CRSF 10-K & 10-Q changes, risk factors and insider trading

Our OpenLocker subsidiary is an early-stage company with a limited operating history. Such limited operating history may not provide an adequate basis to judge our future prospects and results of operations.

OpenLocker was incorporated in Delaware on August 25, 2021. We have limited experience and a limited operating history in which to assess our future prospects as a company. In addition, the market for our products and services is highly competitive. If we fail to successfully develop and offer our products and services in an increasingly competitive market, we may not be able to capture the growth opportunities associated with them or recover our development and marketing costs, and our future results of operations and growth strategies could be adversely affected. Our limited history may not provide a meaningful basis for investors to evaluate our business, financial performance, and prospects.

We may fail to successfully execute our business plan.

Our stockholders may lose their entire investment if we fail to execute our business plan. Our prospects must be considered in light of the following risks and uncertainties, including but not limited to, competition, the erosion of ongoing revenue streams, the ability to retain experienced personnel and general economic conditions. We cannot guarantee that we will be successful in executing our business plan. If we fail to successfully execute our business plan, we may be forced to cease operations, in which case our stockholders may lose their entire investment.

Currently, our President’s law firm is providing legal services necessary to maintain our reporting obligations under the Exchange Act without charge. If our President were to leave or otherwise cease providing these services without charge, we could incur significant additional expenses which could harm our business.

We also process, store and transmit our own data as part of our business and operations. This data may include personally identifiable, confidential or proprietary information, and we use third-party service providers to store and process certain data for us. There can be no assurance that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats. While we take steps in an effort to protect the security of our platform and the availability, integrity, confidentiality and security of our data, our security measures or those of our third-party providers could fail and result in unauthorized access to or use of our platform or unauthorized, accidental or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data.

Whether or not accurate, a market perception that our platform is insecure, underperforming or unreliable could result in:

Any failure to protect our future intellectual property rights could impair our ability to protect our technology and our brand.

Our success depends in part on our ability to enforce our intellectual property and other proprietary rights of the companies we expect to acquire. We expect to rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions, to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary information, develop and market products similar to ours or use trademarks similar to ours, each of which could materially harm our business. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.

Our expansion into new products, services, technologies, and geographic regions subjects us to additional risks.

We may have limited or no experience in our newer markets, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technological challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. Profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.

We rely on third-party systems to conduct our business and relationships with payment processors, advertisers, third party sellers of our products, and our revenues and market share may decrease if these third-party relationship and systems are unavailable in the future or if they no longer offer quality performance.

We rely on third-party computer systems and third-party service providers, including payment services such as Shopify Payment for credit card verifications and confirmations, to host our website and to advertise and deliver the products sold on our website to customers. We also rely on third-party licenses for components of the software underlying our technology platform. Any interruption in our ability to obtain the products or services of these or other third parties or deterioration in their performance could impair the timing and quality of our own service. If our service providers fail to deliver high-quality services in a timely manner to our customers, our services will not meet the expectations of our customers and our reputation and brand will be damaged. Furthermore, if our arrangements with any of these third parties are terminated, we may not find an alternate source of systems support on a timely basis or on terms as advantageous to us. In addition, our contracts or arrangements with suppliers do not provide for the continuation of particular pricing practices, for the availability of any specific services and generally may be terminated by either party. If we are unable to develop and maintain relationships with these third-party suppliers that will allow us to obtain sufficient levels of service on acceptable commercial terms, such inability could harm our business, prospects, financial condition and results of operations.

We may not be able to compete successfully against existing or future competitors including larger, well-established and well-financed NIL and sports focused companies.

Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. In addition, some of our competitors may be able to devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing and devote substantially more resources to systems development than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We cannot provide assurance that we will be able to compete successfully against existing or future competitors.

Our business depends on effective marketing, including marketing via email and social networking messaging, and we intend to increase our spending on marketing and branding, which may adversely affect our financial results.

We depend on effective marketing to attract customers and merchants. We depend on email and social networking messaging to promote our site and offerings and to generate a substantial portion of our revenues. If we are unable to develop, implement and maintain effective and efficient cost-effective advertising and marketing programs, it would have a material adverse effect on our financial results and business. Further, as part of our growth strategies, we intend to increase our spending on marketing and branding initiatives significantly, which may adversely affect our financial results. There is no assurance that any increase in our marketing or branding expenditures will result in increased market shares or will ultimately have a positive effect on our financial results.

Risks Related to Digital Assets

Whether a particular digital asset is a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if we are unable to properly characterize a digital asset, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.

The SEC and its staff have taken the position that certain crypto assets (which includes digital assets) fall within the definition of a “security” under the U.S. federal securities laws. We do not believe that the digital assets we have sold are securities, however, regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC, a state or foreign regulatory authority, or a court were to determine that a digital asset listed and sold on our platform is a “security” under applicable laws.

The classification of a digital asset as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer and sale of such assets. For example, a digital asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in digital assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade digital assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an ATS in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration, and qualification requirements.

We have policies and procedures to analyze whether the digital assets that we sold on our platform could be deemed to be a “security” under applicable laws. Our policies and procedures do not constitute a legal standard but rather represent our company-developed model, which permits us to make a risk-based assessment regarding the likelihood that a particular digital asset could be deemed a “security” under applicable laws. Regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC, a state or foreign regulatory authority, or a court were to determine that a digital asset listed and sold on our platform is a “security” under applicable laws. Customers that purchased such digital assets on our platform and suffered losses could also seek to rescind a transaction that we facilitated as the basis that it was conducted in violation of applicable law, which could subject us to liability.

Although we no longer offer a secondary market or trading platform, we did at one time. Our secondary market was not registered or licensed with the SEC or foreign authorities as a broker-dealer, national securities exchange, or ATS (or foreign equivalents), and we will not seek to register or rely on an exemption from such registration or license. We could be subject to legal or regulatory action in the event the SEC, a state or foreign regulatory authority, or a court were to determine that we operated an unregistered exchange, unregistered broker-dealer or unregistered clearly agency. We believe that our risk is reduced as no secondary or trading transactions were attempted or occurred on our marketplace, but regardless of our conclusion our business would be significantly impacted if the SEC, a state or foreign regulatory authority, or a court were to determine otherwise.

In addition, we could be subject to judicial or administrative sanctions for failing to offer or sell the digital assets in compliance with the registration requirements, or for acting as a broker, dealer, or national securities exchange without appropriate registration. Such an action could result in injunctions, cease and desist orders, as well as civil monetary penalties, fines, and disgorgement, criminal liability, and reputational harm.

There are risks associated with operating a marketplace for digital assets.

There are risks associated with marketplaces for digital assets that sell user generated content, including but not limited to, counterfeit assets, intellectual property violations, unregistered sales of securities, assets on smart contracts with bugs, and assets that may become untransferable. These risks could create liability and have an adverse effect on the Company.

Our risk management efforts may not be effective to prevent fraudulent activities by third-party providers or other parties, which could expose us to material financial losses and liability and otherwise harm our business.

We contract with third-party providers for applications available through our platform, as well as some services required to maintain the platform. We may be targeted by parties, including customers, hackers, or third-party providers, who seek to commit acts of financial fraud using techniques such as stolen identities and bank accounts, compromised email accounts, employee or insider fraud, account takeover, or other types of fraud. We may suffer losses from acts of financial fraud committed by our employees or third parties.

The techniques used to perpetrate fraud on our platform and the applications accessed through our platform are continually evolving, and we expend considerable resources to monitor and combat them, and to inform customers of the limits to the control we have over third-party provider activities. Additionally, when we introduce new products and applications, or expand existing products, we may not be able to identify all risks created by the new products or applications. Our risk management policies and procedures may not be sufficient to identify all of the risks to which we or our customers are exposed, to enable us to prevent or mitigate the risks we have identified, or to identify additional risks to which we or our customers may become subject in the future. Furthermore, our risk management policies and procedures may contain errors, or our employees or agents may commit mistakes or errors in judgment as a result of which we may suffer large financial losses.

Overview

Established on August 25, 2021, OpenLocker Inc. (the “Company” or “OpenLocker”) is dedicated to offering marketing solutions for collegiate and professional sports organizations and athletes to deepen fan engagement through innovative collectibles, membership rewards, exclusive events and experiences.

The OpenLocker mission is to empower athletes by monetizing their Name, Image and Likeness (“NIL”) with autographed collectibles, meaningful fan experiences and partnerships with local merchants, regional and national brands.

OpenLocker launched its first fan community at the University of Connecticut in February 2022, during the first season following the National Collegiate Athletic Association (“NCAA”) policy change allowing student-athletes to receive compensation for their NIL. The Company deliberately included all 14 eligible members of the men’s basketball team to galvanize the fan base and name the fan community the Bone Yard Huskyz Club (BYHC). The OpenLocker design team created the BYHC logo and Huskyz avatar to play off of the university’s Huskies mascot and to have an edgy feel. A Huskyz avatar was created in the likeness of each of the athletes and selected super fans for branding and awareness campaigns. A website with a project roadmap outlining the perks and rewards of club membership was activated two weeks prior to the release date, which was strategically timed around the basketball team’s season schedule. A comprehensive marketing campaign included digital programmatic advertising, organic and paid social media strategy (including pre- and post-drop Twitter spaces conversations with fans, blockchain experts, athletes and parents of athletes), podcasts, email blasts and gorilla marketing at several home basketball games. The OpenLocker athlete liaison also provided the athletes with graphics and talking points they could use to leverage their social media followings and promote sales of their collectibles by word-of-mouth.

OpenLocker initially sold digital collectibles, also known as non-fungible tokens (“NFTs”), due to the popularity at the time and advantages that blockchain technology offered for authenticating collectibles and providing utility and rewards to UConn fans. OpenLocker minted the NFTs on the FLOW blockchain and sold them on its e-commerce platform for fiat currency to appeal to an audience unfamiliar with cryptocurrency. A majority of the revenue from the BYHC project was generated on the first day of sales. The first two hours were the busiest as fans were incentivized by the free autographed “Platinum card” that was included with purchase for the first 25 digital collectibles sold per athlete. This unique collectible is a metal, wallet-sized card hand-signed by the athlete with the digital art printed on the front and quick response (QR) code that directs to the boneyardhuskyzclub.com. Customer behavior and feedback confirmed that the physical collectible was deemed to be of greater value to the majority of fans, who had little to no experience with blockchain technology. Since then, OpenLocker has directed its efforts to marketing and selling autographed physical collectibles along with community membership rewards programs, events and experiences.

Following the success of its college fan community model, OpenLocker launched the OpenStable marketplace in April 2022 to engage the next generation of thoroughbred racing enthusiasts. Through its relationships with owners, trainers and influencers in the racing industry, OpenStable aimed to give fans access to exclusive information, real life experiences, and memorabilia so that they could engage in a truly immersive journey covering a racehorse’s career. By offering both autographed physical collectibles and ownership of digital collectibles which unlocked rewards and experiences, both in the virtual and physical realms, OpenStable was intended to attract a younger audience with a goal to develop the next generation of thoroughbred racing fans.

The Company continued to include digital collectibles with the purchase of a physical collectible featuring student-athlete NIL in the following NCAA athletic season so it would have the option to use blockchain technology to verify ownership for its fan loyalty programs. However, the Company has discontinued sale and distribution of digital collectibles, including NFTs, as there was little interest evidenced by the fact that so few customers actually completed the steps required to view and claim them to a personal digital wallet. The OpenLocker NFT viewer remains accessible so that existing owners may continue to have access to their digital collectibles while the Company focuses on delivering physical collectibles and enhancing the fan experience by removing barriers to fan engagement.

In addition, from April 2022 through September 2022, OpenLocker offered a secondary marketplace for peer-to-peer transactions of digital collectibles, however, no secondary sales were effectuated or attempted and as of September 2022 this secondary marketplace was discontinued. Although OpenLocker no longer operates a trading platform, owners of issued digital collectibles may transfer their digital collectible to their personal digital wallet and thereafter transfer such digital collectible to the wallet of their choice.

As of November 27, 2024, OpenLocker has active fan communities at University of Florida (Gataverse), Florida Atlantic University (PowerOwls Club) and Radford University (RowdyRedz) and is focusing on building club membership rewards programs. While OpenLocker pays athletes a majority of revenue generated from sales of collectibles containing their NIL and compensating them for social media activities and appearances, the Company retains all revenue from sales of community-branded collectibles which do not use athlete NIL nor the marks and logos of any institution. By partnering with local businesses, as well as regional and national brands who can offer perks and rewards to community members, OpenLocker is able to create demand and further engage fans and the local community.

In addition to supporting the athletes, for each fan community, holders of issued digital collectibles and/or authenticated physical collectibles are entitled to participate in any club membership activities, perks or benefits which the Company may offer or arrange from time to time. Such perks or benefits may include, for example, access to community events (such as meet and greet with athletes), giveaways, and rewards based on an athlete’s performance.

OpenLocker is also in discussions with NIL collectives, communities focused on raising funds for school-specific NIL fundraising efforts, that are interested in offering membership rewards programs to their target audiences.

The Company is also in discussions with national brands who are interested in leveraging their relationships with student-athletes to create social media influencer campaigns and build customer loyalty programs.

OpenLocker’s current revenue model includes (i) sales on the OpenLocker platform, (ii) sponsorship and advertising, and (iii) service fees for creative design work, development and product fulfillment services.

OpenLocker believes that it has found a unique and attractive market for autographed collectibles and community rewards programs by focusing on the college athlete market, as we believe that interest in college sports is growing.

Principal Products and Services

OpenLocker aims to provide a comprehensive suite of collectibles, products and services, adopting a hybrid flexible model creating products both licensed and non-licensed with colleges, professional sports teams, leagues, brands, etc.

Autographed Physical Collectibles (Authenticated Physical Collectibles)

The Platinum Card by OpenLocker is a metal, wallet-sized card that has the digital art print sublimated on one side and a QR code printed on the other side which directs to the fan community online portal. The serial number is laser engraved on the card and there is space reserved for the athlete to hand-sign.

The Company also offers autographed collectibles made of PVC plastic that is even more durable, making it a preferable material to carry around.

The Platinum Card entitles the holder to receive any perks or benefits that may be offered by OpenLocker and its brand partners.

Gear

OpenLocker also sells exclusive gear, including t-shirts, sweatshirts, hats and pins, in its exclusive gear shops.

OpenLocker Marketplace

The OpenLocker Marketplace provides a user-friendly shopping experience for sports fans to purchase membership cards, gear and collectibles featuring their favorite athletes for access to exclusive perks and rewards.

Sports Branding Services

OpenLocker also provides branding services for individual athletes, university collectives, horse owners/trainers, and other entities interested in creating a distinctive identity, building their fan base, and maximizing revenue. From logo creation and styling to social media messaging and activation campaigns, OpenLocker’s team can provide enhanced support to collaborating colleges and athletes.

Plan of Operations

Over the next 12 months, we expect to require approximately $2,000,000 in operating funds to carry out our intended plan of operations.

We are planning to obtain the funds necessary to execute our plan of operations from various capital raises, including potentially through private placements or our common stock or the issuance and sales of convertible notes, as well as potentially through a registration statement or an offering statement filed with the SEC.

There can be no assurance that we will be able to obtain the necessary funds for our foregoing operations on terms that are acceptable to us or at all, and there can be no assurance that our plan of operations can be executed as planned, or at all.

Going Concern and Management’s Plans

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.

As reflected in the accompanying consolidated financial statements, for the fiscal year ended July 31, 2024, the Company had:

Additionally, at July 31, 2024, the Company had:

We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company has cash on hand of $4,770 at July 31, 2024. Although the Company intends to raise additional debt or equity capital, the Company expects to continue to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could be significant as operations ramp up along with continuing expenses related to compensation, professional fees, and regulatory are incurred.

The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment, we performed a comprehensive analysis of our current circumstances, including our financial position, our cash flows and cash usage forecasts for the twelve months ended July 31, 2024, and our current capital structure including equity-based instruments and our obligations and debts.

The Company has satisfied its obligations from the issuance of common stock; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.

If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.

These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Management’s strategic plans include the following:

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

In financial reporting, goodwill is not amortized, but is tested for impairment annually (July 31) or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Events that result in an impairment review include significant changes in the business climate, declines in our operating results, or an expectation that the carrying amount may not be recoverable. We assess potential impairment by considering present economic conditions as well as future expectations. All assessments of goodwill impairment are conducted at the individual reporting unit level.