We will likely need additional capital to sustain our operations and will likely need to seek further financing, which we may not be able to obtain on acceptable terms or at all. If we fail to raise additional capital, as needed, our ability to implement our business model and strategy could be compromised.
We have limited capital resources and operations. To date, our operations have been funded entirely from the proceeds of debt and equity financings. We expect to require substantial additional capital in the near future to expand our product lines, develop our intellectual property base, and establish our targeted levels of commercial production. We may not be able to obtain additional financing on terms acceptable to us, or at all.
Even if we obtain financing for our near-term operations, we expect that we will require additional capital thereafter. Our capital needs will depend on numerous factors including: (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership held by our existing stockholders will be reduced and our stockholders may experience significant dilution. In addition, new securities may contain rights, preferences, or privileges that are senior to those of our Common Stock. If we raise additional capital by incurring debt, this will result in increased interest expense. If we raise additional funds through the issuance of securities, market fluctuations in the price of our shares of Common Stock could limit our ability to obtain equity financing.
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 unable to raise capital when needed, our business, financial condition, and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
We face intense competition and many of our competitors have greater resources that may enable them to compete more effectively.
The industries in which we operate in general are subject to intense and increasing competition. Some of our competitors may have greater capital resources, facilities, and diversity of product lines, which may enable them to compete more effectively in this market. Our competitors may devote their resources to developing and marketing products that will directly compete with our product lines. Due to this competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioning of our products. There are no assurances that competition in our respective industries will not lead to reduced prices for our products. If we are unable to successfully compete with existing companies and new entrants to the market this will have a negative impact on our business and financial condition.
If we fail to protect our intellectual property, our business could be adversely affected.
Our viability will depend, in part, on our ability to develop and maintain the proprietary aspects of our technology to distinguish our products from our competitors' products. We rely on copyrights, trademarks, trade secrets, and confidentiality provisions to establish and protect our intellectual property.
Any infringement or misappropriation of our intellectual property could damage its value and limit our ability to compete. We may have to engage in litigation to protect the rights to our intellectual property, which could result in significant litigation costs and require a significant amount of our time. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture market position in such countries by utilizing technologies that are similar to those developed or licensed by us.
Competitors may also harm our sales by designing products that mirror the capabilities of our products, grow operations, leasing strategies, sources of products and sales or technology without infringing on our intellectual property rights. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue.
We may also find it necessary to bring infringement or other actions against third parties to seek to protect our intellectual property rights. Litigation of this nature, even if successful, is often expensive and time-consuming to prosecute and there can be no assurance that we will have the financial or other resources to enforce our rights or be able to enforce our rights or prevent other parties from developing similar technology or designing around our intellectual property.
Although we believe that our technology does not and will not infringe upon the patents or violate the proprietary rights of others, it is possible such infringement or violation has occurred or may occur, which could have a material adverse effect on our business.
We are not aware of any infringement by us of any person's or entity's intellectual property rights. In the event that products we sell are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify our products, obtain a license for the manufacture and/or sale of such products, or cease selling such products. In such event, there can be no assurance that we would be able to do so in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon our business.
There can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. If our products or proposed products are deemed to infringe or likely to infringe upon the patents or proprietary rights of others, we could be subject to injunctive relief and, under certain circumstances, become liable for damages, which could also have a material adverse effect on our business and our financial condition.
Our trade secrets may be difficult to protect.
Our success depends upon the skills, knowledge, and experience of our scientific and technical personnel, our consultants and advisors, as well as our licensors and contractors. Because we operate in several highly competitive industries, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate partners, employees, consultants, outside scientific collaborators, developers, and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party's relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to perfect our rights.
These confidentiality, inventions, and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive, and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.
Our business, financial condition, results of operations, and cash flows have been, and may in the future be, negatively impacted by challenging global economic conditions.
The recent global economic slowdown has caused disruptions and extreme volatility in global financial markets, increased rates of default and bankruptcy, and declining consumer and business confidence, which has led to decreased levels of consumer spending. These macroeconomic developments have and could continue to negatively impact our business, which depends on the general economic environment and levels of consumer spending. As a result, we may not be able to maintain our existing customers or attract new customers, or we may be forced to reduce the price of our products and not be able to source new grow operations in selected states or expand such abilities. We are unable to predict the likelihood of the occurrence, duration or severity of such disruptions in the credit and financial markets and adverse global economic conditions. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.
Our future success largely depends upon the continued services of our executive officers and management team. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain "key person" life insurance on any of our executive officers. Because of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our Common Stock.
Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industry. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. As a result, the value of your investment could be significantly reduced or completely lost.
Our success depends, in part, on the adoption of FutureLand Technology, facilities and products by several segments, including local available licensed cannabis or hemp farmers, and greenhouse growers, and if these segments do not adopt our products and plans, then our revenue will be severely limited.
The major groups to whom we believe may hire FutureLand for leases, leaseholds, operations, and business plan may not continue to embrace its products. Acceptance of FutureLand grow operations will depend on several factors, including cost, ease of use, familiarity of use, convenience, timeliness, strategic partnerships, and reliability. If we fail to meet FutureLand's customers' needs and expectations adequately, its product offerings may not be competitive and our ability to commence or continue generating revenues could be reduced. We also cannot ensure that our business model will gain wide acceptance among all targeted groups. If the market fails to continue to develop, or develops more slowly than we expect, our ability to commence or continue generating revenues could be reduced.
A drop in the retail price of commercially grown produce may negatively impact FutureLand's business.
The demand for FutureLand grown produce depends in part on the price of commercially grown produce and crops to be produced on such land, and for such products produced. Fluctuations in economic and market conditions that impact the prices of commercially grown produce, such as increases in the supply of such produce and the decrease in the price of commercially grown produce, could cause the demand for hydroponic grown produce to decline, which would have a negative impact on our business.
We may not be able to effectively manage our growth or improve our operational, financial, and management information systems, which would impair our results of operations.
In the near term, we intend to expand the scope of our operations activities significantly. If we are successful in executing our business plan, we will experience growth in our business that could place a significant strain on our business operations, finances, management and other resources. The factors that may place strain on our resources include, but are not limited to, the following:
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The need for continued development of our financial and information management systems;
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The need to manage strategic relationships and agreements with manufacturers, customers and partners; and
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Difficulties in hiring and retaining skilled management, technical, and other personnel necessary to support and manage our business.
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Financial abilities to accumulate additional grow properties for cultivation facilities.
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Additionally, our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources. Our ability to effectively manage growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage, and retain qualified management and other personnel. There can be no assurance that we will be successful in recruiting and retaining new employees, or retaining existing employees.
We cannot provide assurances that our management will be able to manage this growth effectively. Our failure to successfully manage growth could result in our sales not increasing commensurately with capital investments or otherwise materially adversely affecting our business, financial condition, or results of operations.
If we are unable to adopt or incorporate technological advances into FutureLand products, our business could become less competitive, uncompetitive, or obsolete and we may not be able to compete effectively with competitors' products.
We expect that technological advances in the processes and procedures for hydroponic growing equipment will continue to occur. As a result, there are risks that products that compete with FutureLand grow operations could be improved or developed. If we are unable to adopt or incorporate technological advances, FutureLand grow operations could be less efficient or cost-effective than methods developed and sold by its competitors, which could cause FutureLand grow operations to become less competitive, uncompetitive or obsolete, which would have a material adverse effect on FutureLand Technology's financial condition, and to a much lesser extent, on our financial condition.
Competing forms of specialized agricultural equipment may be more desirable to consumers or make FutureLand grow operations obsolete.
There are currently several different specialized agricultural equipment technologies being deployed in farming operations. Further development of any of these competitive technologies may lead to advancements in farming techniques that will make some of our methods of farming obsolete. Both Growers and Consumers may prefer alternative technologies and products. Any developments that contribute to the obsolescence of certain technologies and advances may substantially impact our business, reducing our ability to generate revenues.
Litigation may adversely affect our business, financial condition, and results of operations.
From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the results of our operations.
Our major shareholders have significant control over stockholder matters and the minority stockholders will have little or no control over our affairs.
Our major shareholders, being FutureWorld Corp. and Talari Industries currently own approximately 75% of our outstanding Common Stock, and, through the ownership of preferred stock, have approximately 97% of stockholder voting power, and thus significant control over stockholder matters, such as election of directors, amendments to the Articles of Incorporation, and approval of significant corporate transactions. As a result, our minority stockholders will have little or no control over its affairs.
If we fail to implement and maintain proper and effective internal controls and disclosure controls and procedures pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our ability to produce accurate and timely financial statements and public reports could be impaired, which could adversely affect our operating results, our ability to operate our business, and investors' views of us.
Management has
assessed the effectiveness of our internal controls over financial reporting. Management concluded,
for
the
year
ended
December 31, 2017
, that our internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP rules. Management concluded that our internal controls were adversely affected by deficiencies in the design or operation of our internal controls, which management considered to be material weaknesses. These material weaknesses include the following:
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lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our Board, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
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inadequate segregation of duties consistent with control objectives; and ineffective controls over period end financial disclosure and reporting processes.
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The failure to implement and maintain proper and effective internal controls and disclosure controls could result in material weaknesses in our financial reporting such as errors in our financial statements and in the accompanying footnote disclosures that could require restatements. Investors may lose confidence in our reported financial information and disclosure, which could negatively impact our stock price.
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We do not expect that our internal controls over financial reporting will prevent all errors and all fraud. 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. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Our insurance coverage may be inadequate to cover all significant risk exposures.
We will be exposed to liabilities that are unique to the products and land holdings we provide. While we intend to maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from risks and uncertainties of our business. It is also not possible to obtain insurance to protect against all operational risks and liabilities. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations. We do not have any business interruption insurance. Any business disruption or natural disaster could result in substantial costs and diversion of resources.
Because we do not have an audit or compensation committee, stockholders will have to rely on our officers and directors, most of whom are not independent, to perform these functions.
Because we do not have an audit or compensation committee, stockholders will have to rely on our officers and directors, most of whom are not independent, to perform these functions. Thus, there is a potential conflict of interest in that our officers and directors have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.
Federal regulation and enforcement may adversely affect the implementation of medical marijuana laws and regulations may negatively impact our revenues and profits.
Currently, there are 28 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Many other states are considering similar legislation. Conversely, under the Controlled Substance Act (the "CSA"), the policies and regulations of the Federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation and the personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to medical marijuana, as to the timing or scope of any such potential amendments there can be no assurance, there is a risk that federal authorities may enforce current federal law, and we may be deemed to be producing, cultivating, or dispensing marijuana in violation of federal law with respect to the licensed and leased activities of FutureLand and its subsidiary FutureWorld Holdings, Inc. current or proposed business operations or we may be deemed to be facilitating the sale or distribution of drug paraphernalia in violation of federal law with respect to our use of proprietary technologies in our business operations. Active enforcement of the current federal regulatory position on cannabis may thus indirectly and adversely affect our revenues and profits. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain.
The U.S. Supreme Court declined to hear a case brought by San Diego County, California that sought to establish federal preemption over state medical marijuana laws. The preemption claim was rejected by every court that reviewed the case. The California 4th District Court of Appeals wrote in its unanimous ruling, "Congress does not have the authority to compel the states to direct their law enforcement personnel to enforce federal laws." However, in another case, the U.S. Supreme Court held that, as long as the CSA contains prohibitions against marijuana, under the Commerce Clause of the United States Constitution, the United States may criminalize the production and use of homegrown cannabis even where states approve its use for medical purposes.
In an effort to provide guidance to federal law enforcement, the DOJ has issued Guidance Regarding Marijuana Enforcement to all United States Attorneys in a memorandum from Deputy Attorney General David Ogden on October 19, 2009, in a memorandum from Deputy Attorney General James Cole on June 29, 2011, and in a memorandum from Deputy Attorney General James Cole on August 29, 2013. Each memorandum provides that the DOJ is committed to the enforcement of the CSA, but, the DOJ is also committed to using its limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way. The August 29, 2013 memorandum provides updated guidance to federal prosecutors concerning marijuana enforcement in light of state laws legalizing medical and recreational marijuana possession in small amounts.
The memorandum sets forth certain enforcement priorities that are important to the federal government:
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Distribution of marijuana to children;
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Revenue from the sale of marijuana going to criminals;
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Diversion of medical marijuana from states where it is legal to states where it is not; Using state authorized marijuana activity as a pretext of other illegal drug activity; Preventing violence in the cultivation and distribution of marijuana;
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Preventing drugged driving;
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Growing marijuana on federal property; and
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Preventing possession or use of marijuana on federal property.
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The DOJ has not historically devoted resources to prosecuting individuals whose conduct is limited to possession of small amounts of marijuana for use on private property but has relied on state and local law enforcement to address marijuana activity. In the event the DOJ reverses its stated policy and begins strict enforcement of the CSA in states that have laws legalizing medical marijuana and recreational marijuana in small amounts, there may be a direct and adverse impact to our business and our revenue and profits. Furthermore, H.R. 83, enacted by Congress on December 16, 2014, provides that none of the funds made available to the DOJ pursuant to the 2015 Consolidated and Further Continuing Appropriations Act may be used to prevent certain states, including Colorado and California, from implementing their own laws that authorized the use, distribution, possession, or cultivation of medical marijuana.
We could be found to be violating laws related to medical cannabis.
Currently, there are 23 states plus the District of Columbia that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Many other states are considering similar legislation. Conversely, under the CSA, the policies and regulations of the federal government and its agencies are that cannabis has no medical benefit and a range of activities including cultivation and the personal use of cannabis is prohibited. Unless and until Congress amends the CSA with respect to medical marijuana, as to the timing or scope of any such amendments there can be no assurance, there is a risk that federal authorities may enforce current federal law. The risk of strict enforcement of the CSA in light of Congressional activity, judicial holdings, and stated federal policy remains uncertain. This would cause a direct and adverse effect on our subsidiaries' intended businesses and on our revenue and profits.
Variations in state and local regulation and enforcement in states that have legalized medical cannabis that may restrict marijuana-related activities, including activities related to medical cannabis, may negatively impact our revenues and profits.
Individual state laws do not always conform to the federal standard or to other states laws. A number of states have decriminalized marijuana to varying degrees, other states have created exemptions specifically for medical cannabis, and several have both decriminalization and medical laws. Four states, Colorado, Washington, Oregon, and Alaska, have legalized the recreational use of cannabis. Variations exist among states that have legalized, decriminalized, or created medical marijuana exemptions. For example, Alaska and Colorado have limits on the number of marijuana plants that can be homegrown. In most states, the cultivation of marijuana for personal use continues to be prohibited except for those states that allow small-scale cultivation by the individual in possession of medical marijuana needing care or that person's caregiver. Active enforcement of state laws that prohibit personal cultivation of marijuana may indirectly and adversely affect our business and our revenue and profits.
It is possible that federal or state legislation could be enacted in the future that would prohibit us or potential customers from selling FutureLand grow operations, and if such legislation were enacted, our revenues could decline, leading to a loss in your investment.
We are not aware of any federal or state regulation that regulates the sale of indoor cultivation equipment to medical or recreational marijuana growers. The extent to which the regulation of drug paraphernalia under the CSA is applicable to our business and the sale of FutureLand products is found in the definition of "drug paraphernalia." Drug paraphernalia means any equipment, product, or material of any kind that is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful.
Our understanding of federal or state regulation is that the sale of indoor cultivation equipment to medical or recreational cannabis growers is prohibited if the primary intent or design of the equipment is for indoor cultivation of medical or recreational cannabis. Our products are primarily designed for general agricultural use. There are no direct or indirect design features in our equipment specifically or primarily for the cultivation of medical marijuana. Although it is possible that medical marijuana may be grown with our equipment, we make no inquiry of our customers as to their intended agricultural use of our technology products. If federal and/or state legislation is enacted which prohibits the sale of our growing equipment to medical cannabis growers, our revenues would decline, which could lead to a loss of a material portion of your investment.
Prospective customers may be deterred from doing business with a company with a significant nationwide online presence because of fears of federal or state enforcement of laws prohibiting possession and sale of medical or recreational marijuana.
Our website is visible in jurisdictions where medicinal and/or recreational use of marijuana is not permitted and, as a result, we may be found to be violating the laws of those jurisdictions. We could lose potential customers as they could fear federal prosecution for growing marijuana with FutureLand's equipment, reducing our revenue. In most states in which the production and sale of marijuana have been legalized, there are additional laws or licenses required and some states altogether prohibit home cultivation, all of which could make the loss of potential customers more likely.
Marijuana remains illegal under federal law.
Marijuana is a Schedule-I controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with our business plans, especially in respect of FutureLand.
We may not obtain or maintain the necessary permits and authorizations to operate licensed marijuana grow businesses.
FutureLand may not be able to obtain or maintain the necessary licenses, permits, authorizations, or accreditations, or may only be able to do so at great cost, to operate their respective medical marijuana business. In addition, we may not be able to comply fully with the wide variety of laws and regulations applicable to the medical marijuana industry. Failure to comply with or to obtain the necessary licenses, permits, authorizations, or accreditations could result in restrictions on our ability to operate the medical marijuana business, which could have a material adverse effect on our business.
If we incur substantial liability from litigation, complaints, or enforcement actions, our financial condition could suffer.
FutureLand participation in the medical marijuana industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against these subsidiaries. Litigation, complaints, and enforcement actions involving these subsidiaries could consume considerable amounts of financial and other corporate resources, which could have a negative impact on our sales, revenue, profitability, and growth prospects. As FutureLand, we are dependent upon existing license holders as lessees on their properties in Colorado, or other states in the future and will itself only be able to start the process of obtaining final licenses to cultivate and sell medical marijuana in Colorado, and are not as such presently engaged in the cultivation or distribution of marijuana, our subsidiaries have not been, and are not currently, subject to any material litigation, complaint, or enforcement action regarding marijuana (or otherwise) brought by any federal, state, or local governmental authority.
We may have difficulty accessing the service of banks, which may make it difficult for us to operate.
Since the use of marijuana is illegal under federal law, there is a strong argument that banks cannot accept for deposit funds from businesses involved in the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty finding a bank willing to accept their business. The inability to open bank accounts may make it difficult for us to operate our contemplated medical marijuana businesses in the case FutureLand Properties marijuana growing and leasing land business.
FutureLand business activities in some states is dependent upon obtaining certain licenses for grow operations.
FutureLand's business model includes helping licensees get their licenses from both the county and the state in order to grow on our land. In the state of Colorado, in order to be able to grow cannabis you must be a two year resident and be approved both from the county in which you want to grow and also at the state level. The county and state have non-refundable costs associated with applying to get a license. They vary some from county to county. In Huerfano County there is a $1,300 fee due at the time of application and a $10,000 refundable retainer that is given back in a year's time, with the assumption that they don't need to use it for some legal purpose. At the state level there is a $5,000 fee associated with making an application. Other factors include potential moratoriums instituted from time to time either from the state or the counties for getting licenses in certain areas. Currently you cannot be a convicted felon and get a grow license. Additionally, the individual grow licenses need to be attached to a particular location. It is possible, however, to get a locational license transferred to a different property but there is an application process that goes along with the request that may or may not get approved.
We are dependent on appropriate zoning and variances for our grow operations. The lack of such zoning and needed variances could materially impact our business and production.
The zoning for being able to grow cannabis seems to be a bit of a moving target right now. On the one hand it is agricultural so you might expect it to be able to be grown on agricultural permitted land, but there seems to be push backs at the county level to have cannabis properties designated as commercial to keep them from being able to reach out for special grants and subsidies typically only offered only to agriculturally zoned products. There seems to be resistance from farmers to not allow cannabis an agricultural designation which could cause some zoning problems going forward.
We are dependent upon Water supplies and sourcing. The lack of water from grow facilities could materially impact our business
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The entire state of Colorado is over-appropriated for water. This means that every ounce of water, even water that does not exist yet, from say a future flood, is already accounted for by people making claim to the water and having been given those claims by the state. The state reserves the right to make modifications regularly concerning these matters for things like priority of the water, abatement of water to other users of water, and reallocation of water to different parties or expanding area allotments for water and many other such determinations. This often involves water consultants, water attorneys, water selling, and lengthy water courts. However, while growers of cannabis will often need to go down this path, the state has provided a substitutionary water plan application to allow for growing during the period the licensee must go through the courts. That being said, there are still risks associated with getting approval for the amount of water needed. The amount will vary too whether there is a hydroponic grow versus a potted grow. In Colorado water is calculated on acre feet of water, which come up to approximately 325,000 gallons per year per acre. It is important to attach your ballot to the right race horse going in.
FL is arranging to purchase water from the city of Walsenburg who already has a very large supply of water rights. They are parceling out a portion of those rights and will be applying to the state to expand its allocation out to our 240 acres along with many other properties. It makes sense to attach our ticket alongside the goals of a municipality that already has ample water rights available, and desires to sell a portion of those rights to us. This minimizes our risk to get them, on the one hand, and increases the chance for us to get more water from an abundant and ready supply while not needing to go back to water court in order to obtain such sourcing.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
We may allocate net proceeds from this offering in ways which differ from our estimates based on our current plans and assumptions discussed in the section entitled "Use of Proceeds" and with which you may not agree.
The allocation of net proceeds of the offering set forth in the "Use of Proceeds" section below represents our estimates based upon our current plans and assumptions regarding industry and general economic conditions, our future revenues and expenditures. The amounts and timing of our actual expenditures will depend on numerous factors, including access to new business ventures, land deals, success of our FutureLand for Business initiatives, cash generated by our operations and business developments. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes. Circumstances that may give rise to a change in the use of proceeds and the alternate purposes for which the proceeds may be used are discussed in the section entitled "Use of Proceeds" below. You may not have an opportunity to evaluate the information on which we base our decisions on how to use the proceeds and may not agree with the decisions made. Additional information is available in the "Use of Proceeds" section of this Registration Statement of which this Prospectus is a part of.
We expect to experience volatility in the price of our Common Stock, which could negatively affect stockholders' investments.
The trading price of our Common Stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry factors may seriously affect the market price of companies' stock, including ours, regardless of actual operating performance. All of these factors could adversely affect your ability to sell your shares of Common Stock or, if you are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.
The market price for our common stock will be particularly volatile given our status as a relatively unknown company, with a limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price, which may result in substantial losses to you.
Our stock price will be particularly volatile when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats. The volatility in our share price will be attributable to a number of factors. First, our common stock will be compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could decline precipitously in the event that a large number of our common stock are sold on the market without commensurate demand. Secondly, we are a speculative or "risky" investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time. Moreover, the OTC MARKET is not a liquid market in contrast to the major stock exchanges. We cannot assure you as to the liquidity or the future market prices of our common stock if a market does develop. If an active market for our common stock does not develop, the fair market value of our common stock could be materially adversely affected.
Our Common Stock is categorized as "penny stock," which may make it more difficult for investors to sell their shares of Common Stock due to suitability requirements.
Our Common Stock is categorized as "penny stock." The SEC has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The price of our Common Stock is significantly less than $5.00 per share, and is therefore considered "penny stock." This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker- dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser, and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks. These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell our Common Stock, either directly or on behalf of their clients, may discourage potential stockholders from purchasing our Common Stock, or may adversely affect the ability of stockholders to sell their shares.
Financial Industry Regulatory Authority ("FINRA") sales practice requirements may also limit a stockholder's ability to buy and sell our
Common Stock, which could depress the price of our Common Stock.
In addition to the "penny stock" rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.
The elimination of monetary liability against our directors, officers, and employees under Colorado law and the existence of indemnification rights for our obligations to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees.
Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Colorado law. We may also have contractual indemnification obligations under any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs 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 us and our stockholders.
We may issue additional shares of Common Stock or preferred stock in the future, which could cause significant dilution to all stockholders.
Our Articles of Incorporation authorize the issuance of up to
5,900
,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, with no par value. As of
December 31, 2017
, we had
3,705,468,957
shares of Common Stock, 0 shares of Series A Preferred Stock, and
3
,000 shares of Series B Preferred Stock outstanding; however, we may issue additional shares of Common Stock or preferred stock in the future in connection with a financing or an acquisition.
Anti-takeover effects of certain provisions of Colorado state law hinder a potential takeover of us.
Colorado has a business combination law which prohibits certain business combinations between Colorado corporations and "interested stockholders" for three years after an "interested stockholder" first becomes an "interested stockholder," unless the corporation's board of directors approves the combination in advance. For purposes of Colorado law, an "interested stockholder" is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then-outstanding shares of the corporation. The definition of the term "business combination" is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation's assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The effect of Colorado's business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our Board. Both of these provisions could limit the price investors would be willing to pay in the future for shares of our Common Stock.
Because we do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Declaring and paying future dividends, if any, will be determined by our Board, based upon earnings, financial condition, capital resources, capital requirements, restrictions in our Articles of Incorporation, contractual restrictions, and such other factors as our Board deems relevant. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.
We are classified as an "emerging growth company" as well as a "smaller reporting company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public 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 a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Section 107 of the JOBS Act 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 have irrevocably opted out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.
We could 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 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 stock 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.
Notwithstanding the above, we are also currently a "smaller reporting company." Specifically, similar to "emerging growth companies," "smaller reporting companies" are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings.
Decreased disclosures in our SEC filings due to our status as an "emerging growth company" or "smaller reporting company" may make it harder for investors to analyze our results of operations and financial prospects.
The application of Rule 144 creates some investment risk to potential investors; for example, existing shareholders may be able to rely on Rule 144 to sell some of their holdings, driving down the price of the shares you purchased.
The SEC adopted amendments to Rule 144 which became effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
|
|
●
|
1% of the total number of securities of the same class then outstanding (32,397,930 shares of common stock as of the date of this Report); or
|
|
|
●
|
the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
|
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
Statements under, "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Business" and elsewhere in this prospectus may be "forward-looking statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements include, among other things, statements regarding:
|
•
|
|
the growth of our business and revenues and our expectations about the factors that influence our success;
|
|
•
|
|
our plans to continue to invest in systems, facilities, and infrastructure, increase our hiring and grow our business;
|
|
•
|
|
our plans for FutureLand to purchase more lands for lease to the cultivators;
|
|
•
|
|
our ability to attain funding and the sufficiency of our sources of funding;
|
|
•
|
|
our expectation that our cost of revenues, development expenses, sales and marketing expenses, and general and administrative expenses will increase;
|
|
•
|
|
fluctuations in our capital expenditures;
|
|
•
|
|
our plans for potential business partners and any acquisition plans;
|
as well as other statements regarding our future operations, financial condition and prospects, and business strategies. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this registration statement, of which this prospectus is a part, including the risks described under "Risk Factors." Any forward- looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances that occur in the future.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we may have projected. Any forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, financial condition, growth strategy and liquidity. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision.
TAX CONSIDERATIONS
We are not providing any tax advice as to the acquisition, holding or disposition of the securities offered herein. In making an investment decision, investors are strongly encouraged to consult their own tax advisor to determine the U.S. Federal, state and any applicable foreign tax consequences relating to their investment in our securities.
GENERAL RISK STATEMENT
Based on all of the foregoing, we believe it is possible for future revenue, expenses and operating results to vary significantly from quarter to quarter and year to year. As a result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful or indicative of future performance. Furthermore, we believe that it is possible that in any given quarter or fiscal year our operating results could differ from the expectations of public market analysts or investors.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices are located at 10901 Roosevelt Blvd, Suite 1000c Saint Petersburg, FL 33716 where we lease a shared office facility with FutureWorld Corp. at a monthly rental of $500. Our lease term is month to month. We believe our current space is adequate for our operations at this time. We also have a location in Denver Colorado.
ITEM 3. LEGAL PROCEEDINGS
We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Our common stock is quoted on the OTC Pink Current Reporting and has traded under the symbol "FUTL." Previously our stock was quoted under the symbol "AEGA" which was changed on May 29, 2015 to FUTL. Prior to July 19, 2014, our symbol was "FVBC" and our stock was thinly traded. On May 1, 2015, our common stock was subject to a 400 to 1 reverse split. On June 1, 2015, the closing sale price for our common stock was $4.50 on the OTCQB. The following table sets forth the range of high and low prices for our common stock for the periods indicated. The information reflects inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.
High and Low Bid Prices on Our Common Stock
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|
|
|
|
|
|
|
|
|
Year
|
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
2017
|
December 31
|
|
$
|
0.03
|
|
|
$
|
0.005
|
|
|
2017
|
September 30
|
|
$
|
0.07
|
|
|
$
|
0.007
|
|
|
2017
|
June 30
|
|
$
|
0.39
|
|
|
$
|
0.05
|
|
|
2017
|
March 31
|
|
$
|
0
.50
|
|
|
$
|
0.15
|
|
|
2016
|
December 31
|
|
$
|
0.03
|
|
|
$
|
0.
005
|
|
|
2016
|
September 30
|
|
$
|
0.07
|
|
|
$
|
0.007
|
|
|
2016
|
June 30
|
|
$
|
0.39
|
|
|
$
|
0.05
|
|
|
2016
|
March 31
|
|
$
|
0.50
|
|
|
$
|
0.15
|
|
As of December
31, 2017
, there were approximately 132 record holders, an unknown number of additional holders whose stock is held in "street name" and 28,144,092 shares of common stock issued and outstanding.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
N/A
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We define our accounting periods as follows:
● "fiscal 2017" – January 1, 2017 through December 31, 2017
Our History
FutureLand, CORP. (formerly known as AEGEA, Inc.) ("we", "us", the "Company") was incorporated in Colorado on November 29, 2007 under the name Forever Valuable Collectibles, Inc. We changed our name effective July 1, 2014 in connection with our July 22, 2014 acquisition of AEGEA, LLC which is in the planning stages of developing an international community and mega-resort destination in the heart of South Florida called AEGEA. Prior to the acquisition of AEGEA, LLC, we were been engaged in the business of buying and reselling commemorative professional and college sports memorabilia.
On March 10, 2015, an Exchange Agreement was entered (the "Agreement"), by and among certain shareholders and debt holders of the Company, representing the majority of the outstanding shares of the Company ("the AEGA Holders"), and FutureWorld, Corp. (hereafter referred to as "FWDG"), a Delaware Corporation which is the owner of the wholly owned subsidiary, FutureLand Properties, LLC, (hereafter referred to as "FLP"), a Colorado Limited Liability Corporation. Additionally, on June 1, 2015, FWDG, as sole member of FLP resolved that effective with the Exchange Agreement dated March 10, 2015, FWDG sold all rights, title and ownership of FLP to the Company, including all member units, assets, intellectual property, contracts, leases, and real property which includes 200 acres in La Vita, Colorado,
In connection with the Exchange Agreement, we issued an aggregate of 27,845,280 shares of our common stock to FWDG and or its assignee. FWDG and the AEGA Holders entered into the purchase and exchange agreement where the AEGA Holders agreed to deliver to FutureWorld their shareholdings in the Company in exchange for certain actions, including AEGEA Holders resignation as directors and officers of the Company and the simultaneous appointment of two directors as designated by FLP. In return for the AEGEA Holders shares of the Company, in combination with certain debt forgiveness totaling $100,000 by the AEGEA Holders, the AEGA Holders shall receive, an amount of shares to be equal to 4.9% (27,845,280} of the outstanding shares of the Company calculated after the reverse stock split which became effective on May 1, 2015. Such shares as held by the AEGA Holders which are surrendered in return for the new exchange shares to be issued, shall be cancelled in such exchange and returned to treasury. Such exchange shares when issued shall contain certain anti-dilutive rights whereby the AEGEA Holders shall receive additional shares for a period of one year from the date of issuance in order to retain 4.9% of the outstanding shares of the Company, issuable within ten days of the end of each fiscal quarter following such initial issuance. Pursuant to the Agreement, all assets of the Company, including all intellectual property, contractual rights, business plans, architectural works, property rights, and other valuable matters, shall be sold to the AEGA Holders, into a new private entity formed at their direction, control and benefit, in settlement for another $100,000 in debt due to AEGEA Holders by the Company and certain liabilities will be assumed by the new private entity. This transaction is expected to be accounted for as a reverse recapitalization of FLP with the business of FLP being the continuing business since the member of FLP will have voting and management control of the combined entity.
In May 2015, we changed our name to FutureLand, Corp. and effected a 1 for 400 reverse stock split of our common stock. All share and per share data in this annual report have been retroactively restated to reflect the reverse stock split.
Description of Business
FutureLand Properties LLC. was originally formed as a wholly-owned subsidiary of FutureWorld Corp. On October 6, 2014 FutureWorld entered into a Contribution Agreement with FutureLand, a wholly-owned subsidiary of the Company. In accordance with this agreement, FutureLand, in return for contribution of intellectual property, cash, and web development services by the Company, has exchanged 40,000,000 shares of its common stock representing 100% of the shares outstanding. On March, 10th, FutureLand Properties LLC did a merger agreement with Aegea Inc. (FutureLand Corp), ensuing FutureLand Properties LLC to become Aegea Inc. (FutureLand Corp) wholly owned subsidiary. The agreement resulted in the FutureLand Properties LLC's shareholders (FutureWorld Corp) to be issued 27,845,280 shares of Aegea Inc. (FutureLand Corp). This will result in FutureLand Corp's shares being held for investment on FutureWorld's balance sheet.
FutureLand Corp. operates its presented business through its subsidiary, FutureLand Properties, is an agricultural land lease company catering to the industrial hemp, legal medical marijuana and recreational cannabis market. Future Land was started to capitalize upon the distinct separation of the cultivation grows from the dispensaries, specifically with respect to Colorado. In the State of Colorado, which has become the quintessential poster-child for what the industry may look like for the rest of America, at least temporarily, as other states determine what exact direction they will choose to go, there are residency laws that must be adhered to. For instance, in order to get a license to grow or profit from cannabis in Colorado you must be a 2 year resident. The laws are very specific; anyone who is not a 2 year resident cannot profit from the sale of the cannabis flower or infused products. Because of this mandate, Future Land Corp must be a land owner and leaser in order to effectively participate in the cannabis grow industry, which we believe is essential in order to gain a competitive advantage. We also must own the structures on the land to control the lease and our future position in the industry.
The business model is simple; offer growers the opportunity to grow. We have the land and then we find a growers requiring assist in funding and obtaining their license and grow facility. Next, we arrange for additional operational items needed, including but not limited to, complete build-outs provided from our associated company, HempTech Corp, in order to capture additional revenue.
EXCHANGE AGREEMENT AND SALE OF AEGEA ASSETS
As discussed above, on March 10, 2015, an Exchange Agreement was entered, by and among certain shareholders and debt holders of the Company, representing the majority of the outstanding shares of the Company ("the AEGA Holders"), and FWDG and its wholly-owned subsidiary, FLP. Additionally, on June 1, 2015, FWDG, as sole member of FLP resolved that effective with the Exchange Agreement dated March 10, 2015, FWDG sold all rights, title and ownership of FLP to the Company, including all member units, assets, intellectual property, contracts, leases, and real property which includes 200 acres in La Vita, Colorado.
Our current asset will comprise of 240 acres of prime property in southern Colorado and two signed lease agreements for grow facilities on its land. Our business plan is to continue attracting legal license holders to lease land and grow facilities on our 240 acres. We have other developmental land use plans for other projects being pursued as well.
On, October 30, 2014, FLP closed on 239.96 Acres in La Vita, Colorado in Huerfano County for $60,000. FLP entered into a lease agreement contract with a lease with Colorado Flower Company, LTD on Dec 1, 2014 allotting 37 acres for their grow facilities. FLP was formed as a Colorado State company on October 6, 2014 by FutureWorld Corp.
Prior to FLP being formed, the State of Colorado amended their laws allowing cannabis grow facilities to be separated from cannabis dispensaries effectively opening up an entirely new business opportunity that FLP entered into at that time. At such time, FLP pursued the business plan to secure a cannabis or hemp grower to execute their business plan of leasing the land, the structures, the technologies and provide maintenance contracts associated with the grow. Integral to its strategy is to provide the financing for the entire grow operation so as to establish a position by which to harness a competitive advantage in striking the right kind of lease in conjunction with Colorado State laws that would allow FLP to make above average returns. On Jan 20, 2015 FLP entered a contract with GPS, La Vita, Inc. allotting 5 acres for their immediate grow facilities. All of these contracts, and land ownings are currently in FLP.
Results of Operations
The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the years identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the years ended December 31,
2017
and
2016
. For comparative purposes, we are comparing the year ended December 31,
2017
to the year ended December 31,
2016
.
The following information represents our results of operations for the years ended December 31, 2017 and 2016.
|
Increase/(Decrease)
|
|
|
|
|
|
|
|
2017 vs. 2016
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
$
|
%
|
|
|
Total revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
126,291
|
|
|
|
69,939
|
|
|
|
56,352
|
|
|
|
81
|
%
|
|
Salaries and benefits
|
|
|
516,113
|
|
|
|
817,451
|
|
|
|
(301,338
|
)
|
|
|
(37
|
%)
|
|
Professional fees
|
|
|
49,522
|
|
|
|
2,860,760
|
|
|
|
(2,811,238
|
)
|
|
|
(98
|
%)
|
|
Total operating expenses
|
|
|
691,926
|
|
|
|
3,748,150
|
|
|
|
(3,056,224
|
)
|
|
|
(82
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(691,926
|
)
|
|
|
(3,487,150
|
)
|
|
|
3,056,224
|
|
|
|
(82
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of liability
|
|
|
-
|
|
|
|
(150,805
|
)
|
|
|
150,805
|
|
|
|
(100
|
%)
|
|
Interest expense
|
|
|
(102,766
|
)
|
|
|
(65,511
|
)
|
|
|
(37,255
|
)
|
|
|
57
|
%
|
|
Impairment of provisional goodwill
|
|
|
-
|
|
|
|
(3,801,036
|
)
|
|
|
3,801,036
|
|
|
|
(100
|
%)
|
|
Amortization of debt discount
|
|
|
(663,167
|
)
|
|
|
(291,801
|
)
|
|
|
(371,366
|
)
|
|
|
127
|
%
|
|
Bad debt expense
|
|
|
-
|
|
|
|
(3,290,000
|
)
|
|
|
3,290,000
|
|
|
|
(100
|
%)
|
|
Other income (expense)
|
|
|
(765,933
|
)
|
|
|
(7,599,153
|
)
|
|
|
6,833,220
|
|
|
|
(90
|
%)
|
|
Net income (loss)
|
|
$
|
(1,457,859
|
)
|
|
$
|
(11,347,303
|
)
|
|
$
|
9,889,444
|
|
|
|
(87
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
No revenue was generated for the years ended December 31,
2017
and
2016
.
Total Operating Expenses
For the year ended December 31,
2017
, total operating expenses amounted to $
691,926
as compared to $
2,860,760
for the year ended December 31,
2016
, a decrease of $
2,811,238
. This
increase
was primarily due to significant
decrease
in professional fees of $
2,586,011. The majority of professional fees in 2016 related to the issuance of stock for services. General
and
administrative expenses increased by 56,352 or 81%. Salaries and benefits decreased by $301,338 or 37%.
Total Other Expenses
For the year ended December 31,
2017, total other expenses amounted to $765,933
as compared to
$7,599,153
for the year ended December 31,
2016, a decrease of $6,833,220.
The decrease was due to
the fact
in
2016 the impairment of provisional goodwill amounting to $3,801,036 and bad debt expense amounting to $3,290,000 related to the write down of a related party receivable were recorded
.
Net Loss
For the year ended December 31,
2017
and
2016
, net loss amounted to $1
,457,859,
and $
11,347,303
respectively.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. The Company had a working capital deficit of $
248,705
and $
136,149
of cash as of December 31,
2017
and a working capital deficit of $
719,027
and $
62,457
of cash as of December 31,
2016
. As a result, the Company's current cash position is not sufficient to fund its cash requirements during the next twelve months, including operations and capital expenditures.
Net cash used in operating activities was $
602,451
for the year ended December 31,
2017
, compared to $
561,379
for the same period in
2016.
Net cash
used
by investing activities during the year ended December 31,
2017
was $
64,857
compared
to
net cash used in investing activities of
$1,486
for the year ended December 31,
2016.
Net cash
provided by
financing activities during the year ended December 31,
2017
, was
$741,000
compared to net cash provided by financing activities of $
625,414
for the year ended December 31,
2016.
Cash Requirements
Our future capital requirements will depend on numerous factors, including the extent we continue development of our planned resort community and our ability to control costs. We will be reliant upon shareholder loans, private placements or public offerings of debt and equity to fund our resort development plans. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. While we are in discussions with investors and our investment banker who have shown an interest in investing in or raising capital for our company, we have no arrangements or plans currently in effect and our inability to raise funds for the above purposes will have a severe negative impact on our ability to carry out our plans to develop FutureLand Corp.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. As of December 31,
2017
we have no off-balance sheet arrangements
Going Concern
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
At December 31, 2017 and December 31, 2016, the Company had $136,149 and $62,457 in cash, respectively, and $248,705 and $719,027 in negative working capital, respectively. For the years ended December 31, 2017 and 2016, the Company had a net loss of $1,457,859 and $11,347,303, respectively. Continued losses may adversely affect the liquidity of the Company in the future.
Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern.
The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems.
Management's
plans with regard to these matters encompass the following actions: 1) obtain funding from new and potentially current investors to alleviate the
Company's
working deficiency, and 2) implement a plan to generate sales. The
Company's
continued existence is dependent upon its ability to translate its user base into sales. However, the outcome of
management's
plans cannot be ascertained with any degree of certainty. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
Critical Accounting Policies
We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Stock-based Compensation
ASC 718, "Compensation-Stock Compensation" requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). We measure the cost of employee services received in exchange for an award based on the grant-date fair value of the award. We account for non-employee share-based awards based upon ASC 505-50, "Equity-Based Payments to Non- Employees." ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the vesting date, which is presumed to be the date performance is complete.
Revenue Recognition
We had no revenue during the year ended December 31,
2016
. Anticipated future operating revenue will represent revenue upon admission into our planned parks, provision of our services, or when products are delivered to our customers.
Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA