This Form 10-K contains forward-looking statements.
Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans
and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”,
“should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”,
“predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks
in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and
not in limitation:
This list is not an exhaustive list of the
factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, and readers
should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s
beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements
if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United
States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references
to “common stock” refer to the common shares in our capital stock.
ITEM 1. BUSINESS.
GENERAL
The following is a summary of some of the information
contained in this document. Unless the context requires otherwise, references in this document to “our Company,” “us,”
“we,” “our,” “Solei Systems,” or the “Company” are to Solei Systems, Inc.
DESCRIPTION OF BUSINESS
Solei Systems, Inc. was organized October 26,
2004 under the laws of the State of Florida as Eli Enterprises, Inc. Our name was changed in 2008 to Solei Systems, Inc.
On October 20, 2017, we acquired Clinical &
Herbal Innovations, Inc. (CHII), a Georgia corporation, in a share exchange. CHII is a supplement development company with a proprietary
product that is distributed primarily through the internet. Our majority shareholder, our CEO and Chairman Charles O. Scott, licenses
the product to CHII.
In March, 2019, we initiated a private offering
of convertible debt notes with an original principal amount of $10,000, with a total offering of up to $3,000,000 in original principal
amount. The offering is being made to
accredited investors and up to 35 non-accredited
investors in reliance on the exemption from registration afforded by SEC Regulation D, Section 506. If successful, the proceeds
of the private offering will be used in part for the cash consideration due at closing of the proposed acquisition of the assets
and operations of KB Medical Systems, LLC, including the CareClix™ telemedicine business and for working capital to grow
the existing business and the CareClix™ business to be acquired. We are also investigating other possible acquisitions in
the healthcare and technology areas.
Our current business plan will require additional
working capital to expand our business operations and staff, which we anticipate will require an additional funding event by the
end of the 2019 fiscal year.
Reports to Security Holders
We are subject to the reporting requirements
of Section 12(g) of the Exchange Act, and as such, we intend to file all required disclosures.
You may read and copy any materials
we file with the SEC in the SEC’s Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC
maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC, which can be found at http://www.sec.gov.
Jumpstart Our Business Startups Act
We qualify as an “emerging growth
company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we did not have
more than $1,000,000,000 in annual gross revenue and did not have such amount as of December 31, 2018, our last fiscal year.
We may lose our status as an emerging
growth company on the last day of our fiscal year during which (i) our annual gross revenue exceeds $1,000,000,000 or (ii) we issue
more than $1,000,000,000 in non-convertible debt in a three-year period. We will lose our status as an emerging growth company
if at any time we are deemed to be a large accelerated filer. We will lose our status as an emerging growth company on the last
day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an
effective registration statement.
As an emerging growth company, we may
take advantage of specified reduced reporting and other burdens that are otherwise applicable to generally reporting companies.
These provisions include:
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A requirement to have only two years of audited financial statement and only two years of related Management Discussion and Analysis Disclosures:
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Reduced disclosure about the emerging growth company’s executive compensation arrangements; and
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No non-binding advisory votes on executive compensation or golden parachute arrangements.
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As an emerging growth company, we are
exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934.
Such sections are provided below:
Section 404(b) of the Sarbanes-Oxley
Act of 2002 requires a public company’s auditor to attest to, and report on, management’s assessment of its internal
controls.
Sections 14A(a) and (b) of the Securities
and Exchange Act, implemented by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive
compensation and golden parachute compensation.
We have already taken advantage of these
reduced reporting burdens in this Form 10-K, which are also available to us as a smaller reporting company as defined under Rule
12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
As long as we qualify as an emerging
growth company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 and
Section 14A(a) and (b) of the Securities Exchange Act of 1934.
In addition, Section 107 of the JOBS
Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B)
of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.
We are choosing to irrevocably opt out of the extended transition period for complying with new or revised accounting standards
under Section 102(b)(2) of the JOBS Act.
HISTORY
Solei Systems, Inc. (“Solei Systems,”
“We, or the “Company”) was organized October 26, 2004 under the laws of the State of Florida as Eli Enterprises,
Inc. Our name was changed in 2008 to Solei Systems, Inc.
On February 3, 2014, while under the care and
control of prior management, and over 3 years prior to current management taking over SOLI was relegated to “grey market"
status. On that date, the Securities and Exchange Commission (release No. 71465) temporarily suspended trading of 250 OTC companies
due to questions about "the accuracy and adequacy of publicly disseminated information concerning the companies’ operating
status." Solei Systems, Inc. (SOLI) was temporarily suspended under that action.
The company (SOLI) has been trading on the
grey market since February 2014. In June 2017 the control block of SOLI was purchased by Charles Scott from Paul Spivak in a private
sale, at which time the old company management was removed, and new management put in place. No members of prior management are
currently or will be involved in management of the Company.
On October 20, 2017, we acquired Clinical &
Herbal Innovations, Inc. (CHII), a Georgia corporation, in a share exchange. We issued 8,751,000 shares to the shareholders of
Clinical & Herbal Innovations, Inc. for the share exchange. The transaction is a capital transaction where the Company was
treated as a non-business entity, therefore, the accounting for the merger was identical to that resulting from a reverse merger
except no goodwill or other intangible assets are recorded. For accounting purposes, CHII is treated was the accounting acquirer
and was presented as the continuing entity. The historical financial statements are those of CHII.
Our principal executive offices are located
at 206 North Washington St., Suite 100, Alexandria, VA 22314 and our office telephone number is (844) 726-6965. We maintain a website
for sales of our product at www.panoxol.com, and such website is not incorporated into or a part of this filing. We have included
our website address in this filing solely as an inactive textual reference.
CORPORATE STRUCTURE
Our corporate structure is as follows:
Solei
Systems, Inc.,
A
Florida Corporation
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Clinical
and Herbal Innovations, Inc.,
A
Georgia Corporation
100%
Wholly-Owned Subsidiary
CURRENT BUSINESS
The Company is a public reporting holding company,
with one current wholly-owned subsidiary, Clinical & Herbal Innovations, Inc., a Georgia corporation (CHII). CHII is a supplement
development company with a proprietary product that is distributed primarily through the internet. Our majority shareholder, our
CEO and Chairman Charles O. Scott, licenses the product to CHII.
On February 20, 2019 the company entered into
an agreement to acquire all of the assets of KB Medical Systems, LLC, the owner of the proprietary CareClix® operating systems
for telemedicine providers. Under the terms of the acquisition agreement, the Company will form a new, wholly-owned subsidiary
to acquire the CareClix® assets and will operate the business following the acquisition. CareClix is a full-spectrum, white-labeled
telemedicine platform and services company built by doctors, for doctors to deliver simple and easy to use telemedicine solutions
to patients around the world.
Settlement is expected on or before April 15, 2019
Upon settlement we intend to expand the Company’s operations
including, but not limited to:
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Seating a functionally independent corporate board of
directors with compensation, audit, and M&A committees.
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Increase implementation of staff positions at CareClix
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Expand IT capabilities including hiring key IT personnel
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Expand billing capabilities to include Medicare billing
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Expand sales personnel
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Partially fund hypertension related clinical trials
of dietary supplement formula
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Rebrand our dietary supplement formula
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Increase online sales activity of dietary formula
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Fund day to day operations
Market Size – Dietary Supplements
The dietary supplements market is projected to generate around 220
billion U.S. dollars worldwide by 2020.
We intend to acquire PYF Telehealth to secure
its exclusive rights to market the CareClix system to the corrections industry, as well as its contacts and its revenue. PYF Telehealth
is led by Charles Scott, our Chairman and majority shareholder, Josh Flood, our President and a director and Augusteen Cowan. PYF
Telehealth has served as a marketing arm of CareClix since 2015 with exclusive rights to the corrections industry in the United
States, Africa – as introduced through African Union, the nation of Haiti, and Historical Black Colleges. PYF Telehealth
has been very successful in the corrections industry partnering with CareClix and expects exponential growth as a result of its
current contracts with brokers, TPAs, and large clients in the corrections space. PYF Telehealth is also a long-term member of
the Self Insurance Institute of America and brings its powerful presence to CareClix. It also markets CareClix to fully insured
clients, large businesses, and insurance companies. Once acquired, PYF Telehealth will be incorporated into the business of CareClix.
Augusteen Cowan will join CareClix and continue in a sales capacity.
We also plan to acquire additional companies
in the telemedicine, healthcare, and/or wellness space. We are also having preliminary discussions with a global telemedicine technology
company.
Our wholly-owned subsidiary, Clinical &
Herbal Innovations, Inc has created a patent-protected over-the-counter nutraceutical product. The product, currently branded “Panoxol”,
contains a patented combination L Arginine and L Citrulline, which are both naturally occurring amino acids and direct precursors
to the synthesis of nitric oxide in the body. Arginine and citrulline also act as a significant mechanism for endothelial cell
repair, a benefit not commonly found in any prescribed medication. The formula also includes 4 other all-natural ingredients that
promote health, such as cayenne, red yeast rice, ginkgo biloba, and horse chestnut. Together they are patented for the support
of vascular health as a food supplement to help avoid major cardiovascular maladies.
Around 70% of U.S. adults take nutritional
supplements on a daily basis, and research from the Nutrition Business Journal shows the market for supplements nationwide is over
$36 billion and growing. Panoxol to date has been sold through online ecommerce channels. This is the fastest-growing segment of
the market. Internet-based vitamin and supplement sales were estimated at $7 billion in 2015, according to market research firm
IBISWorld, and revenue has grown over 12% annually for the past five years. Moving forward, we intend to expand marketing to include
several other channels and directly marketing to additional consumer groups. We have exclusive rights to the patent which is owned
by our majority shareholder, CEO and Chairman, Charles O. Scott. The patent extends to the U.S., Canada, and the Philippines.
Objectives
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Continue to develop and manufacture our product for the general public while reaching niche market segments, expanding production on a large scale
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Rebrand vascular supplement “Panoxol”
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Expand online, direct, wholesale, and government sales
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Expand radio, print, and call center sales channels
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Continue R&D and begin clinical trials to prove the supplement’s proprietary and synergistic benefits
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Create multiple new, profitable products under the company’s brand
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Products and Services
Our product promotes the synthesis of nitric
oxide in the body for the management and support of vascular health. Our product may help support issues stemming from a lack of
endothelial health such as: memory loss, heart disease, stroke, leg edema, erectile dysfunction, and many more. We intend to position
our product as adjunct to prescription medications for hypertensive people.
Our product stimulates the body to produce
endothelial derived nitric oxide (eNOS), and the nitric oxide then acts to signal the smooth muscle wall within the vascular system
via the endothelium. This can signal the vessels to widen, relax, repair, or constrict. The discovery that nitric oxide (NO) can
widen blood vessels led to the winning of the 1998 Nobel Prize for three American doctors.
CHII developed an all-natural dietary ingredients
pathway to the synthesis of nitric oxide in the body. Both the scope of Panoxol impact and the growing aging population puts the
product at the forefront of the wellness revolution. Panoxol attributes include:
• Direct precursor to nitric oxide in
the body
• All-natural dietary ingredients
• Vegetarian
• No prescription necessary
• No known contraindications
• No side effects
Panoxol is currently sold at the MSRP of $59.95
for 90 pills. However, a 120-count product, which is the recommended 30-day supply, is ready for sale at the MSRP of $79.95.
We are currently selling online and are expanding
our sales and marketing to include several additional distribution channels, including but not limited to:
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Call center outbound / inbound
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Seminars, Health Expos, and Doctor led webinars
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Medical clinics/doctors
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Federal government / military
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The product needs clinical trials to demonstrate
the synergistic effect of our patented blend of ingredients. Research and development is also needed to create other products utilizing
the patented formulation. These products may also add other all-natural food supplements like astaxanthin, Vitamin D3, Garlic,
and Tea Extract, etc. These products will be sold through the above various channels, allowing us to leverage our product into
a known wellness brand.
We currently outsource the manufacturing of
Panoxol to contract manufacturers in the United States while retaining full rights of manufacturing.
Market Segmentation
Our customers include nutrition and dietary
supplement consumers. Primary initial customers may include people with some form of cardiovascular disease, diabetes or other
ailments, as well as general health and nutrition consumers.
On a broader level, cardiovascular disease
is a major cause of death in the U.S. and globally, and it is associated with obesity, high cholesterol, smoking, excessive alcohol,
and poor health habits. According to the World Health Organization (WHO), cardiovascular disease is responsible for approximately
15 million deaths each year across the globe.
1
In the U.S. as noted above, chronic diseases including heart disease
and diabetes cause two-thirds of deaths.
In addition, nationwide, an estimated 68% of
U.S. adults take nutritional supplements on a daily basis, with 76% of adults over 18 reporting regular use of supplements. According
to a survey from the Council for Responsible Nutrition (CRN), “The results have proven year after year that two-thirds of
people in the U.S. use nutritional supplements as a part of their health regimen. These are encouraging findings which indicate
that Americans are becoming increasingly more health-conscious and proactive about managing their health.”
2
Marketing Strategy/Implementation
We intend to target a broad base of customers
in numerous market segments in an effort to reach all potential users of the IP and resulting product lines. Using in-house team
of manufacturer representatives, we intend to work continually to expand our customer base to the general public as well as military
customers. We, at the outset, have developed our website as a customer-focused portal to ensure a strong online presence. On the
site, there is detailed information on the formulation, the products and general company information.
Our product is also being marketed in-house
through formal sales channels. As the manufacturer, we have many channels to sell our product including:
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Call Center Telemarketing:
Supporting our other sales channels will be the central operations of our call center. We plan to hire manufacturer representatives who will approach customers, business, and health systems with our product. Working with inbound and outbound calling, we will support online sales, seminar sales, medical clinics, and health expos.
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Seminar / Expo & Healthfair / Webinar Sales:
We plan to host seminars, webinars as well as to attend health expos to help educate our potential customers on endothelial health and the role of nitric oxide. These will take place as stand-alone events, within popular health fairs, and online via webinar.
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Direct to Medical Clinics / Doctor Channel
: Working directly through partners and directly through our manufacturers’ reps, we will approach medical offices. We plan to partner with Med Aid Technologies, LLC to utilize their 300-nurse network to promote dietary supplement sales within Medical Clinic
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Federal Gov. / Military Program
: Through partnerships like the one we have with DVMSE, we will bring our product to the federal government. We successfully completed our SAM registration and filed for the FSS (Federal Supply Schedule).
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1
Transparency Market Research. “Cardiovascular
Disease Drug Market.” http://www.transparencymarketresearch.com/cardiovascular-disease-drug-market.html
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CRN. “68% of U.S. adults take nutritional supplements.”
https://www.multivitaminguide.org/blog/us-adults-taking-nutritional-supplements/
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Licensing Channel (White Label)
: We will pursue targeted opportunities to white label the patented blend.
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Retail Channel
: We have a distributor who is ready to bring the product into the North American and Canadian market. We have been approached by other distributors seeking a more aggressive retail campaign as well; however, this channel requires the most capital expenditure to deal with manufacturing supply chain and marketing costs. Sales through retail will depend on funding.
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Traditional Marketing:
We will place an emphasis on traditional marketing, using print ads in industry trade magazines and health- and nutrition-oriented publications, especially research-oriented publications and those read by the medical/health community.
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Publicity:
Public relations will serve a critical role in the marketing plan. Editorial coverage is a great means of getting the brand established and credible. It is critical that the brand is carefully positioned as an adjunct to prescription medicine. The company will be portrayed as an educational company led by experts with years of experience and an industry-first proprietary formulation. Press releases will be sent to scientific journals, pharma, nutrition, and personal care product trade magazines, and websites covering these topics.
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Networking:
We plan to attend functions and utilize other networking methods to have access to decision-makers at retail chains, wholesale distributors, and at medical groups and hospitals, etc. In-person seminars, lectures, and other direct marketing will further establish Panoxol in various markets.
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Web Summary
We currently own the domain www.soleihealth.com
and plan to develop a web site for the public company side of the business, with investor relations, SEC filing references and
links to our operating business web sites.
The Panoxol website is live (www.panoxol.com)
and is still being developed with design, graphics, press releases, social media and for e-commerce capabilities. With the rebranding
of the product, we will migrate the current web site to the new domain, It will emphasize the unique attributes that the proprietary
formulation provides to meet market demands for healthier, and nutritionally beneficial medical alternatives as an evolution of
healthcare. Our management will also pursue a comprehensive promotional campaign using online marketing, public relations, and
traditional marketing:
Internet marketing
: Branding, advertising,
online and social media will be a vital component to our marketing efforts as well.
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SEO
: The specificity of vascular health needs lends itself well to search engine optimization (SEO). We will focus on cardiovascular health, nutrition, small vessel disease, and more, and these are major topics of discussion on the internet for gaining knowledge and sharing information among peers. SEO involves organically improving the quality and volume of traffic to a website through search engines. Our new website will use many targeted keywords and tags that make it highly relevant and therefore visible for people searching for nutraceutical, pharmaceutical, and other product development information.
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Customer Referral Program
: We intend to create a financially incentivized social program designed to boost sales. This program will integrate with: online sales, seminar sales, radio and through word of mouth advertising.
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PPC/CPM
: We are currently raising funds to be able to deploy a national marketing campaign. We intend to target online sales through pay-per-click (PPC) and CPM (cost per thousand impressions) campaign that synergizes with our radio, television, and print advertisement.
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Retargeting & Conversion Optimization:
We intend to engage customers over time to inform, encourage, and equip them with the appropriate tools to help meet their health goals.
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Amazon.com and 3
rd
party websites
: We intend to create a new Amazon presence and run targeted campaigns through the Amazon sales environment.
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E-mail marketing
: The current customer and potential customer list will grow continually, and we plan to institute an e-mail marketing campaign.
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Facebook/Social Media
: Customer engagement and feedback are paramount to our brand. We plan to work actively with our customers to help support the lives of their friends and family through social media.
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COMPETITION, MARKETS, REGULATION AND TAXATION
Competition
There are a large number of companies and individuals
engaged in the nutritional supplement industry; accordingly, there is a high degree of competition. Almost all of the companies
and individuals so engaged have substantially greater technical and financial resources than we do.
There are many established companies that have
significantly greater financial and personnel resources and technical expertise than we have. In view of our limited financial
resources and limited management availability, we will continue to be at a significant competitive disadvantage compared to our
competitors.
Markets
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Our market is highly competitive and constantly
changing. Commercial success is frequently dependent on capital availability, the effectiveness and sufficiency of which are very
difficult to predict accurately. It is one of the principal economic risks of companies like ours.
Federal Regulations
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We are subject to regulation by the US Securities
and Exchange Commission, as a public reporting company. We are also subject to state securities regulation in the event of offerings
or other activities in a particular state.
Governmental Regulation
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Our sales include
products that are regulated as dietary supplements under the FDCA. Dietary supplements are also regulated in the United States
under the Dietary Supplement Health and Education Act of 1994 ("DSHEA").
The manufacture
of nutritional or dietary supplements and related products in the United States requires compliance with dietary supplement CGMPs.
CGMP refers to the Current Good Manufacturing Practice regulations enforced by the FDA. CGMPs provide for systems that assure proper
design, monitoring, and control of manufacturing processes and facilities. Adherence to the CGMP regulations assures the identity,
strength, quality, and purity of drug products by requiring that manufacturers of medications adequately control manufacturing
operations. This includes establishing strong quality management systems, obtaining appropriate quality raw materials, establishing
robust operating procedures, detecting and investigating product quality deviations, and maintaining reliable testing laboratories.
The Dietary
Supplement & Nonprescription Drug Consumer Protection Act requires manufacturers of dietary supplement and over-the-counter
products to notify the FDA when they receive reports of serious adverse events occurring within the United States. We have an internal
adverse event reporting system that has been in place for several years, and we believe that we are in compliance with this law.
The FDC Act
permits "statements of nutritional support" to be included in labeling for dietary supplements without FDA pre-market
approval. Such statements must be submitted to the FDA within 30 days of marketing. Such statements may describe how a particular
dietary ingredient affects the structure, function or general well-being of the body, or the mechanism of action by which a dietary
ingredient may affect body structure, function or well-being, but may not expressly or implicitly represent that a dietary supplement
will diagnose, cure, mitigate, treat or prevent a disease. A company that uses a statement of nutritional support in labeling must
possess scientific evidence substantiating that the statement is truthful and not misleading. If the FDA determines that a particular
statement of nutritional support is an unacceptable drug claim, conventional food claim or an unauthorized version of a "health
claim," or, if the FDA determines that a particular claim is not adequately supported by existing scientific data or is false
or misleading, we would be prevented from using the claim.
In addition,
DSHEA provides that so-called "third-party literature," e.g., a reprint of a peer-reviewed scientific publication linking
a particular dietary ingredient with health benefits, may be used "in connection with
the sale of a dietary supplement
to consumers" without the literature being subject to regulation as labeling. The literature: (1) must not be false or misleading;
(2) may not "promote" a particular manufacturer or brand of dietary supplement; (3) must present a balanced view of the
available scientific information on the subject matter; (4) if displayed in an establishment, must be physically separate from
the dietary supplements; and (5) should not have appended to it any information by sticker or any other method. If the literature
fails to satisfy each of these requirements, we may be prevented from disseminating such literature with our products, and any
dissemination could subject our product to regulatory action as an illegal drug.
Over-the-counter
("OTC") drug products may be marketed if they conform to the requirements of the OTC monograph that is applicable to
that drug. Drug products not conforming to monograph requirements require an approved New Drug Application ("NDA") before
marketing may begin. Under these provisions, if the agency were to find that a product or ingredient of one of our OTC drug products
is not generally recognized as safe and effective or is not included in a final monograph that is applicable to one of our OTC
drug products, we would be required to reformulate or cease marketing that product until it is the subject of an approved NDA or
until the time, if ever, that the monograph is amended to include such product.
Advertising
of our products in the United States is subject to regulation by the FTC under the FTC Act. Under the FTC's Substantiation Doctrine,
an advertiser is required to have a "reasonable basis" for all objective product claims before the claims are made. Failure
to adequately substantiate claims may be considered either deceptive or unfair practices. Pursuant to this FTC requirement, we
are required to have adequate substantiation for all material advertising claims that we make for our products in the United States.
In recent years, the FTC has initiated numerous investigations of and actions against companies that sell dietary supplement, weight-management,
and cosmetic products. The FTC has issued guidance to assist companies in understanding and complying with its substantiation requirement.
We believe that we have adequate substantiation for all material advertising claims that we make for our products in the United
States, and we believe that we have organized the documentation to support our advertising and promotional practices in compliance
with these guidelines. However, no assurance can be given that the FTC would reach the same conclusion if it were to review or
question our substantiation for our advertising claims in the United States.
The FTC may
enforce compliance with the law in a variety of ways, both administratively and judicially, using compulsory process, cease and
desist orders, and injunctions. FTC enforcement can result in orders requiring, among other things, limits on advertising, corrective
advertising, consumer redress, divestiture of assets, rescission of contracts, and such other relief as the agency deems necessary
to protect the public. Violation of these orders could result in substantial financial or other penalties. Although, to our knowledge,
we have not been the subject of any action by the FTC, no assurance can be given that the FTC will not question our advertising
or other operations in the United States in the future. Any action in the future by the FTC could materially and adversely affect
our ability to successfully market our products in the United States.
We cannot predict the
nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental
regulations or administrative orders, when and if promulgated, would have on our business. Future changes could include requirements
for the reformulation of certain products to meet new standards, the recall or discontinuation of certain products that cannot
be reformulated, additional record keeping, expanded documentation of the properties of certain products, expanded or different
labeling, and additional scientific substantiation. Any or all of these requirements could have a material adverse effect on our
business, financial condition, and operating results.
Compliance with Environmental Laws and Regulations
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We intend to address this on an as needed basis,
as and when any environmental issues arise. Since we do not now manufacture any product, the impact of any environmental laws and
regulations is minimal.
Title to Properties.
Not applicable.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
NUMBER OF PERSONS EMPLOYED
As of April 10, 2019, we have no full-time employees
and 3 contract employees on a part-time basis.
DESCRIPTION OF PROPERTIES/ASSETS
Real Estate - None
Oil and Gas Properties
- None
Patents – US 8691295
Patent is a composition of matter, granted in US and Philippines, pending in Canada. Expires on March 4, 2034. We do not directly
own the patent for Panoxol. Our majority shareholder, CEO and Chairman, Charles O. Scott, owns the patent and licenses the product
to CHII, our 100% wholly-owned subsidiary. No license fees were incurred or accrued for 2018.
Trademarks – Vasonoxol®.
Our majority shareholder, CEO and Chairman, Charles O. Scott, owns the trademark and licenses it to CHII, our 100% wholly-owned
subsidiary. Vasonoxol, U.S. Registration number: 5082860, date of registration: November 15, 2016, G & S: Dietary and nutritional
supplements; Food supplements; Food supplements for vascular health. The Trademark License Agreement executed October 31, 2018
has a term of 5 years. No license fees were incurred or accrued for 2018.
PLAN OF OPERATIONS
Our current plan of operation is to acquire
CareClix and then increase its staff in sales, implementation, and development. We are currently doing a private offering to raise
funds to complete the closing and for working capital for the expansion. We also will continue the sales of Panoxol™ engaging
in fresh new marketing and expanding our sales online. We expect to rebrand the product as Vasonoxol® and to start a
clinical trial through a reputable secondary education institution. We will continue discussions for acquisition of a telemedicine
technology company. We also plan to purchase a marketing company which specialize in marketing telemedicine to large groups.
We anticipate we will seek additional capital by the end of the fiscal year to continue and expand our operations.
Our current cash reserves are not adequate
for an operational budget of 12 months; however, we have been able to draw on an equity line of credit secured by the personal
residence of our Chairman and majority shareholder, and Mr. Scott also has provided additional funding as needed for operations. Although
the borrowing limit on the line of credit has now been reached, Mr. Scott has committed to providing funding that will allow us
to execute our business plan. While the Company is limited to cash on hand it will remain functionally limited. If we are
unable to generate enough revenue
to cover our operational costs, we will need to seek additional sources of funds.
Currently, we have
no
committed source for any funds although we have recently commenced a private offering of convertible
debt up to $3,000,000. No representation is made that any funds will be available when needed. In the event funds cannot
be raised if and when needed, we may not be able to carry out our business plan and could fail in business as a result of these
uncertainties.
Our independent registered public accounting
firm’s report on our consolidated financial statements as of December 31, 2018, includes a “going concern” explanatory
paragraph that describes substantial doubt about our ability to continue as a going concern.
REPORTS TO SECURITIES HOLDERS
We provide an annual report that includes audited
financial information to our shareholders. We will make our financial information and annual Form 10-K equally available to any
interested parties or investors through compliance with the disclosure rules for a small business issuer under the Securities Exchange
Act of 1934. We are
subject to disclosure filing requirements including
filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from
time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such
reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange
Commission, (“SEC”), at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC.
Item 1A. Risk Factors.
FORWARD LOOKING STATEMENTS
THIS DOCUMENT INCLUDES FORWARD-LOOKING STATEMENTS,
INCLUDING, WITHOUT LIMITATION, STATEMENTS RELATING TO SOLEI SYSTEM’S PLANS, STRATEGIES, OBJECTIVES, EXPECTATIONS, INTENTIONS
AND ADEQUACY OF RESOURCES. THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS THAT
MAY CAUSE OUR COMPANY’S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE
OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: OUR
ABILITY OF TO IMPLEMENT OUR BUSINESS STRATEGY; ABILITY TO OBTAIN ADDITIONAL FINANCING; SOLEI SYSTEMS’S LIMITED OPERATING
HISTORY; UNKNOWN LIABILITIES ASSOCIATED WITH FUTURE ACQUISITIONS; ABILITY TO MANAGE GROWTH; SIGNIFICANT COMPETITION; ABILITY TO
ATTRACT AND RETAIN TALENTED EMPLOYEES; AND FUTURE GOVERNMENT REGULATIONS; AND OTHER FACTORS DESCRIBED IN THIS FILING OR IN OTHER
OF SOLEI SYSTEMS’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. SOLEI SYSTEMS, INC. IS UNDER NO OBLIGATION TO PUBLICLY
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
RISK FACTORS RELATING TO OUR COMPANY
LIMITED OPERATING HISTORY
There can be no assurance that our management
will be successful in its attempts to implement our business plan, build the corporate infrastructure required to support operations
at the levels called for by our business plan or that we will generate sufficient revenues to meet expenses or to achieve or maintain
profitability. We will encounter risks and difficulties that companies at a similar stage of development frequently experience,
including the potential failure to:
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Obtain sufficient working capital to support our establishment and expansion;
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Find and realize the asset management opportunities required to generate revenue;
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Maintain adequate control of our expenses allowing us to realize anticipated income growth; and
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Anticipate and adapt to changing conditions in the nutritional supplement industry resulting from changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.
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OUR MANAGEMENT TEAM HAS MINIMAL EXPERIENCE
OPERATING A PUBLIC COMPANY. ANY FAILURE TO COMPLY OR ADEQUATELY COMPLY WITH FEDERAL AND STATE SECURITIES LAWS, RULES OR REGULATIONS
COULD SUBJECT US TO FINES OR REGULATORY ACTIONS, WHICH MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Members of our management team have minimal
experience managing and operating a public company and may rely in many instances on the professional experience and advice of
third parties including attorneys and accountants. Failure to comply or adequately comply with any federal or state securities
laws, rules, or regulations may result in fines or regulatory actions, which may materially adversely affect our business, results
of operation, or financial condition and could result in delays in achieving either the effectiveness of a registration statement
or the development of an active and liquid trading market for our common stock.
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The audited financial statements included in
this filing have been prepared assuming that we will continue as a going concern and do not include any adjustments that might
result if we cease to continue as a going concern. We have incurred significant losses since our inception. We have funded these
losses primarily through open account borrowing from our majority shareholder and Chairman.
Based on our financial history since inception,
in their report on the financial statements for the period ended December 31, 2018 and 2017, our independent registered public
accounting firm has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company
that has not yet generated significant revenue. There is no assurance that any significant revenue will be realized in the future.
There can be no assurance that we will have
adequate capital resources to fund planned operations or that any additional funds will be available to us when needed or at all,
or, if available, will be available on favorable terms or in amounts required by us. If we are unable to obtain adequate capital
resources to fund operations, we may be required to delay, scale back or eliminate some or all of our operations, which may have
a material adverse effect on our business, results of operations and ability to operate as a going concern.
OUR SUCCESS WILL DEPEND, TO A LARGE DEGREE,
ON THE EXPERTISE AND EXPERIENCE OF THE MEMBERS OF OUR MANAGEMENT TEAM.
Our current directors are also acting as our
officers. We will be heavily dependent upon their skills, talents, and abilities, as well as several consultants to us, to implement
our business plan, and may, from time to time, find that the inability of the officers, directors and consultants to devote their
full-time attention to our business results in a delay in progress toward implementing our business plan. Consultants may be employed
on a part-time basis under a contract to be determined.
Our directors and officers are, or may become,
in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged in a variety
of businesses. Thus, our officers and directors may have potential conflicts involving their time and efforts in participation
with other business entities. Each officer and director of our business is engaged in business activities outside of our business,
and the amount of time they devote as officers and directors to our business will be up to 40 hours per week. Mr. Scott, CEO and
director, spends up to 40 hours a week on our Company’s business. Mr. Flood, President, spends approximately 40 hours a week
on our Company’s business. Because investors will not be able to manage our business, they should critically assess all of
the information concerning our officers and directors.
We do not know of any reason other than outside
business interests that would prevent them from devoting full-time to our Company when the business may demand such full-time participation.
WE WILL BE DEPENDENT UPON KEY PERSONNEL FOR THE FORESEEABLE FUTURE.
We will be dependent on several key members
of our management and operations teams for the foreseeable future. In particular, we are dependent on Charles O. Scott as our CEO
and Joshua Flood as our President and Chief Financial Officer. The loss of the services of either executive could have a material
adverse effect on our operations and prospects. At this time, we have no employment agreements with any of these individuals, though
it is contemplated that the Company may enter into such agreements with certain of its key employees on terms and conditions usual
and customary for its industry. We do not currently have any "key man" life insurance on any employees or officers.
WE WILL INCUR SIGNIFICANT COSTS TO BE A PUBLIC
COMPANY AND TO ENSURE COMPLIANCE WITH U.S. CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS AND WE MAY NOT BE ABLE TO ABSORB SUCH
COSTS.
We may incur significant costs associated with
our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including
requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect
these costs to be approximately $50,000-$75,000 per year. We expect all of these applicable rules and regulations to significantly
increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that
these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability
insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the
same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on
our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these
newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations.
WE ARE AN “EMERGING GROWTH COMPANY,”
AND ANY DECISION ON OUR PART TO COMPLY ONLY WITH CERTAIN REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO “EMERGING GROWTH COMPANIES”
COULD MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.
We are an “emerging growth company,”
as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we expect and fully
intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging
growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company”
for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed
$1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act,
which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business
day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible
debt during the preceding three year period.
In addition, Section 107 of the JOBS Act also
provides that an “emerging growth company” can take advantage of the extended transition period provided in Section
7(a)2(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth
company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to opt in to the extended transition period for complying with the revised accounting standards. We have elected
to rely on these exemptions and reduced disclosure requirements applicable to “emerging growth companies” and expect
to continue to do so.
WE MAY NOT BE ABLE TO MEET THE FILING AND INTERNAL
CONTROL REPORTING REQUIREMENTS IMPOSED BY THE SEC WHICH MAY RESULT IN A DECLINE IN THE PRICE OF OUR COMMON SHARES AND AN INABILITY
TO OBTAIN FUTURE FINANCING.
As directed by Section 404 of the Sarbanes-Oxley
Act, as amended by SEC Release No. 33-8934 on June 26, 2008, the SEC adopted rules requiring each public company to include a report
of management on the company’s internal controls over financial reporting in its annual reports. In addition, the independent
registered public accounting firm auditing a company’s financial statements may have to also attest to and report on management’s
assessment of the effectiveness of the company’s internal controls over financial reporting. We may be required to include
a report of management on its internal control over financial reporting. The internal control report must include a statement
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Of management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;
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Of management’s assessment of the effectiveness of its internal control over financial reporting as of year-end; and
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Of the framework used by management to evaluate the effectiveness of our internal control over financial reporting.
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Furthermore, our independent registered public
accounting firm may be required to file its attestation on whether it believes that we have maintained, in all material respects,
effective internal control over financial reporting.
While we expect to expend significant resources
in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a
risk that we may not be able to comply timely with all of the requirements imposed by this rule. In the event that we are unable
to receive a positive attestation from our independent registered public accounting firm when that becomes required with respect
to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock
price and ability to obtain equity or debt financing as needed could suffer.
In addition, in the event that our independent
registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements,
and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy
of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K
with the SEC, which could also adversely affect the market price of our common stock and our ability to secure additional financing
as needed.
REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT
AND COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002, INCLUDING ESTABLISHING AND MAINTAINING ACCEPTABLE INTERNAL CONTROLS OVER FINANCIAL
REPORTING, ARE COSTLY AND MAY INCREASE SUBSTANTIALLY.
The rules and regulations of the SEC require
a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal,
accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we design, implement and maintain adequate
internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically
qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial
reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our
internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm our overall financial
condition and result in loss of investor confidence and a decline in our share price.
As a public company, we will be subject to
the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities
rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless
increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand
on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires,
among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.
We are working with our legal, accounting and
financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage
our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls
and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other
areas. However, we anticipate that the expenses that will be required in order to adequately prepare for being a public company
could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions; personnel,
such as a chief financial officer familiar with the obligations of public company reporting; consultants to design and implement
internal controls; and financial printing alone will be a few hundred
thousand dollars per year and could be several
hundred thousand dollars per year. In addition, if and when we retain independent directors and/or additional members of senior
management, we may incur additional expenses related to director compensation and/or premiums for directors’ and officers’
liability insurance, the costs of which we cannot estimate at this time. We may also incur additional expenses associated with
investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these additional expenses
individually, or in the aggregate, may also be material.
In addition, being a public company could make
it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability
insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the
same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons
to serve on our board of directors, our board committees or as executive officers.
The increased costs associated with operating
as a public company may decrease our net income or increase our net loss and may cause us to reduce costs in other areas of our
business or increase the prices of our products or services to offset the effect of such increased costs. Additionally, if these
requirements divert our management’s attention from other business concerns, they could have a material adverse effect on
our business, financial condition and results of operations.
THE JOBS ACT ALLOWS US TO DELAY THE ADOPTION
OF NEW OR REVISED ACCOUNTING STANDARDS THAT HAVE DIFFERENT EFFECTIVE DATES FOR PUBLIC AND PRIVATE COMPANIES.
Since, we have elected to use the extended
transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act, this election
allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private
companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable
to companies that comply with public company effective dates.
OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION
OF OFFICERS AND DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR COST TO US AND HURT THE INTERESTS
OF OUR SHAREHOLDERS BECAUSE CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.
Our By-Laws include provisions that eliminate
the personal liability of the directors of the Company for monetary damages to the fullest extent possible under the laws of the
State of Florida or other applicable law. These provisions eliminate the liability of directors to the Company and its stockholders
for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Florida law, however,
such provisions do not eliminate the personal liability of a director for (i) breach of the director’s duty of loyalty, (ii)
acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends
or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper
benefit. These provisions do not affect a director’s liabilities under the federal securities laws or the recovery of damages
by third parties. The position of the SEC with regard to such indemnification and limitation provisions is that they are contrary
to the intent of the federal securities laws and are not enforceable as written.
RISK FACTORS RELATING TO OUR BUSINESS
WE HAVE INCURRED SIGNIFICANT LOSSES AND ANTICIPATE
FUTURE LOSSES.
As of December 31, 2018, we had an accumulated
deficit of ($1,772,492).
As a result of this, among other factors, we
received from our registered independent public accountants in their report for the financial statements for the years ended December
31, 2018 and 2017, an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.
OUR EXISTING FINANCIAL RESOURCES ARE INSUFFICIENT
TO MEET OUR ONGOING OPERATING EXPENSES.
We have limited sources of income at this time
and insufficient assets to meet our ongoing operating expenses. In the short term, unless we are able to raise additional debt
and/or equity, we may be unable to meet our ongoing operating expenses. While our majority shareholder and Chairman has indicated
his intent to provide additional working capital as needed, there can be no assurance that he can will do so indefinitely. There
can be no assurance that these events will be successfully completed.
BECAUSE OUR CEO AND CHAIRMAN CONTROLS OUR ACTIVITIES,
THAT MAY CAUSE US TO ACT IN A MANNER THAT IS MOST BENEFICIAL TO HIM AND NOT TO OUTSIDE SHAREHOLDERS WHICH COULD CAUSE US NOT TO
TAKE ACTIONS THAT OUTSIDE INVESTORS MIGHT VIEW FAVORABLY
Our Chief Executive Officer and Chairman also
is the majority shareholder of our issued and outstanding common stock and beneficially owns approximately 55% of our issued and
outstanding common stock. As a result, he effectively controls all matters requiring director and stockholder approval, including
the election of directors, and the approval of significant corporate transactions, such as mergers and related party transactions.
This insider also has the ability to delay or perhaps even block, by his ownership of our stock, an unsolicited tender offer. This
concentration of ownership could have the effect of delaying, deterring or preventing a change in control of our company that you
might view favorably.
WE MAY DEPEND UPON OUTSIDE ADVISORS, WHO MAY
NOT BE AVAILABLE ON REASONABLE TERMS AND AS NEEDED.
To supplement the business experience of our
officers and directors, we may be required to employ accountants, technical experts, appraisers, attorneys, or other consultants
or advisors. Our Board without any input from stockholders will make the selection of any such advisors. Furthermore, it is anticipated
that such persons may be engaged on an "as needed" basis without a continuing fiduciary or other obligation to us. In
the event we consider it necessary to hire outside advisors, we may elect to hire persons who are affiliates, if they are able
to provide the required services.
WE MAY FACE DIFFICULTIES ESTABLISHING A NEW
BRAND
Our principal business strategy is to develop
the new brand name Vasanoxol® to replace the Panoxol brand name as a respected brand associated with the highest quality nutritional
supplements. The marketing of consumer goods such as high-quality, premium nutritional supplements is highly dependent on creating
favorable consumer perception through well-orchestrated advertising and public relations. We will be expending a significant percentage
of the proceeds of any future cash raises for advertising and promotional activities. Our Company has little advertising experience,
having spent only minimal amounts on such activities to-date. Our Company’s competitors have significantly greater advertising
resources and experience and enjoy well-established brand names. There can be no assurance that our initial advertising and promotional
activities will be successful in creating the desired consumer perception.
OUR COMPETITION IS MUCH LARGER AND HAS BEEN
IN THE MARKETPLACE MUCH LONGER
Several large, well-financed competitors with
long-standing brand recognition, successful histories of new product introductions and long-standing relationships dominate the
market for the distribution of nutritional supplements. We compete with well-established companies for sales to distributors and
to consumers. While we believe that the rapidly expanding market for sales of nutritional supplements has created room for new
competitors to achieve substantial sales and profits, there can be no assurance that we can compete successfully on price or in
obtaining raw materials, building facilities and attracting and keeping skilled labor, which could result in material adverse effects
on our business.
WE MAY BE SUBJECT TO LITIGATION IN THE FUTURE
WHICH COULD IMPACT THE FINANCIAL HEALTH OF THE COMPANY.
Currently we are plaintiff to a legal proceeding.
There are no legal proceedings threatened against our Company. However, from time to time, we may become involved in various lawsuits
and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that may harm our business.
WE SELL OUR PRODUCTS AND SERVICES IN HIGHLY
COMPETITIVE MARKETS, WHICH RESULTS IN PRESSURE ON OUR PROFIT MARGINS AND LIMITS OUR ABILITY TO MAINTAIN OR INCREASE THE MARKET
SHARE OF OUR SERVICES.
The nutritional supplement industry is subject
to significant competition and pricing pressures. We will experience significant competitive pricing pressures as well as competitive
products. Several significant competitors offer products with prices that may match or are lower than ours. We believe that the
products we offer are generally competitive with those offered by other supplement companies. It is possible that one or more of
our competitors could develop a significant advantage over us that allows them to provide superior products or pricing, which could
put us at a competitive disadvantage. Continued pricing pressure or improvements in raw materials and shifts in customer preferences
away from supplement products could adversely impact our customer base or pricing structure and have a material and adverse effect
on our business, financial condition, results of operations and cash flows.
OUR FUTURE GROWTH IS LARGELY DEPENDENT UPON
OUR ABILITY TO SUCCESSFULLY COMPETE WITH NEW AND EXISTING COMPETITORS BY DEVELOPING PRODUCTS THAT ACHIEVE MARKET ACCEPTANCE WITH
ACCEPTABLE MARGINS.
Our business operates in markets that are characterized
by legal and regulatory pressures and evolving industry standards. If similar high-end supplement companies gain market acceptance,
our ability to grow our business could be materially and adversely affected. Accordingly, our future success depends upon a number
of factors, including our ability to accomplish the following: identify emerging trends in our target end-markets; develop and
maintain competitive products; enhance our products by increasing the associated brand reputation that differentiate us from our
competitors; and develop and bring products to market quickly and cost-effectively. Our ability to develop new products can affect
our competitive position and requires the investment of significant resources. These development efforts divert resources from
other potential investments in our businesses, and they may not lead to the development of new products on a timely basis. New
or enhanced products may not satisfy consumer preferences and potential product failures may cause consumers to reject these products.
As a result, these products may not achieve market acceptance and our brand image could suffer. In addition, our competitors may
introduce superior products or business strategies, impairing our brand and the desirability of our products, which may cause consumers
to defer or forego purchases of our products or services. Also, the markets for our products and services may not develop or grow
as we anticipate. The failure of our products to gain market acceptance, the potential for lawsuits, or the obsolescence of our
products could significantly reduce our revenue, increase our operating costs or otherwise adversely affect our business, financial
condition, results of operations or cash flows.
ADVERSE PUBLICITY OR CONSUMER PERCEPTION OF
OUR PRODUCTS AND ANY SIMILAR PRODUCTS DISTRIBUTED BY OTHERS COULD HARM OUR REPUTATION AND ADVERSELY AFFECT OUR SALES AND REVENUES.
We believe we are highly dependent upon positive
consumer perceptions of the quality of our products as well as similar products distributed by other supplement companies. Consumer
perception of nutritional supplement products can be substantially influenced by scientific research or findings, national media
attention and other publicity about product use. Adverse publicity from these sources regarding the safety or quality of our products
could harm our reputation and results of operations. The mere publication of news articles or reports asserting that such products
may be harmful could have a material adverse effect on our business, financial condition and results of operations, regardless
of whether such news articles or reports are scientifically supported.
DEPENDENCE UPON TRADEMARKS AND PROPRIETARY
RIGHTS, FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
Our future success depends significantly on
our ability to protect our current and future brands and products and to defend our intellectual property rights. We have trademark
registrations covering our brands and products, and expect to continue to file, trademark applications seeking to protect newly
developed brands and products. We cannot be sure that trademark registrations will be issued with respect to any of our trademark
applications. There is also a risk that we could, by omission, fail to timely renew or protect a trademark or that our competitors
will challenge, invalidate or circumvent any existing or future trademarks issued to or licensed by us. In addition, we face additional
risks related to the potential failure to protect the intellectual property rights covered by our license to market Panoxol and
the risk of patent infringement claims being filed against us due to our license to market Panoxol.
OUR INSURANCE COVERAGE OR THIRD-PARTY INDEMNIFICATION
RIGHTS MAY NOT BE SUFFICIENT TO COVER OUR LEGAL CLAIMS OR OTHER LOSSES THAT WE MAY INCUR IN THE FUTURE.
In the future, insurance coverage may not be
available at adequate levels or on adequate terms to cover potential losses, including on terms that meet our customer’s
requirements. If insurance coverage is inadequate or unavailable, we may face claims that exceed coverage limits or that are not
covered, which could increase our costs and adversely affect our operating results.
IF DEVELOPED, OUR BRANDS MAY BECOME VALUABLE,
AND ANY INABILITY TO PROTECT THEM COULD REDUCE THE VALUE OF OUR PRODUCTS AND BRAND.
We may invest significant resources to build
and protect our brands. However, we may be unable or unwilling to strictly enforce our rights, including our trademarks, from infringement.
Our failure to enforce our intellectual property rights could diminish the value of our brands and product offerings and harm our
business and future growth prospects.
AN INCREASE IN PRODUCT RETURNS COULD NEGATIVELY
IMPACT OUR OPERATING RESULTS AND PROFITABILITY.
We will permit the return of damaged or defective
products and accept limited amounts of product returns in certain instances. While such returns are expected to be nominal and
within management’s expectations and the provisions established, future return rates may increase more than anticipated.
Any significant increase in damaged or defective products or expected returns could have a material adverse effect on our operating
results for the period or periods in which such returns materialize.
WE HAVE NO MANUFACTURING CAPACITY AND ANTICIPATE
CONTINUED RELIANCE ON THIRD-PARTY MANUFACTURERS FOR THE DEVELOPMENT OF OUR PRODUCTS.
We do not currently operate manufacturing facilities
for production of our products. We lack the resources and the capabilities to manufacture our products. We do not intend to develop
facilities for the manufacture of products in the foreseeable future. We will rely on third-party manufacturers to produce bulk
products required to meet our sales needs. We plan to continue to rely upon contract manufacturers to manufacture commercial quantities
of our products. All of our supplement products are manufactured in the United States and, while we rely primarily on one manufacturer
for our product, multiple other US manufacturers are available that we can employ as needed.
Our contract manufacturers’ failure to
achieve and maintain high manufacturing standards, in accordance with applicable regulatory requirements, or the incidence of manufacturing
errors, could result in consumer injury or death, product shortages, product recalls or withdrawals, delays or failures in product
testing or delivery, cost overruns or other problems that could seriously harm our business. Contract manufacturers often encounter
difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. Our
existing manufacturers and any future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing
business. In the event of a natural disaster, business failure, strike or other
difficulty, we may be unable to replace a third-party
manufacturer in a timely manner and the production of our products would be interrupted, resulting in delays, additional costs
and reduced revenues.
A SHORTAGE IN THE SUPPLY OF KEY RAW MATERIALS
COULD INCREASE OUR COSTS OR ADVERSELY AFFECT OUR SALES AND REVENUES.
All of the raw materials for our products are
obtained from third-party suppliers. Shortages in certain ingredients could result in materially higher raw material prices or
adversely affect our ability to have a product manufactured. Price increases from a supplier would directly affect our profitability
if we are not able to pass price increases on to customers. Our inability to obtain adequate supplies of raw materials in a timely
manner or a material increase in the price of our raw materials could have a material adverse effect on our business, financial
condition and results of operations.
DAMAGE TO OUR REPUTATION.
Maintaining a good reputation is critical to
selling our branded products. Product contamination or tampering or the failure to maintain our standards for product quality,
safety and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials or product components
obtained from suppliers, may reduce demand for our products or cause production and delivery disruptions. Although our producer/distributors
maintain standards for the materials and product components received from suppliers, it is possible that a supplier may not provide
materials or product components that meet the required standards or may falsify documentation associated with the fulfillment of
those requirements. If any of our products becomes unsafe or unfit for consumption, is misbranded or causes injury, we may have
to engage in a product recall and/or be subject to liability and incur additional costs. A widespread product recall, multiple
product recalls, or a significant product liability judgment could cause our products to be unavailable for a period of time, which
could further reduce consumer demand and brand equity. Our reputation could be impacted negatively by public perception, adverse
publicity (whether or not valid), negative comments in social media, or our responses relating to:
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a perceived failure to maintain high ethical, social and environmental standards for all of our operations and activities;
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a perceived failure to address concerns relating to the quality, safety or integrity of our products;
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our environmental impact, including use of agricultural materials, packaging, water and energy use, and waste management; or
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effects that are perceived as insufficient to promote the responsible use of our products.
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Failure to comply with local laws and regulations,
to maintain an effective system of internal controls, to provide accurate and timely financial statement information, or to protect
our information systems against service interruptions, misappropriation of data or breaches of security, could also hurt our reputation.
Damage to our reputation or loss of consumer confidence in our products for any of these or other reasons could result in decreased
demand for our products and could have a material adverse effect on our business, financial condition and results of operations,
as well as require additional resources to rebuild our reputation, competitive position and brand equity.
CONTAMINATION.
The success of our brands depends upon the
positive image that consumers have of those brands. Contamination, whether arising accidentally or through deliberate third-party
action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales. Contaminants
in raw materials, packaging materials or product components purchased from third parties and used in the production of our products
or defects in the process could lead to low quality as well as illness among, or injury to, consumers of our products and may result
in reduced sales of the affected brand or all of our brands
RISKS RELATING TO OWNERSHIP OF
SOLEI SYSTEMS, INC. COMMON STOCK
NO ACTIVE PUBLIC MARKET EXISTS FOR OUR COMMON
STOCK AT THIS TIME, AND THERE IS NO ASSURANCE OF A FUTURE MARKET. SOLI CURRENTLY TRADES ON THE “GREY MARKET” WITH APPROXIMATELY
565 SHAREHOLDERS.
There is a no active public market for our
common stock, although recently reported activity on the grey market has resulted in an increase in the average trading price of
our stock, trading under the symbol SOLI, and in the volume of daily trades. No assurance can be given that a market will develop
or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop,
the price may be highly volatile. Factors such as those discussed in the “Risk Factors” section may have a significant
impact upon the market price of the shares. Due to the low price of our securities, many brokerage firms may not be willing to
effect transactions in our securities. Even if a purchaser finds a broker willing to effect a transaction in our shares, the combination
of brokerage commissions, state transfer taxes, if any, and any other selling costs may exceed the selling price. Further, many
lending institutions will not permit the use of our shares as collateral for any loans.
We have determined to seek listing of our common
stock on the OTC Markets and have sought to convince a market maker to file a Form 15©-211 to allow transactions on the OTC
Markets. There can be no assurance that such a filing will be accomplished or that, if filed, the application will be granted.
OUR STOCK WILL, IN ALL LIKELIHOOD, BE THINLY
TRADED AND AS A RESULT YOU MAY BE UNABLE TO SELL AT OR NEAR ASK PRICES OR AT ALL IF YOU NEED TO LIQUIDATE YOUR SHARES.
The shares of our common stock may be thinly-traded.
We are a small company which is relatively unknown to stock analysts, stock brokers, institutional stockholders and others in the
investment community that generate or influence sales volume, so that even if we came to the attention of such persons, they tend
to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase
of any of our securities until such time as we became more seasoned and viable. As a consequence, there may be periods of several
days or more when trading activity in our securities is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous sales without an adverse effect on Securities price.
We cannot give you any assurance that a broader or more active public trading market for our common securities will develop or
be sustained, or that any trading levels will be sustained. Due to these conditions, we can give stockholders no assurance that
they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their
securities.
OUR COMMON STOCK MAY BE VOLATILE, WHICH SUBSTANTIALLY
INCREASES THE RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SECURITIES AT OR ABOVE THE PRICE THAT YOU MAY PAY FOR THE SECURITY.
Because of the possible price volatility, you
may not be able to sell your shares of common stock when you desire to do so. The inability to sell your securities in a rapidly
declining market may substantially increase your risk of loss because of such illiquidity and because the price for our securities
may suffer greater declines because of our price volatility.
The price of our common stock that will prevail
in the market, if ever available for trading, may be higher or lower than the price you may pay. Certain factors, some of which
are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to the following:
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Variations in our quarterly operating results;
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Loss of a key relationship or failure to complete significant transactions;
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Additions or departures of key personnel;
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Fluctuations in stock market price and volume;
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Changes to the industry; and
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Regulatory developments, particularly those affecting the supplement market.
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Additionally, in recent years the stock market
in general, has experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate
to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our
stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies
following periods of volatility in the market price of those company’s common stock. If we become involved in this type of
litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could
have a further negative effect on your investment in our stock.
THE REGULATION OF PENNY STOCKS BY THE SEC AND
FINRA MAY DISCOURAGE THE TRADABILITY OF OUR SECURITIES.
We are a “penny stock” company,
as our stock price is less than $5.00 per share. None of our securities currently trade in any market other than the grey market
and, if ever available for trading, will be subject to a Securities and Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to persons other than established customers or accredited stockholders.
For purposes of the rule, the phrase “accredited stockholders” means, in general terms, institutions with assets in
excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000
(or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer
must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction
prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will
affect the ability of purchasers in this offering to sell their securities in any market that might develop therefore because it
imposes additional regulatory burdens on penny stock transactions.
In addition, the Securities and Exchange Commission
has adopted a number of rules to regulate “penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4,
15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute “penny
stocks” within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect
the ability of owners of shares to sell our securities in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
Stockholders should be aware that, according
to the Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading
press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections
by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although
we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent the described patterns from being established with
respect to our securities.
Investors in penny stocks have limited remedies
in the event of violations of penny stock rules. While the courts are always available to seek remedies for fraud against us, most,
if not all, brokerages require their customers to sign mandatory arbitration agreements in conjunctions with opening trading accounts.
Such arbitration may be through an independent arbiter. Stockholders may file a complaint with FINRA against the broker allegedly
at fault, and FINRA may be the arbiter, under FINRA rules. Arbitration rules generally limit discovery and provide more expedient
adjudication, but also provide limited remedies in damages usually only the actual economic loss in the account. Stockholders should
understand that if a fraud case is filed an against a company in the courts it may be vigorously defended and may take years and
great legal expenses and costs to pursue, which may not be economically feasible for small stockholders.
Absent arbitration agreements, specific legal
remedies available to stockholders of penny stocks which include the following:
If a penny stock is sold to the investor in
violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the
purchase and receive a refund of the investment.
If a penny stock is sold to the investor in
a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.
The fact that we are a penny stock company
will cause many brokers to refuse to handle transactions in the stocks, and may discourage trading activity and volume, or result
in wide disparities between bid and ask prices. These may cause stockholders significant illiquidity of the stock at a price at
which they may wish to sell or in the opportunity to complete a sale. Stockholders will have no effective legal remedies for these
illiquidity issues.
WE WILL PAY NO DIVIDENDS IN THE FORESEEABLE
FUTURE.
We have not paid dividends on our common stock
and do not anticipate paying such dividends in the foreseeable future. Stockholders whose investment criteria are dependent on
dividends should not invest in our common stock.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR
STOCK PRICE.
The majority of our outstanding shares of common
stock are held by our present officers, directors, and affiliate stockholders as "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an
effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the
Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted
securities for six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares
that does not exceed the greater of 1.0% of a company's outstanding common stock or the average weekly trading volume during the
four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a non-affiliate
after the owner has held the restricted securities for a period of one year. A sale under Rule 144 or under any other exemption
from the Act, if available, or pursuant to subsequent registration of shares of common stock of present stockholders, may have
a depressive effect upon the price of the common stock in any market that may develop.
OUR STOCKHOLDERS MAY SUFFER FUTURE DILUTION
DUE TO ISSUANCES OF SECURITIES FOR VARIOUS CONSIDERATIONS IN THE FUTURE.
There may be substantial dilution to Solei
Systems, Inc. stockholders as a result of future decisions of the Board to issue shares without shareholder approval for cash,
services, or acquisitions. The current pending private offering of up to $3,000,000 in principal amount of convertible notes will,
if issued, also result in substantial potential dilution in our common stock, as the terms of conversion contained in the convertible
notes allows a holder to elect to convert all or part of the principal amount of each note, plus interest accrued at 6 percent
per annum, to be converted into common stock at any time after an initial six month holding period and thereafter up to maturity,
at a conversion price equal to of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period
ending on the latest complete Trading Day prior to the Conversion Date of any such election.