
Although we will require our employees and contractors to enter into broad assignment of inventions agreements, and all of our employees, contractors, and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored. Currently, we do not have any scientific or technical employees.
Products we develop could be subject to infringement claims asserted by others.
We cannot assure that products based on our intellectual property will not be challenged by a third-party claiming infringement of its proprietary rights. If we were not able to successfully defend our intellectual property then we may have to pay substantial damages, possibly including treble damages, for past infringement.
Various aspects of our businesses may become subject to federal, state, and foreign regulation. Any failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide our services, as well as the imposition of civil fines and criminal penalties.
We do not believe there are any pending or threatened legal proceedings that, if adversely determined, would have a material adverse effect on us with the exception of the items described below.
Beginning in April of 2016 our Founder & CEO, Ronald P. Russo, Jr., and the Florida Office of Financial Regulation (“FLOFR”) participated in an examination of securities issues surrounding placement and sale of securities under Florida Statutes. FLOFR alleged that some sales of securities, during a limited period, were not adequately covered under a filed Regulation D of the Securities Act. Mr. Russo and associated parties disputed the non-exemption. Ultimately in June 2017 FLOFR and Mr. Russo entered into a consent agreement without admission of any liability. Such matter has no effect on the legal standing or the ability of web3 Holdings in any offering or exemption.