Welcome to the CYDigital Token Sale Event
For Accredited U.S. Investors...
For non-U.S. Investors...
Timeline & Details
Why consider purchasing CYDT?
There's an additional 30MM in CYDT to be given as a bonus to all private sale investors, divided proportionally (based on size of investment).
Hesitant? Let’s talk! Let me know a time that works for you, and I’ll send the invite.
INDICATION OF PRIVATE SALE INTEREST
Risk Disclosures in Connection with Warrant Offering
→ For U.S. Investors Only ←
This investment involves the purchase of Warrants in CYDigital, Inc. (the “Company”). At a point in time no later than approximately one year following the Initial Closing Date, depending on the circumstances, the Warrants must either be converted to non-voting common stock (“Non-Voting Stock”) of the Company or redeemed with the Company and the proceeds used to purchase CYDigital Tokens (“CYDT”). The Company is in the early development stage of a blockchain-based, smart contract-enabled platform (the “CYDigital Platform”). CYDT will be an integral part of the CYDigital Platform, which connects consumers and advertisers.
An investment in Warrants offered by the Company is highly speculative and involves a high degree of risk of loss of all or a material portion of an investor’s entire investment. Prospective investors in this Warrant offering (the “Offering”) should give careful consideration to the following risk factors, in addition to other information included in the Offering materials, in evaluating the merits and suitability of an investment in the Warrants. Only those investors who can bear the risk of loss of their entire investment should participate in this Offering. Each of risk factors set forth herein could materially adversely affect the Company’s business, operating results or financial condition, as well as adversely affect (i) the value of any securities issued by the Company, including the Warrants and Non-Voting Stock, and (ii) the viability of the CYDigital Platform and CYDT purchased upon potential Warrant redemption.
The Company’s proposed CYDigital Platform and CYDT are in the early development stages and may never be created. The Company is also subject to many risks to which other companies in its industry, and companies in the United States generally, are exposed, which risks are not described below. These include but are not limited to risks relating to economic downturns, political and economic events, and technological developments. Additionally, early-stage companies are inherently riskier than more developed companies. You should consider general risks as well as specific risks, some of which are described herein, when deciding whether to invest. Investors should recognize that the risk factors set forth below are those that, at the date of this Offering, seem to the Company the most likely to be significant and is not intended to be an exhaustive list of all potential risks. Prospective investors must realize, however, that factors other than those set forth below may ultimately affect the investment offered pursuant to this Offering in a manner and to a degree that cannot be foreseen at this time. The order in which the following risks are presented is not intended to represent the magnitude of the risks described.
Risks Related to the Company Generally
The Company has little or no operating history.
The Company was incorporated on or about May 1, 2018, for the purpose of developing the CYDigital Platform. As of the date of this Offering, the Company’s operations have consisted of planning, modeling and developing the CYDigital Platform, contracting the software development to enable the CYDigital Platform, developing relationships with potential service providers, preparing necessary documentation in order to implement the CYDigital Platform as currently conceived, and raising capital. The Company anticipates that its operating expenses will increase for the near future and it may initially operate at a deficit. There can be no assurance that the Company will ever generate any operating activity or develop and operate the CYDigital Platform. As a result, the Company has little or no operating history upon which you can evaluate its prospects, and accordingly, its prospects must be considered in light of the risks and challenges that any new company encounters. You should consider the Company’s lack of operating history and its proposed business, operations and prospects in light of the risks, expenses and challenges faced by an early-stage company.
There is no assurance that investors in this Offering will receive a return on their investment.
There is no assurance that investors will realize a return on their investments or that their entire investments will not be lost. For this reason, each investor should carefully read the Company’s Offering documents, and should consult with their own attorney and business advisor prior to making any investment decision to purchase the Company’s Warrants.
There is a possibility that the Company will be unable to complete development of the CYDigital Platform and related CYDT.
It is possible that, due to lack of capital, technological difficulties, personnel, regulatory issues, business issues or other unforeseen causes, the CYDigital Platform may never be completed and the CYDT may never be available for sale or distribution. It is also possible that the Company may need to modify the functions of the CYDigital Platform and/or CYDT in light of technological, business, regulatory or other considerations.
If the CYDigital Platform fails to launch on or before December 31, 2019, the Warrants will convert to Non-Voting Stock of the Company.
Pursuant to the Offering materials, the Company has until December 31, 2019, to launch the CYDigital Platform. If the CYDigital Platform is not operational and launched at that time, the Warrants issued by the Company will convert to Non-Voting Stock. As holders of Non-Voting Stock, investors shall have no voting rights except as may otherwise be required by applicable law, and are therefore not entitled to vote for the election of directors or on other matters coming before the shareholders for a vote. The Company may issue other classes of common stock or preferred stock that have rights, preferences or dividends or other matters that are senior or preferential to the rights of the Non-Voting Stock. Warrant holders will be required to execute a Stock Purchase Agreement and other documentation as may be required by the Company in order to consummate the conversion of their Warrants into Non-Voting Stock.
The Company faces a quickly changing complex regulatory environment.
The Company intends to develop the CYDigital Platform as a blockchain-based, smart contract-enabled platform that facilitates the consumer’s ability to own and share their data with advertisers through the use of CYDT, a blockchain-based token that the Company is working to develop as a utility token. There are a number of federal and state agencies in the United States who may attempt to assert jurisdiction over certain aspects of the Company’s business activities. These include, but are not limited to the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission, the Internal Revenue Service, the Financial Crimes Enforcement Network, the U.S. Department of Justice, state securities regulators, and state money service transmitter regulators. Depending on the location of investors, advertisers, consumers and those with which the Company does business, the Company may also be subject to the laws of other countries, including but not limited to compliance with the European Union’s General Data Protection Regulation. The statutory and regulatory environment is ever-changing. Changes in statutes and regulations or the manner in which existing statutes and regulations are interpreted and enforced may negatively impact the Company (including forcing the Company to cease operations) and any Warrants, Non-Voting Stock or CYDT issued or distributed by the Company. The need to keep abreast of the changing regulatory and legal environment could also result in substantial legal expenses for the Company, which could have a material adverse effect on the Company generally including its profitability.
The Company is subject to complex laws regarding privacy and data protection and may not be able to develop a compliant CYDigital Platform and may need to restrict its business as a result.
The CYDigital Platform centers on the collection of consumer data. As such, the Company is subject to a variety of laws and regulations in the United States and abroad that involve matters central to its business, such as privacy, data protection and personal information, advertising, marketing, distribution, data security, data retention and deletion, and protection of minors. In addition, foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States. Some of these laws may be enforced by private parties in addition to governmental entities. The Company is working to develop the CYDigital Platform in a way that is compliant with these laws, including the European Union’s General Data Privacy Regulation (“GDPR”). The GDPR, in particular, increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe). Noncompliance with the GDPR and other applicable laws can result in significant penalties for the Company. If the Company is unable to develop the CYDigital Platform in a way that is compliant with the various laws, the Company may need to restrict its business, including but not limited to the rights of Warrant holders, such as those located in Europe, to redeem their Warrants and purchase CYDT.
The Company’s management team has limited experience managing a blockchain-based business and dealing with the risks and challenges specific to the Company’s business.
Members of the Company’s management team may make decisions detrimental to its business and/or be unable to successfully manage the Company’s operations. Ineffective management of the Company would have a negative effect on the results of operations.
The success of the Company depends on the recruitment and retention of key personnel.
Investors have no right or power to take part in the management of the Company. Accordingly, no investor should purchase Warrants unless such investor is willing to entrust all aspects of the management of the Company to the management team. The success of the Company depends largely on the ability to recruit and retain highly qualified personnel, including key personnel and professionals, for the development and operation of the CYDigital Platform and marketing to and acquisition of advertisers and consumers. The Company believes that it will face intense competition for personnel. If the Company is unable to identify and recruit the necessary personnel to implement its business strategy on acceptable terms and in a timely manner to launch and maintain the CYDigital Platform, the Company may not reach the Token Platform Launch or otherwise may suffer material adverse consequences such as delays in product development, loss of customers and sales and diversion of management resources. Similarly, if key personnel, operational or technical staff, were to leave, the Company might not be able to find comparable replacements in a timely fashion and the performance of the Company could, as a result, be adversely affected. The Company may also use consultants and advisors who are employed by third parties and who may have commitments under consulting or advisory contracts with third parties that may limit their availability to us.
The Company’s management will have broad discretion over the use of the net proceeds from this Offering.
The Company’s management intends to use the net proceeds from this Offering to create and develop the CYDigital Platform, to fund general operations, and for operating capital and reserves. However, the Company’s management will have broad discretion in the application of the net proceeds and investors will have to rely upon their judgment with respect to the use of the net proceeds. The Company’s management may utilize the net proceeds in a manner in which you may disagree. The failure by the Company’s management to apply these funds effectively could have a material adverse effect on the Company’s ability to launch the CYDigital Platform and CYDT.
The CYDigital Platform may never achieve market acceptance.
The CYDigital Platform is in the early development stage. Although the Company believes, based on research and historical data, that there is a need for the Company’s services, the Company has not engaged in market testing to determine the likely reception of the specific CYDigital Platform concept. If the Company achieves the CYDigital Token Platform Launch, there is no guarantee that the CYDigital Platform will achieve market acceptance generally or in a sufficient amount to make the Company profitable for holders of Non-Voting Stock or for the Platform to function as intended. Failure to achieve market acceptance will have a material adverse impact on investors purchasing Warrants and holders of Non-Voting Stock.
The Company faces significant competition.
The Company faces competitors who are also making use of blockchain technology and offer functionality somewhat similar to the Company’s CYDigital Platform. Google, Facebook and similar companies and other competitors are or may be much better financed and possess much greater management expertise. Because of these and other factors, the Company may find it difficult or impossible to compete with these competitors, which could have a material adverse effect on the Company, its Warrants and Non-Voting Stock.
The advertising market in which the Company intends to compete is subject to rapid innovation and change and there is a risk that changes or innovations in the advertising market may occur while the Company is developing the CYDigital Platform and CYDT, which could render the business model and developing technology obsolete.
Since its inception, the distributed ledger technology market in general has been characterized by rapid changes and innovations and is constantly evolving. As a result, there is a risk that during the time that the Company is developing the CYDigital Platform, there may occur changes or innovations which may render the Company’s proposed business model and technology obsolete. If the Company is not able to adapt to such changes or innovations, it may not be able to generate sufficient interest in the CYDigital Platform, if any, which would have a material adverse effect on the Company’s prospects.
The Company may depend on third-party service providers and outsource providers for a variety of services, and may outsource a number of its functions and operations.
In certain instances, the Company may rely on single or limited service providers and outsourcing vendors around the world because the relationship is advantageous due to quality, price, or lack of alternative sources. If production or service was interrupted and the Company was not able to find alternate third-party providers, it could experience disruptions in manufacturing and operations including re-engineering costs. Such interruptions in the provision of supplies and/or services could result in the Company’s inability to meet customer demand, damage its reputation and investor, customer, and advertiser relationships and adversely affect its business.
The Company may depend on third party providers, suppliers and licensors to supply some of the hardware, software and operational support necessary to provide some of its services.
The Company obtains these materials from a limited number of vendors, some of which do not have a long operating history or which may not be able to continue to supply the equipment and services the Company desires. Some of the Company’s hardware, software and operational support vendors represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. If demand exceeds these vendors’ capacity or if these vendors experience operating or financial difficulties, or are otherwise unable to provide the equipment or services the Company needs in a timely manner, at its specifications and at reasonable prices, the Company’s ability to provide some services might be materially adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay its ability to operate the CYDigital Platform. These events could materially and adversely affect the Company’s ability to retain and attract Platform users, and have a material negative impact on its operations, business, financial results and financial condition.
The Company, including the CYDigital Platform, CYDT, and the Company’s service providers, may be at risk of cybersecurity attacks and identity theft.
The CYDigital Platform will involve the processing, storage and transmission of transactions and data. The secure storage and transmission of confidential information over public networks will be a critical element of the Company’s operations. The systems, networks, and devices used by the Company and its service providers to carry out routine business operations will employ a variety of protections designed to prevent against damage or interruption from computer viruses, network failures, computer and telecommunication failures, infiltration by unauthorized persons and security breaches. Despite the various protections utilized by the Company and its service providers, their associated systems, networks, or devices potentially can be breached. Cybersecurity breaches can include unauthorized access to systems, networks, or devices; infection from computer viruses or other malicious software code; and attacks that shut down, disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. Cybersecurity breaches may result in the misappropriation of financial assets, intellectual property or sensitive information belonging to the Company, the Company’s investors, CYDigital Platform users, or the Company’s third-party service providers. Cybersecurity breaches may also cause disruptions and impact the Company’s business operations, potentially resulting in financial losses, including but not limited to the loss of CYDT; the inability of the Company, its employees and other service providers to transact business; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs; as well as the inadvertent release of confidential information including information governed by the General Data Protection Regulation or that could result in identity theft. Similar adverse consequences could result from cybersecurity breaches affecting Warrant holders, holders of Non-Voting Stock, and parties who use the CYDigital Platform. These adverse consequences could result in significant liabilities for the Company, including but not limited to loss of revenue, costs of remediation, and fines. In addition, substantial costs may be incurred by the Company in order to prevent any cybersecurity breaches in the future.
The Company may be unable to protect its proprietary technology or keep up with that of its competitors.
The Company’s success will depend to a significant degree upon the protection of its software and other proprietary intellectual property rights. The Company seeks to protect the source code for its proprietary software and other proprietary technology and information under a combination of copyright, trade secrets, patent law, and agreements. Some agreement provisions protecting against unauthorized use, copying, circumvention, transfer and disclosure of company software may be unenforceable under the laws of certain jurisdictions and foreign countries. The Company may be unable to deter misappropriation of its software or proprietary information, detect unauthorized use, or take appropriate steps to enforce the Company’s intellectual property rights. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent the Company expands its international activities, the Company’s exposure to unauthorized copying, transfer and use of its software and proprietary technology or information may increase. In addition, the Company’s competitors may now have or may in the future develop technologies that are as good as or better than the Company’s technology without violating its proprietary rights. The Company’s failure to protect its software and other proprietary intellectual property rights or to utilize technologies that are as good as its competitors’ could put it at a disadvantage to its competitors.
The Company may not be able to obtain trademark protection for its marks, which could impede its efforts to build brand identity.
The Company seeks to protect its brands through trademark law. The Company intends to file trademark applications with the United States Patent and Trademark Office seeking registration of its marks. There can be no assurance that the applications will be filed and, if filed, if they will be successful or that the Company will be able to secure significant protection for its trademarks in the United States or elsewhere. The Company’s competitors or others could adopt product or service marks similar to the Company’s marks, or try to prevent the Company from using its marks, thereby impeding its ability to build brand identity and possibly leading to customer confusion. Any claim by another party against the Company or customer confusion related to its trademark, or the Company’s failure to obtain trademark registration, could harm the Company’s goodwill in its marks or its business. In addition, effective trademark protection may be unavailable, limited or not applied for in certain foreign countries. It also may be difficult for the Company to enforce certain of its trademark rights against third parties who may have inappropriately acquired interests in the Company’s intellectual property rights by filing unauthorized trademark applications in foreign countries to register the Company’s marks because of their familiarity with its business in the United States. Such activities could adversely affect the Company’s future growth and success.
If the Company is unable to adequately protect, maintain or enforce its intellectual property rights or secure rights to third-party patents, it may lose valuable assets, experience reduced market share or incur costly litigation to protect its rights or its third-party collaborators may choose to terminate their agreements with the Company.
The Company’s ability to commercially exploit its products and services will depend significantly on its ability to obtain and maintain patents, maintain trade secret protection and operate without infringing the proprietary rights of others. There can be no assurance that any patent applications that may be filed will be granted. Consequently, the Company’s patent applications may not issue into patents, and any issued patents may not provide protection against competitive technologies or may be held invalid if challenged. The Company’s competitors may also independently develop products similar to the Company’s or design around or otherwise circumvent patents issued to the Company. In addition, the laws of some foreign countries may not protect its proprietary rights to the same extent as U.S. law. The patent laws of the U.S. have recently undergone changes through court decisions which may have significant impact on the Company and its industry. Decisions of the U.S. Supreme Court and other courts with respect to the standards of patentability, enforceability, availability of injunctive relief and damages may make it more difficult for the Company to procure, maintain and enforce patents. In addition, the America Invents Act was signed into law in September 2011, which among other changes to the U.S. patent laws, changes patent priority from “first to invent” to “first to file,” implements a post-grant opposition system for patents and provides a prior user defense to infringement. These judicial and legislative changes have introduced significant uncertainty in the patent law landscape and may potentially negatively impact the Company’s ability to procure, maintain and enforce patents to provide exclusivity for its products and services. The Company also relies upon trade secrets, technical know-how and continuing technological innovation to develop and maintain its competitive position. The Company may be unable to meaningfully protect its rights in trade secrets, technical know-how and other non-patented technology. The Company generally seeks to protect such proprietary intellectual property in part by confidentiality agreements and, if applicable, inventors’ rights agreements with strategic partners and employees, although such agreements have not been put in place in every instance. The Company cannot guarantee that these agreements adequately protect its trade secrets and other intellectual property or proprietary rights. In addition, the Company cannot give any assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships. Furthermore, the steps taken by the Company or the steps the Company may take in the future may not prevent misappropriation of its technologies, particularly in respect of officers and employees who are no longer employed by the Company or in foreign countries where laws or law enforcement practices may not protect the Company’s proprietary rights as fully as in the United States.
The Company may have to resort to litigation to protect its intellectual property rights, or to determine their scope, validity or enforceability. In addition, interference, derivation, post-grant oppositions, and similar proceedings may be necessary to determine rights to inventions in the Company’s patents and patent applications. Enforcing or defending the Company’s proprietary rights is expensive, could cause diversion of its resources, is distracting to management and may be unsuccessful and have a material adverse effect on the Company’s business, operating results and financial condition. Furthermore, the Company’s efforts to enforce its intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of such intellectual property rights or alleging that the Company is infringing the counterclaimant’s own intellectual property, which could cause the Company to lose its rights, in whole or in part, to such intellectual property or narrow its scope such that the Company’s intellectual property no longer provides meaningful protection. Any failure to enforce or protect the Company’s rights could cause the Company to lose the ability to exclude others from using the Company’s technology.
The Company generally seeks to protect its software, among other ways, through copyrights. Policing unauthorized use of the Company’s software is difficult, and the Company may be unable to determine the extent to which piracy of its software exists or will occur in the future. Despite the Company’s precautions, it may be possible for unauthorized third parties to circumvent its security, copy its source code or software products and use information that the Company regards as proprietary to create software products and services in competition.
The Company may be accused of infringing intellectual property rights of third parties.
The Company has not conducted formal evaluations to confirm that its technology and software does not or will not infringe upon the intellectual property rights of third parties. As a result, the Company cannot be certain that its technology and software does not or will not infringe upon the intellectual property rights of others. Other parties may claim that the Company infringes their intellectual property rights. In the future, the Company may be subject to legal claims of alleged infringement of the intellectual property rights of third parties. The ready availability of damages, royalties, and the potential for injunctive relief has increased the defense litigation costs of patent infringement claims, especially those asserted by third parties whose sole or primary business is to assert such claims. Such claims, even if not meritorious, may result in significant expenditure of financial and managerial resources, and the payment of damages or settlement amounts. Additionally, the Company may become subject to injunctions requiring the Company to: (i) cease the development, manufacture, use, or sale of its software or other Company services that infringe upon third party intellectual property; (ii) expend significant resources to develop or acquire non-infringing intellectual property; (iii) discontinue processes incorporating infringing technology; or (iv) obtain licenses to the infringing intellectual property. The Company may not be able to obtain any such licenses to intellectual property it does not own on favorable terms, or at all.
If the Company fails to integrate its software with other software applications and competitive or adjacent offerings that are developed by others, or fails to make its software available on mobile and other handheld devices, the software may become less marketable, less competitive or obsolete and the Company’s revenues could be harmed.
The Company’s software may integrate with a variety of other software applications, and also may integrate with competing or adjacent third-party offerings. The Company needs to continuously modify and enhance its CYDigital Platform to adapt to changes in cloud-enabled hardware, software, networking, browser and database technologies. Any failure of the Company’s software to integrate effectively with other software applications and product offerings could reduce the demand for the Company’s software or result in customer dissatisfaction and harm to the Company’s business. If the Company is unable to respond to future changes in the software applications and tools with which its software integrates in a cost-effective manner, then its software may become less marketable, less competitive or obsolete. Competitors may also impede the Company’s attempts to create integration between its software and competitive offerings, which may decrease demand for the Company’s software. In addition, an increasing number of individuals are utilizing devices other than personal computers, such as mobile phones, tablets and other handheld mobile devices, to access the Internet in order to conduct business. If the Company cannot effectively make its software available on these devices, it may experience difficulty attracting and retaining Platform users.
The Company’s use of open source software could negatively affect its ability to sell its software and subject the Company to possible litigation.
The Company’s software, or a portion thereof, may incorporate open source software, and the Company may continue to incorporate such open source software in the future. Few of the licenses applicable to open source software have been interpreted by courts, and should the Company incorporate or integrate such open source software into its proprietary software, it is impossible at this time to predict what a court will decide with any certainty. Moreover, the Company cannot provide any assurance that it has not incorporated additional open source software in its software in a manner that is inconsistent with the terms of any license or the Company’s current policies or procedures. If the Company fails to comply with these licenses, then it may be subjected to certain requirements, including requirements that: (a) it offer the Company’s software that incorporates such open source software for no cost, (b) it makes available such source code for modifications or derivative works that it creates based upon, incorporating or using such open source software or (c) it licenses such modifications or derivative works under the terms of such open source licenses. If an author or other third party that distributes such open source software were to allege that the Company has not complied with the conditions of one or more of these licenses, the Company could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of its software that contained the open source software and required to comply with the foregoing conditions. Besides the expense of litigation, such action could disrupt the distribution and sale of some of the Company’s software products or services.
The Company relies on the Internet to provide its software services.
The Company relies in large part on the performance of Internet services provided or controlled by third parties. At times, natural disasters, terrorist acts, or actions or inactions caused by these third parties can produce situations in which such connections to the Internet may be impaired or disrupted. Any such impairment or disruption for a considerable period of time, could have significant negative impacts on the Company’s business and revenues.
Risks Related to the Securities (i.e., the Warrants and Non-Voting Stock)
Neither the Offering nor the Warrants or Non-Voting Stock have been registered under federal or state securities laws, leading to an absence of certain regulation applicable to the Company.
No governmental agency has reviewed or passed upon this Offering, the Company, the Warrants or the Non-Voting Stock of the Company. The Company also has relied on its interpretations of exemptions from securities registration requirements under applicable state securities laws. Investors in the Company and purchasers of the Warrants, therefore, will not receive any of the benefits that such registration would otherwise provide. Prospective investors must therefore assess the adequacy of disclosure and the fairness of the terms of this Offering on their own or in conjunction with their personal advisors. In addition, regulators or courts may decide that the Company’s interpretations of the exemptions on which it seeks to rely are incorrect, resulting in significant conequences to the Company, including the possibility that the Company would have to cease operations.
Warrants that are redeemed and the proceeds then used to purchase utility tokens are an untested form of transaction.
Although the issuance of warrants that entitle the holder to the right to purchase a security in the future is not a new concept, the issuance of warrants that can be redeemed and the proceeds of which used to purchase non-securities, in particular digital assets in the form of utility tokens, is an untested offering form and its validity may be suspect. Although the Company has taken steps to ensure compliance with its understandings of applicable United States federal and state securities laws, it is possible that following review, regulators may question or challenge the offering structure resulting in significant costs to the Company and remedies that could include, but not be limited to: (a) rescission; (b) a determination that the CYDT are securities that may only be traded on a national securities exchange or authorized alternative trading system, which would impose requirements that would make it impossible to operate the CYDigital Platform as intended and result in a reduction in value of the Warrants; (c) restitution; and (d) civil monetary penalties.
The Warrants are “restricted securities” subject to transfer restrictions.
Pursuant to the terms of the Warrant Purchase Agreement, the Warrants may not be offered, sold, or transferred without the Company’s prior written consent. In addition, because the Warrants are being offered only to accredited investors in a 506(c) offering under Regulation D under the Securities Act of 1933, the Warrants are “restricted securities” with extremely limited, or non-existent, resale potential. The Company is not obligated to register for sale, under either federal or state securities laws, any Warrant, and the Company has no plans to do so. Accordingly, the sale, transfer or other disposition of any Warrant is substantially restricted by applicable federal and state securities laws.
There is currently no market for the Warrants and Non-Voting Stock and there may never be such a market.
Prior to this Offering, there has been no market for the Warrants being issued or the Non-Voting Stock for which they may be converted. The Company cannot predict the extent to which a market for the Warrants or Non-Voting Stock will develop or be sustained after this Offering, or how the development of such a market might affect the market price of such instruments. The initial offering price of the Warrants in this Offering was determined by the Company’s management based upon factors relating to the estimated pricing of the proposed CYDT and is not in any way indicative of the Company’s actual value or the value of CYDT, if and when issued, following the completion of this Offering. Investors may not be able to resell their Warrants at or above the initial offering price, if at all. If the Warrants are redeemed and used to purchase Non-Voting Stock of the Company, investors may also not be able to resell their shares of Non-Voting Stock at or above the initial offering price, if at all.
You should consult a tax professional regarding the appropriate tax treatment of the Warrants.
This offering structure, whereby Warrants may be converted to Non-Voting Stock or redeemed and the proceeds used to purchase CYDT, is untested and may present unique tax implications. You should consult a tax professional familiar with warrants and digital assets, such as utility tokens, to determine the proper tax treatment.
Risks Related to the CYDT
The regulatory regime governing blockchain technologies, tokens, and digital assets is uncertain and new regulations or policies may adversely affect the development of the CYDigital Platform and CYDT.
Regulation of digital assets is currently underdeveloped and likely to rapidly evolve as government agencies take greater interest in them. Such regulation varies significantly among international, federal, state, and local jurisdictions and is subject to significant uncertainty. Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of our approach to implementing the rewards points system, and the technology behind them or the means of transaction in or transferring them. Failure by the Company or certain users of the rewards points to comply with any laws, rules, and regulations, some of which may not exist yet or that are subject to interpretations that may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines.
Distributed ledger technologies, such as that intended to be used for the CYDigital Platform, face an uncertain regulatory landscape in many foreign jurisdictions.
Various foreign jurisdictions may, in the near future, adopt laws, regulations, or directives that affect certain possible implementations of the CYDigital Platform and distribution or use of CYDT that are under consideration. Such laws, regulations, or directives may conflict with those of the United States or may directly and negatively impact the Company’s business. The effect of any future regulatory change is impossible to predict, but such change could be substantial and materially adverse to the adoption of the CYDigital Platform.
New or changing laws and regulations or interpretations of existing laws and regulations, in the United States and other jurisdictions, may materially and adversely impact the effective use and perceived or actual value of CYDT.
The further development and acceptance of blockchain networks, which are part of a new and rapidly changing ecosystem, are subject to a variety of factors that are difficult to evaluate.
The slowing or stopping of the development or acceptance of blockchain networks and blockchain technology could have an adverse effect on the successful development and adoption of the CYDigital Platform. The growth of blockchain technology in general is subject to a high degree of uncertainty.
Breakthroughs in the field of cryptography could create significant weaknesses in security for blockchain-based technologies, including the CYDigital Platform.
Cryptography is evolving and there can be no guarantee of security at all times. Advancement in cryptography technologies and techniques, including, but not limited to code cracking, and the development of artificial intelligence and/or quantum computers, could be identified as risks to all cryptography-based systems, including some implementations of components of the CYDigital Platform. When such technologies and/or techniques are applied to the CYDigital Platform, adverse outcomes such as theft, loss, disappearance, destruction, devaluation, or other compromises may result. The security of the Company and the CYDigital Platform cannot be guaranteed as the future of cryptography or security innovations is unpredictable.
Regulators may characterize CYDT as securities.
The Company intends to launch the CYDigital Platform at a time when CYDT will have consumptive uses for all Platform participants and believes that this will result in the creation of a non-security, utility token. However, securities regulators may disagree, which would result in the imposition of requirements that would make it impossible to operate the CYDigital Platform and use of CYDT as intended. An inquiry from securities regulators, even if CYDT is ultimately determined to not be a security, could result in substantial legal costs for the Company.
CYDT purchases and acquisitions will be subject to further agreements and restrictions.
All CYDT purchases and acquisitions will be subject to a Token Purchase Agreement to be distributed prior to the Token Platform Launch. Investors who redeem Warrants in order to purchase CYDT will also be required to execute and comply with a Warrant Redemption Agreement.
Purchasers and holders of CYDT may lose the full amount of the purchase price or acquisition cost.
It is possible that due to lack of capital, technological difficulties, personnel, regulatory issues, business issues or other unforeseen causes that even after the CYDigital Platform is launched, the Company could be forced to cease operations and cease as a going concern. If that happens, CYDT may cease to have any use or value and purchasers and/or holders of CYDT may lose the full amount of their purchase or acquisition costs of CYDT.
Even if the CYDigital Platform is launched, there may be an insufficient number of advertisers.
While the price of CYDT will be set by the Company at the time of distribution, the ultimate utility of CYDT to CYDigital Platform participants is dependent on market adoption and the Company’s ability to find a sufficient number of advertisers who are willing to engage with consumers and offer discounts in exchange for consumer data. If the Company is unable to find sufficient advertisers, the CYDigital Platform may not function as intended or it may take an unusually long period of time to make use of a large quantity of CYDT.
There is currently no market for transactions involving CYDT outside of the CYDigital Platform.
There is currently no public or other market for the re-sale or exchange of CYDT. The only planned use for CYDT is within the CYDigital Platform wherein consumers will be awarded CYDT in connection with certain specific actions and may then redeem CYDT in exchange for offers from advertisers. The Company does not own or control any exchange and any decision to allow CYDT to be sold on an exchange is subject to the sole discretion of each exchange. The Company makes no representation or guarantee that a market for the sale, purchase or other transactions involving CYDT will develop or be sustained. If a market develops, the Company cannot guarantee, control or set the terms at which independent parties may buy or sell CYDT. In those circumstances, the Company has no control over the price or value of CYDT and the price or value of CYDT will be determined by market forces. Any market for CYDT, if any develops, may be illiquid, volatile and subject to other limitations. The Company, in its sole discretion, reserves the right to impose limitations, or change any existing limitations, on users’ ability to transfer CYDT outside of the CYDigital Platform as circumstances, including legal or regulatory requirements, may warrant.
In addition to the risks listed above, businesses are often subject to risks not foreseen or fully appreciated by the management. It is not possible to foresee all risks that may affect the Company. Moreover, the Company cannot predict whether the Company will successfully effectuate the Company’s current business plan. Each prospective investor is encouraged to carefully analyze the risks and merits of an investment in the Warrants and should take into consideration when making such analysis, among other, the Risk Factors discussed above.
THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK AND MAY RESULT IN THE LOSS OF YOUR ENTIRE INVESTMENT. ANY PERSON CONSIDERING THE PURCHASE OF THESE SECURITIES SHOULD BE AWARE OF THESE AND OTHER FACTORS AND SHOULD CONSULT WITH HIS OR HER LEGAL, TAX AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN THE WARRANTS. THE WARRANTS SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD TO LOSE ALL OF THEIR INVESTMENT.