As
filed with the Securities and Exchange Commission on November 30, 2011
Registration
No. 333-176704
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1/A
Amendment
No. 1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
ORGANIC
PLANT HEALTH, INC.
(Exact
Name of Registrant as Specified in Charter)
Nevada
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2873
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27-2874167
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(State
or Other Jurisdiction of Incorporation)
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(Primary
Standard Industrial Classification Code Number)
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(IRS
Employer Identification No.)
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9206
Monroe Road
Charlotte, NC 28270 USA
(704)
841-1066
(Address,
including zip code, and telephone number,
including
area code, or registrant’s principal executive offices)
Billy
Styles
Chief
Executive Officer
9206
Monroe Road
Charlotte, NC 28270 USA
(704)
841-1066
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
Copies
to:
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Frank
J. Hariton
1065
Dobbs Ferry Road
White
Plains, NY 10607
Tel:
(914) 674-4373
Fax:
(914) 693-2963
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Greentree
Financial Group Inc.
7951
SW 6
th
Street, Suite 216
Plantation,
FL 33324
Tel:
(954) 424-2345
Fax:
(954) 424-2230
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Approximate
date of commencement of proposed sale to the public:
As
soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box:
S
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:
£
If this Form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
£
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
£
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company:
Large accelerated filer
£
Accelerated filer
£
Non-accelerated filer
£
Smaller
reporting company
S
CALCULATION
OF REGISTRATION FEE
Title of each class of securities to
be registered
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Amount to be
registered
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Proposed
maximum
offering price per
share
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Proposed
maximum
aggregate
offering price
(1)
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Amount of
registration fee
(2)
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Common Stock, par value
$.001
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10,000,000
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$
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.20
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$
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2,000,000
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$
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232.20
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f
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Common
Stock, par value $.001,
(offered
by selling stockholders)
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10,456,375
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$
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.20
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$
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2,091,275
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242.80
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Total
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20,456,375
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$
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4,091,275
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$
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475.00
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(1)
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Estimated solely
for the purpose of calculating the amount of the registration fee in accordance with Rule 457(a) under the Securities Act
of 1933, as amended. Our common stock is currently quoted on the “Pink Sheets - Other” quotation market under
the symbol “OPHI.PK”. The offering price was determined by us arbitrarily based on the price shares were sold
to the selling security holders in private placement transactions plus an increase due to the fact that the shares are being
registered and will be liquid. The selling shareholders may sell shares of our common stock at prevailing market prices or
privately negotiated prices. The 10,000,000 shares offered on behalf of the Company will be sold at $0.20 per share. We have
agreed to bear the expenses relating to the registration of the shares for the selling security holders.
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The
Registrant amends this registration statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. The Company and the Selling Stockholders
may
not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION. DATED NOVEMBER 22, 2011.
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Organic
Plant Health, Inc.
20,456,375
Shares of Common Stock, Par Value $0.001
This
registration statement contains two forms of prospectus, as set forth below:
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·
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Public Offering
Prospectus. A prospectus to be used for the direct public offering by
Organic Plant
Health, Inc. (
the “Company”) of up to 10,000,000 shares of common stock at price of $0.20 per share. This
primary offering will be made on a best-efforts, self-underwritten basis with no minimum offering amount required. The subscriptions
are irrevocable, and will not be escrowed and will be available to you upon receipt. (the “Public Offering Prospectus”
or the “Primary Offering”)
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·
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Selling Stockholder
Prospectus. A prospectus to be used in connection with the potential
resale by certain
selling stockholders of the Company of up to 10,456,375 shares of the Company’s common stock issued and outstanding;
and upon the effectiveness of this prospectus, the selling stockholders may sell the shares from time to time at the prevailing
market price or in negotiated transactions. Each of the selling stockholders may be deemed to be an "underwriter";
as such term is defined in the Securities Act of 1933.
(the “Selling Stockholder Prospectus” or the “Secondary
Offering”)
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The
Public Offering Prospectus and the Selling Stockholder Prospectus will be identical in all respects except for the following principal
points:
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they contain
different Use of Proceeds sections;
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·
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they contain
different Plan of Distribution sections;
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·
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a Selling Stockholders
section is included in the Selling Stockholder Prospectus.
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As
of November 22, 2011 The Company had
71,215,081
(if offering is completed) shares of common stock issued and outstanding.
The Company’s common stock
is currently quoted on the “Pink Sheets - Other” quotation market under
the symbol “OPHI.PK”
. After the date of this prospectus, the Company expects to have an
application filed with the Financial Industry Regulatory Authority for its common stock to eligible for trading on the OTC Bulletin
Board. The Company will be offering 10,000,000 shares of common stock at a fixed price of $0.20 per common share. However, the
selling stockholders may sell their shares from time to time at the prevailing market price or in negotiated transactions upon
the effectiveness of this prospectus.
OUR
BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR SHARES OF COMMON STOCK WILL ALSO INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON PAGE ___ BEFORE INVESTING
IN OUR SHARES OF COMMON STOCK.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
information in this prospectus is not complete and may be changed. This prospectus is included in the registration statement that
was filed by us with the Securities and Exchange Commission. The selling stockholders may not sell these securities until the
registration statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer
to buy these securities in any state where the offer or sale is not permitted.
The
date of this prospectus is November 22, 2011
TABLE
OF CONTENTS
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Page
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Prospectus
Summary
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6
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The
Offering
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9
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Summary
Consolidated Financial Data
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10
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Risk
Factors
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11
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Special
Note Regarding Forward-Looking Statements
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20
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Use
of Proceeds
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20
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Determination
of Offering Price
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21
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Dividend
Policy
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21
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Capitalization
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22
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Market
Price of and Dividends of Common Equity and Related Stock Holder Matters
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23
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Dilution
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24
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Selling
Security Holders
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24
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Plan
of Distribution
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25
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Shares
Eligible for Future Sale
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26
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Description
of Securities
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27
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Interest
of Named Experts And Counsel
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30
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Selected
Consolidated Financial and Operating Data
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30
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Management's
Discussion and Analysis of Financial Condition and Results of Operations
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31
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Organic-based
and Natural Fertilizers Industry Background
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39
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Business
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40
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Company
History
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49
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Management
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50
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Executive
Compensation
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52
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Certain
Relationships and Related Transactions
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53
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Security
Ownership of Certain Beneficial Owners and Management
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53
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Disclosure
of Commission Position of Indemnification for Securities Act Liabilities
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54
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Where
You Can Find Additional Information
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54
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Consolidated
Financial Statements
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70
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You
should only rely on the information contained in this prospectus. We have not, nor have any potential underwriters,
authorized any other person to provide you with different information. This prospectus is not an offer to sell, nor
is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information
in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that
date.
We
obtained statistical data, market data and other industry data and forecasts used throughout this prospectus from market research,
publicly available information and industry publications. We believe, and our actions support, that the statistical data,
industry data, forecasts and market research information contained herein, are correct and accurate. Any errors or misstatements
related to such information contained herein are unintended.
PROSPECTUS
SUMMARY
This
summary highlights material information contained elsewhere in this prospectus and does not contain all of the information that
you should consider in making an investment decision. We urge you to read this entire prospectus carefully, including the “Risk
Factors” section and our financial statements and related notes appearing elsewhere in this prospectus, before making an
investment decision.
Our
Business
We
produce, distribute and sell organic-based, natural and environmentally responsible products for the continual care of the urban
and suburban landscape through our wholly owned subsidiary, Organic Plant Health, LLC (OPH), a North Carolina Limited Liability
Corporation located in Charlotte, North Carolina.
Our
products
consist of granular and liquid fertilizers, soil conditioners, pest control products and
select garden tools. Certain of those products promote and support
soil health and plant health in a variety of residential
and commercial landscape applications.
Our
products are formulated and blended from raw materials brought in from around the United States. Our products and our education
oriented, business practices are designed to appeal to green-minded consumers and businesses, as well as homeowners with do-it-yourself
tendencies. We currently service over 4,500 residential customers located throughout the region, and over 100
commercial landscapers.
We
have a limited history of operations upon which we evaluate our business and prospects. For the nine months ended September 30,
2011, we generated revenues of $741,799 and net loss of $244,041. For the fiscal year of 2010, we generated revenues of $1,026,995
and net loss of $336,057. For the fiscal year of 2009, we generated revenues of $1,062,163 and net loss of $482,437. We may not
be successful in our efforts to grow our business and to generate revenues due to declining revenues since inception. Our business
and prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their
early stage of development. As a result, management may be unable to adjust its spending in a timely manner to compensate for
any unexpected revenue shortfall. This inability could cause net losses in a given period to be greater than expected. An investment
in our securities represents significant risk and you may lose all or part your entire investment.
Further,
without knowledge of our plans to expand the company and with no guarantee that any funds will raised in this offering, our auditor
has expressed substantial doubt about our ability to continue as a going concern.
As
of September 30, 2011, we had total assets of $393,187, available cash and cash equivalents of $56,349, approximately 7 full time
employees, and 3 part time employees to support production and sales for seasonal peaks. Our operating facilities consist of
1)
an 11,000 sq. ft. office and production facility on Monroe Road in Charlotte, NC where production of the proprietary granular
and liquid products occurs; 2) a retail store located in downtown Matthews, North Carolina servicing residential Do-It-Yourselfers
and commercial landscapers.
We
distribute products through our retail store in Matthews, NC, as well as through master retail partners, which mirror the Matthews
store, and through independent retail partners such as Ace Hardware locations and garden centers throughout the region. We
anticipate we will need a minimum of $500,000 additional funds for the year of 2012 to meet our expansion objectives.
The
management of Organic Plant Health, Inc. considers the business a part of the “new” Green Economy because many of
the products we manufacture and distribute support sustainable plant growth, have less impact on the environment than traditional
chemical fertilizers, and support conservation of water if used consistently. As a relatively new business in this economy, much
of our potential consumer base is unaware of our company or the products we develop and offer for sale. Although we plan to market
the company to prospective customers in all areas in which we plan to sell our products, it may take several years, if ever, before
our brand is widely recognized across highly populated regions, or nationwide.
After
achieving some success with a basic retail model in 2007 and 2008, we began to feel the delayed effects from the recession in
early 2009, and by June of 2009, we recognized that the recession would be protracted and would likely continue to have a negative
impact on our business. In July of 2009 we brought on minor investors, and jointly decided that our best opportunity for prolonged
growth and expansion with the least amount of capital was to change the business model from basic retail to a more traditional
manufacturer/distributor model. This growth strategy change would lessen our cost of expansion, otherwise, (appx. $250,000.00
- $300,000.00 annually, per retail store if we had stayed with the previous business model), and allow us to expand faster, and
over a larger area by selling our exclusive products through independent retail partners. These retail partners, existing businesses
with built-in consumer traffic, consist of hardware stores, garden centers and nurseries.
The
company was profitable in 2007 and 2008, however, it was not profitable in 2009 and 2010, and it is likely to sustain another
net loss in 2011. The company currently sells its exclusive products through more than 20 retail partners. We have not added as
many retail partners as initially planned due to the limited cash flow available to support an experienced sales staff. We have
experienced some measure of success with the new business model and believe it is viable and will become profitable in the 1-3
years, if partially or fully funded from this offering. Without receiving any funding from this offering, management will have
to make significant changes in its operations to sustain the business. Management further believes that the company will need
to receive a minimum of $500,000.00 in this offering over the next 6 to 10 months to achieve our initial expansion goals. However,
even if we receive a minimum of $500,000.00 in the next 6-10 months, there is no assurance that we will achieve our initial expansion
goals.
This
new business model presents challenges to growth, but we do not believe they are insurmountable. These challenges consist of attracting
and successfully hiring the right sales and support staff, new branding and packaging designs to help our products compete head-to-head
on the shelf with national brands, and significant marketing and point of purchase materials to support the education process
required with new retailers and their customers. However, even if we are able to hire the right personnel, and update our branding
and packaging, there is no assurance that we will be able to compete head-to-head with widely known national brands.
The
funds from this offering will be used, in part, to hire additional sales and support staff to speed our expansion into additional
markets. This new staff will increase the number of retail partners selling our products at a substantially higher rate and faster
pace than is currently being achieved. We believe that a new sales staff of 2 or 3 salespeople beginning in early 2012 will add
an additional 50-100 retail partners in 2012, alone. We plan to hire additional sales people as we extend our expansion both north,
south and west of the Carolinas.
Additional
funds received from the offering will be used to update our branding and packaging design for our 23 exclusive products. We plan
to have new packaging developed and produced for all exclusive products, depending upon the amount of the initial offering received.
If less than full funding is received, we plan to adjust the number of product packaging revisions performed until such time as
the company can afford to complete the packaging revisions. A detailed review of our Use of Funds can be found later in this document.
Concentration
on Organic-Based and Natural Fertilizers
Industry
D
emand
for organic-based and natural fertility products and soil conditioners has been growing steadily, although slightly behind that
of
demand for organic foods and other items marketed as more natural, earth friendly, or energy efficient
.
We attribute this to greater media attention on organically grown produce and foods used in restaurants. According to
marketresearch.com
,
consumer packaged goods in the lawn and garden sector are estimated to grow at roughly 3.5-4% each year through 2014. Growth will
be led by fertilizers and growing media posting above average gains.
At
present,
Organic fertilizer products represent a small share of the approximately $9 billion consumer packaged lawn
and garden market in the U.S
., roughly 10%, or $900 million. Since 2007 organic fertilizers and growing
media revenues have grown at over 10%, annually, over the past several years, which is greater than twice the average rate for
the category of about 4% over the same time periods. D
emand for these types of products has increased as consumers are
generally becoming more aware of the environment and the negative effects from using synthetic fertilizers and pesticides, such
as contamination of waterways attributed to chemical fertilizers. The same study notes that Baby-boomers are just coming in to
their gardening years, and this will support continued growth in the sector.
According
to the same source, a growing segment of the population is looking for simpler and complete solutions for lawn and landscape care.
The green movement has consumers thinking more about the environment and realizing the benefits of supporting sustainability through
the use of more natural plant care products
. As a result,
demand for earth-friendly fertilizers
and soil conditioners like ours may see an increase in the years to come. As we expand our company we anticipate taking advantage
of these trends.
To
balance this discussion about the growing popularity of organic based products, it is important to note that fertilizers and fertilizer
materials, organic or synthetic, are commodity based to some extent and subject to price volatility. In the past several years
we have seen increases and decreases in the raw materials we use to produce our products. We anticipate that this volatility will
continue, however, we don’t expect it to be a major factor in our success because our competitors using similar raw materials
are subject to the same volatility.
Our
Competitive Advantages
We
position ourselves as developers of organic-based, natural and hybrid-organic products that support sustainability in the landscape.
We evaluate our product offerings frequently and make formula adjustments or improvements as needed, or when appropriate, as science
and agronomy advance, and allow for easier and more affordable use of organic components and materials. W
e
believe we have the following competitive advantages over our competitors:
Strengths
- Internal
· Passion/vision:
Billy
Styles (“Mr. Styles”), our President and Chief Executive Officer, and Alan Talbert (“Mr. Talbert”), our
Vice President and Chief Operating Officer, have been working in their fields of expertise for more than thirty, and twenty years,
respectively. They founded the company and are dedicated to its success. This exhibits a clear advantage over new companies entering
the category.
· Industry relevant experience:
Mr.
Styles has a 35 year career in the lawn and garden industry. Mr. Talbert has a 20+ year career as a marketing/communications professional.
This exhibits a clear advantage over new companies entering the category.
· Product diversity:
We
have the ability to produce a wide variety of products, with very little transition time between formulations. This gives us an
advantage when preparing products for different parts of the country that may have different nutrient requirements. This exhibits
a clear advantage over new companies entering the category.
· Industry contacts:
Mr.
Styles has been involved in the lawn and garden industry for over 3 decades. During this time he has met and worked with a diverse
group of local, regional and national companies. These contacts provide invaluable input into understanding trends and patterns
with regard to consumer habits and new product interests. This exhibits a clear advantage over new companies entering the category.
· Timely
and competitive product line:
Mr.
Styles has been working with sustainable and organic based components for over 8 years. As the green movement is still in its
infancy, we exhibit a clear advantage over companies just now getting into the category.
· Product
performance:
Many
of our formulas including Urban Soil Life Maxx™ and Bio-Balance pH™ granular products, provide real and permanent
change to the soil structure. The performance of the product is obvious with regard to increased microbial populations and their
activity. Traditional chemical fertilizers provide only limited time fertility, offering no benefit for soil health and no components
that support any measure of sustainability. This exhibits a clear advantage over traditional, synthetic-based fertilizers.
· Diverse
experiences in management team:
Our
diverse management team members compliment each others’ strengths and weaknesses very well. Billy Styles has significant
experience in the field, seeing and understanding product needs first hand. Alan Talbert has been involved in business operations,
as well as developing and executing marketing plans on the local and regional levels for many years. Paul DiFraia (“Mr.
DiFraia”), our Vice President, has extensive experience with manufacturing products on a large scale, with great attention
to detail. This exhibits a clear advantage over new companies entering the category.
· Exposure
on regional and national media:
Very
few companies our size have had the level of local, regional and, in some cases, national exposure on radio and television. This
exhibits a clear advantage over new companies entering the category.
Strengths
External
· Organic-based
approach is riding green movement:
The
green economy is in its infancy. As it relates to organic based fertilizers and soil conditioners, these types of products in
the consumer packaged lawn and garden sector are expected to continue to grow at more than twice the rate of traditional fertilizer
sales through 2014.
· Consumer
awareness and acceptance of organic-based products:
The
green economy is in its infancy. As it relates to organic based fertilizers and soil conditioners, these types of products in
the consumer packaged lawn and garden sector are expected to continue to grow at twice the rate of traditional fertilizer sales
through 2014. This exhibits greater acceptance and predilection to purchase these types of products over their traditional counterparts.
· Market
category has experienced 5%-10% growth annually in the past 4 years, and it is expected to continue to grow at more than twice
the average growth rate of 3.5% - 4% through 2014.
Our Strengths
Marketing
Strategy
The
marketing strategy is designed to increase market share and sales of OPH branded products in the Eastern United States by promoting
our exclusive organic based and natural landscape care products at competitive prices. Our marketing will always include
an emphasis on educating the consumer and the general public about the true nature of plant health. We will achieve this
through the use of traditional as well as new media venues, where information and education are a primary factor in the consumer
buying process. In addition we will implement grass roots efforts to create new strategic alliances with municipalities,
community organizations, regional and national foundations, universities and industry trade/buying groups. We will further forge
relationships with like-minded companies including other fertilizer manufacturers, botanical gardens, agricultural entities, plant
material companies and possibly even organic food producers, We plan to average the combined marketing efforts and public relations
initiatives to bring about and reinforce positive change in the minds of our every-day consumer resulting in an increase in consumer
confidence, brand integrity and purchases. Our creative strategy will continue to feature Billy Styles as the visionary behind
the success and expansion of Organic Plant Health, a new provider of organic based and natural fertility and soil conditioner
products for the green minded do-it-yourselfer. Our focus has been and will continue to be one of education, first, whereby we
teach our customers about the true nature of soil and plant health. The reason for this is that much of the information provided
to the consumer by large, national fertilizer manufacturers provides partial or incomplete information that may mislead the consumer
with regard to the effects on soil and plant health or sustainability. We will continue to insert a straight-talk dialogue into
the consciousness of the public wrapped in Billy Styles' ability to convey our message of the benefits related to adherence to
our annual program schedules, proper maintenance practices and the homeowner's personal responsibility for the success and pride
of their landscape.
Sales Strategy
Our
strategy for increasing sales includes:
Increased
purchase volume from existing retail partners through continual acceptance of our products.
Adding
regional sales staff and support staff to expand sales efforts into regional markets up and down the east coast and certain points
in the Midwest. This will increase the number of independent retail partners purchasing products from OPH and significantly increase
revenues and profits that will be used for further expansion efforts. We anticipate adding an additional 50-100 retail
partners in 2012 if we are partially or fully funded through this offering.
We
also anticipate adding more independent retail partners through expansion into other regions, and the promotion of the business
model on the OPH web site.
The
OPH website will continue to be developed in 2012, as we broaden our resource materials and video library. E-commerce function
was added to the website in Q2 2011 to provide for an additional revenue stream. OPH is not forecasting appreciable online
sales in 2011, however increases should begin to occur as the company begins to allocate online-marketing dollars targeted to
building the online revenue stream in Spring 2012.
OPH
anticipates no sales growth and in some cases, declines from existing retail outlets for 2011 and the first half of 2012, in light
of the current economic climate and our non-competitive product packaging. However, company management believes that the
introduction of new packaging in early 2012, afforded by partial or full funding from this offering, will increase consumer interest
in our exclusive products and spur an increase in sales compared to current and past revenues. Although management believes the
new branding and packaging design will significantly improve the company’s ability to compete, head-to-head, with national
branded fertilizer manufacturers, there is no assurance that any such advantage will be realized.
Sales
increases are expected in late 2012 through 2014 as the company rolls out additions to the OPH product line to strategically fill
gaps in the product offering. These are planned to be higher volume, lower priced products for the retail market and online community,
as well as bulk products sold to the commercial landscape industry and agricultural markets. It is managements’ belief that
these enhancements to the product offering will provide the company with a competitive advantage.
Office
Location
Our
executive offices are located at 9206 Monroe Road, Charlotte, NC 28270, and our telephone number is (704) 841-1066. Our website
is www.organicplanthealth.com
.
Information on our website or any other website is not a part of this prospectus.
Corporate
History and Organizational Structure
Organic
Plant Health Inc. (the “Company”) was incorporated
in the State of Nevada on September
5, 2007 and subsequently changed its name to QX Bio-Tech Group, Inc. on October 17, 2007. The Company further changed its name
to Acumedspa Holdings, Inc. on July 30, 2009, and to Organic Plant Health Inc. on December 15, 2010.
On
July 1, 2009, the Company entered into a Plan of Exchange between the Company, Acumedspa Group LLC (“AcuMed”), a Florida
corporation, and Consumer Care of America LLC (“CCA”), a Florida corporation, pursuant to which
the
Company acquired 100% of the capital stock of AcuMed and 100% of the capital stock of CCA in exchange for an issuance by the Company
of 6,200,000 new shares of Common Stock of the Company to the Shareholders of AcuMed and CCA
. The Plan
of Exchange was approved by the Board of Directors and the Majority Shareholders of the Company on July 1, 2009.
AcuMed
and CCA were subsequently vended out after the stock exchange transaction (the “Transaction”) between the Company
and OPH was completed, The Transaction between the Company and OPH was completed has been accounted for as a reverse acquisition
and recapitalization of the Company and resulted in the change of control in the Company. Pursuant to an Agreement (the “Agreement”),
dated December 11, 2010, between and among the Company and Mr. Brian Sperber, an prior director and prior majority shareholder
of the Company (“Mr. Sperber”), Mr. Sperber acquired 100% interest in the common shares of AcuMed
,
as well as assumed any and all liabilities of AcuMed in exchange for the payment of good and valuable consideration of
not less than One Hundred dollars ($100), and acquired 100% interest in the common shares of CCA
,
as well as assumed any and all liabilities of Consumer Care Of America LLC in exchange for the payment of good and valuable
consideration of not less than One Hundred dollars ($100). As a result of the transactions consummated at the closing, the purchase
gave Mr. Sperber a 'controlling interest' in Acumedspa LLC and Consumer Care Of America LLC, and Acumedspa LLC and Consumer Care
Of America LLC were no longer wholly-owned subsidiaries of the Company.
The Agreement was approved
by the Board of Directors of the Company on December 11, 2010.
On
December 10, 2010, the Company entered into a Plan of Exchange agreement (the “Plan of Exchange”) with the members
of Organic Plant Health, LLC, (referred to herein as “OPH”), a North Carolina Limited Liability Company and Mr. Sperber.
Pursuant
to the terms of the Plan of Exchange, the Company acquired 100% of the membership interests of OPH in exchange for a transfer
of 3,985,000 shares of the Company’s Convertible Preferred Stock to OPH Members, which gave
OPH
Members a controlling interest in the Company, representing approximately 76.47% of the then issued and outstanding shares on
a dilutive basis. OPH and the Company were hereby reorganized, such that the Company acquired 100% of the ownership of OPH, and
OPH became a wholly-owned subsidiary of the Company.
The
stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of the Company whereby
OPH
is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The
accompanying consolidated financial statements are in substance those of
OPH
, with the assets
and liabilities, and revenues and expenses, of the Company being included effective from the date of stock exchange transaction. The
Company is deemed to be a continuation of the business of
OPH
.
OPH
was originally founded in Charlotte, NC in 2007 by Billy Styles and Alan Talbert. The business produces and distributes organic
based fertilizers and soil conditioners for use in the continual care of residential and commercial landscapes.
The
following chart reflects our organizational structure as of the date of this prospectus:
Common
Stock Being Offered
|
|
|
Primary Offering
|
|
10,000,000
shares of Common Stock.
|
Secondary Offering
|
|
10,456,375
shares of Common Stock.
|
|
|
|
Initial
Offering Price
|
|
$0.20
|
|
|
|
Terms
of the Offering
|
|
The
Company and the Selling Stockholders will determine when and how they will sell the Common Stock offered in this prospectus.
|
|
|
|
Termination
of the Offering
|
|
The
offering will conclude upon the earliest of (i) such time as all of the Common Stock has been sold pursuant to the registration
statement, (ii) two years or (iii) such time as all of the Selling Shareholder’s Common Stock becomes eligible for resale
without volume limitations pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”),
or any other rule of similar effect.
|
|
|
|
Use
of Proceeds
|
|
|
Proceeds
from Primary Offering
|
|
We
intend to use the net proceeds from this offering to hire additional sales staff to increase
sales related to our expansion, move to a larger production facility to increase our current
production capacity, and make certain upgrades to our production processes that will increase
our efficiency and reduce the cost of production. The production facility will include
certain upgrades and modernizations to equipment and the addition of components that we believe
will allow us to produce our products more quickly and in greater quantity, without sacrificing
quality. We believe the upgraded production facility will enable us to meet the increasing
demand for our products for 2012 and later. The total cost of leasing and up-fitting
such a production facility, we believe, is approximately $574,000 including but not limited
to (i) $187,000 to lease a 18,000-24,000 sq. ft. location for the first year, (ii) $135,000
to purchase and install a spray impregnation system, and (iii) $252,000 to purchase and install
the necessary equipment and equipment upgrades needed to update the production line. Additionally,
we plan to allocate (i) $313,000 for the purchase of bulk raw materials and other components
used in production of our exclusive granular and liquid products. The remaining $1,051,000
will go to hiring and training additional personnel, upgrades to product packaging and working
capital for operations. As such, we believe we will require an aggregate of $2 million
to accomplish these objectives. See “Use of Proceeds” on page 19 for more
information.
|
Proceeds from Secondary Offering
|
|
We
will not receive any of the proceeds from sales of the Selling Stockholders’ Securities.
The Selling Stockholders’ Securities may be offered from time to time at the prevailing
market price or in negotiated transactions by the Selling Stockholders, their pledges, donees,
transferees, assignees and/or successors-in-interest, after the effective date of this Prospectus
|
Market
for our common stock
|
|
Our
common stock is on the “Pink Sheets - Other” quotation market under the symbol
“OPHI.PK”. To date, however, trading activity in our common stock has been extremely
limited. We intend to apply for the listing of our common stock on the OTC Bulletin
Board.
|
|
|
|
Risk
Factors
|
|
The
Common Stock offered hereby involves a high degree of risk and should not be purchased by investors who cannot afford the
loss of their entire investment. See “Risk Factors” beginning on page 13.
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
The
following summary consolidated financial data is derived from our financial statements which have been audited by Silberstein
Ungar, PLLC, an independent registered public accounting firm, including the balance sheet at December 31, 2010 and 2009, and
the related statements of operations, stockholders’ equity and cash flows for the two years ended December 31, 2010 and
2009, which are included elsewhere in this prospectus. Our September 30, 2011 balance sheet and the related statements of operations
for the quarters ended September 30, 2011 and September 30, 2010 have not been audited. The following data should
be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in this prospectus and the financial statements and notes thereto included in this prospectus.
Financial
Summary Information
Because
this is only a financial summary, it does not contain all the financial information that may be important to you. It should be
read in conjunction with the consolidated financial statements and related notes presented in this section.
Consolidated
Statement of Operations
data
Consolidated Statements of
Operations Data
|
|
Three Months ended
September 30, 2011
|
|
Three Months ended
September 30, 2010
|
|
Nine Months
ended
September 30, 2011
|
|
Nine Months ended
September 30,
2010
|
|
Year ended
December 31,
2010
|
|
Year Ended
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
278,706
|
|
|
$
|
292,340
|
|
|
$
|
741,799
|
|
|
$
|
828,984
|
|
|
$
|
1,026,995
|
|
|
$
|
1,062,163
|
|
Cost of Sales
|
|
$
|
76,856
|
|
|
$
|
103,973
|
|
|
$
|
239,629
|
|
|
$
|
265,511
|
|
|
$
|
465,970
|
|
|
$
|
601,963
|
|
Operating expenses
|
|
$
|
256,355
|
|
|
$
|
195,273
|
|
|
$
|
699,031
|
|
|
$
|
637,372
|
|
|
$
|
862,211
|
|
|
$
|
916,601
|
|
(Loss) from operations
|
|
$
|
(54,505
|
)
|
|
$
|
(6,906
|
)
|
|
$
|
(196,860
|
)
|
|
$
|
(73,899
|
)
|
|
$
|
(301,186
|
)
|
|
$
|
(456,401
|
)
|
Other (expense) income
|
|
$
|
(22,315
|
)
|
|
$
|
(5,796
|
)
|
|
$
|
(47,180
|
)
|
|
$
|
(17,445
|
)
|
|
$
|
(34,871
|
)
|
|
$
|
(26,036
|
)
|
(Loss) before provision for income taxes
|
|
$
|
(76,820
|
)
|
|
$
|
(12,702
|
)
|
|
$
|
(244,041
|
)
|
|
$
|
(91,344
|
)
|
|
$
|
(336,057
|
)
|
|
$
|
(482,437
|
)
|
Income taxes
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Net (loss)
|
|
$
|
(76,820
|
)
|
|
$
|
(12,702
|
)
|
|
$
|
(244,041
|
)
|
|
$
|
(91,344
|
)
|
|
$
|
(336,057
|
)
|
|
$
|
(482,437
|
)
|
Net loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
|
|
(0.06
|
)
|
|
|
N/A
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
60,824,782
|
|
|
|
7,892,214
|
|
|
|
40,913,374
|
|
|
|
4,607,399
|
|
|
|
5,442,214
|
|
|
|
N/A
|
|
** Less
than $.01
Balance
Sheet Data:
|
|
As of
September
30,
2011
|
|
|
As of
December 31,
2010
|
|
|
As of
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
56,349
|
|
|
$
|
6,625
|
|
|
$
|
29,257
|
|
Total
current assets
|
|
$
|
271,959
|
|
|
$
|
141,030
|
|
|
$
|
282,146
|
|
Fixed
assets, net
|
|
$
|
114,528
|
|
|
$
|
136,580
|
|
|
$
|
168,772
|
|
Other
assets
|
|
$
|
6,700
|
|
|
$
|
6,700
|
|
|
$
|
6,700
|
|
Total
Assets
|
|
$
|
393,187
|
|
|
$
|
284,310
|
|
|
$
|
457,618
|
|
Current
liabilities
|
|
$
|
430,503
|
|
|
$
|
507,787
|
|
|
$
|
377,486
|
|
Long
term liabilities
|
|
$
|
154,277
|
|
|
$
|
154,052
|
|
|
$
|
382,603
|
|
Stockholders’
equity (deficit)
|
|
$
|
(191,593
|
)
|
|
$
|
(377,529
|
)
|
|
$
|
(302,471
|
)
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
393,187
|
|
|
$
|
284,310
|
|
|
$
|
457,618
|
|
RISK
FACTORS
An
investment in our common stock involves significant risks. You should carefully consider the following risks and all other information
set forth in this prospectus before deciding to invest in our common stock. If any of the events or developments described below
occurs, our business, financial condition and results of operations may suffer. In that case, the value of our common stock may
decline and you could lose all or part of your investment.
Risks
Related to Our Business and Industry
The
current economic and credit environment could have an adverse effect on demand for certain of our products and services, which
would in turn have a negative impact on our results of operations, our cash flows, our financial condition, our ability to borrow
and our stock price.
Generally
speaking, since at least 2008, global market and economic conditions have been disrupted and volatile. Concerns over increased
energy costs increased commodities costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and
a declining residential real estate market in the U.S. have contributed to this increased volatility and diminished expectations
for the economy and the markets going forward. These factors, combined with volatile oil prices, declining business and consumer
confidence and increased unemployment, have precipitated a global recession. It is difficult to predict how long the current economic
conditions will persist, whether they will deteriorate further, and which of our products, if not all of them, will be adversely
affected. These conditions, if they continue, could cause a material decrease in our sales, net income and an increase in the
prices we pay for raw materials we use in producing our organic-based and natural fertilizer products and, thus, materially affect
our operating results and financial condition.
More
specifically, the company has noted a contraction in its revenues from the peak in 2008 through 2009, 2010 and 2011. Part of this
contraction is due to the economic climate, while another part is likely due to the company’s inability to replace lost
customers from normal attrition. Although missed opportunities can be easily tied to the same economic factors, management believes
that with partial or full funding from this offering, we can improve our sales efforts that will enable us to bring on new customers
and retain current customers. This reasoning goes back to our inability to afford an adequate number of experienced sales and
support staff. It should be noted, however, that even with an adequate number of experienced sales and support staff, there is
no assurance that sales revenues will increase, or that the number of lost customers through attrition will be reduced.
This
contraction is what precipitated our change of business model in mid 2009, to a manufacturer/distributor model, over the previous
traditional retail model. Management believes that increasing the number of places that sell our exclusive products, even if per
store sales are significantly lower than that of the company’s retail store, is the most prudent strategy for expanding
the business at this time. By spreading the sales revenue goal among more stores, the dependence on the performance of any one
store is reduced, thereby increasing the likelihood that the company will enjoy positive growth in the future, so long as the
company generates enough revenue to meet its obligations and expenses as well as to be able to afford an adequate number of experienced
sales and support staff. Although this is managements belief, there is no assurance that this reduced dependence will result in
adequate sales revenue to sustain the business.
The
weakened economic climate also has impacted the credit market, and more specifically, the company’s access to available
credit. As a young company still in the start-up phase, we have not yet achieved stability in our operations; therefore few, if
any, lending institutions would consider the company a good credit risk. This inability to get credit may adversely affect the
company’s operations, such as limiting the company’s ability to meet seasonal raw goods and inventory needs. If credit
is extended to the company by a financial institution, the terms and conditions may not be favorable.
The
industry in which we operate and market for our services is characterized by volatile commodities prices and rapid advancements
in science and agriculture. Advancements in technology or the development and introduction of new products and services could
render our existing products less marketable.
Our
business depends in significant part on our ability to continually improve the performance, features, and reliability of our current
fertility and soil conditioning products and services, and to modify our practices to work with new technological standards in
response to both evolving demand in the marketplace and competitive products and services. Our pursuit of improved performance,
new features, and necessary technological advances will require substantial time and expense, and there can be no assurance that
we will succeed in adapting our services to changing technology standards and customer requirements.
Although
we intend to support emerging manufacturing and production standards, there can be no assurance that industry standards will emerge,
or if they become established, that we will be able to conform to these new standards in a timely and economic fashion and maintain
a competitive position in the market. There can be no assurance that the announcement or introductions of new products or services
by us or our competitors, or any change in industry standards will not cause customers to defer or cancel purchases of existing
products or services, which could have a material adverse effect on our business, financial condition, and results of operations.
The
fertilizer industry is highly competitive
and, if we are unable to compete successfully, our financial
condition and results of operations may be adversely affected.
The
organic based fertility market is increasingly competitive and there are no substantial barriers to entry. We expect that competition
will intensify in the future. We believe that our ability to compete successfully depends on a number of factors, including brand
awareness and market presence; the quality of our advertising services; the pace of expansion into new Retail Partners; the pricing
policies of our competitors and suppliers; the features, ease of use and timing of introductions of our new products by us and
our competitors; our ability to establish co-marketing relationships; and industry and general economic trends.
We
may not be able to continue to compete effectively with our existing competitors, or compete effectively with new competitors.
In addition, some of our competitors may acquire or have more financial and other resources than we do. If we fail to compete
effectively, our business operations and financial condition will suffer.
We
have limited operating history upon which to base an evaluation of our business and prospects. We may not be successful in our
efforts to grow our business and to earn increased revenues. We had accumulated deficit of $1,007,570 as of September 30,
2011, and had net losses of $244,041 for the nine months ended September 30, 2011. An investment in our securities
represents significant risk and you may lose all or part your entire investment.
Although
the business is nearly five years old, much of the five years have been spent enduring a deep recession and uncertain economic
climate. The business is young and has not lived through multiple cycles of economic growth and contraction. As such, there is
no significant track record with which an investor might be able to assume or predict how the company might perform. Due to the
limited operating history of the company there can be no assurance that the company will generate adequate revenues to sustain
the business.
Further,
our limited operating history has not allowed us to build a reliable sales and support system, on which the company could adequately
predict future sales and growth. Even though the company believes it will be able to hire the right people to develop a successful
system, there is no assurance that one will be developed, and if one is there is no assurance it will be successful.
Therefore,
our business and prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies
in their early stage of development, particularly companies providing services to a rapidly evolving market. As a result, management
may be unable to adjust its spending in a timely manner to compensate for any unexpected revenue shortfall. This inability could
cause net losses in a given period to be greater than expected. An investment in our securities represents significant risk and
you may lose all or part your entire investment.
Raw
materials or production related expenses variations could adversely affect operating results and expenses.
Prices
for certain of our raw materials have recently increased due to the global demand and increased interest in organic based fertility.
A drastic increase in raw materials costs could increase our sales prices and force us to completely restructure our business
model, thereby likely causing substantial expenses and losses. We, in anticipation of this possibility, have continued to contact
major raw goods suppliers so as to forge strategic alliances. However, we have not yet formed any such alliance, and there is
no guarantee that such an alliance will ever be formed in the future or that it will assure us cost effective prices for raw materials.
We
expect to incur significant losses for some time, and we may never operate profitably.
From
inception through September 30, 2011, we have incurred an accumulated net loss of approximately $1,007,570 . The
revenues have not yet resulted in our earning a profit, and we will continue to incur significant losses for at least the near
future. There is no assurance that our operations will ever become profitable.
We
could fail to remain a going concern. We will need to raise additional capital to fund our operations through the near term, and
we do not have any commitments for that capital.
There
exists substantial doubt regarding our ability to continue as a going concern. Our independent registered public accounting firm
has added an emphasis of matter paragraph to their report for our fiscal year ended December 31, 2010 with respect to our
ability to continue as a going concern. Our consolidated financial statements have been prepared on the basis of a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we became
unable to continue as a going concern, we would have to liquidate our assets and we might receive significantly less than the
values at which they are carried on our consolidated financial statements. The inclusion of a going concern modification in our
independent registered public accounting firm’s audit opinion for the year ended December 31, 2010 may materially and
adversely affect our stock or our ability to raise new capital.
As
reflected in our financial statements, for the nine months ended September 30, 2011 and for the year ended December 31,
2010, we incurred net losses of $244,041 and $336,057, respectively, and as of September 30, 2011, had an accumulated
deficit of $1,007,570 , and had a working capital deficiency of $158,544 . We will need additional capital and/or
increased sales to execute our business strategy, and if we are unsuccessful in either raising additional capital or achieving
desired sales levels we will be unable to fully execute our business strategy on a timely basis, if at all. If we raise additional
capital through the issuance of debt securities, the debt securities may be secured and any interest payments would reduce the
amount of cash available to operate and grow our business. If we raise additional capital through the issuance of equity securities,
such issuances will likely cause dilution to our stockholders, particularly if we are required to do so during periods when our
common stock is trading at historically low price levels.
Additionally,
we do not know whether any financing, if obtained, will be adequate to meet our capital needs and to support our growth. If we
are unsuccessful in raising additional capital, we may be unable to fully execute our business strategy on a timely basis, if
at all. If adequate capital cannot be obtained on satisfactory terms, we may curtail or delay implementation of updates to our
facilities or delay the expansion of our sales and marketing capabilities, any of which could cause our business to fail.
We
will need to obtain additional debt and equity financing to complete subsequent stages of our business plan, including the funds
required to expand our businesses.
We
presently have limited operating capital. Current revenue from our wholesale and retail operations, as well as from our new ecommerce
web site is only sufficient to maintain our presence in the market. To meet future capital requirements necessary for the expansion
of our business, we may issue additional securities in the future with rights, terms and preferences designated by our Board of
Directors, without a vote of stockholders, which could adversely affect stockholder rights. Additional financing will likely cause
dilution to our stockholders and could involve the issuance of securities with rights senior to our currently outstanding shares.
There is no assurance that such financing will be sufficient, that the financing will be available on terms acceptable to us and
at such times as required, or that we will be able to obtain the additional financing required, if any, for the continued operation
and growth of our business. Any inability to raise necessary capital will have a material adverse effect on our ability to implement
our business strategy and will have a material adverse effect on our revenues and net income.
Because
we will require additional financing to expand our operation in accordance with our growing strategy, our failure to obtain necessary
financing will impair our
growth strategy.
The
Shares offered by us are on a "best efforts basis"; there is no underwriter and no firm commitment from anyone to purchase
all or any of the Shares offered. No assurance can be given that all or any of the Shares will be sold. Furthermore, there is
no escrow of funds or other provisions for returning any investors funds if less than all Shares offered hereby are sold. This
creates an increased risk to initial investors, in the event we are unable to raise the entire Offering amount, because there
is no minimum Offering amount and funds will be utilized as received by us.
Many
factors may, however, affect our cash needs, including our possible failure to generate sufficient revenues from operations. In
addition, if less than all Shares are sold, we may not have sufficient capital to fund operations until sufficient revenues are
being generated and may be unable to find suitable financing on terms acceptable to us. This event would significantly increase
the risk to those persons who invest in this offering.
We
have not yet entered into an agreement with a financing institution, therefore the company may find it difficult, if at all possible,
to sell any shares from this offering.
We
currently have no commitments with any third party to obtain such additional financing and we cannot assure you that we will be
able to obtain additional financing on any terms, and, if we are able to raise additional funds, it may be necessary for us to
sell our securities at a price which is at a significant discount from the market price and on other terms which may be disadvantageous
to us. In connection with any such financing, we may be required to provide registration rights to the investors and pay damages
to the investors in the event that the registration statement is not filed or declared effective by specified dates. The price
and terms of any financing which would be available to us could result in both the issuance of a significant number of shares
and significant downward pressure on our stock price.
We
are exposed to risks from legislation requiring companies to evaluate internal control over financial reporting.
Section 404
of the Sarbanes-Oxley Act of 2002 (“Section 404”) required our management to start reporting on the operating
effectiveness of our internal control over financial reporting for the years ended December 31, 2010 and 2009. We must continue
an ongoing program of system and process evaluation and testing necessary to comply with these requirements. We expect that this
program will require us to incur significant expenses and to devote additional resources to Section 404 compliance on an
ongoing annual basis. We cannot predict how regulators will react or how the market prices of our securities will be affected
in the event that our Chief Executive Officer and Chief Financial Officer determine that our internal control over financial reporting
is not effective as defined under Section 404.
Our
future success is dependent on existing key employees and hiring and assimilating new key employees; our inability to attract
or retain key personnel in the future would materially harm our business and results of operations.
Our
success depends on the continuing efforts and abilities of our current management team. In addition, our future success will depend,
in part, on our ability to attract and retain highly skilled employees, including management, technical and sales personnel. We
may be unable to identify and attract highly qualified employees in the future. In addition, we may not be able to successfully
assimilate these employees or hire qualified personnel to replace them if they leave the Company. The loss of the services of
any of our key personnel, the inability to attract or retain key personnel in the future, or delays in hiring required personnel
could materially harm our business and results of operations.
As
co-founder, president and CEO of the Company, Mr. Styles plays a significant role in the Company. Mr. Styles is the visionary
behind the development of the Company’s products, and he is the inspiration behind the philosophical and educational approach
we take with all of our customers, In addition, as a 5
th
generation farmer with decades of field experience in the
backyards of the Carolinas, Mr. Styles’ personal knowledge base is the primary resource from which most of the product formulas,
application instructions, plant care protocols and care practices are derived. Our inability to maintain and grow this relationship
with Mr. Styles could severely impact our ability to continue operations.
We
may be unable to successfully expand our manufacturing capacity, which could result in material delays, quality issues, increased
costs and loss of business opportunities, which may negatively impact our product margins and profitability.
Part
of our future growth strategy is to increase our manufacturing capacity to meet increasing demand for our existing products. Assuming
we obtain sufficient funding to increase our manufacture capacity, any projects undertaken by us to increase such capacity may
not be constructed on the anticipated timetable or within budget. We may also experience quality control issues as we implement
these manufacturing upgrades and ramp up production. Any material delay in completing these projects, or any substantial increase
in costs or quality issues in connection with these projects, could materially delay our ability to bring our products to markets
and adversely affect our business, reduce our revenue, income and available cash, all of which could result in reducing financial
condition by a loss of business opportunities.
Failure
to enhance our brand recognition could have a material adverse effect on our business and results of operations.
We
believe we will need to expend significant time, effort and resources to enhance the recognition of our brands. We believe developing
our brand is important to our sales and marketing efforts. If we fail to enhance the recognition of our brands, it could have
a material adverse effect on our ability to sell our product and thus affect our business and results of operations. If we fail
to develop a positive public image and reputation, our existing business with our customers could decline and we may fail to develop
additional business, which could in turn adversely affect our prospects and results of operations.
Because
we
depend on retailers or wholesalers to market our products
,
any problems encountered
by these third parties, or our failure to maintain relationships with these third parties or to expand third parties, we
may
be unable to establish marketing and sales capabilities necessary to commercialize and gain market acceptance for our products.
We
currently have limited resources with which to expand our sales and marketing capabilities. Co-promotion or other marketing arrangements
to commercialize our planned products could significantly limit the revenues we derive from our products, and the parties with
whom we would enter into such agreements may fail to commercialize our products successfully. Our products address different markets
and can be offered through multiple sales channels. Addressing each market effectively will require sales and marketing resources
tailored to the particular market and to the sales channels that we choose to employ, and we may not be able to develop such specialized
marketing resources.
Defects
in our products or failures in quality control could impair our ability to sell our products or could result in product liability
claims, litigation and other significant events with substantial additional costs.
Detection
of any significant defects in our products or failure in our quality control procedures may result in, among other things, delay
in time-to-market, loss of sales and market acceptance of our products, diversion of development resources, and injury to our
reputation. The costs we may incur in correcting any product defects may be substantial. Additionally, errors, defects or other
performance problems could result in financial or other damages to our customers, which could result in litigation. Product liability
litigation, even if we prevail, would be time consuming and costly to defend, and if we do not prevail, could result in the imposition
of a damages award. We presently maintain product liability insurance; however, it may not be adequate to cover any claims.
Changes
in environmental regulations or violations of such regulations could result in increased expense and could have a material negative
effect on our financial performance.
We
are subject to extensive air, water and other environmental regulations and need to maintain our environmental permits, and need
to obtain a number of environmental permits to construct and operate our planned facilities. If for any reason any of these permits
are not maintained or granted, construction costs for our facilities may increase, or the facilities may not be constructed at
all. Additionally, any changes in environmental laws and regulations, both at the federal and state level, could require us to
invest or spend considerable resources in order to comply with future environmental regulations. Our failure to comply with environmental
regulations could cause us to lose our required permits, which could cause the interruption or cessation of our operations. Furthermore,
the expense of compliance could be significant enough to adversely affect our operation and have a material negative effect on
our financial performance.
Our
facilities will require certain permits to operate, which we may not be able to obtain at all or obtain on a timely basis.
We
have obtained the permits and approvals required to operate our facilities. We may not be able to secure all the necessary permits
for future facilities on a timely basis or at all, which may prevent us or potential licensees from operating such facilities
according to our business plan.
For
future facilities, particularly in the organic fertilizer areas, we may need certain permits to operate solid waste or recycling
facilities, as well as permits for our sewage connection, water supply, land use, air emission, and wastewater discharge. The
specific permit and approval requirements are set by the state and the various local jurisdictions, including but not limited
to city, town, county, township, and state agencies having control over the specific properties. Permits once given may be withdrawn.
Inability to obtain or maintain permits to construct, operate or maintain our facilities will severely and adversely affect our
business.
The
communities where our facilities may be located may be averse to hosting waste handling and manufacturing facilities.
Local
residents and authorities in communities where our facilities may be located may be concerned about odor, vermin, noise, increased
truck traffic, air pollution, decreased property values, and public health risks associated with operating a manufacturing facility
in their area. These constituencies may oppose our permitting applications or raise other issues regarding our proposed facilities
or bring legal challenges to prevent us from constructing or operating facilities.
If
we make any acquisitions, they may disrupt or have a negative impact on our business.
Although
we have no present plans for any specific acquisition, in the event that we make acquisitions, we could have difficulty integrating
the acquired companies’ personnel and operations with our own. 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:
|
·
|
the
difficulty of integrating acquired products, services or operations;
|
|
·
|
the
potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
|
|
·
|
the
difficulty of incorporating acquired rights or products into our existing business;
|
|
·
|
difficulties
in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities;
|
|
·
|
difficulties
in maintaining uniform standards, controls, procedures and policies;
|
|
·
|
the
potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
|
|
·
|
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;
|
|
·
|
the
effect of any government regulations which relate to the business acquired;
|
|
·
|
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 the defense of any litigation, whether of not successful,
resulting from actions of the acquired company prior to our acquisition.
|
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 these acquisitions, 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.
Risks
Related to Ownership of our Common Stock
No
minimum offering amount.
We
are offering 10,000,000 shares of our common stock on a best efforts basis with all proceeds being paid to us. If we only sell
a limited number of the 10,000,000 shares we will not be able to execute our business plan as described herein, would be forced
to forego what management believes is an opportunity for growth and it is likely that our investors would not ever realize a gain
on their stock.
The
Secondary Offering of 10,456,375 shares of common stock could have the effect of reducing the number of shares sold in the Primary
Offering, which in turn would reduce the net proceeds available to implement our business plan.
Upon
the effectiveness of this prospectus, the selling stockholders may sell the shares from time to time at the prevailing market
price or in negotiated transactions.
A sale of shares under the Secondary Offering at any given time could cause
the trading price of our common stock to decline, which could make it more difficult for us to sell the shares under the Primary
Offering at a fixed price of $.20 per share.
Our
management intends to use the net proceeds from the Primary Offering to hire additional sales staff to increase sales related
to our expansion, move to a larger production facility to increase our current production capacity, and make certain upgrades
to our production processes that will increase our efficiency and reduce the cost of production. If we fail to receive sufficient
proceeds from the Primary Offering, we will not be able to execute our business plan as described herein.
Volatility
in our common stock price may subject us to securities litigation.
Stock
markets, in general, have experienced in recent months, and continue to experience, significant price and volume volatility, and
the market price of our common stock may continue to be subject to similar market fluctuations unrelated to our operating performance
or prospects. This increased volatility, coupled with depressed economic conditions, could continue to have a depressing effect
on the market price of our common stock. The following factors, many of which are beyond our control, may influence our stock
price:
|
•
|
the
status of our growth strategy including the expansion of our production capabilities and the increase in sales and administrative
personnel with the net proceeds from the offering;
|
|
•
|
announcements
of technological or competitive developments;
|
|
•
|
actual
or anticipated fluctuations in our quarterly operating results;
|
|
•
|
changes
in financial estimates by securities research analysts;
|
|
•
|
changes
in the economic performance or market valuations of our competitors;
|
|
•
|
additions
or departures of our executive officers or other key personnel;
|
|
•
|
release
or expiration of lock-up or other transfer restrictions on our outstanding common stock; and
|
|
•
|
sales
or perceived sales of additional shares of our common stock.
|
In
addition, the securities market has, from time to time, experienced significant price and volume fluctuations that are not related
to the operating performance of particular companies. Any of these factors could result in large and sudden changes in the volume
and trading price of our common stock and could cause our stockholders to incur substantial losses. In the past, following periods
of volatility in the market price of a company’s securities, stockholders have often instituted securities class action
litigation against that company. If we were involved in a class action suit or other securities litigation, it would divert the
attention of our senior management, require us to incur significant expense and, whether or not adversely determined, could have
a material adverse effect on our business, financial condition, results of operations and prospects.
The
Offering price of the Shares offered hereby was determined by our management, which has no specific relationship to our assets,
book value, net worth or other economic or recognized criteria of value.
The
Offering price of the Shares offered hereby was determined by our management, and was set based upon an agreed upon formula in
relation to average closing price of the stock since the symbol change became effective on February 2, 2011. The price bears no
specific relationship to our assets, book value, net worth or other economic or recognized criteria of value. In no event should
the public offering price be regarded as an indicator of any future market price of our securities.
Our
common stock is currently quoted on the “Pink Sheets - Other” quotation market under the symbol “OPHI.PK”.
To date, however, trading activity in our common stock has been extremely limited. There is no assurance as to the depth or liquidity
of any such market or the prices at which holders may be able to sell the securities.
Our
common stock is on the “Pink Sheets - Other” quotation market under the symbol “OPHI.PK”. To date, however,
trading activity in our common stock has been extremely limited. There is also no assurance as to the depth or liquidity of any
such market or the prices at which holders may be able to sell the securities. An investment in the Shares may be totally illiquid
and investors may not be able to liquidate their investment readily or at all when they need or desire to sell. We are intent,
however, on submitting our shares for trading on the OTC Markets bulletin board by filing the registration statement.
If
you purchase the common stock sold in this offering, you
will provide a disproportionately greater percentage
of the cash contributed to our capital than the ownership percentage you receive.
Collectively,
the existing shareholders own 61,215,081 shares of our Common Stock. If all Shares offered hereby are sold, upon completion of
the Offering present stockholders will own 85.96% of the then outstanding Common Stock, and investors in this Offering will own
the other 14.04%, for which they will have paid $2,000,000 cash, if all shares offered for sale, are sold. Thus, investors in
this Offering will provide a disproportionately greater percentage of the cash contributed to our capital than the ownership percentage
they receive. Present stockholders will benefit from a greater share of the Company if successful, while investors in this Offering
risk a greater loss of cash invested if we are not successful. Investors should also note that we recently converted indebtedness
to our officers to our common stock at $0.05 per share, a price significantly below that being offered by this Prospectus.
If
we issue shares of preferred stock, your investment could be diluted or subordinated to the rights of the holders of preferred
stock.
Our
Board of Directors is authorized by our Certificate of Incorporation to establish classes or series of preferred stock and fix
the designation, powers, preferences and rights of the shares of each such class or series without any further vote or action
by our stockholders. Any shares of preferred stock so issued could have priority over our common stock with respect to dividend
or liquidation rights. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be
used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede
a business combination by including class voting rights that would enable a holder to block such a transaction. In addition, under
certain circumstances, the issuance of preferred stock could adversely affect the voting power of holders of our common stock.
Although our Board of Directors is required to make any determination to issue preferred stock based on its judgment as to the
best interests of our stockholders, our Board could act in a manner that would discourage an acquisition attempt or other transaction
that some, or a majority, of our stockholders might believe to be in their best interests or in which such stockholders might
receive a premium for their stock over the then-market price of such stock. Presently, our Board of Directors does not intend
to seek stockholder approval prior to the issuance of currently authorized preferred stock, unless otherwise required by law or
applicable stock exchange rules. Although we have no plans to issue any additional shares of preferred stock or to adopt any new
series, preferences or other classification of preferred stock, any such action by our Board of Directors or issuance of preferred
stock by us could dilute your investment in our common stock and warrants or subordinate your holdings to such shares of preferred
stock.
Future
issuances or sales, or the potential for future issuances or sales, of shares of our common stock, the conversion of preferred
stock into our common stock, or the conversion of convertible notes into our common stock, may cause the trading price of our
securities to decline and could impair our ability to raise capital through subsequent equity offerings.
During
2011, we issued a significant number of shares of our common stock, preferred stock convertible into shares of our common stock,
and convertible notes that may be converted into our common stock in connection with various financings and the repayment of debt,
and we anticipate that we will continue to do so in the future. All of these issuances were at prices significantly below the
price at which the common stock is offered under this Prospectus. The additional shares of our common stock issued and to be issued
in the future upon the conversion of debt could cause the market price of our common stock to decline, and could have an adverse
effect on our earnings per share if and when we become profitable. In addition, future sales of a substantial number of shares
of our common stock or other securities in the public markets, or the perception that these sales may occur, could cause the market
price of our common stock to decline, and could materially impair our ability to raise capital through the sale of additional
securities.
We
do not anticipate paying cash dividends on our common stock in the foreseeable future.
We
do not anticipate paying cash dividends in the foreseeable future on shares of our common stock. Presently, we intend to retain
all of our earnings, if any, to finance development and expansion of our business. Consequently, your only opportunity to achieve
a positive return on your investment in us will be if the market price of our common stock appreciates.
Our
principal stockholder controls our business affairs, so you will have little or no participation in our business affairs.
After
the Offering, our current management will beneficially own over 50% of our outstanding Common Stock and will have full control
over the affairs of the Company. The security holder will be able to continue to elect over a majority of our directors and to
determine the outcome of the corporate actions requiring shareholder approval, regardless of how additional security holders of
the Company may vote. The investors will have no ability to influence corporate actions.
Future
issuances of capital stock may depress the trading price of our common stock.
Any
issuance of shares of our common stock (or common stock equivalents) after this offering could dilute the interests of our existing
stockholders and could substantially decrease the trading price of our common stock. We may issue additional shares of our common
stock in the future for a number of reasons, including financing our operations and business strategy (including in connection
with acquisitions, strategic collaborations or other transactions).
Sales
of a substantial number of shares of our common stock in the public market could depress the market price of our common stock,
and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future
sales of our
common stock or other equity-related securities would have on the market price of our
common stock. .
Our
stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and the FINRA’s
sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our
common shares may be deemed to be "penny stock" as that term is defined in Regulation Section "240.3a51-1"
of the Securities and Exchange Commission (the "SEC"). Penny stocks are stocks: (a) with a price of less than U.S. $5.00
per share; (b) that are not traded on a "recognized" national exchange; (c) whose prices are not quoted on the NASDAQ
automated quotation system (NASDAQ - where listed stocks must still meet requirement (a) above); or (d) in issuers with net tangible
assets of less than U.S. $2,000,000 (if the issuer has been in continuous operation for at least three years) or U.S. $5,000,000
(if in continuous operation for less than three years), or with average revenues of less than U.S. $6,000,000 for the last three
years.
Section
"15(g)" of the United States Securities Exchange Act of 1934, as amended, and Regulation Section "240.15g(c)2"
of the SEC require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks
of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in
a penny stock for the investor’s account. Potential investors in the Company’s common shares are urged to obtain and
read such disclosure carefully before purchasing any common shares that are deemed to be "penny stock".
Moreover,
Regulation Section "240.15g-9" of the SEC requires broker dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker dealer to:
(a) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives;
(b) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that
the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions;
(c) provide the investor with a written statement setting forth the basis on which the broker dealer made the determination in
(ii) above; and (d) receive a signed and dated copy of such statement from the investor confirming that it accurately reflects
the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements
may make it more difficult for investors in the Company’s common shares to resell their common shares to third parties or
to otherwise dispose of them. Security holders should be aware that, according to Securities and Exchange Commission Release No.
34-29093, dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:
(i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer
(ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases
(iii) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons
(iv) excessive and undisclosed bid-ask differential and mark-ups by selling broker-dealers
(v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,
along with the resulting inevitable collapse of those prices and with consequent investor losses
As
an issuer of “penny stock” the protection provided by the federal securities laws relating to a forward-looking statement
does not
apply to us and as a result we could be subject to legal action.
Although
federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under
the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock,
we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material
provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include
any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.
The
issuance of any of our equity securities pursuant to any equity compensation plans we intend to adopt may dilute the value of
existing stockholders and may affect the market
price of our stock.
In
the future, we may issue to our officers, directors, employees and/or other persons equity based compensation under any equity
based compensation plan we intend to adopt to provide motivation and compensation to our officers, employees and key independent
consultants. The award of any such incentives could result in an immediate and potentially substantial dilution to our existing
stockholders and could result in a decline in the value of our stock price. The exercise of these options and the sale of the
underlying shares of common stock and the sale of stock issued pursuant to stock grants may have an adverse effect upon the price
of our stock.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may", "expect", "plans", "intends", "anticipate",
"believe", "estimate" and "continue" or similar words. You should read statements that contain these
words carefully because they discuss our future expectations contain projections of our future results of operations or of our
financial condition or state other "forward-looking" information. These statements reflect our current views with respect
to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not
place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions
only as of the date of this prospectus and, except as required by law, we undertake no obligation to update or revise publicly
any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus.
The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended. We believe that it is important
to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately
predict or control. The factors listed above in the section captioned "Risk Factors", as well as any cautionary language
in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially
from the expectations described in our forward-looking statements. Before you invest in our securities, you should be aware that
the occurrence of the events described as risk factors and elsewhere in this prospectus could have a material adverse effect on
our business, operating results and financial condition.
USE
OF PROCEEDS
Proceeds
from Primary Offering
We
estimate that the net proceeds from the sale of common stock we are offering pursuant to this prospectus will be approximately
$1,888,525 after deducting the underwriting discount and our expenses of the offering, and assuming a public offering price of
$0.20 per share.
We
intend to use the net proceeds from this offering to hire additional sales staff to increase sales related to our expansion, move
to a larger production facility to increase our current production capacity, and make certain upgrades to our production processes
that will increase our efficiency and reduce the cost of production. The production facility will include certain upgrades
and modernizations to equipment and the addition of components that we believe will allow us to produce our products more quickly
and in greater quantity, without sacrificing quality. We believe the upgraded production facility will enable us to meet the increasing
demand for our products for 2012 and later. The detailed breakdown of use of proceeds in case of 100%, 75% , 50%
and 25% funded, respectively, is set forth in the tables as below:
Organic
Plant Health, Inc. Use of Funds Chart – 100% Funded
Facility
|
1
yr. lease of 18,000-24,000 sq. ft. office/warehouse
|
$187,000
|
Facility
Upgrades & Equipment
|
•
Upgrade
existing
system
for higher
speed
and higher
production
output.
•
Automate certain production aspects to reduce production costs and improve consistency in production cycles.
•
Improve storage capacity and efficiency
•
Purchase and install additional components to streamline production process and improve consistency of production cycles
|
$387,000
|
Raw
Materials
|
Purchase
bulk volume of certain raw materials to achieve greater cost efficiencies.
|
$313,000
|
Branding
& Packing Materials
|
Complete
design phase and production of new branding design for all exclusive OPHI products. This cost includes the completion
of the design process and execution of the designs on actual packaging in quantities of 5,000 – 10,000 minimum.
Much of this cost will be recouped in the production of finished goods using the new packaging.
|
$311,000
|
Operations
& Personnel
|
Expand
sales staff, support staff and management to drive the expansion into new markets along the east coast and points in the mid-west.
|
$740,000
|
|
Net
use of funds
|
$1,938,000
|
|
Filing
Fees and Expenses
|
$62,000
|
|
Total
Offering (10,000,000 shares @ $.20)
|
$2,000,000
|
Organic
Plant Health, Inc. Use of Funds Chart – 75% Funded
Facility
|
1
yr. lease of 12,000-18,000 sq. ft. office/warehouse
|
$119,000
|
Facility
Upgrades & Equipment
|
•
Upgrade
existing
system
for higher
speed
and higher
production
output.
•
Automate certain production aspects to reduce production costs and improve consistency in production cycles.
•
Improve storage capacity and efficiency
|
$295,000
|
Raw
Materials
|
Purchase
bulk volume of certain raw materials to achieve greater cost efficiencies.
|
$173,000
|
Branding
& Packing Materials
|
Complete
design phase and production of new branding design for all exclusive OPHI products. This cost includes the completion
of the design process and execution of the designs on actual packaging in quantities of 5,000 – 10,000 minimum.
Much of this cost will be recouped in the production of finished goods using the new packaging.
|
$301,000
|
Operations
& Personnel
|
Expand
sales staff, support staff and management to drive the expansion into new markets along the east coast and points in the mid-west.
|
$550,000
|
|
Net
use of funds
|
$1,438,000
|
|
Filing
Fees and Expenses
|
$62,000
|
|
Total
Offering (7,500,000 shares @ $.20)
|
$1,500,000
|
Organic
Plant Health, Inc. Use of Funds Chart – 50% Funded
Raw
Materials
|
Purchase
bulk volume of certain raw materials to achieve greater cost efficiencies.
|
$140,000
|
Branding
& Packing Materials
|
Complete
design phase and production of new branding design for all exclusive OPHI products. This cost includes the completion
of the design process and execution of the select designs on actual packaging in quantities of at least 5,000. Much
of this cost will be recouped in the production of finished goods using the new packaging.
|
$273,000
|
Operations
& Personnel
|
Expand
sales staff, support staff to drive the expansion into new markets along the east coast and points in the mid-west.
|
$525,000
|
|
Net
use of funds
|
$938,000
|
|
Filing
Fees and Expenses
|
$62,000
|
|
Total
Offering (5,000,000 shares @ $.20)
|
$1,000,000
|
Organic
Plant Health, Inc. Use of Funds Chart – 25% Funded
Raw
Materials
|
Purchase
bulk volume of certain raw materials to achieve greater cost efficiencies.
|
$22,000
|
Branding
& Packing Materials
|
Complete
design phase and production of new branding design for all exclusive OPHI products. This cost includes the completion
of the design process and execution of the select designs on actual packaging in quantities of at least 5,000. Much
of this cost will be recouped in the production of finished goods using the new packaging.
|
$176,000
|
Operations
& Personnel
|
Expand
sales staff, support staff to drive the expansion into new markets along the east coast and points in the mid-west.
|
$240,000
|
|
Net
use of funds
|
$438,000
|
|
Filing
Fees and Expenses
|
$62,000
|
|
Total
Offering (2,500,000 shares @ $.20)
|
$500,000
|
The
expected use of net proceeds of this offering represents our intentions based on our current plans and business conditions. The
amount and timing of our actual expenditures will depend on numerous factors, including increases in construction and renovation
costs and expenses or unforeseen delays in upgrading and up-fitting the new production facility, opportunities for expanded sales
that may arise, and any unforeseen cash needs. As a result, we will retain broad discretion in the allocation and use of the net
proceeds of this offering based on its assessment of the then current needs of our business and the benefit to shareholders.
Proceeds
from Secondary Offering
We
will not receive any proceeds upon the sale of any of the Selling Stockholders’ Securities registered on behalf of the Selling
Stockholder. Each of the Selling Stockholders will receive all of the net proceeds from the sale of shares by that stockholder.
We are responsible for the fees, costs and expenses of this offering.
DETERMINATION
OF OFFERING PRICE
The
$0.20 offering price of our common stock was determined by us after considering the following principal factors:
|
•
|
the information
in this prospectus and otherwise available to the investors;
|
|
•
|
the history and
the prospects for the industry in which we compete;
|
|
•
|
the ability of
our management;
|
|
•
|
the prospects
for our future earnings;
|
|
•
|
the present state
of our development and our current financial condition;
|
|
•
|
the general condition
of the economy and the securities markets in the United States at the time of this offering;
|
|
•
|
other factors
we deemed relevant.
|
Our
common stock is currently quoted on the “Pink Sheets - Other” quotation market under the symbol “OPHI.PK”.
We intend to apply to the Over-the-Counter Bulletin Board electronic quotation service for the trading of our common stock. If
our common stock becomes traded on the Over-the-Counter Bulletin Board electronic quotation market, the actual price of stock
will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders
named in this prospectus. The offering price would thus be determined by market factors and the independent decisions of the selling
shareholders named in this prospectus.
We
can offer no assurances that the public offering price in the Primary Offering will correspond to the price at which our shares
will trade in the public market following this offering or that an active trading market for our shares will develop and continue
after this offering.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends on our common
stock in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors
and will depend upon our financial condition, operating results, capital requirements, Nevada laws, and other factors that our
board of directors deems relevant.
CAPITALIZATION
The
following table sets forth our cash and our capitalization as of September 30, 2011 on an actual basis and on a pro forma
basis to reflect our sale of
10,000,000
shares of common stock in this offering, at an assumed
public offering price of $0.20 per share, after deducting the estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
The
pro forma information below is illustrative only and our capitalization following the completion of this offering may be different
based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this
table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and our audited financial statements and the related notes appearing elsewhere in this prospectus.
|
|
As of September 30, 2011
|
|
|
Actual
(Unaudited)
|
|
Pro Forma
if 100% of shares are sold
|
|
Pro Forma
if 75% of shares are sold
|
|
Pro Forma
if 50% of shares are sold
|
|
Pro Forma
if 25% of shares are sold
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001; 5,000,000 shares authorized; none
issued and outstanding
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Common stock, par value $0.001; 150,000,000 shares authorized;
61,215,081 shares issued and 71,215,081 shares to be issued and outstanding after offering
|
|
$
|
61,215
|
|
|
|
71,215
|
|
|
|
68,715
|
|
|
|
66,215
|
|
|
|
63,715
|
|
Additional paid-in capital
|
|
$
|
773,512
|
|
|
|
2,763,512
|
|
|
|
2,266,012
|
|
|
|
1,768,512
|
|
|
|
1,271,012
|
|
Deferred compensation
|
|
$
|
(18,750
|
)
|
|
|
(18,750
|
)
|
|
|
(18,750
|
)
|
|
|
(18,750
|
)
|
|
|
(18,750
|
)
|
Accumulated deficit
|
|
$
|
(1,007,570
|
)
|
|
|
(1,069,570
|
)
|
|
|
(1,069,570
|
)
|
|
|
(1,069,570
|
)
|
|
|
(1,069,570
|
)
|
Total Stockholders Equity
|
|
$
|
(191,593
|
)
|
|
|
1,746,407
|
|
|
|
1,246,407
|
|
|
|
746,407
|
|
|
|
246,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capitalization
|
|
$
|
—
|
|
|
|
2,000,000
|
|
|
|
1,500,000
|
|
|
|
1,000,000
|
|
|
|
500,000
|
|
MARKET
PRICE AND DIVIDENDS
OF
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock is quoted on the “Pink Sheets - Other” quotation market
under the symbol “OPHI.PK”.
We intend to apply for listing of our common stock on over-the-counter on the OTCBB. Our common stock became eligible for quotation
on
the “Pink Sheets - Other” quotation market
in January of 1998. Since such date,
there has been extremely limited trading in our common stock.
The
following table sets forth the high and low bid prices, on the “Pink Sheets - Other” quotation market
,
as reported and summarized by the
“Pink Sheets - Other” quotation market
, for each
fiscal quarter during the fiscal year ended December 31, 2010 and 2009 and for the first and second quarter of 2011. As of November
22 , 2011, the last reported sale price of our common stock was $0.16 per share.
Quarter Ended
|
|
High
|
|
Low
|
2011:
|
|
|
|
|
First Quarter
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
Second Quarter
|
|
|
0.15
|
|
|
|
0.15
|
|
Third Quarter
|
|
|
0.20
|
|
|
|
0.07
|
|
2010:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.70
|
|
|
$
|
0.50
|
|
Second Quarter
|
|
|
0.35
|
|
|
|
0.25
|
|
Third Quarter
|
|
|
0.15
|
|
|
|
0.135
|
|
Fourth Quarter
|
|
|
0.065
|
|
|
|
0.045
|
|
2009:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
7.50
|
|
|
$
|
7.50
|
|
Second Quarter
|
|
|
0.525
|
|
|
|
0.525
|
|
Third Quarter
|
|
|
3.00
|
|
|
|
3.00
|
|
Fourth Quarter
|
|
|
1.00
|
|
|
|
0.75
|
|
Holders
As
of
November 22
, 2011, there were 588 shareholders of record of our common stock. This
does not reflect the number of persons or entities who hold stock in nominee or “street” name through various brokerage
firms.
Equity
Compensation Plan Information
We
currently have no equity compensation plan.
DILUTION
Our
net tangible book deficit as of September 30, 2011 was $191,593 or less than $.01 per share of common stock. Net
tangible book deficit per share is determined by dividing our tangible book deficit (total tangible assets less total liabilities)
by the number of outstanding shares of our common stock
. Tangible assets represent total assets excluding
goodwill and other intangible assets
. As of
November 22 ,
2011, we had a total
of 61,215,081 shares of common stock outstanding. Accordingly, the sale of common stock we are offering pursuant to this prospectus
will have no dilution to our existing shareholders.
However,
if you invest in our shares of common stock in this offering, your investment would be diluted immediately to the extent of the
difference between the public offering price per share of common stock that you will pay in this offering, and the net tangible
book value per share of common stock immediately after this offering. For example, assuming the sale by us of 10,000,000 shares
of common stock at a public offering price of $0.20 per share, after deducting the estimated offering expenses, our as adjusted
net tangible book value as of September 30, 2011 would have been $1,746,407, or $0.02 per share of common stock. This represents
an immediate decrease in net tangible book value per share to the new investors purchasing shares of common stock in this offering.
The
following table illustrates the per share dilution in case of 100%, 75%, 50% and 25% funded, respectively:
|
|
If 100% of shares are sold
|
|
If 75% of shares are sold
|
|
If 50% of shares are sold
|
|
If 25% of shares are sold
|
|
|
|
|
|
|
|
|
|
Public offering price
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
Pro forma net tangible book value after this offering (1)
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
$
|
0.004
|
|
Decreased value per share to new investors
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.19
|
|
|
$
|
0.196
|
|
(1)
After deduction of corporate finance fee and other estimated offering expenses.
The
pro forma net tangible book value after the offering is calculated as follows:
|
|
If 100% of shares are sold
|
|
If 75% of shares are sold
|
|
If 50% of shares are sold
|
|
If 25% of shares are sold
|
Numerator:
|
|
|
|
|
|
|
|
|
Net tangible book deficit before this offering
|
|
|
(191,593
|
)
|
|
|
(191,593
|
)
|
|
|
(191,593
|
)
|
|
|
(191,593
|
)
|
Net proceeds from this offering (1)
|
|
|
1,938,000
|
|
|
|
1,438,000
|
|
|
|
938,000
|
|
|
|
438,000
|
|
Total
|
|
|
1,746,407
|
|
|
|
1,246,407
|
|
|
|
746,407
|
|
|
|
246,407
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock outstanding prior to this offering
|
|
|
61,215,081
|
|
|
|
61,215,081
|
|
|
|
61,215,081
|
|
|
|
61,215,081
|
|
Shares of common stock included in the offering
|
|
|
10,000,000
|
|
|
|
7,500,000
|
|
|
|
5,000,000
|
|
|
|
2,500,000
|
|
Total
|
|
|
71,215,081
|
|
|
|
68,715,081
|
|
|
|
66,215,081
|
|
|
|
63,715,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Net of corporate finance fee and other estimated offering expenses.
SELLING
SECURITY HOLDERS
The
following table presents information regarding the selling security holders. Unless otherwise stated below, to our knowledge no
selling security holder nor any affiliate of such shareholder has held any position or office with, been employed by or otherwise
has had any material relationship with us or our affiliates during the three years prior to the date of this prospectus. None
of the selling security holders are members of the National Association of Securities Dealers, Inc. The selling security holders
may be deemed to be “underwriters” within the meaning of the Securities Act of 1933. The number and percentage of
shares beneficially owned before and after the sales is determined in accordance with Rule 13d-3 and 13d-5 of the Exchange
Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. We believe that each individual
or entity named has sole investment and voting power with respect to the securities indicated as beneficially owned by them, subject
to community property laws, where applicable, except where otherwise noted. The total number of common shares sold under this
prospectus may be adjusted to reflect adjustments due to stock dividends, stock distributions, splits, combinations or recapitalizations.
For
purposes of calculating the percentage of shares owned after the offering, we assumed the sale of all common shares offered under
this prospectus. However, the selling security holders are under no obligation to sell all or any portion of the common shares
offered for sale under this prospectus. Accordingly, no estimate can be given as to the amount or percentage of our common shares
that will ultimately be held by the selling security holders upon termination of sales pursuant to this prospectus. The percentage
of outstanding shares is based on 61,215,081 shares of common stock outstanding as of
November 22 ,
2011.
Name of Selling Stockholder
|
Relationship to Management
|
|
Shares of Common Stock Owned
prior to Offering
|
|
Percent of
Common
Stock Owned prior to Offering (1)
|
|
Shares of
Common
Stock to be Sold
|
|
Shares of
Common
Stock
Owned
After
Offering
|
|
Percentage
of Shares
Owned
Upon
Completion (1)
|
Greentree Financial Group Inc. (2)
|
Consultant
|
|
|
5,261,375
|
|
|
|
8.59
|
%
|
|
|
4,681,375
|
|
|
|
580,000
|
|
|
|
0.95
|
%
|
Lisa DeRosa
|
None
|
|
|
4,575,000
|
|
|
|
7.47
|
%
|
|
|
4,575,000
|
|
|
|
0
|
|
|
|
0
|
%
|
Frank Toral
|
None
|
|
|
200,000
|
|
|
|
0.33
|
%
|
|
|
200,000
|
|
|
|
0
|
|
|
|
0
|
%
|
Guardian Financial Services Group (3)
|
Consultant
|
|
|
1,000,000
|
|
|
|
1.63
|
%
|
|
|
1,000,000
|
|
|
|
0
|
|
|
|
0
|
%
|
-
Applicable
percentage of ownership is based on 61,215,081 shares as of
November 22
, 2011 (there
are no securities exercisable or convertible into shares of common stock). Beneficial ownership is determined in accordance with
the rules of the Commission and generally includes voting or investment power with respect to securities. Note that
affiliates are subject to Rule 144 and Insider trading regulations – percentage computation is for form purposes only.
-
Robert
C. Cottone and Michael Bongiovanni are the owners of Greentree Financial Group, Inc. (“Greentree”). Mr.
Cottone and Mr. Bongiovanni share equal voting power over the investments of Greentree. Greentree received 4,900,000
shares of our common stock for consulting services as described in our services agreement attached hereto as Exhibit 10.1. Additionally,
Greentree received 156,375 shares for miscellaneous accounting services pursuant to an oral agreement. Greentree also owned 205,000
shares of our common stock, which was purchased via open stock market.
-
Robert Bragg is the Chief Executive
Officer, Chairman of the Board, and an owner of Guardian Financial Services Group (“Guardian”). Guardian received
1,000,000 shares of our common stock for business advisory services pursuant to a services agreement entered in May of 2011. The
agreement had a term of 6 months effective from May 15, 2011 ending November 15, 2011, a copy of which attached hereto as Exhibit
10.2.
PLAN
OF DISTRIBUTION
Primary
Offering
We
have agreed to sell up to 10,000,000 shares of our common stock to the investors at price of $0.20 per share. This Primary Offering
will be made on a best-efforts, self-underwritten basis by the Company with no minimum offering amount required. The subscriptions
are irrevocable, and will not be escrowed and will be available to the investors upon receipt.
Pricing
of Securities
The
$0.20 offering price of our common stock was determined by the Company after considering the following principal factors:
|
•
|
the information
in this prospectus and otherwise available to the investors;
|
|
•
|
the history and
the prospects for the industry in which we compete;
|
|
•
|
the ability of
our management;
|
|
•
|
the prospects
for our future earnings;
|
|
•
|
the present state
of our development and our current financial condition;
|
|
•
|
the general condition
of the economy and the securities markets in the United States at the time of this offering;
|
|
•
|
other factors
we deemed relevant.
|
Our
common stock is currently quoted on the “Pink Sheets - Other” quotation market under the symbol “OPHI.PK”.
We intend to apply to the Over-the-Counter Bulletin Board electronic quotation service for the trading of our common stock. If
our common stock becomes traded on the Over-the-Counter Bulletin Board electronic quotation market, the actual price of stock
will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders
named in this prospectus. The offering price would thus be determined by market factors and the independent decisions of the selling
shareholders named in this prospectus.
We
can offer no assurances that the public offering price in this offering will correspond to the price at which our shares will
trade in the public market following this offering or that an active trading market for our shares will develop and continue after
this offering.
Foreign
Regulatory Restrictions on Purchase of Shares
We
have not taken any action to permit a public offering of the shares outside the United States or to permit the possession or distribution
of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must
inform themselves about and observe any restrictions relating to this offering of ordinary shares and the distribution of the
prospectus outside the United States.
Escrow
The
subscriptions are irrevocable, and will not be escrowed and will be available to the Company upon receipt.
Secondary
Offering
The
Selling Security Holders are offering to sell
10,456,375
shares of our common stock. The Selling
Shareholders shall sell their shares at market prices or negotiated prices. We will not receive any proceeds from the
sale of the shares by the Selling Security Holders. We are not aware of any underwriting arrangements that have been entered into
by the Selling Security Holders. The distribution of the securities by the Selling Security Holders may be effected in one or
more transactions that may take place in the over-the-counter market, including broker's transactions or privately negotiated
transactions.
Any
of the Selling Security Holders, acting alone or in concert with one another, may be considered underwriters under the Securities
Act of 1933, if they are directly or indirectly conducting an illegal distribution of the securities on our behalf. For
instance, an illegal distribution may occur if any of the Selling Security Holders provide us with cash proceeds from their sales
of the securities. If any of the Selling Security Holders determined to be underwriters, they may be liable for securities
violations in connection with any material misrepresentations or omissions made in this prospectus.
In
addition, the Selling Security Holders and any brokers through whom sales of the securities are made may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, and the commissions or discounts and other compensation paid to such persons
may be regarded as underwriters' compensation.
The
Selling Security Holders may pledge all or a portion of the securities owned as collateral for margin accounts or in loan transactions,
and the securities may be resold pursuant to the terms of such pledges, accounts or loan transactions. Upon default by such Selling
Security Holders, the pledgee in such loan transaction would have the same rights of sale as the Selling Security Holders under
this prospectus so long as the Company files a post-effective amendment to name and identify the new selling security holder.
The Selling Security Holders also may enter into exchange trading of listed option transactions that require the delivery of the
securities listed under this prospectus. The Selling Security Holders may also transfer securities owned in other ways
not involving market makers or established trading markets, including directly by gift, distribution, or other transfer without
consideration, and upon any such transfer the transferee would have the same rights of sale as such Selling Security Holders under
this prospectus so long as the Company files a post-effective amendment to name and identify the new selling security holder.
If a post-effective amendment is not filed with the Securities and Exchange Commission by the Company, 'pledgees' and 'transferees'
of a Selling Security Holder would not have rights to resell under this prospectus.
In
addition to, and without limiting, the foregoing, each of the Selling Security Holders and any other person participating in a
distribution will be affected by the applicable provisions of the Securities and Exchange Act of 1934, including, without limitation,
Regulation M, which may limit the timing of purchases and sales of any of the securities by the Selling Security Holders or any
such other person. Specifically, Regulation M prohibits an issuer, the Selling Security Holders or affiliated purchaser
other than in an excepted security or activity, to bid for, purchase, or attempt to induce any person to bid for or purchase,
a covered security during the applicable restrictive period. The restrictive period for our securities being registered begins
on the later of five business days prior to the determination of the offering price or such time that a person becomes a distribution
participant, and ends upon such person’s completion of participation in the distribution. Distribution is defined
under Regulation M as meaning an offering of securities, whether or not subject to registration under the Securities Act of 1933
that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling
efforts and selling methods. Distribution participant is defined under Regulation M as meaning an underwriter, prospective
underwriter, broker, dealer, or other person who has agreed to participate or is participating in a distribution.
There
can be no assurances that the Selling Security Holders will sell any or all of the securities. In order to comply with state securities
laws, if applicable, the securities will be sold in jurisdictions only through registered or licensed brokers or dealers. In various
states, the securities may not be sold unless these securities have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with. Under applicable rules and regulations of the
Securities and Exchange Act of 1934, as amended, any person engaged in a distribution of the securities may not simultaneously
engage in market-making activities in these securities for a period of one or five business days prior to the commencement of
such distribution.
All
of the foregoing may affect the marketability of the securities. Pursuant to the various agreements we have with the Selling Security
Holders, we will pay all the fees and expenses incident to the registration of the securities, other than the Selling Security
Holders' pro rata share of underwriting discounts and commissions, if any, which are to be paid by the Selling Security Holders.
SHARES
ELIGIBLE FOR FUTURE SALE
Prior
to this offering, there has been a limited public market for our common stock, and we cannot assure you that a significant public
market for our common stock will develop or be sustained after this offering. As described below, no shares currently outstanding
will be available for sale immediately after this offering due to certain contractual and securities law restrictions on resale.
Sales of substantial amounts of our common stock in the public market after the restrictions lapse could cause the prevailing
market price to decline and limit our ability to raise equity capital in the future.
Immediately
after this offering, we will have
71,215,081
shares of our common stock issued and outstanding.
Of these shares,
20,456,375
shares sold in this offering will be freely tradable without restriction
or further registration under the Securities Act, except for any shares of our common stock purchased by one of our affiliates
within the meaning of Rule 144 under the Securities Act. As of
November 22
, 2011, 53,897,248
shares of our outstanding common stock are restricted securities as that term is defined in Rule 144. Restricted securities may
be sold in the public market only if registered or if they qualify for an exemption from registration under Section 4(1), or Rule
144 promulgated under the Securities Act. None of those shares of common stock will be eligible for sale under Rule 144 prior
to February of 2012.
Rule
144
The
availability of Rule 144 will vary depending on whether restricted shares are held by an affiliate or a non-affiliate. In general,
under Rule 144 as in effect on the date of this prospectus, a person who has beneficially owned restricted shares of our common
stock or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed
to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject
to the Exchange Act periodic reporting requirements for at least three months before the sale.
Persons
who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates
at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which
such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater
of either of the following:
-
1%
of the number of shares of common stock then outstanding, which will equal 712,151 shares immediately after this offering (assuming
no exercise of the underwriter’s over-allotment option.); and
-
the
average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144
with respect to the sale.
In
addition, any sales by affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and the
availability of current public information about us.
Registration
Rights
After
the completion of this offering, the holders of shares of common stock sold in the offering will be entitled to the registration
rights described in the section titled “Description of Capital Stock — Registration Rights.” Following the expiration
of the lock-up period, registration of these shares under the Securities Act would result in the shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased
by our affiliates.
DESCRIPTION
OF SECURITIES
The
following is a summary description of our capital stock and certain provisions of our certificate of incorporation and by-laws,
copies of which have been filed as exhibits to our registration statements of which this prospectus forms a part. The following
discussion is qualified in its entirety by reference to such exhibits.
General
We
are authorized to issue 150,000,000 shares of our common stock, par value $.001 per share and 5,000,000 shares of our preferred
stock.
Common
Stock
As
of November 22, 2011, there were
61,215,081
shares of our common stock issued and outstanding,
which were held of record by approximately 588 share holders.
Holders
of our common stock are entitled to one vote per share on matters on which our stockholders vote. There are no cumulative voting
rights. Subject to any preferential dividend rights of any outstanding shares of preferred stock, holders of our common stock
are entitled to receive dividends, if declared by our Board of Directors, out of funds that we may legally use to pay dividends.
If we liquidate or dissolve, holders of our common stock are entitled to share ratably in our assets once our debts and any liquidation
preference owed to any then-outstanding preferred stockholders are paid. Our certificate of incorporation does not provide our
common stock with any redemption, conversion or preemptive rights. All shares of our common stock that are outstanding as of the
date of this prospectus and, upon issuance and sale, all shares we are selling in this offering, will be fully-paid and nonassessable.
Preferred
Stock
Our
Board of Directors has the authority, without further stockholder authorization, to issue from time to time shares of our preferred
stock in one or more series and to fix the terms, limitations, relative rights and preferences and variations of each series set
forth as follows. Although we have no present plans to issue any shares of our preferred stock, the issuance of shares of our
preferred stock, or the issuance of rights to purchase such shares, could decrease the amount of earnings and assets available
for distribution to the holders of our common stock, could adversely affect the rights and powers, including voting rights, of
our common stock, and could have the effect of delaying, deterring or preventing a change in control of us or an unsolicited acquisition
proposal. As of the date thereof, we have no preferred stock issued and outstanding and no current plans to issue any our preferred
stock.
(1)
Designation and Rank.
The series of Preferred Stock shall be designated the
“Convertible Preferred Stock”
(“Convertible Preferred”) and shall consist of 5,000,000 shares. The Convertible Preferred is authorized by the
Board of Directors of this Corporation and shall be senior to the common stock.
(2)
Conversion into Common Stock.
(a)
Right to Convert. Each share of Convertible Preferred Stock shall be convertible, at the option of the holder thereof, at any
time after one year from the date of issuance (the “Conversion Date”) into ten (10) shares of fully paid and non-assessable
shares of Common Stock (the “Conversion Ration”).
(b)
Mechanics of Conversion. Before any holder shall be entitled to convert, he shall surrender the certificate or certificates representing
Convertible Preferred Stock to be converted, duly endorsed or the Corporation or of any transfer agent, and shall give written
notice to the Corporation at such office that he elects to convert the same. The Corporation shall, as soon as practicable thereafter,
issue a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled. The Corporation
shall, as soon as practicable after delivery of such certificates, or such agreement and indemnification in the case of a lost,
stolen or destroyed certificate, issue and deliver to such holder of Convertible Preferred Stock a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled as aforesaid and a check payable to the holder in the
amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall
be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Convertible
Preferred Stock to be converted.
(c)
Adjustment to Conversion Ratio.
(i)
Merger or Reorganization. In case of any consolidation or merger of the Corporation as a result of which holder of Common Stock
become entitled to receive other stock or securities or property, or in case of any conveyance of all or substantially all of
the assets of the Corporation to another corporation, the Corporation shall mail to each holder of Convertible Preferred Stock
at least thirty (30) days prior to the consummation of such event a notice thereof, and each such holder shall have the option
to either (i) convert such holder’s shares of Convertible Preferred Stock into shares of Common Stock pursuant to this Section
3 and thereafter receive the number of shares of stock or other securities or property to which a holder of the number of shares
of Common Stock of the Corporation deliverable upon conversion of such Convertible Preferred Stock would have been entitled upon
such consolidation, merger or conveyance, or (ii) exercise such holder’s rights pursuant to Section 1 (a). Unless otherwise
set forth by the Board of Directors, the Conversion Ratio shall not be affected by a stock dividend or subdivision (stock split)
on the Common Stock of the Corporation, or a stock combination (reverse stock split) or stock consolidation by reclassification
of the Common Stock. However, once the Convertible Preferred Stock has been converted to Common Stock, it shall be subject to
all corporate actions that affect or modify the common stock.
(d)
No Impairment. The Corporation will not, by amendment of its Articles of Incorporation, this Certificate of Designation or through
any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Convertible
Preferred Stock against impairment.
(e)
Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Ratio of the Convertible
Preferred Stock pursuant to this Section 3, the Corporation at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and furnish to each holder of Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and the calculation on which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Convertible Preferred Stock, furnish or cause to be furnished to such holder
a like certificate setting forth (i) such adjustment and readjustment, (ii) the Conversion Ratio for the Convertible Preferred
Stock at the time in effect and (iii) the number of share of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the Convertible Preferred Stock.
(f)
Notice of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend which is the
same as cash dividends paid in previous quarter) or other distribution, the Corporation shall mail to each holder of Convertible
Preferred Stock at least ten (10) days prior to the date specified herein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution.
(g)
Common Stock Reserve. The Corporation shall reserve and keep available out of its authorized but unissued Common Stock such number
of shares of Common Stock as shall from time to time be sufficient to effect conversion of the Convertible Preferred Stock.
(3)
Voting Rights.
Except as otherwise required by law, the holders of Convertible Preferred Stock and the holders of Common
Stock shall be entitled to notice of any stockholders’ meeting and to vote as a single class upon any matter submitted to
the stockholders for a vote as follows: (i) the holders of each series of Preferred Stock shall have one vote for each full share
of Common Stock into which a share of such series would be convertible on the record date for the vote, or, if no such record
date is established, at the date such vote is taken or any written consent of stockholders is solicited; and (ii) the holders
of Common Stock shall have one vote per share of Common Stock held as of such date.
(4)
Reissuance.
No share or shares of Convertible Preferred Stock acquired by the Corporation by reason of conversion, all
such shares thereafter shall be returned to be the status of unissued shares of Convertible Preferred Stock of the Corporation.
Expenses
of Registration
We
will pay all registration expenses related to one demand, and any piggyback registration, other than underwriting discounts and
commissions and any professional fees or costs of accounting, financial or legal advisors to any of the holders of registrable
securities.
Our
Corporate Charter Documents
Our
amended certificate of incorporation and bylaws include provisions that are intended to enhance the likelihood of continuity and
stability in our Board of Directors and in its policies. These provisions might have the effect of delaying or preventing a change
in control and may make the removal of incumbent management more difficult even if such transactions could be beneficial to the
interests of stockholders. These provisions will be described in an amendment to this registration statement.
Transfer
Agent
The
transfer agent for our common stock is Guardian Registrar & Transfer, Inc., 7951 SW 6
th
Street, Suite 216, Plantation,
FL 33324, Phone: (954) 915-0109.
Legal
Matters
Frank
J. Hariton, 1065 Dobbs Ferry Road, White Plains, NY 10607, Tel: (914) 674-4373, Fax: (914) 693-2963 has
passed upon the
validity of the common stock offered by this prospectus. Mr. Hariton owns 75,000 shares of our common stock.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No
expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion
upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering
of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with
the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director,
officer, or employee.
The
consolidated financial statements of Organic Plant Health, Inc. as of and for the years ended December 31, 2010 and 2009 appearing
in this prospectus have been audited by Silberstein Ungar, PLLC CPAs. Independent Registered Public Accountants, as set forth
in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The
offices of
Silberstein Ungar, PLLC CPAs
are located at 30600 Telegraph Road, Suite 2175, Bingham
Farms, MI 48025.
SELECTED
CONSOLIDATED FINANCIAL AND OPERATING DATA
The
following selected consolidated financial information should be read in conjunction with our consolidated financial statements
and related notes included as part of this prospectus as well as and the information contained in the section of this prospectus
captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The
selected consolidated statement of income data for the fiscal years ended December 31, 2010 and 2009 and the consolidated balance
sheet data as of December 31, 2010 and 2009 have been derived from our audited consolidated financial statements included elsewhere
in this prospectus. Our September 30, 2011 balance sheet and the related statements of operations for the quarters
ended September 30, 2011 and September 30, 2010 have not been audited. The results of operations for past accounting
periods are not necessarily indicative of the results to be expected for any future periods.
Consolidated
Statement of Operations
data
Consolidated Statements of
Operations Data
|
|
Three Months ended
September 30, 2011
|
|
Three Months ended
September 30, 2010
|
|
Nine Months
ended
September 30, 2011
|
|
Nine Months ended
September 30,
2010
|
|
Year ended
December 31,
2010
|
|
Year Ended
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
278,706
|
|
|
$
|
292,340
|
|
|
$
|
741,799
|
|
|
$
|
828,984
|
|
|
$
|
1,026,995
|
|
|
$
|
1,062,163
|
|
Cost of Sales
|
|
$
|
76,856
|
|
|
$
|
103,973
|
|
|
$
|
239,629
|
|
|
$
|
265,511
|
|
|
$
|
465,970
|
|
|
$
|
601,963
|
|
Operating expenses
|
|
$
|
256,355
|
|
|
$
|
195,273
|
|
|
$
|
699,031
|
|
|
$
|
637,372
|
|
|
$
|
862,211
|
|
|
$
|
916,601
|
|
(Loss) from operations
|
|
$
|
(54,505
|
)
|
|
$
|
(6,906
|
)
|
|
$
|
(196,860
|
)
|
|
$
|
(73,899
|
)
|
|
$
|
(301,186
|
)
|
|
$
|
(456,401
|
)
|
Other (expense) income
|
|
$
|
(22,315
|
)
|
|
$
|
(5,796
|
)
|
|
$
|
(47,180
|
)
|
|
$
|
(17,445
|
)
|
|
$
|
(34,871
|
)
|
|
$
|
(26,036
|
)
|
(Loss) before provision for income taxes
|
|
$
|
(76,820
|
)
|
|
$
|
(12,702
|
)
|
|
$
|
(244,041
|
)
|
|
$
|
(91,344
|
)
|
|
$
|
(336,057
|
)
|
|
$
|
(482,437
|
)
|
Income taxes
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Net (loss)
|
|
$
|
(76,820
|
)
|
|
$
|
(12,702
|
)
|
|
$
|
(244,041
|
)
|
|
$
|
(91,344
|
)
|
|
$
|
(336,057
|
)
|
|
$
|
(482,437
|
)
|
Net loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
|
|
**
|
|
|
|
(0.06
|
)
|
|
|
N/A
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
60,824,782
|
|
|
|
7,892,214
|
|
|
|
40,913,374
|
|
|
|
4,607,399
|
|
|
|
5,331,483
|
|
|
|
N/A
|
|
** Less
than $.01
Balance
Sheet Data:
|
|
As of
September
30,
2011
|
|
|
As of
December 31,
2010
|
|
|
As of
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
56,349
|
|
|
$
|
6,625
|
|
|
$
|
29,257
|
|
Total
current assets
|
|
$
|
271,959
|
|
|
$
|
141,030
|
|
|
$
|
282,146
|
|
Fixed
assets, net
|
|
$
|
114,528
|
|
|
$
|
136,580
|
|
|
$
|
168,772
|
|
Other
assets
|
|
$
|
6,700
|
|
|
$
|
6,700
|
|
|
$
|
6,700
|
|
Total
Assets
|
|
$
|
393,187
|
|
|
$
|
284,310
|
|
|
$
|
457,618
|
|
Current
liabilities
|
|
$
|
430,503
|
|
|
$
|
507,787
|
|
|
$
|
377,486
|
|
Long
term liabilities
|
|
$
|
154,277
|
|
|
$
|
154,052
|
|
|
$
|
382,603
|
|
Stockholders’
equity (deficit)
|
|
$
|
(191,593
|
)
|
|
$
|
(377,529
|
)
|
|
$
|
(302,471
|
)
|
Total
liabilities and stockholders’ equity (deficit)
|
|
$
|
393,187
|
|
|
$
|
284,310
|
|
|
$
|
457,618
|
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion together with our consolidated financial statements and the related notes included elsewhere
in this prospectus. This discussion contains forward-looking statements that are based on our current expectations,
estimates and projections about our business and operations. Our actual results may differ materially from those currently
anticipated and expressed in such forward-looking statements as a result of a number of factors, including those which we discuss
under “Risk Factors” and elsewhere in this prospectus.
General
We
produce, distribute and sell contemporary, professional grade, organic based, natural and environmentally responsible
products for the continual care of the urban and suburban landscape through our wholly-owned subsidiary, Organic Plant Health,
LLC (OPH), a North Carolina Limited Liability Corporation located in Charlotte, North Carolina. Our products
consist
of granular and liquid fertilizers and soil conditioners for all landscape needs. They are formulated to
improve soil health,
plant health, control for fungus, diseases and insect infestation in various locations throughout landscapes and properties. These
products are formulated and blended from raw materials brought in from around the country. Our innovative products and education
oriented, customer-first business practices appeal to green-minded consumers and businesses along with homeowners with do-it-yourself
tendencies. We have built a customer base of over 4,500 residential customers located throughout the region, and over
100 commercial landscapers.
For
the nine months ended September 30, 2011, we generated revenues of $741,799 and net loss of $244,041 .
For the fiscal year of 2010, we generated revenues of $1,026,995 and net loss of $336,057. For the fiscal year of 2009, we generated
revenues of $1,062,163 and net loss of $482,437.
As
of September 30, 20111, we had total assets of $393,187 , available cash and cash equivalents of $56,349 ,
approximately 7 full time employees, and 3 part time employees to support production and sales for seasonal peaks. Our operating
facilities consist of
1) an 11,000 square foot production facility on Monroe Road in Charlotte, NC where production of
the proprietary granular and liquid products occurs; 2) a retail store located in downtown Matthews servicing residential Do-It-Yourselfers
and commercial landscapers. We also distribute products through master retailers, which mirror the Matthews store, and through
independent retailers such as Ace Hardware locations and garden centers throughout the region, as well as master distributors
who also sell to independent retailers. We currently have distribution representation in the state of SC and are in negotiations
with a potential distributor for the lower half of Florida.
Based
upon our perceived and historical growing demand for our organic-based and natural fertility products, we believe we have a unique
opportunity to substantially increase our revenues, net income and gross margins by expanding our current manufacturing capacity
and producing different types of fertility products that we believe there is a large and increasing demand for.
Important
Factors Affecting our Results of Operations
We
believe significant factors that could affect our operating results are the (i) cost of raw materials, (ii) the ability to identify
and hire qualified sales people and management personnel to drive our sales expansion, (iii) prices of our products to our retailers
and wholesalers and their markup to the end users, (iv) consumer acceptance of new products, and (v) general economic conditions
in the US markets.
Results
of Operations
Comparison
of the three and nine months ended September 30, 2011 and 2010
The
following tables set forth key components of our results of operations for the periods indicated, in dollars and as a percentage
of revenue.
(All
amounts in thousands of U.S. dollars, except for the percentages)
Consolidated Statements of
|
|
For the three months ended
|
|
|
|
For the nine months ended
|
|
|
Operations Data
|
|
9/30/2011
|
|
|
|
9/30/2010
|
|
|
|
9/30/2011
|
|
|
|
9/30/2010
|
|
|
|
|
$
|
|
%(1)
|
|
$
|
|
%(1)
|
|
$
|
|
%(1)
|
|
$
|
|
%(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
278,706
|
|
|
|
—
|
|
|
|
292,340
|
|
|
|
—
|
|
|
|
741,799
|
|
|
|
—
|
|
|
|
828,984
|
|
|
|
—
|
|
Cost of sales
|
|
|
76,856
|
|
|
|
28
|
%
|
|
|
103,973
|
|
|
|
36
|
%
|
|
|
239,629
|
|
|
|
32
|
%
|
|
|
265,511
|
|
|
|
32
|
%
|
Gross profit
|
|
|
201,850
|
|
|
|
72
|
%
|
|
|
188,367
|
|
|
|
64
|
%
|
|
|
502,170
|
|
|
|
68
|
%
|
|
|
563,473
|
|
|
|
68
|
%
|
Operating expenses
|
|
|
256,355
|
|
|
|
92
|
%
|
|
|
195,273
|
|
|
|
67
|
%
|
|
|
699,031
|
|
|
|
94
|
%
|
|
|
637,372
|
|
|
|
77
|
%
|
(Loss) from operations
|
|
|
(54,505
|
)
|
|
|
20
|
%
|
|
|
(6,906
|
)
|
|
|
2
|
%
|
|
|
(196,860
|
)
|
|
|
27
|
%
|
|
|
(73,899
|
)
|
|
|
9
|
%
|
Other (expense)
|
|
|
(22,315
|
)
|
|
|
8
|
%
|
|
|
(5,796
|
)
|
|
|
2
|
%
|
|
|
(47,180
|
)
|
|
|
6
|
%
|
|
|
(17,445
|
)
|
|
|
2
|
%
|
Net loss before income taxes
|
|
|
(76,820
|
)
|
|
|
28
|
%
|
|
|
(12,702
|
)
|
|
|
4
|
%
|
|
|
(244,041
|
)
|
|
|
33
|
%
|
|
|
(91,344
|
)
|
|
|
11
|
%
|
Net (loss)
|
|
|
(76,820
|
)
|
|
|
28
|
%
|
|
|
(12,702
|
)
|
|
|
4
|
%
|
|
|
(244,041
|
)
|
|
|
33
|
%
|
|
|
(91,344
|
)
|
|
|
11
|
%
|
(1)
Representing percentage of revenues.
Revenues
Our
revenues consist of the sale of our fertility products less, returns and allowances, and the sale of license agreements. We currently
sell our products directly to ultimate end users via our retail store located in downtown Matthews; we also sell them to non-related
retailers and wholesalers who then sell such products to the ultimate end users. To date, returns and allowances have been virtually
non-existent and as such have had no material effect on our revenues. The revenues from the sale of license agreements, and optional
license agreements are in connection with our approval to the distribution partners that desire to represent us in developing
sales and marketing agreements with potential wholesale customers. We recognize this revenue upon execution of the licensing agreement.
Revenue
for the three and nine months ended September 30, 2011 was $
278,706
and $741,799, respectively,
of which $45,000 and $80,000 from sale of license agreement during the three-month and nine-month periods, respectively. Comparatively,
we had revenues of $292,340 and $828,984 for the three and nine months ended September 30, 2010, respectively. The decrease by
$13,634, or approximately 4.7%, and by $87,185, or approximately 10.5%, during the three and nine months ended September 30, 2011,
respectively, was due to the impact from changes in our business model / marketing strategy, and simultaneous effects from a weakening
economy. Management believes that the effects from the ongoing recession or weakened economy will continue to hamper growth unless
the company increases the number of retail partners purchasing products on a consistent basis. Further, management believes that
the receipt of partial or full funding from this offering will enable the company to afford to expand the company’s sales
efforts to increase the number of retail partners such that new revenues over the next 18-24 months will grow at a pace greater
than our operating expenses and bring about profitability. However, there is no assurance that revenues will grow and there is
reason to believe that sales will continue to decline under the current economic climate.
There
are several trends that currently affect our revenues.
i)
Economic Trends: Management conservatively expects that effects from the recession will continue to linger through 2012 and into
2013. Lingering effects from the recession could continue to adversely affect revenues and gross profits, and if this occurs it
could adversely affect the company’s ability to continue operations.
ii)
Consumer Trends: Management expects that, generally, consumers will show increased interest in products that support sustainability,
conserve energy, conserve water and use less natural resources. Although this statement is unsubstantiated, it is widely accepted
that, globally, consumers are tending towards a greater concern for the environment and using products that have a lower impact
on the environment and the use of natural resources. Without partial or full funding to provide for initial sales force expansion
and the development of new packing and branding strategy the company will be likely not be in a sufficient position to take full
advantage of this increased interest.
In
order to reduce the impact from financial crisis, our management decided to shift our business model in 2009 to include new distribution
through established retail outlets such as hardware stores, independent garden centers and nurseries, referred as our “Retail
Partners”. We believe these Retail Partners enable us to expand awareness and distribution of our exclusive products, while
maximizing sales through the added exposure to the Retail Partner’s existing customer base. However, the increase in numbers
of Retail Partners in the Charlotte area has an adverse effect on retail sales at the Matthews retail store, because of the close
proximity, and causes the decrease in our total revenue during the short term. We believe the gross revenues from Retail Partners,
as the number of retail partners increase over time, will far exceed Matthews’ retail store sales potential, resulting in
greater long-term revenue stability and profitability.
|
Matthews Retail
|
Wholesale Partners
|
Revenue
Jan 1,-Sept. 30, 2009 (less Sales Tax):
|
$698,806
|
$112,588
|
Revenue Jan 1,-Sept. 30, 2010 (less Sales Tax):
|
$557,239
|
$243,548
|
Revenue Jan 1,-Sept.
30, 2011 (less Sales Tax):
|
$405,424
|
$315,051
|
The
above chart shows a decline in retail sales at the Matthews Retail Store, with an offsetting increase in Wholesale sales. Although
the offset shown here is not balanced, it does illustrate the trend we expect to continue, with one caveat – we anticipate
that annual retail sales will level off by the end of 2011 or 2012, as we do not anticipate adding more retail partners in the
Charlotte NC metro area. Thus, assuming a strengthening economy, retail sales will likely rebound slightly at the Matthews Retail
store, while wholesale revenues should continue to climb. Although management believes this is the trend, there is no assurance
that this trend will continue, and there is no assurance that revenues, in general, will not continue to decline in the current
economic climate.
In
2009 we started with 3 Retail Partners. In 2010 we added 21 Retail Partners. In 2011, we added 6 Retail Partners and lost 4 Retail
partners. The failure to achieve greater wholesale growth in 2011 was due to the company’s primary sales person missing
a great deal of work time because of serious illness and personal family issues that kept him from achieving our sales objectives.
Management
believes that the extenuating circumstances mentioned above, in large part, prevented the company from generating incremental
revenue growth in 2011. If 2011 retail partner growth had been more similar to the growth seen from 2010 over 2009, the result
in 2011 would have been the addition of another 20 or more retail partners generating approximate annual sales of $280,000.00
more in gross revenue, (this number is based on total Wholesale revenue generated in 2010 of $280,000.00 from 24 Retail Partners).
Further, if we receive partial or full funding from this offering management plans to hire 3 or 4 sales people that are expected
to bring on an additional 50-100 retail partners, generating an additional $500,000.00 to $1,100,000.00 in additional wholesale
revenue, (based on the average retail partner purchasing $11,673.00 or more annually). This sales growth is expected to be incremental
over the next several years, as we continue to add more sales people as we expand into new markets. Although management plans
to achieve these general sales goals, there is no assurance that we will be able to hire additional sales people, and if we are
able to hire them, there is no assurance that those sales people will be able to generate gross revenues as described in this
offering.
Cost
of Goods Sold
Our
cost of goods sold consists primarily of costs of raw materials and direct labor, and other costs directly attributable to the
production of our products. Write-down of inventories to lower of cost or market is also recorded in cost of goods sold. Cost
of goods sold for the three months ended September 30, 2011 was $76,856, decreased by $27,117, or approximately 26.1% from $103,973
for the comparable period in 2010. Such decrease was due to a decrease in retail sales at our Matthews store during the third
quarter of 2011, and the sales from our Retail Partners did not pick up due to the economy. For the nine months ended September
30, 2011, we had cost of goods sold in an amount of $239,629, decreased by $25,882, or approximately 9.7% from $265,511 for the
comparable period in 2010. We experienced a slightly higher cost on certain commodity components, and reduced costs on certain
other commodity components during the nine months ended September 30, 2011. Commodity components that increased in cost include
a pasteurized poultry litter base that provides a source of organic nutrients, (Nitrogen, Phosphorous and Potassium), as well
as beneficial bacteria and micorrhizal fungi, which add bio-diversity to the soil. Commodity components that decreased in cost
include one source or organic acids (Humic Acid and Fulvic Acid derived from plant extracts). Although we achieved a greater impact
in overall retail sales for the region, fewer of those retail sales occurred at our Matthews retail store. As referenced above,
we believe the long-term gross revenues from our increasing number of wholesale customers will far exceed the sales potential
at our Matthews’ retail store, simply because adding additional wholesale partners is much faster and significantly less
costly than expanding our existing retail store, or opening additional brick and mortar retail stores.
There
are several trends that currently affect our cost of goods sold:
i)
Commodity price volatility: The current weakened economy has increased the volatility of commodity prices for raw materials. The
company has not seen a significant increase in raw materials, nor do we expect one, however the current economic instability could
cause price fluctuations. If these price fluctuations resulted in higher raw goods prices this could have an adverse effect on
our operations, as it would increase our cost of goods sold. It is the nature of commodities to fluctuate in price based on supply
and demand forces. Over the past several years one of the largest consumers of raw goods has been China, since its middle class
has been expanding, creating increased demand for goods. If this trend continues it could have an adverse effect on our ability
to receive favorable pricing on certain of our commodity based products. However, management does not believe that this will affect
our long-term pricing outlook. Most, if not all, of our raw materials now come from the United States, or at least North America
and we do not anticipate great price volatility with respect to those components. However, if such price volatility occurs, and
it could, this would have an adverse effect on our cost of goods sold and negatively affect our operations.
ii)
Cost of Direct Labor Trends: The current weakened economy has increased the company’s ability to hire and retail direct
labor at a reasonable cost. We anticipate this to be consistent through 2012 and into 2013. However, if the economy were to sharply
improve our direct labor costs could increase. If this were to occur, it would result in higher direct labor costs and this would
have an adverse effect on our operations, as it would reduce our gross profit margins.
Gross
profit
Our
gross profit is obtained based upon our total revenues minus our cost of goods sold for a particular period. Gross profit for
the three months ended September 30, 2011 was $201,850, increased by $13,483, or approximately 7.2% from $188,367 for the comparable
period in 2010. Such increase was due to the increase in sale of license agreement during the period, which had no direct cost
incurred. For the nine months ended September 30, 2011, we had gross profit in an amount of $502,170, decreased by $61,303, or
approximately 10.9%, from $563,473 for the comparable period in 2010. The decrease in gross profit during the nine months ended
September 30, 2011 was primarily attributable to the increase in less profitable wholesale sales to our retail partners over the
same period a year ago and a decrease in the more profitable retail sales from our Matthews retail store. Gross profits also continue
to be adversely affected by ongoing effects from the recession. We expect the recession to continue to impact sales and gross
profits negatively over the nest 2-3 years. Even if the economy recovers more quickly than expected, there is no assurance that
sales and gross profits will increase.
Operating
expenses
Our
operating expenses were $256,355 for the three months ended September 30, 2011,
increased by $61,082, or approximately
31.3%, compared to operating expenses of $195,273 for the same period in 2010. Our operating expenses were $699,031 for the nine
months ended September 30, 2011, which was approximately equal to the operating expenses in the same period in 2010.
Our
fixed expenses remained fairly constant from year to year. We realized some savings as the result of lower sales activity in 2011,
such as the decrease in salaries by $86,811 during the nine months ended September 30, 2011, respectively. We are working to reduce
some of the fixed expenses to maintain positive cash flow during 2011. However, we expect an increase in overall expenses during
2011 due to the plan to hire 2-3 new sales employees and the additional expenses incurred
as a result of becoming a publicly
traded company in the United States. Such increase will include legal service fees, audit fees and other cash or non-cash payments
for professional services
The increase will be somewhat offset by the reduction in fixed expenses and
the increased revenue generated from new sales activity. However, there is no assurance that we will be able to hire new sales
and support staff, and this could negatively affect our ability to generate new sales for the period and this could impact the
company’s operations and ability to continue operations.
The
company has made efforts to reduce operating expenses wherever possible. Some of the results from these efforts have come from
negotiating lower pricing with certain manufacturers of raw goods, or choosing to work with new suppliers that can provide similar
quality goods at a lower cost. We will continue to monitor our vendor pricing relative to other similar vendors to ensure we have
competitive pricing associated with our raw materials. Further, we have explored options with our vendors for purchasing in larger
quantities, which would reduce our per unit price. We will continue to work with our vendors to make sure we are taking advantage
of every opportunity afforded to us to reduce our materials cost. However, there is no assurance that any prices we have negotiated
will continue to be available to us in the future, and if our costs were to rise significantly, it would have an adverse effect
on operations.
Management
has also determined that executing a new packaging strategy will reduce our costs associated with this part of our product costs.
We have retained Kaliedoscope-Chicago, a branding and packaging design company to help us with the development of this packaging
strategy. This will include pre-printed bags and pre-printed product labels. Not only will this reduce our costs, it will help
us to compete better, head-to–head on retailer shelves. Currently all products labels are printed in-house at greater cost
per unit, but with lower upfront costs. We anticipate converting to the new packaging in early 2012. However if we are not able
to convert to the new packaging strategy, our costs will remain higher and this could negatively affect operations, and could
cause our end pricing to the retailer to be so high as to not be competitive. This would also affect our revenues and our sell
through at the retail level and this could jeopardize the company’s ability to generate sufficient revenue to continue operations.
Interest
expense
Interest
expense for the three and nine months ended September 30, 2011 was $17,515 and $55,331, respectively, which was an increase of
$10,431, or approximately 147.2%, and $33,671, or approximately 155.5%, respectively, compared to interest expense of $7,084 and
$21,660 for the three and nine months ended September 30, 2010, respectively. An increase in interest expenses in 2011 was
due primarily to interest charges on a convertible promissory note in amount of $100,000 (the “Note”), dated January
1, 2011. The Note bears interest at a rate of 6% per annum and is discounted in full amount due to the issuance of 1,000,000 shares
of Common Stock as sweetener to the Note, and a beneficial conversion feature. The fair value of the 1,000,000 shares was $68,245
determined by an arm’s length payable settlement with a non-affiliate since there was nominal trading volume of our common
stock in the market, and recorded as discount to note payable, which will be amortized over 2 years starting from January 1, 2011.
The remaining discount of $31,755 represented the intrinsic value of the beneficial conversion option. Pursuant to the Note, all
or any portion of the accrued interest and unpaid principal balance of the Note is convertible at the option of the holder into
the Common Stock of the Company or its successors, at Ten Cents ($.10) per share, no sooner than December 31, 2011. We recorded
interest expense from the Note of $14,000 and $42,000 for the three and nine months ended September 30, 2011, respectively.
N
et
loss
Net
loss for the three and nine months ended September 30, 2011 was $76,820
and $
244,041
,
respectively, increased by $64,118, and by $152,697,
compared to net loss of $12,702 and $91,344 for the same periods in
2010. The increase in net loss was primarily attributable to the decrease in gross profit and the increase in interest expenses
during the three and nine months ended September 30, 2011.
Comparison
of the fiscal year ended December 31, 2010 and fiscal year ended December 31, 2009
The
following tables set forth key components of our results of operations for the periods indicated, in dollars and as a percentage
of revenue.
(All
amounts in thousands of U.S. dollars, except for the percentages)
Consolidated Statements of Operations Data
|
|
For the year ended
December 31, 2010
|
|
For the year ended
December 31,
2009
|
|
|
USD
|
|
% of
Revenue
|
|
USD
|
|
% of
Revenue
|
Revenues
|
|
$
|
1,026,995
|
|
|
|
—
|
|
|
|
%
|
|
|
$
|
1,062,163
|
|
|
-%
|
Cost of Sales
|
|
$
|
(465,970
|
)
|
|
|
45.37
|
|
|
|
%
|
|
|
$
|
(601,963
|
)
|
|
56.67%
|
Gross profit
|
|
$
|
561,025
|
|
|
|
54.63
|
|
|
|
%
|
|
|
$
|
460,200
|
|
|
43.33%
|
Operating expenses
|
|
$
|
862,211
|
|
|
|
83.95
|
|
|
|
%
|
|
|
$
|
916,601
|
|
|
86.30%
|
(Loss) from operations
|
|
$
|
(301,186
|
)
|
|
|
29.33
|
|
|
|
%
|
|
|
$
|
(456,401
|
)
|
|
42.97%
|
Other (expense)
|
|
$
|
(34,871
|
)
|
|
|
3.40
|
|
|
|
%
|
|
|
$
|
(26,036
|
)
|
|
2.45%
|
Net loss before income taxes
|
|
$
|
(336,057
|
)
|
|
|
32.72
|
|
|
|
%
|
|
|
$
|
(482,437
|
)
|
|
45.42%
|
Net (loss)
|
|
$
|
(336,057
|
)
|
|
|
32.72
|
|
|
|
%
|
|
|
$
|
(482,437
|
)
|
|
45.42%
|
Revenues
Revenue
for the fiscal year ended December 31, 2010 was $1,026,995, of which $50,000 from sale of license agreement. Compared to
the revenue of $1,062,163 for the year of 2009, the slightly decrease in 2010 by $35,168, or 3.3%,
was
primarily attributable to our new marketing strategy.
In
order to reduce the impact from financial crisis, our management decided to shift our business model in 2010 to include new distribution
through established retail outlets such as hardware stores, independent garden centers and nurseries, referred as our “Retail
Partners”. We believe these Retail Partners enable us to expand awareness and distribution of our exclusive products, while
maximizing sales through the added exposure to the Retail Partner’s existing customer base. However, the increase in numbers
of Retail Partners in the Charlotte area has an adverse affect on retail sales at the Matthews retail store and causes the decrease
in our total revenue during the short term. We believe the gross revenues from Retail Partners will far exceed Matthews’s
retail store sales potential, resulting in greater long-term revenue stability and profitability.
Cost
of Goods Sold
Our
cost of goods sold consists primarily of costs of raw materials and direct labor, and other costs directly attributable to the
production of our products. Write-down of inventories to lower of cost or market is also recorded in cost of goods sold. Cost
of goods sold for the fiscal year ended December 31, 2010 was $465,970, decreased by $135,993, or approximately 22.6%, from $601,963
for the comparable period in 2009. Such decrease was due to achieving efficiencies in the production process, as well as negotiating
more favorable pricing for some of our raw materials. These combined to decrease our direct labor cost and the raw cost of materials,
which resulted in a reduced cost of goods.
Gross
profit
Our
gross profit is obtained based upon our total revenues minus our cost of goods sold for a particular period. Gross profit for
the fiscal year ended December 31, 2010 was $561,025. An increase of $100,825 or 21.9% compared to $460,200 for the comparable
period in 2009 was primarily attributable to decreased costs in the production process for certain of our exclusive products,
as well as a reduction in the cost of certain of our raw materials. Since we elected to maintain our wholesale price levels, the
result was increased gross profit over the same period last year.
Operating
expenses
Our
operating expenses were $862,211 and $916,601 for the twelve months ended December 31, 2010 and 2009, respectively, a decrease
of $54,390, or 5.9%. Our fixed expenses remained fairly constant from year to year. We realized some savings as the result of
lower sales activity in 2010, such as the decrease in advertising expenses by $28,459 and the decrease in salaries by $143,948.
We are working to reduce some of the fixed expenses to maintain positive cash flow during 2011. However, we expect an increase
in overall expenses during 2011 due to the plan to hire 2-3 new sales employees. The increase will be somewhat offset by the reduction
in fixed expenses and the increased revenue generated from new sales activity.
Interest
expense
Interest
expenses for the fiscal year ended December 31, 2010 and 2009 were $34,896 and $26,472, respectively. An increase of
$8,424, or 31.8% in 2010, was due primarily to our several shareholders loan in total amount of $275,000, which commenced in July
2009 with interest at the floating interest rate of Prime plus 2.5%. Accordingly, the interest expenses in connection with the
shareholders loan were accrued for 6 months in 2009 and for the whole year in 2010.
N
et
loss
Net
loss for fiscal 2010 was $336,057, a decrease of $146,380, or 30.3% as compared to $482,437 in 2009. Net loss as a percentage
of our sales revenues decreased to 32.7% in 2010 from 45.4% in fiscal 2009.
The decrease was primarily attributable
to the increase in our gross profit and the decrease in our operating expenses during 2010.
Liquidity
and Capital Resources
The
following table sets forth a summary of our net cash flow information for the periods indicated:
(All
amounts in U.S. dollars)
|
|
For the Nine Months
|
|
For the Year
|
|
|
Ended September 30,
|
|
Ended December 31,
|
|
|
2011*
|
|
2010*
|
|
2010*
|
|
2009*
|
|
|
(Consolidated,
unaudited)
|
|
(Consolidated,
unaudited)
|
|
(Consolidated,
audited)
|
|
(Consolidated,
audited)
|
Net cash (used in)/provided by operating activities
|
|
$
|
(232,966
|
)
|
|
$
|
12,690
|
|
|
$
|
(1,710
|
)
|
|
$
|
(250,205
|
)
|
Net cash (used in)/provided by investing activities
|
|
$
|
(528
|
)
|
|
$
|
(7,960
|
)
|
|
$
|
(411
|
)
|
|
$
|
(8,261
|
)
|
Net cash provided by/(used in) financing activities
|
|
$
|
283,218
|
|
|
$
|
(5,817
|
)
|
|
$
|
(20,511
|
)
|
|
$
|
246,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and equivalents
|
|
$
|
49,724
|
|
|
$
|
(1,087
|
)
|
|
$
|
(22,632
|
)
|
|
$
|
(12,182
|
)
|
Cash and cash equivalents, beginning of period
|
|
$
|
6,625
|
|
|
$
|
29,257
|
|
|
$
|
29,257
|
|
|
$
|
41,439
|
|
Cash and cash equivalents, end of period
|
|
$
|
56,349
|
|
|
$
|
28,170
|
|
|
$
|
6,625
|
|
|
$
|
29,257
|
|
*
The above financial data have been derived from our unaudited consolidated financial statements for the nine months
ended September 30, 2011 and 2010, and audited consolidated financial statements for the fiscal year ended December 31,
2010 and 2009.
Comparison
of the nine months ended September 30, 2011 and 2010
Operating
Activities
Net
cash used in operating activities was $232,966 for the nine months ended September 30, 2011, compared to net cash of $12,690 provided
by operations for the nine months ended September 30, 2010. Negative cash flows from operation during the nine months ended September
30, 2011 was due primarily to the net loss of $244,041, the increase in accounts receivable in an amount of $93,647 and the decrease
in account payable by $65,419, partially offset by the decrease in inventory by $9,320, and the non-cash expenses in total of
$126,202, which included bad debt expenses of $3,122, depreciation of $22,580, amortization of discount to note payable in amount
of $37,500, and common stock issued for services rendered in an amount of $63,000. We issued 1,000,000 shares of common stock
to a consultant for
business advisory services in a term of six months effective from May 15, 2011
ending November 15, 2011, and would issue 75,000 shares of common stock to our securities attorney during the fourth quarter of
2011.
The shares were valued at $.075 per share and $.09 per share, respectively, based on the facts that we had nominal
trading volume for our stock, and had negative shareholder equity at the time entering the agreement. Comparatively, positive
cash flows from operation during the same period in 2010 was due to the increase in accounts payable by $123,566, partially offset
by the net loss of $91,678 and the increase in accounts receivable and inventory by $19,048 and $57,970, respectively.
Accounts
Receivables increased during the period ended September 30, 2011 as the result of sales on account to new wholesale customers
and one wholesale distributor that did not purchase products during the comparable period in 2010. This number was also elevated
because a wholesale distributor was overdue on his payment to the company. Had the distributor paid the invoice when due, the
accounts receivable number for the period ending September 30, 2011 would have been reduced by about $12,000.
Investing
Activities
Cash
used in investing activities mainly consists of capital expenditures, expenditures for property, plant, and equipment.
Net
cash used in investing activities was $528 and $7,960 for the nine months ended September 30, 2011 and 2010, respectively, due
primarily to purchase of property and equipment in both periods.
Financing
Activities
Net
cash provided by financing activities was $283,218 for the nine months ended September 30, 2011, due primarily to the proceeds
from notes payable in an amount of $142,500, and the proceeds from stock issuance in amount of 205,482, offset by the payments
of total $64,764 to notes payable, of which $22,500 was in connection with related parties loan. Comparatively, we had cash outflow
of $5,817 during the same period in 2010 due to the payments of $25,817 to notes payable, offset by the proceeds from related
parties loan in amount of $20,000.
Comparison
of the years ended December 31, 2010 and 2009
Operating
Activities
Net
cash used in operating activities was $1,710 and $250,205 for the year ended December 31, 2010 and 2009, respectively. Negative
cash flows in 2010 were due primarily to the net loss of $336,057, partially offset by the non-cash expenses in total of $82,725,
the decrease in accounts receivable and inventory in the amount of $21,860 and $96,502, respectively, and the increase in accounts
payable and accrued expenses in the amount of $104,226 and $15,254, respectively. Comparatively, negative cash flows from operation
in 2009 were due primarily to the net loss of $482,437, and the increase in accounts receivable by $18,091, partially offset by
the decrease in inventory by $42,070, and the increase in accounts payable in the amount of $159,357.
Investing
Activities
Net
cash used in investing activities was $411 and $8,261 for the year ended December 31, 2010 and 2009, respectively, due primarily
to purchase of property and equipment in both periods. In addition, we had cash inflow of $5,000 due to return of security deposit
in 2009.
Financing
Activities
Net
cash used in financing activities was $20,511 for the year ended December 31, 2010, compared to net cash of $246,284 provided
by financial activities during the year of 2009. Negative cash flows from financing activities in 2010 was due to the payments
of total $40,511 to notes payable, offset by the proceeds of $20,000 from related parties loan. Positive cash flows from financing
activities in 2009 was due to the proceeds from shareholders loan in the amount of $275,000, and the proceeds of $45,000 from
third parity note, offset by the payments of total $73,716 to the notes.
Loan
Facilities
We
believe that we currently maintain good business relationships with our local banks and note holders. As of September 30, 2011
and December 31, 2010, our outstanding loans on the accompanying consolidated balance sheets were as follows:
|
|
As of
|
|
|
9/30/2011
|
|
12/31/2010
|
Bank of Granite, 8.5% interest rates, due on November 26, 2011 (1)
|
|
|
9,174
|
|
|
|
27,463
|
|
Bank of NC, 6.5% interest rate, due on June 30, 2013 (2)
|
|
|
74,277
|
|
|
|
98,252
|
|
Greentree Financial Group, 6% interest rate, due on January 1, 2013, net of discount (3)
|
|
|
37,500
|
|
|
|
—
|
|
US Green Pros, LLC 5% interest rate, due on January 1, 2013 (4)
|
|
|
42,500
|
|
|
|
—
|
|
|
|
$
|
163,451
|
|
|
$
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125,715
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|
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(1) The
Company has a line of credit with Bank of Granite at an interest rate of 8.5% per annum. The balance on this credit line was $9,174
as of September 30, 2011. Accordingly, the Company recorded interest expenses of $383 and $1,111 during the three and nine months
ended September 30, 2011, respectively.
(2) The
Company has a long-term loan payable to Bank of North Carolina at an interest rate of 6.5% per annum and due on June 30, 2013.
The balance of this bank loan was $74,277 as of September 30, 2011. Accordingly, the Company recorded interest expenses of $1,127
and $3,687 during the three and nine months ended September 30, 2011, respectively.
(3) On
January 1, 2011, the Company entered into a convertible promissory note (the Note) in a principal amount of $100,000 payable to
Greentree Financial Group (“Greentree”), which bears an interest rate of 6% per annum and is due on January 1, 2013.
Pursuant to the Note, Greentree has an option to convert all or any portion of the accrued interest and unpaid principal balance
of the Note into the Common Stock of the Company or its successors, at Ten Cents ($.10) per share, no sooner than December 31,
2011.
The
Note is discounted in full amount due to the issuance of 1,000,000 shares of Common Stock as sweetener to the Note, and a beneficial
conversion feature. The fair value of the 1,000,000 shares was $68,245 determined by an arm’s length payable settlement
with a non-affiliate since there was nominal trading volume of our common stock in the market, and recorded as discount to note
payable, which will be amortized over 2 years starting from January 1, 2011. The remaining discount of $31,755 represented the
intrinsic value of the beneficial conversion option, which will be amortized over 2 years starting from January 1, 2011. We recorded
interest expense from the Note of $14,000 and $42,000 for the three and nine months ended September 30, 2011, respectively.
The
carry value of the Note was $37,500 as of September 30, 2011. The 1,000,000 shares of Common Stock were issued on
May 13, 2011.
(4) The
Company has a long-term loan payable to US Green Pros, LLC at an interest rate of 5% per annum and due on January 1, 2013. The
balance of this loan was $42,500 as of September 30, 2011, of which $40,000 was received during the second quarter of 2011. Accordingly,
the Company recorded interest expenses of $535 and $1,090 during the three and nine months ended September 30, 2011, respectively.
We
do not foresee a squeeze on the availability of credit to fund our operations and meet our growth objectives.
Capital
Expenditures
We
project that we will need additional capital to fund operations over the next 12 months. We anticipate we will need a minimum
of $500,000 additional funds for the year of 2012 to meet our expansion objectives.
Overall,
we have funded our cash needs from inception through September 30, 2011 with a series of debt and equity transactions,
primarily with related parties. If we are unable to receive additional cash from our related parties, we may need to rely on financing
from outside sources through debt or equity transactions. Our related parties are under no legal obligation to provide us with
capital infusions. Failure to obtain such financing could have a material adverse effect on operations and financial condition.
We
had cash of $
56,349
on hand as of September 30, 2011. Currently, we do not have
enough cash to fund our operations for the next 12 months. This is based on current negative cash flows from operation and working
capital deficit. Therefore, we will need to obtain additional capital through equity or debt financing to sustain operations for
an additional year. Our current level of operations would require capital of approximately $500,000 per year starting in 2011.
Modifications to our business plans may require additional capital for us to operate. For example, if we are unable to raise additional
capital in the future we may need to curtail our number of product offers or limit our marketing efforts to the most profitable
geographical areas. This may result in lower revenues and market share for us. In addition, there can be no assurance that additional
capital will be available to us when needed or available on terms favorable to us.
On
a long-term basis, liquidity is dependent on continuation and expansion of operations, receipt of revenues, and additional infusions
of capital and debt financing. Our current capital and revenues are insufficient to fund such expansion. If we choose to launch
such an expansion campaign, we will require substantially more capital. The funds raised from this offering will also be used
to market our products and services as well as expand operations and contribute to working capital. However, there can be no assurance
that we will be able to obtain additional equity or debt financing in the future, if at all. If we are unable to raise additional
capital, our growth potential will be adversely affected and we will have to significantly modify our plans. For example, if we
are unable to raise sufficient capital to develop our business plan, we may need to:
·
|
Curtail
new product launches
|
·
|
Limit our future
marketing efforts to areas that we believe would be the most profitable.
|
Demand
for the products and services will be dependent on, among other things, market acceptance of our products, organic-based fertilizer
market in general, and general economic conditions, which are cyclical in nature. Inasmuch as a major portion of our activities
is the receipt of revenues from the sales of our products, our business operations may be adversely affected by our competitors
and prolonged recession periods.
Our
success will be dependent upon implementing our plan of operations and the risks associated with our business plans. We manufacture,
trade and distribute contemporary, professional grade, organic, natural and environmentally responsible products for the continual
care of the urban landscape through our wholly-owned subsidiary and our Retail Partners. We plan to strengthen our position in
these markets. We also plan to expand our operations through aggressively marketing our products and our concept.
Critical
Accounting Policies
We
prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the
amounts reported in our combined and consolidated financial statements and related notes. We periodically evaluate these
estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions
that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral
component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies
require higher degrees of judgment than others in their application. We believe the following accounting policies involve
the most significant judgments and estimates used in the preparation of our financial statements.
Revenue
recognition
In
accordance with guidance by paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition, the
Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have
been rendered, the selling price is fixed or determinable and collectability is reasonably assured. OPH provides a
warranty, but only in as much as the products conform to their descriptions and that they are reasonably fit for the purpose stated
on the label, when used properly under normal conditions.
(a) Sale
of products
The
Company recognizes revenue from the sale of products upon delivery to the customers and the transfer of title and risk of loss.
The Company did not record any product returns for the three and nine months ended September 30, 2011 and 2010,
and for the years ended December 31, 2010 and 2009, respectively.
(b) License
income
The
Company recognizes revenue from the sale of license agreements, and optional license agreements, to approved distribution partners
that desire to represent the Company in developing sales and marketing agreements with potential wholesale customers. The license
fee paid by the approved distribution partners is nonrefundable, one-time charge and independent from the sale of products or
services. The Company recognizes licensing revenue when the license term begins.
Accounts
Receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due
accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements,
aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. As of September
30, 2011, the Company had allowances for uncollectible accounts of $5,311.
Inventory
Inventories
consist of finished goods and are valued at lower of cost or market value, cost being determined on the first-in, first-out method. The
Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and
also evaluates the impact of any anticipated changes in future demand. The Company provides inventory allowances based
on excess and obsolete inventories determined principally by customer demand. As of September 30, 2011, the
Company did not record an allowance for obsolete inventories, nor had there been any write-offs during the nine months
ended September 30, 2011.
Recently
Issued Accounting Standards
In
May 2011, FASB issued Accounting Standards Update No. 2011-04,
“Fair Value Measurements (Topic 820): Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”
(“ASU 2011-04”). ASU
2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the
disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new
guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially
expand its financial statement note disclosures.
Seasonality
Our
operating results and cash flows historically have been subject to seasonal variations. Because a high percentage of our
sales are from lawn care fertilizers, revenues increase proportionately during the fall, late winter and spring months. Conversely,
our sales cycle dips during the summer months and early winter months. As we expand our sales into other parts of the country
and online via our ecommerce website, our sales cycles will broaden and we will experience fewer peaks and valleys. However, this
expansion process will take time to develop and until this occurs, we will continue to experience revenues in a cyclical fashion.
Off-Balance
Sheet Arrangements
We
have not entered into, nor do we expect to enter into, any off-balance sheet arrangements. We also have not entered into
any financial guarantees or other commitments to guarantee the payment obligations of third parties. In addition, we have
not entered into any derivative contracts that are indexed to our equity interests and classified as shareholders’ equity.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves
as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity
that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development
services with us.
ORGANIC-BASED
AND NATURAL FERTILIZERS
INDUSTRY
BACKGROUND
Overview
of the Industry
Prior
to 2007 information resources and products of this type were generally not available to the public. Organic-based fertility products
that were available had to be bought in such sizes and quantities that purchasing them was impractical for the average homeowner
or landscape service provider.
According
to
marketresearch.com
, consumer packaged goods in the lawn and garden sector are estimated to grow at roughly 3.5-4% each
year through 2014. Growth will be led by fertilizers and growing media posting above average gains.
At
present,
Organic fertilizer products represent a small share of the approximately $9 billion consumer packaged lawn
and garden market in the U.S
., roughly 10%, or $900 million. Since 2007 organic fertilizers and growing
media revenues have grown at over 10%, annually, over the past several years, which is greater than twice the average rate for
the category of about 4% over the same time periods. D
emand for these types of products has increased as consumers are
generally becoming more aware of the environment and the negative effects from using synthetic fertilizers and pesticides, such
as contamination of waterways attributed to chemical fertilizers. The same study notes that Baby-boomers are just coming in to
their gardening years, and this will support continued growth in the sector.
It
is managements’ opinion that a growing segment of the population is looking for simpler and more complete solutions for
lawn and landscape care. The green movement has consumers thinking more about the environment and realizing the benefits
of supporting sustainability through the use of more natural plant care products
. As a result,
demand
for earth-friendly fertilizers and soil conditioners like ours may see an increase in the years to come. As we expand our company
we anticipate taking advantage of these trends
Although
this has prompted many companies to offer organic-based or natural products as part of their existing lines, the majority of the
companies are small local or regional firms with only a web-based presence. The primary companies actively seeking market
share through multiple channels are the Scott's Miracle-Gro company, and the Espoma plant food company. This is more of
a benefit to Organic Plant Health than one might think. Competition from national companies provides validity to the concept
of organic-based fertilizers and gives immediate credibility to Organic Plant Health's vision for our company.
In
the U.S., farmers and other agriculture related business use the most fertilizer with the professional turf, golf course and retail
segments consuming the remainder. Many Farmers, Home Owner Associations and Municipalities, as well as other local, state and
federal bodies, are recommending, requesting or mandating that fertilizer run-off and other forms of toxicity be taken into consideration
when applying fertilizer to properties under a landscape care agreement.
BUSINESS
Overview
We
produce, distribute and sell organic based, natural and environmentally responsible products for the continual care of the urban
and suburban landscape through our wholly-owned subsidiary, Organic Plant Health, LLC (OPH), a North Carolina Limited Liability
Corporation located in Charlotte, North Carolina. Our products
consist of granular and liquid fertilizers,
soil conditioners, pest control products and select garden tools. Certain of those products promote and support
soil health
and plant health in a variety of residential and commercial landscape applications, however, there is no assurance that these
products will improve soil health, plant health, control for fungus, diseases and insect infestation in every landscape and every
property.
Our
products are formulated and blended from raw materials brought in from around the country. Our products and education oriented,
business practices are designed to appeal to green-minded consumers and businesses, as well as homeowners with do-it-yourself
tendencies. We currently service over 4500 residential customers located throughout the region, and over 100 commercial
landscapers.
The
management of Organic Plant Health, Inc. considers the business a part of the “new” Green Economy because many of
the products we manufacture and distribute support sustainable plant growth, have less impact on the environment than traditional
chemical fertilizers, and support conservation of water if used consistently.
After
achieving some success and increasing revenues with the basic retail model in 2007 and 2008, we began to feel the effects from
the recession in early 2009, and by June of 2009, we recognized that the recession would be protracted and would likely continue
to have a negative impact on our business. In July of 2009 we brought on minor investors, and jointly decided that our best opportunity
for prolonged growth and expansion with the least amount of capital was to change the business model from basic retail to a more
traditional manufacturer/distributor model. This growth strategy change would lessen our cost of expansion, otherwise, (appx.
$250,000.00 - $300,000.00 annually, per retail store if we had stayed with the previous business model), and allow us to expand
faster, and over a larger area by selling our exclusive products through independent retail partners. These retail partners, existing
businesses with built-in consumer traffic, consist of hardware stores, garden centers and nurseries.
We
began transitioning to the manufacturing/distribution model in the fall of 2009. The company was profitable in 2007 and 2008,
however, it was not profitable in 2009 and 2010, and it is likely to sustain another net loss in 2011. The company currently sells
its exclusive products through 20+ retail partners. Although, we have not added as many retail partners as initially planned due
to the limited cash flow available to support an experienced sales staff, we have experienced some measure of success with the
new business model and believe it is viable and will become profitable in the next 18 to 24 months, if partially or fully funded
from this offering. Without receiving any funding from this offering, management will have to make significant changes in its
operations to sustain the business. Management further believes that the company will need to receive a minimum of $500,000.00
- $750,000.00 from this offering over the next 6 to 10 months to achieve our initial expansion goals.
During
the past year, company management has had several meetings with key retail partners to discuss sales performance of our products,
and several ways that our company could increase consumer interest in the products to improve sell-through at the retail level.
After reviewing data from those meetings management decided it would be beneficial to update the company’s branding (corporate
identity for all representations), package design of our products, (all bags, bottles and containers in which our products are
sold), and marketing materials, (all banners, exterior and interior signage and display materials), as well as all company sales
materials. Management contacted several companies in Charlotte, New York and Chicago that perform such services and decided that
Kaliedoscope-Chicago was the best fit for revamping the OPH brand, product packaging and marketing materials.
The
cost for the initial design and development is expected to be $30,000.00. Subsequent adjustments and revisions will result with
finished artwork for all custom bags, bottles and labels for each of the more than 60 individual SKUs, as well as finished artwork
for all marketing materials. Management expects the final cost of the services associated with Kaleidoscope to be in the $60,000.00
to $90,000.00 range.
We
began this process in August of 2011 with initial meetings and conference calls to establish a direction for the new brand identity
that would convey the company’s experience, knowledge and passion for helping growers of all varieties grow – from
the 35-year old magazine executive concerned about indoor plant care to the 50-year old caretaker of his family’s 500 acre
farm. This process has advanced over the past few months to the design stage. Management plans to launch the new brand identity
and package design during Q1 2012.
For
the nine months ended September 30, 2011, we generated revenues of $741,799 and net loss of $244,041. For the fiscal year of 2010,
we generated revenues of $1,026,995 and net loss of $336,057. For the fiscal year of 2009, we generated revenues of $1,062,163
and net loss of $482,437.
As
of September 30, 2011, we had total assets of $393,187, available cash and cash equivalents of $56,349, approximately 7 full time
employees, and 3 part time employees to support production and sales for seasonal peaks. Our operating facilities consist of
1)
an 11,000 sq. ft. production facility on Monroe Road in Charlotte, NC where production of the proprietary granular and liquid
products occurs; 2) a retail store located in downtown Matthews servicing residential Do-It-Yourselfers and commercial landscapers.
We also distribute products through master distributors, which mirror the Matthews store, and through independent retailers such
as Ace Hardware locations and garden centers throughout the region.
Concentration
on
Organic-Based and Natural Fertilizers
Industry
Based
upon our experience as manufacturer and seller for
organic-based and natural fertility and plant care products,
we believe that the demand for
natural fertility and plant care products
has been growing steadily,
along with the increasing demand for organic foods and other items marketed as more natural and earth friendly
.
According
to
marketresearch.com
, consumer packaged goods in the lawn and garden sector are estimated to grow at roughly 3.5-4% each
year through 2014. Growth will be led by fertilizers and growing media posting above average gains.
At
present,
Organic fertilizer products represent a small share of the approximately $9 billion consumer packaged lawn
and garden market in the U.S
., roughly 10%, or $900 million. Since 2007 organic fertilizers and growing
media revenues have grown at over 10%, annually, over the past several years, which is greater than twice the average rate for
the category of about 4% over the same time periods. D
emand for these types of products has increased as consumers are
generally becoming more aware of the environment and the negative effects from using synthetic fertilizers and pesticides, such
as contamination of waterways attributed to chemical fertilizers. The same study notes that Baby-boomers are just coming in to
their gardening years, and this will support continued growth in the sector.
It
is managements’ opinion that a growing segment of the population is looking for simpler and more complete solutions for
lawn and landscape care. The green movement has consumers thinking more about the environment and realizing the benefits
of working with nature
. As a result,
we believe we have our prosperity with our quality
organic products, education first approach and easy-to-use annual care programs on this fast growing market segment.
Our
Competitive Advantages
We
position ourselves as developers of organic-based, natural and hybrid-organic products that support sustainability in the landscape.
We evaluate our product offerings frequently and make formula adjustments or improvements as needed, or when appropriate, as science
and agronomy advance, and allow for easier and more affordable use of organic components and materials. W
e
believe we have the following competitive advantages over our competitors:
Strengths
- Internal
·
Passion/vision :
Mr.
Styles and Mr. Talbert have been working in their fields of expertise for more than thirty, and twenty years, respectively. They
founded the company and are dedicated to its success. This exhibits a clear advantage over new companies entering the category.
·
Industry relevant experience:
Mr.
Styles has a 35 year career in the lawn and garden industry. Mr. Talbert has a 20+ year career as a marketing/communications professional.
This exhibits a clear advantage over new companies entering the category.
·
Product diversity:
We
have the ability to produce a wide variety of products, with very little transition time between formulations. This gives us an
advantage when preparing products for different parts of the country that may have different nutrient requirements. This exhibits
a clear advantage over new companies entering the category.
·
Industry contacts – Mr. Styles has been involved in the greens industry for over 3 decades. During this time he has met
and worked with a diverse group of local, regional and national companies. These contacts provide invaluable input into understanding
trends and patterns with regard to consumer habits and new product interests. This exhibits a clear advantage over new companies
entering the category.
·
Timely and competitive product line – Mr. Styles has been working with sustainable and organic based components for over
8 years. The green movement is in its infancy and we exhibit a clear advantage over companies just now getting into the category.
·
Product performance – Many of our formulas including Urban Soil Life Maxx™ and Bio-Balance pH™ granular products,
provide real and permanent change to the soil structure. The performance of the product is obvious with regard to increased microbial
populations and their activity. Traditional chemical fertilizers provide only limited time fertility, offering no benefit for
soil health and no components that support any measure of sustainability. This exhibits a clear advantage over traditional, synthetic-based
fertilizers.
·
Diverse experiences in management team. Our diverse management team members compliment each others’ strengths and weaknesses
very well. Mr. Styles has significant experience in the field seeing and understanding product needs first hand. Mr. Talbert has
been involved in developing and executing marketing plans on the local and regional levels for many, many years. Mr. DiFraia has
extensive experience with manufacturing products on a large scale, with great attention to detail. This exhibits a clear advantage
over new companies entering the category.
·
Exposure on regional and national media – Very few companies our size have had the level of local, regional and, in some
cases, national exposure on radio and television. This exhibits a clear advantage over new companies entering the category.
Strengths
External
·
Organic-based approach is riding green movement – The green economy is in its infancy. As it relates to organic based fertilizers
and soil conditioners, these types of products in the consumer packaged lawn and garden sector are expected to continue to grow
at twice the rate of traditional fertilizer sales through 2014.
·
Consumer awareness and acceptance of organic-based products – The green economy is in its infancy. As it relates to organic
based fertilizers and soil conditioners, these types of products in the consumer packaged lawn and garden sector are expected
to continue to grow at twice the rate of traditional fertilizer sales through 2014. This exhibits greater acceptance and predilection
to purchase these types of products over their traditional counterparts.
·
Market category has experienced 5%-10% growth annually in the past 4 years, and it is expected to continue to grow at twice the
average growth rate of 3.5% - 4% through 2014.
Our Strengths
Marketing
Strategy
The
marketing strategy is designed to increase market share and sales of OPH branded products in the Eastern United States by promoting
our exclusive organic based and natural landscape care products at competitive prices. Our marketing will always include
an emphasis on educating the consumer and the general public about the true nature of plant health. We will achieve this
through the use of traditional as well as new media venues, where information and education are a primary factor in the consumer
buying process. In addition we will implement grass roots efforts to create new strategic alliances with municipalities,
community organizations, regional and national foundations, universities and industry trade/buying groups. We will further forge
relationships with like-minded companies including other fertilizer manufacturers, botanical gardens, agricultural entities, plant
material companies and possibly even organic food producers. We plan to average the combined marketing efforts and public relations
initiatives to bring about and reinforce positive change in the minds of our every-day consumer resulting in an increase in consumer
confidence, brand integrity and purchases. Our creative strategy will continue to feature Billy Styles as the visionary behind
the success and expansion of Organic Plant Health, a new provider of organic based and natural fertility and soil conditioner
products for the green minded do-it-yourselfer. Our focus has been and will continue to be one of education, first, whereby we
teach our customers about the true nature of soil and plant health. The reason for this is that much of the information provided
to the consumer by large, national fertilizer manufacturers provides partial or incomplete information that may mislead the consumer
with regard to the effects on soil and plant health or sustainability. We will continue to insert a straight-talk dialogue into
the consciousness of the public wrapped in Billy Styles' ability to convey our message of the benefits related to adherence to
our annual program schedules, proper maintenance practices and the homeowner's personal responsibility for the success and pride
of their landscape.
Sales
Strategy
Our
strategy for increasing sales includes:
Increased
purchase volume from existing retail partners through continual acceptance of our products.
Adding
regional sales staff and support staff to expand sales efforts into regional markets up and down the east coast and certain points
in the Midwest. This will increase the number of independent retail partners purchasing products from OPH and significantly increase
revenues and profits that will be used for further expansion efforts. We anticipate adding an additional 50-100 retail
partners in 2012 if we are partially or fully funded through this offering.
We
also anticipate adding more independent retail partners through expansion into other regions, and the promotion of the business
model on the OPH web site.
The
OPH website will continue to be developed in 2012, as we broaden our resource materials and video library. E-commerce function
was added to the website in Q2 2011 to provide for an additional revenue stream. OPH is not forecasting appreciable online
sales in 2011, however increases should begin to occur as the company begins to allocate online-marketing dollars targeted to
building the online revenue stream in Spring 2012.
OPH
anticipates no sales growth and in some cases, declines from existing retail outlets for 2011 and the first half of 2012, in light
of the current economic climate and our inferior product packaging. However, company management believes that the introduction
of new packaging in early 2012, afforded by partial or full funding from this offering, will increase consumer interest in our
exclusive products and spur an increase in sales compared to current and past revenues. Management believes the new branding and
packaging design will significantly improve the company’s ability to compete, head-to-head. However, there is no assurance
that new branding and packaging will be developed, and if developed, there is no assurance that this change will increase sales
or sales opportunities.
Additional
sales increases are expected in 2013 through 2014 as the company rolls out additions to the OPH product line to strategically
fill gaps in the product offering. These are high volume low cost products for the retail market and online community, as well
as bulk products sold to the commercial landscape industry and agricultural markets. Enhancements to the product offering will
ensure a strong competitive advantage. However, there is no assurance that new products will be introduced, and if introduced
there is no assurance that sales will increase as a result of these introductions.
The
Impact of the Recession after 2 years of growth.
Organic
Plant Health was founded in late 2006 by Billy Styles and Alan Talbert, two entrepreneurs from different backgrounds that sought
to achieve a common goal of changing the way American’s Grow plants in their homes, landscapes and commercial scapes. The
company started operations in April of 2007. Company revenues in 2007 and 2008, prior to the recession, were growing at an aggressive
pace. Gross Revenues in 2007 were $481,291.61 for the three quarters ended, December 31, 2007, with a Gross Profit of $261,513.83,
or 54%. Gross Revenues in 2008 were $1,416,125.81 for the four quarters ended, December 31, 2008, with a Gross Profit of $975,792.38,
or 69%. New customer acquisition grew at an aggressive pace in the first two years of the company’s history. 2007 saw customer
counts reach approximately 400 people. In 2008 the company added another 1,400 customers. The recession didn’t begin to
affect our new customer additions and revenues until late Q1 2009. It was obvious then that revenues would be flat for an extended
term until unemployment rates decreased significantly and consumer confidence bounced back. Our revenues were essentially flat
in 2010 over 2009, which is somewhat of an accomplishment for our business since, nationally, retail revenues continued to slide
in 2010. Unemployment rates remained high and consumer confidence did not bounce back as expected due to a variety of national
and international economic factors that slowed the emergence from the global recession.
The
company is very optimistic about prospects for the future. We have weathered most of the effects from the recession and feel our
added focus on increasing sales through expansion into other regions and sales channels. This diversity of revenue channels should
provide the company with sustainable sales growth, and profitability within the next 24 months. However, there is no assurance
the company will expand into other regions or develop additional revenue channels, whether funds are received from this offering
or not. Further, if partial or full funding is received from this offering, and if expansion does occur, and if diverse revenue
channels are established, there is no assurance that sales growth and profitability will be realized any time in the future.
Positive
Reputation within the Regional Greens Industry
Organic
Plant Health and its management have developed a positive reputation over the last several years in the greens industry in the
region. Billy Styles, company president and CEO, is well known for his industry knowledge, decades of field experience, and passion
for helping others learn about the true nature of soil and plant health in the region. Billy is frequently called upon to consult
with greens industry professionals about problems they face in managing landscape care. He also meets frequently with garden clubs,
as well as local and regional associations geared towards promoting sustainable maintenance practices inside and outside of the
home and business. One example of the latter is Billy’s involvement with the Union County Neighborhood Leaders Forum, (UCNLF)
– he was the keynote speaker at the UCNLF Spring Conference in 2011.
Reliable
Supplier Network for Low-Cost Raw Materials
Many
of the raw materials we use in our proprietary blends are commodity products that are available from a variety of sources. We
practice redundancy with our suppliers on these products to ensure availability at a competitive price. We strive to find excellent
vendors from whom to buy our raw goods and also strive to be a good customer for our vendors. Our belief is that long-term relationships
play a role in maintaining low cost production and profitability.
Experienced
Management and Operational Teams with Greens Industry Market Knowledge
Our
senior management team and key operating personnel have extensive management and operating experience and greens industry knowledge.
In particular, Mr. Billy Styles, our Pres/CEO is a 5
th
generation farmer and has managed and operated businesses
in the greens industry for approximately 35 years. Mr.
Alan Talbert, our VP/COO has 22 years experience in management and
operations in the Marketing/Communications industry, the last 8 of which have been highly focused on the greens industry. Mr.
Paul DiFraia, VP has 30+ years experience in management and manufacturing, having worked many of those as principal of a Johnson
& Johnson company. The Company’s Manufacturing and Distribution Manager, James Islam, has more than 20 years experience
in regional distribution and developing processes and efficiencies to streamline costs and maintain the highest level of quality.
We believe that our management team’s experience and in-depth knowledge of this business will enable us to continue to successfully
execute our expansion strategies. In addition, we believe our management team’s experience will enable us to continue
to take advantage of market opportunities that may arise.
We
are Taking Advantage of Industry Trends
As
a small company we are able to respond to market forces and trends more quickly than larger manufacturers. This allows the company
to take advantage of certain opportunities afforded when industry and market trends reveal themselves. For example, when we learned
that incorporating sources of organic matter held multiple benefits for a variety of growing environments, we chose to incorporate
sources of organic matter into our products for use in lawns, gardens and ornamental beds, and have done so since 2007. Organic
matter has many benefits for the soil, which include increasing microbial activity, diversity in the soil food web, and helping
to ease compaction, as well as improving water and nutrient, holding capacity. The combined effects from using organic matter
help the homeowner or commercial business reduce the amount of supplemental irrigation needed, thus saving them money on their
water bill.
Although
management believes that our products are superior to others in the category, our company size is too small at this point to have
any significant impact on the entire lawn and garden category regionally or nationally. However, management does believe that
providing added benefits in our products now, in the early stages of our existence, may give the company an advantage over our
competitors as we grow and expand into other markets.
Our
Proposed Growth Strategy
Based
upon the current demand for organic based fertilizers, soil conditioners and plant care products, we believe we have an opportunity
to increase our revenues, net income and gross margins by expanding our sales model into other regional markets, capturing a larger
market share, and expanding our production, manufacturing and/or distribution capabilities. In addition, our growth will also
afford us the opportunity to develop new products for which we believe there is a large and increasing national demand. We seek
to increase our revenues by taking advantage of the increasing demand for organic based fertilizers, soil conditioners and plant
care products. As such we have developed a growth strategy that we believe will allow us to capitalize on this opportunity.
Our
growth strategy is focused on increasing revenues in three distinct ways: (i) expansion of our direct to retailer sales model
in regional markets on the east coast and points in the mid-west; (ii) expansion of our wholesale distributor sales model in select
regions; (iii) and by developing new products and services targeted at both a broad base of homeowner and commercial businesses,
and to targeted submarkets within the greens industry. An example of the latter would be a specific line of fertilizers targeted
to certain agriculture and farming markets.
As
the company develops new products or improves existing products, and then further, identifies new markets and opportunities for
these products, we will register the products we plan to offer in that market with the appropriate State and Federal Agencies.
Since the cost of registration is expensive, we will only register our products in markets or states in which we believe there
is an opportunity to achieve successful distribution and sell-though of our products.
Generally
speaking, the cost of registration is about $250 per year, per product, for initial registration. In addition, most all states
require a Fertilizer license (approximately $100 - $200 per state), and most states charge a monthly tonnage fee related to the
quantity of product sold in that state. In all we can expect to pay approximately $4,500.00 - $6,000.00 per state, per year to
keep our products registered and legal for sale.
As
registration relates to e-commerce, we will only market our products in areas or states where our products are already registered.
As our expansion occurs, and as working capital becomes available, we will increase the rate at which we register our products.
We have identified several service companies that will assist us with the registration process. Eventually the company plans to
have all of its products registered in every viable market across the country. However, there is no assurance that the company
will register each if its products in every state, and if the company does register each product in every state, there is no assurance
that this will result in successful and profitable sales in that state.
Develop
new products
We
have plans to develop new products over the next few years targeted to specific segments of the residential, commercial and Ag/Farmer
fertilizer markets. 1) Liquid & Granular organic based fertilizers for use inside and outside of the home. These products
will primarily be smaller in size and weight and are targeted for Internet Ecommerce and on-shelf, retail partner sales. 2) A
line of granular and liquid fertilizers targeted to the commercial landscaper and agriculture segments. These products will be
developed using key macro and micronutrients specific to the industry and will be sold at lower price points to be competitive
in those segments. Management believes commercial and Ag/Farmer use of organic based fertilizers will increase, based on the previously
discussed consumer demand. We have already observed instances in the southeast, where residential consumers have demanded that
their landscape service providers use organic based and natural products on their landscapes, or risk losing the contract. We
have also been told by customers that engage in the development of real estate projects that their some of their customers have
demanded a switch to more environmentally responsible landscape care products.
Products
under consideration
|
Devel.
Stage
|
R&D
Cost
|
PJ
Launch Date
|
1.
Indoor Plant Fertilizer
|
Investigation
|
$30,000
|
Fall
2012
|
2. Insect Repellants
|
Investigation
|
$25,000
|
Spring
2013
|
3. Liquid Turf Fertilizers
|
Investigation
|
$40,000
|
Spring
2013
|
4. Liquid Bio-Fungicides
|
Investigation
|
$20,000
|
Spring
2012
|
5. Comm/Ag/Farm
Fertilizers
|
Investigation
|
$45,000
|
Spring
2013
|
Although
management plans to continue research and development on these product categories, there is no assurance that any actual products
will be developed for the noted categories. And if there are products developed, there is no assurance that they will be in any
great demand.
Increasing
production capacity
Our
current production equipment and components are adequate to meet current demand and limited future demand. However, to meet the
demand anticipated later in 2012, based on the planned expansion of our sales efforts, we will need to move to a larger production
and warehouse facility. This larger facility will provide greater warehousing space for inventory items, which will allow us to
continue to meet delivery requirements for our customers. This larger facility will also allow us to upgrade existing equipment
and to utilize additional components to further increase our production efficiency, and help us achieve overall cost savings,
which will attribute to increased profitability.
Our
manufacturing expansion costs and timeline are largely contingent upon the level of funds raised in this offering, however our
current lease at our manufacturing/warehousing facility is scheduled to end on March 31, 2012. As illustrated in our USE OF FUNDS
charts, if we receive full funding we plan to move to a 18,000 – 24,000 sq. ft. facility at an annual cost of about $187,000.
If partially funded through this offering, we plan to move into a 12,000 – 18,000 sq. ft. facility at an annual cost of
about $119,000. If partial funding from this offering is not adequate to afford moving to a larger facility, we have considered
outsourcing the production of our granular products and possibly our liquid products, as well. However, some companies that provide
outsourcing services of fertilizer production have minimum production requirements, and there is no assurance that we will be
able to meet their requirements. If outsourcing the production is not an option for us, then we will secure additional warehouse
space in an affordable facility as near as possible and feasible to our existing manufacturing facility.
Strengthening
R&D
Over
the first 4 years of the business we have limited the amount of funds allocated to research and development because there were
limited funds available to commit. Instead, our focus has been on building a market for our existing products and then understanding
the opportunities for additional products that will fill in gaps in our product offering.
Additional
research and development is required to keep pace with competitors or take advantage of opportunities we believe exist in the
lawn and garden category. We have identified several opportunities to broaden our product offering and we plan to continue development
of these new products as funding becomes available. As our business expands we will commit greater dollars to R&D to meet
this demand.
Products
under consideration
|
Devel.
Stage
|
R&D
Cost
|
PJ
Launch Date
|
1.
Indoor Plant Fertilizer
|
Investigation
|
$30,000
|
Fall
2012
|
2. Insect Repellants
|
Investigation
|
$25,000
|
Spring
2013
|
3. Liquid Turf Fertilizers
|
Investigation
|
$40,000
|
Spring
2013
|
4. Liquid Bio-Fungicides
|
Investigation
|
$20,000
|
Spring
2012
|
5. Comm/Ag/Farm
Fertilizers
|
Investigation
|
$45,000
|
Spring
2013
|
Strengthening
our relationships with key customers and diversifying our customer base.
We
intend to strengthen our relationships with key customers while further expanding our customer base. We plan to continue providing
high-quality and cost-competitive products to our existing customers and to use our existing customer network and strong industry
reputation to expand our product sales up and down the east coast and to points in the mid-west.
We
also plan, subject to available financing, to improve our sales networks by establishing master retail partners in regional hub
markets to allow us to sell our products directly to the end users.
We intend to continue to use customer feedback to improve
the quality of our products and services and to strengthen our base of regional customers as we grow into a national company.
Seasonality
Our
operating results and cash flows historically have been subject to seasonal variations. Because a high percentage of our
sales are from lawn care fertilizers our revenues increase proportionately during the fall, late winter and spring months.
Conversely, our sales cycle dips during the summer months and early winter months. As we expand our sales into other parts of
the country and online via our ecommerce website, our sales cycles will broaden and we will experience fewer peaks and valleys.
However, this expansion process will take time to develop and until this occurs, we will continue to experience revenues in a
cyclical fashion.
Operations
We
produce, distribute and sell contemporary, professional grade, organic, natural and environmentally responsible products
for the continual care of the urban landscape through its wholly-owned subsidiary, Organic Plant Health, LLC (OPH), a North Carolina
Limited Liability Corporation located in Charlotte, North Carolina. These products improve soil health and plant health, control
for fungus, diseases and insect infestation in all landscapes and properties.
We
operate two facilities: 1) An 11,000 square foot production facility on Monroe Road in Charlotte, NC where production
of the proprietary granular and liquid products occurs. 2) A retail store located in downtown Matthews servicing residential Do-It-Yourselfers
and commercial landscapers. We also distribute products through master distributors, which mirror the Matthews store, and
through independent retailers such as Ace Hardware locations and garden centers throughout the region. These products are
formulated and blended from raw materials brought in from around the country. Our innovative products and education oriented,
customer-first business practices appeal to green-minded consumers and businesses along with homeowners with do-it-yourself tendencies,
two of the fastest growing segments in the residential consumer market. The Company currently services over 4,500 residential
customers located throughout the region, and over 100 commercial landscapers.
Products
Historically,
our business has been primarily focused on our annual turf care fertilizers and soil conditioners. We produce 24 exclusive products
in a range of sizes, 9 of which are used exclusively on turf grasses. We believe that acceptance of our turf care products will
lead to additional purchases of our other 15 fertilizers, soil conditioners or controls for insect and disease. We
believe we offer retailers a comprehensive product line principally in the medium to upper price range in most all categories. Based
on our sales and client base, we believe our products represent good value, and that the style and quality of our fertilizers
and soil conditioners compare favorably with well known products in the lawn and garden industry.
The
following table lists our product categories and their respective contribution to our sales for the twelve months ended December
31, 2010.
ProductCategory
|
Main
Target Market
|
Revenue
($)
|
Revenue
(%)
|
Soil
Health
|
Residential
/ Commercial / Agri-Business
|
$231,486.07
|
22.54%
|
Turf
Fertility
|
Residential
/ Commercial / Agri-Business
|
$492,448.21
|
47.95%
|
Garden
& Ornamental
|
Residential
/ Commercial
|
$70,244.35
|
6.84%
|
Garden
Tools & Seeding Supplies
|
Residential
/ Commercial
|
$133,919.33
|
13.04%
|
Pest
Control
|
Residential
/ Commercial
|
$98,897.05
|
9.63%
|
Summary
of the products:
Soil
Health:
Urban
Soil Life Maxx™
Jackhammer
Maxx™
Soil
Energy™
Turf
Fertility:
OPH
Pre-Emergent™ 16-0-8
OPH
Pre-Emergent™ 0-0-7
Summer
Care™
Bio-Balance
pH™
Germinate™
Top
Growth™
Hibernate™
Winter
Care™
Organic
Seeding Mulch™
Garden
& Ornamental:
Billy’s
Organic Planting Mix™
Garden
& Flower Blend™
Urban
Bloom & Evergreen™
Urban
Tree Care™
Sunburst™
Vita-Root™
Good
Day Roses™
Good
Night Roses™
Good
Health Roses™
Pest
Control:
Eco-Cedar™
Good
Health Landscape™
Good
Health Roses™
Turf
& Garden Warrior™
Various
3
rd
Party Pest Controls
Garden
Tools & Seeding Supplies:
Gloves,
Rakes, Hoses, etc.
Spreaders,
Pump Sprayers, etc.
Grass
Seed, Moisture Retention Mulch, etc.
Manufacturing
We
currently operated approximately 11,000 sq. ft. of manufacturing space and are operating at approximately 35% - 50% capacity
depending upon the season. This manufacturing facility is located adjacent to our corporate office in Charlotte, NC.
We consider the machinery and equipment at such location generally to be relatively up to date and well-maintained. The manufacturing
equipment at this location includes a 65 foot custom blending machine with 5 primary bulk hoppers and 3 micro-component hoppers.
This machine also uses a sophisticated computer system that can retain up to 99 customized granular formulas. Additionally, the
machine uses a tumbling blending mixer and bagging unit, along with a bagging conveyor system with a heat sealer. We utilize fork-lift
mounted loading hoppers to move raw materials into the primary hoppers.
Our
manufacturing strategy includes:
|
•
|
|
Increased efficiency to reduce
manufacturing costs
|
|
•
|
|
Installation of upgrades and new components
to increase production efficiency
|
|
•
|
|
More frequent and cost-effective production
runs,
|
|
•
|
|
Identification and recycling of product
waste, and
|
|
•
|
|
Improvement of our relationships with
suppliers by establishing primary suppliers.
|
Customers
and Suppliers
We
believe we have established long-term, stable business relationships with over 4,500 residential customers located throughout
the region, and over 100 commercial landscapers. Our products are sold in Retail Fertilizer Stores, Hardware Stores, Garden
Centers and Nurseries.
In fiscal
2010, our top 5 customers purchased product from us as follows:
Major
customers
Name
|
|
12
months ended December
31, 2010
(’000s)
|
|
|
Percentage of
Overall
Sales (%)
|
|
Customer
A
|
|
$
|
99,158
|
|
|
9.66
|
%
|
Customer
B
|
|
$
|
51,427
|
|
|
5.01
|
%
|
Customer
C
|
|
$
|
43,826
|
|
|
4.27
|
%
|
Customer
D
|
|
$
|
38,896
|
|
|
4.22
|
%
|
Customer
E
|
|
$
|
21,888
|
|
|
3.79
|
%
|
In fiscal
2010, our top 5 suppliers sold products to us as follows:
Suppliers
of Raw Materials
Name
|
|
Amount (USD)
12 months
ended December 31,
2010
|
|
Location
|
|
Percentage
of Overall Purchases (%)
|
|
Supplier
A
|
$
|
117,395
|
|
Charlotte
|
|
33.79
|
%
|
Supplier
B
|
$
|
55,643
|
|
Charlotte
|
|
16.01
|
%
|
Supplier
C
|
$
|
29,797
|
|
Charlotte
|
|
8.58
|
%
|
Supplier
D
|
$
|
27,449
|
|
Charlotte
|
|
7.90
|
%
|
Supplier
E
|
$
|
11,623
|
|
Charlotte
|
|
3.34
|
%
|
During
the nine months ended September 30, 2011, the Company had no customers whose purchases represented 10% or more of the Company’s
total revenues during the period. During the nine months ended September 30, 2011, the Company had several major suppliers that
provide a variety of raw materials to the company. These vendors, in no particular order, are Purdue Agri-Recycle, Solu-Cal USA,
Growth Products, Regal Fertilizer Company, and Arctech.
Quality
Control
Consistent
with our continuing commitment to quality, we impose various quality control standards at different stages of our production process.
Our Production Manger inspects every truckload of raw materials upon arrival to ensure it meets with our internal quality standards
and is suitable to be blended as a component for our finished goods. He also visually inspects the materials during the production
process to ensure the quality of the finished goods and to confirm the absence of foreign materials. Every pallet of finished
goods is visually inspected to ensure that it meets our internal quality standards and that it is ready for delivery to one of
our retail partners. We strictly comply with all safety regulations established by local, state and federal authorities.
Marketing
and Sales
Organic
Plant Health's marketing strategy is designed to increase market share and sales of OPH branded products along the Eastern and
Mid-Western United States by promoting our innovative, competitively superior, organic-based and natural landscape care products
at competitive prices. Our marketing plans include an emphasis on our education-first approach to customer service.
We
plan to achieve this through the use of traditional, as well as new media venues, where information and education are a primary
factor in the consumer buying process. In addition we plan to stimulate grass roots efforts to create new strategic
alliances with municipalities, community organizations, regional and national foundations, universities and industry trade/buying
groups.
We further plan to forge relationships with like-minded companies and leverage the combined marketing efforts and public relations
initiatives to bring about and reinforce positive change in the minds of every-day consumers resulting in an increase in consumer
confidence, brand integrity and purchases.
Our
creative strategy intends to continue to feature 5
th
generation farmer and Organic Expert, Billy Styles as the visionary
behind the success and expansion of Organic Plant Health, a leader in innovative organic and natural fertilizers, soil conditioners
and pest control products for the green minded do-it-yourselfer. Our focus has been and our plans are to continue to be one of
education first. We plan to continue to insert a straight-talk dialogue into the consciousness of the public wrapped in Billy
Styles' unique ability to convey our message of consistent adherence to our annual program schedules, proper maintenance practices
and the homeowner's personal responsibility for the success and pride of their landscape.
Our
plans to secure additions to our sales force is a primary goal for the company upon receiving significant funding through this
offering. The company’s plans for increasing revenue are directly related to our ability to discover and successfully hire
desired sales professionals. It will be their responsibility, under the guidance of management, to create relationships with additional
independent retail partners, garden centers, mass retailers, and distribution partners to increase the sales points of OPH branded
products in other markets. We plan to methodically hire the right sales people and support staff that will allow the company to
continue to expand from one market to the next.
The
OPH website (www.organicplanthealth.com) has launched the E-commerce web store since Q2 2011. We are not forecasting significant
sales from the website in 2011, however we plan to begin marketing the website beginning in Q4-2011 or Q1-2012, and could realize
e-commerce sales moving into the gardening season in Q2 2012. The website is a constant work in progress as we add content
in all areas, including but not limited to audio and video content, articles, photo galleries and diagnostic tools
Warehousing,
Inventory and Supply Chain Management
We
distribute fertilizers and soil conditioners to retailers and wholesalers from our manufacturing facility in Charlotte, NC. We
ship
finished products
directly from
our manufacturing facilities to third-party retailers
and wholesalers.
There
is no backlog of unshipped orders for all of our products as of September 30, 2011. We are currently able to produce all of the
fertilizer and soil conditioners needed to supply our customers from our facility in Charlotte. However, as we begin expanding
our sales force, we believe the demand will quickly outpace capacity for production at this facility. As a result, we are planning
to move to a larger production facility in order to meet anticipated demand for 2012-2015.
Intellectual
Property
As of September
30, 2011, we have the following intellectual property rights:
Trade Secrets,
Trademarks and Domain Names:
Management
has been advised by counsel to safeguard the proprietary formulas used in producing our products by utilizing Trade Secret and
Trademark intellectual property rights. The company does not own patents on the proprietary formulas from which our products are
made, nor do we own patents on the processes by which our formulas are produced. Counsel has further advised us that applying
for patent protection on our formulas would require us to disclose the exact recipes of the products, and the company is not interested
in pursuing that at this time, as we believe the Trade Secret option provides better protection. However, we do have the following
product names trademarked
Urban
Soil Life Maxx™
Jackhammer
Maxx™
Soil
Energy™
OPH
Pre-Emergent™ 16-0-8
OPH
Pre-Emergent™ 0-0-7
Summer
Care™
Bio-Balance
pH™
Germinate™
Top
Growth™
Hibernate™
Winter
Care™
Organic
Seeding Mulch™
Billy’s
Organic Planting Mix™
Garden
& Flower Blend™
Urban
Bloom & Evergreen™
Urban
Tree Care™
Sunburst™
Vita-Root™
Good
Day Roses™
Good
Night Roses™
Good
Health Roses™
Eco-Cedar™
Good
Health Landscape™
Good
Health Roses™
Turf
& Garden Warrior™
We have
registered the following domain names:
Domain
Name
|
|
Owner
|
|
Registration
Date
|
|
Expiration
Date
|
Organicplanthealth.com
|
|
OPH
|
|
|
|
March 2013
|
Organicplanthealth.net
|
|
OPH
|
|
|
|
March 2013
|
Backyardstyles.com
|
|
OPH
|
|
|
|
October 2013
|
Stylesinyourbackyard.com
|
|
OPH
|
|
|
|
October 2013
|
Grogreennow.com
|
|
OPH
|
|
|
|
February 2012
|
Grogreennow.net
|
|
OPH
|
|
|
|
February 2012
|
Grogreennow.org
|
|
OPH
|
|
|
|
February 2012
|
Organiclandscapeshow.com
|
|
OPH
|
|
|
|
September 2013
|
Theorganiclandscapeshow.com
|
|
OPH
|
|
|
|
September 2013
|
Organicplanthealthcare.com
|
|
OPH
|
|
|
|
December 2013
|
Organicplanthealthcare.net
|
|
OPH
|
|
|
|
December 2013
|
Organiclandscapecare.com
|
|
OPH
|
|
|
|
December 2013
|
Organiclandscapecare.net
|
|
OPH
|
|
|
|
December 2013
|
Organicprotocols.com
|
|
OPH
|
|
|
|
December 2011
|
Silentgardener.com
|
|
OPH
|
|
|
|
June 2012
|
Silentgardener.net
|
|
OPH
|
|
|
|
June 2012
|
Thesilentgardener.net
|
|
OPH
|
|
|
|
June 2012
|
Sodsaver.com
|
|
OPH
|
|
|
|
March 2012
|
Sodsaver.net
|
|
OPH
|
|
|
|
March 2012
|
Supersodsaver.com
|
|
OPH
|
|
|
|
March 2012
|
Supersodsaver.net
|
|
OPH
|
|
|
|
March 2012
|
Theorganicdepot.net
|
|
OPH
|
|
|
|
September 2012
|
|
|
|
|
|
|
|
Employees
We
have a human resource performance review system that allows personnel reviews to be carried out annually or semi-annually, depending
on the length of employees’ service for the Company.
We
have not experienced any significant labor disputes and consider our relationship with our employees to be good.
Government
Regulations
Our
end-use products are regulated by federal, state, and local governments, as well as various agencies thereof, including the United
States Department of Agriculture, State Departments of Agriculture, State Departments of Environmental and Natural Resources and
the Environmental Protection Agency.
In
addition to the regulations governing the sale of our end products, our current facility and any future facilities are also subject
to certain regulation. Specific permit and approval requirements are set by the state and state agencies, and in some cases, local
jurisdictions including but not limited to cities, towns, and counties. Any changes to our plant or procedures would likely increase
the need for additional permits and the cost of operations related to acquiring permits and any additional licenses required.
Certain
products produced by the company may require approval and registration by the US Environmental Protection Agency, (EPA). These
products are most always in the insecticide, fungicide, or herbicide categories. However some of the insecticidal or fungicidal
products we produce are exempt from regulation by the EPA. For example, our products Eco-Cedar™, a cedar oil based insect
repellant, and our product Good Health Landscape™, a sesame oil based insecticide and fungicide, are both exempt from regulation
by the EPA under the 25b rule of the US Insecticide, Fungicide and Rodenticide Act, related to regulation exempt components.
Certain
environmental regulations also affect the operation of our current manufacturing facility and will also affect operations at any
future facilities. Because we blend raw materials at our manufacturing facility, we are required to register the location with
the Environmental Protection Agency (EPA), and we are also required to maintain an approved water quality permit with the state
in which the plant is located, (in our case, it’s North Carolina). To be in full compliance, we maintain and hold all required
permits and certificates required by federal, state and local government regulations, where applicable. Changes in the types of
products we blend together could require greater oversight by some or all of the agencies listed above. For example, if we decided
to blend a restricted use chemical product (such as the herbicide: Prodiamine, for weed control), this would require that we acquire
additional permits for blending restricted use pesticides, and we would likely experience increased restrictions related to our
water quality permit. Any changes such as this would result in increased regulation and cost of operations.
Approvals,
Licenses and Certificates
Organic
Plant Health is listed as an authorized fertilizer dealer in NC, SC, GA, FL, NY, and PA. Due to the high cost of registering products
in the individual states, the company only registers products in states when a sales opportunity is identified and developed.
As
the company develops new products or improves existing products, and then further, identifies new markets and opportunities for
these products, we will register such products with the appropriate State and Federal Agencies. Since the cost of registration
is expensive, we will only register our products in markets or states in which we believe there is an opportunity to achieve successful
distribution and sell-though of our products. Generally speaking, the cost of registration is about $250 per year, per product,
for initial registration. In addition, most all states require a Fertilizer license (approximately $100 - $200 per state), and
most states charge a monthly tonnage fee related to the quantity of product sold in that state. In all we can expect to pay approximately
$4,500 - $6,000 per state, per year to keep our products registered and legal for sale.
Certain
products produced by the company may require approval and registration by the US Environmental Protection Agency, (EPA). These
products are most always in the insecticide, fungicide, or herbicide categories. However some of the insecticidal or fungicidal
products we produce are exempt from regulation by the EPA. For example, our products Eco-Cedar™, a cedar oil based insect
repellant, and our product Good Health Landscape™, a sesame oil based insecticide and fungicide, are both exempt from regulation
by the EPA under the 25b rule of the US Insecticide, Fungicide and Rodenticide Act, related to regulation exempt components.
As
registration relates to e-commerce, we will only market our products in areas or states where our products are already registered.
As our expansion occurs, and as working capital becomes available, we will increase the rate at which we register our products.
We have identified several service companies that will assist us with the registration process. Eventually the company plans to
have all of its products registered in every viable market across the country. However, there is no assurance that the company
will register each if its products in every state, and if the company does register each product in every state, there is no assurance
that this will result in successful and profitable sales in that state.
Properties
Our
operating facilities consist of 1) an 11,000 square foot production and office facility on Monroe Road in Charlotte, NC where
production of the proprietary granular and liquid products occurs; 2) a 3,000 square foot retail store, with an additional 3,000
square feet of warehouse and office space is located in downtown Matthews, NC servicing residential Do-It-Yourselfers and commercial
landscapers.
We believe
that our existing facilities are well maintained and in good operating condition
.
Insurance
We
maintain various insurance policies to safeguard against risks and unexpected events. We provide unemployment insurance, work
related injury insurance and medical insurance in accordance with state and federal regulations (see
Government
Regulations
)
.
We also maintain insurance for our plants, machinery, equipment, inventories and motor vehicles.
However, we do not maintain product liability insurance for our products.
Legal
Proceedings
We
are not currently a party to any material legal or administrative proceedings. We are not aware of any material legal or administrative
proceedings threatened against us. From time to time, we are subject to various legal or administrative proceedings arising in
the ordinary course of our business.
COMPANY
HISTORY
Organic
Plant Health Inc. (the “Company”) was incorporated
in the State of Nevada on September
5, 2007 and subsequently changed its name to QX Bio-Tech Group, Inc. on October 17, 2007. The Company further changed its name
to Acumedspa Holdings, Inc. on July 30, 2009, and to Organic Plant Health Inc. on December 15, 2010.
On
July 1, 2009, the Company entered into a Plan of Exchange between the Company, Acumedspa Group LLC (“AcuMed”), a Florida
corporation, and Consumer Care of America LLC (“CCA”), a Florida corporation, pursuant to which
the
Company acquired 100% of the capital stock of AcuMed and 100% of the capital stock of CCA in exchange for an issuance by the Company
of 6,200,000 new shares of Common Stock of the Company to the Shareholders of AcuMed and CCA
. The Plan
of Exchange was approved by the Board of Directors and the Majority Shareholders of the Company on July 1, 2009.
AcuMed
and CCA were subsequently vended out after the stock exchange transaction (the “Transaction”) between the Company
and OPH was completed, The Transaction between the Company and OPH was completed has been accounted for as a reverse acquisition
and recapitalization of the Company and resulted in the change of control in the Company. Pursuant to an Agreement (the “Agreement”),
dated December 11, 2010, between and among the Company and Mr. Brian Sperber, an prior director and prior majority shareholder
of the Company (“Mr. Sperber”), Mr. Sperber acquired 100% interest in the common shares of AcuMed
,
as well as assumed any and all liabilities of AcuMed in exchange for the payment of good and valuable consideration of
not less than One Hundred dollars ($100), and acquired 100% interest in the common shares of CCA
,
as well as assumed any and all liabilities of Consumer Care Of America LLC in exchange for the payment of good and valuable
consideration of not less than One Hundred dollars ($100). As a result of the transactions consummated at the closing, the purchase
gave Mr. Sperber a 'controlling interest' in Acumedspa LLC and Consumer Care Of America LLC, and Acumedspa LLC and Consumer Care
Of America LLC were no longer wholly-owned subsidiaries of the Company.
The Agreement was approved
by the Board of Directors of the Company on December 11, 2010.
On
December 10, 2010, the Company entered into a Plan of Exchange agreement (the “Plan of Exchange”) with the members
of Organic Plant Health, LLC, (referred to herein as “OPH”), a North Carolina Limited Liability Company and Mr. Sperber.
Pursuant
to the terms of the Plan of Exchange, the Company acquired 100% of the membership interests of OPH in exchange for a transfer
of 3,985,000 shares of the Company’s Convertible Preferred Stock to OPH Members, which gave
OPH
Members a controlling interest in the Company, representing approximately 76.47% of the then issued and outstanding shares on
a dilutive basis. OPH and the Company were hereby reorganized, such that the Company acquired 100% of the ownership of OPH, and
OPH became a wholly-owned subsidiary of the Company.
The
stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of the Company whereby
OPH
is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The
accompanying consolidated financial statements are in substance those of
OPH
, with the assets
and liabilities, and revenues and expenses, of the Company being included effective from the date of stock exchange transaction. The
Company is deemed to be a continuation of the business of
OPH
.
OPH
was originally founded in Charlotte, NC in 2007 by Billy Styles and Alan Talbert. The business produces and distributes organic
based fertilizers and soil conditioners for use in the continual care of residential and commercial landscapes.
MANAGEMENT
Directors,
Executive Officers and Significant Employees
The
following table sets forth the name, age and position of each of our directors and executive officers.
Name Age Position
William
G. Styles 55
President
and CEO for the Company; Director, Chairman of the Board (1 year Term)
J.
Alan Talbert 47
Vice
President and COO for the Company; Director, Vice-Chairman of the Board (1 year Term)
Paul
K. DiFraia 62
Vice
President and CFO for the Company; Director (1 year Term)
The
following is a brief description of the principal occupation and recent business experience of each of our directors and executive
officers:
Billy
Styles: President & CEO
Billy
Styles has held the position of President and CEO of Organic Plant Health since April of 2007, the month the company came into
existence. Prior to that, Mr. Styles was President of Shrub Doctor, LLC, a North Carolina LLC, operating in the field of Tree
& Shrub fertilization and plant health management. Mr. Styles has been Chairman of the Board of Directors since the company
became a public company in December of 2010. He is serving a 1-year term.
Billy
Styles holds a variety of professional certifications: Certified Master Gardener, Certified Clean Stream Administrator, Certified
Turf Grass Professional and a Certified Plantsman.
Alan
Talbert: Vice President & COO
Alan
Talbert has held the position of Vice President of Organic Plant Health since April of 2007, the month the company came into existence.
Prior to that, Mr. Talbert was the owner and CEO of Talbert Marketing, Inc., a North Carolina corporation, operating in the field
of Marketing, Communications and Business Strategy since 1992. Mr. Talbert has been Vice-Chairman of the Board of Directors since
the company became a public company in December of 2010. He is serving a 1-year term.
Paul
DiFraia: Vice President & CFO
Paul
DiFraia has held the position of Vice President of Organic Plant Health since July of 2009. Prior to that, Mr. DiFraia had been
self-employed as a manufacturing and operations consultant since 2005. Prior to 2005 Mr. DiFraia held positions of Vice President
of Operations for Resound, Inc., a Hi-tech manufacturer of hearing devices, and President of Lifescan, Inc., a Johnson & Johnson
company, operating in the field of Medical Equipment Manufacturing. Mr. DiFraia joined Organic Plant Health as a minority investor
in July of 2009 to provide expertise for the company’s manufacturing and distribution. Mr. DiFraia has been a Director for
the company since the company became a public company in December of 2010. He is serving a 1-year term.
Compensation
of Directors
The
Board of Directors may compensate directors for their services as such. The Board of Directors may also provide for the payment
of all travel and out-of-pocket expenses in connection with Directors’ attendance at Board meetings. Each board member serves
for a one-year term until elections are held at each annual meeting.
Beginning
October 1, 2011 The Board of Directors shall be paid either $1,500 per month, or an equivalent in company common stock computed
at the share price of $0.025 per share, for their participation as Board members and participation in committees as needed. The
choice of cash or stock equivalent will be determined, jointly, by the Chairman of the Board and the individual board member.
Directors
are elected at the Company’s annual meeting of Stockholders and serve for one year until the next annual Stockholders’
meeting or until their successors are elected and qualified. Officers are elected by the Board of Directors and their terms of
office are, except to the extent governed by employment contract, at the discretion of the Board. The Company may reimburse all
Directors for their expenses in connection with their activities as directors of the Company.
Family
Relationships
There
are no family relationships amongst our management and directors.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director
or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was
a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of
any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a
civil action), the Commission or the commodities futures trading commission to have violated a Federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.
Director
Independence
We
are not subject to listing requirements of any national securities exchange or national securities association and, as a result,
we are not at this time required to have our board comprised of a majority of “independent directors.”
Compliance
with Section 16 (a) of the Exchange Act
Not
applicable.
Code
of Ethics
The
Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer or controller
or persons performing similar functions. Such Code of Ethics is filed as Exhibit 14.1 hereto.
EXECUTIVE
OFFICER COMPENSATION
The
following Summary Compensation Table shows the compensation awarded to or earned by our Chief Executive Officer and other two
most highly compensated executive officers for fiscal 2010 and 2009. Also shown is the compensation awarded to or earned by our
former President due to the fact that he held such position during a portion of fiscal 2009. The persons listed in the following
Summary Compensation Table are referred to herein as the “Named Executive Officers.”
SUMMARY COMPENSATION TABLE
|
Name and principal position
(a)
|
|
Year
(b)
|
|
Salary ($)
(c)
|
|
Bonus ($)
(d)
|
|
Stock Awards (1) ($)
(e)
|
|
Option Awards ($)
(f)
|
|
Non-Equity Incentive Plan
Compensation ($)
(g)
|
|
Nonqualified Deferred Compensation
Earnings ($)
(h)[1]
|
|
All Other Compensation ($)
(i)
|
|
Total ($)
(j)
|
Gregory Antoine
Former President
|
|
|
2010
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
2009
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
William G Styles,
President, CEO Director
|
|
|
2010
|
|
|
|
90,000
[1]
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
90,000
|
|
|
|
|
2009
|
|
|
|
90,000[2]
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
90,000
|
|
J. Alan Talbert
Vice President
COO, Director
|
|
|
2010
|
|
|
|
75,000
[3]
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
75,000
|
|
|
|
|
2009
|
|
|
|
75,000
[4]
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
75,000
|
|
Paul DiFraia Vice President
CFO, Director
|
|
|
2010
|
|
|
|
37,500
[5]
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,500
|
|
|
|
|
2009
|
|
|
|
37,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,500
|
|
[1]
The $32,900 was accrued but not paid to Mr. Styles during the years represented hereto.
[2]
The $30,000 was accrued but not paid to Mr. Styles during the years represented hereto.
[3]
The $23,200 was accrued but not paid to Mr. Talbert during the years represented hereto.
[4]
The $18,200 was accrued but not paid to Mr. Talbert during the years represented hereto.
[5]
The $35,500 was accrued but not paid to Mr. DiFraia during the years represented hereto.
The
officers of the company are currently considered “at-will” employees. The company has no compensation agreements with
the officers, however simple compensation arrangements have been made and summarized as follows:
William
G. Styles is currently under an arrangement to receive $90,000.00 in annual compensation as President and CEO of the company.
No other compensation arrangements have been made with Mr. Styles at this time.
J.
Alan Talbert is currently under an arrangement to receive $75,000.00 in annual compensation as Vice President and COO of the company.
No other compensation arrangements have been made with Mr. Talbert at this time.
Paul
DiFraia was under a compensation arrangement to receive $37,500.00 in 2010. No other compensation arrangements have been made
with Mr. DiFraia at this time. Mr. DiFraia is currently retained as a consultant, and acting CFO for the company. He has waived
further compensation at this time.
The
officers of the company, in their efforts to provide as much working capital as possible to fund the company’s operations,
occasionally defer payment of all or part of their salaries to an undetermined later date defined as some point in the future
when the company is in better financial position to afford the payments.
Outstanding
Equity Awards At Fiscal Year-End Table
None.
Option
Exercises And Stock Vested Table
None.
Pension
Benefits Table
None.
Nonqualified
Deferred Compensation Table
None.
All
Other Compensation Table
None.
Perquisites
Table
None.
Potential
Payments Upon Termination Or Change In Control Table
None.
Long-Term
Incentive Plan Awards
We
do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance to occur over
a period longer than one fiscal year, whether such performance is measured by reference to our financial performance, our stock
price, or any other measure.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
In
July 2009, the Company’s shareholders made several loans in total amount of $275,000 to the Company to fund its operations.
The summary of the loans made by each officer and director was discussed as follows:
On
July 1 2009, we entered into a convertible promissory note with Billy Styles, our President, Chief Executive Officer and Director,
in a principal amount of $165,000. The Note is due in July 2012, with interest at the floating interest rate of Prime plus 2.5%.
The interest rate will be adjusted each calendar quarter of January 1, April 1, July 1 and October 1. Effective December 31, 2010,
pursuant to the oral agreement between the Company and Mr. Styles, the principal of $165,000 was converted into 3,300,000 shares
of the Company’s Common Stock at a rate of $.05 per share. A copy of the Note with Bill Styles was attached hereto as Exhibit
10.7.
On
July 1 2009, we entered into a convertible promissory note with J. Alan Talbert, our Vice President, Chief Operating Officer and
Director, in a principal amount of $27,500. The Note is due in July 2012, with interest at the floating interest rate of Prime
plus 2.5%. The interest rate will be adjusted each calendar quarter of January 1, April 1, July 1 and October 1. As of December
31, 2009, the principal was reduced to $20,000. Effective December 31, 2010, pursuant to the oral agreement between the Company
and Mr. Talbert, the remaining principal of $20,000 was converted into 400,000 shares of the Company’s Common Stock at a
rate of $.05 per share. A copy of the Note with J. Alan Talbert was attached hereto as Exhibit 10.8.
On
July 1 2009, we entered into a convertible promissory note with Matthew Styles, son of Billy Styles, in a principal amount of
$27,500. The Note is due in July 2012, with interest at the floating interest rate of Prime plus 2.5%. The interest rate will
be adjusted each calendar quarter of January 1, April 1, July 1 and October 1. As of December 31, 2009, the principal was reduced
to $26,800. Effective December 31, 2010, pursuant to the oral agreement between the Company and Mr. Styles, the principal of $26,000
was converted into 520,000 shares of the Company’s Common Stock at a rate of $.05 per share. The remaining principal of
$800 will be paid in full when due. The Company recorded interest expense of $34 during the nine months ended September 30, 2011.
A copy of the Note with Matthew Styles was attached hereto as Exhibit 10.9.
On
July 1 2009, we entered into a convertible promissory note with David Blankenberg in a principal amount of $55,000. The Note is
due in July 2012, with interest at the floating interest rate of Prime plus 2.5%. The interest rate will be adjusted each calendar
quarter of January 1, April 1, July 1 and October 1. The Company recorded interest expenses of $797 and $2,357 during the three
and nine months ended September 30, 2011, respectively. A copy of the Note with David Blankenberg was attached hereto as Exhibit
10.10.
In
addition, the Company had outstanding balances of $60,884 due to the Company’s President as of September 30, 2011. The funds
borrowed from the Company’s President was to fund the Company’s operations, and not evidenced by any promissory note,
which was an oral agreement between the President and the Company and due on demand. Accordingly, the Company recorded interest
expenses of $1,612 and $5,053 during the three and nine months ended September 30, 2011, respectively. A written description of
the loan from our President was attached hereto as Exhibit 10.11.
On
January 1, 2011, the Company entered into a convertible promissory note (the Note) with Greentree Financial Group Inc. (“Greentree”)
in a principal amount of $100,000, which bears an interest rate of 6% per annum and is due on January 1, 2013. Pursuant to the
Note, Greentree has an option to convert all or any portion of the accrued interest and unpaid principal balance of the Note into
the common stock of the Company or its successors, at Ten Cents ($.10) per share, no sooner than December 31, 2011.
The
Note is discounted in full amount due to the issuance of 1,000,000 shares of Common Stock as sweetener to the Note, and a beneficial
conversion feature. The fair value of the 1,000,000 shares was $68,245 determined by an arm’s length payable settlement
with a non-affiliate since there was nominal trading volume of our common stock in the market, and recorded as discount to note
payable, which will be amortized over 2 years starting from January 1, 2011. The remaining discount of $31,755 represented the
intrinsic value of the beneficial conversion option, which will be amortized over 2 years starting from January 1, 2011. We recorded
interest expense from the Note of $14,000 and $42,000 for the three and nine months ended September 30, 2011, respectively.
The
carry value of the Note was $37,500 as of September 30, 2011. The 1,000,000 shares of Common Stock were issued on May 13, 2011.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership of the common stock as of
August
30
, 2011, by (i) each person who is known by the Company to own beneficially more than 5% of any classes of outstanding
Stock, (ii) each director of the Company, (iii) each officer and (iv) all directors and executive officers of the
Company as a group.
The number
and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 and 13d-5 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any other purpose. We believe that each individual or entity
named has sole investment and voting power with respect to the securities indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise noted.
|
|
|
|
|
|
|
Name of Beneficial
Owner
|
|
Number of Shares
of Common Stock
|
|
|
Percent of
Class
(1)
|
|
William
G. Styles
President,
CEO & Director
P.
O. Box 2070
Indian
Trail, NC 28079
|
|
|
22,419,200
|
|
|
|
36.62
|
%
|
J
J.
Alan Talbert
Vice
President, COO & Director
P.
O. Box 2070
Indian
Trail, NC 28079
|
|
|
3,589,720
|
|
|
|
5.86
|
%
|
|
|
|
|
|
|
|
|
|
Paul
K. DiFraia
Vice
President, CFO & Director
6812,
Summerhill Ridge Drive
Charlotte,
NC 28226
|
|
|
7,971,910
|
|
|
|
13.02
|
%
|
J
David
Blankenberg
1754
Rock Hill Church Road
Matthews,
NC 28104
|
|
|
6,379,440
|
|
|
|
10.42
|
%
|
Lisa
DeRosa
19419
Beaufain Street
Cornelius,
NC 28031
|
|
|
4,575,000
|
|
|
|
7.47
|
%
|
J
Matthew
Styles
(2)
P.
O. Box 2070
Indian
Trail, NC 28079
|
|
|
3,709,720
|
|
|
|
6.06
|
%
|
Greentree
Financial Group, Inc.
7951
SW 6
th
Street, Suite 216
Plantation,
FL 33324
|
|
|
5,261,375
|
|
|
|
8.59
|
%
|
All
officers and directors as a group (3 persons)
|
|
|
33,980,830
|
|
|
|
55.51
|
%
|
(1)
|
Based on 61,215,081 issued
and outstanding shares of common stock.
|
(2)
Matthew Styles is the son of William G. Styles, President of the Company
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in
the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issue.
We
have been advised that in the opinion of the SEC indemnification for liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the
question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed
by the court’s decision.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to shares of common stock
offered in this offering. This prospectus does not contain all of the information set forth in the registration statement. For
further information with respect to us and the shares of our common stock, we refer you to the registration statement and to the
attached exhibits. With respect to each such document filed as an exhibit to the registration statement, we refer you to the exhibit
for a more complete description of the matters involved.
You
may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities
maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of our registration
statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room
by calling the SEC at 1-800-SEC-0330.
Our
SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from
the SEC’s website at www.sec.gov, which contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC.
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2011
|
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
Index to Unaudited Consolidated Financial
Statements
|
|
Pages
|
|
|
|
Unaudited Consolidated Balance Sheets
|
|
65
|
|
|
|
Unaudited Consolidated Statements of Operations
|
|
66
|
|
|
|
Unaudited Consolidated Statement of Stockholders’/Members’ Equity (Deficit)
|
|
67
|
|
|
|
Unaudited Consolidated Statements of Cash Flows
|
|
68
|
|
|
|
Notes to Unaudited Consolidated Financial Statements
|
|
69-74
|
|
|
|
ORGANIC PLANT HEALTH, INC. AND SUBSIDIARY
|
CONSOLIDATED BALANCE SHEETS
|
AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010
|
(UNAUDITED)
|
|
|
|
|
|
|
|
9/30/2011
|
|
12/31/2010
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
56,349
|
|
|
$
|
6,625
|
|
Accounts receivable, net
|
|
|
98,738
|
|
|
|
8,213
|
|
Inventory
|
|
|
116,872
|
|
|
|
126,192
|
|
Total Current Assets
|
|
|
271,959
|
|
|
|
141,030
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
114,528
|
|
|
|
136,580
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Security deposits
|
|
|
6,700
|
|
|
|
6,700
|
|
Total Other Assets
|
|
|
6,700
|
|
|
|
6,700
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
393,187
|
|
|
$
|
284,310
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'/MEMBERS' DEFICIT
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
230,919
|
|
|
$
|
364,583
|
|
Notes payable - current portion
|
|
|
9,174
|
|
|
|
27,463
|
|
Notes payable - related parties
|
|
|
116,684
|
|
|
|
83,384
|
|
Accrued expenses
|
|
|
40,439
|
|
|
|
15,254
|
|
Accrued interest
|
|
|
26,537
|
|
|
|
17,103
|
|
Common stock to be issued
|
|
|
6,750
|
|
|
|
—
|
|
Total Current Liabilities
|
|
|
430,503
|
|
|
|
507,787
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
154,277
|
|
|
|
98,252
|
|
Notes payable - related parties
|
|
|
—
|
|
|
|
55,800
|
|
Total Long-Term Liabilities
|
|
|
154,277
|
|
|
|
154,052
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
584,780
|
|
|
|
661,839
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'/MEMBERS' DEFICIT
|
|
|
|
|
|
|
|
|
Common stock, par value $0.001; 150,000,000 shares authorized; 61,215,081
and 12,112,214 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively
|
|
|
61,215
|
|
|
|
12,112
|
|
Preferred stock, par value $0.001; 5,000,000 shares authorized; 0 and
4,000,000 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively
|
|
|
—
|
|
|
|
4,000
|
|
Paid-in capital
|
|
|
773,512
|
|
|
|
369,888
|
|
Deferred compensation
|
|
|
(18,750
|
)
|
|
|
—
|
|
Accumulated deficit
|
|
|
(1,007,570
|
)
|
|
|
(763,529
|
)
|
Total Stockholders'/Members' Deficit
|
|
|
(191,593
|
)
|
|
|
(377,529
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'/MEMBERS' DEFICIT
|
|
$
|
393,187
|
|
|
$
|
284,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements
|
ORGANIC PLANT HEALTH, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND
2010
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
9/30/2011
|
|
9/30/2010
|
|
9/30/2011
|
|
9/30/2010
|
REVENUES
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
278,706
|
|
|
$
|
292,340
|
|
|
$
|
741,799
|
|
|
$
|
828,984
|
|
Cost of Goods Sold
|
|
|
(76,856
|
)
|
|
|
(103,973
|
)
|
|
|
(239,629
|
)
|
|
|
(265,511
|
)
|
GROSS PROFIT
|
|
|
201,850
|
|
|
|
188,367
|
|
|
|
502,170
|
|
|
|
563,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
59,883
|
|
|
|
12,909
|
|
|
|
104,204
|
|
|
|
25,647
|
|
Rent
|
|
|
30,895
|
|
|
|
31,480
|
|
|
|
91,799
|
|
|
|
92,530
|
|
Bank and finance charges
|
|
|
4,082
|
|
|
|
6,017
|
|
|
|
13,208
|
|
|
|
6,923
|
|
Depreciation
|
|
|
7,527
|
|
|
|
8,150
|
|
|
|
22,580
|
|
|
|
24,451
|
|
Advertising and promotion
|
|
|
23,541
|
|
|
|
5,006
|
|
|
|
75,723
|
|
|
|
65,556
|
|
Automobile
|
|
|
3,242
|
|
|
|
1,250
|
|
|
|
11,939
|
|
|
|
3,887
|
|
Contract labor
|
|
|
24,137
|
|
|
|
27,628
|
|
|
|
83,610
|
|
|
|
40,886
|
|
Credit card processing fees
|
|
|
3,881
|
|
|
|
2,074
|
|
|
|
10,218
|
|
|
|
10,114
|
|
Website maintenance
|
|
|
225
|
|
|
|
225
|
|
|
|
3,452
|
|
|
|
8,675
|
|
Insurance
|
|
|
6,871
|
|
|
|
10,395
|
|
|
|
21,922
|
|
|
|
28,203
|
|
Travel, meals and entertainment
|
|
|
2,105
|
|
|
|
5,864
|
|
|
|
11,054
|
|
|
|
17,974
|
|
Wages and taxes
|
|
|
51,449
|
|
|
|
60,144
|
|
|
|
149,894
|
|
|
|
236,705
|
|
Commissions
|
|
|
314
|
|
|
|
4,384
|
|
|
|
6,516
|
|
|
|
13,169
|
|
Supplies
|
|
|
3,111
|
|
|
|
3,288
|
|
|
|
9,858
|
|
|
|
14,439
|
|
Telephone and utilities
|
|
|
7,290
|
|
|
|
9,167
|
|
|
|
23,260
|
|
|
|
27,725
|
|
Product development
|
|
|
12,500
|
|
|
|
—
|
|
|
|
18,500
|
|
|
|
—
|
|
Bad debt
|
|
|
—
|
|
|
|
122
|
|
|
|
3,122
|
|
|
|
122
|
|
General and administrative
|
|
|
15,301
|
|
|
|
7,169
|
|
|
|
38,170
|
|
|
|
20,366
|
|
TOTAL OPERATING EXPENSES
|
|
|
256,355
|
|
|
|
195,273
|
|
|
|
699,031
|
|
|
|
637,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(54,505
|
)
|
|
|
(6,906
|
)
|
|
|
(196,860
|
)
|
|
|
(73,899
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
(4,800
|
)
|
|
|
1,289
|
|
|
|
8,151
|
|
|
|
4,215
|
|
Interest expense
|
|
|
(17,515
|
)
|
|
|
(7,084
|
)
|
|
|
(55,331
|
)
|
|
|
(21,660
|
)
|
TOTAL OTHER INCOME (EXPENSE)
|
|
|
(22,315
|
)
|
|
|
(5,796
|
)
|
|
|
(47,180
|
)
|
|
|
(17,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(76,820
|
)
|
|
|
(12,702
|
)
|
|
|
(244,041
|
)
|
|
|
(91,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(76,820
|
)
|
|
$
|
(12,702
|
)
|
|
$
|
(244,041
|
)
|
|
$
|
(91,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE: BASIC AND DILUTED
|
|
|
**
|
|
|
|
**
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
|
|
|
60,824,782
|
|
|
|
7,892,214
|
|
|
|
40,913,374
|
|
|
|
4,607,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** Less than $.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements
|
ORGANIC PLANT HEALTH, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS'/MEMBERS' DEFICIT
|
AS OF SEPTEMBER 30, 2011
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
Common stock
|
|
Preferred stock
|
|
Paid-in
|
|
Members'
|
|
Deferred
|
|
Subscription
|
|
Earnings
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Equity
|
|
Compensation
|
|
Receivalbe
|
|
(Deficit)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
|
|
$
|
(427,472
|
)
|
|
$
|
(302,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization of company in reverse merger
|
|
|
2,992,214
|
|
|
|
2,992
|
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
118,008
|
|
|
|
(125,000
|
)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
4,900,000
|
|
|
|
4,900
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,100
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to convert debt
|
|
|
4,220,000
|
|
|
|
4,220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
206,780
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
211,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2010
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(336,057
|
)
|
|
|
(336,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
12,112,214
|
|
|
$
|
12,112
|
|
|
|
4,000,000
|
|
|
$
|
4,000
|
|
|
$
|
369,888
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
(763,529
|
)
|
|
$
|
(377,529
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued due to private placement
|
|
|
4,075,000
|
|
|
|
4,075
|
|
|
|
—
|
|
|
|
—
|
|
|
|
70,925
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to settle accounts payable
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,245
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
68,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as loan sweetener
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
67,245
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
68,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of conversion option
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services rendered
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
74,000
|
|
|
|
—
|
|
|
|
(18,750
|
)
|
|
|
|
|
|
|
—
|
|
|
|
56,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred shares
|
|
|
39,999,990
|
|
|
|
40,000
|
|
|
|
(4,000,000
|
)
|
|
|
(4,000
|
)
|
|
|
(36,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued due to private placement
|
|
|
727,578
|
|
|
|
728
|
|
|
|
—
|
|
|
|
—
|
|
|
|
64,754
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
65,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued due to private placement
|
|
|
1,300,000
|
|
|
|
1,300
|
|
|
|
|
|
|
|
|
|
|
|
63,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period ended September 30, 2011
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
(244,041
|
)
|
|
|
(244,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2011
|
|
|
61,214,782
|
|
|
$
|
61,215
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
773,512
|
|
|
$
|
—
|
|
|
$
|
(18,750
|
)
|
|
$
|
—
|
|
|
$
|
(1,007,570
|
)
|
|
$
|
(191,593
|
)
|
|
The accompanying
notes are an integral part of these consolidated financial statements
|
ORGANIC PLANT HEALTH, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
|
(UNAUDITED)
|
|
|
|
|
|
|
|
For the nine months ended
|
|
|
9/30/2011
|
|
9/30/2010
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net loss for the period
|
|
$
|
(244,041
|
)
|
|
$
|
(91,678
|
)
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Bad debt expense
|
|
|
3,122
|
|
|
|
122
|
|
Depreciation
|
|
|
22,580
|
|
|
|
24,451
|
|
Amortization of discount to note payable
|
|
|
37,500
|
|
|
|
—
|
|
Common stock issued for services rendered
|
|
|
56,250
|
|
|
|
—
|
|
Common stock to be issued
|
|
|
6,750
|
|
|
|
—
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(93,647
|
)
|
|
|
(19,048
|
)
|
Inventory
|
|
|
9,320
|
|
|
|
(57,970
|
)
|
Accounts payable
|
|
|
(65,419
|
)
|
|
|
123,566
|
|
Accrued expenses
|
|
|
25,185
|
|
|
|
22,912
|
|
Accrued interest
|
|
|
9,434
|
|
|
|
10,335
|
|
Net cash (used in) provided by operating activities
|
|
|
(232,966
|
)
|
|
|
12,690
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(528
|
)
|
|
|
(7,960
|
)
|
Net cash (used in) investing activities
|
|
|
(528
|
)
|
|
|
(7,960
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
(Payments to) proceeds from notes payable - related parties
|
|
|
(22,500
|
)
|
|
|
20,000
|
|
Proceeds from notes payable
|
|
|
142,500
|
|
|
|
—
|
|
Payments to notes payable
|
|
|
(42,264
|
)
|
|
|
(25,817
|
)
|
Proceeds from stock issuance
|
|
|
205,482
|
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
|
283,218
|
|
|
|
(5,817
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
49,724
|
|
|
|
(1,087
|
)
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
6,625
|
|
|
|
29,257
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
56,349
|
|
|
$
|
28,170
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
7,965
|
|
|
$
|
7,686
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
|
|
|
|
|
|
|
|
|
Common stock issued to settle accounts payable
|
|
$
|
68,245
|
|
|
$
|
—
|
|
Common stock issued for services rendered
|
|
$
|
56,250
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements
|
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
NOTE - 1 BASIS OF PRESENTATION
The accompanying unaudited
consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles
for complete financial statements. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting
of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results
for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
The unaudited consolidated
financial statements and related disclosures have been prepared with the presumption that users of the interim financial information
have read or have access to the Company’s annual audited consolidated financial statements and the related notes for the
years ended December 31, 2010 and 2009.
NOTE
-
2 ORGANIZATION AND BUSINESS BACKGROUND
Organic Plant Health,
LLC, (referred to herein as “OPH”), a North Carolina Limited Liability Company, was originally founded in Charlotte,
NC in 2007 by Billy Styles and Alan Talbert. The business produces and distributes organic based fertilizers and soil conditioners
for use in the continual care of residential and commercial landscapes.
On December 10, 2010,
OPH entered into a Plan of Exchange agreement (the “Plan of Exchange”) between and among the members of OPH (“OPH
Members”) and Acumedspa Holdings, Inc., (herein referred to as the Company), a publically traded Nevada corporation, and
its majority shareholder, Mr. Brian Sperber.
Pursuant to the terms
of the Plan of Exchange, Acumedspa Holdings, Inc. acquired 100% of the membership interests of OPH in exchange for a transfer
of 3,985,000 shares of the Company’s Convertible Preferred Stock to OPH Members, which gave
OPH
Members a controlling interest in Acumedspa Holdings, Inc., representing approximately 76.47% of the then issued and outstanding
shares on a dilutive basis. OPH and Acumedspa Holdings, Inc. were hereby reorganized, such that the Company acquired 100% of the
ownership of OPH, and OPH became a wholly-owned subsidiary of the Company.
The stock exchange
transaction has been accounted for as a reverse acquisition and recapitalization of the Company whereby
OPH
is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The
accompanying consolidated financial statements are in substance those of
OPH
, with the assets
and liabilities, and revenues and expenses, of the Company being included effective from the date of stock exchange transaction. The
Company is deemed to be a continuation of the business of
OPH
. Accordingly, the accompanying
consolidated financial statements include the following:
(1) The
balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree
at historical cost;
(2) The
financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization
had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of
stock exchange transaction.
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
NOTE
-
2 ORGANIZATION AND BUSINESS BACKGROUND
(CONT’D)
On December 11, 2010,
the Company vended out the two subsidiaries, ACUMEDSPA LLC, a Tennessee Limited Liability Company, and CONSUMER CARE OF AMERICA
LLC, a Florida Limited Liability Company, pursuant to an Agreement entered between and among OPH and Chinita LLC, a Nevada Limited
Liability Company (“Buyer”). Accordingly, the Buyer acquired 100% interest in ACUMEDSPA LLC and 100% interest in CONSUMER
CARE OF AMERICA LLC, as well as any and all assets and liabilities in both subsidiaries in exchange for the total payments of
not less than Two Hundred dollars ($200). As a result of the transactions consummated at the closing, the purchase gave the Buyer
a 'controlling interest' in both subsidiaries; therefore, ACUMEDSPA LLC and CONSUMER CARE OF AMERICA LLC were no longer wholly-owned
subsidiaries of the Company.
Organic Plant Health,
Inc
. and OPH are hereinafter referred to as (the “Company”).
NOTE
-
3 RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has reviewed
all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.
In May 2011, FASB issued
Accounting Standards Update No. 2011-04,
“Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”
(“ASU 2011-04”). ASU
2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the
disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new
guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially
expand its financial statement note disclosures.
NOTE
-
4 ACCOUNTS RECEIVABLE
Accounts receivable was comprised
of the following amounts at the respective dates:
|
As of
|
|
9/30/2011
|
|
12/31/2010
|
|
|
|
|
|
|
Gross trade accounts receivable from customers
|
$
|
104,049
|
|
$
|
10,545
|
Allowance for doubtful customer accounts
|
|
(5,311)
|
|
|
(2,332)
|
|
$
|
98,738
|
|
$
|
8,213
|
|
|
|
|
|
|
Bad debt expenses
of $3,122 were recognized during the nine months ended September 30, 2011 in the accompanying consolidated income statements.
NOTE
-
5 INVENTORIES
Inventories were comprised of the
following amounts at the respective dates:
|
As of
|
|
9/30/2011
|
|
12/31/2010
|
|
|
|
|
|
|
Raw materials
|
$
|
92,521
|
|
$
|
41,408
|
Work in process
|
|
0
|
|
|
14,996
|
Finished goods
|
|
24,351
|
|
|
69,788
|
|
|
116,872
|
|
|
126,192
|
Provision for obsolete inventories
|
|
0
|
|
|
0
|
|
$
|
116,872
|
|
$
|
126,192
|
|
|
|
|
|
|
NOTE
-
6 FIXED ASSETS
Property, plant and equipment were
comprised of the following amounts at the respective dates:
|
As of
|
|
9/30/2011
|
|
12/31/2010
|
Cost:
|
|
|
|
|
|
Machinery and equipment
|
$
|
178,534
|
|
$
|
178,309
|
Furniture and fixtures
|
|
25,623
|
|
|
25,623
|
Software
|
|
13,252
|
|
|
12,949
|
|
|
217,409
|
|
|
216,881
|
Less: Accumulated depreciation
|
|
(102,881
|
)
|
|
(80,301)
|
Net
|
$
|
114,528
|
|
$
|
136,580
|
|
|
|
|
|
|
NOTE
-
7 NOTES PAYABLE
The Company
had outstanding balances on its notes payable of the following amounts at the respective dates:
|
|
As of
|
|
|
|
9/30/2011
|
|
|
12/31/2010
|
|
Bank of Granite,
8.5% interest rates, due on November 26, 2011
(1)
|
|
|
9,174
|
|
|
|
27,463
|
|
|
Bank of NC, 6.5% interest rate, due on June
30, 2013
(2)
|
|
|
74,277
|
|
|
|
98,252
|
|
|
Greentree Financial
Group, 6% interest rate, due on January 1, 2013, net of discount
(3)
|
|
|
37,500
|
|
|
|
-
|
|
|
US Green Pros, LLC 5% interest rate, due on
January 1, 2013
(4)
|
|
|
42,500
|
|
|
|
-
|
|
|
|
|
$
|
163,451
|
|
|
$
|
125,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
NOTE
-
7 NOTES PAYABLE (CONT’D)
(1) The Company has a line of credit
with Bank of Granite at an interest rate of 8.5% per annum. The balance on this credit line was $9,174 as of September 30, 2011.
Accordingly, the Company recorded interest expenses of $383 and $1,111 during the three and nine months ended September 30, 2011,
respectively.
(2) The Company has a long-term loan
payable to Bank of North Carolina at an interest rate of 6.5% per annum and due on June 30, 2013. The balance of this bank loan
was $74,277 as of September 30, 2011. Accordingly, the Company recorded interest expenses of $1,127 and $3,687 during the three
and nine months ended September 30, 2011, respectively.
(3) On January 1, 2011, the Company
entered into a convertible promissory note (the Note) in a principal amount of $100,000 payable to Greentree Financial Group (“Greentree”),
which bears an interest rate of 6% per annum and is due on January 1, 2013. Pursuant to the Note, Greentree has an option to convert
all or any portion of the accrued interest and unpaid principal balance of the Note into the Common Stock of the Company or its
successors, at Ten Cents ($.10) per share, no sooner than December 31, 2011. The conversion price associated with the Note was
determined based on the facts that the Company had nominal trading volume for its stock, and had negative shareholder equity at
the time of issuance.
The Note is discounted
in full amount due to the issuance of 1,000,000 shares of Common Stock as sweetener to the Note, and a beneficial conversion feature.
The fair value of the 1,000,000 shares was $68,245 determined by an arm’s length payable settlement with a non-affiliate
since there was nominal trading volume of our common stock in the market, and recorded as discount to note payable, which will
be amortized over 2 years starting from January 1, 2011. The remaining discount of $31,755 represented the intrinsic value of
the beneficial conversion option, which will be amortized over 2 years starting from January 1, 2011. We recorded interest expense
from the Note of $14,000 and $42,000 for the three and nine months ended September 30, 2011, respectively.
The carry value of
the Note was $37,500 as of September 30, 2011. The 1,000,000 shares of Common Stock were issued on May 13, 2011.
(4) The Company has a long-term loan
payable to US Green Pros, LLC at an interest rate of 5% per annum and due on January 1, 2013. The balance of this loan was $42,500
as of September 30, 2011, of which $40,000 was received during the second quarter of 2011. Accordingly, the Company recorded interest
expenses of $535 and $1,090 during the three and nine months ended September 30, 2011, respectively.
NOTE
-
8 NOTES PAYABLE – RELATED
PARTIES
In July 2009,
the Company’s shareholders made several loans in total amount of $275,000 to the Company to fund its operations. The shareholder
loans were evidenced by promissory notes due in July 2012, with interest at the floating interest rate of Prime plus 2.5%. The
interest rate will be adjusted each calendar quarter of January 1, April 1, July 1 and October 1. The principal balance of the
shareholder loans was $55,800 as of September 30, 2011. Accordingly, the Company recorded interest expenses of $808 and $2,391
during the three and nine months ended September 30, 2011, respectively.
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
NOTE
-
8 NOTES PAYABLE – RELATED PARTIES
(CONT’D)
In addition, the Company
had outstanding balances of $60,884 due to the Company’s President as of September 30, 2011. The funds borrowed from the
Company’s President were to fund the Company’s operations. The loan agreement was not evidenced by any promissory
note, but rather a verbal agreement between the President and the Company, and due on demand. Accordingly, the Company recorded
interest expenses of $1,612 and $5,053 during the three and nine months ended September 30, 2011, respectively.
NOTE
-
9 CAPITAL TRANSACTIONS
On
March 14, 2011, the Board of Directors and Majority Shareholders of the Company authorized the effectuation of a 1-for-4 reverse
split of the Company’s Preferred Stock (the “Preferred Stock Reverse Split”). Accordingly, the Preferred Stock
Reverse Split
combined the Company’s authorized and outstanding
Preferred
Stock on the basis of 4 authorized and outstanding shares being changed to 1 authorized and outstanding share.
All
options, warrants, and any other similar instruments convertible into, or exchangeable or exercisable for, shares of preferred
stock were proportionally adjusted. As a result, the Company’s number of authorized shares of preferred stock decreased
to 5,000,000 shares, of which 3,999,999 shares of preferred stock issued and outstanding.
The
Preferred
Stock Reverse Split
became effective upon
the Company filing a Certificate of Change with the
Secretary of State of the State of Nevada on
April 21, 2011. The consolidated statement of stockholders’ equity has
been restated per FASB 128 paragraph 134, as if the
Preferred Stock Reverse Split
took effect
at the beginning of the periods presented.
On February 28, 2011,
the Board of Directors of the Company approved the issuance of 4,075,000 shares of the Company’s Common Stock in exchange
for cash payment of $75,000 made by an investor. The transaction was independently negotiated between the Company and the investor.
The Company evaluated the transaction based on the fact that the Company had nominal trading volume for its stock, and had negative
shareholder equity at the time of issuance. The proceeds from this issuance mitigated the Company’s cash pressure in short
term.
On March 31, 2011,
the Board of Directors of the Company approved the issuance of 1,000,000 shares of the Company’s Common Stock to settle
accounts payable of $68,245 to a non-related party. The transaction was independently negotiated between the Company and the creditor.
The Company evaluated the transaction based on the fact that the Company had nominal trading volume for its stock, and had negative
shareholder equity at the time of issuance. The settlement of the accounts payable through the issuance of common stock preserved
the limited cash available currently in the Company.
On April 22, 2011,
the Board of Directors of the Company approved the conversion of 3,999,999 shares of the Company’s Preferred Stock into
39,999,990 shares of the Company’s Common Stock at a ratio of 1:10, which was designated by the Amendment to Articles of
Incorporation of the Company.
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
NOTE
-
9 CAPITAL TRANSACTIONS
(CONT’D)
On May 13, 2011, the
Company issued 1,000,000 shares of Common Stock of the Company to the Note holder pursuant to the Convertible Promissory Note,
dated January 1, 2011 (see Note 7). The Note is discounted in full amount due to the issuance of 1,000,000 shares of Common Stock
as sweetener to the Note, and a beneficial conversion feature. The fair value of the 1,000,000 shares was $68,245 determined by
an arm’s length payable settlement with a non-affiliate since there was nominal trading volume of our common stock in the
market, and recorded as discount to note payable, which will be amortized over 2 years starting from January 1, 2011. The remaining
discount of $31,755 represented the intrinsic value of the beneficial conversion option, which will be amortized over 2 years
starting from January 1, 2011. We recorded interest expense from the Note of $14,000 and $42,000 for the three and nine months
ended September 30, 2011, respectively. The transaction was independently negotiated between the Company and the note holder.
The Company evaluated the transaction based on the fact that the Company had nominal trading volume for its stock, and had negative
shareholder equity at the time of issuance. The proceeds from this Convertible Promissory Note mitigated the Company’s cash
pressure in short term.
On June 27, 2011, the
Board of Directors of the Company approved the issuance of 727,578 shares of the Company’s Common Stock at a price of $.09
per share, in exchange for cash payment of total $65,482.. The transaction was independently negotiated between the Company and
the investors. The Company evaluated the transaction based on the fact that the Company had nominal trading volume for its stock,
and had negative shareholder equity at the time of issuance. The proceeds from this issuance mitigated the Company’s cash
pressure in short term.
In July of 2011, the
Board of Directors of the Company approved the issuance of 1,300,000 shares of the Company’s Common Stock at a price of
$.05 per share, in exchange for cash payment of total $65,000. The transaction was independently negotiated between the Company
and the investors. The Company evaluated the transaction based on the fact that the Company had nominal trading volume for its
stock, and had negative shareholder equity at the time of issuance. The proceeds from this issuance mitigated the Company’s
cash pressure in short term.
Our current management
and beneficial owners beneficially own, approximately 65% of our outstanding Common Stock and will have full control over the
affairs of the Company. The beneficial owners will be able to continue to elect over a majority of our directors and to determine
the outcome of the corporate actions requiring shareholder approval, regardless of how additional security holders of the Company
may vote. The investors will have no ability to influence corporate actions.
NOTE
-
10 STOCK BASED COMPENSATION
In May of 2011, the Company entered into
a consulting service agreement with a Consultant for business advisory services in exchange for 1,000,000 shares of Common Stock
of the Company. The agreement had a term of 6 months effective from May 15, 2011 ending November 15, 2011. The fair value of this
stock issuance was determined by the fair value of the Company’s Common Stock on the grant date, at a price of approximately
$.075 per share. Accordingly, the Company calculated the stock based compensation of $75,000 at its fair value and
booked pro rata within the relative service periods. For the nine months ended September 30, 2011, the Company recognized $56,250 to
the consolidated statements of operations. The unrecognized compensation was recorded as deferred compensation amounting
to $18,750 as of September 30, 2010. The transaction was independently negotiated between the Company and the Consultant. The
Company evaluated the transaction based on the fact that the Company had nominal trading volume for its stock, and had negative
shareholder equity at the time of issuance. The stock based compensation preserved the limited cash available currently in the
Company.
ORGANIC PLANT
HEALTH INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
NOTE
-
10 STOCK BASED COMPENSATION
(CONT’D)
On September 1, 2011,
the Company entered into an agreement with a Security Attorney for legal advisory services in exchange for cash payment of $6,000
and the issuance of 75,000 shares of Common Stock of the Company. The shares were valued at $.09 per share based on the facts
that the Company had nominal trading volume for its stock, and had negative shareholder equity at the time entering the agreement.
Accordingly, the Company calculated the stock based compensation of $6,750 during the period. The shares have not been issued
as of the date of this quarterly report. The transaction was independently negotiated between the Company and the Consultant.
The Company evaluated the transaction based on the fact that the Company had nominal trading volume for its stock, and had negative
shareholder equity at the time of issuance. The stock based compensation preserved the limited cash available currently in the
Company.
NOTE
-
11 COMMITMENT AND CONTINGENCIES
The Company leases its retail stores and
manufacturing facilities under non-cancelable operating lease agreements. The Company has no long-term lease agreements
as the current expansion plans call for the Company to move to larger manufacturing and warehousing facilities in Q4 2011 to Q1
2012.
Year ended December 31
|
|
Lease
payment
|
2011
|
|
$116,850
|
2012
|
|
$0
|
2013
|
|
$0
|
2014
|
|
$0
|
2015
|
|
$0
|
Total
|
|
$116,850
|
For the three and nine
months ended September 30, 2011, the Company had rental expenses of $30,895 and $91,799, respectively. For the three and
nine months ended September 30, 2010, the Company had rental expenses of $31,480 and $ $92,529, respectively.
NOTE
-
12 LOSS PER SHARE
Basic net loss per
share is computed using the weighted average number of common shares outstanding during the three and nine months ended September
30, 2011, respectively. There was no dilutive earning per share as of September 30, 2011 due to net losses during the
periods.
The following table
sets forth the computation of basic net loss per share for the periods indicated:
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
9/30/2011
|
|
|
9/30/2010
|
|
|
9/30/2011
|
|
|
9/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Net loss
|
|
$
|
(76,820
|
)
|
|
$
|
(12,702
|
)
|
|
$
|
(244,041
|
)
|
|
$
|
(91,344
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Weighted average common shares outstanding
|
|
|
60,824,782
|
|
|
|
7,892,214
|
|
|
|
40,913,374
|
|
|
|
4,607,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share
|
|
|
**
|
|
|
|
**
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.02)
|
|
** Less than $.01
NOTE
-
13 CONCENTRATION AND RISK
During the
nine months ended September 30, 2011, the Company had no customers whose purchases represented 10% or more of the Company’s
total revenues during the period. During the nine months ended September 30, 2011, the Company had four vendors from whom company
purchases exceeded 10% of the Company’s total purchases. The first vendor represented 31% of the company’s total purchases
during the period, the second vendor represented 17% of the company’s total purchases during the period, the third vendor
represented 16% of the company’s total purchases during the period, and the fourth vendor represented 16% of the company’s
total purchases during the period.
NOTE
-
14 GOING CONCERN
These consolidated
financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization
of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As of September 30,
2011, the Company had an accumulated deficit of $1,007,570. Management has taken certain action and continues to implement changes
designed to improve the Company’s financial results and operating cash flows. The actions involve certain cost-saving initiatives
and growing strategies, including (a) reductions in raw materials costs, as well as packaging costs; and (b) expansion of the
business model into new markets. Management believes that these actions will enable the Company to improve future profitability
and cash flow in its continuing operations through December 31, 2012. As a result, the financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.
Management expects
to use funds raised through a planned registration statement with the SEC to build out its
infrastructure and make key hires in sales and sales management that will increase revenues significantly and return the
company to profitability in the short term.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
AUDITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
(WITH
REPORT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM THEREON)
|
Index
to Audited Consolidated Financial Statements
|
|
Pages
|
|
|
|
Report of Independent Registered Public
Accounting Firm
|
|
77
|
|
|
|
Consolidated Balance Sheets
|
|
78
|
|
|
|
Consolidated Statements of Operations
|
|
79
|
|
|
|
Consolidated Statement of Stockholders’/Members’
Equity (Deficit)
|
|
80
|
|
|
|
Consolidated Statements of Cash Flows
|
|
81
|
|
|
|
Notes to Consolidated Financial Statements
|
|
82 – 92
|
|
|
|
Silberstein
Ungar, PLLC CPAs and Business Advisors
Phone
(248) 203-0080
Fax
(248) 281-0940
30600
Telegraph Road, Suite 2175
Bingham
Farms, MI 48025-4586
www.sucpas.com
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors
Organic
Plant Health, Inc.
We
have audited the consolidated balance sheets of Organic Plant Health, Inc. and Subsidiary as of December 31, 2010 and 2009, and
the related consolidated statements of operations, stockholders’/members’ equity (deficit), and cash flows for the
years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Organic Plant Health, Inc. as of December 31, 2010 and 2009, and the results of its consolidated operations and its cash flows
for the years then ended in conformity with U.S. generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered
a loss in 2010 and in 2009, has negative working capital, and generated a negative internal cash flow from operations in 2010
and 2009 that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to
these matters are described in Note 15. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/
Silberstein Ungar, PLLC
Silberstein
Ungar, PLLC
Bingham
Farms, Michigan
November
29, 2011
ORGANIC
PLANT HEALTH, INC. AND SUBSIDIARY
|
CONSOLIDATED
BALANCE SHEETS
|
AS OF
DECEMBER 31, 2010 AND 2009
|
|
|
|
|
|
|
|
2010
|
|
2009
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and
cash equivalents
|
|
|
6,625
|
|
|
|
29,257
|
|
Accounts receivable,
net
|
|
|
8,213
|
|
|
|
30,195
|
|
Inventory
|
|
|
126,192
|
|
|
|
222,694
|
|
Total Current Assets
|
|
|
141,030
|
|
|
|
282,146
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
136,580
|
|
|
|
168,772
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Security
deposits
|
|
|
6,700
|
|
|
|
6,700
|
|
Total Other Assets
|
|
|
6,700
|
|
|
|
6,700
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
284,310
|
|
|
$
|
457,618
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'/MEMBERS'
DEFICIT
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
364,583
|
|
|
$
|
260,358
|
|
Accrued expenses
|
|
|
15,254
|
|
|
|
0
|
|
Accrued interest -
related parties
|
|
|
17,103
|
|
|
|
3,323
|
|
Notes payable - current
portion
|
|
|
27,463
|
|
|
|
45,422
|
|
Notes
payable - related parties
|
|
|
83,384
|
|
|
|
68,384
|
|
Total Current Liabilities
|
|
|
507,787
|
|
|
|
377,487
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
98,252
|
|
|
|
115,803
|
|
Notes
payable - related parties
|
|
|
55,800
|
|
|
|
266,800
|
|
Total Long-Term Liabilities
|
|
|
154,052
|
|
|
|
382,603
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
661,839
|
|
|
|
760,090
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'/MEMBERS' DEFICIT
|
|
|
|
|
|
|
|
|
Common stock, par
value $0.001; 150,000,000 shares authorized;12,112,214 and 2,992,214 issued and outstanding - 2010
and 2009, respectively
|
|
|
12,112
|
|
|
|
2,992
|
|
Preferred stock, par
value $0.001; 5,000,000 shares authorized; 4,000,000 shares issued and outstanding - 2010
and 2009
|
|
|
4,000
|
|
|
|
4,000
|
|
Paid-in capital
|
|
|
369,888
|
|
|
|
118,008
|
|
Accumulated
deficit
|
|
|
(763,529
|
)
|
|
|
(427,472
|
)
|
Total Stockholders'/Members' Deficit
|
|
|
(377,529
|
)
|
|
|
(302,472
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS'/MEMBERS' DEFICIT
|
|
$
|
284,310
|
|
|
$
|
457,618
|
|
ORGANIC PLANT HEALTH,
INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS
OF OPERATIONS
|
FOR THE YEARS ENDED DECEMBER
31, 2010 AND 2009
|
|
|
|
|
|
|
|
2010
|
|
2009
|
REVENUES
|
|
|
|
|
Sales
|
|
$
|
1,026,995
|
|
|
$
|
1,062,163
|
|
Cost
of Goods Sold
|
|
|
(465,970
|
)
|
|
|
(601,963
|
)
|
GROSS PROFIT
|
|
|
561,025
|
|
|
|
460,200
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
79,278
|
|
|
|
10,360
|
|
Rent
|
|
|
123,248
|
|
|
|
114,214
|
|
Bank and finance charges
|
|
|
18,664
|
|
|
|
14,805
|
|
Depreciation
|
|
|
32,603
|
|
|
|
32,278
|
|
Advertising and promotion
|
|
|
65,814
|
|
|
|
94,273
|
|
Automobile
|
|
|
14,620
|
|
|
|
14,363
|
|
Contract labor
|
|
|
62,711
|
|
|
|
31,421
|
|
Credit card processing
fees
|
|
|
17,101
|
|
|
|
0
|
|
Website maintenance
|
|
|
9,153
|
|
|
|
19,287
|
|
Insurance
|
|
|
36,480
|
|
|
|
31,757
|
|
Travel, meals and
entertainment
|
|
|
20,624
|
|
|
|
14,180
|
|
Wages and taxes
|
|
|
290,248
|
|
|
|
434,196
|
|
Commissions
|
|
|
16,891
|
|
|
|
4,225
|
|
Charitable contributions
|
|
|
0
|
|
|
|
7,500
|
|
Supplies
|
|
|
15,860
|
|
|
|
34,292
|
|
Telephone and utilities
|
|
|
34,493
|
|
|
|
17,218
|
|
Bad debt
|
|
|
122
|
|
|
|
8,252
|
|
General
and administrative
|
|
|
24,301
|
|
|
|
33,980
|
|
TOTAL OPERATING
EXPENSES
|
|
|
862,211
|
|
|
|
916,601
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(301,186
|
)
|
|
|
(456,401
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Other income
|
|
|
25
|
|
|
|
436
|
|
Interest
expense
|
|
|
(34,896
|
)
|
|
|
(26,472
|
)
|
TOTAL OTHER INCOME
(EXPENSE)
|
|
|
(34,871
|
)
|
|
|
(26,036
|
)
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(336,057
|
)
|
|
|
(482,437
|
)
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(336,057
|
)
|
|
$
|
(482,437
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE:
BASIC AND DILUTED
|
|
$
|
(0.06
|
)
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
|
|
|
5,442,214
|
|
|
|
2,992,214
|
|
|
|
|
|
|
|
|
|
|
ORGANIC
PLANT HEALTH, INC. AND SUBSIDIARY
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS'/MEMBERS' DEFICIT
|
AS OF
DECEMBER 31, 2010 AND 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
Common
stock
|
|
Preferred
stock
|
|
Paid-in
|
|
Members'
|
|
Earnings
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Equity
|
|
(Deficit)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2009
|
|
|
0
|
|
|
$
|
—
|
|
|
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,000
|
|
|
$
|
54,965
|
|
|
$
|
179,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recapitalization of company in reverse merger
|
|
|
2,992,214
|
|
|
|
2,992
|
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
118,008
|
|
|
|
(125,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December
31, 2009
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(482,437
|
)
|
|
|
(482,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
2,992,214
|
|
|
|
2,992
|
|
|
|
4,000,000
|
|
|
|
4,000
|
|
|
|
118,008
|
|
|
|
0
|
|
|
|
(427,472
|
)
|
|
|
(302,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
4,900,000
|
|
|
|
4,900
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued to convert debt
|
|
|
4,220,000
|
|
|
|
4,220
|
|
|
|
—
|
|
|
|
—
|
|
|
|
206,780
|
|
|
|
—
|
|
|
|
—
|
|
|
|
211,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December
31, 2010
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(336,057
|
)
|
|
|
(336,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2010
|
|
|
12,112,214
|
|
|
$
|
12,112
|
|
|
|
4,000,000
|
|
|
$
|
4,000
|
|
|
$
|
369,888
|
|
|
$
|
—
|
|
|
$
|
(763,529
|
)
|
|
$
|
(377,529
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORGANIC PLANT HEALTH,
INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
FOR THE YEARS ENDED DECEMBER
31, 2010 AND 2009
|
|
|
|
2010
|
|
2009
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net loss
for the period
|
|
$
|
(336,057
|
)
|
|
$
|
(482,437
|
)
|
Adjustments to reconcile net loss to
net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Bad debt expense
|
|
|
122
|
|
|
|
8,252
|
|
Depreciation
|
|
|
32,603
|
|
|
|
32,278
|
|
Common stock issued
for services
|
|
|
50,000
|
|
|
|
0
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
21,860
|
|
|
|
(18,091
|
)
|
Inventory
|
|
|
96,502
|
|
|
|
42,070
|
|
Prepaid expenses
|
|
|
0
|
|
|
|
8,900
|
|
Accounts payable
|
|
|
104,226
|
|
|
|
159,357
|
|
Accrued expenses
|
|
|
15,254
|
|
|
|
(3,857
|
)
|
Accrued
interest - related parties
|
|
|
13,780
|
|
|
|
3,323
|
|
Net Cash Used by Operating Activities
|
|
|
(1,710
|
)
|
|
|
(250,205
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(411
|
)
|
|
|
(13,261
|
)
|
Return
of security deposit
|
|
|
0
|
|
|
|
5,000
|
|
Net Cash Used By Investing Activities
|
|
|
(411
|
)
|
|
|
(8,261
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from notes
payable - related parties
|
|
|
20,000
|
|
|
|
275,000
|
|
Payments on notes
payable - related parties
|
|
|
(5,000
|
)
|
|
|
(15,700
|
)
|
Proceeds from notes
payable
|
|
|
0
|
|
|
|
45,000
|
|
Payments
on notes payable
|
|
|
(35,511
|
)
|
|
|
(58,016
|
)
|
Net Cash Provided By (Used by) Financing
Activities
|
|
|
(20,511
|
)
|
|
|
246,284
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(22,632
|
)
|
|
|
(12,182
|
)
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning
of Period
|
|
|
29,257
|
|
|
|
41,439
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of
Period
|
|
$
|
6,625
|
|
|
$
|
29,257
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
21,116
|
|
|
$
|
23,149
|
|
Cash
paid for income taxes
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING
INFORMATION:
|
|
|
|
|
|
|
|
|
Common
stock issued in exchange for debt
|
|
$
|
211,000
|
|
|
$
|
0
|
|
Conversion
of members' equity to common stock and paid-in capital in connection with reverse merger
|
|
$
|
125,000
|
|
|
$
|
0
|
|
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 1 ORGANIZATION AND BUSINESS BACKGROUND
Organic
Plant Health, LLC, (referred to herein as “OPH”), a North Carolina Limited Liability Company, was originally founded
in Charlotte, NC in 2007 by Billy Styles and Alan Talbert. The business produces and distributes organic based fertilizers and
soil conditioners for use in the continual care of residential and commercial landscapes.
On
December 10, 2010, OPH entered into a Plan of Exchange agreement (the “Plan of Exchange”) between and among the members
of OPH (“OPH Members”) and Acumedspa Holdings, Inc., (herein referred to as the Company), a publically traded Nevada
corporation, and its majority shareholder, Mr. Brian Sperber. Acumedspa Holdings was originally incorporated in the state of New
York in 1995.
Pursuant
to the terms of the Plan of Exchange, Acumedspa Holdings, Inc. acquired 100% of the membership interests of OPH in exchange for
a transfer of 3,985,000 shares of the Company’s Convertible Preferred Stock to OPH Members, which gave
OPH Members a controlling interest in Acumedspa Holdings, Inc., representing approximately 76.47% of the then issued and
outstanding shares on a dilutive basis. OPH and Acumedspa Holdings, Inc. were hereby reorganized, such that the Company acquired
100% of the ownership of OPH, and OPH became a wholly-owned subsidiary of the Company.
The
stock exchange transaction has been accounted for as a reverse acquisition and recapitalization of the Company whereby
OPH
is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The
accompanying consolidated financial statements are in substance those of
OPH
, with the assets
and liabilities, and revenues and expenses, of the Company being included effective from the date of stock exchange transaction. The
Company is deemed to be a continuation of the business of
OPH
. Accordingly, the accompanying
consolidated financial statements include the following:
(1) The
balance sheet consists of the net assets of the accounting acquirer at historical cost and the net assets of the accounting acquiree
at historical cost;
(2) The
financial position, results of operations, and cash flows of the accounting acquirer for all periods presented as if the recapitalization
had occurred at the beginning of the earliest period presented and the operations of the accounting acquiree from the date of
stock exchange transaction.
On
December 11, 2010, the Company vended out the two subsidiaries, ACUMEDSPA LLC, a Tennessee Limited Liability Company, and CONSUMER
CARE OF AMERICA LLC, a Florida Limited Liability Company, pursuant to an Agreement entered between and among OPH and Chinita LLC,
a Nevada Limited Liability Company (“Buyer”). Accordingly, the Buyer acquired 100% interest in ACUMEDSPA LLC and 100%
interest in CONSUMER CARE OF AMERICA LLC, as well as any and all assets and liabilities in both subsidiaries in exchange for the
total payments of not less than Two Hundred dollars ($200). As a result of the transactions consummated at the closing, the purchase
gave the Buyer a 'controlling interest' in both subsidiaries; therefore, ACUMEDSPA LLC and CONSUMER CARE OF AMERICA LLC were no
longer wholly-owned subsidiaries of the Company.
Organic
Plant Health, Inc
. and OPH are hereinafter referred to as (the “Company”).
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.
Use
of estimates
In
preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of
revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation
of accounts receivables, inventories, income taxes and the estimation on useful lives of property, plant and equipment. Actual
results could differ from these estimates.
Basis
of consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiary.
All
significant inter-company balances and transactions within the Company and subsidiary have been eliminated upon consolidation.
Cash
and Cash Equivalents
The
Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents
for purposes of the statement of cash flows.
Accounts
Receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due
accounts. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements,
aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. As of December
31, 2010 and 2009, the Company had allowances for uncollectible accounts of $2,332 and $7,640, respectively.
Inventory
Inventories
consist of finished goods and are valued at lower of cost or market value, cost being determined on the first-in, first-out method. The
Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and
also evaluates the impact of any anticipated changes in future demand. The Company provides inventory allowances based
on excess and obsolete inventories determined principally by customer demand. As of December 31, 2010 and 2009, the
Company did not record an allowance for obsolete inventories, nor had there been any write-offs during the years ended December
31, 2010 and 2009, respectively.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fixed
assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after
taking into account their estimated residual values:
|
Depreciable
life
|
|
Residual
value
|
Machinery
and Equipment
|
5
years
|
|
5%
|
Furniture
and fixture
|
7
years
|
|
5%
|
Software
|
3
years
|
|
5%
|
|
|
|
|
|
|
|
|
Expenditure
for maintenance and repairs is expensed as incurred.
Fair
Value for Financial Assets and Financial Liabilities
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial
instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to
measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in
U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements
and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted)
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair
value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
1
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
Level
2
|
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date.
|
|
|
Level
3
|
Pricing
inputs that are generally observable inputs and not corroborated by market data.
|
The
carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their
fair values because of the short maturity of these instruments.
The
Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently,
the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2010 nor
gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses
relating to those assets and liabilities still held at the reporting date for the for the years ended December 31, 2010 and 2009,
respectively.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue
recognition
In
accordance with guidance by paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition, the
Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title has occurred or services have
been rendered, the selling price is fixed or determinable and collectability is reasonably assured. OPH provides a
warranty, but only in as much as the products conform to their descriptions and that they are reasonably fit for the purpose stated
on the label, when used properly under normal conditions.
(a) Sale
of products
The
Company recognizes revenue from the sale of products upon delivery to the customers and the transfer of title and risk of loss.
The Company did not record any product returns for the years ended December 31, 2010 and 2009, respectively.
(b) License
income
The
Company recognizes revenue from the sale of license agreements, and optional license agreements, to approved distribution partners
that desire to represent the Company in developing sales and marketing agreements with potential wholesale customers. The license
fee paid by the approved distribution partners is nonrefundable, one-time charge and independent from the sale of products or
services. The Company recognizes licensing revenue when the license term begins.
Cost
of Goods Sold
Cost
of goods sold consists primarily of costs of raw materials and direct labor, and other costs directly attributable to the production
of products. Write-down of inventories to lower of cost or market is also recorded in cost of goods sold.
Stock-Based
Compensation
The
Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of
the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity
to measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of
the award (with limited exceptions). That cost will be recognized over the period during which a consultant is required to provide
service in exchange for the award within the requisite service period (usually the vesting period). No compensation cost is recognized
for equity instruments for which consultants do not render the requisite service. During the year ended December 31, 2010, the
Company recorded $50,000 in compensation expense based on the fair value of services rendered in exchange for common shares issued
to the consultants. These approximated the fair value of the shares at the dates of issuances.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income
Taxes
The
Company adopts the ASC Topic 740, “
Income Taxes
” regarding accounting for uncertainty in income taxes, which
prescribes the recognition threshold, and measurement attributes for financial statement recognition and measurement of tax positions
taken or expected to be taken on a tax return. In addition, the guidance requires the determination of whether the benefits of
tax positions will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions
that are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is
greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not
determined to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial
statements. The guidance provides for de-recognition, classification, penalties and interest, accounting in interim periods and
disclosure.
For
the years ended December 31, 2010 and 2009, the Company did not have any interest and penalties associated with tax positions.
As of December 31, 2010 and 2009, the Company did not have any significant unrecognized uncertain tax positions.
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income
in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is
uncertain.
Loss
Per Share
Net
loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss
per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially
outstanding shares of common stock during each period.
Related
parties
Parties,
which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in making financial and operating decisions.
Companies are also considered to be related if they are subject to common control or common significant influence. A material
related party transaction has been identified in Note 7 and Note 8 in the financial statements.
The
Company evaluated for subsequent events through the issuance date of the Company’s financial statements.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently
issued accounting standards
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated
results of its operations.
Credit
Quality of Financing Receivables and the Allowance for Credit Losses
In
July 2010, the Financial Accounting Standards Board (“FASB”) amended the requirements for
Disclosures about the
Credit Quality of Financing Receivables and the Allowance for Credit Losses
. As a result of these amendments, an entity is
required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about
its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are
effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period
are effective for the first fiscal quarter of 2011. The adoption of this guidance will not impact the Company’s consolidated
results of operations or financial position.
Fair
Value Measurements and Disclosures
In
January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires
disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the
transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value
roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement
disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs
used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company
in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this
guidance will not impact the Company’s consolidated results of operations or financial position.
NOTE
- 3 ACCOUNTS RECEIVABLE
Accounts
receivable is comprised of the following amounts at the respective dates:
|
As
of December 31,
|
|
2010
|
|
2009
|
|
|
|
|
|
|
Gross
trade accounts receivable from customers
|
$
|
10,545
|
|
$
|
37,835
|
Allowance
for doubtful customer accounts
|
|
(2,332)
|
|
|
(7,640)
|
|
$
|
8,213
|
|
$
|
30,195
|
|
|
|
|
|
|
Bad
debt expense of $122 and $8,252 were recognized during the years ended December 31, 2010 and 2009, respectively, in the accompanying
consolidated income statements.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 4 INVENTORIES
Inventories
are comprised of the following amounts at the respective dates:
|
As
of December 31,
|
|
2010
|
|
2009
|
|
|
|
|
|
|
Raw
materials
|
$
|
41,408
|
|
$
|
112,083
|
Work
in process
|
|
14,996
|
|
|
924
|
Finished
goods
|
|
69,788
|
|
|
109,687
|
|
|
126,192
|
|
|
222,694
|
Provision
for obsolete inventories
|
|
0
|
|
|
0
|
|
$
|
126,192
|
|
$
|
222,694
|
|
|
|
|
|
|
NOTE
- 5 FIXED ASSETS
Property,
plant and equipment are comprised of the following amounts at the respective dates:
|
As
of December 31,
|
|
2010
|
|
2009
|
Cost:
|
|
|
|
|
|
Machinery
and equipment
|
$
|
178,309
|
|
$
|
177,898
|
Furniture
and fixtures
|
|
25,623
|
|
|
25,623
|
Software
|
|
12,949
|
|
|
12,949
|
|
|
216,881
|
|
|
216,470
|
Less:
Accumulated depreciation
|
|
(80,301)
|
|
|
(47,698)
|
Net
|
$
|
136,580
|
|
$
|
168,772
|
|
|
|
|
|
|
NOTE
- 6 NOTES PAYABLE
The
Company has a line of credit with Bank of Granite at an annual rate of 8.5%. The current portion on this credit line was $27,463
and $45,422 as of December 31, 2010 and 2009, respectively. Accordingly, the Company recorded interest expenses of $2,510 and
$8,957 during the years ended December 31, 2010 and 2009, respectively.
The
Company has a long-term loan payable to Bank of North Carolina at an annual rate of 6.5% and due on June 30, 2013. The balance
of this bank loan was $98,252 and $115,803 as of December 31, 2010 and 2009, respectively. Accordingly, the Company recorded interest
expenses of $11,543 and $9,041 during the years ended December 31, 2010 and 2009, respectively.
NOTE
- 7 NOTES PAYABLE – RELATED PARTIES
In
July 2009, the Company’s shareholders made several loans in total amount of $275,000 to the Company to fund its operations.
The shareholder loans were evidenced by promissory notes due in July 2012, with interest at the floating interest rate of Prime
plus 2.5%. The interest rate will be adjusted each calendar quarter of January 1, April 1, July 1 and October 1. Accordingly,
the Company recorded interest expenses of $0.00 and $0.00 in connection with the shareholder loans during the years ended December
31, 2010 and 2009, respectively, as shareholders waived interest payments they were entitled to receive.
The
principal balance of the shareholder loans was $266,800 as of December 31, 2009 due to cash payments of $8,200 made during the
year of 2009.
The
principal balance of the shareholder loans was $55,800 as of December 31, 2010 due to the settlement of $211,000 in shareholder
loans through the issuance of 4,220,000 shares of the Company’s common stock. This debt was converted at a discounted rate
of $.05 per common share.
In
addition to the shareholder loans in Note 7, the Company had outstanding balances of $83,384 and $68,384 due to the Company’s
President as of December 31, 2010 and 2009, respectively. The funds borrowed from the Company’s President was for the company
to fund its operations, and not evidenced by any promissory note, which was an oral agreement between the President and the Company
and due on demand. No interest was accrued due to the immateriality.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 8 CAPITAL TRANSACTIONS
On
December 10, 2010, the Board of Directors and Majority Shareholders of the Company authorized the effectuation of a 1-for-50 reverse
split of the Company’s Common Stock (the “Common Stock Reverse Split”). Accordingly, the Common Stock Reverse
Split
combined the Company’s outstanding Common Stock on the basis of 50 outstanding shares being changed to 1 outstanding
share.
All options, warrants, and any other similar instruments convertible into, or exchangeable or
exercisable for, shares of common stock were proportionally adjusted. The Company’s number of authorized shares of
Common Stock remained unchanged.
The
Common Stock Reverse Split
became effective on January 27, 2011 pursuant to the FINRA announcement.
The consolidated statement of stockholders’ equity and the loss per share numbers in the consolidated financial statements
have been restated per FASB 128 paragraph 134, as if the
Common Stock Reverse Split
took effect
at the beginning of the periods presented.
On
December 31, 2010, the Board of Directors of the Company approved the issuance of 4,220,000 shares of the Company’s Common
Stock to settle $211,000 in shareholder loans. This debt was converted at a discounted rate of $.05 per common share, which represents
the fair value of the conversion feature relative to the fair value of the debt instrument due to the following facts:
1.
The market price of the Company’s common stock varied between $0.045 and $0.07 during the 5 consecutive days before the
conversion date, December 31, 2010;
2.
The Company had nominal trading volume for its common stock, and had negative shareholder equity at the time of issuance.
Therefore,
the Company believed the debt had substantive conversion feature, but the conversion feature are note beneficial. No gain or loss
is recognized pursuant to ASC 470-20-40.
After
the completion of the Offering, our current management and beneficial owners will beneficially own approximately 75.7% of our
then outstanding Common Stock and will have full control over the affairs of the Company. The beneficial owners will be able to
continue to elect over a majority of our directors and to determine the outcome of the corporate actions requiring shareholder
approval, regardless of how additional security holders of the Company may vote. The investors will have no ability to influence
corporate actions.
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 9 STOCK BASED COMPENSATION
On
July 1, 2010, the Company entered into a consulting service agreement with a Consultant in exchange for 4,900,000 shares of common
stock of the Company. The fair value of the common stock issued was determined using the fair value of the Company’s
common stock on the grant date at approximately $.01 per share. Accordingly, the Company calculated stock based compensation of
$50,000, which was recognized in full for the year ended December 31, 2010 due to the completion of services rendered.
NOTE
- 10 COMMITMENT AND CONTINGENCIES
The
Company leases its retail stores and manufacturing facilities under non-cancelable operating lease agreements. The
Company has no long-term lease agreements as the current expansion plans call for the Company to move to larger manufacturing
and warehousing facilities in Q4 2011 to Q1 2012.
Year
ended December 31
|
|
Lease
payment
|
2011
|
|
$116,850
|
2012
|
|
$0
|
2013
|
|
$0
|
2014
|
|
$0
|
2015
|
|
$0
|
Total
|
|
$116,850
|
For
the years ended December 31, 2010 and 2009, rental expenses were $123,248 and $114,214, respectively.
NOTE
- 11 LOSS PER SHARE
Basic
net loss per share is computed using the weighted average number of the ordinary shares outstanding during the year. There
were no dilutive common stock equivalents as of December 31, 2010 and 2009, respectively, due to net losses during the years.
The
following table sets forth the computation of basic net loss per share for the years indicated:
|
For
year ended December 31,
|
|
2010
|
|
2009
|
Numerator:
|
|
|
|
|
|
-
Net loss
|
$
|
(336,057)
|
|
$
|
(482,437)
|
Denominator:
|
|
|
|
|
|
-
Weighted average common shares outstanding
|
|
5,442,214
|
|
|
2,992,214
|
|
|
|
|
|
|
Basic
net loss per share
|
$
|
(0.06)
|
|
$
|
(0.16)
|
|
|
|
|
|
|
|
|
|
|
|
|
ORGANIC
PLANT HEALTH INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE
- 12 CONCENTRATION AND RISK
In
2009 the Company had one customer whose purchases exceeded 10% of the Company’s total revenues. This customer represented
11.5% of the Company’s total revenues. In 2009 the Company had one vendor from whom company purchases exceeded 10% of the
Company’s total purchases. This vendor represented 29.6% of the company’s total purchases.
In
2010 the Company had one customer whose purchases exceeded 10% of the Company’s total revenues. This customer represented
10.1% of the Company’s total revenues. In 2010 the Company had one vendor from whom company purchases exceeded 10% of the
Company’s total purchases. This vendor represented 23.8% of the company’s total purchases.
NOTE
- 13 GOING CONCERN
These
consolidated financial statements have been prepared assuming that Company will continue as a going concern, which contemplates
the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
As
of December 31, 2010, the Company had an accumulated deficit of $763,529. Management has taken certain action and continues to
implement changes designed to improve the Company’s financial results and operating cash flows. The actions involve certain
cost-saving initiatives and growing strategies, including (a) reductions in raw materials costs, as well as packaging costs; and
(b) expansion of the business model into new markets. Management believes that these actions will enable the Company to improve
future profitability and cash flow in its continuing operations through December 31, 2011. As a result, the financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going
concern.
Management
is confident that funds raised through a planned registration statement with the SEC will allow the company to build out its infrastructure
and make key hires in sales and sales management that will increase revenues significantly and return the company to profitability
in the short term.
NOTE
- 14 SUBSEQUENT EVENTS
On
March 14, 2011, the Board of Directors and Majority Shareholders of the Company authorized the effectuation of a 1-for-4 reverse
split of the Company’s Preferred Stock (the “Preferred Stock Reverse Split”). Accordingly, the Preferred Stock
Reverse Split
combined the Company’s authorized and outstanding
Preferred
Stock
on the basis of 4 authorized and outstanding shares being changed to 1 authorized and outstanding share.
All
options, warrants, and any other similar instruments convertible into, or exchangeable or exercisable for, shares of preferred
stock were proportionally adjusted. As a result, the Company’s number of authorized shares of preferred stock decreased
to 5,000,000 shares, of which 3,999,999 shares of preferred stock issued and outstanding.
The
Preferred Stock Reverse Split
became effective upon
the Company filing
a Certificate of Change with the Secretary of State of the State of Nevada on
April 21, 2011. The consolidated statement
of stockholders’ equity has been restated per FASB 128 paragraph 134, as if the
Preferred Stock
Reverse Split
took effect at the beginning of the periods presented.
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth estimated expenses expected to be incurred in connection with the issuance and distribution of the
securities being registered. The Company will pay all expenses in connection with this offering.
|
|
|
|
Commission Registration
Fee
|
|
$
|
475
|
Printing and
Engraving Expenses
|
|
$
|
1,000
|
Accounting Fees
and Expenses
|
|
$
|
25,000
|
Legal Fees and
Expenses
|
|
$
|
20,000
|
Miscellaneous
|
|
$
|
15,525
|
TOTAL
|
|
$
|
62,000
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our
articles of incorporation and Bylaws provide that we will indemnify an officer, director, or former officer or director, to the
full extent permitted by law. We have been advised that in the opinion of the Securities and Exchange Commission indemnification
for liabilities arising under the Securities Act of 1933 is against public policy as expressed in the Securities Act of 1933,
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of
our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion
of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification
is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES
Following
are all issuances of securities by the registrant during the past three years, which were not registered under the Securities
Act of 1933, as amended (the "Securities Act"). All of the following shares of our common stock issued by us were issued
to accredited investors pursuant to the exemption from the registration requirement of Section 5 of the Securities Act, pursuant
to Section 4(2) of the Securities Act and Rule 506 promulgated there under. In each of these issuances the recipient represented
that he was acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance
with applicable securities laws. No general solicitation or advertising was used in connection with any transaction, and the certificate
evidencing the securities that were issued contained a legend restricting their transferability absent registration under the
Securities Act or the availability of an applicable exemption there from. Unless specifically set forth below, no underwriter
participated in the transaction and no commissions were paid in connection with the transactions.
On
September 18, 2009, 6,200,000 shares of Common Stock were issued in connection with a Plan of Exchange with AcuMedSpa Group LLC.
- and Consumer Care of America LLC,
Florida Limited Liability Companies, of which 5,800,000
shares
of Common Stock were voluntarily surrendered by the shareholder in exchange for total 4,000,000 shares of Preferred Stock.
On
September 18, 2009 and July 28, 2010, 700,000 shares and 400,000 shares of Common Stock were issued to settle a convertible loan
in principal amount of $100,000, dated May 15, 2008.
Effective
December 31, 2010, Shareholders Billy Styles, Matthew Styles and Alan Talbert, collectively, converted $211,000.00 of promissory
notes owed to them by the Company, (these notes were given in exchange for loans to the Company made by the shareholders in July
of 2009). The notes were converted to common shares of the Company at a rate of $.05 per share, for a total of 4,220,000 shares.
On
July 1, 2010, the Company entered into a consulting service agreement with a Consultant in exchange for 4,900,000 shares of common
stock of the Company. The fair value of the common stock issued was determined using the fair value of the Company’s
common stock on the grant date at approximately $.01 per share. Accordingly, the Company calculated stock based compensation of
$50,000, which was recognized in full for the year ended December 31, 2010 due to the completion of services rendered.
On
February 28, 2011, the Board of Directors of the Company approved the issuance of 4,075,000 shares of the Company’s Common
Stock in exchange for cash payment of $75,000 made by an investor.
On
March 31, 2011, the Board of Directors of the Company approved the issuance of 1,000,000 shares of the Company’s Common
Stock to settle accounts payable of $68,245 to a non-related party.
On
May 13, 2011, the Company issued 1,000,000 shares of common stock of the Company as sweetener to Greentree pursuant to a Convertible
Promissory Note (the Note), dated January 1, 2011. The Note in a principal amount of $100,000 bears an interest rate of 6% per
annum and is due on January 1, 2013. Pursuant to the Note, Greentree has an option to convert all or any portion of the accrued
interest and unpaid principal balance of the Note into the common stock of the Company or its successors, at Ten Cents ($.10)
per share, no sooner than December 31, 2011. The Company relied on exemptions provided by Section 4(2) of the Securities Act of
1933, as amended. The Company made this offering based on the following facts: (1) the issuance was an isolated private transaction
which did not involve a public offering; (2) there was only one offeree, (3) the offeree has agreed to the imposition of a restrictive
legend on the face of the stock certificate representing its shares, to the effect that it will not resell the stock unless its
shares are registered or an exemption from registration is available; (4) the offeree was a sophisticated investor familiar with
us and stock-based transactions; (5) there were no subsequent or contemporaneous public offerings of the stock; (6) the stock
was not broken down into smaller denominations; and (7) the negotiations for the sale of the stock took place directly between
the offeree and our management.
In
May of 2011, the Company entered into a consulting service agreement with a Consultant for business advisory services in exchange
for 1,000,000 shares of Common Stock of the Company. The agreement had a term of 6 months effective from May 15, 2011 ending November
15, 2011. The fair value of this stock issuance was determined by the fair value of the Company’s Common Stock on the grant
date, at a price of approximately $.075 per share. The share value was arrived at based on the facts that the Company had
limited trading volume for its stock, and had negative shareholder equity at the time of issuance. Accordingly, the Company calculated
the stock based compensation of $75,000 at its fair value and booked pro rata within the relative service periods. The Company
relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended. The Company made this offering based
on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there
was only one offeree, (3) the offeree has agreed to the imposition of a restrictive legend on the face of the stock certificate
representing its shares, to the effect that it will not resell the stock unless its shares are registered or an exemption from
registration is available; (4) the offeree was a sophisticated investor familiar with us and stock-based transactions; (5) there
were no subsequent or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations;
and (7) the negotiations for the sale of the stock took place directly between the offeree and our management.
During
the second quarter of 2011, the Board of Directors of the Company sold a total of 727,578 shares of the Company’s Common
Stock in exchange for cash payments of $65,482 made by investors. We will use the proceeds from this offering for working capital
purposes. We relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended. We made this
offering based on the following facts: (1) the issuance was an isolated private transaction which did not involve a public offering;
(2) there were 18 offerees, (3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate
representing the shares indicating the stock cannot be resold unless registered or an exemption from registration is available;
(4) the offerees were sophisticated investors familiar with our company and stock-based transactions; (5) there were no subsequent
or contemporaneous public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations
for the sale of the stock took place directly between the offerees and our management.
In
July of 2011, the Board of Directors of the Company sold a total of 1,300,000 shares of the Company’s Common Stock in exchange
for cash payments of $65,000 made by investors. We will use the proceeds from this offering for working capital purposes. We
relied on exemptions provided by Section 4(2) of the Securities Act of 1933, as amended. We made this offering based on the following
facts: (1) the issuance was an isolated private transaction which did not involve a public offering; (2) there were 4 offerees,
(3) the offerees have agreed to the imposition of a restrictive legend on the face of the stock certificate representing the shares
indicating the stock cannot be resold unless registered or an exemption from registration is available; (4) the offerees were
sophisticated investors familiar with our company and stock-based transactions; (5) there were no subsequent or contemporaneous
public offerings of the stock; (6) the stock was not broken down into smaller denominations; and (7) the negotiations for the
sale of the stock took place directly between the offerees and our management.
On
September 1, 2011, the Company entered into an agreement with Frank J. Hariton for acting as counsel in connection with this registration
statement in exchange for cash payment of $6,000 and the issuance of 75,000 shares of Common Stock of the Company. The shares
were valued at $.09 per share based on the facts that the Company had nominal trading volume for its stock, and had negative shareholder
equity at the time entering the agreement. Such issuance was exempt under section 4(2) of the Securities Act of 1933, as amended,
as not involving any public offering. We will assume a legal expense of $0.10 per share for this issuance as representing our
recent prices for private sales of our restricted securities. The shares are going to be issued during the fourth quarter of 2011.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
3.1 Articles
of Incorporation
*
3.2 Amendments
to the Articles of Incorporation
*
3.3 Bylaws
*
5.1 Opinion
regarding Legality
*
10.1 Consulting
Agreement with Greentree Financial Group, Inc.
*
10.2 Consulting
Agreement with Guardian Financial Services Group
*
10.3 Lease
Agreement for the address at Monroe Road in Charlotte, NC
*
10.4 Lease
Agreement for the address at Matthews, NC
*
10.5
Plan of Exchange
*
10.6
Plan of Exchange
*
10.7 Convertible
Promissory Note with Billy G. Styles, dated July 1, 2009
10.8 Convertible
Promissory Note with J. Alan Talbert, dated July 1, 2009
10.9 Convertible
Promissory Note with Matthew Styles, dated July 1, 2009
10.10 Convertible
Promissory Note with David Blankenberg, dated July 1, 200910.11 A written description of the loan from our President
14.1 Code
of Ethics
*
23.1 Consent
of Registered Certified Public Accountants
23.2 Consent
of Legal Counsel (included in Exhibit 5.1 hereto)
ITEM
17. UNDERTAKINGS
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any propectus required by section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) (§230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective
registration statement.
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any
financial statements required by “Item 8.A. of Form 20–F (17 CFR 249.220f)” at the start of any delayed offering
or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need
not be furnished,
provided
that the registrant includes in the prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in
the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F–3 (§239.33 of this chapter), a post-effective amendment need not be filed to include
financial statements and information required by Section 10(a)(3) of the Act or §210.3–19 of this chapter if such financial
statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F–3.
(5)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i)
If the registrant is relying on Rule 430B (§230.430B of this chapter):
(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) shall be deemed to be
part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement;
and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of
this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii), or (x) (§230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities
in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that
is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to
the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial
bona fide
offering thereof.
Provided, however,
that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date;
or
(ii)
If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness.
Provided, however,
that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with
a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first
use.
(6)
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The
undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser
and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424 (§230.424 of this chapter);
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf
by the undersigned on November 30, 2011.
|
ORGANIC
PLANT HEALTH, INC.
|
|
|
|
|
By:
|
/s/ William
Styles
|
|
|
Name:
William Styles
Title:
President, Chief Executive Officer and Director
|
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
By:
|
/s/
William Styles
|
|
November
30, 2011
|
Name:
William Styles
Title:
President, Chief Executive Officer
and Director
|
|
|
|
|
|
By:
|
/s/
Paul K. DiFraia
|
|
November
30, 2011
|
Name:
Paul K. DiFraia
Title:
Chief Financial Officer and Director
|
|
|
|
|
|
By:
|
/s/
J. Alan Talbert
|
|
November
30, 2011
|
Name:
J. Alan Talbert
Title:
Director
|
|
|
Index
to Exhibits
3.1 Articles
of Incorporation
*
3.2 Amendments
to the Articles of Incorporation
*
3.3 Bylaws
*
5.1
Opinion regarding Legality
*
10.1 Consulting
Agreement with Greentree Financial Group, Inc.
*
10.2 Consulting
Agreement with Guardian Financial Services Group
*
10.3 Lease
Agreement for the address at Monroe Road in Charlotte, NC
*
10.4 Lease
Agreement for the address at Matthews, NC
*
10.5
Plan of Exchange
*
10.6
Plan of Exchange
*
10.7
Convertible Promissory Note with Billy G. Styles, dated July 1, 2009
10.8
Convertible Promissory Note with J. Alan Talbert, dated July 1, 2009
10.9
Convertible Promissory Note with Matthew Styles, dated July 1, 2009
10.10
Convertible Promissory Note with David Blankenberg, dated July 1, 200910.11 A written description of the loan from our President
10.11
Description of Personal Loan from William G. Styles to Organic Plant Health, LLC.– not represented by Promissory Note
14.1 Code
of Ethics
*
23.1
Consent of Registered Certified Public Accountants
23.2 Consent
of Legal Counsel (included in Exhibit 5.1 hereto)
(97)