Veritas Farms (VFRM) Risk Analysis

Under the Jobs Act, the information that the Company is required to disclose has been reduced in a number of ways. Before the adoption of the Jobs Act, the Company was required to register the common stock under the Exchange Act within 120 days after the last day of the first fiscal year in which the Company had total assets exceeding $1,000,000 and 500 record holders of the common stock; the Jobs Act has changed this requirement such that the Company must register the common stock under the Exchange Act within 120 days after the last day of the first fiscal year in which the Company has total assets exceeding $10,000,000 and 2,000 record holders or 500 record holders who are not "Accredited Investors." As a result, the Company is now required to register the common stock under the Exchange Act substantially later than previously. Since the Company is not required, among other things, to file reports under Section 13 of the Exchange Act or to comply with the proxy requirements of Section 14 of the Exchange Act until such registration occurs or to comply with certain provisions of Sarbanes-Oxley Act and the Dodd-Frank Act and certain provisions and reporting requirements of or under the Securities Act and the Exchange Act, and the Company's officers, directors and 10% stockholders are not required to file reports under Section 16(a) of the Exchange Act until such registration occurs, the Jobs Act has had the effect of reducing the amount of information that the Company and its officers, directors and 10% stockholders are required to provide for the foreseeable future. In addition, the Company is a "smaller reporting company," as defined in Rule 12b-2 under the Exchange Act. A smaller reporting company is generally defined as a company with less than $250 million of public float or a company with less than $100 million in annual revenues and either no public float or a public float that is less than $700 million. As a smaller reporting company, we are not required to provide certain information in our SEC reports as is otherwise required by larger companies. Accordingly, the Company is not required, among other things, to provide information in its SEC reports as to "risk factors", "selected financial data", "supplementary financial information", "quantitative and qualitative disclosures about market risk", "only two-year MD&A comparison rather than three-year comparison", "compensation discussion and analysis", "grants of plan-based awards table", "option exercises and stock vested table", "pension benefits table", "nonqualified deferred compensation table", "disclosure of compensation policies and practices related to risk management", "pay ratio disclosure", "compensation committee report", "description of policies/procedures for the review, approval or ratification of related party transactions", or "auditor's attestation of management's assessment of internal control over financial reporting". We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares of common stock held by non-affiliates exceeds $250 million as of the end of our second fiscal quarter ending June 30th of each year, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our shares of common stock held by non-affiliates exceeds $700 million as of the end of our second fiscal quarter ending June 30th of each year. For as long as we continue to be a smaller reporting company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of this classification. We also expect that we will remain a smaller reporting company for the foreseeable future, and we could retain our smaller reporting company status indefinitely depending on the size of our revenues and public float. As a result of such reduced disclosure, the price for the common stock may be adversely affected, if an active market ever develops.

Our shares of common stock are currently quoted on the OTCQB market tier of the over-the-counter market operated by OTC Markets Group, Inc. ("OTC Markets"). Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our shares of common stock for reasons unrelated to operating performance. Accordingly, OTCQB may provide less liquidity for holders of our shares of common stock than a national securities exchange such as the Nasdaq Stock Market. Moreover, there is a limited trading market for our common stock. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that trading market might become. If a liquid trading market does not develop or is not sustained, investors may find it difficult to dispose of shares of our common stock and may suffer a loss of all or a substantial portion of their investment in our common stock. Market prices for our shares of common stock may also be influenced by a number of other factors, including: - the issuance of new equity securities pursuant to a public or private offering;- changes in interest rates;- competitive developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;- variations in quarterly operating results;- change in financial estimates by securities analysts;- the depth and liquidity of the market for our shares;- investor perceptions of the Company and its industry generally; and - general economic and other national conditions. All of the foregoing factors may limit the ability of an investor to liquidate their investment in our common stock. There is no assurance that we can successfully develop or maintain an active established trading market for our shares of common stock. Accordingly, investors should be prepared to hold the securities for an indefinite period of time.

Broker-dealers are generally prohibited from effecting transactions in "penny stocks" unless they comply with the requirements of Section 15(h) of the Exchange Act and the rules promulgated thereunder. These rules apply to the stock of companies whose shares are not traded on a national stock exchange, trade at less than $5.00 per share or who do not meet certain other financial requirements specified by the SEC. Trades in our common stock are subject to these rules, which include Rule 15g-9 under the Exchange Act, which imposes certain requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, brokers/dealers must make a special written determination that the penny stock is a suitable investment for purchasers of the securities and receive the purchaser's written agreement to the transaction prior to sale. The penny stock rules also require a broker/dealer, prior to effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. A broker/dealer also must provide the customer with current bid and offer quotations for the relevant penny stock and information on the compensation of the broker/dealer and its salesperson in the transaction. A broker/dealer must also provide monthly account statements showing the market value of each penny stock held in a customer's account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. Our securities have in the past constituted "penny stock" within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares and impede their sale in the secondary market.

Our directors, within the limitations and restrictions contained in our articles of incorporation, with the consent of the majority of the holders of the Series B Convertible Preferred Stock and under certain circumstances with the consent of the majority of the holders of the Series A Convertible Preferred Stock, and without further action by the holders of our common stock, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. While we have no intention of issuing additional shares of preferred stock at the present time, we continue to seek to raise capital through the sale of our securities and may issue shares of preferred stock in connection with a particular investment. Any issuance of shares of preferred stock could adversely affect the rights of holders of our common stock.

Each outstanding share of the Series B Convertible Preferred Stock of the Company entitles the holder to 250 votes at any meeting of our stockholders, for an aggregate of 250,000,000 votes, and such shares of Series B Convertible Preferred Stock will vote together with the common stockholders. As a result of the change in control, the holder of the Series B Convertible Preferred Shares could vote the shares in a manner that could be contrary to the interests of the holders of our common stock. All shares of the Series B Convertible Preferred Stock are owned by the Wit Trust.

As of the date of filing this report, the Wit Trust Wit Trust owned approximately 88% of our outstanding voting securities. As a result of this majority ownership of voting securities, the Wit Trust has the ability to exert substantial control over all matters requiring approval by our stockholders and our board of directors, including the election and removal of directors, any proposed merger, consolidation or sale of all or substantially all of our assets and other significant corporate transactions, and may delay, deter or prevent a change in control and may make some transactions more difficult or impossible to complete without the support of the Wit Trust, regardless of the impact of such transaction on our other stockholders. This concentration of control could be disadvantageous to other stockholders with interests different from those of the Wit Trust.

The "market overhang" from options, warrants, preferred stock and convertible securities could adversely impact the market price of our common stock as a result of the dilution which would result if such securities were exercised for or converted into common stock. As of the date of filing this report, there were 41,625,331 shares of our common stock outstanding. In addition, the Company has issued and outstanding (i) 4,000,000 shares of Series A Convertible Preferred Stock, each share convertible into 20 shares of common stock for an aggregate of 80,000,000 shares of common stock, (ii) 1,000,000 shares of Series B Convertible Preferred Stock, each share convertible into 5 shares of common stock for an aggregate of 5,000,000 shares of common stock, and (iii) options, warrants and other securities exercisable for or convertible into 68,555,270 shares of common stock. All outstanding shares of our common stock are eligible for sale in the public market under applicable federal securities laws, subject in certain cases to the requirements of Rule 144 under the Securities Act, and shares issued upon the exercise or conversion of outstanding options, warrants, preferred stock or other convertible securities may also be eligible for sale in the public market, to the extent permitted by Rule 144 or other applicable securities laws and the provisions of the applicable option, warrant, preferred stock and convertible securities agreements. If these shares are sold, or if it is perceived that they may be sold, in the public market, the trading price of our common stock could fall.