Cannagistics (CNGT) Risk Analysis

Our Common Stock is currently quoted for public trading on the OTC Pink Open Market. Presently, this market, places a "shell risk" warning to investors. While the acquisition of Integrity Wellness and commencement of operations with respect to the related CBD products may remove the shell risk designation, the OTC Pink Open Market generally is not an active market. Further, our Common Stock has only traded sporadically. We intend to apply to have our Common Stock quoted on the OTCQB. Even if our Common Stock begins trading on the OTCQB, investors should be aware that the OTCQB is not as liquid as major national securities exchanges. The trading price and volume of our Common Stock have historically been low and may become subject to wide fluctuations. Trading prices of our Common Stock may fluctuate in response to several factors, many of which are beyond our control. The stock market has generally seen extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies such as ours with limited business operations or that recently began operating in an entirely new industry. These stock market and industry factors may adversely affect the market price of our Common Stock, regardless of our operating performance. Finally, in the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.

As of October 28, 2021, we have $1,200,000 of convertible debt outstanding which convert into a total of 120,000,000 shares of Common Stock id converted at the minimum price of $0.01 per share, in addition to the approximately 219,468,674 shares of Common Stock presently outstanding. Given our history of operating losses and continued expenditures, which we expect to increase in the short-term as we attempt to establish and grow our operations through Integrity Wellness and its products, we may face difficulty paying these obligations as and when they come due. None of the Notes totaling $1,200,000 are currently past due. The convertible notes have maturity beginning July 2022 through August 2022. The promissory notes documenting this indebtedness contain conversion price triggers upon an event of default which entitle the holder to receive more shares of Common Stock upon conversion during a continuing default. Conversions of the convertible debt would therefore have a dilutive effect on our stockholders, whereas payment of the debt will further add to our deficit, either of which could adversely affect our stockholders. The Company's subsidiary has defaulted Convertible Notes totaling approximately $300,000.

Any future entry into new markets and/or growth in our consumer base may place a significant strain on our resources and increase demands on our executive management, personnel and operational systems, and our human, administrative and financial resources may be inadequate to meet these demands. We may also be unable to effectively manage any expanded operations or achieve planned growth on a timely or profitable basis, particularly if the number of customers using our products significantly increases within a short period of time. If we are unable to manage any operational expansion effectively, we may experience operating inefficiencies, the quality of and market for our products could decline, and our business and results of operations could be materially adversely affected.

Following the passage of the 2018 Farm Bill described below and elsewhere in this Filing under the title "Government Regulations," our industry experienced an influx of hemp farmers and producers which resulted in a saturated marketplace. As a result, the supply for CBD and related products has in the past exceeded demand. This trend could force us to reduce our prices to remain competitive or could result in lower sales levels than we have experienced in the past, either of which would result in a decline in revenue or growth rate and could materially adversely affect our financial condition and prospects.

Adverse publicity concerning any actual or purported failure by us or our competitors to comply with applicable laws and regulations or concerning any other aspect of our business or the CBD industry could have an adverse effect on the public perception of us and our products. This, in turn, could negatively affect our ability to obtain financing, endorsers and attract distributors, retailers or consumers for our products, which would have a material adverse effect on our ability to generate sales and revenue. Our distributors' and customers' perception of the safety, utility and quality of our products or even similar products distributed by others can be significantly influenced by national media attention, publicized scientific research or findings, product liability claims and other publicity concerning our products or similar products distributed by others. Adverse publicity, whether or not accurate, that causes a perceived connection between the use of our products or any similar products and illness or other adverse effects, will likely diminish the public's perception of and in turn the demand for our products. Claims that any products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could have a material adverse effect on the market demand for our products, including reducing our sales and revenue, which would have a material adverse effect on our business.

We intend to rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our products. In connection with our acquisition of Integrity Wellness in July 2021, at least one patent license, for ImmuniZin, was held by Availa Bio, Inc. and was not assignable without the patent holder's consent. If we cannot obtain the patent holder's consent, we cannot market this product. Further, with respect to other patents and licenses for the Integrity Wellness products, we have been unable to obtain the documentation for transfers thereof to Integrity Wellness, and some of the documentation we do have is illegible. As a result of these issues, we may lack patent protection for some of our products, which would hinder our ability to market and sell these products. The strength of patents in the medical, pharmaceutical, therapeutic and related fields involves complex legal and scientific questions and can be uncertain. The patent applications we own or in-license, specifically ImmuniZin may fail to result in patents with claims that cover the products in the U.S. or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found; such prior art can invalidate a patent or prevent issuance of a patent based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may cause such patents to be narrowed or invalidated. Even if unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the patent applications we hold or have in-licensed regarding our products and processes fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop product candidates and threaten our ability to commercialize products. Patents may not issue and issued patents may be found invalid and unenforceable or challenged by third parties. Since patent applications in the U.S. and most other countries are confidential for a period after filing, and some remain so until issued, we cannot be certain that we were the first to invent a patent application related to a product candidate. In certain situations, if we and one or more third parties have filed patent applications in the U.S. and claiming the same subject matter, an administrative proceeding can be initiated to determine which applicant is entitled to the patent on that subject matter. Patents have a limited lifespan. In the U.S., the natural expiration of a patent is 20 years after it is filed, although various extensions may be available. The life of a patent, and the protection it affords, is limited. When the patent life has expired for a product, we will become vulnerable to competition from generic medications and therapeutics attempting to replicate that product. Further, if we encounter delays in regulatory approvals, the time during which we will be able to market and commercialize a product candidate under patent protection could be reduced. In addition to patent protection, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our products and development and production processes that involve proprietary know-how, information or technology not covered by patents. We plan to require each of our employees to agree to assign their inventions to us through an employee inventions or similar agreement. In addition, as a general practice, we intend to have our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements. Nonetheless, our trade secrets and other confidential proprietary information may be disclosed, and competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. In addition, in January 2018 the FDA as part of its Transparency Initiative, launched a voluntary pilot program calling on biopharmaceutical research companies to release clinical study reports summarizing clinical trial data. Following the completion of this pilot program in March 2020, the FDA may consider making release of clinical study reports mandatory and may consider making additional information publicly available on a routine basis in response to concerns expressed by the academic community emphasized by the COVID-19 pandemic, including information we may consider to be trade secrets or other proprietary information. If the FDA takes these measures, we may be forced to disclose propriety information about our products, research and processes, which could materially harm our business. The laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. We may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

Commercialization of our products require access to facilities to manufacture a sufficient supply of our products in compliance with applicable regulatory requirements. Because of our limited capital and other resources, we must outsource the manufacturing of our products, and while we have manufacturing partners, to the extent we need or want to increase volume or expand to new markets, or to replace current manufacturers for any reason, we may be unable to locate viable third parties and sources and negotiate acceptable terms. Further, the need for GMP certified facilities and compliance with FDA rules and guidelines to produce CBD products such as ours increases the difficulty of manufacturing efforts and the related costs and could operate to reduce our leverage when we deal with GMP-certified third parties resulting in unfavorable terms. We may face competition for access to third party supply sources, development or production partners and facilities such as hemp growers and may be subject to production delays if any of those third parties give their other business partners a higher priority than they give to us. Even if we are able to identify additional or replacement third parties, the delays and costs associated with establishing and maintaining a relationship with such third parties may have a material adverse effect on us. Further, we lack control over production of our products due to outsourcing, which exposes us to a greater risk of liability, including regulatory enforcement actions for alleged noncompliance with law and product liability claims. This could also result in lower product quality which could negatively impact demand for our offerings or our competitive advantage. Any of these challenges could prevent us from achieving our business objectives and harm your investment in us.

We may be subject to claims asserting that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees' former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we succeed, litigation could cause substantial cost and be a distraction to our management and other employees.

We do not have control over all of the third parties involved in the distribution and sale of our products and their compliance with government health, safety and labelling standards. Even if our products meet these standards, they could otherwise become contaminated or fail, or the standards could be changed in a manner adverse to our operations or those of our business partners. A failure to meet these standards could occur in our operations or those of our distributors or suppliers. This could result in expensive production interruptions, recalls, regulatory investigations and enforcement actions and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.