ITEM 1. BUSINESS.
Company Overview
We were formed
to monetize the experience of our founders in generating traffic through the front doors of hearing aid dispensing practices by
providing advertising and marketing and design services that are unique to the industry. We also provide consulting services including
store set-up, customer relations management and sales techniques, all to take advantage of the customers acquired in the course
of the advertising and marketing campaigns. We have created the “Alliance” program, enabling independent hearing aid
practitioners to leverage their collective purchasing power of hearing devices by grouping together and aggregating their purchases.
We plan to become a leader in auditory rehab training utilizing our interactive computer-based software program called Aware™,
a self-assessment and training module that helps individuals work through simple to difficult auditory skills. We are dedicated
to serving the retail hearing aid dispensing community and developing a program to contribute to various hearing aid focused charities.
Whether the hearing
aid dispensary is small, medium or large, we have previously shown an ability to increase the total revenue of our clients without
increasing cost. There are over 14,000 retail hearing aid dispensing practices in the United States. The company operates in a
highly competitive and growing industry. The proliferation of media channels, including the rapid development of interactive technologies
and mediums, along with their integration within all offerings has fragmented consumer audiences, especially the 55+ age sector
which is our clients’ primary targeted audience. These developments make it more complex for marketers to reach their target
audiences in a cost-effective way, causing them to turn to marketing service providers for a customized mix of advertising and
marketing communications services designed to make the best use of their total marketing expenditures.
The
Alliance program will enable independent hearing aid practitioners to leverage the purchasing power of the hearing devices
by grouping together and aggregating their purchases. The potential savings to an individual of the Alliance may be
significant and may increase their operating margin.
Additionally, individual
Alliance members can also utilize our expertise in marketing and advertising to potentially increase each member’s units
sold per month. We use geographically and demographically targeted Direct Mail campaigns as well as print advertising in local
newspapers during a promotional event. The goal is for Alliance members to work with us in creating an exclusive and time-sensitive
promotion for buying devices without the consumer researching their local market for the same product at a cheaper price, a common
problem for the industry and individual businesses. Oftentimes, the consumer researches the same product and compares prices with
other local hearing device retailers on the internet and purchases the hearing device with the cheapest, but not always the best
hearing aid retailer. The Company anticipates that this approach, combined with the Alliance, may increase the efficiency of the
promotion.
We
provide a comprehensive range of services (including consulting services), grouped into four fundamental disciplines: advertising/marketing,
customer relationship management, public relations and specialty communications.
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Advertising/marketing:
We design and implement all the advertising and marketing activities for the client, generally to the general population
in their market to the pre-determined demographic.
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Customer
relationship management (CRM):
We work with our clients to help identify and market to the their customer database, using
automatic triggers to market to them on certain anniversaries for the customer, for example, initial purchase date, hearing
device warranty expiration, birthday, etc...
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Public
relations:
We work with local and national press release companies to help the client write and publish press releases,
as well as with the client to determine and execute certain actives to yield a long term positive outcome for the business,
using community outreach and other activities to help build the clients brand.
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Specialty
communications:
The world is no longer one big place where mass communications and marketing define the methods of communications.
Our society is now a collection of audiences defined by differe
nt
cultures, ethnicities, genders, lifestyles and interests. We excel in specialty communications by reaching each intended audience
with communication styles and vehicles germane to the targeted audience.
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Corporate Overview
InnerScope Advertising
Agency, Inc. (“InnerScope”) is a Nevada Corporation incorporated on June 15, 2012, with its principal place of business
in Roseville, California. InnerScope was formed to provide advertising and marketing services to retail establishments in the
hearing device industry.
On June 20, 2012,
Innerscope acquired InnerScope Advertising Agency, LLC. Through this Acquisition and Plan of Share Exchange with InnerScope Advertising
Agency, LLC (“ILLC”), a commonly owned entity, InnerScope acquired a 100% interest of all membership interests in
ILLC. On November 1, 2013, InnerScope entered into an Acquisition and Plan of Share Exchange with Intela-Hear, LLC (“Intela-Hear”),
a commonly owned entity, whereby InnerScope acquired 100% of the outstanding membership interests of Intela-Hear. InnerScope (herein
after referring to InnerScope, ILLC and Intela-Hear or “the Company”) was formed to fill the gap in the advertising/marketing
side of the hearing device industry. Both ILLC and Intela-Hear were controlled and majority owned by our Chairman.
On October 28,
2016, a majority of the Company’s shareholders, based on the recommendation of the Company’s Board of Directors (the
“BOD”), approved a forward split of the common stock, whereby an additional two shares of common stock were issued
for every share of common stock outstanding (the “Forward Split”). The Company filed Amended and Restated Articles
of Incorporation with the State of Nevada on October 31, 2016. All share amounts for all periods presented have been retroactively
adjusted to reflect the Forward Split.
InnerScope is an
"emerging growth company" within the meaning of the federal securities laws. For as long as we are an emerging growth
company, we will not be required to comply with the requirements that are applicable to other public companies that are not "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, the reduced disclosure obligations regarding executive compensation in our periodic reports
and proxy statements and the 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 intend to take advantage of these reporting
exemptions until we are no longer an emerging growth company.
Innerscope
will continue to be an emerging growth company until the earliest to occur of (1) the last day of the fiscal year during which
we had total annual gross revenues of at least $1 billion (as indexed for inflation), (2) the last day of the fiscal year following
the fifth anniversary of the date of our initial public offering under this prospectus, (3) the date on which we have,
during the previous three-year period, issued more than $1 billion in non-convertible debt and (4) the date on which we are deemed
to be a “large accelerated filer,” as defined under the Securities Exchange Act of 1934, as amended (which we refer
to as the “Exchange Act”).
InnerScope also
qualifies as a “smaller reporting company” under Rule 12b-2 of the Securities Exchange Act of 1934, as amended, which
is defined as a company with a public equity float of less than $75 million. To the extent that we remain a smaller reporting
company at such time as we are no longer an emerging growth company, we will still have reduced disclosure requirements for our
public filings some of which are similar to those of an emerging growth company including not being required to comply with the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements.
Our authorized
capital stock currently consists of 225,000,000 shares of common stock, and 25,000,000 shares of preferred stock. Our common stock
is listed on The OTCQB under the symbol “INND.”
Our principal
corporate headquarters are located at 2281 Lava Ridge Court, Suite 130, Roseville, CA. 95661. Our telephone number is (916) 218-4100.
Our website address is www.innerscopeadagency.com. (The information contained on, or that can be accessed through, our website
is not a part of this Annual Report on Form 10-K.)
Customers
Moore
Family Hearing Company (“MFHC”), a related party, controlled by our Chairman, pursuant to a Marketing Agreement
(the “MFHC Marketing Agreement”), accounted for approximately 48% and 83% of our revenues for the years ended
December 31, 2016 and 2015, respectively. On August 5, 2016, MFHC and the Company agreed to cancel the MFHC Marketing
Agreement as a result of the sale by MFHC of substantially all of their assets, including the hearing aid dispensaries to
which we were providing services. Prior to the sale, MFHC stores increased from 18 as of January 1, 2015 to 20 as August 5,
2016. We charged MHFC $3,200 per store per month effective January 1, 2015. Beginning April 1, 2016, through August 5, 2016,
the Company also provided direct print and mail advertising services to MFHC. For the year ended December 31, 2016, one
unrelated customer accounted for approximately 52% of our revenues.
On
August 5, 2016, the Company along with Mark Moore (“Mark”, the Company’s chairman), Matthew
Moore (“Matthew”, the Company’s Chief Executive Officer) and Kim Moore (“Kim”, the
Company’s Chief Financial Officer) entered into a Store Expansion Consulting Agreement (the “Expansion
Agreement”) with an unrelated party. Mark, Matthew and Kim are herein referred to collectively as the Moores. Pursuant to
the Expansion Agreement, the Company and the Moores will be responsible for all physical plant and marketing details for new
store openings during the initial term of six-months. The Expansion Agreement was cancelled on January 6, 2017. The
Company’s client has decided
to do their own marketing in-house and eliminate
this out-sourced contract, and has decided to delay the opening of any new stores.
The Company has recognized a
gain on the cancellation of the Expansion Agreement of $64,000 in other income for the year ended December 31, 2016. The
client has agreed to pay the Store Expansion earn out fee and an additional $30,000 for the cancellation of the Marketing
Agreement and Store Expansion Agreement.
Also
on August 5, 2016, the Company and the Moores entered into a Consulting Agreement (the “Consulting Agreement”)
with the same unrelated party as the store Expansion Agreement. Under the Consulting Agreement, including a Non-Compete
provision covering a ten mile radius of any retail store, the Company and the Moores will provide unlimited licensing of the
Intela-Hear brand name, exclusive access to the Aware Aural Rehab Program within 10 miles of retail stores, exclusive
territory of all services within 10 miles of retail stores and 40 hours per month of various consulting services. The
Consulting Agreement continues until January 31, 2019, unless terminated for cause, as defined in the Consulting Agreement.
The Company recognized $402,777 of revenue from the Consulting Agreement for the year ended December 31, 2016. The Company
will realize $1,000,000 of the revenues under the Agreement in the fiscal year ending December 31, 2017.
Effective
August 5, 2016, the Company entered into a Marketing Agreement (the “Marketing Agreement”) with the same
unrelated party as the Consulting and Store Expansion Agreement. Pursuant to the Marketing Agreement, the Company will provide
marketing concepts and designs to promote its products and use the Company’s advertising services for an initial
six month period. Pursuant to the Marketing Agreement and the current structure, the Company will receive $50,000 per month.
On January 6, 2017, the Marketing Agreement was cancelled.
For
the year ended December 31, 2016, the Company recognized $193,548 of revenue from the Marketing Agreement.
We typically focus
on the medium size hearing aid providers and practices (4 to 20 locations) to large hearing aid 20+ dispensing practice locations
where the advantages of strategic, cost-effective advertising are appreciated, but practice ownership cannot afford or have the
time or expertise in-house to create and maintain these programs. The Company is currently marketing its services to potential
new clients.
Revenue Generation
We
derive our revenue from:
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Monthly
Consulting Fees,
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Design
Services/Licensing Fees, and
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Consulting
Fees
We create
relationships with our clients for monthly consulting fees. This fee gives the client access to copyrighted materials in our library.
The fee also gives the client preferred buying status in the media-buying program, which includes direct mailings, television
and radio advertisements, and email advertisements. This allows the client to realize substantial savings through our relationships.
Management believes this saved money is typically invested back into the marketing expenditure of the client, which increases
our revenue and profits. Fees are based on the practice size (number of locations) in conjunction with an estimated number of
consulting and design hours expected to be utilized by the client.
Design Services
& Licensing Fees
We are
a full design studio that designs individual Business to Customer (B2C) marketing pieces specialized for the hearing device industry.
We also design and implement website creations from concept to implementation.
Media Buying
We negotiate,
on behalf of the client, to get the best possible rates while receiving a commission from the media outlet. As part of our media
buying, we utilize television advertisements, radio advertisements, email campaigns, and direct mail marketing.
The most
profitable of these media-buying sectors is direct mail marketing where we contract with mail production houses as needed. This
allows us to produce the highest quality materials at a competitive price with minimum quantities required, which is a key competitive
edge for us and our clients. Our management believes that when the client saves money, they typically reinvest back into their
marketing budget for further marketing expenditures.
Marketing and
Business Development
We market our advertising
services through three different marketing programs: Direct Relationships, Customer Referrals and Direct Sales and Marketing.
Direct Relationships
Our business primarily
comes from referrals from industry consultants and hearing aid manufacturers. Industry consultants and hearing aid manufacturers
refer their customers (hearing practices) to us to help the hearing practice with their marketing services including practice
consultation, direct mail, newspaper advertisements, media buying and telemarketing services.
Referrals
We continue to
develop a self-referral network between current and past clients that uses current and time-tested successful marketing campaigns
and marketing consulting services.
Direct Sales
and Marketing
We have a complete
database of all hearing aid practices across the country, totaling over 15,000 independent businesses. We target these practices
through telemarketing, direct mail, and email marketing to contact the practice owners and managers to consider us as their marketing
arm.
We provides incentives
to new customers by providing a low cost direct mail program, which would be on average 30% less in cost then the competition
but still maintaining a profit. This marketing offer creates goodwill and proves to the customer that they can be profitable and
successful using our services.
THE FUTURE
The Alliance
Plan
The Company
is in the midst of setting up an Alliance (the “Alliance”), which will provide for hearing aid practices to purchase
products offered by the Alliance at a discount through a contract already negotiated by the Company with a manufacturer. The Alliance
will set up members (at no additional cost) in all large and medium sized markets around the United States to sell private label
hearing devices that are manufactured and shipped by a leading manufacturer. Through the Alliance, the member will be able to
purchase product directly from the manufacturer at a discount. The manufacturer will be billing and collecting for all hearing
aids sold to the member under the pricing arrangement agreed to by the member and the Alliance. The manufacturer and the Alliance,
on a monthly basis, will calculate the difference between the member price and the Alliance price (the “rebate”).
The manufacturer will then pay the rebate to the Company on a monthly basis. The Company will recognize the rebate as revenue
in the month the rebate is earned. The manufacturer will not charge any fees associated with the collecting or distribution of
the margin between the member’s price and the Alliance’s price.
Marketing
Support
A
significant benefit for the Alliance members will be marketing support. We will be the marketing arm for the Alliance and all
members will have access to the lowest cost of direct mail marketing in the industry and time-tested marketing materials for direct
mail and newspaper advertisements. This benefit could increase an Alliance member’s practice to new levels or help the Alliance
become more efficient and cost effective business.
The
Alliance will be creating a Business Development Fund (BDF) for every Alliance member created from their monthly hearing device
purchases from the Alliance group. The Alliance will contribute 5% of the monthly total or net paid for hearing instruments purchased
through the member’s Alliance account every month and deposited into a BDF to be used or credited toward that member’s
future marketing/advertising.
By
agreeing to become a part of The Alliance, the Alliance Member will gain exclusive access to the Alliance offerings in a particular
geographic area, with a guarantee from the Company that it will not permit any other hearing aid practice in that geographic area
to join the Alliance. This insures that no competitors in the member’s market area has the right to sell or use:
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The Alliance’s
private label brand hearing instruments
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The Alliance’s
proprietary programming software (only authorized Alliance businesses can program the hearing instruments)
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Any marketing,
advertising, or price strategies (exclusive to only Alliance businesses)
The
Company’s arrangement with the manufacturer will allow each practice to decide whether a private label strategy (using an
Alliance brand) is right for their practice, or if a combination of both the manufacturer’s label and private label hearing
instruments may be the right choice. The Alliance will offer both choices with the same discount levels. Unless a retailer is
a member of the Alliance, the discount of purchasing either an Alliance branded device or the manufacturer’s hearing device
will not be available.
The
Alliance will use high value packaging and collateral materials. All of the hearing instruments will be delivered to the patient
in a branded and zippered fabric case, which includes a drying cup, cleaning spray, ear gel, cleaning wipes, and brush/pick magnet
combo with a vent brush. All of the Alliance’s high quality hearing instruments will be fully supported with quality customer
brochures, as well as a consumer based website,
www.intelahear.com
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Alliance
Marketing Plan
The
Alliance marketing plan is divided into distinct phases.
1
st
phase: The Alliance will focus on a grass roots campaign through word of mouth with industry leaders, which have private
practice contacts that are currently searching for a group to help them navigate through these challenging times.
2
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phase: Using social media such as LinkedIn, the Alliance will make connections with the decision makers of private practices
that are not currently tied into a single manufacturer or a supply arrangement with a hearing device manufacturer.
3
rd
phase: Recruit outside manufacturer representatives that are already located in the geographic territories where the Alliance
desires to expand. These outside manufacturer representatives would have local knowledge and resources to find and convert existing
practices to the Alliance.
The
Alliance will primarily offer 2 levels for the Alliance members, and 1 additional, exclusive tier in the network.
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The first level
will offer the Alliance member a 35% discount off the single unit price from the manufacturer if they purchase less than 20 units
per month through the alliance. These units could be a private label or the manufacturer’s labeled hearing device. All units
except the entry-level hearing device would qualify for a 5% Business Development Fund (hereinafter “BDF”) contribution.
This BDF will be calculated on the Alliance accounting side at the end of each month. The Alliance will then produce a statement
to the Alliance member. The Alliance will be fully responsible for reimbursing the BDF to the Alliance members.
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The second level
will offer the Alliance member a 40% discount if they purchase more than 20 units per month through the Alliance, plus the 5%
BDF on all units except for the Entry Level Hearing Devices.
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The exclusive
tier will be called the “Founders.” This super exclusive tier will be for the elite few businesses that can produce
over 100 units per month for the Alliance. The Founders tier will receive a 45% discount, plus the 5% BDF on all units except
for the Entry Level Hearing Devices. All Founders will sign a confidentially and non-disclosure agreements about their practice
being in the founders tier.
Competition
We have numerous
direct, indirect and partial competitors, many of which have valuable industry relationships and access to greater resources than
we do. There is no assurance that we will be able to provide services that will be competitive in the marketplace, and even if
competitive, that we will be able to earn a profit.
The numerous types
of direct or indirect competitors that exist in the market today include, but may not be limited to, sales and marketing firms,
marketing consultants, design services, ad agencies, media buying firms, Internet marketing firms, online social media firms and
others: Key competitors include Chicago Advertising & Marketing (CAM), a leader in direct marketing for the Hearing Aid Industry
since 1995, Beeman Marketing, a marketing firm specializing in hearing care practitioners and audiologists since 2004, and Nutshell
Marketing, a high quality direct response marketing firm specialized in targeting 55 and older age group.
The Alliance faces
competition from major retail distributors and/or networks, as there is presently rapid growth of manufacturer-owned retail stores.
Major consolidation has taken place in the US market by the hearing aid manufacturers in the last few years, with almost every
manufacturer participating in buying out other smaller manufacturers, resulting in many different brand labels controlled under
the same parent company umbrella. This consolidation has allowed the manufacturers to increase and control more of their distribution
by offering different levels in their product lines throughout their different brands. This has also allowed the manufacturers
to implement different price strategies for the same technology throughout their brands. This consolidation has not only
increased their market share but also increased their profit margins.
The Internet is
fast becoming a major factor in the distribution of hearing aids in the U.S. Numerous small companies are on the Internet advertising
hearing aids for the cheapest price, and the largest hearing aid manufacturer, Sonova, which owns HearingPlanet, is most prominent
among these online offerings. However, Internet sales still require the participation of a local practitioner for testing and
fitting. This limits the widespread geographic appeal of Internet sales.
Technology and Development
We are equipped
with three (3) G5 MacPros and one (1) iMac, which are up-to-date with the latest in software package from Adobe Creative Cloud
and other graphic design software. We also utilize a large format printer and a production color printer to handle all proofing
needs. All design and client information is held on a cloud computing network, which allows all designers and customer relation
associates to access all design and customer files from on-site and off-site, to improve productivity and decrease lag time. Files
are encrypted and password protected to make sure files are securely stored.
Intellectual Property
We have copyrights
on all materials that are created or modified by any designers, which includes all conceptual and final artwork. Over the years,
we have developed proprietary processes in how we manage our marketing programs; these processes are not protected by any patents
but are covered by non-disclosure agreements executed with clients, consultants and employees. In the future we may utilize the
services of contract developers, consultants, and/or third party personnel. Our success may depend in part upon our ability to
preserve our trade secrets, obtain and maintain patent protection for our technologies, products and processes, and operate without
infringing upon the proprietary right of other parties. However, we may rely on certain proprietary technologies, trade secrets,
and know-how that are not patentable. Although we may take action to protect our unpatented trade secrets and our proprietary
information, in part, by the use of confidentiality agreements with our employees, consultants and certain of our contractors,
we cannot guarantee that:
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these agreements will not be
breached;
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(b)
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we would have adequate remedies
for any breach; or
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(c)
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our proprietary trade secrets
and know-how will not otherwise become known or be independently developed or discovered by competitors.
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We cannot guarantee
that our actions will be sufficient to prevent imitation or duplication of either our products or services by others or prevent
others from claiming violations of their trade secrets and proprietary rights.
Government Regulation.
We are subject
to a limited variety of local, state, and federal regulations. While we believe that our operations are in compliance with all
applicable regulations, there can be no assurances that from time to time unintentional violations of such regulations will not
occur. We are subject to federal, state and local laws and regulation applied to businesses, such as payroll taxes on the state
and federal levels. Our current business requires that we comply with state corporate filings, city or county business license
and the necessary business liability insurance. The requirements of these regulations are minimal and do not cause any undue burden.
Internet access
and online services are not subject to direct regulation in the United States. Changes in the laws and regulations relating to
the telecommunications and media industry, however, could impact our business. For example, the Federal Communications Commission
could begin to regulate the Internet and online service industry, which could result in increased costs for us. The laws and regulations
applicable to the Internet and to our services are evolving and unclear and could damage our business. There are currently few
laws or regulations directly applicable to access to, or commerce on, the Internet. Due to the increasing popularity and use of
the Internet, it is possible that laws and regulations may be adopted, covering issues such as user privacy, defamation, pricing,
taxation, content regulation, quality of products and services, and intellectual property ownership and infringement. Such legislation
could expose us to substantial liability as well as dampen the growth in use of the Internet, decrease the acceptance of the Internet
as a communications and commercial medium, or require us to incur significant expenses in complying with any new regulations.
Employees
As of March 31,
2017, we have 5 employees.
ITEM 1A –
RISK FACTORS
You should carefully
consider the risks described below, as well as other information provided to you in this document, including information in the
section of this document entitled “Forward-Looking Statements.” The risks and uncertainties described below are not
the only ones facing the Company. If any of the following risks actually occur, the Company’s business, financial condition
or results of operations could be materially adversely affected.
Investors should
not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the
date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events
or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events
or circumstances. Our business, financial condition and/or results of operation may be materially adversely affected by the nature
and impact of these risks. New factors emerge from time to time, and it is not possible for us to predict all of such factors.
Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Risks Related
to Our Business and Our Industry
For the year
ended December 31, 2016, two customers accounted for all of our business, one of which was a related party.
For the year ended
December 31, 2016 two customers accounted for all of our business, of which one (MFHC) was a related party. MFHC, pursuant to
a Marketing Agreement (the “MFHC Marketing Agreement”), accounted for approximately 48% and 83% of our revenues for
the years ended December 31, 2016 and 2015, respectively. On August 5, 2016, MFHC and the Company agreed to cancel the MFHC Marketing
Agreement as a result of the sale by MFHC of substantially all of their assets, including the hearing aid dispensaries to which
we were providing services. We entered into a 30 month Consulting Agreement with an unaffiliated party, as well as a Store Expansion
Agreement and Marketing Agreement. The Store Expansion Agreement and Marketing Agreement were subsequently cancelled. The unaffiliated
party represented approximately 52% of our revenues for the year ended December 31, 2016. For the year ended December 31, 2017,
we will recognize $1,000,000 of revenues from the Consulting Agreement and seek to add new customers.
We have incurred
losses or minimal profits annually from operations since inception and any losses threaten the company’s ability to remain
in business and pursue our business plan.
Since inception
we have generated minimum cumulative profits from operations. For the years ending December 31, 2016 and 2015, we had net income
of $69,744 and $70,853, respectively, and we may incur losses from operating activities in the near future.
A significant
part of our business plan depends on marketing of our products and services, which may not be accepted in the marketplace.
Our industry is
extremely competitive and we have yet to attain a market share. In order to achieve successful operations we will depend on effective
marketing to gain a significantly larger market share. We do not engage independent sales representatives. We do not employ a
marketing agency. Employing a greater number of marketing personnel or a marketing agency would require greater financial resources
than we currently possess. Furthermore, our ability to attract independent sales representatives may be limited without greater
name recognition, an advertising campaign and market penetration. Unless we are able to address these limitations in our marketing
capabilities, you may expect our revenues to be limited and we may have difficulty staying in business. And under such circumstances,
our stock would not gain in value.
We operate
in and plan to expand into extremely competitive environments, which will make it difficult for us to achieve market recognition
and revenues.
We operate in an
extremely competitive environment and the markets for our products and services are characterized by rapidly changing technologies,
frequent new product introductions, short product life cycles and evolving industry standards. Our success depends, in substantial
part, on the timely and successful introduction of our new products and services and thereafter upgrades of our products and services
to comply with emerging industry standards and to address competing technological and product developments by our competitors.
We may focus our resources on technologies that do not become widely accepted, are not timely released or are not commercially
viable. In addition, our products may contain defects or errors that are detected only after deployment. If our products are not
competitive or do not work properly, our business could suffer and our financial performance could be negatively impacted. You
have no assurance that our new products and services, which we intend to be a significant part or our business, will be accepted
in the marketplace. If our products and services do not achieve market acceptance, our revenues will be significantly below the
level we anticipate.
We are an
early-stage company with an unproven business model and our business may not become profitable.
We are an early-stage
company with a limited operating history upon which you can evaluate our business. We have very limited historical financial data.
As a result of these factors, the revenue and income potential of our business is unproven, and we have only a limited operating
history upon which to base an evaluation of our current business and future prospects. Because of our limited operating history
and because the health care industry is rapidly evolving, we have limited insight into trends that may emerge and affect our business.
We may make errors in predicting and reacting to relevant business trends, which could harm our business. Early-stage companies
in new and rapidly evolving markets such as ours frequently encounter risks, uncertainties and difficulties, including those described
in this section. We may not be able to successfully address any or all of these risks. Failure to adequately address such risks
could cause our business, financial condition, results of operations and prospects to suffer.
While management
believes our current operations differ from our competitors because of the array of marketing and advertising services we provide,
there will be an added competitive advantage as our future plans depend on developing the Alliance business model. The Alliance
business model differs from those of many of our competitors, and customers may be reluctant to adopt our model. This reluctance
may hinder our ability to gain new customers and to expand our business.
Our revenues
are highly susceptible to declines as a result of unfavorable economic conditions.
Economic downturns
could affect the hearing aid industry more severely than other industries, and the recovery of the hearing aid industry could
lag behind that of the economy generally. In the past, some clients have responded to weakening economic conditions by reducing
their purchases of hearing aids in general and marketing budgets specifically, which include discretionary components that are
easier to reduce in the short term than other operating expenses. This pattern may recur in the future. A decrease in our revenue
could pose a challenge to our cash generation from operations.
Our financial
condition could be adversely affected if our available liquidity is insufficient.
If our business
is significantly adversely affected by further deterioration in the economic environment or otherwise, it could lead us to seek
new or additional sources of liquidity to fund our needs. Currently, for a non-investment-grade company such as ours, the capital
markets are challenging, with limited available financing and at higher costs than in recent years. There can be no guarantee
that we would be able to access any new sources of liquidity on commercially reasonable terms or at all.
We may lose
or fail to attract and retain key employees and management personnel.
Our employees,
including creative, research, media and account specialists, and their skills and relationships with clients, are among our most
important assets. An important aspect of our competitiveness is our ability to attract and retain key employees and management
personnel. Our ability to do so is influenced by a variety of factors, including the compensation we award, and could be adversely
affected by our financial or market performance.
We
currently have only a small management team and staff, which could limit our ability to effectively seize market opportunities
and grow our business.
Our operations
are subject to all of the risks inherent in a growing business enterprise, including the likelihood of operating losses. As a
smaller company with a limited operating history, our success will depend, among other factors, upon how we manage the problems,
expenses, difficulties, complications and delays frequently encountered in connection with the growth of a new business, products
and channels of distribution, and current and future development. In addition, as a company with a limited operating history and
only a small management team and staff to grow the business and manage the risks inherent in a growing business enterprise, these
factors could limit our ability to effectively seize market opportunities and grow.
We are subject
to regulations and other governmental scrutiny that could restrict our activities or negatively impact our revenues.
Our industry is
subject to government regulation and other governmental action, both domestic and foreign. There has been an increasing tendency
on the part of advertisers and consumer groups to challenge advertising through legislation, regulation, the courts or otherwise.
For example, challenges have been made in the courts on the grounds that the advertising is false and deceptive or injurious to
public welfare. Through the years, there has been a continuing expansion of specific rules, prohibitions, media restrictions,
labeling disclosures and warning requirements with respect to the advertising for certain products. Representatives within government
bodies, both domestic and foreign, continue to initiate proposals to ban the advertising of specific products and to impose taxes
on or deny deductions for advertising, which, if successful, may have an adverse effect on advertising expenditures and consequently
our revenues.
We will be
subject to the periodic reporting requirements of Section 15(d) of the Exchange Act that will require us to incur audit fees and
legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to
earn a profit.
We will be subject
to the periodic reporting requirements of Section 15(d) of the Exchange Act that will require us to incur audit fees and legal
fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn
a profit. We will be required to file periodic reports with the SEC pursuant to the Exchange Act and the rules and regulations
promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm will have
to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal
counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services
cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in and
the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent
by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have
a negative effect on our ability to meet our overhead requirements and earn a profit. We may be exposed to potential risks resulting
from any new requirements under Section 404 of the Sarbanes-Oxley Act of 2002. If we cannot provide reliable financial reports
or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial
information, and the trading price of our common stock, if a market ever develops, could drop significantly
If we experience
significant fluctuations in our rate of anticipated growth and fail to balance our expenses with our revenue forecasts, our results
could be harmed.
Due to our evolving
business model, the unpredictability of new markets that we intend to enter and the unpredictability of future general economic
and financial market conditions, we may not be able to accurately forecast our rate of growth. We plan our expense levels and
investment on estimates of future revenue and future anticipated rate of growth. As a result, we expect that our revenues, operating
results and cash flows may fluctuate significantly on a quarterly basis.
We may in
the future be sued by third parties for alleged infringement of their proprietary rights.
The software and
Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent
litigation based on allegations of infringement or other violations of intellectual property rights. We may receive in the future
communications from third parties claiming that we have infringed the intellectual property rights of others. We may in the future
be sued by third parties for alleged infringement of their proprietary rights. Our technologies may not be able to withstand any
third-party claims against their use. The outcome of any litigation is inherently uncertain. Any intellectual property claims,
whether with or without merit, could be time-consuming and expensive to resolve, could divert management attention from executing
our business plan and could require us to change our technology, change our business practices and/or pay monetary damages or
enter into short- or long-term royalty or licensing agreements which may not be available in the future at the same terms or at
all.
We rely on
third-party computer hardware and software that may be difficult to replace or which could cause errors or failures of our service.
We will rely on
computer hardware purchased or leased and software licensed from third parties in order to offer our proposed service, including
database software from Oracle Corporation and an open source content management system. This hardware and software may not continue
to be available at reasonable prices or on commercially reasonable terms, or at all. Any loss of the right to use any of this
hardware or software could significantly increase our expenses and otherwise result in delays in the provisioning of our service
until equivalent technology is either developed by us, or, if available, is identified, obtained and integrated, which could harm
our business. Any errors or defects in third-party hardware or software could result in errors or a failure of our service which
could harm our business.
Our business
could be adversely affected if our customers are not satisfied with their purchase through us or the implementation and customization
services provided by third party Service Providers.
Our business will
depend on our ability to satisfy our potential customers. If a customer is not satisfied with the quality of the product or service,
the customer's dissatisfaction could damage our ability to obtain additional or future orders from that customer. In addition,
potential negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business
by affecting our ability to compete for new business with prospective customers.
We are dependent
on our President and outsourced consultants, and the loss of one or more of these individuals could harm our business and prevent
us from implementing our business plan in a timely manner.
Our success depends
substantially upon the continued services of our executive officers and other key members of management, particularly our President,
Matthew Moore. We do not maintain key person life insurance policies on our President. The loss of the services of our President
could seriously harm our business.
Our President is
also the Director of Marketing of Moore Family Hearing Corporation.
Our future
growth may be dependent, in part, on our distribution arrangements directly with retailers and regional retail accounts. If we
are unable to establish and maintain these arrangements, our results of operations and financial condition could be adversely
affected.
Our future growth
may be dependent in part on our distribution arrangements directly with retailers and regional retail accounts. If we are unable
to establish and maintain these arrangements, our results of operations and financial condition could be adversely affected. We
currently have distribution arrangements with a few regional retail accounts to distribute our products directly through their
venues; however, there are several risks associated with this distribution strategy. First, we do not have long-term agreements
in place with any of these accounts and thus, the arrangements are terminable at any time by these retailers or us. Accordingly,
we may not be able to maintain continuing relationships with any of these national accounts. A decision by any of these retailers,
or any other large retail accounts we may obtain, to decrease the amount purchased from us or to cease carrying our products could
have a material adverse effect on our reputation, financial condition or results of operations. In addition, we may not be able
to establish additional distribution arrangements with other national retailers. In addition, our dependence on large regional
retail chains may result in pressure on us to reduce our pricing to them or seek significant product discounts. In general, our
margins are lower on our sales to these customers because of these pressures. Any increase in our costs for these retailers to
carry our product, reduction in price, or demand for product discounts could have a material adverse effect on our profit margin.
Our ability
to grow our business may depend on developing a positive brand reputation and member loyalty.
Establishing and
maintaining a positive brand reputation and nurturing member loyalty is critical to attracting new customers. We expect to expend
reasonable but limited resources to develop, maintain and enhance our brand in the near future. In addition, nurturing customer
loyalty will depend on our ability to provide a high-quality, user experience. If we are unable to maintain and enhance our brand
reputation and customer satisfaction, our ability to attract new customers will be harmed.
Investors
may lose their entire investment if we fail to reach profitability.
We commenced business
in 2006. We have no demonstrable operations record from which you can evaluate the business and its prospects. Our prospects must
be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early
stages of development. We cannot guarantee that we will be successful in accomplishing our objectives. To date, we have incurred
losses and will continue to do so in the foreseeable future. Investors should therefore be aware that they may lose their entire
investment in the securities.
In order
to execute our business plan, we may need to raise additional capital. If we are unable to raise additional capital, we may not
be able to achieve our business plan and you could lose your investment.
We may need to
raise additional funds through public or private debt or equity financings as well as obtain credit from vendors to be able to
fully execute our business plan. Any additional capital raised through the sale of equity may dilute your ownership interest.
We may not be able to raise additional funds on favorable terms, or at all. If we are unable to obtain additional funds or credit
from our vendors, we will be unable to execute our business plan and you could lose your investment. Management estimates we will
need approximately $250,000 to fully implement, execute and launch our Alliance program.
We have limited
protection of our intellectual property.
Our business prospects
do not rely upon company-owned patented technologies. Our business prospects will depend largely on our ability to service and
support customers and deliver services and solutions. There can be no assurance that we will be able to adequately protect our
trade secrets. In the event competitors independently develop or otherwise obtain access to our know-how, concepts or trade secrets,
we may be adversely affected.
Litigation
or legal proceedings could expose us to significant liabilities and damage our reputation.
Litigation or legal
proceedings could expose us to significant liabilities and damage our reputation.
We may become party
to litigation claims and legal proceedings. Litigation involves significant risks, uncertainties and costs, including distraction
of management attention away from our current business operations. We evaluate litigation claims and legal proceedings to assess
the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments
and estimates, we establish reserves and/or disclose the relevant litigation claims or legal proceedings, as appropriate. These
assessments and estimates are based on the information available to management at the time and involve a significant amount of
management judgment. We caution you that actual outcomes or losses may differ materially from those envisioned by our current
assessments and estimates. Our policies and procedures require strict compliance by our employees and agents with all United States
and local laws and regulations applicable to our business operations, including those prohibiting improper payments to government
officials. Nonetheless, there can be no assurance that our policies and procedures will always ensure full compliance by our employees
and agents with all applicable legal requirements. Improper conduct by our employees or agents could damage our reputation in
the United States and internationally or lead to litigation or legal proceedings that could result in civil or criminal penalties,
including substantial monetary fines, as well as disgorgement of profits.
Our business
model is subject to change
We may elect from
time to time to make pricing, service, hiring and marketing decisions that could increase our expenses, affect our revenues and
impact our financial results. Moreover, because our expense levels in any given quarter are based, in part, on management’s
expectations regarding future revenues, if revenues are below expectations, the effect on our operating results may be magnified
by our inability to adjust spending in a timely manner to compensate for a shortfall in revenues. The extent to which expenses
are not subsequently followed by increased revenues would harm our operating results and could seriously impair our business.
Our Directors
and Officers possess the majority of our voting power, and through this ownership, control our Company and our corporate actions.
Our current Officers
and Directors as a group hold approximately 93% of the voting power of our outstanding shares. As a result of this substantial
ownership in our common stock, our officers and directors have a controlling influence in determining the outcome of any corporate
transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, election of directors, and other significant corporate actions. Our officers and/or directors
may also have the power to prevent or cause a change in control. In addition, without their consent, we could be prevented from
entering into transactions that could be beneficial to us. For additional details concerning voting power please refer to
the section below entitled “Description of Securities.”
Our management
team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day
management of our business.
Our management
team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day
management of our business. Some of the individuals who now constitute our management team have limited experience managing a
publicly traded company and limited experience complying with the increasingly complex laws pertaining to public companies. Our
management team may not successfully or efficiently manage our continued transition to a public company that will be subject to
significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations
will require substantial attention from our senior management and could divert their attention away from the day-to-day management
of our business, which could materially and adversely impact our business operations
We will incur
increased costs as a result of being a public company. These costs will adversely impact our results of operations.
As a public company.
We will incur significant legal, accounting and other expenses that a private company does not incur. We estimate these costs
to be approximately $150,000 annually and include the costs associated with having our financial statements prepared, audited
and filed with the Securities and Exchange Commission (“SEC”) via EDGAR (the Electronic Data Gathering, Analysis,
and Retrieval system) and
XBRL
(eXtensible Business Reporting Language) costs. In addition, we have costs associated
with our transfer agent. The Sarbanes-Oxley Act of 2002 (SOX) and related rules resulted in an increase in costs of maintaining
compliance with the public reporting requirements, as well as making it more difficult and more expensive for us to obtain directors'
and officers' liability insurance.
If
we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.
To manage our growth
successfully, we must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls,
systems, procedures and resources may not be adequate to support a changing and growing company. If our management fails to respond
effectively to changes and growth in our business, including acquisitions, this could have a material adverse effect on the Company’s
business, financial condition, results of operations and future prospects.
As we attempt
to expand our customer base through our marketing efforts, our new customers may use our products differently than our existing
customers and, accordingly, our business model may not be as efficient at attracting and retaining new customers.
As we attempt to
expand our customer base, our new customers may use our products differently than our existing customers. For example, a greater
percentage of new customers may take advantage of the free trial period we offer but ultimately choose to use another form of
marketing to reach their constituents. If our new customers are not as loyal as our existing customers, our attrition rate will
increase and our customer referrals will decrease, which would have an adverse effect on our results of operations. In addition,
as we seek to expand our customer base, we expect to increase our spending on sales and marketing activities in order to attract
new customers, which will increase our operating costs. There can be no assurance that these sales and marketing efforts will
be successful
U.S. federal
legislation entitled Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 imposes certain obligations
on the senders of commercial emails, which could minimize the effectiveness of our email marketing solution, and establishes financial
penalties for non-compliance, which could increase the costs of our business.
U.S. federal legislation
entitled Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 imposes certain obligations on the senders
of commercial emails, which could minimize the effectiveness of our email marketing solution, and establishes financial penalties
for non-compliance, which could increase the costs of our business. In December 2003, Congress enacted Controlling the Assault
of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, which establishes certain requirements for commercial
email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient
as to source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients
with the ability to opt out of receiving future emails from the sender. In addition, some states have passed laws regulating commercial
email practices that are significantly more punitive and difficult to comply with than the CAN-SPAM Act, particularly Utah and
Michigan, which have enacted do-not-email registries listing minors who do not wish to receive unsolicited commercial email that
markets certain covered content, such as adult or other harmful products. Some portions of these state laws may not be preempted
by the CAN-SPAM Act. The ability of our customers’ constituents to opt out of receiving commercial emails may minimize the
effectiveness of our email marketing solution. Moreover, non-compliance with the CAN-SPAM Act carries significant financial penalties.
If we were found to be in violation of the CAN-SPAM Act, applicable state laws not preempted by the CAN-SPAM Act, or foreign laws
regulating the distribution of commercial email, whether as a result of violations by our customers or if we were deemed to be
directly subject to and in violation of these requirements, we could be required to pay penalties, which would adversely affect
our financial performance and significantly harm our business. We also may be required to change one or more aspects of the way
we operate our business, which could impair our ability to attract and retain customers or increase our operating costs.
Government
regulation of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by us to comply with these
laws and regulations could substantially harm our business and results of operations.
Government regulation
of the Internet, e-commerce and m-commerce is evolving, and unfavorable changes or failure by us to comply with these laws and
regulations could substantially harm our business and results of operations. We are subject to general business regulations and
laws as well as regulations and laws specifically governing the Internet, e-commerce and m-commerce in a number of jurisdictions
around the world. Existing and future regulations and laws could impede the growth of the Internet, e-commerce, m-commerce or
other online services. These regulations and laws may involve taxation, tariffs, privacy and data security, anti-spam, data protection,
content, copyrights, distribution, electronic contracts, electronic communications and consumer protection. It is not clear how
existing laws and regulations governing issues such as property ownership, sales and other taxes, libel and personal privacy apply
to the Internet as the vast majority of these laws and regulations were adopted prior to the advent of the Internet and do not
contemplate or address the unique issues raised by the Internet, e-commerce or m-commerce. It is possible that general business
regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce may be interpreted and applied in
a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot assure
you that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived
failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business, and
proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation,
force us to spend significant resources in defense of these proceedings, distract our management, increase our costs of doing
business, and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition of monetary
liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of
noncompliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek
to censor content available on our websites and mobile applications or may even attempt to completely block access to our marketplace.
Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted,
in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely
affected and we may not be able to maintain or grow our net revenues as anticipated
Our business
practices with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental
regulation, legal requirements or industry standards relating to consumer privacy, data protection and consumer protection.
Our business practices
with respect to data and consumer protection could give rise to liabilities or reputational harm as a result of governmental regulation,
legal requirements or industry standards relating to consumer privacy, data protection and consumer protection. Federal, state
and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect. We
strive to comply with all applicable laws, regulations, self-regulatory requirements and legal obligations relating to privacy,
data protection and consumer protection, including those relating to the use of data for marketing purposes. It is possible, however,
that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may
conflict with other rules or our practices. We cannot assure you that our practices have complied, comply, or will comply fully
with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, by us to comply with federal,
state or international laws or regulations, including laws and regulations regulating privacy, data security, marketing communications
or consumer protection, or other policies, self-regulatory requirements or legal obligations could result in harm to our reputation,
a loss in business, and proceedings or actions against us by governmental entities, consumers, retailers or others. We may also
be contractually liable to indemnify and hold harmless performance marketing networks or other third parties from the costs or
consequences of noncompliance with any laws, regulations, self-regulatory requirements or other legal obligations relating to
privacy, data protection and consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or
handle as part of operating our business. Any such proceeding or action, and any related indemnification obligation, could hurt
our reputation, force us to incur significant expenses in defense of these proceedings, distract our management, increase our
costs of doing business and cause consumers and retailers to decrease their use of our marketplace, and may result in the imposition
of monetary liability.
The Company
may lose its status as an Emerging Growth Company.
Under Section 2(a)(19)
of the Securities Act of 1933 and Section 3(a)(80) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
an Emerging Growth Company ("EGC") will lose its EGC status upon the earliest of:
-
the last day of the first fiscal year in
which the company's annual gross revenues exceed $1 billion;
-
the date on which the company is deemed
to be a large accelerated filer (as defined in Rule 12b-2 under the Exchange Act);
-
the date on which the company has, during
the previous three-year period, issued more than $1 billion in non-convertible debt; and
-
the last day of the fiscal year in which
the fifth anniversary of the company's first sale of equity securities pursuant to an effective registration statement occurs.
Risks Related
to Our Common Stock
Liquidity
of shares of our common stock is limited.
There is no established
public trading market for our securities. Hence, there is no central place, such as a stock exchange or electronic trading system,
to resell your common stock. If you want to resell your shares, you will have to locate a buyer and negotiate your own sale. It
is our plan to utilize a market maker who will apply to have our common stock quoted on the Over the Counter Bulletin Board in
the United States. Our shares are not and have not been listed or quoted on any exchange or quotation system. There can be no
assurance that a market maker will agree to file the necessary documents FINRA which operates the Over the Counter Bulletin Board,
no can there be any assurance that such an application for quotations will be approved or that a regular trading market will develop
or that if developed, will be sustained. In the absence of a trading market, an investor will be unable to liquidate his investment
except by private sale.
Failure to develop
or maintain a trading market could negatively affect its value and make it difficult or impossible for you to sell your shares.
Even if a market for common stock does develop, the market price of common stock may be highly volatile. In addition to the uncertainties
relating to future operating performance and the profitability of operations, factors such as variations in interim financial
results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market
price of our common stock.
Our stock
is listed on the OTCQB MarketPlace, if we fail to remain current on our reporting requirements, we could be removed from the OTCQB
which would limit the ability of broker-dealers to sell our securities in the secondary market.
Companies trading
on the OTCQB, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current
in their reports under Section 13, in order to maintain price quotation privileges on the OTCQB. As a result, the market liquidity
for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the
ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get relisted on the
OTCQB, which may have an adverse material effect on the Company.
The Possible
Sale of Shares of Common Stock by Our Selling Security Holders May Have a Significant Adverse Effect on the Market Price of Our
Common Stock.
We have registered
906,000 shares of common stock with the U.S. Securities Exchange Commission. The security holders may sell some or all of their
shares at anytime. In the event that the security holders sell some or all of their shares, the price of our common stock could
decrease significantly.
Our ability to
raise additional capital through the sale of our stock in a private placement may be harmed by these competing re-sales of our
common stock by the selling security holders. Potential investors may not be interested in purchasing shares of our common stock
if the selling security holders are selling their shares of common stock. The selling of stock by the security holders could be
interpreted by potential investors as a lack of confidence in us and our ability to develop a stable market for our stock. The
price of our common stock could fall if the selling security holders sell substantial amounts of our common stock. These sales
may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate
because the selling security holders may offer to sell their shares of common stock to potential investors for less than we do.
We are an
‘Emerging Growth Company” and we intend to take advantage of reduced disclosure and governance requirements applicable
to Emerging Growth Companies, which could result in our stock being less attractive to investors.
We are an "emerging
growth company," as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act, and we
intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not 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, 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 cannot predict if investors
will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less
attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company, which in certain
circumstances could be for up to five years.
The Company’s
election to take advantage of the jobs act’s extended accounting transition period may not make its financial statements
easily comparable to other companies.
Pursuant to the
JOBS Act of 2012, as an emerging growth company the Company can elect to take advantage of the extended transition period for
any new or revised accounting standards that may be issued by the Public Company Accounting Oversight Board ("PCAOB")
or the Securities & Exchange Commission ("SEC"). The Company has elected take advantage of such extended transition
period which means that when a standard is issued or revised and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the standard on the private company timeframe. This may make comparison
of the Company's financial statements with any other public company which is not either an emerging growth company nor an emerging
growth company which has opted out of using the extended transition period difficult or impossible as possible different or revised
standards may be used.
The Jobs
Act will also allow the Company to postpone the date by which it must comply with certain laws and regulations intended to protect
investors and reduce the amount of information provided in reports filed with the
The JOBS Act is
intended to reduce the regulatory burden on “emerging growth companies. The Company meets the definition of an emerging
growth company and so long as it qualifies as an “emerging growth company,” it will, among other things:
-
be exempt from the provisions of
Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation
report on the effectiveness of its internal control over financial reporting.
-
be exempt from the “say on
pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the
“say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements
for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act and certain
disclosure requirements of the Dodd-Frank Act relating to compensation of its chief executive officer;
-
be permitted to omit the detailed
compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934 and instead
provide a reduced level of disclosure concerning executive compensation; and
-
be exempt from any rules that may be adopted
by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s
report on the financial statements
The Company currently
intends to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to it so
long as it qualifies as an “emerging growth company”.
As long as
the Company qualifies as an Emerging Growth Company, the Company’s independent registered public accounting firm will not
be required to attest to the effectiveness of the company’s internal control over financial reporting.
Because the Company
has elected to take advantage of the extended time periods for compliance with new or revised accounting standards provided for
under Section 102(b) of the JOBS Act, among other things, this means that the Company's independent registered public accounting
firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial
reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or deficiencies in
the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company,
the Company may elect not to provide certain information, including certain financial information and certain information regarding
compensation of executive officers that would otherwise have been required to provide in filings with the SEC, which may make
it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company
and the market price of its common stock may be adversely affected.
The Penny
Stock Rules Could Restrict the Ability of Broker-Dealers to Sell Our Shares.
The SEC has adopted
penny stock regulations which apply to securities traded over-the-counter. These regulations generally define penny stock to be
any equity security that has a market price of less than $5.00 per share or an equity security of an issuer with net tangible
assets of less than $5,000,000 as indicated in audited financial statements, if the corporation has been in continuous operations
for less than three years. Subject to certain limited exceptions, the rules for any transaction involving a penny stock require
the delivery, prior to the transaction, of a risk disclosure document prepared by the SEC that contains certain information describing
the nature and level of risk associated with investments in the penny stock market. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly account
statements must be sent by the broker-dealer disclosing the estimated market value of each penny stock held in the account or
indicating that the estimated market value cannot be determined because of the unavailability of firm quotes. In addition, the
rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established
customers and institutional accredited investors (generally institutions with assets in excess of $5,000,000). These practices
require that, prior to the purchase, the broker-dealer determined that transactions in penny stocks were suitable for the purchaser
and obtained the purchaser’s written consent to the transaction. If a market for our common stock does develop and our shares
trade below $5.00 per share, it will be a penny stock. Consequently, the penny stock rules will likely restrict the ability of
broker-dealers to sell our shares and will likely affect the ability of purchasers in the offering to sell our shares in the secondary
market. Trading in our common stock will be subject to the “penny stock” rules. Due to the thinly traded market of
these shares investors are at a much higher risk to lose all or part of their investment. Not only are these shares thinly traded
but they are subject to higher fluctuations in price due to the instability of earnings of these smaller companies. As a result
of the lack of a highly traded market in our shares investors are at risk of a lack of brokers who may be willing to trade in
these shares.
We do not
expect to pay dividends in the future; any return on investment may be limited to the value of our common stock.
We do not currently
anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings,
financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant.
Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development
and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends
to the holders of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our
board of directors. If we do not pay dividends, our common stock may be less valuable because a return on your investment will
only occur if its stock price appreciates.
The market
price of our common stock may be volatile and may decline in value.
The market price
of our common stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market
for OTC Marketplace quoted stocks, in particular. Some of the factors that may materially affect the market price of our
common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or
trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the
market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme
price and trading volume volatility. This volatility has significantly affected the market prices of securities of many
companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of our common stock.
Our stockholders
may experience significant dilution if future equity offerings are used to fund operations or acquire complementary businesses.
If our future operations
or acquisitions are financed through the issuance of equity securities, our stockholders could experience significant dilution.
In addition, securities issued in connection with future financing activities or potential acquisitions may have rights and preferences
senior to the rights and preferences of our common stock. We also have established an equity incentive plan for our management
and employees. We expect to grant options to purchase shares of our common stock to our directors, employees and consultants and
we will grant additional options in the future. The issuance of shares of our common stock upon the exercise of these options
may result in dilution to our stockholders.
Our current
management can exert significant influence over us and make decisions that are not in the best interests of all stockholders.
Our executive officers
and directors beneficially own as a group approximately 93% of our outstanding shares of common stock. As a result, these
stockholders will be able to assert significant influence over all matters requiring stockholder approval, including the election
and removal of directors and any change in control. In particular, this concentration of ownership of our outstanding shares
of common stock could have the effect of delaying or preventing a change in control, or otherwise discouraging or preventing a
potential acquirer from attempting to obtain control. This, in turn, could have a negative effect on the market price of
our common stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares
of common stock. Moreover, the interests of the owners of this concentration of ownership may not always coincide with our
interests or the interests of other stockholders and, accordingly, could cause us to enter into transactions or agreements that
we would not otherwise consider.
We could
issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder
interests and impairing their voting rights, and provisions in our charter documents and under Nevada law could discourage a takeover
that stockholders may consider favorable.
Our certificate
of incorporation provides for the authorization to issue up to 25,000,000 shares of “blank check” preferred stock
with designations, rights and preferences as may be determined from time to time by our board of directors. Our board of
directors is empowered, without stockholder approval, to issue one or more series of preferred stock with dividend, liquidation,
conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders.
The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control.
For example, it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control of our company. In addition, advanced notice is required
prior to stockholder proposals.
Investors
who purchase shares of our common stock should be aware of the possibility of a total loss of their investment.
An investment in
our common stock involves a substantial degree of risk. Before making an investment decision, you should give careful consideration
to the risk factors described in this section in addition to the other information contained in this prospectus. The risk factors
described herein, however, may not reflect all of the risks associated with our business or an investment in our common stock.
You should invest in our Company only if you can afford to lose your entire investment.
The Financial
Industry Regulatory Authority, or FINRA, sales practice requirements may also limit a stockholder's ability to buy and sell our
stock.
In addition to
the Penny Stock Rules described above, FINRA has adopted rules that require that in recommending an investment to a customer,
a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending
speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain
information about the customer's financial status, tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for
at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
A significant
amount of our issued and outstanding shares of common stock are restricted securities and may not be freely resold to the public.
When the restriction on any or all of these shares is lifted, and the shares are sold in the open market, the price of our common
stock could be adversely affected.
A significant amount
of our issued and outstanding shares of common stock are "restricted securities" as defined under Rule 144 promulgated
under the Securities Act of 1933, as amended, and may only be sold pursuant to an effective registration statement or an exemption
from registration, if available. Although Rule 144 may not be immediately available to permit resale of such shares, once available,
and given the number of shares that would no longer be restricted, sales of shares by our shareholders, whether pursuant to Rule
144 or otherwise, could have an immediate negative effect upon the price of our common stock.
For the year
ended December 31, 2016, two customers accounted for all of our business, one of which was a related party.
For the year ended
December 31, 2016 two customers accounted for all of our business, of which one (MFHC) was a related party. Our Marketing Agreement
with MFHC was terminated on August 5, 2016 based upon the sale of the hearing aid dispensaries owned by MFHC to an unaffiliated
party. We entered into a 30 month Consulting Agreement with the unaffiliated party, as well as a Store Expansion Agreement and
Marketing Agreement. The Store Expansion Agreement and Marketing Agreement were subsequently cancelled. MFHC represented approximately
48% and 83% of our revenues for the years ended December 31, 2016 and 2015, respectively, and the unaffiliated party represented
approximately 52% of our revenues for the year ended December 31, 2016. For the year ended December 31, 2017, we will recognize
$1,000,000 of revenues from the Consulting Agreement and seek to add new customers.