ITEM
1. BUSINESS
Introduction
The
information included in this Annual Report on Form 10-K should be read in conjunction with the consolidated financial statements and
related notes included in “Item 8. Financial Statements and Supplemental Data” of this Report.
Our
logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service
marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may
appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate
in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if
any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their
rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with,
or endorsement or sponsorship of us by, any other companies.
The
market data and certain other statistical information used throughout this Report are based on independent industry publications, reports
by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research,
surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do
not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this Report,
and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any
misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections,
involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those
discussed under the section entitled “Risk Factors” beginning on page 20 of this Report. These and other factors could cause
our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as
the data of competitors as they relate to American International Holdings Corp., is also based on our good faith estimates.
Unless
the context requires otherwise, references to the “Company,” “we,” “us,” “our,”
“American International”, “AMIH” and “American International Holdings Corp.”
refer specifically to American International Holdings Corp. and its consolidated subsidiaries.
In
addition, unless the context otherwise requires and for the purposes of this Report only:
●
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
●
“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and
●
“Securities Act” refers to the Securities Act of 1933, as amended.
Where
You Can Find Other Information
We
file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the
public over the Internet at the SEC’s website at www.sec.gov and are available for download, free of charge, soon after
such reports are filed with or furnished to the SEC, on our website at https://amihcorp.com/investors/.
Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary,
who can be contacted at the address and telephone number set forth on the cover page of this Report. Our
website address is https://amihcorp.com. The information on, or that may be accessed through, our website is not incorporated
by reference into this Report and should not be considered a part of this Report.
Corporate
History
American
International Holdings Corp.
American
International Holdings Corp. was organized in 1986 and is incorporated in Nevada. The Company has undergone several name changes and
changes of control since its incorporation; however, from 2012 until April 2019, the Company had no operations and nominal assets.
Prior
to May 31, 2018, the Company was a 93.2% owned subsidiary of American International Industries, Inc. (“American”,
“AMIN”), a company whose securities are traded on the OTCQB market maintained by OTC Markets under the symbol “AMIN”.
Effective
on May 31, 2018, the Company issued (a) 4,300,000 shares of restricted common stock to Mr. Daniel Dror (the Company’s former Chief
Executive Officer and President (who resigned from such positions effective on May 31, 2018)); (b) 3,800,000 shares of restricted common
stock to Mr. Robert Holden (who was appointed President, Chief Executive Officer and Director of the Company on May 31, 2018 and resigned
on August 20, 2018); (c) 750,000 shares of restricted common stock to Mr. Everett Bassie (who was appointed as Chief Financial Officer,
Secretary, Treasurer and a member of the board of directors of the Company on May 31, 2018, and who has since resigned from all positions
with the Company); (d) 750,000 shares of restricted common stock to Mr. Winfred Fields (a consultant to the Company); and (e) 500,000
shares of restricted common stock to Mr. Charles R. Zeller (a then director of the Company), each in consideration for services rendered
to the Company.
As
a result of the issuance of the shares in May 2018 as discussed above, a change in control occurred. American International Industries,
Inc. ownership decreased from 93.2% to 6.4%.
On
April 12, 2019, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Novopelle
Diamond, LLC, a Texas limited liability company (“Novopelle Diamond” and “Novopelle”) and certain
unitholders of Novopelle Diamond. Pursuant to the terms of the Share Exchange Agreement, the Company acquired 100% of the issued and
outstanding membership interests of Novopelle Diamond by means of a share exchange with the Novopelle Members in exchange for 18,000,000
newly issued shares of the common stock of the Company (the “Share Exchange”). As a result of the Share Exchange,
Novopelle became a 100% owned subsidiary of the Company. The closing of the Share Exchange occurred concurrently with the entry into
the Share Exchange Agreement and resulted in a change of control of the Company. As a result of the Share Exchange, the Company acquired
the business of Novopelle Diamond and all of its assets. Novopelle Diamond is a physician supervised, medical spa and wellness clinic
that offers a full menu of wellness services including anti-aging, weight loss and skin rejuvenation treatments.
The
three unitholders of Novopelle Diamond who received shares pursuant to the Share Exchange Agreement were (1) Jacob D. Cohen; (2) Esteban
Alexander; and (3) Luis Alan Hernandez, who each received six million shares pursuant to the Share Exchange.
Concurrent
with the Share Exchange, the Company entered into individual share exchange agreements and promissory notes with each of Daniel Dror,
Winfred Fields and former directors Everett Bassie and Charles Zeller (the “AMIH Shareholders”) whereby the AMIH Shareholders
agreed to cancel and exchange a total of 4,900,000 shares of their Company common stock for individual promissory notes with an aggregate
principal amount of $350,000 (the “Promissory Notes”). The Promissory Notes had a term of two years and accrue interest
at the rate of 10% per annum (payable at maturity) until paid in full by the Company. The current principal balance of the Promissory
Notes is approximately $110,000 as of the date of this filing.
As
a result of the issuance of the shares in the Share Exchange and the cancellation of the shares held by the AMIH Shareholders, control
of the Company changed to (1) Jacob D. Cohen; (2) Esteban Alexander; and (3) Alan Hernandez, who each owned 26% of the Company’s
common stock following such transactions.
Also
effective on April 12, 2019, the directors of the Company changed to Mr. Jacob D. Cohen; Mr. Esteban Alexander; and Mr. Alan Hernandez,
who were also each appointed as the Chief Executive Officer and President of the Company (Mr. Cohen); the Chief Operating Officer and
Treasurer (Mr. Alexander); and the Chief Marketing Officer and Secretary (Mr. Hernandez). Mr. Bassie resigned as a member of the board
of directors of the Company and as the Secretary and Treasurer on April 12, 2019, but remained as the Company’s Chief Financial
Officer until his passing on May 21, 2020.
On
October 2, 2020, Jacob D. Cohen, the Chief Executive Officer and member of the board of directors of the Company entered into Stock Purchase
Agreements with each of (a) Esteban Alexander, the Chief Operating Officer and member of the board of directors of the Company, and (b)
Luis Alan Hernandez, the Chief Marketing Officer and member of the board of directors of the Company (collectively, the “Preferred
Holders” and the “Stock Purchase Agreements”).
Pursuant
to the Stock Purchase Agreements, Mr. Alexander agreed to sell 7,000,000 shares of common stock of the Company which he held to Mr. Cohen,
which rights to such shares were assigned by Mr. Cohen to Cohen Enterprises, Inc., which entity he controls (“Cohen Enterprises”),
in consideration for an aggregate of $1,500 as well as for the amount of services provided by Mr. Cohen to the Company; and Mr. Hernandez
agreed to sell 4,000,000 shares of common stock of the Company which he held to Cohen Enterprises, in consideration for an aggregate
of $1,000 as well as for the amount of services provided by Mr. Cohen to the Company. The sales closed on November 5, 2020.
One
of the reasons that Mr. Alexander and Mr. Hernandez agreed to the terms of the Stock Purchase Agreements (including the sale of the shares
of common stock of the Company at below market value), is because (a) each of Mr. Cohen, Mr. Alexander, and Mr. Hernandez were all appointed
as officers and directors of the Company at the same time in April 2019, with the intention that such persons would provide a relatively
equal amount of services to the Company in the roles as officers and directors thereof; (b) since such appointment date Mr. Cohen has
been required to provide a disproportionate amount of services to the Company; and (c) each of Mr. Alexander and Mr. Hernandez desired
to provide additional consideration to Mr. Cohen for such disproportionate level of service.
A
condition to the Stock Purchase Agreements was that each of Mr. Alexander and Mr. Hernandez resign as a member of the board of directors
of the Company by no later than January 15, 2021, which resignations were effective December 15, 2020.
A
further requirement to the terms of the Stock Purchase Agreements was that each of Mr. Alexander and Mr. Hernandez take such actions
necessary and which may be requested from time to time by Mr. Cohen, to affect the cancellation of the one share of Series A Preferred
Stock of the Company held by each of them, for no consideration (including, but not limited to, without the required payment by the Company
of the $1 redemption price described in the designation of such Series A Preferred Stock).
The
shares of Series A Preferred Stock held by Mr. Alexander and Mr. Hernandez were canceled on November 6, 2020. The common shares were
also transferred to Mr. Cohen on November 6, 2020, and as such, a change of control occurred on such date, with Mr. Cohen taking over
voting control of the Company, and serving between December 15, 2020 and October 19, 2021, as the sole officer and director of the Company.
The Company has subsequently appointed new directors and a Chief Financial Officer, as discussed in greater detail below.
Overview
The
Company is headquartered in Plano, Texas, and is an investor, developer and asset manager with diversified assets across the healthcare
supply chain. The Company’s portfolio encompasses telemedicine and other virtual health platforms, subscriber based primary care
and concierge medicine plans, preventative care solutions and wellness related assets such as mental and behavioral health services,
as well as its own proprietary life coaching platform. The Company provides its various services through direct-to-consumer and business-to-business
distribution channels and is focused on developing, acquiring and bringing to market technologies and solutions that we believe can advance
the quality of life for the global community. Additionally, the Company seeks opportunities to acquire and grow businesses that possess
strong brand values and that can generate long-term sustainable free cash flow and attractive returns in order to maximize value for
all stakeholders.
Corporate
Structure
The
Company currently is the parent to ten subsidiaries, of which eight are wholly-owned subsidiaries and two (2) are majority-owned
subsidiaries. In 2021, the Company ceased operations of five of its ten subsidiaries in order to focus on the subsidiaries that better
aligned with the purpose of the Company and its ongoing business plan. The following diagram represents our corporate structure and the
subsidiaries that we consolidate:
ZIPDOCTOR,
INC. – 100% OWNED
On
April 28, 2020, the Company incorporated a wholly-owned subsidiary, ZipDoctor, Inc. (“ZipDoctor”) in the state of
Texas. ZipDoctor launched its online, direct-to-consumer subscription-based telemedicine platform www.ZipDoctor.co in the third
quarter of 2020. ZipDoctor provides its customers with unlimited, 24/7 access to board certified physicians and licensed mental and behavioral
health counselors and therapists via a newly developed, monthly subscription-based online telemedicine platform. ZipDoctor’s online
telemedicine platform is available to customers across the United States and offers bilingual coverage (English and Spanish), with virtual
visits taking place either via the phone or through a secured video chat platform. ZipDoctor customers subscribe through the website
and are only required to pay a monthly fee, which is determined based on whether they are an individual, a couple, or a family. ZipDoctor
is currently being sold on a direct-to-consumer basis, with an emphasis on digital marketing and advertising.
Digital
Marketing Initiative: The ZipDoctor website was originally designed to be marketed and sold primarily using a digital and social
media advertising campaign. Shortly after the website’s launch, ZipDoctor began to advertise on Google pay per click (PPC), search
engine optimization (SEO), Facebook and Instagram. Shortly after launching, the Company decided to shift the focus of its marketing to
a direct sales approach, resulting in the formation and launch of EPIQ MD, Inc. (discussed below).
Going
Forward Strategy: With EPIQ MD, Inc. taking over the sales and marketing of the direct-to-consumer telemedicine platform, ZipDoctor
has changed its business plan to focus on developing customized telemedicine solutions for niche, or specialty care, areas of medicine.
Telemedicine
Platform Provider for Pharmacies. ZipDoctor is targeting relationships with specialty compound pharmacies seeking both an online
telemedicine platform and a network of doctors to assist in facilitating patient online visits and to streamline the medical intake,
patient demographics, health insurance verifications and overall prescription process. In exchange, ZipDoctor expects to receive a monthly
fee on a per-patient per month basis for this customized access to the telemedicine platform. The initial focus is on Texas based pharmacies,
however, if successful in Texas, ZipDoctor plans to expand its customized telemedicine solution to pharmacies across the United States,
funding permitting.
On
August 15, 2021, ZipDoctor entered into a Telemedicine Services Agreement (the “Services Agreement”) with Murphy RX,
LLC (“Murphy”), a Texas-based specialty pharmacy, which has since ceased operations as of January 31, 2022. Pursuant
to the Services Agreement, ZipDoctor agreed to provide Murphy with access to its centralized technology platform, to collect and manage
patient demographics, and access to telemedicine services. Murphy agreed to pay ZipDoctor a monthly fee on a per-patient basis for the
use of the technology platform and for access to primary care telemedicine services. ZipDoctor also agreed to provide continued support
for the ZipDoctor website through the term of the agreement. The Services Agreement is no longer in effect, as Murphy ceased operations
effective as of January 31, 2022.
As
of the date of this Report, ZipDoctor has approximately 100 total members subscribed to its subscription-based telemedicine platform
at www.ZipDoctor.co. Monthly subscription payments range from $25/month to $45/month, depending on how many family members are included,
and provide members with unlimited, 24/7 access to board certified physicians and licensed mental and behavioral health counselors and
therapists.
EPIQ
MD, INC. – 100% OWNED
On
October 23, 2020, the Company incorporated a wholly-owned subsidiary, EPIQ MD, Inc. (“EPIQ MD”) in the state of Nevada. EPIQ
MD is a direct-to-consumer, telemedicine and healthcare company targeting Americans who are uninsured or underinsured. The EPIQ MD service
offering is a convergence of primary care telemedicine, preventative care services and wellness programs – under the EPIQ MD brand
and on a single platform. EPIQ MD markets and sells its services direct to end-use consumers, as well as through business-to-business
(B2B) efforts, by focusing on employers in the targeted industries.
Products
& Services
EPIQ
MD’s telemedical services revolve around three services (1) primary care, (2) mental health care, and (3) prevention. Using cloud-based
software, EPIQ MD has been able to merge these services under a single platform.
Primary
care with EPIQ MD connects users to board certified doctors and medical professionals who can treat most non-emergency conditions using
telemedicine. Similarly, EPIQ MD’s mental health services connect users with licensed therapists and counselors. As for EPIQ MD’s
preventive care, the Company is using data driven technologies (wearables and apps), nutritionist and lab services, to help attempt to
mitigate chronic diseases and the risk factors associated with them. In the future, funding permitting, EPIQ MD plans to add in-home
medical devices to record vital information, offering what we believe to be the ambit of services between patient and doctor via the
use of EPIQ MD’s telemedicine platform.
EPIQ
MD also provides its subscribers with an option to participate in two premium add-on services, EPIQ LUX and EPIQ Paws. EPIQ LUX provides
subscribers with discounts to ancillary healthcare related services such as laboratory services, dental and vision discount plans, prescription
drug discounts, and imaging services and EPIQ Paws provides subscribers with access to virtual consultations with licensed veterinarians.
As
of the date of this Report, EPIQ MD has nominal subscribers as it is expanding its marketing initiatives. However, EPIQ MD is currently
registered to do business and is being marketed in Alaska, Georgia, Illinois, Texas, Arizona, New
Mexico, Colorado, Louisiana, Mississippi, Alabama, Florida, Nevada and Utah. To ensure the highest quality control, it plans to
scale up its full-service coverage incrementally to all 50 U.S. states by year-end 2022, funding permitting.
Marketing
Strategy
With
approximately 30 million people uninsured in the United States (according to 2019 Congressional Budget Office estimates) and 45 percent
of U.S. adults between ages of 19 and 64 being inadequately insured (according to a February 2019 Survey Brief by the Commonwealth Fund),
and an estimated 530,000 families turning to bankruptcy each year due to medical expenses (according to a study published in the March
2019 American Public Journal of Health), the Company sees an opportunity to make a positive impact in the lives of these uninsured or
underinsured people. We believe that this is the demographic that the healthcare system has abandoned, ignored and/or left behind and
is what we believe to be a largely underserved group.
To
grow its subscriber base, EPIQ MD has implemented its own direct-to-consumer distribution channel referred to as the “Ambassador
Program”. The Ambassador Program is intended to allow social influencers, community leaders and entrepreneurial-minded sales agents
to market and sell EPIQ MD’s services across the nation, on a commission-only basis.
Market
Opportunity
As
previously described above, with approximately 30 million people uninsured in the United States and 45 percent of U.S. adults between
ages of 19 and 64 being inadequately insured, EPIQ MD believes that their service offerings will be instrumental in reaching these Americans
and plans to reach this demographic through its own direct-to-consumer distribution channel, or Ambassador Program, and through its commercial
division that will target small and medium sized businesses (SMB’s) and municipalities.
According
to a 2020 study by the Kaiser Family Foundation, a leading industry research firm (“Key Facts About the Uninsured Population”),
the high cost of insurance is one of the main reasons individuals lack coverage (in 2019, 73.7% of uninsured adults said they were uninsured
because the cost of coverage was too high); and, individuals with income below 200% of the Federal Poverty Level (FPL) are at the highest
risk of being uninsured.
We
see a significant opportunity to market to these uninsured and/or underinsured persons, and believe that our low-cost, flat rate, telemedical
services can be an attractive alternative to those persons seeking lower cost health services.
LIFE
GURU, INC. – 51% OWNED
On
May 15, 2020, the Company acquired a 51% interest in Life Guru, Inc., a Delaware corporation (“Life Guru”). Life Guru
owns www.LifeGuru.me – a website dedicated to providing an online platform to connect consumers to a variety of mentors, professionals,
life coaches and career coaches. Upon final launch of the platform, it will include functionality enabling: life coaches from around
the world to access and subscribe to the Life Guru platform; and consumers to filter their life coach options by geographic location,
language and even the type of currency they would like to pay with. While Life Guru is free to consumers, it generates revenues by charging
monthly subscription fees to coaches participating on the platform. Further, and depending on the type of subscription plan the life
coach chooses to participate in, Life Guru receives a percentage of the per session fees generated and earned between the consumer and
the life coach.
Since
the LifeGuru.me website was launched around March 2021, Life Guru has been working to optimize the website for mobile and completing
integration with its merchant account provider to automate monthly payouts to coaches. LifeGuru is currently in the process of marketing
and onboarding coaches onto the platform.
Industry
Trends
Life
coaching has been the second fastest growing industry in the world for over ten consecutive years, behind the information technology
sector (according to a May 2016 article posted at Forbes.com). The global Personal Development Industry (including market segments from
holistic approaches, motivational speakers, inspirational websites, personal coaching, and other forms of personal development) was valued
at approximately $38.28 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 5.1% from 2020 to 2027 (according
to a July 2020 report by Grand View Research). Moreover, Life Guru believes that improving social skills and focusing on critical areas
for self-awareness, such as emotions, character traits, habits, individual values, and the psychological need that shapes the day-to-day
behavior of individuals are gaining importance.
Operational,
Technological & Cost Advantages
We
anticipate that coaches that subscribe to the Life Guru platform will benefit from Life Guru’s investment in digital marketing
and promotion, enabling them to reach customers and providing increased visibility. Life Guru has developed a proprietary technology
platform for coaching online, as well as proprietary video conferencing capabilities for coaching interactively. Through our existing
marketing partnerships, Life Guru believes it has access to sales tools which allow the effective marketing of coaches across all major
social media platforms, including and most importantly, LinkedIn. LifeGuru.me is mobile-friendly and can run smoothly on many platforms,
making it highly scalable.
Subscriptions
Life
Guru offers free membership for all consumers to gain access to the site and search for life coaches. Life Guru’s model is to charge
coaches, and not members, for the use of its services. The Company currently offers three different subscription levels to life coaches,
with varying levels of promotion on the Life Guru site, prominence of search results, and commissions payable. As of the date of this
Report, Life Guru has no members and approximately 200 total life coaches that have signed up and created profiles on the platform.
Growth
Objectives
In
addition to marketing Life Guru directly to consumers, Life Guru intends to implement packages to be sold to various businesses and corporations,
which can, in turn, be marketed as a corporate benefit by employers. Life Guru calls this “Life Guru Corporate”. A recent
survey of 256 companies by the National Alliance of Healthcare Purchaser Coalitions, a nonprofit employer group, found that 53% of employers
are providing special emotional and mental health programs for their workforce in the wake of the pandemic. Life Guru believes that Life
Guru Corporate represents important potential upside in targeting the business and corporate world, and providing services to employees
on an ongoing basis. Life Guru Corporate can only be developed once the platform has achieved a reputable brand and a substantial amount
of high-quality business coaches are engaged, and Life Guru does not anticipate launching Life Guru Corporate with fewer than 200 life
coaches, provided Life Guru’s projected milestones are met.
MANGOCEUTICALS,
INC. – 100% OWNED
On
October 7, 2021, the Company incorporated a wholly-owned subsidiary, Mangoceuticals, Inc. (“Mangoceuticals”) in the
state of Texas with the intent of focusing on developing, marketing and selling a variety of men’s wellness products and services
via a telemedicine platform. To date, the Company has identified men’s wellness telemedicine services and products as a growing
sector in the most recent years and especially related to the areas of erectile dysfunction and hair loss products. In this regard, Mangoceuticals
is currently in the process of developing and preparing to market a new brand of erectile dysfunction (ED) products that delivers fast
acting results through a proprietary combination of FDA approved ingredients.
Mangoceuticals
plans to market and sell this new brand of ED products exclusively online and will require the use of a telemedicine visit, a doctor’s
prescription and the fulfillment of the prescription by pharmacy licensed in the state in which the customer resides. Mangoceuticals
plans to rely heavily on digital and social media marketing through channels such as Facebook, Instagram, Twitter, Snap Chat and TikTok
and further has plans to use digital marketing with the goal of creating viral marketing campaigns, using social media influencers and
celebrities, funding permitting.
Our
goal is to eventually sell this new brand of ED products nationwide and to use EPIQ Scripts (described below) as its mail order pharmacy
to fulfill the ED prescriptions. Mangoceuticals is currently in the branding and development stage of this ED product and anticipates
a planned and limited launch in the Texas market in the second quarter of 2022 with the intent of expanding its marketing initiatives
at a pace in which Epiq Scripts obtains additional state licenses across the United States.
EPIQ
SCRIPTS, LLC – 51% OWNED
On
January 24, 2022, the Company formed EPIQ Scripts, LLC (“EPIQ Scripts”) in the state of Texas. EPIQ Scripts has been
established with the intent of operating as a close-door online mail order pharmacy with a specific target and vision to obtain licenses
in all 50 states across the U.S., of which no state licenses have been obtained as of the date of this Report. EPIQ Scripts also plans
to seek to become accredited with the most respected and highly recognized authorities in the industry, such as Utilization
Review Accreditation Commission (URAC), Legit Script, Accreditation Commission for Health
Care (ACHC), and National Association of Boards of Pharmacy (NABP) Digital Pharmacy.
EPIQ Scripts also intends to obtain in-network contracts with all major Pharmacy Benefit Managers (PBM) and insurance payors.
Market
Opportunity
It
is anticipated that if licenses, accreditations and in-network contracts are secured in all 50 U.S. states, EPIQ Scripts will be able
to market itself to the many up and coming telemedicine companies that have been on the rise since early 2020. Pursuant to a July 9,
2021 article published by McKinsey & Company, according to a study taken by McKinsey & Company, in
April 2020, overall telehealth utilization for office visits and outpatient care was 78 times higher than in February 2020. Even
though telemedicine use has now leveled off as in-person visits have returned, McKinsey & Company is still consistently seeing use
that is 38 times higher than pre-pandemic numbers. Furthermore, a majority of Americans have now tried out telehealth. According to an
article published at Sykes.com, a March 2021 survey of 2,000 U.S. adults undertaken by Sykes.com found that by March 2021, more than
61% of such surveyed individuals had made a telehealth/telemedicine appointment, which is a massive increase from just 19.5% a year prior,
according to Sykes. We further believe that telemedicine use is now widespread across demographics.
We
believe the significant increases in demand for telemedicine has created a vacuum for pharmacies that have the capabilities to handle
the prescription volume generated by these platforms. We believe that EPIQ Scripts’ planned mail order pharmacy, which is expected
to have advanced API capabilities and infrastructure and be supported with nationwide licenses and accreditations can position itself
to capitalize on the current market opportunity.
EPIQ
Scripts has currently filed with the Utilization Review Accreditation Commission (URAC) to obtain
its pharmacy accreditation and is in the process of obtaining its first state license in the State of Texas, which it anticipates receiving
in April 2022. Once the Texas state license is obtained, EPIQ Scripts will be able to apply for additional state licenses until they
have obtained all 50 state licenses, with some state licenses easier to obtain and quicker to obtain than others. EPIQ Scripts intends
to have licenses to operate in all 50 states by the first quarter of 2023.
*
* * * * *
The
Company intends to continue to grow its business both organically and through identifying acquisition targets over the next 12 months
in the telemedicine, life coaching and wellness space, funding permitting. As these opportunities arise, the Company will determine the
best method for financing its growth which may include the issuance of additional debt instruments, common stock, preferred stock, or
a combination thereof, any one or more of which may cause significant dilution to existing shareholders. The
Company requires approximately $5 million to implement its current business strategy for its different subsidiaries and to support potential
growth. We expect to raise funds in the future through the sale of debt and/or equity in order to allow us to operate for the
next twelve months, and may need to raise further additional capital in order to expedite our growth through acquisitions, none of which
are currently planned. There is no assurance that we will be successful in raising such funds and if we do raise funds, this may result
in substantial dilution to current investors.
DISCONTINUED
OPERATIONS:
MEDICAL
SPA AND WELLNESS
The
Company previously operated three wholly-owned subsidiaries that were in the Medical Spa and Wellness Sector (collectively hereinafter
referred to as “MedSpa”, or “VISSIA”), the operations of which were discontinued in October 2020:
|
1. |
VISSIA
MCKINNEY, LLC (F/K/A NOVOPELLE DIAMOND, LLC) – 100% OWNED |
VISSIA
McKinney was a physician supervised, medical spa and wellness clinic that offered a full menu of wellness services including anti-aging,
weight loss and skin rejuvenation treatments and was located at 5000 Collin McKinney Parkway, Suite 150, McKinney, Texas 75070.
|
2. |
VISSIA
WATERWAY, INC. (F/K/A NOVOPELLE WATERWAY, INC.) – 100% OWNED |
VISSIA
McKinney was a physician supervised, medical spa and wellness clinic that offered a full menu of wellness services including anti-aging,
weight loss and skin rejuvenation treatments and was located at 25 Waterway, Suite 150, The Woodlands, Texas.
|
3. |
NOVOPELLE
TYLER, INC. – 100% OWNED |
On
December 3, 2019, the Company formed and organized Novopelle Tyler, Inc. in the State of Texas with the plan to come to terms on a retail
location for a new med spa to be located in Tyler, Texas. The Company no longer intends to open this location and no activity has been
performed under this entity to date.
*
* * * *
As
a result of COVID-19 and ‘stay-at-home’ and social distancing orders issued in McKinney and The Woodlands, Texas, we had
to close both of our then operational MedSpas, VISSIA McKinney and VISSIA Waterway, Inc., effective March 10, 2020, and which resulted
in both the loss of income and the loss of substantially all of our MedSpa employees, who had to be let go. VISSIA Waterway, Inc. reopened
effective June 21, 2020 and VISSIA McKinney reopened effective August 8, 2020. However, due to the termination of employees associated
with the shutdown we were forced to expend resources to attract, hire and train completely new staff for preparation of the re-launchings.
Notwithstanding the re-openings, customer traffic and demand at our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations failed
to rebound to pre-COVID-19 levels due to COVID-19 and the pandemic’s effects on the economy, and because we were unable to predict
the length of the pandemic or ultimate outcome thereof, and further due to our limited capital resources, effective on October 25, 2020,
we made the decision to close both our VISSIA Waterway, Inc. and VISSIA McKinney locations. Our former MedSpa operations and assets are
included under discontinued operations in the statement of operations and balance sheet included herein for the year ended December 31,
2021 and for the year ended, December 31, 2020.
|
4. |
CAPITOL
CITY SOLUTIONS, USA, INC. – 100% OWNED |
On
September 17, 2019, the Company formed and organized Capitol City Solutions USA, Inc. (“CCS”) in the State of Texas
to act as a general contracting and construction company focused on the remodeling, general construction and interior finish of both
the Company’s then MedSpa locations (which have since been closed) as well as to market to other commercial real estate projects
within the United States. The Company made the decision to cease any further construction-based operations under CCS in July 2021, in
order to focus on the subsidiaries that better aligned with the purpose of the Company and its ongoing business plan in the telehealth
and wellness space.
|
5. |
LEGEND
NUTRITION, INC. – 100% OWNED |
On
September 23, 2019, the Company formed and organized Legend Nutrition, Inc. (“Legend Nutrition”) in the State of Texas
to act as a new brand of retail vitamin and supplement stores to be branded and marketed as Legend Nutrition. October 18, 2019, Legend
entered into an Asset Purchase Agreement to acquire all of the assets associated with and related to a retail vitamin, supplements and
nutrition store located in McKinney, Texas and previously identified and doing business as “Ideal Nutrition.” Pursuant
to the Asset Purchase Agreement, Legend purchased a variety of assets including software, contracts, bank and merchant accounts, products,
inventory, computers, security systems and other intellectual properties. As Legend Nutrition’s lease expired in January 2021,
the Company made the decision to cease its operations to focus on the subsidiaries that better aligned with the purpose of the Company
and its ongoing business plan in the telehealth and wellness space.
Government
Regulation
The
health care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations,
ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complex
and for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We will
also be subject to regulation regarding sale of our products online and solicitation of clients thereby, as well as through our general
contractor business and the licensing and code requirements relating thereto.
COVID-19
Outlook and Discontinued Operations
The
outbreak of the 2019 novel coronavirus disease (“COVID-19”), which was declared a global pandemic by the World Health
Organization on March 11, 2020, and the related responses by public health and governmental authorities to contain and combat its outbreak
and spread has severely impacted the U.S. and world economies, the market for health spa services, nutrition supplements and our other
business offerings during the end of the first quarter of 2020, and continuing through the end of 2020 and into 2021. Government mandated
‘stay-at-home’ and similar orders have to date, and may in the future, prevent us from operating. In late 2020, we made the
decision to discontinue operations of our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations, due to declines in customers and
issues staffing such facilities, each as a result of the pandemic. Additionally, our Legend Nutrition store saw a deep decline in sales
due to social distancing orders and decreases in customers who are willing to venture out to brick-and-mortar establishments. Legend
Nutrition’s lease was up January 31, 2021, and the Company chose to not renew the lease, closed the store, and will not continue
in this line of business moving forward. We also decided to cease offering construction services around July 2021.
As
of the date of this Report, our operations are limited, and consist solely of ZipDoctor, Inc., Life Guru, Inc., EPIQ MD, Inc, Mangoceuticals,
Inc., and EPIQ Scripts, LLC.
Moving
forward, economic recessions, including those brought on by the continued COVID-19 outbreak, geopolitical events, including the current
military conflict between Russia and the Ukraine, inflationary pressures, or other events, may have a negative effect on the demand for
our services and our operating results. Any prolonged disruption to our operations or work force available is likely to have a significant
adverse effect on our results of operations, cash flows and ability to meet continuing debt service requirements. All of the above may
be exacerbated in the future as the COVID-19 outbreak and the governmental responses thereto continues.
Recent
Events:
On
October 7, 2021, the Company incorporated a wholly-owned subsidiary, Mangoceuticals, Inc. in the state of Texas with the intent of focusing
on developing, marketing and selling a variety of men’s wellness products and services via a telemedicine platform. To date, the
Company has identified men’s wellness telemedicine services and products as a growing sector in the most recent years and especially
related to the areas of erectile dysfunction and hair loss products. In this regard, Mangoceuticals is currently in the process of developing
and preparing to market a new brand of erectile dysfunction (ED) products that delivers fast acting results through a proprietary combination
of FDA approved ingredients.
Between
November 22, 2021 and December 2, 2021, we entered into four separate Securities Purchase Agreements (collectively, the “Purchase
Agreements”) with four accredited institutional investors (collectively, the “Investors”), for the sale
of convertible promissory notes in an aggregate principal amount of $2,000,000 (collectively, the “Notes”) and warrants
to purchase an aggregate of 13,333,332 shares of the Company’s common stock (collectively, the “Warrants”).
The Purchase Agreements, Notes, and Warrants are collectively referred to as the “Transaction Documents”). The Company
and the Investors closed the sale of the Notes and Warrants between November 23, 2021 and December 3, 2021. Gross proceeds of $1,800,000
were raised through the sale of the Notes and Warrants.
J.H.
Darbie & Co., Inc. acted as placement agent for the offering and was paid a total of $188,000 in placement agent fees of which $98,000
was paid in cash and $90,000 was paid in the form of 1,151,678 shares of restricted common stock issued by the Company between November
22, 2021 and December 3, 2021.
On
January 24, 2022, the Company formed EPIQ Scripts, LLC in the state of Texas. EPIQ Scripts has been established with the intent of operating
as a close-door online mail order pharmacy with a specific target and vision to obtain licenses in all 50 states across the U.S., of
which no state licenses have been obtained as of the date of this Report. EPIQ Scripts also plans to seek to become accredited with the
most respected and highly recognized authorities in the industry, such as Utilization Review Accreditation
Commission (URAC), Legit Script, Accreditation Commission for Health Care (ACHC),
and National Association of Boards of Pharmacy (NABP) Digital Pharmacy. EPIQ Scripts also
intends to obtain in-network contracts with all major Pharmacy Benefit Managers (PBM) and insurance payors.
Reverse
Stock Split
We
have applied to list our common stock and certain warrants to purchase common stock which we plan to sell in the future in a public offering,
on the NASDAQ Capital Market; however, our application to uplist our common stock and certain warrants on the NASDAQ Capital Market may
not be approved and our securities may never trade on the NASDAQ Capital Market.
On
July 30, 2021, our board of directors, and on July 30, 2021, stockholders holding a majority of our outstanding voting shares, approved
resolutions authorizing a reverse stock split of the outstanding shares of our common stock in the range from one-for-two (1-for-2) to
one-for-sixty (1-for-60), and provided authority to our board of directors to select the ratio of the reverse stock split in their discretion,
at any time prior to the earlier of July 30, 2022 and the date of our 2022 annual meeting of shareholders. On January 25, 2022, our board
of directors, pursuant to such shareholder authority, approved a one-for-sixty (1-for-60) reverse stock split of the outstanding shares
of our common stock, which is intended to allow us to meet the minimum share price requirement of the NASDAQ Capital Market. Notwithstanding
such board of directors approval, the reverse stock split is subject to approval thereof by Financial Industry Regulatory Authority,
Inc. (FINRA), which approval has not been received yet, and may not be received on a timely basis, if at all. The board of directors
approved the reverse stock split in an effort to increase the trading price of the Company’s common stock to a level sufficient
to allow an uplisting of the Company’s common stock on the Nasdaq Capital Market. Because FINRA has not yet approved the reverse
stock split and the Company has not formally affected the reverse stock split, none of the outstanding share amounts set forth below
have been adjusted for such board of directors approved reverse stock split. The board of directors reserves the right to adjust the
ratio of the reverse stock split and/or terminate the authority for such reverse stock split in the future.
Employees
As
of the date of this Report, we have fifteen full-time employees (two at the parent/ZipDoctor level, nine at the EPIQ MD level, two at
the EPIQ Scripts level, and two at the Life Guru level). Our compensation programs are designed to align the compensation of our employees
with performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results. The structure
of our compensation programs balances incentives earnings for both short-term and long-term performance such as incentive bonuses and
flexible schedules. The Company believes that its rich culture of inclusion and diversity enables it to create, develop and fully leverage
the strength of its workforce to exceed customer expectation and meet its growth objectives. The Company places a high value on diversity
and inclusion. We also utilize numerous outside consultants. Our future success will depend partially on our ability to attract, retain
and motivate qualified personnel. We are not a party to any collective bargaining agreements and have not experienced any strikes or
work stoppages. We consider our relations with our employees to be satisfactory.
Government
Regulation
The
health care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations,
ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complex
and for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We will
also be subject to regulation regarding sale of our products online and solicitation of clients thereby, as well as through our general
contractor business and the licensing and code requirements relating thereto.
ITEM
1A. RISK FACTORS
Investing
in our common stock will provide an investor with an equity ownership interest. Shareholders will be subject to risks inherent in our
business. The performance of our shares will reflect the performance of our business relative to, among other things, general economic
and industry conditions, market conditions and competition. The value of the investment may increase or decrease and could result in
a loss. An investor should carefully consider the following factors as well as other information contained in this Annual Report on Form
10-K.
This
Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties, see also “Cautionary Statement Regarding Forward-Looking Statements”, above. Our actual results could differ materially from those anticipated in
the forward-looking statements as a result of many factors, including the risk factors described below and the other factors described
elsewhere in this Form 10-K.
Summary
Risk Factors
Our
business is subject to numerous risks and uncertainties, including those in the section entitled “Risk Factors” and elsewhere
in this Report. These risks include, but are not limited to, the following:
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Our
limited operating history; |
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Our
need for additional funding to support our operations, repay debt and expand our operations; |
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The
continuing effects of COVID-19 on our operations and prospects; |
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Impairments
we may be required to assess in connection with our assets and goodwill as a result of such shutdowns and/or otherwise; |
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Risks
associated with our telehealth platform, including liability in connection therewith, funding
needed to support such operations and other risks associated with the operations of the telehealth
platform;
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Risks
associated with the launch of our new closed door online digital pharmacy, Epiq Scripts,
LLC, including liability in connection therewith, ability to obtain state licenses, funding
needed to support such operations and other risks associated with the operations of an online
digital pharmacy;
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Risks
associated with the development of our new ED product, including liability in connection therewith, funding needed to support such
operations and other risks associated with the operations of the telehealth platform; |
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The
ability of Life Guru to sign up enough life coaches to make the commercial launch of such website economic, and the willingness of
individuals to use such website in the future; |
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Disruptions
to our operations or liabilities associated with future acquisitions; |
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Our
ability to continue as a going concern; |
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Our
dependence on our Chief Executive Officer and director, Jacob D. Cohen, including the lack of independent directors, and related
party transactions affecting the Company; |
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Competition
we face; |
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Our
ability to maintain our varied operations, and service our indebtedness; |
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Material
weaknesses in our controls and procedures; |
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Our
ability to obtain and maintain adequate insurance; |
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Legal
challenges and litigation; |
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Liability
associated with our contracting operations; |
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The
terms of Mr. Cohen’s employment agreement; |
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Dilution
caused by the conversion of outstanding notes, conversion of preferred stock, exercise of outstanding warrants, and future fund-raising
activities; |
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The
price of, volatility in, and lack of robust trading market for, our common stock; and |
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The
fact that Mr. Cohen, our Chief Executive Officer, has voting control over the Company. |
Risks
Related to our Business
Since
we have a limited operating history, it is difficult for potential investors to evaluate our business.
Our
short operating history in the health and wellness industry and mentoring/life coach industry may hinder our ability to successfully
meet our objectives, and makes it difficult for potential investors to evaluate our business or prospective operations. As an early-stage
company, we are subject to all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a
new business. Accordingly, our business and success face risks from uncertainties faced by developing companies in a competitive environment.
There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
We
may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our service locations and
product development programs or commercialization efforts and could cause our business to fail.
The
Company intends to continue to grow its business both organically and by identifying acquisition targets over the next twelve months
in the telemedicine, life coaching and wellness space. We may need to raise additional capital in order to expedite our growth through
acquisitions, provided that none are currently planned. Notwithstanding that, we expect to need substantial additional funding to satisfy
outstanding debt obligations, pay operating expenses, continue our business plan and pursue additional service locations and product
development and commercialize our products and services. There are no assurances that future funding will be available on favorable terms
or at all. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial
condition and results of operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay,
reduce or eliminate our expansion of spa locations and development programs or any future commercialization efforts. Any of these events
could significantly harm our business, financial condition and prospects.
Our
business has been materially and adversely disrupted by COVID-19, and the control response measures that state and local governments
have implemented to address it, and may be impacted by other epidemics or pandemics in the future. We have been forced to close our MedSpas
and have closed our nutrition store.
An
epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could
significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along
with any associated economic and/or social instability or distress, have a material adverse impact on our consolidated financial statements.
On
March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic and recommended containment
and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and several states
and municipalities have declared public health emergencies. Along with these declarations, there were extraordinary and wide-ranging
actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak
and spread of COVID-19 in regions across the United States and the world, including quarantines, “stay-at-home” orders
and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal
operations.
The
COVID-19 pandemic, and related social distancing requirements, travel bans, stay-at-home orders and closures limited access to our spas
and store and forced us to close our spas and store during the first quarter of 2020 and into the second quarter of 2020 and even though
such stores eventually reopened in June and August 2020, customer traffic and demand at our MedSpa locations failed to rebound to pre-closure
levels due to COVID-19 and the pandemic’s effects on the economy, and because we were unable to predict the length of the pandemic
or ultimate outcome thereof, and further due to our limited capital resources, effective in October, 2020, we made the decision to discontinue
operations of both our MedSpa locations.
While
our MedSpas were forced to close during the second and third quarters of 2020. Legend Nutrition was able to remain open as an essential
business, as we sold vitamins and other nutritional supplements. Though the store was able to remain open, the store saw a deep decline
in sales due to social distancing orders and decreases in customers who are willing to venture out to brick-and-mortar establishments.
Legend Nutrition’s lease was up January 31, 2021, and the Company chose to not renew the lease, closed the store, and will not
continue in this line of business moving forward.
We
also decided to cease offering construction services around July 2021.
All
of the above has, in turn, not only negatively impacted our operations, financial condition and demand for our services, but our overall
ability to react timely to mitigate the impact of this event. Our 2021 financial results were significantly negatively affected by COVID-19
and the closure of our med spas and nutrition store in connection therewith (both due to governmental orders and separately due to our
lack of operating funds) and our decision to cease our construction services; however, the full effect on our business and operation
as a result of COVID-19 is currently unknown. The outbreak of COVID-19 has caused significant disruptions to the Company’s ability
to generate revenues and cash flows, and uncertainty regarding the length of the disruption may adversely impact our ability to raise
additional capital.
As
of the date of this Report, our operations are limited, and consist solely of ZipDoctor, Inc., Life Guru, Inc., Mangoceuticals, Inc.,
EPIQ Scripts, LLC, and EPIQ MD, Inc., which have been only minimally affected by COVID-19 as they mainly operate through online platforms.
Should
the COVID-19 public health effort intensify to such an extent that we cannot operate, if there are prolonged government restrictions
on our business and our customers, and/or an extended economic recession or significant inflation, we could be unable to produce revenues
and cash flows sufficient to conduct our business; or service our outstanding debt. Such a circumstance could, among other things, exhaust
our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all
of our then-outstanding debt obligations, which we may be unable to do.
Our
business may suffer from the severity or longevity of the Coronavirus/COVID-19 global outbreak.
The
demand for our services relies upon, among other things, the ability of our telemedicine platform to provide telemedicine services and
will in the future rely on the operation of our Life Guru website. Economic recessions, including those brought on by the COVID-19 outbreak
may have a negative effect on the demand for our services and our operating results. We have also previously experienced delays due to
the COVID-19 outbreak and supply chain issues in receiving products and supplies which we need to operate. All of the above may be exacerbated
in the future as the COVID-19 outbreak and the governmental responses thereto continues. All of the above may in the future cause, and
have to date caused, a material adverse effect on our operating results.
We
have recently changed our primary business focus from the operation of MedSpas, a nutrition store and construction services, to telemedicine,
life coaching and wellness.
Customer
traffic and demand at our VISSIA Waterway, Inc. and VISSIA McKinney MedSpa locations which were re-opened after mandatory closures associated
with COVID-19 in June and August 2020, respectively, failed to rebound to pre-closure levels due to COVID-19 and the pandemic’s
effects on the economy, and because we were unable to predict the length of the pandemic or ultimate outcome thereof, and further due
to our limited capital resources, effective in October 2020, we made the decision to close both our VISSIA Waterway, Inc. and VISSIA
McKinney MedSpa locations and discontinue operations. Separately, legend Nutrition’s lease was up January 31, 2021, and the Company
chose not to renew the lease, closed the store, and not continue in that line of business moving forward. We also decided to cease offering
construction services around July 2021. As such, our current operations consist solely of operations in the telemedicine, life coaching
and wellness industries, which industries we have only a limited history with. Furthermore, the majority of our revenues for the two
years ending December 31, 2020 were generated through our MedSpa, nutrition store and construction services, and as such, our continued
ability to generate revenues and support our operations is currently unknown.
We
may owe significant amounts to a consultant under the terms of a consulting agreement.
On
March 8, 2021, we entered into a Consulting Agreement with KBHS, LLC (“KBHS”), whose Chief Executive Officer is Mr.
Kevin Harrington, who was appointed the sole member of our then newly formed Advisory Committee. Pursuant to the Consulting Agreement,
KBHS agreed to provide consulting services to the Company as the Company’s Brand Ambassador, including providing endorsement services
and advising on marketing, promotions, acquisitions, licensing and business development. KBHS also agreed to up to four webinar appearances
on behalf of the Company per year to support the Company’s direct sales efforts. The Consulting Agreement has a term of two years,
and can be terminated with ten days prior written notice (subject to applicable cure rights set forth in the Consulting Agreement), in
the event we or KBHS breach any term of the agreement, or we fail to pay any amounts due, become subject to any government regulatory
investigation, certain lawsuits, claims, actions or take certain other actions during the term of the Consulting Agreement. As consideration
for providing the services under the Consulting Agreement, we issued KBHS 1.5 million shares of restricted common stock, which vested
immediately upon issuance, and agreed to pay KBHS $10,000 per month, a 5% finder’s fee on any new business introduced or developed
by KBHS (of which there has been none to date) and 7.5% of the value of any acquisition or merger created or developed exclusively by
KBHS, undertaken by the Company, subject to applicable laws. In the event we fail to pay any consideration due under the Consulting Agreement,
such amount accrues interest at the rate of 1.5% per month until paid in full.
The
requirement to pay the finder’s fees and/or acquisition/merger fee under the agreement could significantly decrease any margin
we would otherwise obtain on any transaction, decrease our cash flows, and could prevent us from completing certain transactions in the
future, all of which could have a material adverse effect on the Company and its securities.
We
have previously suffered impairment losses, may suffer impairment losses in the future, and may be required to record significant additional
charge to earnings.
Due
to COVID-19’s effects on the economy, and because we are unable to predict the length of the pandemic or ultimate outcome thereof,
and further due to our limited capital resources, effective on October 25, 2020, we made the decision to close both MedSpa locations,
which are expected to be closed permanently. In accordance with the Generally Accepted Accounting Principles of the United States of
America (“GAAP”), we review our assets for impairment when events or changes in circumstances indicate the carrying
value of the asset may not be recoverable. For example, we had an impairment loss of $605,488 primarily attributable to the investment
in Life Guru, and settlement loss of $1,041,445 in connection with the common shares issued for note settlements in 2020. Other than
a settlement loss of $13,805 for the year ended December 31, 2021, we had no impairment loss nor settlement loss in the year ended December
31, 2021. Goodwill of $29,689 associated with Legend Nutrition was impaired in full during the fourth quarter of 2020. We have other
assets, goodwill and equipment on our balance sheet, which may be impaired in the future. Such impairments may have a significant negative
effect on our balance sheet, results of operations and financial results, and could cause the value of our common stock to decline in
value or become worthless.
We
face numerous risks associated with our ZipDoctor and EPIQ MD telehealth platforms which only recently commenced operations.
In
2020, the Company incorporated two wholly-owned subsidiaries, ZipDoctor, Inc. in the state of Texas and EPIQ MD, Inc. in the state of
Nevada.
Zip
Doctor’s telemedicine platform does not require the customer to have an existing insurance plan and does not demand or require
any additional copays. ZipDoctor customers subscribe through the website and are only required to pay a low monthly fee, which is determined
based on if they are an individual, a couple, or a family.
EPIQ
MD is a direct-to-consumer, telemedicine and healthcare company targeting Americans who are uninsured or underinsured. The EPIQ MD service
offering is a convergence of primary care telemedicine, preventative care services and wellness programs – under the EPIQ MD brand
and on a single platform.
The
Company launched the ZipDoctor platform in August 2020 and the EPIQ MD platform in September 2021, and has generated nominal subscriptions
and revenues from each platform through their respective soft launch periods. There is no significant operating history upon which to
base any assumption as to the likelihood that either of the ZipDoctor and EPIQ MD telemedicine platforms will prove successful, and we
may never achieve operations or profitable operations through either platform. Each of our telehealth platforms also faces the following
risks, any of which may significantly negatively affect our operations, results of operations, and cash flows and could cause the value
of our common stock to decline in value:
●
Our telehealth platforms could be adversely affected by legal challenges or by actions restricting our ability of our health providers
to provide services in certain jurisdictions;
●
We will be dependent on the relationships of our partners with health care professionals;
●
Evolving government regulations may require increased costs or adversely affect our results of operations;
●
The market for telehealth services is new and if it does not develop as we forecast or develops more slowly than we expect our growth
may be harmed;
●
The market for telehealth services is competitive and we compete with multiple competitors which have more resources and funding than
we have and a more well-known brand name;
●
Economic uncertainty or downturns, particularly as it impacts particular industries, could adversely affect our business and operating
results; and
●
We will be entirely dependent on the infrastructure and operations of our partner to operate our telehealth platforms and such infrastructure
and operations are completely outside of our control.
Our
independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our
historical financial statements have been prepared under the assumption that we will continue as a going concern. Our independent registered
public accounting firm has issued a report on our financial statements for the years ended December 31, 2021 and 2020, that included
an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a
going concern. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity financing or other
capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate revenue. Our financial statements do not
include any adjustments that might result from the outcome of this uncertainty. However, if adequate funds are not available to us when
we need it, we will be required to curtail our operations which would, in turn, further raise substantial doubt about our ability to
continue as a going concern. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability
to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our stockholders
may lose some or all of their investment in the Company.
We
depend heavily on our Chief Executive Officer, and the loss of his services could harm our business.
Our
future business and results of operations depend in significant part upon the continued contributions of our senior management personnel,
particularly our Chief Executive Officer and director, Jacob D. Cohen. If we lose his services or if he fails to perform in his current
position, or if we are not able to attract and retain skilled personnel as needed, our business could suffer. Significant turnover in
our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend
on the skills and abilities of these key personnel in managing our operations, product development, marketing and sales aspects of our
business, any part of which could be harmed by turnover in the future.
We
expect to face intense competition, often from companies with greater resources and experience than we have.
The
health, wellness, and mentoring/life coach industries are highly competitive and subject to rapid change. The industries continue to
expand and evolve as an increasing number of competitors and potential competitors enter the market. Many of these competitors and potential
competitors have substantially greater financial, technological, managerial and research and development resources and experience than
we have. Competitors for our products include Teladoc, PlushCare and Sesamecare. Some of these competitors and potential competitors
have more experience than we have in the development of health and wellness services and products. In addition, our services and products
compete with service and product offerings from large and well-established companies that have greater marketing and sales experience
and capabilities than we or our collaboration partners have. If we are unable to compete successfully, we may be unable to grow and sustain
our revenue.
We
are growing the size of our organization, and we may experience difficulties in managing any growth we may achieve.
As
of the date of this Report, we have twelve full-time employees (two at the parent/ZipDoctor level, eight at the EPIQ MD level, and two
at the Life Guru level). As our development and commercialization plans and strategies develop, we expect to need additional development,
managerial, operational, sales, marketing, financial, accounting, legal, and other resources. Future growth would impose significant
added responsibilities on members of management. Our management may not be able to accommodate those added responsibilities, and our
failure to do so could prevent us from effectively managing future growth, if any, and successfully growing our company.
We
may expend our limited resources to pursue particular products, services or locations and may fail to capitalize on products, locations
or services that may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and managerial resources, we must focus our efforts on particular service programs, products and locations.
As a result, we may forego or delay pursuit of opportunities with other services, products or locations that later prove to have greater
commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable
market opportunities. Any such failure could result in missed opportunities and/or our focus on products, services or locations with
low market potential, which would harm our business and financial condition.
We
engage in transactions with related parties and such transactions present possible conflicts of interest that could have an adverse effect
on us.
We
have entered, and may continue to enter, into transactions with related parties for financing, corporate, business development and operational
services, as detailed herein. Such transactions may not have been entered into on an arm’s-length basis, and we may have achieved
more or less favorable terms because such transactions were entered into with our related parties. This could have a material effect
on our business, results of operations and financial condition. The details of certain of these transactions are set forth under “Certain Relationships and Related Transactions”. Such conflicts could cause an individual in our management to seek to advance his
or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest
created by related party transactions could impair the confidence of our investors.
We
have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated,
our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could
result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which
could have a material adverse effect on our financial condition and the trading price of our common stock.
Maintaining
effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce
reliable financial statements. As reported in this Report, we have determined that our disclosure controls and procedures and our internal
control over financial reporting were not effective at the reasonable assurance level, primarily due to a lack of segregation of duties
in financial reporting, as of December 31, 2021, and continue to be ineffective. Separately, management assessed the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2021 and determined that such internal control over
financial reporting was not effective as a result of such assessment; and further have not been effective since at least March 31, 2016.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented
or detected on a timely basis. A control deficiency exists when the design or operation of a control does not allow management or employees,
in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
We
recognized the following deficiencies that we believe to be material weaknesses as of December 31, 2021: (a) the Company has not fully
designed, implemented or assessed internal controls over financial reporting and due to the Company being a developing company, management’s
assessment and conclusion over internal controls were ineffective this year; (b) we recognized the following deficiencies that we believe
to be significant deficiencies: (i) the Company has no formal control process related to the identification and approval of related party
transactions; (ii) we do not have written documentation of our internal control policies and procedures. Written documentation of key
internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act; and (iii) we do not have sufficient
segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all
conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of
transactions, the custody of assets and the recording of transactions should be performed by separate individuals.
We
believe we have taken significant steps during and since the year ended December 31, 2021 to correct certain of our disclosure controls
and procedures and internal controls. These steps include the hiring of a third party CPA firm to assist the Company in resolving the
financial statement preparation and disclosure issues, the establishment of an Audit Committee (discussed under “Committees of
the Board”, below), and the hiring of Dr. Craig Hewitt to serve as our full-time Chief Financial Officer effective the day after
this Report is filed with the SEC. Nonetheless, until these elements have been fully integrated into our organization and we have established
appropriate controls and internal processes in consultation with our third party CPA firm and Audit Committee, there is no assurance
that our disclosure controls and procedures and internal controls will in fact be effective.
Maintaining
effective disclosure controls and procedures and effective internal control over financial reporting are necessary for us to produce
reliable financial statements and the Company is committed to remediating its material weaknesses in such controls as promptly as possible.
However, there can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will
not arise in the future. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal
control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our
reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price
of our common stock, and/or result in litigation against us or our management. In addition, even if we are successful in strengthening
our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or facilitate the
fair presentation of our financial statements or our periodic reports filed with the SEC.
The
employment agreement of Mr. Jacob Cohen, our Chief Executive Officer and director provides for the payment of certain severance payments
upon termination.
Mr.
Jacob D. Cohen’s employment agreement provides that if he is terminated during the term of such agreement by the Company without
cause (as defined in the agreement) or by Mr. Cohen for good reason (as defined in the agreement), Mr. Cohen is due a severance payment.
That severance payment is equal to the compensation (including bonus) earned through the date of termination and three times (one time
if less than one year remains on the employment agreement)(the “multiplier”) the base salary in effect on the date
of the termination plus the average bonus received by Mr. Cohen over the prior two years and Mr. Cohen is also to be paid any bonus which
he would have earned at the end of the fiscal year during which the employment is terminated (pro-rated for days worked), and is to be
paid health insurance for Mr. Cohen and his family for 18 months from the date of termination (the “Severance Payments”).
Also, all equity compensation due to vest in the following 12 months vests immediately. If Mr. Cohen dies while the employment agreement
is in place, or the agreement is terminated due to Mr. Cohen’s disability, the Company is required to pay Mr. Cohen’s salary
to his beneficiaries for a period of one year following such death, pay the pro-rated amount of any bonus due, and pay 18 months of health
insurance. If a change in control (as defined in the agreement) occurs and Mr. Cohen is terminated up to one year after such change in
control, Mr. Cohen is due the Severance Payments (based on a 3x multiplier) and all unvested equity awards vest immediately. The payment
of severance fees could have a material adverse effect on our cash flows and results of operations.
Risks
relating to our Telehealth Operations
Our
telehealth business could be adversely affected by ongoing legal challenges to our business model or by new state actions restricting
our ability to provide the full range of our services in certain states.
Our
ability to conduct planned business operations in each state is dependent upon the state’s treatment of medicine under such state’s
laws, and rules and policies governing the practice of physician supervised services, which are subject to changing political, regulatory
and other influences.
Our
use and disclosure of personally identifiable information, including health information, is subject to federal and state privacy and
security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could result in
significant liability or reputational harm and, in turn, a material adverse effect on our client base and revenue.
Numerous
state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability and
integrity of personally identifiable information, or PII, including protected health information, or PHI. These laws and regulations
include the Health Information Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic
and Clinical Health Act, or HITECH, and their implementing regulations (referred to collectively as HIPAA). HIPAA establishes a set of
basic national privacy and security standards for the protection of PHI. HIPAA requires us to develop and maintain policies and procedures
with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect
such information. HIPAA imposes mandatory penalties for certain violations. Penalties for violations of HIPAA and its implementing regulations
start at $100 per violation and are not to exceed $50,000 per violation, subject to a cap of $1.5 million for violations of the same
standard in a single calendar year. However, a single breach incident can result in violations of multiple standards. HIPAA also authorizes
state attorneys general to file suit on behalf of their residents. Courts are able to award damages, costs and attorneys’ fees
related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in
civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for
negligence or recklessness in the misuse or breach of PHI. In addition, HIPAA mandates that the Secretary of Health and Human Services,
or HHS, conduct periodic compliance audits of HIPAA covered entities or business associates for compliance with the HIPAA Privacy and
Security Standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of
unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator. HIPAA further requires that patients
be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromises the privacy or security
of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals.
HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days
after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay,
and HHS will post the name of the breaching entity on its public web site. Breaches affecting 500 patients or more in the same state
or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record
it in a log and notify HHS at least annually.
Numerous
other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI. These
laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations
by courts and government agencies, creating complex compliance issues for us and our clients and potentially exposing us to additional
expense, adverse publicity and liability.
Because
of the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important. If
our security measures are breached or fail, unauthorized persons may be able to obtain access to sensitive client data, including HIPAA-regulated
PHI. As a result, our reputation could be severely damaged, adversely affecting client confidence. In addition, we could face litigation,
damages for contract breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significant
costs for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach could
also result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been
caused by such breaches, incentives offered to clients in an effort to maintain our business relationships after a breach and implementing
measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies,
training employees and engaging third-party experts and consultants.
The
failure of our 3rd party telemedicine services provider to attract and retain physicians and nurse practitioners in a competitive labor
market could limit our ability to execute our growth strategy, resulting in a slower rate of growth.
Our
wellness business depends on our ability of our 3rd party telemedicine services provider to continue to recruit and retain
a sufficient number of qualified licensed doctors and nurses. Although we believe such provider has an effective recruitment process,
there is no assurance that such provider will be able to secure arrangements with sufficient numbers of licensed doctors and nurses or
retain the services of such practitioners. If our provider experiences delays or shortages in obtaining access to qualified physicians
and nurses, we would be unable to expand our services and operations, resulting in reduced revenues.
If
the physicians who are available through our telemedicine operations develop a poor reputation, our operations and future revenues would
suffer.
The
success of our wellness business is dependent upon quality medical services being rendered by the physicians who are provided by our
3rd party telemedicine services provider. As the patient-physician relationship involves inherent trust and confidence, any
negative publicity, whether from civil litigation, allegations of criminal misconduct, or forfeiture of medical licenses, with respect
to any physicians made available for our services, and/or our facilities could adversely affect our future results of operations.
If
we fail to comply with government laws and regulations it could have a materially adverse effect on our business.
The
health care industry is subject to extensive federal, state and local laws and regulations relating to licensure, conduct of operations,
ownership of facilities, addition of facilities and services, payment for services and prices for services that are extremely complex
and for which, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. We exercise
care in structuring our arrangements with physicians and other referral sources to comply in all material respects with applicable laws.
We will also take such laws into account when planning future centers, marketing and other activities, and expect that our operations
will be in compliance with applicable law. The laws, rules and regulations described above are complex and subject to interpretation.
In the event of a determination that we are in violation of such laws, rules or regulations, or if further changes in the regulatory
framework occur, any such determination or changes could have a material adverse effect on our business. There can be no assurance however
that we will not be found in noncompliance in any particular situation.
We
may not be able to successfully develop, launch and commercialize our planned erectile dysfunction (ED) product or any other potential
future men’s wellness products.
We
may not be able to effectively develop and profitably launch and commercialize our planned erectile dysfunction (ED) product or any other
potential future men’s wellness products. If we are unable to successfully develop, produce, launch and commercialize our planned
erectile dysfunction (ED) product or any other potential future men’s wellness products, our ability to generate product sales
will be severely limited, which will have a material adverse impact on our business, financial condition, and results of operations.
Changes
to our strategic business plan may cause uncertainty regarding the future of our business, and may adversely impact employee hiring and
retention, our stock price, and our revenue, operating results, and financial condition.
Our
recent change in our business focus from operating MedSpas, a nutrition store and construction services, to men’s wellness products
and services and telehealth services, life coaching and other wellness services may cause or result in:
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disruption
of our business or distraction of our employees and management; |
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difficulty
in recruiting, hiring, motivating and retaining talented and skilled personnel; |
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stock
price volatility; and |
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difficulty
in negotiating, maintaining or consummating business or strategic relationships or transactions. |
If
we are unable to mitigate these or other potential risks, our revenue, operating results and financial condition may be adversely impacted.
We
will depend on our partners to manufacture our planned erectile dysfunction (ED) product and other potential future men’s wellness
products.
We
will rely on our planned partners for the manufacture of our planned erectile dysfunction (ED) product and any other potential future
men’s wellness products and we cannot assure you that they will be successful. This subjects us to a number of risks, including
the following:
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we
may not be able to control the commercialization of our products, including the amount, timing and quality of resources that our
partners may devote to our products; |
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our
partners may experience financial, regulatory or operational difficulties, which may impair their ability to fulfill their contractual
obligations; |
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business
combinations or significant changes in a partner’s business strategy may adversely affect a partner’s willingness or
ability to perform their obligations under any arrangement; |
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legal
disputes or disagreements may occur with one or more of our partners or between our partners and our suppliers or former partners;
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a
partner could independently move forward with a competing product developed either independently or in collaboration with others,
including with one of our competitors. |
If
any of our partners fail to fulfill their contractual obligations, our business may be negatively affected and we may receive limited
or no revenues under our agreements with them.
If
we are unable to maintain or enter into agreements with suppliers or our suppliers fail to supply us with our planned erectile dysfunction
(ED) product or any other potential future men’s wellness products, we may experience delays in selling our products.
We
cannot guarantee that we will be successful in maintaining or entering into supply agreements on reasonable terms or at all or that we
or our suppliers will be able to obtain or maintain the necessary regulatory approvals or state and federal controlled substances registrations
for current or potential future suppliers in a timely manner or at all. If we are unable to obtain a sufficient quantity of compounds
required to product products, there could be a delay in producing products, which could adversely affect our product sales and operating
results materially, which could significantly harm our business.
We
currently do not have any manufacturing facilities and intend to rely on third parties for the supply of the products, as well as for
the supply of materials. However, we cannot be certain that we or our suppliers will be able to obtain or maintain the necessary regulatory
approvals or registrations for these suppliers in a timely manner or at all.
Our
ability to gain and increase market acceptance and generate revenues will be subject to a variety of risks, many of which are out of
our control.
Our
planned erectile dysfunction (ED) product or any other potential future men’s wellness products may not gain or increase market
acceptance among physicians, patients, healthcare payors or the medical community. We believe that the degree of market acceptance and
our ability to generate revenues from such products will depend on a number of factors, including:
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our
ability to expand the use of our products through targeted patient and physician education; |
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competition
and timing of market introduction of competitive products; |
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quality,
safety and efficacy in the approved setting; |
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prevalence
and severity of any side effects, including those of the components of our products; |
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emergence
of previously unknown side effects, including those of the generic components of our products; |
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potential
or perceived advantages or disadvantages over alternative treatments; |
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the
convenience and ease of purchasing the product, as perceived by potential patients; |
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strength
of sales, marketing and distribution support; |
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price,
both in absolute terms and relative to alternative treatments; |
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the
effectiveness of any future collaborators’ sales and marketing strategies; |
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the
effect of current and future healthcare laws; |
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availability
of coverage and reimbursement from government and other third-party payors; |
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recommendations
for prescribing physicians to complete certain educational programs for prescribing drugs; |
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the
willingness of patients to pay out-of-pocket in the absence of government or third-party coverage; and |
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product
labeling, product insert, or new studies or trial requirements of FDA or other regulatory authorities. |
Our
future products may fail to achieve market acceptance or generate significant revenue to achieve sustainable profitability. In addition,
our efforts to educate the medical community and third-party payors on the safety and benefits of our drugs may require significant resources
and may not be successful.
If
we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage, if any.
Our
future products will be subject to risks for product liability claims due to inherent potential side effects. We may be unable to obtain
or maintain product liability coverage. A product liability claim in excess of, or excluded from, our insurance coverage (if any) would
have to be paid out of cash reserves and could have a material adverse effect upon our business, financial condition and results of operations.
Product liability insurance is expensive even with large self-insured retentions or deductibles, difficult to maintain, and current or
increased coverage may not be available on acceptable terms, if at all.
If
we cannot successfully defend ourselves against a product liability claim, we may incur substantial liabilities. Regardless of merit
or eventual outcome, liability claims may result in:
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injury
to our reputation; |
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costs
of defending the claim and/or related litigation; |
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cost
of any potential adverse verdict; |
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substantial
monetary awards to patients or other claimants; and |
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the
inability to commercialize our products. |
Damages
awarded in a product liability action could be substantial and could have a negative impact on our financial condition. Whether or not
we were ultimately successful in product liability litigation, such litigation would consume substantial amounts of our financial and
managerial resources, and might result in adverse publicity, all of which would impair our business. In addition, product liability claims
could result in an FDA investigation of the safety or efficacy of our products, our third-party manufacturing processes and facilities,
or our marketing programs. An FDA investigation could also potentially lead to a recall of our future products or more serious enforcement
actions, limitations on the indications for which they may be used, or suspension or withdrawal of approval.
The
markets in which we operate are highly competitive and we may be unable to compete successfully against new entrants or established companies.
Competition
in the pharmaceutical and medical products industries is intense and is characterized by costly and extensive research efforts and rapid
technological progress. Our competitors may develop technologies and products that are more effective than those we are planning to market.
Such developments could render our planned products less competitive or possibly obsolete.
New
developments, including the development of other products and technologies occur in the pharmaceutical and medical technology industries
at a rapid pace. These developments may render our products obsolete or noncompetitive. Compared to us, many of our potential competitors
have substantially greater:
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research
and development resources, including personnel and technology; |
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regulatory
experience; |
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experience
and expertise in exploitation of intellectual property rights; and |
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access
to strategic partners and capital resources. |
As
a result of these factors, our competitors may develop drugs or products that are more effective, more useful and less costly than ours
and may also be more successful in manufacturing and marketing their products. In addition, our competitors may be more effective in
commercializing their products. We currently outsource our manufacturing and therefore rely on third parties for that competitive expertise.
There can be no assurance that we will be able to develop or contract for these capabilities on acceptable economic terms, or at all.
Marketing
activities for our planned erectile dysfunction (ED) products are subject to continued governmental regulation.
FDA
authorities have the authority to impose significant restrictions on approved products through regulations on advertising, promotional
and distribution activities. If our future products are marketed in contradiction with FDA laws and regulations, FDA may issue warning
letters that require specific remedial measures to be taken, as well as an immediate cessation of the impermissible conduct, resulting
in adverse publicity. FDA may also require that all future promotional materials receive prior agency review and approval before use.
Certain states have also adopted regulations and reporting requirements surrounding the promotion of pharmaceuticals. Failure by us or
any of our collaborators to comply with state requirements may affect our ability to promote or sell future products in certain states.
This, in turn, could have a material adverse impact on our financial results and financial condition and could subject us to significant
liability, including civil and administrative remedies as well as criminal sanctions.
Many
of our competitors in the online mail order pharmacy space are better established and have resources significantly greater than we have,
which may make it difficult to fend off competition.
We
plan to operate as a close-door online mail order pharmacy with a specific target and vision to obtain licenses in all 50 states across
the U.S. We expect to compete with the three largest drug distributors (McKesson, Cardinal Health and AmerisourceBergen), in addition
to other pharmaceutical distributors, buying groups, software products, and various start-up drug companies. Many of these operations
have substantially greater financial and manufacturer-backed resources, longer operating histories, greater name recognition and more
established relationships in the industry than us. In addition, a number of these competitors may combine or form strategic partnerships.
As a result, our competitors may establish a more favorable footing in the pharmaceutical industry with respect to pricing or other factors.
Our failure to compete successfully with any of these companies would have a material adverse effect on our business and the trading
price of our common stock.
Additional
restrictive elements exist within the pharmaceutical channels of distribution. For example, a number of the inventory management systems,
either developed by the distributors or third-party vendors, have been developed to require compliance to these restrictive purchasing
agreements. Management anticipates that other existing and prospective competitors will adopt technologies or business plans similar
to ours or seek other means to develop operations competitive with ours, particularly if our development of large-scale production progresses
as scheduled.
We
may not receive licenses to operate as an online mail order pharmacy.
Our
planned operations as a close-door online mail order pharmacy is subject to among other things, our receipt of regulatory approvals and
licenses in the states in which we plan to operate. Our failure to receive regulatory approval or licenses in the states in which we
hope to operate may prohibit us from operating as a close-door online mail order pharmacy, be costly, require us to comply with costly
rules and regulations, and/or subject us to liability, fines and penalties for non-compliance. We may not be able to receive approvals
or licenses to operate in any states and may not be able to undertake any operations as a close-door online mail order pharmacy. Any
of the above may have an adverse effect on our revenues, operations and cash flow, and may require us to abandon altogether our business
plans.
There
are inherent risks associated with our planned operations within the Pharmaceutical Distribution Market.
There
are inherent risks involved with doing business within the pharmaceutical distribution market, any of which may have a material adverse
effect on our planned operations, cash flow and revenues, including:
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Improperly
manufactured products may prove dangerous to the end consumer. |
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Products
may become adulterated by improper warehousing methods or modes of shipment. |
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Counterfeit
products or products with fake pedigree papers. |
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Unlicensed
or unlawful participants in the distribution channel. |
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Risk
with default and the assumption of credit loss. |
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Regulatory
risks. |
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Risk
related to the loss of supply, or the loss of a number of suppliers, or in the delay of obtaining the supply of drugs. |
Pedigree
tracking laws and regulations could increase our regulatory burdens.
Congress
and state and federal agencies, including state boards of pharmacy and departments of health and the FDA, have made increased efforts
in the past year to regulate the pharmaceutical distribution system in order to prevent the introduction of counterfeit, adulterated
or mislabeled drugs into the pharmaceutical distribution system (otherwise known as “pedigree tracking”). In November
2013, Congress passed (and President Barack Obama signed into law) the Drug Quality and Security Act (the “DQSA”).
The DQSA establishes federal standards requiring supply-chain stakeholders to participate in an electronic, interoperable, lot-level
prescription drug track-and-trace system. The law also preempts state drug pedigree requirements and establishes new requirements for
drug wholesale distributors and third-party logistics providers, including licensing requirements in states that had not previously licensed
such entities.
In
addition, the Food and Drug Administration Amendments Act of 2007 requires the FDA to establish standards and identify and validate effective
technologies for the purpose of securing the pharmaceutical supply chain against counterfeit drugs. These standards may include track-and-trace
or authentication technologies, such as radio frequency identification devices, 2D data matrix barcodes, and other similar technologies.
On March 26, 2010, the FDA released the Serialized Numerical Identifier (the “SNI”) guidance for manufacturers who
serialize pharmaceutical packaging. We expect to be able to accommodate these SNI regulations in our distribution operations. The DQSA
and other pedigree tracking laws and regulations have increased the overall regulatory burden and costs associated with our planned drug
distribution operations and may have had a material adverse impact on our results of operations.
It
may be difficult and costly for us to comply with the extensive government regulations to which our business is subject.
Our
operations are subject to extensive regulation by the U.S. federal and state governments. In addition, as we expand our operations, we
may also become subject to the regulations of foreign jurisdictions, as well as additional regulations relating to environmental matters,
transportation of pharmaceutical products, shipping restrictions, and import and export restrictions. We are also required to comply
with various state pricing gouging laws. Our required compliance, or failure to comply with any of the above rules and regulations, may
adversely affect our cash flow, profitability, and growth.
Regulatory
and Reporting Risks
We
are subject to the reporting requirements of federal securities laws, which are expensive and subject us to potential liability.
We
are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Exchange
Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual
and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders causes our
expenses to be higher than they would be if we remained a privately-held company. We could also be subject to sanctions or deregistration
if we fail to keep up with or run afoul of our reporting obligations.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls is time consuming, difficult and costly.
Because
we are a reporting company with the SEC, we must comply with Sarbanes-Oxley Act and SEC rules concerning internal controls. It is time
consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley
Act. In order to expand our operations, we will need to hire additional financial reporting, internal control, and other finance staff
in order to develop and implement appropriate internal controls and reporting procedures.
Risks
Related to Our Common Stock and Securities
Shareholders
who hold unregistered shares of our common stock will be subject to resale restrictions pursuant to Rule 144, if and when available,
due to the fact that we are deemed to be a former “shell company”.
Pursuant
to Rule 144 of the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined
as a company that has no or nominal operations; and, either no or nominal assets; assets consisting solely of cash and cash equivalents;
or assets consisting of any amount of cash and cash equivalents and nominal other assets. While we do not believe that we are currently
a “shell company”, we were previously a “shell company” and as such are deemed to be a former “shell
company” pursuant to Rule 144, and as such, sales of our securities pursuant to Rule 144 may not be able to be made if we are
not subject to Section 13 or 15(d) of the Exchange Act, and have filed all of our required periodic reports for at least the previous
one year period prior to any sale pursuant to Rule 144; and a period of at least twelve months has elapsed from the date “Form
10 information” has been filed with the Commission reflecting the Company’s status as a non-“shell company”
(which Form 10 information was filed by the Company in August 2019). Although to date we have complied with the requirement of Rule 144
as related to “shell companies”, our status as a former “shell company” could prevent us from raising
additional funds, engaging consultants, and using our securities to pay for any acquisitions in the future (although none are currently
planned).
We
have various outstanding convertible notes which are convertible into shares of our common stock at a discount to market.
As
of the date of this Report, we owed approximately $2,648,560 under various convertible promissory notes. The conversion prices of the
convertible notes initially vary from between $0.075 per share (as to the convertible notes issued between November 22 and December 2,
2022), and 25% of the market value of our common stock (as to our other convertible notes), subject in many cases to
adjustments to the conversion prices upon defaults and anti-dilution and other rights which may result in such conversion prices declining.
As a result, any conversion of the convertible notes and sale of shares of common stock issuable in connection with the conversion thereof
may cause the value of our common stock to decline in value, as described in greater detail under the Risk Factors below. Notwithstanding
the above, we hope to repay the convertible notes in full before any conversions take place.
The
issuance and sale of common stock upon conversion of the convertible notes may depress the market price of our common stock.
If
sequential conversions of the convertible notes and sales of such converted shares take place, the price of our common stock may decline,
and as a result, the holders of the convertible notes will be entitled to receive an increasing number of shares in connection with conversions,
which shares could then be sold in the market, triggering further price declines and conversions for even larger numbers of shares, to
the detriment of our investors. The shares of common stock which the convertible notes are convertible into may be sold without restriction
pursuant to Rule 144. As a result, the sale of these shares may adversely affect the market price, if any, of our common stock.
In
addition, the common stock issuable upon conversion of the convertible notes may represent overhang that may also adversely affect the
market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there
is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders
attempt to sell in the market will only further decrease the share price. The convertible notes will be convertible into shares of our
common stock at a discount to market as described above, and such discount to market provides the holders with the ability to sell their
common stock at or below market and still make a profit. In the event of such overhang, the note holders will have an incentive to sell
their common stock as quickly as possible. If the share volume of our common stock cannot absorb the discounted shares, then the value
of our common stock will likely decrease. Notwithstanding the above, we hope to repay the convertible notes in full before any conversions
take place.
The
issuance of common stock upon conversion of our outstanding convertible notes will cause immediate and substantial dilution.
The
issuance of common stock upon conversion of the convertible notes will result in immediate and substantial dilution to the interests
of other stockholders since the holders of the convertible notes may ultimately receive and sell the full number of shares issuable in
connection with the conversion of such convertible notes. Although certain of the convertible notes may not be converted if such conversion
would cause the holders thereof to own more than 4.99% or 9.99% of our outstanding common stock, this restriction does not prevent the
holders of the convertible notes subject to such restrictions from converting some of their holdings, selling those shares, and then
converting the rest of its holdings, while still staying below the 4.99%/9.99% limit. In this way, the holders of the convertible notes
could sell more than any applicable ownership limit while never actually holding more shares than the applicable limits allow. If the
holders of the convertible notes choose to do this, it will cause substantial dilution to the then holders of our common stock.
The
continuously adjustable conversion price feature of the convertible notes could require us to issue a substantially greater number of
shares, which may adversely affect the market price of our common stock and cause dilution to our existing stockholders.
Our
existing stockholders will experience substantial dilution upon any conversion of the convertible notes. The convertible notes are convertible
into shares of common stock at a conversion price equal to a discount to the market value of our common stock as described above. As
a result, the number of shares issuable could prove to be significantly greater in the event of a decrease in the trading price of our
common stock, which decrease would cause substantial dilution to our existing stockholders. As sequential conversions and sales take
place, the price of our common stock may decline, and if so, the holders of the convertible notes would be entitled to receive an increasing
number of shares, which could then be sold, triggering further price declines and conversions for even larger numbers of shares, which
would cause additional dilution to our existing stockholders and would likely cause the value of our common stock to decline.
We
could face significant penalties for our failure to comply with the terms of our outstanding convertible notes.
Our
various convertible notes contain positive and negative covenants and customary events of default including requiring us in many cases
to timely file SEC reports. In the event we fail to timely file our SEC reports in the future, or any other events of defaults occur
under the notes, we could face significant penalties and/or liquidated damages and/or the conversion price of such notes could be adjusted
downward significantly, all of which could have a material adverse effect on our results of operations and financial condition, or cause
any investment in the Company to decline in value or become worthless.
Certain
of our outstanding warrants to purchase shares of common stock contain anti-dilution rights and favored nation rights, and certain of
our securities purchase agreements include favored nations rights.
We
have outstanding warrants to purchase 15,697,499 shares of common stock which were originally granted with exercise prices from between
$0.20 and $0.50 per share, include anti-dilution and favored nations rights. Pursuant to such rights, subject to certain exceptions,
in the event we issued securities below the then exercise price, the exercise price of the warrants is reduced to the lower of such dilutive
issuance or the volume weighted average price (VWAP) of our common stock on the next trading day following the first public disclosure
of such dilutive issuance, subject to certain exceptions which may reduce such exercise price further in certain cases, including the
issuance of units. Certain of these warrants also include anti-dilution rights which provides for a reduction of the exercise price to
match the price per share of any dilutive issuance made while the warrant is outstanding, subject to certain exceptions. If in the future
we issue securities at prices less than such exercise price, the exercise price of the warrants may be further reduced to such lower
amount. Certain of such warrants also include favored nations provisions which could be triggered in the future and could materially
change the terms of the warrants. In the event any anti-dilution or favored nations provisions of the warrants are triggered, it may
cause the terms of such warrants to be materially amended in favor of the holders thereof, cause significant dilution to existing shareholders,
and otherwise have a material adverse effect on the Company.
Our
outstanding convertible promissory notes include favored nations rights.
All
of our outstanding convertible promissory notes include provisions which provide that, so long as such notes are outstanding, upon any
issuance by the Company (or under certain notes, any of its subsidiaries) of any security, or amendment to a security that was originally
issued, with any term that the holder of such note reasonably believes is more favorable to the holder of such security or with a term
in favor of the holder of such security that the holder reasonably believes was not similarly provided to the holder in such note, then
at the option of the holder, such term may become part of the holder’s notes. The types of terms contained in another security
that may be more favorable to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest
rates, and original issue discounts. Such favored nations provisions could be triggered in the future and could materially change the
terms of the notes. In the event any favored nations provisions of the notes are triggered, it may cause the terms of such notes to be
materially amended in favor of the holders thereof, cause significant dilution to existing shareholders, and otherwise have a material
adverse effect on the Company.
The
issuance and sale of common stock upon exercise of warrants may cause substantial dilution to existing stockholders and may also depress
the market price of our common stock.
As
of the date of this Report, we had a total of 23,253,332 warrants outstanding, of which a) 7,250,000 warrants have an exercise price
of $0.075 per share and mature on January 6, 2026, b) 2,670,000 warrants have an exercise price of $0.075 per share and mature on June
24, 2026, and c) 13,333,332 warrants mature between November 23, 2026 and December 2, 2026 and have an exercise price equal to either
i) in the event of the Company’s listing on a national exchange by May 23, 2022, at a price equal to 120% of the offering price
upon uplisting, or ii) $0.075 per share. The warrants contain provisions limiting each holder’s ability to exercise the warrants
if such exercise would cause the holder’s (or any affiliate of any such holder) holdings in the Company to exceed 9.99% of the
Company’s issued and outstanding shares of common stock (4.99% in connection with the Warrants). The ownership limitation does
not prevent such holder from exercising some of the warrants, selling those shares, and then exercising the rest of the warrants, while
still staying below the 9.99% limit (4.99% in connection with the Warrants). In this way, the holders of the warrants could sell more
than this limit while never actually holding more shares than this limit allows. If the holders of the warrants choose to do this, it
will cause substantial dilution to the then holders of our common stock.
If
exercises of the warrants and sales of such shares issuable upon exercise thereof take place, the price of our common stock may decline.
In addition, the common stock issuable upon exercise of the warrants may represent overhang that may also adversely affect the market
price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand
for that stock. When this happens the price of the company’s stock will decrease, and any additional shares which shareholders
attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares
sold by the warrant holders, then the value of our common stock will likely decrease.
The
issuance of common stock upon conversion of our outstanding convertible promissory notes will cause immediate and substantial dilution
to existing shareholders.
As
of the date of this Report, we owed approximately $2,648,560 under various convertible promissory notes. The conversion prices of the
convertible notes initially vary from between $0.075 per share (as to the convertible notes issued between November 22 and December 2,
2022), and 25% of the market value of our common stock (as to our other convertible notes), subject in many cases to
adjustments to the conversion prices upon defaults and anti-dilution and other rights which may result in such conversion prices declining.
Although the Notes may not be converted by a holder if such conversion would cause the holder to own more than 4.99% of our outstanding
common stock, this restriction does not prevent such holder from converting some of its holdings, selling those shares, and then converting
the rest of its holdings, while still staying below the 4.99% limit. In this way, the holders of the Notes could sell more than this
limit while never actually holding more shares than this limit allows. If the holders of the Notes choose to do this, it will cause substantial
dilution to the then holders of our common stock.
The
issuance and sale of common stock upon conversion of our outstanding convertible promissory notes may depress the market price of our
common stock.
If
conversions of our outstanding convertible notes and sales of such converted shares take place, the price of our common stock may decline.
In addition, the common stock issuable upon conversion of our outstanding convertible notes may represent overhang that may also adversely
affect the market price of our common stock. Overhang occurs when there is a greater supply of a company’s stock in the market
than there is demand for that stock. When this happens the price of the company’s stock will decrease, and any additional shares
which shareholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock
cannot absorb converted shares sold by the holders of the Notes, then the value of our common stock will likely decrease.
We
currently owe a significant amount of money under our outstanding convertible notes.
As
of the date of this Report we owe approximately $2,648,560 under outstanding convertible and non-convertible promissory notes. We do
not have sufficient funds to repay such notes and if we are unable to raise additional funds in the future to repay such amounts, which
may not be available on favorable terms, if at all, such failure could have a material adverse effect on our financial condition or results
of operations and cause any investment in the Company to decline in value or become worthless.
We
have established preferred stock which can be designated by the Company’s Board of Directors without shareholder approval and the
board has established Series A Preferred Stock, which gives the holders majority voting power over the Company.
The
Company has 5,000,000 shares of preferred stock authorized. The shares of preferred stock of the Company may be issued from time to time
in one or more series, each of which shall have a distinctive designation or title as shall be determined by the board of directors of
the Company prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting
powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions
thereof as adopted by the board of directors. In May 2020, we designated three shares of Series A Preferred Stock. The Series A Preferred
Stock have the right, voting in aggregate, to vote on all shareholder matters equal to sixty percent (60%) of the total vote (the “Super
Majority Voting Rights”), so long as such shares are held by directors of the Company. A total of one share of Series A Preferred
Stock is currently outstanding and held by Jacob D. Cohen, our Chief Executive Officer and director, providing him sole voting right
over 60% of our voting shares.
Because
the board of directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of the Company’s
shareholders, shareholders of the Company will have no control over what designations and preferences the Company’s preferred stock
will have. The issuance of shares of preferred stock or the rights associated therewith, could cause substantial dilution to our existing
shareholders. Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such
preferred stock may have voting rights and/or other rights or preferences which could provide the preferred shareholders with substantial
voting control over us and/or give those holders the power to prevent or cause a change in control, even if that change in control might
benefit our shareholders (similar to the Series A Preferred Stock). As a result, the issuance of shares of preferred stock may cause
the value of our securities to decrease.
Stockholders
may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares
of our common stock.
We
have no committed source of financing. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy
obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. Our
board of directors has authority, without action or vote of the stockholders, to issue all or part of the authorized but unissued shares
of common stock and designate series of preferred stock. In addition, if a trading market develops for our common stock, we may attempt
to raise capital by selling shares of our common stock (or convertible securities), possibly at a discount to market. These actions will
result in dilution of the ownership interests of existing stockholders, may further dilute common stock book value, and that dilution
may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because
the shares may be issued to parties or entities committed to supporting existing management.
Our
stock price may be volatile, which may result in losses to our stockholders.
The
stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the OTC
Markets’ OTCQB Market, where our shares of common stock are quoted, generally have been very volatile and have experienced sharp
share-price and trading-volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in
response to many of the following factors, some of which are beyond our control:
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variations
in our operating results; |
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in expectations of our future financial performance, including financial estimates by securities analysts and investors; |
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changes
in operating and stock price performance of other companies in our industry; |
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additions
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future
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Domestic
and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic
and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, following initial
public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating
performance of these companies. These market prices are generally not sustainable and could vary widely. In the past, following periods
of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.
Our
common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices
or at all, if you need to sell your shares to raise money or otherwise desire to liquidate such shares.
We
cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors,
including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors,
and others in the investment community that generate or influence sales volume, and 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 company such as ours or purchase or recommend the purchase of
our shares 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 shares 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 share price. We cannot give you any assurance that
a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will
be sustained. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial
losses to you. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may
disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously
in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer
that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky”
investment due to our lack of revenues or profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under
the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their
shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
Our
common stock is currently subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
Broker-dealer
practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by
the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer,
prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure
document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition,
the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that
becomes subject to the penny stock rules.
Our
Chief Executive Officer and director holds majority voting control over the Company.
Our
Chief Executive Officer and director, Jacob D. Cohen, beneficially owns 28.7% of our outstanding common stock and also has the ability
to vote in aggregate, a separate 60% of our voting stock pursuant to his ownership of the one outstanding share of Series A Preferred
Stock, which gives him control over approximately 71.5% of our voting securities. As a result, Mr. Cohen has the ability to influence
matters affecting our stockholders and will therefore exercise control in determining the outcome of all corporate transactions or other
matters, including the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the
power to prevent or cause a change in control. Any investor who purchases shares will be a minority stockholder and as such will have
little to no say in the direction of the Company and the election of directors. Additionally, it will be difficult if not impossible
for investors to remove Mr. Cohen as a director, which will mean he will remain in control of who serves as officers of the Company as
well as whether any changes are made in the board of directors. As a potential investor in the Company, you should keep in mind that
even if you own shares of the Company’s common stock and wish to vote them at annual or special stockholder meetings, your shares
will likely have little effect on the outcome of corporate decisions. Because Mr. Cohen controls such vote, investors may find it difficult
to replace our management if they disagree with the way our business is being operated. Additionally, the interests of Mr. Cohen may
differ from the interests of the other stockholders and thus result in corporate decisions that are averse to other stockholders.
We
currently have limited operations and may not generate significant revenues or be profitable in the future.
Our
current operations consist solely of ZipDoctor, Inc., Life Guru, Inc., EPIQ MD, Inc., EPIQ Scripts, LLC, and Mangoceuticals, Inc. We
may not be successful in our planned operations in the future and can make no assurances that we will be able to generate significant
revenues in the future, that we will have sufficient funding to support our operations and pay our expenses, or that we will ever become
profitable. In the event we are unable to generate revenues and/or support our operations, we will be forced to curtail and/or abandon
our current business plan and any investment in the Company could become worthless.
Risks
Related to the Planned Reverse Stock Split
On
July 30, 2021, our board of directors, and on July 30, 2021, stockholders holding a majority of our outstanding voting shares, approved
resolutions authorizing a reverse stock split of the outstanding shares of our common stock in the range from one-for-two (1-for-2) to
one-for-sixty (1-for-60), and provided authority to our board of directors to select the ratio of the reverse stock split in their discretion,
at any time prior to the earlier of July 30, 2022 and the date of our 2022 annual meeting of shareholders. On January 25, 2022, our board
of directors, pursuant to such shareholder authority, approved a one-for-sixty (1-for-60) reverse stock split of the outstanding shares
of our common stock, which is intended to allow us to meet the minimum share price requirement of the NASDAQ Capital Market. Notwithstanding
such board of directors approval, the reverse stock split is subject to approval thereof by Financial Industry Regulatory Authority,
Inc. (FINRA), which approval has not been received yet, and may not be received on a timely basis, if all. The board of directors approved
the reverse stock split in an effort to increase the trading price of the Company’s common stock to a level sufficient to allow
an uplisting of the Company’s common stock on the Nasdaq Capital Market. Because FINRA has not yet approved the reverse stock split
and the Company has not formally affected the reverse stock split, none of the outstanding share amounts set forth below have been adjusted
for such board of directors approved reverse stock split. The board of directors reserves the right to adjust the ratio of the reverse
stock split and/or terminate the authority for such reverse stock split in the future.
We
anticipate effecting a reverse stock split of our outstanding common stock in the future.
We
expect that the reverse stock split will increase the market price of our common stock while our stock is trading and enable us to meet
the minimum market price requirement of the listing rules of the Nasdaq Capital Market. However, the effect of a reverse stock split
upon the market price of our common stock cannot be predicted with certainty, and the results of reverse stock splits by companies in
similar circumstances have been varied. It is possible that the market price of our common stock following the reverse stock split will
not increase sufficiently for us to be in compliance with the minimum market price requirement of the Nasdaq Capital Market, or if it
does, that such price will be sustained. If we are unable to meet the minimum market price requirement, we may be unable to list our
shares on the Nasdaq Capital Market.
Even
if the market price of our common stock increases sufficiently so that we comply with the minimum market price requirement, we cannot
assure you that we will be able to comply with the other standards that we are required to meet in order to be approved for listing on
the Nasdaq Capital Market or maintain a listing of our common stock on the Nasdaq Capital Market. Our failure to meet these requirements
may result in our common stock being unable to be listed on the Nasdaq Capital Market.
The
reverse stock split may decrease the liquidity of the shares of our common stock.
The
liquidity of the shares of our common stock may be affected adversely by the reverse stock split given the reduced number of shares that
will be outstanding following the reverse stock split. In addition, the reverse stock split may increase the number of stockholders who
own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the
cost of selling their shares and greater difficulty affecting such sales.
The
reverse stock split may not increase our stock price over the long-term.
The
principal purpose of the reverse stock split is to increase the per-share market price of our common stock. It cannot be assured, however,
that the reverse stock split will accomplish this objective for any meaningful period. While it is expected that the reduction in the
number of outstanding shares of common stock will proportionally increase the market price of the Company’s common stock, it cannot
be assured that the reverse stock split will increase the market price of our common stock by a multiple of the proposed reverse stock
split ratio, or result in any permanent or sustained increase in the market price of our common stock, which is dependent upon many factors,
including our business and financial performance, general market conditions, and prospects for future success. Thus, while our stock
price might meet the initial and continued listing requirements for The Nasdaq Capital Market initially, it cannot be assured that it
will continue to do so.
General
Risk Factors
We
will continue to incur increased costs as a result of being a reporting company, and given our limited capital resources, such additional
costs may have an adverse impact on our profitability.
We
are an SEC reporting company. The rules and regulations under the Exchange Act require reporting companies to provide periodic reports
with interactive data files, which require that we engage legal, accounting and auditing professionals, and eXtensible Business Reporting
Language (XBRL) and EDGAR (Electronic Data Gathering, Analysis, and Retrieval) service providers. The engagement of such services can
be costly, and we may continue to incur additional losses, which may adversely affect our ability to continue as a going concern. In
addition, the Sarbanes Oxley Act of 2002, as well as a variety of related rules implemented by the SEC, have required changes in corporate
governance practices and generally increased the disclosure requirements of public companies. For example, as a result of being a reporting
company, we are required to file periodic and current reports and other information with the SEC and we have adopted policies regarding
disclosure controls and procedures and regularly evaluate those controls and procedures.
The
additional costs we continue to incur in connection with becoming a reporting company (expected to be approximately a hundred thousand
dollars per year) will continue to further stretch our limited capital resources. Due to our limited resources, we have to allocate resources
away from other productive uses in order to continue to comply with our obligations as an SEC reporting company. Further, there is no
guarantee that we will have sufficient resources to continue to meet our reporting and filing obligations with the SEC as they come due.
Our
acquisitions may expose us to unknown liabilities.
Because
we have acquired, and expect generally to acquire, all (or a majority of) the outstanding securities of certain of our acquisition targets,
our investment in those companies is or will be subject to all of their liabilities other than their respective debts which we paid or
will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, our business could be materially affected.
We may also experience issues relating to internal controls over financial reporting that could affect our ability to comply with the
Sarbanes-Oxley Act, or that could affect our ability to comply with other applicable laws.
We
may have difficulty obtaining future funding sources, if needed, and we may have to accept terms that would adversely affect stockholders.
We
will need to raise funds from additional financing in the future to complete our business plan and may need to raise additional funding
in the future to support our operations. We have no commitments for any financing and any financing commitments may result in dilution
to our existing stockholders. We may have difficulty obtaining additional funding, and we may have to accept terms that would adversely
affect our stockholders. For example, the terms of any future financings may impose restrictions on our right to declare dividends or
on the manner in which we conduct our business. Additionally, we may raise funding by issuing additional convertible notes, which if
converted into shares of our common stock would dilute our then stockholders’ interests. Lending institutions or private investors
may impose restrictions on a future decision by us to make capital expenditures, acquisitions or significant asset sales. If we are unable
to raise additional funds, we may be forced to curtail or even abandon our business plan.
If
we make any acquisitions, they may disrupt or have a negative impact on our business.
If
we make acquisitions in the future, funding permitting, which may not be available on favorable terms, if at all, we could have difficulty
integrating the acquired company’s assets, personnel and operations with our own. We do not anticipate that any acquisitions or
mergers we may enter into in the future would result in a change of control of the Company. In addition, the key personnel of the acquired
business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether
we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees
and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including,
without limitation, the following:
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the
difficulty of integrating acquired products, services or operations; |
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potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies; |
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difficulties
in maintaining uniform standards, controls, procedures and policies; |
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the
potential impairment of relationships with employees and customers as a result of any integration of new management personnel; |
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the
potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products
to new and existing customers; |
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the
effect of any government regulations which relate to the business acquired; |
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potential
unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition
or modify the marketing and sales of acquired products or operations, or the defense of any litigation, whether or not successful,
resulting from actions of the acquired company prior to our acquisition; and |
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potential
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Our
business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems
encountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt our
ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
Current
global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity
and financial condition.
Current
global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of
the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt
or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our
initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations
will negatively impact our business, prospects, liquidity and financial condition.
Our
ability to service our indebtedness will depend on our ability to generate cash in the future.
Our
ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash
is subject to general economic and market conditions and financial, competitive, legislative, regulatory and other factors that are beyond
our control. Our business may not generate sufficient cash to fund our working capital requirements, capital expenditure, debt service
and other liquidity needs, which could result in our inability to comply with financial and other covenants contained in our debt agreements,
our being unable to repay or pay interest on our indebtedness, and our inability to fund our other liquidity needs. If we are unable
to service our debt obligations, fund our other liquidity needs and maintain compliance with our financial and other covenants, we could
be forced to curtail our operations, our creditors could accelerate our indebtedness and exercise other remedies and we could be required
to pursue one or more alternative strategies, such as selling assets or refinancing or restructuring our indebtedness. However, such
alternatives may not be feasible or adequate.
Our
potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects,
and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment
and could harm our business, financial condition, results of operations and cash flow.
Our
entry into the rapidly growing health, wellness, and mentoring/life coaching market may place a significant strain on our resources and
increase demands on our executive management, personnel and systems, and our operational, administrative and financial resources may
be inadequate. We may also not be able to effectively manage any expanded operations, or achieve planned growth on a timely or profitable
basis, particularly if the number of customers using our technology significantly increases or their demands and needs change as our
business expands. If we are unable to manage expanded operations effectively, we may experience operating inefficiencies, the quality
of our products and services could deteriorate, and our business and results of operations could be materially adversely affected.
If
we are unable to develop and maintain our brand and reputation for our service and product offerings, our business and prospects could
be materially harmed.
Our
business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation in the markets
we serve. If problems arise with our products or services, our brand and reputation could be diminished. If we fail to develop, promote
and maintain our brand and reputation successfully, our business and prospects could be materially harmed.
We
may not maintain sufficient insurance coverage for the risks associated with our business operations.
Risks
associated with our business and operations include, but are not limited to, claims for wrongful acts committed by our officers, directors,
and other representatives, the loss of intellectual property rights, the loss of key personnel, risks posed by natural disasters and
risks of lawsuits from customers who are injured from or dissatisfied with our services. Any of these risks may result in significant
losses. We cannot provide any assurance that our insurance coverage is sufficient to cover any losses that we may sustain, or that we
will be able to successfully claim our losses under our insurance policies on a timely basis or at all. If we incur any loss not covered
by our insurance policies, or the compensated amount is significantly less than our actual loss or is not timely paid, our business,
financial condition and results of operations could be materially and adversely affected.
We
do not anticipate paying any cash dividends.
We
presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends,
if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment
of any dividends will be within the discretion of our board of directors. We presently intend to retain all earnings, if any, to implement
our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
Any
failure to protect our intellectual property rights could impair our ability to protect our technology and our brand.
Our
success depends in part on our ability to enforce our intellectual property and other proprietary rights. We rely upon a combination
of trademark and trade secret laws, as well as license and other contractual provisions, to protect our intellectual property and other
proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights
may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent that our intellectual property and other proprietary
rights are not adequately protected, third parties may gain access to our proprietary information, develop and market solutions similar
to ours or use trademarks similar to ours, each of which could materially harm our business. The failure to adequately protect our intellectual
property and other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.
For
all of the foregoing reasons and others set forth herein, an investment in our securities involves a high degree of risk.