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As filed with the Securities and Exchange Commission on February 9, 2023

 

Registration No.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

Healthy Extracts, Inc.

(Exact name of registrant as specified in its charter)

 

 

Nevada

 

2833

47-2594704

 

(State or other jurisdiction of

incorporation or organization

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

 

 

7375 Commercial Way, Suite 125

Henderson, NV 89011

 

(702) 463-1004

(Address, including zip code, of registrant’s principal executive offices)

(Telephone number, including area code)

 

 

Kevin “Duke” Pitts

President

Healthy Extracts, Inc.

7375 Commercial Way, Suite 125

Henderson, NV 89011

(702) 463-1004

 

(Name, address, including zip code, and telephone

number, including area code, of agent for service)

Picture 



Copies to:

 

Brian A. Lebrecht, Esq.

Clyde Snow & Sessions, PC

201 S. Main Street, Suite 2200

Salt Lake City, UT  84111

Telephone: (801) 322-2516

Richard I. Anslow, Esq.

Lawrence A. Rosenbloom, Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, NY 10105
Telephone: (212) 370-1300

 

Approximate date of commencement of proposed sale to the public:

From time to time 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.  [ X ] 

 

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 smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 

 

Large accelerated filer

 

 

 

Accelerated filer

 

 

Non-accelerated filer

 

 

 

Smaller reporting company

 

 

(Do not check if a smaller reporting company)

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  [   ]

 

The registrant hereby 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 thereafter 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 said Section 8(a), may determine. 



The information in this prospectus is not complete and may be changed. We 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 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 February 9, 2023

 

HEALTHY EXTRACTS, INC.

 

Picture 

 

[·] shares

common stock

 

This is an initial public offering of the common stock, par value $0.001 per share (the “Common Stock”), of Healthy Extracts, Inc., a Nevada corporation. 

 

We are hereby registering on the registration statement of which this prospectus forms a part a total of [·] shares of our Common Stock for sale by us. This offering is being made on a firm commitment basis at an assumed offering price of $[·] per share, assuming a 1-for-100 reverse stock split of our outstanding shares of Common Stock. The number of shares of Common Stock offered pursuant to this prospectus and all other applicable information, other than in the historical and pro-forma financial statements and related notes included elsewhere in this prospectus, has been determined based on such assumed offering price. The actual offering price of the shares offered hereby will be determined between the underwriters and us at the time of pricing, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business. Therefore, the assumed offering price per share of the shares used throughout this prospectus may not be indicative of the actual offering price for the shares (see “Underwriting – Determination of Public Offering Price” for additional information).

 

On September 23, 2022, our majority shareholder approved by written consent, declared it advisable and in our best interest, to amend our Articles of Incorporation to effect a reverse split of our outstanding Common Stock within a range of 1-for-25 to 1-for-150, the exact ratio and timing to be determined by our board of directors (“Board”) no later than June 30, 2023. On September 23, 2022, our Board of Directors approved the stock split. We intend for the Board to effect such reverse stock split in connection with the Offering and our intended listing of our Common Stock on the Nasdaq Capital Market (“Nasdaq”), however we cannot guarantee that The Nasdaq Stock Market LLC will approve our initial listing application for our Common Stock upon such reverse stock split. Unless specifically provided otherwise herein, such numbers and prices above and used elsewhere in this prospectus assume the effectiveness of a 1-for-100 reverse stock split of our Common Stock, an assumed offering price of $[·] per share, and the listing of our Common Stock on Nasdaq to occur as of the effective date of the registration statement of which this prospectus forms a part but prior to the closing of this offering.

 

Currently, our common stock is quoted on the OTCQB Marketplace maintained by OTC Markets, Inc. under the symbol “HYEX.”  The closing price of our common stock (not adjusted for the anticipated



stock split) as reported on the OTCQB on February 8, 2023 was $0.0495. We intend to apply to list our Common Stock on the Nasdaq Capital Market (“Nasdaq”) under the same symbol. We believe that upon the completion of the offering, we will meet the standards for listing on Nasdaq. We cannot guarantee that we will be successful in listing our common stock on Nasdaq; however, we will not complete this offering unless we are so listed.

 

Investing in the common stock is speculative and involves a high degree of risk. You should not invest unless you can afford to lose your entire investment. See “Risk Factors” beginning on page 12.

 

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.

 

 

 

Per Share

 

Total (1)

Price to the public

 

$[·] 

 

$[·] 

Underwriting discounts (2)

 

$[·] 

 

$[·] 

Proceeds, before expenses, to us

 

$[·] 

 

$[·] 

 

(1)Assumes no exercise of the over-allotment options by the underwriters. 

(2)We have agreed to pay the underwriters a cash fee of 8% of the aggregate gross proceeds raised in the Offering of the shares (including proceeds received from shares of Common Stock sold to cover over-allotments, if any). We have also agreed to issue warrants to purchase up to [·] shares of our Common Stock to the underwriters exercisable at a per share price equal to 110% of the offering price of the shares (the “Underwriters’ Warrants”), which number of shares will be equal to 5% of the aggregate number of shares sold in the Offering (including the over-allotment), and to reimburse the underwriters for certain expenses. See “Underwriting” for additional information regarding underwriting compensation. 

 

We have granted to the representative of the underwriters a 45-day option to purchase up to an additional [·] shares of Common Stock to cover over-allotments, if any.

 

The underwriters expect to deliver the securities against payment to the investors in this offering made on or about [·], 2023.

 

 

Picture 

 

 

 

The date of this prospectus is [·], 2023



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Table of Contents

 




ABOUT THIS PROSPECTUS

 

The registration statement of which this prospectus forms a part that we have filed with the U.S. Securities and Exchange Commission (the “SEC”) includes exhibits that provide more detail of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC, together with the additional information described under the heading “Where You Can Find More Information,” before making your investment decision.

 

You should rely only on the information provided in this prospectus or in any prospectus supplement or any free writing prospectuses or amendments thereto, or to which we have referred you, before making your investment decision. Neither we nor the underwriters have authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or any related free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any prospectus supplement, or any free writing prospectuses or amendments thereto do not constitute an offer to sell, or a solicitation of an offer to purchase, the shares of Common Stock offered by this prospectus, any prospectus supplement or any free writing prospectuses or amendments thereto in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer or solicitation of an offer in such jurisdiction. You should not assume that the information contained in this prospectus, any prospectus supplement or any free writing prospectuses or amendments thereto, as well as information we have previously filed with the SEC, is accurate as of any date other than the date on the front cover of the applicable document.

 

To the extent there is a conflict between the information contained in this prospectus and any prospectus supplement, you should rely on the information in such prospectus supplement, provided that if any statement in one of these documents is inconsistent with a statement in another document having a later date — for example, a document incorporated by reference in this prospectus or any prospectus supplement — the statement in the document having the later date modifies or supersedes the earlier statement.

 

Neither the delivery of this prospectus nor any distribution of any shares of Common Stock pursuant to this prospectus shall, under any circumstances, create any implication that there has been no change in the information set forth or incorporated by reference into this prospectus or in our affairs since the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since such date.

 

Neither we nor the underwriters are offering to sell or seeking offers to purchase such shares of Common Stock offered hereby in any jurisdiction where the offer or sale is not permitted. Neither we nor the underwriters have done anything that would permit this Offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in 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, the Offering as to distribution of the prospectus outside of the United States.

 

Solely for convenience, our trademarks and tradenames referred to in this prospectus and the registration statement of which it forms a part may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.

 

Information contained in, and that can be accessed through our websites, www.healthyextractsinc.com, www.bergamentna.com, and www.tryubn.com does not constitute part of this prospectus or the registration statement of which it forms a part.

 

For investors outside the United States: neither we nor the underwriters have done anything that would permit this Offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this Offering and the distribution of this prospectus.




PROSPECTUS SUMMARY

 

This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our common stock. You should read the entire prospectus, including our financial statements and related notes and the information set forth under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before investing in our common stock. In this prospectus, the “Company,” “we,” “us,” and “our” refer to Healthy Extracts, Inc.

 

Our Business

 

We are a platform for acquiring, developing, researching, patenting, marketing, and distributing science-forward, clinically proven, plant-based nutraceuticals. Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health.

 

Nutraceuticals are generally considered to be substances that beyond their nutritional value can be used to achieve a benefit for an existing physiological condition or provide protection against potential aliments.

 

The primary philosophy behind nutraceuticals is the focus on prevention and the body’s ability to use natural rather than artificially derived substances to treat disease or dysfunction—or as the Greek physician and father of modern medicine, Hippocrates, famously espoused, “Let food be your Medicine.”  

 

Today, the role of nutraceuticals in human health and wellbeing has become one of the most active and important areas of scientific investigation, with the latest findings presenting wide-ranging implications for consumers, health care providers, regulators, nutritional supplement producers and distributors. Our mission is to lead and support this investigation and use our findings to acquire or create products with health and performance benefits that have mass consumer appeal.

 

Guided by this mission, our first two acquisitions (in 2019 and 2020, respectively) formed our current operating subsidiaries, Bergamet NA, LLC (“Bergamet”), which offers nutraceutical heart and immune health products, and Ultimate Brain Nutrients, LLC (“UBN”), which offers nutraceutical products for brain health.

 

Through more than 17 published clinical trials, our Bergamet products have been shown to support heart health, support immune response, and address metabolic syndrome. Our UBN brain heath formulations have been in development for more than 20 years, over which time it has gained support by more than 100 clinical studies.

 

On January 13, 2023, we entered into a definitive agreement to acquire nutraceutical manufacturer, Hyperion, L.L.C. (“Hyperion”), and its digital marketing affiliate, Online Publishing & Marketing, LLC (“OPM”), both based in Lexington, Virginia. We intend to use a portion of the proceeds from this Offering to fund this acquisition. See “Use of Proceeds.”

 

Hyperion products have been formulated to support brain, memory, vision, sinus and digestive health, as well as healthy sleep and aging. OPM provides online advertising and marketing for Hyperion as well as other companies in the health and wellness space. The closing of these two acquisitions is expected to occur following the completion of and using the proceeds from this Offering.


1



We anticipate the acquisition of Hyperion and OPM to be transformative to our business, significantly strengthening our manufacturing, marketing and distribution capabilities, expanding our nutraceutical product portfolio, adding positive cash flow, and significantly increasing our annualized gross revenues.

 

We also expect that the greater financial and operational strength afforded by these two acquisitions to better enable us to make future strategic complementary acquisitions, including some of which we have identified and are currently evaluating.

 

Our Markets

 

The overall nutraceutical market is growing at a 7.8% compounded annual growth rate (“CAGR”) and is expected to reach $441 billion by 2026, according to ReportLinker. Driving this growth are multiple factors, including changing lifestyles, growing consumer desire to move away from expensive prescription medicine and undesirable side effects, aging population and increased life expectancy.

 

A growing self-care trend is also driving strong demand for nutraceuticals. Given increasingly hectic lifestyles, and the lack of time for preparing and consuming the required nutrients through a regular diet, the desire to replenish or augment essential nutrients with nutraceuticals is also increasing.

 

Our BergaMet all-natural Citrus Bergamot SuperFruit formulations address an expanding global heart health ingredients market that is projected to grow at a 4.6% CAGR to reach $55.3 billion by 2027, according to ResearchAndMarkets. This growth is largely being driven by concerns about cardiovascular disease, which remains the leading cause of premature death globally according to the World Health Organization.

 

Our UBN products tap the fast-growing market for brain health, which is growing at a 9.4% CAGR to reach $15.7 billion by 2030, according to Grandview Research. This market is being driven in part by the rise in the aging adult population in North America and Europe, with consumers increasingly using brain health supplements to prevent or treat mental conditions such as memory loss or dementia, or to improve mental cognition, energy and focus.

 

Our UBN RELIEF product for migraine suffers also address a huge market opportunity, with an estimated 39 million people suffering from migraine headaches in the U.S. and 1 billion worldwide, according to the American Migraine Foundation.

 

Our Competitive Strengths

 

We compete with other manufacturers, distributors and marketers of vitamins, minerals, herbs, and other nutritional supplements both within and outside the U.S. The nutritional supplement industry is highly competitive, and we expect the level of competition to remain high over the near term.

 

We believe we have unique market position in high gross margin categories, with our gross margin ranging from 60% to 80%, depending on product and market channel.

 

Based upon our exclusive U.S. and Canada licensing and manufacturing agreement with Gelteq, we believe we are able to offer a unique gel-pack delivery system that our competition in North America cannot provide.


2



As the exclusive North American provider of the world’s highest strength Citrus Bergamot SuperFruit, our heart and immune products have unique advantages. For example, our BergaMet PRO+ product has 47% BPF Gold potency as compared to our closest competitor at only 38% BPF.

 

Backed by more than 17 published clinical trials, our citrus bergamot has been shown to support heart health, support immune response, and address metabolic syndrome.

 

Our peer-reviewed clinical studies that support our health and brain health products also provide us important competitive advantages. Our UBN brain health formulation has been in development for more than 20 years, over which time it has gained support by more than 100 clinical studies.

 

In January 2022, the World Journal of Advanced Research and Reviews published the results of a clinical study which showed that taking a daily serving of UBN RELIEF for 60 days can naturally reduce or alleviate neurological discomfort. It was also shown to improve cognitive function, sleep satisfaction and overall quality of life.

 

Future Anticipated Growth Drivers

 

New Sales Channels and Product Launches

 

In order to drive continued sales growth and leverage our growing customer base, we are planning to expand our product portfolio to include supplements that support gut health as well as introduce more products in gel-pack format.

 

We plan to further expand our sales channels as well as our portfolio of proprietary, clinically proven natural formulations for heart and brain health and other indications.

 

Strategic Acquisitions

 

The market for nutraceutical products is highly fragmented, which create many acquisition opportunities. As part of our primary mission, we will continue to evaluate potential acquisition opportunities that could expand our product portfolio and benefit from our marketing strength and multi-channel distribution.

 

We anticipate that the greater financial and operational strength afforded by our planned acquisitions of Hyperion and OPM will better enable us to make future strategic complementary acquisitions.

 

Employees

 

On the Healthy Extracts holding company level, are employees are comprised of our company’s officers. Our BergaMet subsidiary has two employees. Our UBN subsidiary currently does not have its own employees since it uses outside contract help on an as-needed basis, with management provided by our officers.

 

We anticipate all of our employees will continue to work for us for the foreseeable future. We plan to hire appropriate personnel on an as-needed basis and utilize the services of independent contractors as needed.

 

We anticipate that our planned acquisition of Hyperion and OPM will add approximately 14 employees, which will continue to work out of their existing facilities in Lexington, Virginia.


3



Corporate History

 

We were incorporated on December 19, 2014 in the State of Nevada.

 

On February 4, 2019, we acquired BergaMet NA, LLC, a Delaware limited liability company (“BergaMet”). BergaMet is a wholly-owned subsidiary through which we conduct our nutraceuticals business. As a result of the acquisition, Jay Decker became our majority shareholder. The shares of common stock issued in the acquisition were equal to approximately 80.1% of our outstanding common stock immediately following the closing.

 

On April 3, 2020, we acquired Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”). UBN is a wholly-owned subsidiary through which we conduct our plant-based neuro-products business. As a result of the acquisition, Jay Decker became a significantly larger shareholder. The shares of common stock issued in the acquisition were equal to approximately 42.5% of our outstanding common stock immediately following the closing.

 

On January 13, 2023, we entered into an Acquisition Agreement for the acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC, both Virginia limited liabilities companies, by merging them into our newly-formed wholly-owned subsidiaries, Green Valley Natural Solutions, LLC (“Green Valley”) and Online Publishing & Marketing, LLC (“OPM”), both Nevada limited liability companies. The closing of the acquisition will take place following the completion of and using the proceeds from this Offering. 

 

Corporate Information

 

Our corporate headquarters are located at 7375 Commercial Way, Suite 125, Henderson, NV 89011, and our telephone number is (702) 463-1004. Our websites are www.healthyextractsinc.com, www.bergametna.com, and www.tryubn.com. Information contained on our websites is not incorporated into, and does not constitute any part of, this prospectus.

 

Recent Developments

 

Reverse Stock Split

 

On September 23, 2022, our majority shareholder approved by written consent, declared it advisable and in our best interest, to amend our Articles of Incorporation to effect a reverse split of our outstanding Common Stock within a range of 1-for-25 to 1-for-150, the exact ratio and timing to be determined by our board of directors (“Board”) no later than June 30, 2023. On September 23, 2022, our Board of Directors approved the stock split. We intend for the Board to effect such reverse stock split in connection with the Offering and our intended listing of our Common Stock on the Nasdaq Capital Market (“Nasdaq”), however we cannot guarantee that The Nasdaq Stock Market LLC will approve our initial listing application for our Common Stock upon such reverse stock split. Unless specifically provided otherwise herein, such numbers and prices above and used elsewhere in this prospectus assume the effectiveness of a 1-for-100 reverse stock split of our Common Stock, an assumed offering price of $[·] per share, and the listing of our Common Stock on Nasdaq to occur as of the effective date of the registration statement of which this prospectus forms a part but prior to the closing of the Offering of the shares.

 

We intend to apply to list our Common Stock on Nasdaq in connection with this offering. We intend for the Board to effect such reverse stock in connection with this Offering and our intended listing of our Common Stock on Nasdaq, however we cannot guarantee that we will receive approval of our initial listing application for our Common Stock on Nasdaq upon such reverse stock split.


4



The number of shares of Common Stock offered pursuant to this prospectus and all other applicable information, other than in the historical financial statements and related notes included elsewhere in this prospectus, assumes the effectiveness of a 1-for-100 reverse stock split of our Common stock.

 

2023 Pending Acquisitions

 

On January 13, 2023, we entered into an Acquisition Agreement for the acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC, both Virginia limited liabilities companies, by merging them into our newly-formed wholly-owned subsidiaries, Green Valley Natural Solutions, LLC (“Green Valley”) and Online Publishing & Marketing, LLC (“OPM”), both Nevada limited liability companies. The closing of the acquisition will take place following the satisfaction of certain closing conditions, including a capital raise of at least $4,000,000 and the commencement of trading, or approval for the commencement of trading, of our common stock on the Nasdaq Capital Market. The total purchase price for the acquisitions will be $1,750,000 in cash, $1,300,000 in the form of secured promissory notes, and $1,250,000 worth of our common stock (based on a 30% premium to the price paid per share of common stock in the above-referenced capital raise, but in no event more than ninety percent (90%) of the volume weighted average price for our common stock for the ninety (90) trading days up to and including the trading day immediately before the day the price is finally determined for securities sold in the capital raise).

 

The combination of the businesses is expected to significantly increase our current annualized gross revenues. Revenues for Hyperion and OPM were over $9 million for the nine-months ended September 30, 2022. Hyperion is also expected to strengthen our manufacturing and distribution capabilities, as well as expand our product portfolio with 15 unique and proprietary nutraceutical formulations sold under the brand, Green Valley Natural Solutions. These products are formulated to support brain, memory, vision, sinus and digestive health, as well as healthy sleep and aging.

 

Green Valley Natural Solutions products are manufactured and shipped direct-to-consumer from specially temperature-controlled warehouses in Shenandoah Valley, Virginia. These facilities would add an East Coast presence to our existing warehouse and shipping facilities in Nevada, with this expected to lower customer shipping costs and order delivery times.

 

Hyperion’s relationships with high-quality contract manufacturers are also expected to lower our manufacturing costs, as well as improve supply chain efficiencies and economies of scale.

 

Online Publishing & Marketing specializes in creating digital and affiliate marketing content for Hyperion and will enhance our overall marketing strategy and audience reach. They also bring a large email distribution list of hundreds of thousands of potential customers with a new affiliate marketing channel. OPM also produces engaging digital content such as educational videos and newsletters.

 

The planned acquisition of Hyperion and OPM is expected to add approximately 14 employees, who would continue to work out of the existing facilities in Lexington, Virginia.

 

We expect these two synergistic and accretive acquisitions to accelerate and support our growth and expand our market reach. Our natural, clinically-proven heart and brain health formulations are perfect for cross selling or private labeling with Green Valley products, such as their stem cell restore formulation that are sold across various marketing channels. Likewise, Green Valley sales would benefit from our established marketing channels, which includes subscription-based direct-to-consumer, national grocery stores, and a strong presence on Amazon.

 

On a pro forma basis upon the closing of the acquisitions, we would generate over $12 million in annualized gross revenue, including significant recurring revenue being generated by subscriptions. The


5



anticipated positive cash flow would fund future revenue growth from new product introductions and market expansion, as well as other potential strategic acquisitions.

 

The completion of the acquisitions is subject to certain closing terms and there can be no assurance that the transactions will be completed as described.

 

Summary of Risk Factors

 

There are a number of risks related to our business, this offering and our common stock that you should consider before you decide to participate in this offering. You should carefully consider all the information presented in the section titled “Risk Factors” in this prospectus. Some of the principal risks related to our business include the following:

 

We rely on a single supplier relationship for licensing and manufacturing, and the termination of that agreement could have material effect on the cost of our products and the manufacturing of our finished goods. 

 

We have a limited operating history in our current business, we are not profitable, and we do not expect to be profitable in the near future. There is no assurance our future operations will result in revenues sufficient to obtain or sustain profitability. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations. 

 

We received and responded to a warning letter from the FDA. 

 

Our success is linked to the size and growth rate of the vitamins, minerals and supplements market and an adverse change in the size or growth rate of that market could have a material adverse effect on us; 

 

We expect to incur substantial costs and devote substantial time to the integration of Hyperion and OPM, which could have a negative impact on our operating results; 

 

Our success depends on our ability to maintain the value and reputation of our brands; 

 

We may fail to attract, acquire or retain customers at our current or anticipated future growth rate, or may fail to do so in a cost-effective manner, which would adversely affect our business, financial condition and results of operations; 

 

If we are unable to anticipate customer preferences and successfully develop new and innovative products in a timely manner or effectively manage the introduction of new or enhanced products, then our business may be adversely affected; 

 

We are highly dependent upon consumers’ perception of the safety, quality, and efficacy of our products as well as similar products distributed by other companies in our industry, and adverse publicity and negative public perception regarding particular ingredients or products or our industry in general could limit our ability to increase revenue and grow our business; 

 

We face intense competition from competitors that are larger, more established and that possess greater resources than we do, and if we are unable to compete effectively, we may be unable to gain sufficient market share to sustain profitability; 

 


6



Because we depend on outside suppliers with whom we do not have long-term agreements for raw materials, we may be unable to obtain adequate supplies of raw materials for our products at favorable prices or at all, which could result in product shortages and back orders for our products, with a resulting loss of sales and profitability; 

 

A disruption in the service, a significant increase in the cost of our primary delivery and shipping services for our products or a significant disruption at shipping ports could adversely affect our business; 

 

We will required additional financing in the future, and we can provide no assurance that such funding will be available on terms that are acceptable to us, or at all. 

 

We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs, and the lack of adequate financing could negatively impact our business; 

 

We and our suppliers are subject to numerous laws and regulations that apply to the manufacturing and sale of nutritional supplements, and compliance with these laws and regulations, as they currently exist or as modified in the future, may increase our costs, limit or eliminate our ability to sell certain products, subject us or our suppliers to the risk of enforcement action, or otherwise adversely affect our business, results of operations and financial condition; and 

 

Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology and any interruption in these systems could have a material adverse effect on our business, financial condition and results of operations. 

 

These and other risks are more fully described in the section titled “Risk Factors” in this prospectus. If any of these risks actually occurs, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected. As a result, you could lose all or part of your investment in our common stock.


7



The Offering

 

Shares of Common Stock to be offered by us:

 

[·] shares ([·] shares if the underwriters exercise their over-allotment option in full to purchase shares of Common Stock at the offering price), based on an assumed offering price of $[·] per share.

 

 

 

Shares of Common Stock outstanding immediately before this Offering:

 

3,451,724 shares.

 

 

 

Shares of Common Stock outstanding immediately after this Offering:

 

[·] shares ([·] shares if the underwriters exercise their over-allotment options in full to purchase [·] shares of Common Stock at the offering price), based on an assumed offering price of $[·] per share, and assuming no exercise of any Underwriters’ Warrants.

 

 

 

Assumed public offering price:

 

$[·] per share. The actual public offering price may be at, above or below such assumed public offering price and will be determined at pricing based on, among other factors, the closing bid price of the Common Stock on the effective date of this registration statement. See “Underwriting — Determination of Public Offering Price” for additional information.

 

 

 

Option to purchase additional shares of Common Stock:

 

We have granted to the underwriters the option, exercisable for 45 days from the date of this prospectus, to purchase up to [·] additional shares of Common Stock to cover over-allotments, if any.

 

 

 

Underwriters’ Warrants:

 

The registration statement of which this prospectus forms a part also registers for sale up to an aggregate of [·] shares of Common Stock (based on an assumed public offering price of $[·] per share) underlying the Underwriter’s Warrants as a portion of the underwriting compensation payable to the underwriters in connection with this offering. The Underwriters’ Warrants will be exercisable at any time, and from time to time, in whole or in part, after the closing of this Offering until the fifth anniversary of the date of the commencement of sales of the Shares issued in connection with this Offering at an exercise price of $[·] per share (110% of the public offering price per share of Common Stock). See “Underwriting —Underwriters’ Warrants” for a more detailed description of the Underwriters’ Warrants.

 

 

 

Use of Proceeds:

 

We estimate that the net proceeds from the sale of our Common Stock in this Offering will be approximately $[·] million, based on an assumed public offering price of $[·] per share, and assuming the underwriters do not exercise their option to purchase additional shares of Common Stock and no exercise of Underwriters’ Warrants.

 

We intend to use $3.1 million of the net proceeds from this Offering to complete the acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC. The remainder of the proceeds will be used for working capital and general corporate purposes. See the section entitled “Use of Proceeds.”


8



Reverse Stock Split:

 

We anticipate that we will effect a reverse stock split of the outstanding shares of Common Stock at a ratio between 1-for-25 and 1-for-150 on or after the date on which the registration statement of which this prospectus forms a part is declared effective by the SEC, but in no event later than the pricing of this Offering. Unless otherwise noted, the share and per share information in this prospectus, other than in the historical financial statements and related notes included elsewhere in this prospectus, assumes the effectiveness of a 1-for-100 reverse stock split of our outstanding shares of Common Stock.

 

 

 

Risk Factors:

 

An investment in our shares of Common Stock offered hereby is speculative and involves a high degree of risk. You should read the section entitled “Risk Factors” beginning on page 12 of this prospectus for a discussion of factors you should consider carefully before deciding to purchase our shares of Common Stock offered hereby.

 

 

 

Proposed Nasdaq symbol and trading:

 

Our Common Stock is presently quoted on the OTCQB Market. We intend to apply to list our Common Stock on Nasdaq. We cannot guarantee that we will be successful in listing our Common Stock on Nasdaq. We will not consummate this Offering unless our Common Stock is approved for listing on Nasdaq.

 

 

The number of shares of our Common Stock to be outstanding before this Offering is based on 3,451,724 shares of our Common Stock outstanding as of February 9, 2023, giving effect to the anticipated reverse stock split of our outstanding Common Stock on a 1-for-100 basis, and assuming no exercise of the underwriters’ over-allotment option and no exercise of any Underwriters’ Warrants, and includes or excludes the following, as applicable:

 

·excludes [·] shares of Common Stock issuable upon the closing of the acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC. The number of shares of Common stock will be equal to $1,250,000 based on a 30% premium to the price paid per share of Common Stock in this Offering, but in no event more than ninety percent (90%) of the volume weighted average price for our common stock for the ninety (90) trading days up to and including the trading day immediately before the day the price is finally determined for securities sold in this Offering; 

·excludes 168 shares of Common Stock issuable upon the exercise of outstanding warrants with an exercise price of $6,250.00 per share; 

·excludes 75,000 shares of Common Stock issuable upon the exercise of outstanding warrants with an exercise price of $5.00 per share; 

·excludes 65,000 shares of Common Stock issuable upon the exercise of outstanding warrants with an exercise price of $7.50 per share; 

·excludes 104,500 shares of Common Stock issuable upon the exercise of outstanding options with an exercise price of $5.00 per share; and 

·excludes 157,750 shares of Common Stock represented by Restricted Stock Units and 360,000 shares of Common Stock represented by Restricted Stock Awards. 

 

The actual number of shares of our Common Stock to be outstanding before this Offering will be determined based on the actual public offering price and the final reverse stock split ratio, as determined by the Board.


9



SUMMARY FINANCIAL INFORMATION

 

 

 

As of and for the Nine Months ended September 30,

 

As of and for the Year Ended December 31,

 

As of and for the Year Ended December 31,

Healthy Extracts, Inc.

 

2022

(unaudited)

 

2021

(audited)

 

 

2020

(audited)

 

 

 

 

 

 

 

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

1,668,105

$

1,676,598

$

1,299,398

Net operating income (loss)

$

(311,476)

$

(907,658)

$

(1,755,376)

Net income (loss)

$

(1,026,538)

$

(97,945)

$

(1,056,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$

73,884

$

222,098

$

59,201

Current assets

$

2,041,081

$

2,313,404

$

625,272

Total assets

$

2,779,161

$

3,029,579

$

3,115,430

 

 

 

 

 

 

 

Current liabilities

$

944,248

$

558,841

$

261,604

Total liabilities

$

944,248

$

558,841

$

261,604

Accumulated deficit

$

(15,970,158)

$

(14,943,620)

$

(12,956,498)

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

$

 

[·]

$

[·]

$

[·]


10



SUMMARY PRO-FORMA FINANCIAL INFORMATION

 

 

 

 

Healthy Extracts, Inc.

 

As of and for the Nine Months ended September 30,

 

As of and for the Year Ended December 31,

 

As of and for the Year Ended December 31,

Hyperion, L.L.C.

OP&M

 

2022

(unaudited)

 

2021

(audited)

 

2020

(audited)

 

 

 

 

 

 

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

9,576,077

$

12,837,096

$

13,025,222

Net operating income (loss)

$

7,618,113

$

10,089,485

$

9,161,648

Net income (loss)

$

(1,026,551)

$

(1,328,145)

$

(1,130,008)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

$

273,884

$

2,459,584

$

2,603,992

Current assets

$

3,199,901

$

5,609,481

$

5,897,871

Total assets

$

7,438,616

$

6,484,902

$

6,720,442

 

 

 

 

 

 

 

Current liabilities

$

1,303,716

$

1,050,058

$

749,488

Total liabilities

$

1,303,716

$

1,050,058

$

749,488

Accumulated equity (deficit)

$

(15,970,171)

$

(11,979,514)

$

(9,839,370)

Total stockholders’ equity

 

6,134,900

 

5,434,844

 

5,970,954

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

$

 

0.003

$

0.004

$

0.005


11



RISK FACTORS

 

Any investment in our common stock is speculative and involves a high degree of risk. You should consider carefully the risk factors related to our business described below, together with the other information and financial statements contained in this prospectus, before you decide to buy our common stock. There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If one or more of the these risks actually occurs, our business will suffer, and as a result our financial condition or results of operations will be adversely affected. In this case, the market price of our common stock could decline, and you could lose all or part of your investment in our common stock.

 

Risk Factors Related to our Business

 

We rely on a single supplier relationship for licensing and manufacturing, and the termination of that agreement could have material effect on the cost of our products and the manufacturing of our finished goods.

 

In August 2021, we signed an exclusive U.S. and Canada licensing and manufacturing agreement with Gelteq Pty Ltd, a developer of ingestible gel technology, under which we agreed to develop and manufacture an advanced oral delivery system for our plant-based, clinically proven, heart, immune and brain health formulations. Through this agreement we secured the exclusive rights to use Gelteq’s internationally patented gelification process in the U.S. and Canada for the development and marketing of natural ingestible gels that contain our Citrus Bergamot or UBN ingredients. In the event either party terminates that agreement, our ability to obtain and manufacture our products will be interrupted, and we may not be able to find a replacement at the same cost.

 

We have a limited operating history in our current business, we are not profitable, and we do not expect to be profitable in the near future. There is no assurance our future operations will result in revenues sufficient to obtain or sustain profitability. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.

 

We were incorporated on December 19, 2014, but we have changed our business focus with the acquisition of BergaMet in 2019 and UBN in 2020.  We have not fully developed our current business operations and have not yet to generate significant revenue from such operations. Our ability to continue as a going concern is dependent upon our ability to further establish and then grow our business and to obtain adequate financing in order to reach profitable levels of operations. In that regard we have no proven history of performance, earnings or success. 

 

Our net loss from inception to December 31, 2021, was ($14,943,620). Based on our cash position of $73,884 as of September 30, 2022, we will need to raise additional capital from the sale of our stock or debt. Such funding may not be available, or may be available only on terms which are not beneficial and/or acceptable to us. 

 

Our ability to achieve profitability and positive cash flow in the future is dependent upon our ability to attract new customers who will buy our nutritional supplement products and services, and our ability to generate sufficient revenue through the sale of those products and services.

 

Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses that may exceed revenues. We cannot guarantee that we will be successful in generating sufficient revenues in the future. In the event we cannot generate sufficient revenues and/or secure additional financing, we may be forced to cease operations.


12



Our success is linked to the size and growth rate of the vitamin, mineral and supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.

 

An adverse change in size or growth rate of the vitamin, mineral and supplement market could have a material adverse effect on us. Underlying market conditions are subject to change based on economic conditions, consumer preferences and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative. In addition, the vitamin, mineral and supplement market is heavily saturated, and the demand for and market acceptance of new products and services in the market is uncertain. While we predict that the overall vitamin, mineral and supplement market will continue to grow, it is difficult to predict the future growth rates, if any, to the size of our market. We cannot assure you that our market will continue to develop, that the public’s interest in personalized health and wellness will continue, or that our products and services will become widely adopted. If our market does not further develop, develops more slowly than expected, or becomes saturated with competitors, or if our products and services do not achieve market acceptance, our business, financial condition, and operating results could be adversely affected.

 

We are highly dependent upon consumers’ perception of the safety and quality of our products and if we fail to maintain adequate quality standards for our products and services, or if our products become subject to regulatory investigations, our business may be adversely affected and our reputation harmed.

 

Our products, including nutritional supplements, may contain defects or may not perform as intended. These defects could result in a product recall, market withdrawal, negative publicity or other events that would result in harm to our reputation, loss of customers or revenue, health and safety issues for our customers, product liability claims, refunds, order cancellations, or lack of market acceptance of our products and services. Any such defects, errors, or vulnerabilities would require us to take remedial action, which could require us to allocate significant research and development and customer support resources to address any such problems. Further, if we make acquisitions, we may encounter difficulties in integrating acquired technologies into our services and in augmenting those technologies to meet the quality standards that are consistent with our brand and reputation.

 

Our agreements with customers, distribution partners, and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred in connection with any such defects or errors of our products or services, or other liabilities relating to or arising from our products or services. Some of these indemnity agreements provide for uncapped liability for which we would be responsible, and some indemnity provisions survive termination or expiration of the applicable agreement. Large indemnity payments could harm our business, financial condition, and results of operations. Although we attempt to contractually limit our liability with respect to such indemnity obligations, we are not always successful and may still incur substantial liability related to such claims. In addition, although we carry general liability insurance, our insurance against this liability may not be adequate to cover a potential claim, and such coverage may not be available to us on acceptable terms, or at all. Any dispute with a customer or other third party with respect to such obligations could have adverse effects on our relationship with such customer or other third party, our reputation, or demand for our platform. Any of the foregoing could adversely affect our business, financial condition, and results of operations.

 

Negative public perception may also arise from regulatory actions or investigations, regardless of whether those investigations involve us. We are highly dependent upon consumers’ perception of the safety and quality of our products as well as similar products distributed by other companies. Thus, the mere publication of reports asserting that such products may be harmful or adverse public reports or other media


13



attention regarding the safety, efficacy and quality of nutritional supplements in general, or our products specifically, or associating the consumption of nutritional supplements with illness, questioning the benefits of nutritional supplements in general, or our products specifically, or claiming that such products do not perform as marketed, labeled and advertised, could have a material adverse effect on us, regardless of whether these reports are scientifically supported. Any such adverse public reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products as directed and the content of such public reports and other media attention may be beyond our control. Publicity related to nutritional supplements may also result in increased regulatory scrutiny of our industry. Adverse publicity may have a material adverse effect on our business, financial condition, results of operations and cash flows. There can be no assurance of future favorable scientific results and media attention or of the absence of unfavorable or inconsistent findings.

 

Our success depends on our ability to maintain the value and reputation of our brands.

 

We believe that our customers associate our name with quality products and services and that the strength of our brands is important to attracting and retaining customers. We rely on our trusted brands to differentiate our products and services from those of our competitors in a crowded and saturated market for nutritional supplements. Maintaining, protecting, and enhancing our brands depends largely on the success of our marketing efforts, ability to provide consistent, high-quality products, services, features, content and support. We believe that the importance of our brands will increase as competition further intensifies. Accordingly, brand promotion activities aimed at bolstering our brands may require substantial expenditures. Our brands could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity. Our brands could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity. Our brands could also be harmed if any of our influencers receive negative publicity, or if our products and services do not perform as intended.

 

We may fail to attract, acquire or retain customers at our current or anticipated future growth rate, or may fail to do so in a cost-effective manner, which would adversely affect our business, financial condition and results of operations.

 

Our continued growth depends, in part, on our ability to attract, acquire and retain customers in a cost-effective manner. Numerous factors, however, may impede our ability to attract, acquire or retain customers, including our failure to attract, effectively train, retain, and motivate sales and marketing personnel, our failure to educate customers and health professionals about the benefits of our products, our failure to develop or expand relationships with our suppliers, our inability to convert initial adoption into ongoing recurring revenue and our failure to provide customer support once products are delivered.

 

We rely on internet search engines, lead generators, and social networking sites to help drive traffic to our website and the sale of our products, and if we fail to appear prominently in the search results or fail to drive traffic through paid advertising, our traffic and product sales would decline and our business would be adversely affected.

 

We depend in part on internet search engines (such as Google), lead generators, and social networking sites (such as Facebook) to drive traffic to our website and the sale of our products. Our ability to maintain and increase the number of visitors directed to our website is not entirely within our control. Our competitors may increase their search engine optimization efforts and outbid us for placement on various sites or search terms on various search engines, resulting in their websites receiving a higher search result page ranking than ours. Additionally, internet search engines could revise their methodologies in a way that would adversely affect our search result rankings. If internet search engines modify their search algorithms in ways that are detrimental to us, if sites refuse to display any or all of our products in certain geographic markets, or if our competitors’ efforts are more successful than ours, overall growth in our


14



customer base could slow or our customer base could decline. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our website through internet search engines, lead generators, or social networking sites could harm our business and operating results.

 

Our success depends, in part, on our existing customers continuing to purchase our products. Our customers have no obligation to purchase our products, and in the normal course of business, some customers may decide to purchase less or none of our products. If we acquire fewer customers than expected, or fewer customers purchase our existing products or try our new products, then our business, financial condition and results of operations may be adversely affected. Our business depends on the effectiveness of our advertising and marketing programs, including the strength of our social media presence, to attract and retain customers.

 

Our business success depends on our ability to attract and retain customers. Our ability to attract and retain customers depends significantly on the effectiveness of our advertising and marketing practices. From time-to-time, we use the success stories of our customers, and utilize brand ambassadors, spokespersons and social media influencers, including in some cases celebrities, in our advertising and marketing programs to communicate on a personal level with consumers. Any actions taken by these individuals that harm their personal reputation or image, or their decision to stop using our services and products, could have an adverse impact on the advertising and marketing campaigns in which they are featured. We and our brand ambassadors, spokespersons and social media influencers also use social media channels as a means of communicating with customers. Unauthorized or inappropriate use of these channels could result in harmful publicity or negative consumer experiences, which could have an adverse impact on the effectiveness of our marketing in these channels. In addition, substantial negative commentary by others on social media platforms could have an adverse impact on our reputation and ability to attract and retain customers. If our advertising and marketing campaigns do not generate a sufficient number of customers, our business, financial condition and results of operations will be adversely affected.

 

If we are unable to anticipate customer preferences and successfully develop new and innovative products in a timely manner or effectively manage the introduction of new or enhanced products, then our business may be adversely affected.

 

Part of our success is our ability to innovate and introduce new products focused on our consumer demands. To maintain our success and increase our customer base, we must continue to develop products with differentiated benefits and anticipate and react to changing health professional and consumer demands in a timely manner. Our products and services are subject to changing consumer preferences that cannot be predicted with certainty. If we are unable to introduce new or enhanced products in a timely manner, or our new or enhanced products are not accepted by our customers, then our competitors may introduce competitive products faster than us, which could negatively affect our rate of growth. Moreover, our new products may not receive customer acceptance because preferences could shift rapidly to alternative nutritional supplements, and our future success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing customer preferences could lead to, among other things, lower sales, pricing pressure, lower gross margins, and excess inventory levels. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address them will partially depend upon our continued ability to develop and introduce innovative, high-quality product offerings. Development of new or enhanced products and services may require significant time and financial investment, which could result in increased costs and a reduction in our profit margins.

 

If we are unable to sustain pricing levels for our products, our business could be adversely affected.


15



The prices for our nutritional supplement products reflect their high quality, safety and benefits. If we are unable to sustain pricing levels for our products, whether due to competitive pressure or otherwise, then our gross profits could be reduced. Further, our decisions regarding the development of new products are based on assumptions about future pricing. If there is price compression in the market after these decisions are made, then it could lower our gross profits and have a negative effect on our results of operations.

 

We face intense competition from competitors that are larger, more established and that possess greater resources than we do, and if we are unable to compete effectively, we may be unable to gain sufficient market share to sustain profitability.

 

Numerous manufacturers and distributors compete actively for consumers. There can be no assurance that we will be able to compete in this intensely competitive environment. In addition, nutritional supplements can be purchased in a wide variety of channels of distribution. These channels include mass market retail stores and the Internet. Because these markets generally have low barriers to entry, additional competitors could enter the market at any time. Private label products of our customers also provide competition to our products. Additional national or international companies may seek in the future to enter or to increase their presence in our distribution channels or the vitamin, mineral supplement market. Increased competition in either or both could have a material adverse effect on us.

 

Adverse economic conditions may harm our business.

 

Our business depends on global economic conditions. Unstable market conditions make it difficult for our clients and us to accurately forecast and plan future business activities, and could cause our customers to reduce or delay their spending with us. Economic downturns or unstable market conditions may cause customers to decrease their budgets, which could reduce spend on our products and adversely affect our business, financial condition and results of operations. As we explore new countries to expand our business, economic downturns or unstable market conditions in any of those countries could result in our investments not yielding the returns we anticipate.

 

Generally, the United States and other key international economies have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, and overall uncertainty with respect to the economy, including with respect to tariff and trade issues. In particular, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the banking sector, uncertainty over the future of the Eurozone and volatility in the value of the pound sterling and the Euro, including instability surrounding Brexit. We have operations, as well as current and potential new customers, throughout the United Kingdom and most of Europe. If economic conditions in the United Kingdom and Europe and other key markets for our platform continue to remain uncertain or deteriorate further, it could adversely affect our customers’ ability or willingness to subscribe to our platform, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions or affect renewal rates, all of which could harm our operating results.

 

Inflation or other changes in economic conditions that affect demand for nutritional supplements could adversely affect our revenue. Uncertainty about current global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit markets, negative financial news and/or declines in income or asset values, each of which could have a material negative effect on the demand for our products. Other factors that could influence demand include conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors


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could have a material adverse effect on demand for our products and on our financial condition and operating results.

 

Overall tightening of the labor market, increases in labor costs or any possible labor unrest may adversely affect our business and results of operations.

 

Our business, particularly the manufacturing of our products, requires a substantial number of personnel. Any failure to retain stable and dedicated labor by us may lead to disruption to our business operations, including the manufacturing of our products. Although we have not experienced any material labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition and results of operations may be materially and adversely affected.

 

Our operating results could be adversely affected if we are unable to accurately forecast customer demand for our products and services and adequately manage our inventory.

 

To ensure adequate inventory supply, we must forecast inventory needs and expenses and place orders sufficiently in advance with our suppliers, based on our estimates of future demand for particular products and services. Failure to accurately forecast our needs may result in manufacturing delays or increased costs. Our ability to accurately forecast demand could be affected by many factors, including changes in customer demand for our products and services, changes in demand for the products and services of our competitors, widespread acceptance of personalized health recommendations and nutritional supplements, unanticipated changes in general market conditions, and the weakening of economic conditions or consumer confidence in future economic conditions. This risk may be exacerbated by the fact that we may not carry a significant amount of inventory and may not be able to satisfy short-term demand increases. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products available for sale. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and our brand. Further, lower than forecasted demand could also result in excess manufacturing capacity or reduced manufacturing efficiencies, which could result in lower margins. Conversely, if we underestimate customer demand, our suppliers and manufacturers may not be able to deliver products to meet our requirements or we may be subject to higher costs in order to secure the necessary production capacity. An inability to meet customer demand and delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships and have an adverse effect on our business, financial condition, and operating results.

 

We acquire ingredients for our products from foreign suppliers and may be negatively affected by the risks associated with international trade and importation issues.

 

We acquire ingredients for a number of our products from suppliers outside of the United States. Accordingly, the acquisition of these ingredients is subject to the risks generally associated with importing raw materials, including, among other factors, delays in shipments, changes in economic and political conditions, quality assurance, health epidemics affecting the region of such suppliers (including the COVID-19 pandemic), nonconformity to specifications or laws and regulations, tariffs, trade disputes and foreign currency fluctuations (particularly as it relates to the tariffs currently imposed on certain products originating from China). While we inspect 100% of the lots received from third party suppliers, we cannot assure you that raw materials received from suppliers or finished products from manufacturers outside of the United States will conform to all specifications, laws and regulations or our internal standards.


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There have in the past been quality and safety issues in our industry with certain items imported from overseas. We may incur additional expenses and experience shipment delays due to preventative measures adopted by the U.S. governments, our suppliers and our company.

 

Ingredient and packaging costs are volatile and may rise significantly, which may negatively impact the profitability of our business.

 

Costs of ingredients and packaging are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, fluctuations in currency and exchange rates, weather conditions, natural or man-made disasters, consumer demand and changes in governmental trade and agricultural programs. Continued volatility in the prices of the core ingredients and other supplies we purchase could increase our cost of goods sold and reduce our profitability.

 

We do not use hedges or forward pricing for availability of any core ingredients. As such, any material upward movement in core ingredient pricing could negatively impact our margins if we are not able to pass these costs on to our consumers, or our sales if we are forced to increase its prices. If we are not successful in managing our ingredient and packaging costs, if we are unable to increase our prices to cover increased costs or if such price increases reduce our sales volumes, then such increases in costs will adversely affect our business, financial condition and results of operations.

 

Certain of our core ingredient contracts have minimum volume commitments that could require purchases without matching revenues during weaker sales periods. Future core ingredient prices may be impacted by new laws or regulations, suppliers’ allocations to other purchasers, interruptions in production by suppliers, natural disasters, volatility in the price of crude oil and related petrochemical products and changes in exchange rates.

 

A disruption in the service, a significant increase in the cost of our primary delivery and shipping services for our products or a significant disruption at shipping ports could adversely affect our business.

 

We use a variety of shipping services for delivery of our products to users and brick-and-mortar and online retail partners, including air carriers and ocean shipping services. We have experienced and could continue to experience increased congestion and new import and export restrictions implemented at ports on which we rely for our business. In many cases, we have had to secure alternative transportation, such as air freight, or use alternative routes, at increased costs, to run our supply chain.

 

In the event of any significant interruption in service by shipping providers or at airports or shipping ports, we may be unable to engage alternative suppliers or to receive or ship goods through alternate sites in order to deliver our products in a timely and cost-efficient manner. As a result, we could experience delays, increased shipping costs and lost sales as a result of missed delivery deadlines and product demand cycles. For example, at times during the COVID-19 pandemic, shipping of our products has been delayed, which has inconvenienced our users and brick-and-mortar and online retail partners. Furthermore, if the cost of delivery or shipping services were to increase significantly and the additional costs could not be covered by product pricing, our results of operations could be adversely affected.

 

In particular, we are dependent upon major shipping companies, including FedEx, for the shipment of our products to and from our third-party logistics partner facilities. Changes in shipping terms, or the inability of these third-party shippers to perform effectively, could affect our responsiveness to our users and brick-and-mortar and online retail partners. Increases in our shipping costs may adversely affect our financial results if we are unable to pass on these higher costs to our users or brick-and-mortar and online retail partners.


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We will required additional financing in the future, and we can provide no assurance that such funding will be available on terms that are acceptable to us, or at all.

 

We will require additional financing in the future in order to grow our business, and are faced with the risk that funding will be unavailable in sufficient amounts or on terms acceptable to us, if at all, when needed. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest will be diluted, and the terms of those securities may include liquidation or other preferences that materially adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to make capital expenditures, declare dividends, or otherwise conduct our business. If we are unable to obtain any funding we need on a timely basis, we may be required to significantly curtail, delay or discontinue research or development of new products, the commercialization of our products or expansion into new geographies, which could materially affect our business, financial condition, and results of operations.

 

Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease COVID-19.

 

Throughout 2020, 2021, and 2022, the COVID-19 outbreak caused disruptions in our operations, which have resulted in delays on existing projects. A prolonged disruption or any further unforeseen delay in our operations could continue to result in increased costs and reduced revenue.

 

We cannot foresee whether the outbreak of COVID-19 or new variants thereof will be effectively contained, nor can we predict the severity and duration of its impact. If any outbreak of COVID-19 or its variants or any similar disease is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

 

Our competitors may develop nutritional supplement products that are less expensive, safer or otherwise more appealing, which may diminish or eliminate the commercial success of any potential product that we may commercialize.

 

If our competitors market nutritional supplement products that are less expensive, safer or otherwise more appealing than our current and potential products, or that reach the market before our current and potential products, we may not achieve commercial success. The market may choose to continue utilizing existing products for any number of reasons, including familiarity with or pricing of these existing products. The failure of any of our products to compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse effect on our future business, financial condition, results of operations, and cash flows. Our competitors may:

 

·develop and market products that are less expensive, safer, or otherwise more appealing than our products; 


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·commercialize competing products before we or our partners can launch our products; and 

 

·initiate or withstand substantial price competition more successfully than we can. 

 

Our auditors have substantial doubt about our ability to continue as a going concern.

 

Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our auditor’s report reflects that our ability to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. If we are unable to continue as a going concern, our stockholders will lose their investment. We will be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to our stockholders.

 

Our controlling stockholders have significant influence over us.

 

Our officers and directors currently own stock representing approximately 10% of our outstanding Common Stock. However, when combined with the shares held by our controlling shareholder, Jay Decker, such persons collectively hold approximately 63% of our outstanding Common Stock. In addition, Mr. Decker’s two adult sons collectively own an additional 14% of our outstanding Common Stock.  As a result, such individuals will (even after this offering) possess a significant influence over our affairs and may have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company, which in turn could materially and adversely affect the market price of our common stock. Our minority shareholders will be unable to affect the outcome of stockholder voting as long as our officers and directors retain a controlling interest.

 

After this Offering, one of our shareholders will continue to own a significant percentage of our Common Stock and will maintain the ability to substantially influence all matters submitted to stockholders for approval.

 

After this offering, Jay Decker will own approximately [·]% of our outstanding shares of Common Stock (approximately [·]% if the underwriters exercise their over-allotment option in full). As of February 1, 2023, Decker owns approximately 51% of our outstanding shares of Common Stock. For as long as Decker retains a significant ownership of our shares of Common Stock, he will be able to substantially influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, he will substantially influence the election of directors and approval of any merger, consolidation or sale of all or substantially all our assets. This concentration of voting power could delay or prevent an acquisition of us on terms that other stockholders may desire or result in management that our stockholders disagree with.


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Our current officers and directors may set salaries and perquisites in the future which we are unable to support with our current assets.

 

Although our officers and directors have written employment or services agreements, our officers and directors may decide to award themselves higher salaries and other benefits but all changes to these agreements will need to be approved by the Board of Directors. We do not have significant revenues, and there is no guarantee that we will have significant revenue in the near future. If we do not increase our revenues, we will be unable to support any higher salaries or other benefits for management, which may cause us to cease operations.

 

We may engage in strategic transactions that fail to enhance stockholder value.

 

From time to time, we may consider possible strategic transactions, including the potential acquisitions or licensing of products or technologies or acquisition of companies, and other alternatives with the goal of maximizing stockholder value. Our pending acquisitions of Hyperion and OPM are examples of this strategy.  We may never complete a strategic transaction, and in the event that we do complete a strategic transaction, implementation of such transactions may impair stockholder value or otherwise adversely affect our business. Any such transaction may require us to incur non-recurring or other charges and may pose significant integration challenges and/or management and business disruptions, any of which could harm our results of operation and business prospects.

 

We may not be able to gain or sustain market acceptance for our products and services.

 

Failure to establish a brand and presence in the marketplace on a timely basis could adversely affect our financial condition and results of operations. Moreover, there can be no assurance that we will successfully complete our development and introduction of new products and services or that any such products and services will achieve acceptance in the marketplace. We may also fail to develop and deploy new products and services on a timely basis.

 

We have a significant amount of unsold inventory, which could affect our assets and our profitability.

 

As of December 31, 2021, we had over $1.9 million in inventory, after writing off over $400,000 in inventory for the year. The amount of our inventory exceeds our revenues for the year ended December 31, 2021. As of September 30, 2022, we had over $1.8 million in inventory. Our inventory could spoil or be damaged, or we could never sell it, affecting the assets on our balance sheet as well as our future profitability. 

 

We are subject to and affected by extensive governmental regulations. 

 

We are subject to and affected by extensive governmental regulations, including, among other things, regulations pertaining to (i) the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products, and (ii) product claims and advertising (including direct claims and advertising by us, as well as claims and advertising by distributors for which we may be held responsible) 

 

We could be found not to be in compliance with existing regulations as a result, among other things, of the ambiguous nature of certain of the regulations, the considerable interpretive and enforcement discretion given to regulators or misconduct by distributors, who are generally independent contractors over whom we have limited control. Enforcement actions that could be undertaken by state and federal regulators include product seizures, injunctions against further product distribution, requests for product recall, and  


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possible criminal prosecution. Any assertion or determination that we or our distributors are not in compliance with existing regulations could have a material adverse effect on our revenues.

 

In addition, the adoption of new regulations, or changes in the interpretation of existing regulations, could have a material adverse effect on us. For example, in September 1997 the United States Food and Drug Administration (the “FDA”) issued regulations governing the labeling and marketing of dietary supplement products.  

 

In addition, claims made with respect to weight management, dietary supplement, personal care or other products of ours may change the regulatory status of the products. For example, it is possible that the FDA could take the position that claims made in connection with certain of our products place those products within the scope of an FDA “over-the counter” (OTC) drug monograph. OTC monographs prescribe permissible ingredients and appropriate labeling language, and require the marketer or supplier of the products to register and file annual drug listing information with the FDA.  

 

The U.S. Federal Trade Commission (“FTC”), which exercises jurisdiction over the advertising of all our products, has in the past instituted enforcement actions against dietary supplement companies for false and misleading advertising of certain products. These enforcement actions have resulted in consent decrees and monetary payments by the companies involved. In addition, the FTC has increased its scrutiny of the use of testimonials. 

 

We received and responded to a warning letter from the FDA.

 

On November 14, 2022, BergaMet NA, LLC, our subsidiary, received a warning letter from the FDA regarding claims we allegedly make about our Cholesterol Command product. On December 1, 2022, we responded to the warning letter notifying the FDA that we had hired a third-party to review our advertising and revise portions of our website, Facebook page, and online product listings.

 

There can be no assurance that the FDA will not pursue this action further. If the FDA were to pursue this action, we may have to cease selling certain of our products. Any action brought by the FDA would have a material adverse effect on our sales and operations.

 

Economic uncertainties or downturns could materially adversely affect our business.

 

Current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy including conditions resulting from changes in gross domestic product growth, the continued sovereign debt crisis, financial and credit market fluctuations, political deadlock, natural catastrophes, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, could cause a decrease in business investments.

 

General worldwide economic conditions have experienced a significant downturn and continue to remain unstable. These conditions make it extremely difficult for us to forecast and plan future business activities accurately, and they could cause our potential customers to reevaluate their decisions to purchase our product, which could delay and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times our potential customers may tighten their advertising budgets which may impact their spend on local inventory based digital marketing products. To the extent purchases of our products are perceived by potential customers to be discretionary, sales of our products may never occur. Also, customers may choose to seek other methods to achieve the benefits our products provide.

 


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We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic conditions of the general economy or industries in which we operate do not improve, or worsen from present levels, our business, results of operations, financial condition and cash flows could be adversely affected.

 

We are dependent on the services of key personnel and failure to attract qualified management could limit our growth and negatively impact our results of operations.

 

We are highly dependent on the principal members of our management team, including our President, Kevin “Duke” Pitts, and our Chief Financial Officer, Robert Madden. At this time, we do not know of the availability of such experienced management personnel or how much it may cost to attract and retain such personnel. The loss of the services of any member of senior management or the inability to hire experienced technical or programing personnel could have a material adverse effect on our financial condition and results of operations.

 

Other companies may claim that we have infringed upon their intellectual property or proprietary rights.

 

We do not believe that our products and services violate third-party intellectual property rights; however, we have not had an independent party conduct a study of possible patent infringements. Nevertheless, we cannot guarantee that claims relating to violation of such rights will not be asserted by third parties. If any of our products or services are found to violate third-party intellectual property rights, we may be required to expend significant funds to re-engineer or cause to be re-engineered one or more of those products or services to avoid infringement, or seek to obtain licenses from third parties to continue offering our products and services without substantial re-engineering, and such efforts may not be successful.

 

In addition, future patents may be issued to third parties upon which our products and services may infringe. We may incur substantial costs in defending against claims under any such patents. Furthermore, parties making such claims may be able to obtain injunctive or other equitable relief, which effectively could block our ability to further develop or commercialize some or all of our products or services in the United States or abroad, and could result in the award of substantial damages against us. In the event of a claim of infringement, we may be required to obtain one or more licenses from third parties. There can be no assurance that we will be able to obtain such licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any such license could be costly and have a material adverse effect on our business.

 

As a part of our business strategy, we have made and expect to continue to make acquisitions. These acquisitions could disrupt our operations and harm our operating results.

 

An element of our strategy includes expanding our product offerings and gaining access to new skills and other resources through strategic acquisitions when attractive opportunities arise. Acquiring additional businesses and the implementation of other elements of our business strategy are subject to various risks and uncertainties. Some of these factors are within our control and some are outside our control. These risks and uncertainties include, but are not limited to, the following:

 

  any acquisition may result in significant expenditures of cash, stock and/or management resources, 

 

  acquired businesses may not perform in accordance with expectations, 

 

  we may encounter difficulties and costs with the integration of the acquired businesses, 


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  management’s attention may be diverted from other aspects of our business, 

 

  we may face unexpected problems entering geographic and product markets in which we have limited or no direct prior experience, 

 

  we may lose key employees of acquired or existing businesses, 

 

  we may incur liabilities and claims arising out of acquired businesses, 

 

  we may be unable to obtain financing, and 

 

  we may incur indebtedness or issue additional capital stock, which could be dilutive to holders of our common stock. 

 

There can be no assurance that attractive acquisition opportunities will be available to us, that we will be able to obtain financing for or otherwise consummate any acquisitions or that any acquisitions which are consummated will prove to be successful. There can be no assurance that we can successfully execute all aspects of our business strategy.

 

Our success depends on our ability to protect our proprietary technology.

 

Our success depends, to a significant degree, upon the protection of our proprietary technology, and that of any licensors. Legal fees and other expenses necessary to obtain and maintain appropriate patent protection could be material. Currently, no material aspect of our business is protected by registered patents, copyrights or trademarks. Insufficient funding may inhibit our ability to obtain and maintain such protection. Additionally, if we must resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive, and could involve a high degree of risk to our proprietary rights if we are unsuccessful in, or cannot afford to pursue, such proceedings.

 

We may also rely on trademarks, trade secrets and contract law to protect certain of our proprietary technology. There can be no assurance that any trademarks will be approved, that such contract will not be breached, or that if breached, we will have adequate remedies. Furthermore, there can be no assurance that any of our trade secrets will not become known or independently discovered by third parties.

 

Our future growth may be inhibited by the failure to implement new technologies.

 

Our future growth is partially tied to our ability to improve our knowledge and implementation of mobile, AI, machine learning, and other advanced technologies in a retail environment, which is a rapidly changing market. The inability to successfully implement commercially technologies in response to market conditions in a manner that is responsive to our customers’ requirements could have a material adverse effect on our business.

 

Our common stock is governed under The Securities Enforcement and Penny Stock Reform Act of 1990.

 

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ and any equity security issued by an issuer that has (i) net tangible assets of at


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least $2,000,000, if such issuer has been in continuous operation for three years; (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years; or (iii) average annual revenue of at least $6,000,000, if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

 

Risks Related to our Acquisition and Integration of Hyperion, L.L.C. and

Online Publishing & Marketing, LLC

 

We have incurred and expect to incur substantial costs related to the acquisition of Hyperion and OPM and subsequent integration efforts.

 

We have incurred and expect to incur a number of non-recurring costs associated with our acquisition of Hyperion and OPM. These costs include legal, accounting, consulting and other advisory fees, closing, integration and other related costs.

 

In addition, upon closing of the acquisitions, we will pay to the selling parties $1.75 million in cash and execute promissory notes in the aggregate principal amount of $1.3 million. These obligations may have a negative impact on our operating results.

 

After the acquisition of Hyperion and OPM, integration may be more difficult, costly, or time-consuming than expected, and we may not realize the anticipated benefits of the underlying acquisition.

 

The anticipated benefits of our pending acquisition of Hyperion and OPM, including product candidate diversification and revenue growth, may not be realized fully or at all or may take longer to commercialize than expected and integration may result in additional and unforeseen expenses. An inability to realize the full extent of the anticipated benefits, as well as any delays encountered in the integration process, could have an adverse effect upon our operating results.

 

In addition, we and Hyperion and OPM will have operated independently prior to the completion of the acquisition. It is possible that the now-active integration process could result in the loss of one or more key employees, including employees of Hyperion and OPM, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect each company’s ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits of the acquisition. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on our business and operations during this transition period and for an undetermined period.

 

We may not have discovered certain liabilities or other matters related to Hyperion and OPM, which may adversely affect the future financial performance of the combined company.

 

In the course of the due diligence review that we conducted prior to the execution of the Acquisition Agreement, we may not have discovered, or may have been unable to properly quantify, certain liabilities of Hyperion and OPM or other factors that may have an adverse effect on the business, results of operations, financial condition, and cash flows of the combined company.


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Our estimates and judgments related to the acquisition accounting methods used to record the purchase price allocation related to the merger may be inaccurate.

 

With respect to our proposed acquisition of Hyperion and OPM (and other acquisitions we may undertake in the future), our management will make significant accounting judgments and estimates related to the application of acquisition accounting of the acquisition under GAAP, as well as the underlying valuation models. Our business, operating results, and financial condition could be materially adversely impacted in future periods if the accounting judgments and estimates prove to be inaccurate.

 

Risk Factors Related to the Offering and Our Securities Generally

 

Existing stockholders will experience significant dilution from the sale of our Common Stock.

 

The sale of our Common Stock pursuant to this Offering will have a dilutive impact on our shareholders. As a result, our net income per share could decrease in future periods and the market price of our common stock could decline.

 

The perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our common stock.

 

The market prices and trading volume of our shares of Common Stock may experience rapid and substantial price volatility, which could cause purchasers of our Common Stock to incur substantial losses. 

 

Recently, the market prices and trading volume of shares of Common Stock of other small publicly traded companies with a limited number of shares available to purchasers, have experienced rapid and substantial price volatility unrelated to the financial performance of those companies. Similarly, subsequent to this Offering, shares of our Common Stock may experience similar rapid and substantial price volatility unrelated to our financial performance, which could cause purchasers of our Common Stock in this Offering to incur substantial losses, which may be unpredictable and not bear any relationship to our business and financial performance. Extreme fluctuations in the market price of our Common Stock may occur in response to strong and atypical retail investor interest, including on social media and online forums, the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our Common Stock and our other securities, access to margin debt, trading in options and other derivatives on our shares of Common Stock and any related hedging and other trading factors:

 

If there is extreme market volatility and trading patterns in our Common Stock, it may create several risks for investors in this Offering, including the following:

 

·the market price of our Common Stock may experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals; 

·if our future market capitalization reflects trading dynamics unrelated to our financial performance or prospects, purchasers of our Common Stock could incur substantial losses as prices decline once the level of market volatility has abated; 

·if the future market price of our Common Stock declines, purchasers of shares of Common Stock in this Offering may be unable to resell such shares at or above the price at which they acquired them. We cannot assure such purchasers that the market of our Common  


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Stock will not fluctuate or decline significantly in the future, in which case investors in this Offering could incur substantial losses.

 

Further, we may incur rapid and substantial increases or decreases in our Common Stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or affecting us. Accordingly, the market price of our Common Stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in our business. Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our Common Stock or result in fluctuations in the price or trading volume of our Common Stock, including:

 

·actual or anticipated variations in our annual or quarterly results of operations, including our earnings estimates and whether we meet market expectations with regard to our earnings; 

·our current inability to pay dividends or other distributions; 

·publication of research reports by analysts or others about us or the industry in which we operate, including the nutraceutical industry which may be unfavorable, inaccurate, inconsistent or not disseminated on a regular basis; 

·changes in market valuations of similar companies; 

·market reaction to any additional equity, debt or other securities that we may issue in the future, and which may or may not dilute the holdings of our existing stockholders; 

·additions or departures of key personnel; 

·actions by institutional or significant stockholders; 

·short interest in our Common Stock or our other securities and the market response to such short interest; 

·the dramatic increase in the number of individual holders of our Common Stock and their participation in social media platforms targeted at speculative investing; 

·speculation in the press or investment community about our company or industries in which we operate; 

·strategic actions by us or our competitors, such as acquisitions or other investments; 

·legislative, administrative, regulatory or other actions affecting our business, our industry, including positions taken by the FDA; 

·investigations, proceedings, or litigation that involve or affect us; 

·the occurrence of any of the other risk factors included in this registration statement of which this prospectus forms a part; and 

·general market and economic conditions. 

 

If our initial listing application for our Common Stock is not approved by Nasdaq, we will not be able to consummate the Offering and will terminate this Offering.

 

Approval of our initial listing application for our Common Stock by Nasdaq will be subject to, among other things, our fulfillment of the following conditions: (i) the Offering of the Shares is completed and closed; and (ii) we have raised a sufficient amount of equity necessary to qualify for the minimum equity requirements necessary to list our Common Stock on Nasdaq. Currently we are endeavoring to satisfy the standard for admission on Nasdaq requiring $5 million in stockholders’ equity and $15 million market value of publicly held shares of Common Stock. If we fail to meet the minimum requirements for initial listing on Nasdaq, we will not be able to consummate the Offering and will terminate this Offering. There is no assurance that our Common Stock will ever be listed on Nasdaq or that we will be able to comply with such applicable initial listing standards. Failure to have our Common Stock listed on Nasdaq would make it more difficult for our stockholders to dispose of our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. Our ability to issue additional securities for


27



financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Common Stock is not traded on a national securities exchange.

 

The Nasdaq Stock Market LLC may delist our Common Stock from trading on Nasdaq, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

 

In the event that our Nasdaq initial listing application for our Common Stock is approved, should we fail to satisfy the continued listing requirements for remaining listed on Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, The Nasdaq Stock Market LLC may take steps to delist our Common Stock. Such a delisting would likely have a negative effect on the price of our Common Stock and would impair your ability to sell or purchase our Common Stock when you wish to do so. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our Common Stock, prevent our Common Stock from dropping below Nasdaq’s minimum bid price requirement or prevent future non-compliance with such listing requirements.

 

If we cannot maintain the listing of our Common Stock for trading on Nasdaq, we could face significant material adverse consequences, including:

 

·a limited availability of market quotations for our Common Stock; 

·reduced liquidity for our Common Stock; 

·a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Common Stock; 

·a limited amount of news and analyst coverage; and 

·a decreased ability to issue additional Common Stock or obtain additional financing in the future. 

 

Even if the reverse stock split of our outstanding shares of Common Stock currently achieves the requisite increase in the market price of our Common Stock for listing of our Common Stock on Nasdaq, we cannot assure you that the market price of our Common Stock will remain high enough for such reverse split to have the intended effect of complying with Nasdaq’s minimum bid price requirement.

 

In connection with this Offering and the initial listing of our Common Stock on Nasdaq, we expect to effect a reverse stock split of our Common Stock at the ratio we believe necessary to allow us to obtain Nasdaq approval of our initial listing application to list our Common Stock on Nasdaq. Even if such reverse stock split achieves the requisite increase in the market price of our Common Stock for listing of our common stock on Nasdaq, there can be no assurance that the market price of our Common Stock following such reverse stock split will remain at the level required for continuing compliance with such requirements. It is not uncommon for the market price of a company’s Common Stock to decline in the period following a reverse stock split. If the market price of our Common Stock declines following the effectuation of such reverse stock split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In any event, other factors unrelated to the number of shares of our Common Stock outstanding, such as negative financial or operational results, could adversely affect the market price of our Common Stock and thus jeopardize our ability to meet or maintain Nasdaq’s minimum bid price requirement.

 

If we are unable to satisfy these requirements or standards, we would not be able to meet Nasdaq’s initial listing application, which could cause us to terminate the Offering. We can provide no assurance that


28



any such action taken by us would allow our Common Stock to be listed on Nasdaq, stabilize the market price or improve the liquidity of our common stock, prevent the price of our Common Stock from dropping below Nasdaq’s minimum bid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements.

 

The anticipated reverse stock split to be effected by us in connection with this Offering may decrease the liquidity of the shares of our Common Stock.

 

The liquidity of the shares of our Common Stock may be affected adversely by a reverse stock split to be effected by us in connection with this Offering given the reduced number of shares of our Common Stock that will be outstanding following such reverse stock split, especially if the market price of our Common Stock does not increase as a result of such reverse stock split. In addition, such reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our Common Stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares of Common Stock and greater difficulty effecting such sales.

 

Following such anticipated reverse stock split, the resulting market price of our Common Stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.

 

Although we believe that a higher market price of our Common Stock may help generate greater or broader investor interest, there can be no assurance that the reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our Common Stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our Common Stock may not necessarily improve.

 

As a result of when the post-reverse split price of our Common Stock will be made available upon the anticipated listing of our Common Stock on Nasdaq, potential investors in this Offering will not have an opportunity to check the actual post-reverse split market price of our Common Stock before confirming their purchases of shares of Common Stock in this Offering.

 

The post-split price of our Common Stock will only be available following the SEC declaring the registration statement of which this prospectus forms a part effective and upon the anticipated initial listing of the Common Stock on Nasdaq, which will occur prior to the closing of the Offering of the Shares. Because such post-reverse split price will not be available until the SEC declares such registration statement effective and in connection with the pricing of this Offering of the Shares and such initial listing, potential investors may not be able to check the actual post-reverse split market price of our Common Stock on Nasdaq before confirming purchases of shares of Common Stock in the Offering.

 

A significant portion of our total outstanding shares of Common Stock are restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our Common Stock to drop significantly, even if our business is performing well.

 

As a result of this Offering and the initial listing of our Common Stock on Nasdaq sales of a substantial number of shares of our Common Stock in the public market could occur at any time, subject to certain restrictions described below. All of the Shares will be freely tradable without restrictions or further registration under the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act (“Rule 144”). These sales, or the perception in the market that holders of a large number of shares of our Common Stock intend to sell shares, could reduce the market price of our Common Stock. After this Offering, assuming no exercise of the Underwriters’ over-allotment option and no exercise


29



of any Underwriters’ Warrants, we will have outstanding 3,451,724 shares of Common Stock based on the number of our shares of Common Stock outstanding as of February 9, 2023, 1,651,919 of which may be resold in the public market immediately without restriction, and the rest of which may be sold pursuant to Rule 144. Also, we intend to register all shares of Common Stock that we may issue under our equity compensation plan on a registration statement on Form S-8. Upon such registration, such shares can be freely sold in the public market upon issuance, subject to the terms of applicable award agreements, volume limitations applicable to affiliates and the lock-up agreements described in the “Shares Eligible for Future Sale” section of this prospectus.

 

If you purchase our shares of Common Stock in this Offering at the public offering price, you will suffer immediate dilution of your investment.

 

The public offering price of the Shares will be substantially higher than the net tangible book value per share of our Common Stock. Therefore, if you purchase shares of Common Stock in this Offering at such price, you will pay an public offering price per share of Common Stock that substantially exceeds our net tangible book value per share after such Offering. Based on the assumed public offering price of $[·] per share, you will experience immediate dilution of $[·] per share, representing the difference between the assumed public offering price per share of our Common Stock and our as adjusted pro forma net tangible book value per share of $[·] after giving effect to this Offering of the Shares. See “Dilution.” In addition, to the extent any Underwriters’ Warrants, or any of our outstanding options or other warrants are exercised, you will incur further dilution.

 

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Common Stock, the price of our Common Stock could decline.

 

The trading market for our Common Stock may rely, in part, on the research and reports that industry or financial analysts publish about us or our business. If securities analysts do not commence coverage of us, the trading price of our Common Stock could decrease. Additionally, if one or more of the analysts covering our business downgrade their evaluations of our Common Stock, the price of our Common Stock could decline. If one or more of these analysts cease to cover our Common Stock, we could lose visibility in the market for our Common Stock, which in turn could cause our Common Stock price to decline.

 

The price of our Common Stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our Common Stock in this Offering.

 

The public offering price for the shares of our Common Stock sold in this Offering will be determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our Common Stock following this Offering. In addition, the market price of our Common Stock is likely to be highly volatile due to many factors, including:

 

·the success of competitive products or technologies; 

·commencement or termination of collaborations; 

·regulatory or legal developments in the United States and other countries; 

·developments or disputes concerning patent applications, issued patents or other proprietary rights; 

·the recruitment or departure of key personnel; 

·the level of expenses related to any of our product candidates or clinical development programs; 

·the results of our efforts to discover, develop, acquire or in-license additional product candidates; 


30



·actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; 

·our inability to obtain or delays in obtaining adequate product supply for any approved product or inability at acceptable prices; 

·disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; 

·significant lawsuits, including patent or stockholder litigation; 

·variations in our financial results or those of companies that are perceived to be similar to us; 

·market conditions in the nutraceutical sector; 

·general economic, industry and market conditions; and 

·the other factors described in this “Risk Factors” section. 

 

An active trading market for our Common Stock may not develop and you may not be able to resell your shares at or above the public offering price.

 

Prior to this Offering, there has been a limited public market for shares of our Common Stock. Although we have applied to list our Common Stock on Nasdaq, an active trading market for our Common Stock may never develop or be sustained following this Offering. The public offering price of our Common Stock will be determined through negotiations between us and the underwriters. This public offering price may not be indicative of the market price of our Common Stock after this Offering. In the absence of an active trading market for our Common Stock, investors may not be able to sell their Common Stock at or above the public offering price or at the time that they would like to sell. An inactive market may also impair our ability to raise capital by selling shares of our Common Stock and may impair our ability to acquire other companies, products or technologies by using shares of our Common Stock as consideration.

 

We have broad discretion in the use of our cash, including the net proceeds from the Shares sold in this Offering, and may not use them effectively.

 

Our management will have broad discretion in the application of our cash, including the net proceeds from this Offering of the Shares, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Common Stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business or cause the price of our Common Stock to decline. Pending their use, we may invest our cash, including the net proceeds from this Offering of the Shares, in a manner that does not produce income or that loses value.

 

Raising additional capital may cause dilution to our existing stockholders and restrict our operations.

 

We will likely seek to raise additional capital following this offering through a combination of public and private equity offerings, debt financings. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or any of our product candidates, or grant licenses on terms unfavorable to us.


31



We will incur increased costs as a result of operating as a smaller reporting public company, and our management will be required to devote substantial time to new compliance initiatives.

 

As a smaller reporting public company, we will incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.

 

Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

 

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

 

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.


32



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

We have made forward-looking statements in this prospectus, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are only predictions and involve known and unknown risks and uncertainties, including the risks outlined under “Risk Factors” and elsewhere in this prospectus.

 

Forward-looking statements contained in this prospectus include, but are not limited to, statements about the following:

 

·our estimates regarding the potential market opportunity for our products; 

 

·our ability to identify and develop new product candidates; 

 

·the anticipated benefits of our pending acquisition of Hyperion and OPM; 

 

·our ability to identify, recruit and retain key personnel; 

 

·our commercialization and marketing capabilities and strategy; 

 

·the implementation of our business model, strategic plans for our business, product candidates and technology; 

 

·the rate and degree of market acceptance and clinical utility of our product candidates, in general; 

 

·our competitive position; 

 

·our intellectual property position and our ability to protect and enforce our intellectual property; 

 

·our financial performance; 

 

·developments and projections relating to our competitors and our industry; 

 

·our ability to obtain additional funding; 

 

·our expectations related to the use of proceeds from this Offering; 

 

·our estimates regarding expenses, future revenue, capital requirements and needs for or ability to obtain additional financing; 

 

·the impact of laws and regulations; and 

 

·the impact that general economic conditions and the uncertainty of the U.S. and global economy, particularly the continuing COVID-19 pandemic, inflation in the U.S., globally  


33



supply chain disruptions and the sanctions imposed on Russia as a result of its invasion of Ukraine has had and will have on our industry, market, business and product candidates.

 

Forward-looking statements are subject to a number of significant risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

 

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We are not under any duty to update any of the forward-looking statements after the date of this annual report to conform these statements to actual results, unless required by law.


34



USE OF PROCEEDS

 

We estimate that the net proceeds from our issuance and sale in this Offering of [·] Shares will be approximately $[·] million (or $[·] million if the underwriters exercise in full their option to purchase additional shares of Common Stock), assuming no exercise of any Underwriters’ Warrants and an assumed public offering price of $[·] per share, and after deducting estimated underwriting discounts and estimated offering expenses payable by us.

 

Each $0.25 increase (decrease) in the assumed public offering price of $[·] per share and, would increase (decrease) the net proceeds to us from this Offering by approximately $[·] million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and assuming no exercise of any Underwriters’ Warrants, and after deducting the underwriting discounts and estimated offering expenses payable by us. Similarly, each 500,000 increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us by $[·] million, assuming the assumed public offering price per share remains the same and assuming no exercise of any Underwriters’ Warrants, and after deducting the underwriting discounts and estimated offering expenses payable by us.

 

As of September 30, 2022, we had cash and short-term investments of approximately $73,000. We intend to use the net proceeds from this Offering, together with our existing cash, as follows:

 

·approximately $3.1 million to complete the acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC; and 

 

·any remaining balance for general corporate purposes, including general and administrative expenses and working capital. 

 

We believe that our current cash, along with the net proceeds from this Offering, will be sufficient for us to fund our operating expenses and capital expenditure requirements into 2024.

 

The amounts and timing of our actual expenditures will depend on numerous factors, including the amount of cash used in our operations. Although we have no present intention or commitment to do so, we may use a portion of the net proceeds for the acquisition of, or investment in, technologies, intellectual property or businesses that complement our business.

 

Our expected use of net proceeds from this Offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with complete certainty all of the particular uses for the net proceeds to be received upon the completion of the Offering or the actual amounts that we will spend on the uses set forth above. We may find it necessary or advisable to use the net proceeds for other purposes, and our management will retain broad discretion over the allocation of the net proceeds of this Offering. Pending the uses described above, we may invest the net proceeds from this Offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

 

DIVIDEND POLICY

 

We have not declared or paid a cash dividend on our capital stock in our last two fiscal years and we do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.


35



CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2022:

 

·on an actual basis; and  

·on a pro forma basis, after giving effect to the sale of [·] shares of our Common Stock in this Offering at an offering price of $[·] per share, after deducting the underwriting discounts and estimated offering expenses payable by us, and the issuance of shares of our common stock in the acquisition of Hyperion and OPM. 

 

The information in this table is illustrative only and our capitalization following the closing of the offering will be adjusted based upon the actual public offering price and other terms of this offering determined at pricing.

 

 

 

 

Actual

 

Pro forma as adjusted

Cash and cash equivalents

$

[·]

$

[·]

 

 

 

 

 

Capitalization

 

 

 

 

Current liabilities:

 

 

 

 

  Accounts payable

 

[·]

 

[·]

  Accrued expenses

 

[·]

 

[·]

  Short term debt

 

[·]

 

[·]

     Total current liabilities

 

[·]

 

[·]

 

 

 

 

 

Long term debt

 

[·]

 

[·]

 

 

 

 

 

  Total liabilities

 

[·]

 

[·]

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

Common stock, $0.001 par value, 2,500,000,000 shares authorized, 345,172,442 shares issued and outstanding ([·] pro-forma)

 

[·]

 

[·]

Additional paid in capital

 

[·]

 

[·]

Accumulated deficit

 

[·]

 

[·]

  Total stockholders equity (deficit)

$

[·]

$

[·]


36



DILUTION

 

We are registering for sale to new investors up to [·] shares at $[·] per share. Our existing shareholders paid approximately $5.16 per share for their shares. The shares for other existing shareholders may have been paid for in cash, or were issued for assets contributed to us or services provided to us. The following table sets forth on a pro forma basis at September 30, 2022, the differences between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us, and the average price paid per share (assuming a proposed public offering price of $[·] per share).

 

 

 

Shares Purchased

 

Total Consideration

 

Average Price
Per Share

 

 

Amount

 

Percent

 

Amount

 

Percent

 

 

 

 

 

 

 

 

 

 

 

 

 

Existing

Stockholders

 

3,451,724

 

63%

$

17,805,071

 

 

[·]%

$

5.16

 

 

 

 

 

 

 

 

 

 

 

New Investors

 

[·]

 

[·]%

$

[·]

 

[·]%

$

[·]

 

 

 

 

 

 

 

 

 

 

 

Total

 

[·]

 

100%

$

[·]

 

100%

$

[·]

 

The difference between the public offering price per share of common stock and the net tangible book value per share of common stock after this Offering constitutes the dilution to investors in this offering. Net tangible book value per share is determined by dividing the net tangible book value (total assets less intangible assets and total liabilities) by the number of outstanding shares of common stock. The dilution calculations we have set forth in this section reflect an offering price of $[·] per share. 

 

As of September 30, 2022, we had a net tangible book value of $1,119,772 or $0.32 per share of issued and outstanding common stock. After giving effect to the sale of the shares proposed to be offered in the Offering of [·] shares, the net tangible book value at that date would have been $[·] or $[·] per share. This represents an immediate increase in net tangible book value of $[·] per share to existing shareholders and an immediate dilution of $[·] per share to new investors. 

 

The following table illustrates such per share dilution: 

 

Proposed public offering price (per share)

 

 

$

[·]

 

Net tangible book value per share at September 30, 2022

$

0.32

 

 

 

Increase in net tangible book value per share attributable to the proceeds of the maximum offering

$

[·]

 

 

Pro forma net tangible book value per share after the offering

 

 

$

[·]

 

 

 

 

 

Dilution to new investors

$

[·]

 

 


37



MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

The following discussion and analysis should be read in conjunction with and is qualified in its entirety by and should be read together with our financial statements and the related notes thereto appearing elsewhere in this prospectus. This discussion contains certain forward-looking statements that involve risks and uncertainties, as described under the heading “Cautionary Note Regarding Forward-Looking Statements.” Actual results could differ materially from those projected in the forward-looking statements.

 

Overview

 

We are a platform for acquiring, developing, researching, patenting, marketing, and distributing science-forward, clinically proven, plant-based nutraceuticals.  Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health.

 

Guided by this mission, our first two acquisitions formed our current operating subsidiaries, Bergamet, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health. Through more than 17 published clinical trials, our Bergamet products have been shown to support heart health, support immune response, and address metabolic syndrome. Our UBN brain heath formulations have been in development for more than 20 years, over which time it has gained support by more than 100 clinical studies.

 

On January 13, 2023, we entered into a definitive agreement to acquire nutraceutical manufacturer, Hyperion, and its digital marketing affiliate OPM. We intend to use a portion of the proceeds from this offering to fund this acquisition.  Hyperion products have been formulated to support brain, memory, vision, sinus and digestive health, as well as healthy sleep and aging. OPM provides online advertising and marketing for Hyperion as well as other companies in the health and wellness space. The closing of these two acquisitions is expected to occur following the completion of and using the proceeds from this Offering. We anticipate the acquisition of Hyperion and OPM to be transformative to our business, significantly strengthening our manufacturing, marketing and distribution capabilities, expanding our nutraceutical product portfolio, adding positive cash flow, and significantly increasing our annualized gross revenues. Revenues for Hyperion and OPM were over $9 million for the nine-months ended September 30, 2022.

 

We expect the combination of these synergistic and accretive acquisitions to help accelerate our growth and expand our market reach. Our existing natural, clinically-proven heart and brain health formulations are perfect for cross selling with Hyperion’s Green Valley Natural Solutions branded product line. Likewise, we see Green Valley sales benefiting from our established broad marketing channels, which includes subscription-based direct-to-consumer sales, national grocery stores, wholesale distribution, and a strong presence on Amazon.  We also anticipate that the greater financial and operational strength afforded by these two acquisitions to better enable us to make future strategic complementary acquisitions, including some of which we have identified and are currently evaluating.

 

Going Concern

 

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2021 and 2020 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. From inception (December 19, 2014) through the end of December 31, 2021, we have incurred accumulated net losses of $14,943,620. In order to continue as a going concern we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues.


38



If we are not able to do this we may not be able to continue as an operating company. At our current revenue and burn rate, we have an immediate cash need, and thus we must raise capital by issuing debt or through the sale of our stock. However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.

 

Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

 

Introduction

 

We had revenues of $573,967 and $1,668,105 for the three and nine months ended September 30, 2022, respectively, compared to $447,986 and $903,142 for the three and nine months ended September 30, 2021. Our cost of revenue for the three and nine months ended September 30, 2022 were $68,551 and $402,788, respectively, compared to $72,250 and $147,456 for the three and nine months ended September 30, 2021.

 

Our operating expenses were $485,568 and $1,744,326 for the three and nine months ended September 30, 2022, respectively, compared to $692,940 and $1,873,858 for the three and nine months ended September 30, 2021. Our operating expenses consisted entirely of general and administrative expenses.

 

We had a Net Loss of $170,223 for the three months ended September 30, 2022, compared to a Net Loss of $672,470 for the three months ended September 30, 2021. 

 

Revenues and Net Operating Loss

 

Our revenue, operating expenses, net operating loss, and net gain (loss) for the three and nine months ended September 30, 2022 and 2021 were as follows:

 

 

 

 

Three Months

Ended

 

 

Three Months

Ended

 

Nine Months

Ended

 

Nine Months

Ended

 

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

Revenue

$

573,967

$

447,986

 

1,668,105

 

903,142

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

68,551

 

72,250

 

402,788

 

147,456

 

 

 

 

 

 

 

 

 

Gross Profit

 

431,102

 

307,625

 

1,030,062

 

646,737

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

485,568

 

692,940

 

1,744,326

 

1,873,858

Total operating expenses

 

485,568

 

692,940

 

1,744,326

 

1,873,858

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expenses, net of interest income

 

(11,336)

 

(19,242)

 

(68,657)

 

(48,598)

Change in fair value on derivative

 

(104,421)

 

(307,746)

 

(246,260)

 

(1,287,971)

Loss on extinguishment of debt

 

-

 

-

 

-

 

-

SBA Loan Forgiveness

 

-

 

39,833

 

-

 

39,833

Gain on sale of asset

 

-

 

-

 

2,643

 

-

Total other income (expense)

 

(115,757)

 

(287,155)

 

(312,274)

 

(1,296,736)

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(170,223)

$

(672,470)

 

(1,026,538)

 

(2,523,857)


39



Revenues

 

We had revenues of $573,967 and $1,668,105 for the three and nine months ended September 30, 2022, compared to $447,986 and $903,142 for the three and nine months ended September 30, 2021, an increase of $125,981 and $764,963, or 28% and 85%, respectively.

 

Cost of Revenue

 

Our cost of revenue for the three and nine months ended September 30, 2022 was $68,551 and $402,788, or 12% and 24% of revenue, respectively, compared to $72,250 and $147,456, or 16% and 16% of revenue, for the three and nine months ended September 30, 2021. Gross profit was $431,102 and $1,030,062 for the three and nine months ended September 30, 2022, compared to $307,625 and $646,737 for the three and nine months ended September 30, 2021, an increase of $123,477 and $383,325, or 40% and 59%, respectively.

 

General and Administrative

 

General and administrative expenses were $485,568 and $1,744,326 for the three and nine months ended September 30, 2022, compared to $692,940 and $1,873,858 for the three and nine months ended September 30, 2021. In the three months ended September 30, 2022, general and administrative expenses consisted mainly of advertising of $456,270, consulting fees of $448,515, broker fees of $383,938, professional fees of $94,966, and salary and wages of $109,305. In the three months ended September 30, 2021, general and administrative expenses consisted mainly of advertising of $443,416, consulting fees of $534,702, professional fees of $445,223, salary and wages of $109,236, and postage of $36,956.

 

Other Income (Expense)

 

Other income (expense) was $(115,757) and $(312,274) for the three and nine months ended September 30, 2022, compared to $(287,155) and $(1,296,736) for the three and nine months ended September 30, 2021, a decrease of $171,398, or 60%, for three months ended September 30, 2022 and a decrease of $984,462, or 76%, for the three months ended September 30, 2021. In the three months ended September 30, 2022, other income (expense) consisted of interest expenses, net of interest income of $(11,336) and change in fair value on derivative of $(104,421). In the three months ended September 30, 2021, other income (expense) consisted of interest expense, net of interest income of $(19,242) and change in fair value on derivative of $(307,746), offset by SBA loan forgiveness of $39,833. Change in fair value of derivative was related to the conversion of convertible debts into common stock shares.

 

Net Income (Loss)

 

Net income (loss) was $(170,223) and $(1,026,538), or $0.00 and $0.00 per share, for the three and nine months ended September 30, 2022, compared to $(672,470) and $(2,523,857), or $0.00 and $0.01 per share, for the three and nine months ended September 30, 2021.

 

Our net income (loss) various from period to period primarily because of the change in fair value on derivative.


40



Liquidity and Capital Resources

 

Introduction

 

During the three and nine months ended September 30, 2022, we were unable to generate sufficient revenues and had negative operating cash flows. Our cash on hand as of December 31, 2021 was $222,098 and as of September 30, 2022 was $73,884. Our monthly cash flow burn rate for 2021 (not including inventory purchases) was approximately $37,000 and for the nine months ended September 30, 2022 was approximately $27,000. We have strong short and medium term cash needs. We anticipate that these needs will be satisfied through increased revenues and the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of September 30, 2022 and December 31, 2021, respectively, are as follows:

 

 

September 30,

 

December 31,

 

Increase/

 

2022

 

2021

 

(Decrease)

 

 

 

 

 

 

Cash

$

73,884

 

$

222,098

 

$

(148,214)

Total Current Assets

2,041,081

 

 

2,313,404

 

(272,323)

Total Assets

2,779,161

 

 

3,029,579

 

(250,418)

Total Current and Total Liabilities

944,248

 

 

558,841

 

385,406

 

Our total current assets and total assets decreased during the nine months ended September 30, 2022 primarily as a result of our decrease in cash of $148,214, accounts receivable of $32,585, and inventory of $91,524. Our total current and total liabilities increased by $385,407 during the nine months ended September 30, 2022 primarily because of an increase in accounts payable of $76,799, notes payable of $93,174, convertible debt of $189,000, and derivative liabilities of $246,260, offset in part by a decrease in accrued liabilities of $52,330 and notes payable to related party of $170,000. Our accumulated deficit increased during the nine months ended September 30, 2022 by $1,026,538 to $15,970,158.

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

Our cash on hand as of September 30, 2022 was $73,884. Based on our current level of revenues and monthly burn rate of approximately $27,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

Sources and Uses of Cash

 

Operating Activities

 

We had net cash used in operating activities of $(241,015) for the nine months ended September 30, 2022, compared to $(942,175) for the nine months ended September 30, 2021. We use our cash for normal business operations. Our net cash used in operating activities for the nine months ended September 30, 2022 consisted of our net loss of $1,026,538 plus primarily our increase in accrued liabilities of $52,330, offset primarily by our warrants issued for services of $402,100, change in fair value on derivative liability of $246,260, increase in inventory of $91,523, and increase in accounts payable of $76,799. Our net cash used in operating activities for the nine months ended September 30, 2021 consisted of our net loss of


41



$2,523,857, plus a decrease in inventory of $115,487, a decrease in accounts receivable of $70,311, and a decrease in accounts payable of $41,678, offset in part by a change in fair value on derivative liability of $1,287,971 and warrants issued for services of $434,836.

 

Investing Activities

 

We had $(7,987) in cash flows provided by investing activities for the nine months ended September 30, 2022, compared to $(84,888) for the nine months ended September 30, 2021.

 

Financing Activities

 

Our net cash provided by financing activities for the nine months ended September 30, 2022 was $100,788, compared to $1,083,000 for the nine months ended September 30, 2021. Our net cash provided by financing activities consisted of proceeds from the issuance of convertible debt of $445,826, offset by proceeds from the issuance of common stock of $(11,386), payments for repayment of convertible debt of $(256,826), and payments for repayment of notes payable related party of $(170,000).

 

Results of Operations for the Years Ended December 31, 2021 and 2020

 

Introduction

 

We had revenues of $1,465,782 for the year ended December 31, 2021, as compared to $1,276,559 for the year ended December 31, 2020, an increase of $377,200, or 29%. Our cost of revenue was $770,704 for the year ended December 31, 2021, as compared to $1,855,001 for the year ended December 31, 2020, a decrease of $1,084,297, or 58%. Our cost of revenue exceeded revenue for the year ended December 31, 2020 because we built up our inventory of bergamot product.

 

Revenues and Net Operating Loss

 

Our revenues, operating expenses, and net operating loss for the years ended December 31, 2021 and 2020 were as follows:

 

 

 

Year Ended
December 31, 2021

 

Year Ended
December 31, 2020

 

Increase/

(Decrease)

 

 

 

 

 

 

 

Revenue

 

$

1,465,782

 

 

$

1,276,559

 

 

$

377,200

 

Cost of Revenue

 

 

770,704

 

 

 

1,855,001

 

 

 

(1,084,297)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

2,584,256

 

 

 

1,474,891

 

 

 

1,109,365

 

Total operating expenses

 

 

2,584,256

 

 

 

3,054,774

 

 

 

(470,518)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating loss

 

 

 

 

 

 

 

 

 

 

 

 

Other income/(expense)

 

 

(97,945)

 

 

 

1,056,841

 

 

 

(1,154,786)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain/(loss)

 

$

(1,987,122)

 

 

$

(2,576,375)

 

 

$

589,253

 

 


42



Revenues

 

We had revenues of $1,465,782 and $1,276,559 for the years ended December 31, 2021 and 2020, respectively, an increase of 29%. The increase in revenues was main due to our increased focus on the Amazon marketplace.

 

Cost of Revenue

 

Cost of revenue was $770,704 and $1,855,001 for the years ended December 31, 2021 and 2020, respectively, a decrease of 58%, and consisted of wholesale product costs and packaging. Our cost of revenue exceeded revenue for the year ended December 31, 2020 because we built up our inventory of bergamot product.

 

General and Administrative

 

General and administrative expense was $2,584,256 and $1,474,891 for the years ended December 31, 2021 and 2020, an increase of $1,109,365, or 75%. The increase was related to the additional costs of fund raising and the increased administrative costs associated with being a public company. In the year ended December 31, 2021, general and administrative expenses consisted mainly of consulting of $1,010,902, selling expenses of $560,883, accounting and legal fees of $323,658, salary and wages of $147,938, and transfer agent and filing fees of $46,778. In the year ended December 31, 2020, general and administrative expenses consisted mainly of consulting of $607,197, selling expenses of $239,296, accounting and legal fees of $192,198, salary and wages of $156,250, and transfer agent and filing fees of $41,431.

 

Net Operating Gain/Loss

 

As a result of the items discussed above, our net operating loss was $1,889,177 and $3,633,216 for the years ended December 31, 2021 and 2020, respectively, a reduction of $1,744,039.

 

Other Income and Expense

 

Other income (expense) was $(97,945) and $1,056,841 for the years ended December 31, 2021 and 2020, respectively, a decrease of $1,154,786, of which $1,138,512 was a change in fair value of derivative.

 

Net Gain/(Loss)

 

Our net gain (loss) for the year ended December 31, 2021 was $(1,987,122), or $0.01 per share, and our net gain (loss) for the ended December 31, 2020 was $(2,576,375), or $(0.01) per share.

 

Liquidity and Capital Resources

 

Introduction

 

During the years ended December 31, 2021 and 2020, we had negative operating cash flows. Our cash on hand as of December 31, 2021 was $222,098. Our monthly cash flow burn rate in 2021 (not including inventory purchases) was approximately $37,000. Although we have strong short term cash needs, as our operating expenses increase we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs. With the acquisitions of BergaMet and UBN, we expected to see an increase in revenues that would help us maintain the cash we


43



need to operate our business. However, we have incurred additional expenses in these acquisitions and the additional costs to be incurred through this expansion of our operations will increase our need for additional cash flow.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2021 and 2020 are as follows:

 

 

 

December 31, 2021

 

December 31, 2020

 

Change

 

 

 

 

 

 

 

Cash

$

222,098

 

 

 

$

59,201

 

 

$

162,897

Total Current Assets

 

(2,313,404)

 

 

 

 

2,490,158

 

 

 

(176,754)

Total Assets

 

(3,029,579)

 

 

 

 

3,115,430

 

 

 

(85,850)

Total Current Liabilities

 

(558,841)

 

 

 

 

261,604

 

 

 

297,237

Total Liabilities

$

$558,841

 

 

 

$

261,604

 

 

$

297,237

 

Our cash increased by $162,897 as of December 31, 2021 as compared to December 31, 2020. Our total current assets decreased by $176,754, despite our increase in cash and accounts receivable as a result of our decrease in inventory. Our total assets decreased by $85,850 despite our increase in cash, accounts receivable, and patents/trademarks from the UBN acquisition.

 

Our current and total liabilities increased by $297,237, from $261,604 as of December 31, 2020 to $558,841 as of December 31, 2021. Our total liabilities as of the year ended December 31, 2021 consisted primarily of notes payable – related party of $170,866 and convertible debt of $171,750.

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

Our cash on hand as of December 31, 2021 was $222,098. Our monthly cash flow burn rate in 2021 (not including inventory purchases) was approximately $37,000. Although we have strong short term cash needs, as our operating expenses increase we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Sources and Uses of Cash

 

Operations

 

Our net cash used in operating activities for the years ended December 31, 2021 and 2020 was $901,298 and $1,902,758, respectively, a decrease of $441,581. Our net cash used in operating activities for the year ended December 31, 2021 consisted primary of a net loss of $1,987,122, plus a decrease in accounts receivable of $120,066, offset by an adjustment for warrants issued for services of $608,836 and changes in inventory of $459,717. Our net cash used in operating activities for December 31, 2020 consisted primarily of a net loss of $2,576,375, plus a change in fair value on derivative liability of $1,053,186 and accrued interest to related party of $490,703, offset by impairment of goodwill of $1,579,883 and changes in inventory of $663,476.

 


44



Investments

 

Our cash flow provided by (used in) investing activities for the years ended December 31, 2021 and 2020 was $(96,004) and $(115,740), respectively, a decrease of $19,737. The decrease in 2021 was as a result of a reduction in the value of our trademarks.

 

Financing

 

Our net cash provided by financing activities for the years ended December 31, 2021 and 2020 was $1,160,199 and $1,944,248, respectively, a decrease of $784,049. The decrease in 2021 was due to proceeds from the issuance of common stock of $995,199 and proceeds from the issuance of convertible debt of $165,000.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related notes. Our significant accounting policies are described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates and such differences may be material.

 

Management considers the following policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

 

Recent Accounting Pronouncements

 

Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these recent pronouncements will not have a material effect on our financial statements.


45



BUSINESS

 

Overview

 

We are a platform for acquiring, developing, researching, patenting, marketing, and distributing science-forward, clinically proven, plant-based nutraceuticals.

 

Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health.

 

The term “nutraceutical” is derived from the combination of the words “nutrient,” which means a nourishing food component, and “pharmaceutical,” meaning a medical drug. The term was coined in 1989 by Stephen DeFelice, founder and chairman of the Foundation for Innovation in Medicine.

 

Nutraceuticals are generally considered to be substances that beyond their nutritional value can be used as medicine to achieve a benefit for an existing physiological condition or provide protection against potential aliments. Nutraceuticals may be used to improve health, delay the aging process, help prevent chronic disease, increase life expectancy, or support the structure or function of the body.

 

In the U.S., nutraceutical products are regulated as drugs, food ingredients and dietary supplements. The term is not defined the same in all countries but is usually defined as a product isolated from foods and generally sold in medicinal forms not usually associated with food.

 

The primary philosophy behind nutraceuticals is the focus on prevention and the body’s ability use natural rather artificially derived substances to treat disease or dysfunction—or as the Greek physician and father of modern medicine, Hippocrates, famously espoused, “Let food be your Medicine.”  

 

Today, the role of nutraceuticals in human health and wellbeing has become one of the most active and important areas of scientific investigation, with the latest findings presenting wide-raging implications for consumers, health care providers, regulators, nutritional supplement producers and distributors. Our mission is to lead and support this investigation and use our findings to acquire or create products with health and performance benefits that have mass consumer appeal.

 

Guided by this mission, our first two acquisitions (in 2019 and 2020, respectively) formed our current operating subsidiaries, Bergamet, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health.

 

Through more than 17 published clinical trials, our Bergamet products have been shown to support heart health, support immune response, and address metabolic syndrome. Our UBN brain heath formulations have been in development for more than 20 years, over which time it has gained support by more than 100 clinical studies.

 

On January 13, 2023, we entered into a definitive agreement to acquire nutraceutical manufacturer, Hyperion and its digital marketing affiliate OPM, both based in Lexington, Virginia. We intend to use a portion of the proceeds from this offering to fund this acquisition.  See “Use of Proceeds.”

 

Hyperion products have been formulated to support brain, memory, vision, sinus and digestive health, as well as healthy sleep and aging. OPM provides online advertising and marketing for Hyperion as well as other companies in the health and wellness space. The closing of these two acquisitions is expected to occur following the completion of and using the proceeds from this Offering. See “Recent Developments – Acquisitions.”


46



We anticipate the acquisition of Hyperion and OPM to be transformative to our business, significantly strengthening our manufacturing, marketing and distribution capabilities, expanding our nutraceutical product portfolio, adding positive cash flow, and significantly increasing our annualized gross revenues. Revenues for Hyperion and OPM were over $9 million for the nine-months ended September 30, 2022.

 

We expect the combination of these synergistic and accretive acquisitions to help accelerate our growth and expand our market reach. Our existing natural, clinically-proven heart and brain health formulations are perfect for cross selling with Hyperion’s Green Valley Natural Solutions branded product line. Likewise, we see Green Valley sales benefiting from our established broad marketing channels, which includes subscription-based direct-to-consumer sales, national grocery stores, wholesale distribution, and a strong presence on Amazon.

 

We also anticipate that the greater financial and operational strength afforded by these two acquisitions to better enable us to make future strategic complementary acquisitions, including some of which we have identified and are currently evaluating.

 

Our Products

 

Heart & Immune Health

 

Our products which are designed to promote heart and immune health have been developed by our BergaMet subsidiary. 47% BPF Bergamet products are currently the only heart health supplements distributed in North America that contain Citrus Bergamot SuperFruit. This exclusive superfruit is of the bergamot orange family, a fragrant citrus fruit about the size of a common orange but with a yellow or green color similar to a lime, depending on its ripeness.

 

Our Citrus Bergamot SuperFruit varietal is considered a superfruit since it has been shown to have the highest quality and concentration of polyphenols and flavonoids of the citrus bergamia or bergamot orange fruit species, with the healthy heart benefits of these substances demonstrated by multiple clinical studies.

 

BergaMet currently holds the exclusive rights to distribute Citrus Bergamot SuperFruit 47% BPF products in the U.S. pursuant to a supply agreement with H&AD S.r.L., an Italian limited company, which we entered into on January 1, 2019. The supply agreement has a term of five years and is renewable for up to four additional and successive three-year terms. 

 

Bergamot is a rare citrus fruit native to the Calabrian region of Southern Italy. Due to the fruit’s sensitivity to certain weather and soil conditions, this region accounts for 80 percent of the worldwide production of bergamot. Bergamot has been used for decades in the Calabrian regions for its beneficial effects in promoting overall health, particularly in support of cholesterol, cardiovascular, and metabolic health.

 

Our Citrus Bergamot SuperFruit formulations contain citrus bergamot extracts approved by the prestigious Academia Del Bergamotto in Reggio Calabria, Italy.

 

Citrus bergamot contains five unique antioxidant polyphenols in unusually concentrated amounts, which are believed to help protect the human body’s trillions of cells from free radical damage. The juice and albedo of bergamot has a unique profile of flavanoid and glycosides, such as neoeriocitrin, neohesperidin, naringin, rutin, neodesmin, rhoifolin, and poncirin.


47



Naringin has been shown to be beneficial in animal models of atherosclerosis, while neoeriocitrin and rutin have been found to exhibit a strong capacity to prevent LDL from oxidation. Importantly, bergamot juice is rich in brutieridine and melitidine with an ability to inhibit HMG-CoA reductase, which inhibits the liver’s ability to produce LDL, resulting in reduced cholesterol levels in liver cells.

 

Bergamot Products

 

We develop, manufacture and distribute bergamot-based products in tablet and capsule form under the following brands:

 

·BergaMet Pro+ 

·BergaMet Mega+O 

·BergaMet HERHEART 

·BergaMet Cholesterol Command 

·BergaMet SPORTSHEART 

·BergaMet CLINICAL IMMUNE 

 

Picture 

 

All of our BergaMet products are certified organic, vegan friendly, non-GMO and gluten-free, and produced and tested by certified U.S. facilities.

 

In more than 17 published clinical studies, our Citrus Bergamot has been shown to support heart health, support immune response and address metabolic syndrome. Our Citrus Bergamot has also been clinically shown to naturally reduce cholesterol by lowering LDL and increasing HDL.

 

According to the CDC, nearly 94 million U.S. adults aged 20 years or older have high cholesterol levels that puts them at risk of heart disease. Every year an estimated 35 million people are prescribed statins to lower cholesterol, according to drugs.com, but these drugs can cause numerous negative side effects.

 

A peer-reviewed clinical study demonstrated that the naturally-derived, bergamot polyphenolic fraction (BPF) contained in our Citrus Bergamot can significantly enhance the beneficial effects of rosuvastatin, one of the most prescribed drugs for reducing cardiometabolic risk.


48



Brain Health

 

Our UBN subsidiary is a science-based company that develops unique, plant-based health technology neuro-products that have been clinically shown to improve brain health, including memory, cognition, focus and neuro-energy. UBN's mission is to naturally create better lifestyles with superior health technology and science-based products.

 

UBN’s KETONOMICS® proprietary formulations, which have been designed to enhance brain activity, focus, headache and cognitive behavior, provide many sales and intellectual property licensing opportunities.

 

UBN’s all-natural, sugar-free and caffeine-free proprietary formulations are the result of 20 years of scientific research and are positioned to provide consumer neuro-products that are natural brain solutions.

 

UBN’s KETONOMICS® supplementation has also been studied in sports physiology, with specific regard to its potential benefits for competitive performance and endurance.

 

UBN offers several proprietary products, with four unique patent-pending formulations and two patents issued covering brain activity, focus, headache and cognitive behavior.

 

UBN Products

 

We have launched four brain health products based upon our proprietary Fuel4Thought® (F4T®) formulations. These brain health products are sold under the following product labels:

 

·UBN ACTIVATE: a proprietary natural formulation that has been clinically demonstrated to increase key brain activity by as much as 46%. This product is sold direct-to-consumer via our UBN website, either as a singular sale or monthly subscription. 

·UBN RELIEF: designed for migraine sufferers, this proprietary, patent-pending natural formulation has been shown to provide relief from symptoms often associated with migraine headaches, while also increasing brain and cognitive activation. This product is sold direct-to consumer on our website as singular sale or monthly subscription, as well as sold in the retail marketplace. 

·Brain Activate - Gel, a unique proprietary gel pack formulation which was launched in collaboration with and under the brand name of our top brand influencer, Whitney Johns. The concentrated natural gel formulation provides the perfect “brain food” for sustained mental energy and attention without added sugars. It is sold direct-to-consumer on whitneyjohns.com as a singular sale or by subscription. The gel packs are based on patented gel science developed by Gelteq, a global leader in ingestible gel technology. Gelteq gels offer a super-convenient way to consume nootropics and other nutrients, with the additional benefits of easier digestion and better absorption.  

·Brain Activate - ENERGY Gel: a unique proprietary gel pack nootropic formulation with caffeine. It is specially formulated to support focus, memory, cognition, mood and brain health, as well as reduce brain fog and support natural sleep patterns. The product was developed and launched in collaboration with Whitney Johns, and is sold direct-to-consumer on whitneyjohns.com as a singular sale or monthly subscription. 

 

Our F4T® formulation includes highly concentrated medium chain triglycerides, F4T® MCT, which are derived from our patented extraction process. F4T® MCTs have been clinically shown to elevate the level of ketones in the brain—a major alternative energy source.


49



The F4T® formulation also includes a proprietary blend of other key ingredients, including a naturally sourced nootropic spearmint extract that is clinically demonstrated to support mental focus during the day without disrupting sleep at night and a protective antioxidant found naturally in the body that helps the brain function optimally and promotes better mood and sleep habits. It also includes a unique natural marigold extract that is scientifically shown to block blue light and replenish lutein, which is critical for optimum eye health. The formulation has been in development for more than 20 years, over which time it has gained support by more than 100 clinical studies.

 

Picture 

 

The above EEG brain scan images are from a study that showed a 46% increase in brain activation after a subject consumed our active ingredients. The uniquely concentrated formulation provides the perfect “brain food” for sustained mental energy and attention. There can be no assurance that our formulations will produce the same results as this study using just our active ingredients.

 

In January 2022, the World Journal of Advanced Research and Reviews published the results of a clinical study which showed that taking a daily serving of UBN RELIEF for 60 days can naturally reduce or alleviate neurological discomfort. It was also shown to improves cognitive function, sleep satisfaction and overall quality of life.

 

We are in the research and development phase for new products focused on Alzheimer’s disease and dementia. We are finalizing research on additional clinically proven, non-FDA approved, brain health products which focus on dementia and Alzheimer’s disease. We expect the associated clinical trials to be completed in 2024.

 

Gel-Pack Exclusive Licensing and Manufacturing Agreement

 

In August 2021, we signed an exclusive U.S. and Canada licensing and manufacturing agreement with Gelteq Pty Ltd, a developer of ingestible gel technology, under which we agreed to develop and manufacture an advanced oral delivery system for our plant-based, clinically proven, heart, immune and brain health formulations.


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Picture 

 

Through this agreement we secured the exclusive rights to use Gelteq’s internationally patented gelification process in the U.S. and Canada for the development and marketing of natural ingestible gels that contain our Citrus Bergamot or UBN ingredients. Among the many benefits, we believe our new exclusive gel pack format will make our products easier and more convenient to consume.

 

Citrus Bergamot has been traditionally taken in tablet form which presents several drawbacks. Tablets require a liquid to facilitate swallowing or prevent choking (which still may occur), and proper digestion and absorption can sometimes be challenging. The liquid extract form of Bergamot is typically not preferred due to its unpleasant bitter taste.

 

The proprietary ingredients used in in our UBN product line are typically available in powder form, with this requiring it be mixed with a liquid in a separate container. This can be messy and inconvenient for today’s on-the-go lifestyles. In contrast, a single-serving, bio-degradable gel pack containing our health-promoting formulations can be easily consumed anytime, anywhere with no liquid or mixing required.

 

 

We also believe this gel-based oral delivery technology can be superior to pills, tablets, powders and other delivery methods in terms of greater bioavailability, targeted release times and pleasant taste, while reducing the risk of choking.


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Picture 

We have launched two gel pack products using our patent-protected Fuel4Thought® (F4T®) formulation with Whitney Johns, including Brain Activate - Gel (without caffeine) and Brain Activate - ENERGY Gel. We plan to next introduce heart and immune health gel packs that exclusively feature Citrus Bergamot SuperFruit in 2024.

 

Our Markets

 

The overall nutraceutical market is growing at a 7.8% CAGR and is expected to reach $441 billion by 2026, according to ReportLinker. Driving this growth are multiple factors, including changing lifestyles, growing consumer desire to move away from expensive prescription medicine and undesirable side effects, aging population and increased life expectancy.

 

A growing self-care trend is also driving strong demand for nutraceuticals. Given increasingly hectic lifestyles, and the lack of time for preparing and consuming the required nutrients through a regular diet, the desire to replenish or augment essential nutrients with nutraceuticals is also increasing.

 

Our BergaMet all-natural Citrus Bergamot SuperFruit formulations address an expanding global heart health ingredients market that is projected to grow at a 4.6% CAGR to reach $55.3 billion by 2027, according to ResearchAndMarkets. This growth is largely being driven by concerns about cardiovascular disease, which remains the leading cause of premature death globally according to the World Health Organization.

 

Our UBN products tap the fast-growing market for brain health, which is growing at a 9.4% CAGR to reach $15.7 billion by 2030, according to Grandview Research. This market is being driven in part by the rise in the aging adult population in North America and Europe, with consumers increasingly using brain health supplements to prevent or treat mental conditions such as memory loss or dementia, or to improve mental cognition, energy and focus.

 

Americans consume unhealthy energy shots and drinks every day, with this alone generating over $12.5 billion per year in industry sales. Within this growing market, UBN is advancing its position to meet rising consumer demand for healthy, science-based options backed by clinical studies. Our KETONOMICS® proprietary formulations have been proven to naturally elevate brain energy and function, including memory, cognition and focus.


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Our UBN RELIEF product for migraine suffers also address a huge market opportunity, with an estimated 39 million people suffering from migraine headaches in the U.S. and 1 billion worldwide, according to the American Migraine Foundation.

 

We anticipate launching a gut health gel pack in the second quarter of 2023. The new gut health product will allow us to address a large and expanding global gut health market that is growing at a 7.9% CAGR to reach nearly $72 billion by 2027, according to Fortune Business Insights.

 

Picture 

 

Go-to-Market Strategy

 

Our approach to the market has been to implement a multi-channel marketing strategy that includes major eCommerce websites, distributors, white and private label, direct-to-consumer, influencer and affiliate programs, and traditional retail marketplaces.

 

As a key part of our multi-channel strategy, Amazon.com has been generating strong sales, particularly with its popular ‘Subscribe & Save’ option helping to further expand our recurring revenue stream. Amazon complements our director-to-consumer channel on our BergaMet and UBN websites that offer a subscription-based option. Last year our Citrus Bergamot SuperFruit formulations also became available for purchased on Walmart.com.

 

In the third quarter of 2022, we launched our premium Citrus Bergamot SuperFruit heart health supplement, BergaMet PRO+, on Fullscript.com, the nation’s leading care delivery platform for integrative medicine. This made BergaMet PRO+ available to the more than 70,000 healthcare professionals and their more than 5 million patients on the Fullscript care platform.

 

The Fullscript launch followed the entry of our natural formulations for brain health into the retail marketplace through Natural Grocers stores nationwide. Natural Grocers is the nation's largest family-operated organic and natural grocery retailer. The retailer also provides extensive free science-based nutrition education programs that help consumers make informed nutritional health choices. The initial two products sold by Natural Grocers where our Ultimate Brain Nutrients (UBN) ACTIVATE and UBN RELIEF.

 


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Influencer Program

 

We introduced our influencer program in the Fall of 2021 as a cost-effective and efficient way to expand our sales, brand awareness and market share. According to the social commerce platform Poshmark, about 41% of consumers discover new brands from influencers and 33% through social media marketing.

 

We believe our influencer program is ideally suited for influencers who have more than 500,000 followers in the health and wellness, sports and healthcare markets, and particularly those who would like to enhance their personal brand with unlimited revenue potential. Through this program, qualified influencers can easily introduce their own personally branded nutraceutical products, with Healthy Extracts providing the backend of product development, manufacturing, distribution, order fulfillment and customer service.

 

As our first major influencer under this program, we teamed with popular fitness coach and entrepreneur, Whitney Johns. Whitney is an accomplished fitness athlete, model, personal trainer and nutrition advocate who has garnerd more than a million followers across Instagram, Facebook, TikTok, Twitter, and YouTube. Some of her popularity is due to her personalized diet and fitness program, Find Your Fit with Whit, which helps individuals from all walks of life achieve their personal nutritional and fitness goals.

 

Whitney Johns’ new product line of brain, physical performance and women’s hormone health products are based upon our proven all-natural Citrus Bergamot SuperFruit and Ultimate Brain Nutrients formulations. This means they are also vegan-friendly, non-GMO, gluten-free and organic, and made in a certified U.S. facility. Moreover, they are supported by our extensive catalog of published clinical research, which helps influencers like Whitney to provide their full-throated endorsement of our proprietary formulations.

 

The first Whitney products have included Whitney Johns Nutrition BRAIN ACTIVATE (in powder and gel format), ACTIVE for enhanced physical performance, and WOMEN’S HORMONE SUPPORT. These products are available from whitneyjohns.com as well as on Whitney’s Amazon.com store, with both channels offering subscription options.

 

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Future Growth Drivers

 

New Sales Channels and Product Launches

 

In order to drive continued sales growth and leverage our growing customer base, we are planning to expand our product portfolio to include supplements that support gut health as well as introduce more products in gel-pack format. We anticipate this to include a new Whitney Johns gut health gel-pack as well as a new gel pack option for our Ultimate Brain Nutrients RELIEF.

 

We plan to further expand our sales channels as well as our portfolio of proprietary, clinically proven natural formulations for heart and brain health and other indications.

 

Strategic Acquisitions

 

The market for nutraceutical products is highly fragmented, which create many acquisition opportunities. As part of our primary mission, we will continue to evaluate potential acquisition opportunities that could expand our product portfolio and benefit from our marketing strength and multi-channel distribution.

 

We anticipate that the greater financial and operational strength afforded by the aforementioned planned acquisitions of Hyperion and OPM will better enable us to make future strategic complementary acquisitions.

 

Patents and Intellectual Property Rights

 

Our subsidiary, UBN, has four patent-pending formulations and two patents issued. We have not otherwise filed for any intellectual property protection. We rely on intellectual property law that may include a combination of copyright, trade secret and confidentiality agreements to protect our intellectual property.

 

Status

Serial No.

Date Filed

Title

Pending

15/743,448

January 10, 2018

PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES

Pending/In Appeal

16/501,502

April 22, 2019

PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES

Pending

16/350,663

December 19, 2018

COMPOSITIONS OF MEDIUM CHAIN TRIGLYCERIDES AND PLANT-BASED NUTRIENTS FOR BRAIN HEALTH

Issued

16/350,664

December 19, 2018

COMPOSITIONS WITH KETOGENIC AGENTS, CANNABINOIDS, PLANT-DERIVED SUBSTANCES AND MICRONUTRIENTS


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Issued

16/501,249

(Patent No. 10,500,182)

December 17, 2018

COMPOSITIONS OF KETOGENIC SOURCES, MICRONUTRIENTS AND HYTOCHEMICALS FOR PROPHYLAXIS AND MITIGATION OF MIGRAINE HEADACHE

Pending

17/011,650

September 3, 2020

PROPHYLAXIS AND MIIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTERS, AND OTHER KETOGENIC SOURCES

 

Competition

 

We compete with other manufacturers, distributors and marketers of vitamins, minerals, herbs, and other nutritional supplements both within and outside the U.S.

 

The nutritional supplement industry is highly fragmented and competition for the sale of nutritional supplements comes from many sources. Such products are sold primarily through retailers (drug store chains, supermarkets, and mass market discount retailers), health and natural food stores, and direct sales channels (network marketing and internet sales).

 

The nutritional supplement industry is highly competitive, and we expect the level of competition to remain high over the near term. We do not believe it is possible to accurately estimate the total number or size of our competitors. The nutritional supplement industry has undergone some consolidation in the recent past and we expect that trend may continue in the near term.

 

We believe we have a unique market position in high gross margin categories, with our gross margin ranging from 60% to 80%, depending on product and market channel.

 

Based upon our exclusive U.S. and Canadian licensing and manufacturing agreement with Gelteq, we believe we are able to offer a unique gel-pack delivery system that our competition in North America cannot provide.

 

As the exclusive North American provider of the world’s highest strength Citrus Bergamot SuperFruit, our heart and immune products have unique advantages. For example, our BergaMet PRO+ product has 47% BPF Gold potency as compared to the closest competitor at only 38% BPF.

 

Backed by more than 17 published clinical trials, our citrus bergamot has been shown to support heart health, support immune response, and address metabolic syndrome.

 

Our peer-reviewed clinical studies that support our health and brain health products also provide us important competitive advantages. Our UBN brain health formulation has been in development for more than 20 years, over which time it has gained support by more than 100 clinical studies.

 

In January 2022, the World Journal of Advanced Research and Reviews published the results of a clinical study which showed that taking a daily serving of UBN RELIEF for 60 days can naturally reduce or alleviate neurological discomfort. It was also shown to improve cognitive function, sleep satisfaction and overall quality of life.


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Employees

 

On the Healthy Extracts holding company level, are employees are comprised of our officers. Our BergaMet subsidiary has two employees. Our UBN subsidiary currently does not have its own employees since it uses outside contract help on an as-needed basis, with management provided by our officers.

 

We anticipate all of our employees will continue to work for us for the foreseeable future. We plan to hire appropriate personnel on an as-needed basis and utilize the services of independent contractors as needed.

 

We anticipate that our planned acquisition of Hyperion and OPM will add approximately 14 employees, which will continue to work out of their existing facilities in Lexington, Virginia.

 

Recent Developments

 

Pending Acquisitions

 

On January 13, 2023, we entered into an Acquisition Agreement for the acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC, both Virginia limited liabilities companies, by merging them into our newly-formed wholly-owned subsidiaries, Green Valley Natural Solutions, LLC (“Green Valley”) and Online Publishing & Marketing, LLC (“OPM”), both Nevada limited liability companies. The closing of the acquisition will take place following the satisfaction of certain closing conditions, including a capital raise of at least $4,000,000 and the commencement of trading, or approval for the commencement of trading, of our common stock on the Nasdaq Capital Market. The total purchase price for the acquisitions will be $1,750,000 in cash, $1,300,000 in the form of secured promissory notes, and $1,250,000 worth of our common stock (based on a 30% premium to the price paid per share of common stock in the above-referenced capital raise, but in no event more than ninety percent (90%) of the volume weighted average price for our common stock for the ninety (90) trading days up to and including the trading day immediately before the day the price is finally determined for securities sold in the capital raise).

 

The combination of the businesses is expected to significantly increase our current annualized gross revenues. Hyperion is also expected to strengthen our manufacturing and distribution capabilities, as well as expand our product portfolio with 15 unique and proprietary nutraceutical formulations sold under the brand, Green Valley Natural Solutions. These products are formulated to support brain, memory, vision, sinus and digestive health, as well as healthy sleep and aging.

 

Green Valley Natural Solutions products are manufactured and shipped direct-to-consumer from specially temperature-controlled warehouses in Shenandoah Valley, Virginia. These facilities would add an East Coast presence to our existing warehouse and shipping facilities in Nevada, with this expected to lower customer shipping costs and order delivery times.

 

Hyperion’s relationships with high-quality contract manufacturers is also expected to lower our manufacturing costs, as well as improve supply chain efficiencies and economies of scale.

 

OPM specializes in creating digital and affiliate marketing content for Hyperion and will enhance our overall marketing strategy and audience reach. They also bring a large email distribution list of hundreds of thousands of potential customers with a new affiliate marketing channel. OPM also produces engaging digital content such as educational videos and newsletters.

 

The planned acquisition of Hyperion and OPM is expected to add approximately 14 employees, who would continue to work out of the existing facilities in Lexington, Virginia.


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We expect these two synergistic and accretive acquisitions to accelerate and support our growth and expand our market reach. Our natural, clinically-proven heart and brain health formulations are perfect for cross selling or private labeling with Green Valley products, such as their stem cell restore formulation that are sold across various marketing channels. Likewise, Green Valley sales would benefit from our established marketing channels, which includes subscription-based direct-to-consumer, national grocery stores, and a strong presence on Amazon.

 

On a pro forma basis upon the closing of the acquisitions, we would generate over $12 million in annualized gross revenue, including significant recurring revenue being generated by subscriptions. The anticipated positive cash flow would fund future revenue growth from new product introductions and market expansion, as well as other potential strategic acquisitions.

 

The completion of the acquisitions is subject to certain closing terms and there can be no assurance that the transactions will be completed as described.

 

Governmental Controls, Approval and Licensing Requirements

 

Federal laws related to the advertising, distribution and sale of health supplements.

 

We expect that the formulation, manufacturing, packaging, labeling, advertising, distribution and sale (hereafter, “sale” or “sold” may be used to signify all of these activities) of our vitamin and nutritional supplement products will be subject to regulation by one or more federal agencies, primarily the Food and Drug Administration (“FDA”) and the Federal Trade Commission (“FTC”), and to a lesser extent the Consumer Product Safety Commission (“CPSC”), the United States Department of Agriculture, and the Environmental Protection Agency. Our activities are also regulated by various governmental agencies for the states and localities in which our products are sold, as well as by governmental agencies in certain countries outside the United States in which our products are sold. Among other matters, regulation by the FDA and the FTC is concerned with product safety and claims made with respect to a product’s ability to provide health-related benefits. Specifically, the FDA, under the Federal Food, Drug, and Cosmetic Act (“FDCA”), regulates the formulation, manufacturing, packaging, labeling, distribution, and sale of food, including dietary supplements and over-the-counter (“OTC”) drugs. The FTC regulates the advertising of these products. The National Advertising Division (“NAD”) of the Council of Better Business Bureaus oversees an industry-sponsored, self-regulatory system that permits competitors to resolve disputes over advertising claims. The NAD has no enforcement authority of its own, but may refer matters that appear to violate the FTC Act or the FDCA to the FTC or the FDA for further action, as appropriate.

 

Most of the nutritional supplement products that we plan to sell are classified as dietary supplements. The FDA’s revision of nutrition labeling requirements also affects the nutrition labeling of certain dietary supplements. Our affected manufacturers may have to revise labels on some of their dietary supplements in the next two years. Moreover, these manufacturers may need to reformulate their products to maintain eligibility for certain marketing claims.

 

The Dietary Supplement Health and Education Act (“DSHEA”) was enacted in 1994, amending the FDCA. Among other things, DSHEA prevents the FDA from regulating dietary ingredients in dietary supplements as “food additives” and allows the use of statements of nutritional support on product labels and in labeling. DSHEA establishes a statutory class of “dietary supplements,” which includes vitamins, minerals, herbs, amino acids and other dietary ingredients for human use to supplement the diet. Dietary ingredients marketed in the United States before October 15, 1994 may be marketed without the submission of a “new dietary ingredient” (“NDI”) premarket notification to the FDA. Dietary ingredients not marketed in the United States before October 15, 1994 may require the submission, at least 75 days before marketing,


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of an NDI notification containing information establishing that the ingredient is reasonably expected to be safe for its intended use. The FDA has issued final regulations under DSHEA.

 

As required by Section 113(b) of the Food Safety Modernization Act, the FDA published in July 2011 a draft guidance document clarifying when the FDA believes a dietary ingredient is an NDI, when a manufacturer or distributor must submit an NDI premarket notification to the FDA, the evidence necessary to document the safety of an NDI and the methods for establishing the identity of an NDI. Industry strongly objected to several aspects of the draft guidance. In 2016, the FDA issued revised draft guidance on what constitutes an NDI and NDI notification requirements. Regardless of whether the FDA finalizes this draft guidance, the FDA has recently acted more aggressively to remove ingredients from the market that the FDA views as unlawful dietary ingredients. This trend, if it continues, may limit the dietary supplement market. Several bills to amend DSHEA in ways that would make this law less favorable to consumers and industry have been proposed in Congress.

 

The FDA issued a Final Rule on GMPs for dietary supplements on June 22, 2007. The GMPs cover manufacturers and holders of finished dietary supplement products, including dietary supplement products manufactured outside the United States that are imported for sale into the United States. Among other things, the new GMPs: (a) require identity testing on all incoming dietary ingredients, (b) call for a “scientifically valid system” for ensuring finished products meet all specifications, (c) include requirements related to process controls, including statistical sampling of finished batches for testing and requirements for written procedures and (d) require extensive recordkeeping. We have reviewed the GMPs and have taken steps to ensure compliance. While we believe we are in compliance, there can be no assurance that our operations or those of our suppliers will be in compliance in all respects at all times. Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance with the GMPs.

 

On December 22, 2006, Congress passed the Dietary Supplement and Nonprescription Drug Consumer Protection Act, which went into effect on December 22, 2007. The law requires, among other things, that companies that manufacture or distribute nonprescription drugs or dietary supplements report serious adverse events allegedly associated with their products to the FDA and institute recordkeeping requirements for all adverse events (serious and non-serious). There is a risk that consumers, the press and government regulators could misinterpret reported serious adverse events as evidence of causation by the ingredient or product complained of, which could lead to additional regulations, banned ingredients or products, increased insurance costs and a potential increase in product liability litigation, among other things.

 

All states regulate foods and drugs under laws that generally parallel federal statutes. We are also subject to state consumer health and safety regulations, such as the California Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”). Violation of Proposition 65 may result in substantial monetary penalties and compliance with Proposition 65 is a major focus. Contemplated changes in the Proposition 65 labeling requirements could potentially lead to substantial costs. Current legislation in Massachusetts regarding restrictions on weight loss and sports nutrition products could also impact the marketing of dietary supplements generally. Further, state attorneys general have pressured industry to adopt DNA testing for herbal-based products to assure plant identity, and have taken other actions relating to dietary ingredient status. It is uncertain whether these efforts will have a material impact on the dietary supplement market.

 

Description of Property

 

We do not currently own, lease or use any office space as we operate on a virtual basis.  


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MANAGEMENT

 

Directors and Executive Officers

 

The following table sets forth the names, ages, and biographical information of each of our current directors and executive officers, and the positions held by each person, and the date such person became a director or executive officer. Our executive officers are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Family relationships among any of the directors and officers are described below.

 

Name

 

Age

 

Position(s)

 

 

 

 

 

Kevin “Duke” Pitts

 

 

63

 

 

President, Director (2018)

 

 

 

 

 

 

 

Robert Madden

 

 

51

 

 

Secretary, Chief Financial Officer (2022)

 

 

 

 

 

 

 

William Bossung

 

 

64

 

 

Director (2014)

 

 

 

 

 

 

 

Bill Croyle

 

 

71

 

 

Director (2019)

 

Kevin “Duke” Pitts, age 63, was appointed to our Board of Directors on September 28, 2018, and as our President on September 24, 2019. Mr. Pitts is a proven leader who has 30 years of senior management experience within a technology-driven industry. Mr. Pitts has been the President and Owner of Envision Enterprises, a consumer electronic integration business, where he has worked since 2007. Earlier in his career, Mr. Pitts served as the Director of Direct Marketing at Dish Network, the well-known satellite television provider. His deep experience in senior management and marketing will be of great value to us.

 

Robert Madden, age 51, was appointed as our Secretary and Chief Financial Officer on June 2, 2022. Mr. Madden has been working in the accounting industry for over 30 years. From 1990 to 2012 he worked for several companies starting as a staff accountant, then assistant controller position, finally the company controller position. During that time, he worked in the wholesale apparel, advertising, television, and special event industries. From 2012 to 2015, he took a sabbatical and lived overseas volunteering for different NGO’s and non-profit organizations. During the sabbatical, he volunteered for a British NGO, worked as their CFO, and was the driving force in getting the organization registered with 2 foreign nations. In 2016, he moved back to the United States and started an accounting consulting business. From 2016 to the present, he was hired to fill either a Controller or CFO position for several private and public companies. He graduated from the University of Utah with a bachelor’s degree in accounting and from Westminster College with an MBA with a certificate of accounting.

 

William Bossung, age 64, has served as a member of the Board of Directors since our inception, and was our Secretary and Chief Financial Officer from our inception until June 2, 2022. Mr. Bossung has a diverse background in Corporate Finance, Insurance and accounting. From 2003 to August 2006 Mr. Bossung was co-founder of BCF Technology, an insurance software company that was ultimately sold to Vertafore in August of 2006. During January 2012 Mr. Bossung co-founded Splash Beverage Group, (SBEV) a beverage distribution company that distributes both alcohol and non-alcohol products. The company’s products are sold in over 25,000 retail locations Mr. Bossung is the managing partner of Bishop Equity Partners LLC, a small boutique private equity firm that invests in both private and public companies. From 1997 to 2002 Mr. Bossung was the Director of Corporate Finance of Chadmoore Wireless Group, the company was engaged in the business of wireless communications utilizing 800 MHZ frequencies.


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Chadmoore aggregated over 5500 Specialized Mobile Radio licenses from the Federal Communications Commission, the licenses were acquired by Nextel, then merged into the Sprint PCS wireless network. Mr. Bossung currently holds an Insurance License and earned a bachelor’s degree in accounting and finance from Bloomsburg State University.

 

Bill Croyle, age 71, was appointed to our Board of Directors on September 24, 2019. Mr. Croyle is a private investor and an accomplished Senior Executive with more than 40 years of success across the IT, energy, manufacturing, telecommunications, venture capital, and finance industries. His broad areas of expertise include M&A, negotiations, service contracts and delivery, executive development and mentoring, and managing complexities. Since 2009 Bill is has been a founder, owner or executive of EnTX Group, Impact Legacy Partners, FB Oilfield Special Tools and Western Energy Advisors. He is Chairman of the Colorado Chapter of the Marine Corps Scholarship Foundation, and he has served on the boards of Hill City Silica LLC, the University of Colorado Advocates program, the Association for Corporate Growth/Denver, and the Denver Consulting Alliance. Bill served in the Marine Corps 1972-1974. Mr. Croyle holds Certificates in Energy Finance and Management from the University of Denver and International Trade from World Trade Center Denver. He graduated from the University of California, Santa Barbara, with a BA in History and minor in French.

 

Family Relationships

 

There are no family relationships between any of our officers or directors.

 

Other Directorships; Director Independence

 

Other than as set forth above, none of our officers and directors is a director of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on which shares of our common stock are quoted does not have any director independence requirements. The NASDAQ definition of “independent director” means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, Mr. Bossung and Mr. Croyle are independent directors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

Except as set forth below, to our knowledge, none of our officers, directors, or beneficial owners of more than ten percent of our common stock failed to file on a timely basis reports required by section 16(a) of the Exchange Act during the most recent fiscal or prior fiscal year.

 


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Board Committees

 

Our Board of Directors maintains separate audit, nominating and compensation committees. The members of all three committees are only our two independent directors, William Bossung and Bill Croyle.

 

Audit Committee. Our audit committee consists of two independent directors. The members of the audit committee are William Bossung and Bill Croyle. The audit committee will consist exclusively of directors who are financially literate. In addition, Mr. Bossung is considered an “audit committee financial expert” as defined by the SEC’s rules and regulations. The audit committee responsibilities include:

 

·Review and reassess the adequacy of the Audit Committee Charter annually and submit the Charter to the Board for approval. 

·Review our annual audited financial statements and any reports or other financial information as the Committee may request, including, without limitation, any material submitted to any governmental body, or the public, including any certification, report, opinion or review rendered by the registered public accountants. Discuss major issues and significant changes regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect our financial statements.  

·Review any reports to management prepared by the internal auditing department, together with management’s response. Review with management and the registered public accountants significant financial reporting issues and judgments made in connection with the preparation of our financial statements.  

·Review with management and the registered public accountants our annual report on Form 10-K and our quarterly report on Form 10-Q prior to its filing or prior to the release of earnings. The chair of the Committee may represent the entire Committee for purposes of these reviews.  

·Review our major financial risk exposures and the steps management has taken to monitor and control such exposures. 

·Establish procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. 

·The Committee shall be directly responsible for the appointment, compensation, and oversight of the work of our registered public accounting firm. The Committee shall monitor the independence and effectiveness and approve the fees and other compensation to be paid to the registered public accountants. On an annual basis, the Committee should review and discuss with the accountants all significant relationships the accountants have with us to confirm the accountants’ independence.  

·Meet with the registered public accountants to review the scope, accuracy, completeness and overall quality of the annual financial statements. 

·Receive from the registered public accountants the information they are required to communicate to the Committee under generally accepted auditing standards, including, without limitation a formal written statement delineating all relationships between the registered public accountants and us, consistent with Independence Standards Board Standard No. 1, engage in a dialogue with the registered public accountants with respect to any disclosed relationships or services that may impact the objectivity and independence of the registered public accountants, and recommend that the Board take appropriate action to enhance the independence of the registered public accountants, and reapprove all auditing services (which may entail providing comfort letters in connection with securities underwritings) and all non-audit services as provided for under Section 202 of Sarbanes-Oxley Act of 2002. 

·In consultation with the registered public accountants, review the integrity of our financial reporting processes, both internal and external. 


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·Meet with management and the registered public accountants to review the planning and staffing of the audit. 

·Discuss with the registered public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as modified or amended, relating to the conduct of the audit. 

·Review with the registered public accountants any problems or difficulties the accountants may have encountered and any management letter provided by the accountants and our response to that letter. Such review should include any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, and any changes required in the planned scope of the audit. 

·make regular reports to the Board of Directors. The Committee shall also prepare the report required by the rules of the Securities and Exchange Commission to be included our annual proxy statement. 

 

Compensation Committee. Our compensation committee consists of two independent directors. The members of the audit committee are William Bossung and Bill Croyle. The compensation committee responsibilities include:

 

·Review the competitiveness of our executive compensation programs to ensure (a) the attraction and retention of executives, (b) the motivation of executives to achieve our business objectives, and (c) the alignment of the interests of key leadership with the long-term interests of our shareholders. Assist the Board in establishing CEO annual goals and objectives. 

·Review trends in executive compensation, oversee the development of new compensation plans, and, when necessary, approve the revision of existing plans. 

·Review and approve the compensation structure for executives. 

·Oversee an evaluation of the performance of our executive officers and approve the annual compensation, including salary, bonus, incentive and equity compensation, for the executive officers. Review and approve compensation packages for new executive officers and termination packages for executive officers. 

·Review and make recommendations concerning long-term incentive compensation plans, including the use of equity-based plans. 

·Periodically review the compensation paid to non-employee directors and make recommendations to the Board for any adjustments. No member of the Committee will act to fix his or her own compensation except for uniform compensation to directors for their services as a director. 

·Review periodic reports from management on matters relating to our compensation practices. 

·Produce an annual report of the Compensation Committee on executive compensation for our annual proxy statement in compliance with and to the extent required by applicable Securities and Exchange Commission rules and regulations and any relevant listing authority. 

·Obtain or perform an annual evaluation of the Committee’s performance and make applicable recommendations about, among other things, changes to the charter of the Committee. 

 

Nominating Committee. Our nominating committee consists of two independent directors. The members of the nominating committee are William Bossung and Bill Croyle. The nominating committee responsibilities include screening and recommending to the full Board director candidates for nomination. The Nominating and Governance Committee will consider stockholder recommendations for candidates for the board of directors, although we do not currently have a process for security holders to send communications to the Board.

 

During the fiscal years ended December 31, 2021 and 2020, the Board of Directors met as necessary.


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Involvement in Certain Legal Proceedings

 

None of our officers or directors has, in the past ten years, filed bankruptcy, been convicted in a criminal proceeding or named in a pending criminal proceeding, been the subject of any order, judgment, or decree of any court permanently or temporarily enjoining him or her from any securities activities, or any other disclosable event required by Item 401(f) of Regulation S-K.

 

On November 14, 2022, BergaMet NA, LLC, our subsidiary, received a warning letter from the FDA regarding claims we allegedly make about our Cholesterol Command product. On December 1, 2022, we responded to the warning letter notifying the FDA that we had hired a third-party to review our advertising and revise portions of our website, Facebook page, and online product listings.

 

Other than as set forth above, we are not a party to or otherwise involved in any legal proceedings.

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

Code of Ethics

 

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. The full text of our code of business conduct and ethics will be posted on our corporate website and is filed as an exhibit to this registration statement. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of these provisions, on our corporate website or in filings under the Exchange Act.


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EXECUTIVE COMPENSATION

 

Narrative Disclosure of Executive Compensation

 

Pitts Independent Contractor Agreement

 

On October 1, 2019, we entered into an Independent Contractor Agreement with Kevin “Duke” Pitts. Pursuant to this agreement, Mr. Pitts has agreed to serve as our President and Chief Executive Officer in exchange for $120,000 per year. The agreement had an expiration date of December 31, 2021, but has been extended indefinitely since then.  

 

Madden Consulting Agreement

 

Effective June 1, 2022, we entered into a Consulting Agreement with Robert Madden. Pursuant to the agreement, Madden has agreed to serve as our Chief Financial Officer and Secretary in exchange for $42,000 per year. The agreement is effective for one year, and will automatically renew for successive one year terms. 

 

Summary Compensation Table

 

The following table sets forth information with respect to compensation earned by our President and our Secretary and Chief Financial Officer for the years ended December 31, 2022 and 2021.

 

Name and

Principal Position

Year

Salary

($)

Bonus

($)

Stock

Awards

($)

Option Awards

($)

Non-Equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation ($)

All Other

($)

 

 

Total

($)

 

 

 

 

 

 

 

 

 

 

Kevin “Duke” Pitts

2022

110,000

     -0-

       -0-

         -0-

                   -0-

                   -0-

         -0-

110,000

President

2021

110,000

     -0-

       -0-

         -0-

                   -0-

                   -0-

         -0-

110,000

 

2020

 110,000

     -0-

       -0-

         -0-

                   -0-

                   -0-

         -0-

110,000

 

 

 

 

 

 

 

 

 

 

William Bossung (1)

2022

-0-

     -0-

       -0-

         -0-

                   -0-

                   -0-

         -0-

-0-

Secretary and CFO

2021

65,000

     -0-

       -0-

         -0-

                   -0-

                   -0-

         -0-

65,000

 

2020

 66,000

     -0-

       -0-

         -0-

                   -0-

                   -0-

         -0-

 66,000

 

 

 

 

 

 

 

 

 

 

Robert Madden (1)

2022

38,500

-0-

-0-

17,500

-0-

-0-

-0-

56,000

Secretary and CFO

 

 

 

 

 

 

 

 

 

 

(1)Mr. Bossung resigned as our Secretary and Chief Financial Officer effective June 2, 2022, and was replaced by Robert Madden. 

 

Director Compensation

 

For the years ended December 31, 2021 and 2020, none of the members of our Board of Directors received compensation for his service as a director.

 


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Outstanding Equity Awards at Fiscal Year-End

 

On June 10, 2020, our Board of Directors approved the Grey Cloak Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside 250,000 shares of our common stock for issuance thereunder. Pursuant to the plan, officers, directors, key employees and certain consultants may be granted stock options (including incentive stock options and non-qualified stock options), restricted stock awards, unrestricted stock awards, or performance stock awards. As of December 31, 2021, we have awarded an aggregate of 195,000 options to twenty five (25) individuals at an exercise price of $5.00 per share.

 

On December 26, 2022, we canceled 121,500 of the options and, on that same date, we approved the Healthy Extracts, Inc. 2022 Equity Incentive Plan and set aside 520,000 shares of our common stock for issuance thereunder. On December 26, 2022, we approved a total of 159,750 Restricted Stock Units at $1.00 per share and 360,000 Restricted Stock Awards with a strike price of $0.00 to $1.00 to a total of sixteen (16) individuals.


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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of February 9, 2023, certain information with respect to our equity securities owned of record or beneficially by (i) each of our Officers and Directors; (ii) each person who owns beneficially more than 10% of each class of our outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

 

 

 

Name and Address (1)

 

 

Common Stock Beneficial Ownership

 

Percentage of Common Stock Beneficial Ownership (2)

 

 

 

 

 

Kevin “Duke” Pitts (3)(5)

 

262,301

 

7.11%

 

 

 

 

 

William Bossung (3)(6)

 

64,143

 

1.85%

 

 

 

 

 

Bill Croyle (3)(4)(7)

 

14,637

 

<1%

 

 

 

 

 

Robert Madden (3)(8)

 

60,000

 

1.71%

 

 

 

 

 

Jay Decker (9)

 

 1,776,475

 

50.80%

 

 

 

 

 

Shelton Decker (10)

 

251,337

 

7.25%

 

 

 

 

 

Logan Decker (11)

 

262,837

 

7.56%

 

 

 

 

 

All Officers and Directors as a Group (4 Persons)

 

401,080

 

10.41%

 

 

(1)

Unless otherwise indicated, the address of the shareholder is c/o Healthy Extracts Inc.

 

 

 

 

(2)

Unless otherwise indicated, based on 3,451,724 shares of common stock issued and outstanding. Shares of common stock subject to convertible preferred stock and options or warrants currently exercisable, or exercisable or convertible within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

 

 

 

 

(3)

Indicates one of our officers or directors.

 

 

 

 

(4)

Includes 6,637 shares of common stock held by BMJ Estate Matters, LLC, of which Mr. Croyle is the controlling party.

 

 

 

 

(5)

Includes 160,000 Restricted Stock Awards that have vested, and 80,000 that have not vested.

 

 

 

 

(6)

Includes 24,750 Restricted Stock Units that have vested.

 

 

 

 

(7)

Includes 8,000 Restricted Stock Units that have vested.

 

 

 

 

(8)    

Includes 30,000 Restricted Stock Awards that have vested, and 30,000 that have not vested.

 

 

 


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(9)     

Includes warrants to acquire 45,000 shares of common stock at $5.00 per share. Jay Decker disclaims any ownership of securities held by his adult sons.

 

 

 

 

(10)

Shelton Decker is the adult son of Jay Decker. Includes warrants to acquire 15,000 shares of common stock at $5.00 per share.

 

 

 

 

(11)

Logan Decker is the adult son of Jay Decker. Includes warrants to acquire 15,000 shares of common stock at $5.00 per share, 1,000 Restricted Stock Units that have vested, and 10,500 Restricted Stock Units that have not vested.

 

The issuer is not aware of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.

 

There are no current arrangements which will result in a change in control.


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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Pitts Independent Contractor Agreement

 

On October 1, 2019, we entered into an Independent Contractor Agreement with Kevin “Duke” Pitts. Pursuant to this agreement, Mr. Pitts has agreed to serve as our President and Chief Executive Officer in exchange for $120,000 per year. The agreement had an expiration date of December 31, 2021, but has been extended indefinitely since then. 

 

Madden Consulting Agreement

 

Effective June 1, 2022, we entered into a Consulting Agreement with Robert Madden. Pursuant to the agreement, Madden has agreed to serve as our Chief Financial Officer and Secretary in exchange for $42,000 per year. The agreement is effective for one year, and will automatically renew for successive one year terms. 

 

Jay Decker Transactions

 

We have entered into numerous transactions with Jay Decker, our majority shareholder, as follows: 

 

BergaMet Acquisition

 

On February 4, 2019, we acquired BergaMet NA, LLC, a Delaware limited liability company (“BergaMet”). BergaMet is a wholly-owned subsidiary through which we conduct our nutraceuticals business. As a result of the acquisition, Jay Decker became our majority shareholder upon our issuance to him of 85,345,862 shares of our common stock. The shares of common stock issued in the acquisition were equal to approximately 80.1% of our outstanding common stock immediately following the closing.

 

Ultimate Brain Nutrients, LLC Acquisition

 

On April 3, 2020, we acquired Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”). UBN is a wholly-owned subsidiary through which we conduct our plant-based neuro-products business. As a result of the acquisition, Jay Decker became a significantly larger shareholder upon our issuance to him of 44,907,968 shares of our common stock. The shares of common stock issued in the acquisition were equal to approximately 42.5% of our outstanding common stock immediately following the closing.


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Note Conversion Agreements and Advance Conversion Agreements

 

Effective April 13, 2020, we entered into a total of eighteen (18) agreements (16 Note Conversion Agreements and 2 Advance Conversion Agreements) whereby an aggregate of $1,508,407.84 in outstanding principal and accrued interest was converted into an aggregate of 392,488 shares of our common stock. The conversion price was either $3.00 per share or $5.00 per share, depending on the individual agreement. The conversions included notes and advances held by our officers and directors and our largest shareholder, as follows:

 

 

Name

Aggregate Principal
and Interest

 

Aggregate Shares

Jay W. Decker

$1,282,231.11

334,180

William Bossung

$65,677.84

21,892

First Capital Properties LLC

$16,180.00

5,393

Shelton S. Decker

$33,717.78

7,822

Logan B. Decker

$33,717.78

7,822

Kevin Pitts

$51,255.56

10,251

Innovation Group Holdings, LLC

$25,627.78

5,125

 

Note Conversion Agreements

 

Effective September 2, 2020, we entered into five (5) Note Conversion Agreements whereby an aggregate of $1,791,382.56 in outstanding principal and accrued interest was converted into an aggregate of 358,276 shares of our common stock. The conversion price was $5.00 per share. The conversions included a note held by our largest shareholder, as follows:

 

Name:

No. of Shares

Jay W. Decker

307,350

Genuine Partners

16,926

Dan Bishop

22,000

James Knox

10,000

Matthew Dee Grabau

2,000

Total

358,276

 

Securities Purchase Agreements

 

Effective October 15, 2020, we entered into four (4) Securities Purchase Agreements whereby we sold and issued 59,000 shares of our common stock at $5.00 per share for aggregate consideration of $295,000. The purchasers included our officers and directors and our largest shareholder, as follows:

 

 

Name

Aggregate Principal
and Interest

 

Aggregate Shares

Jay W. Decker

$100,000

20,000

Shelton S. Decker

$50,000

10,000

Logan B. Decker

$50,000

10,000

Dr. Gerald Haase

$95,000

19,000

   Total

$295,000

59,000


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Securities Purchase Agreements

 

On February 10, 2021, and effective December 29, 2020, we entered into Securities Purchase Agreements with Shelton Decker and Logan Decker for the purchase and sale of an aggregate of 20,000 shares of our common stock at $5.00 per share, as follows:

 

Name:

No. of Shares

Logan Decker

10,000

Jay Decker

10,000

Total

20,000

 

Promissory Notes

 

On February 10, 2021, we issued promissory notes to Jay Decker dated December 14, 2020 and December 21, 2020 in the principal amount of $100,000 and $70,000 respectively.

 

On January 20, 2022, we issued a promissory note to Jay Decker in the principal amount of $185,000. In conjunction therewith and on the same date, we issued to Jay Decker warrants to purchase 20,000 shares of our common stock at an exercise price of $5.00 per share. 

 

On June 24, 2022, we entered into a Note Conversion Agreement with Jay Decker whereby Decker converted $17,000 in principal and $31.07 in interest on an outstanding convertible note into 3,406 shares of our common stock at a conversion price of $5.00 per share.

 

Warrants

 

On February 10, 2021, but effective December 21, 2020, we issued warrants to purchase an aggregate of 75,000 shares of our common stock, at an exercise price of $5.00 per share, as follows (the “Warrants”), for consulting services rendered:

 

Name:

No. of Warrants

Jay Decker

45,000

Logan Decker

15,000

Shelton Decker

15,000

Total

75,000

 

On January 20, 2022, we issued a promissory note to Jay Decker in the principal amount of $185,000. In conjunction therewith and on the same date, we issued to Jay Decker warrants to purchase 20,000 shares of our common stock at an exercise price of $5.00 per share.

 

Director Independence

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on which shares of common stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, Mr. Bossung and Mr. Croyle are independent directors.


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DESCRIPTION OF SECURITIES

 

Our authorized capital stock consists of 25,000,000 shares of common stock, par value $0.001, and 750,000 shares of preferred stock, par value $0.001. As of February 9, 2023, there were 3,451,724 shares of our common stock issued and outstanding, and no shares of preferred stock issued or outstanding.

 

Common Stock. Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common shareholders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.

 

Preferred Stock. We are authorized to issue 750,000 shares of preferred stock, par value $0.001 per share. No shares of preferred stock are issued or outstanding, and no series of preferred stock has been created.

 

Options and Warrants.

 

There are currently outstanding options to acquire 104,500 shares of Common Stock at $5.00 per share, warrants to acquire 140,000 shares of Common Stock at either $5.00 or $7.50 per share, warrants to acquire 168 shares of Common Stock at $6,250 per share, Restricted Stock Units to acquire 159,750 shares of Common Stock at $1.00 per share, and 360,000 unvested Restricted Stock Awards.

 

On a fully diluted basis, the number of shares of common stock that could be issued and outstanding prior to this Offering is 4,408,450 shares. 


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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK

 

The following discussion is a summary of the material United States federal income tax consequences to Non-U.S. Holders (as defined below) of the ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other United States federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-United States tax laws are not discussed. This discussion is based on the United States Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the United States Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS will not take, or that a court will not sustain, a contrary position to that discussed below regarding the tax consequences of the ownership and disposition of our common stock.

 

This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all United States federal income tax consequences relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income or the alternative minimum tax. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:

 

·certain United States expatriates and former citizens or long-term residents of the United States;  

 

·persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;  

 

·banks, insurance companies, and other financial institutions;  

 

·brokers, dealers or certain traders in securities;  

 

·“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid United States federal income tax;  

 

·partnerships or other entities or arrangements treated as partnerships for United States federal income tax purposes (and investors therein);  

 

·tax-exempt organizations or governmental organizations;  

 

·persons deemed to sell our common stock under the constructive sale provisions of the Code;  

 

·persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;  

 

·tax-qualified retirement plans;  

 

·“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;  


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·persons who own, or are deemed to own, more than 5% of our capital stock (except to the extent specifically set forth below); and  

 

·persons subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement.  

 

If an entity treated as a partnership for United States federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership generally will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships (or other entities treated as partnerships for United States federal income tax purposes) holding our common stock and the partners in such partnerships (or other entities treated as partnerships for United States federal income tax purposes) should consult their tax advisors regarding the United States federal income tax consequences to them.

 

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-UNITED STATES TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

 

Definition of a Non-U.S. Holder

 

For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for United States federal income tax purposes.

 

A U.S. person is any person that, for United States federal income tax purposes, is or is treated as any of the following:

 

·an individual who is a citizen or resident of the United States;  

 

·a corporation, or an entity treated as a corporation, created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia, or other entity treated as such for United States federal income tax purposes;  

 

·an estate, the income of which is subject to United States federal income tax regardless of its source; or  

 

·a trust that (1) is subject to the primary supervision of a United States court and all substantial decisions of which are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a United States person for United States federal income tax purposes.  

 


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Distributions

 

As described in the section titled “Dividend Policy,” we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for United States federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, amounts not treated as dividends for United States federal income tax purposes will constitute a return of capital and will first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in our common stock owned by such Non-U.S. Holder, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “-Sales or Other Taxable Dispositions of Common Stock.”

 

Subject to the discussion below on effectively connected income, backup withholding and foreign accounts, dividends paid to a Non-U.S. Holder of our common stock will be subject to United States federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder timely furnishes a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate of United States withholding tax, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

 

If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the United States federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must timely furnish to the applicable withholding agent a valid IRS Form W-8ECI (or applicable successor form), certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.

 

Any such effectively connected dividends will be subject to United States federal income tax on a net income basis at regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

 

Sales or Other Taxable Dispositions of Common Stock

 

Subject to the discussion below regarding backup withholding and foreign accounts, a Non-U.S. Holder generally will not be subject to United States federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

 

·the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable);  

 

·the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or  

 


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·our common stock constitutes a United States real property interest, or USRPI, by reason of our status as a United States real property holding corporation, or USRPHC, for United States federal income tax purposes.  

 

Gain described in the first bullet point above generally will be subject to United States federal income tax on a net income basis at regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

 

Gain described in the second bullet point above will be subject to United States federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by certain United States source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed United States federal income tax returns with respect to such losses.

 

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Generally, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-United States real property interests and our other business assets, there can be no assurance that we currently are not a USRPHC or will not become a USRPHC in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common stock will not be subject to United States federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition thereof or the Non-U.S. Holder’s holding period.

 

NON-U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING ANY POTENTIALLY APPLICABLE INCOME TAX TREATIES THAT MAY PROVIDE FOR DIFFERENT RULES.

 

Information Reporting and Backup Withholding

 

Payments of distributions on our common stock will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the Non-U.S. Holder is a United States person and the Non-U.S. Holder either certifies its non-United States status, such as by furnishing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any distributions on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld.

 

In addition, proceeds of the sale or other taxable disposition of our common stock within the United States, or conducted through certain United States-related brokers, generally will not be subject to backup withholding or information reporting if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such Non-U.S. Holder is a United States person, or the Non-U.S. Holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-United States office of a non-United States broker that does not have certain enumerated relationships with the United States generally will not be subject to backup


76



withholding or information reporting. Non-U.S. Holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.

 

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s United States federal income tax liability, provided the required information is timely furnished to the IRS.

 

Additional Withholding Tax on Payments Made to Foreign Accounts

 

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) on certain types of payments made to non-United States financial institutions and certain other non-United States entities. Specifically, a 30% withholding tax may be imposed on distributions on our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the United States Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

 

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of distributions on our common stock. While withholding under FATCA also would have applied to payments of gross proceeds from the sale or other disposition of such stock on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of such gross proceeds. In its preamble to these proposed Treasury Regulations, the U.S. Treasury Department stated that taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

 

PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE POTENTIAL APPLICATION OF WITHHOLDING UNDER FATCA TO THEIR INVESTMENT IN OUR COMMON STOCK.


77



UNDERWRITING

 

We intend to enter into an underwriting agreement with Spartan Capital Securities, LLC, as the representative of the underwriters and the lead book-running manager of this Offering. Subject to the terms and conditions of the underwriting agreement, each underwriter will agree to purchase from us the number of Shares set forth opposite its name below.

 

Underwriter

 

Number of Shares

Spartan Capital Securities, LLC

 

[·]

[·]

 

[·]

Total

 

[·]

 

We have been advised by the underwriters that they propose to offer the Shares directly to the public at the public offering price set forth on the cover page of this prospectus. Any Shares sold by the underwriters to securities dealers will be sold at the public offering price less a selling concession not in excess of $[·] per share. The underwriters may allow, and these selected dealers may re-allow, a concession of not more than $[·] per share to other brokers and dealers.

 

We intend for the underwriting agreement to provide that the underwriters’ obligation to purchase the Shares that we are offering will be subject to the terms and conditions described therein.

 

Over-Allotment Option

 

We intend to grant to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to [·] additional shares of Common Stock from us at the initial offering price set forth on the cover page of this prospectus, less the underwriting discount. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the Offering of the Shares offered by this prospectus.

 

Underwriting Discount and Expenses

 

The following table shows the public offering price, underwriting discount of 8%, and proceeds before expenses to us. The information assumes either no exercise or full exercise of the option we granted to the underwriters to purchase additional shares of Common Stock.

 

 

 

 

Total

 

Per share of Common Stock

 

No exercise of Over-Allotment Option

 

Full exercise of Over-Allotment Option

Initial public offering price

$[·]

 

$[·]

 

$[·]

Underwriting discounts

$[·]

 

$[·]

 

$[·]

Proceeds, before expenses, to us

$[·]

 

$[·]

 

$[·]

 

We estimate expenses payable by us in connection with this Offering, other than the underwriting discounts referred to above, will be approximately $280,000. We have agreed to reimburse the underwriters for all reasonable travel and other out-of-pocket expenses, including fees and disbursements related to its legal counsel, in an amount not to exceed $200,000 in the aggregate.


78



Determination of Public Offering Price

 

The public offering price of the Shares will be determined by negotiations between us and the underwriters. Among the factors considered in determining the public offering price of the shares of Common Stock will be our historical stock price, the history and prospects of other companies in the industry in which we compete; our financial information; an assessment of our management and their experience; an assessment of our business potential and earning prospects; the prevailing securities markets at the time of this Offering; the recent market prices of, and the demand for, publicly traded shares of generally comparable companies; and other factors deemed relevant. Neither we nor the underwriters can assure that the shares of Common Stock will trade in the public market at or above the public offering price for such shares.

 

Underwriters’ Warrants

 

In addition, we intend to agree to issue to the underwriters the Underwriters’ Warrants, exercisable for up to [·] shares of Common Stock, which is equal to 5% of the total number of Shares sold in this Offering (including any such shares of Common Stock sold to cover over-allotments, if any) at an exercise price equal to $[·] per share (110% of the public offering price of $[·] per share of Common Stock). The Underwriters’ Warrants may be purchased in cash or via cashless exercise and will be exercisable at any time after the closing of this Offering of the Shares until the fifth anniversary of the date of commencement of sales of such shares of Common Stock. The Underwriters’ Warrants and the shares of Common Stock underlying the Underwriters’ Warrants will be deemed compensation by FINRA, and therefore will be subject to FINRA Rule 5110. In accordance with FINRA Rule 5110, neither the Underwriters’ Warrants nor any of our shares of Common Stock issued upon exercise of the Underwriters’ Warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days beginning on the date of commencement of sales of the Shares, subject to certain exceptions set forth in FINRA Rule 5110(e)(2).

 

Stabilization

 

In connection with this Offering of the Shares, the underwriters may engage in stabilizing transactions and syndicate covering transactions and purchases to cover positions created by short sales.

 

Stabilizing transactions permit bids to purchase shares of Common Stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the Common Stock while the Offering of the Shares is in progress.

 

Syndicate covering transactions involve purchases of Common Stock in the open market after the distribution has been completed in order to cover syndicate short positions. Since there is no over-allotment option, if the underwriters would have a naked short position, it can be closed out only by buying shares of Common Stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares of Common Stock in the open market that could adversely affect investors who purchase shares of Common Stock in this Offering.

 

Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the security originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our Common


79



Stock or preventing or retarding a decline in the market price of our Common Stock. As a result, the price of our Common Stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our Common Stock. These transactions may be effected on Nasdaq, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

 

Indemnification

 

We intend to agree, pursuant to the underwriting agreement, to indemnify the underwriters and selected dealers against certain liabilities, including certain liabilities arising under the Securities Act, or to contribute to payments that the underwriters or selected dealers may be required to make for these liabilities.

 

Listing on the Nasdaq Capital Market

 

We intend to apply to list our Common Stock on Nasdaq.

 

Electronic Distribution

 

A prospectus in electronic format may be made available on websites maintained by the underwriters, or selling group members, if any, participating in this Offering. The underwriters may agree to allocate a number of shares of our Common Stock for sale to its online brokerage account holders.

 

Other Relationships

 

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing, and brokerage activities. The underwriters and their respective affiliates may in the future perform various financial advisory, investment banking, and other services for us, for which they may receive customary fees and commissions. In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may effect transactions for their own account or the accounts of customers, and hold on behalf of themselves or their customers long or short positions in our debt or equity securities or loans, and may do so in the future. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to their customers that they acquire, long or short positions in such securities and instruments.

 

Selling Restrictions

 

No action has been taken by us or the underwriters that would permit a public offering of the shares of Common Stock in any jurisdiction where action for that purpose is required. None of our shares of Common Stock included in this Offering may be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sales of any of the shares of Common Stock offered hereby be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating to this Offering of shares of Common Stock and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy the shares of Common Stock in any jurisdiction where that would not be permitted or legal.


80



LEGAL MATTERS

 

The validity of the securities offered by this prospectus have been passed upon for us by Clyde Snow & Sessions, PC, Salt Lake City, Utah. The underwriters of this offering are being represented by Ellenoff Grossman & Schole LLP, New York, New York.

 

EXPERTS

 

The audited financial statements of Healthy Extracts, Inc. as of December 31, 2021 and 2020 appearing in this prospectus which is part of a registration statement have been so included in reliance on the report of BF Borgers CPA PC, given on the authority of such firm as experts in accounting and auditing.

 

INTEREST OF NAMED EXPERTS AND COUNSEL

 

Clyde Snow & Sessions, PC serves as our legal counsel in connection with this offering. Brian A. Lebrecht, a shareholder at Clyde Snow & Sessions, owns Restricted Stock Units to acquire 10,000 shares of Common Stock at $1.00 per share.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the Securities and Exchange Commission a registration statement on Form S-1, together with all amendments and exhibits thereto, under the Securities Act of 1933 with respect to the common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. You should refer to the registration statement and its exhibits and schedules for further information. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.

 

Copies of documents we file with the Commission, including this prospectus, the registration of which it is a part and the related exhibits, may be read and copies at the Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our filings with the Commission are also available through the Commission’s website at the following address: http://www.sec.gov.

 

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, and, in accordance therewith, file periodic reports, proxy statements and other information with the Commission. Such periodic reports, proxy statements and other information are available for inspection and copying at the Public Reference Room and website of the SEC referred to above. We also furnish our shareholders with annual reports containing our financial statements audited by an independent registered public accounting firm and quarterly reports containing our unaudited financial information. We maintain a website at www.healthyextractsinc. You may access our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act with the Commission free of charge at our website as soon as reasonably practicable after this material is electronically filed with, or furnished to, the Commission. The reference to our website or web address does not constitute incorporation by reference of the information contained at that site.


81



INCORPORATION BY REFERENCE

 

We “incorporate by reference” information from other documents that we file with the SEC into this prospectus, which means that we disclose important information to you by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus except for any information that is superseded by information included directly in this prospectus, and the information that we file later with the SEC will automatically supersede this information. Any statement contained in this prospectus or any prospectus supplement or a document incorporated by reference in this prospectus or in any prospectus supplement will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document that is incorporated by reference in this prospectus modifies or superseded the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. You should not assume that the information in this prospectus is current as of the date other than the date on the cover page of this prospectus.

 

We are incorporating by reference into this prospectus any additional documents that we may file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the effective date of the registration statement and prior to the termination of the offering.

 

You may request a copy of any document incorporated by reference in this prospectus and any exhibit specifically incorporated by reference in those documents, at no cost, by writing or telephoning us at the following address or phone number:

 

Healthy Extracts, Inc.

7375 Commercial Way, Suite 125

Henderson, NV 89011

(702) 463-1004

Attn: Kevin “Duke” Pitts


82



INDEX TO FINANCIAL STATEMENTS

 

Healthy Extracts, Inc.:

 

For the Three and Nine Months ended September 30, 2022 and 2021

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (Unaudited)

F-5

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

F-6

 

 

Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the nine months ended September 30, 2022 and 2021 (Unaudited)

F-7

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)

F-8

 

 

Notes to Condensed Consolidated Financial Statements

F-9

 

For the Years ended December 31, 2021 and 2020

 

Report of Independent Registered Public Accounting Firm

F-17

 

 

Balance Sheets as of December 31, 2021 and 2020 (Audited)

F-18

 

 

Statements of Operations for the years ended December 31, 2021 and 2020 (Audited)

F-19

 

 

Statement of Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and 2020 (Audited)

F-20

 

 

Statements of Cash Flows for the years ended December 31, 2021 and 2020 (Audited)

F-21

 

 

Notes to Financial Statements

F-22


F-1



Hyperion, L.L.C.: 

 

For the Nine Months ended September 30, 2022 and 2021

 

Balance Sheets as of September 30, 2022 and December 31, 2021 (Audited)

F-32

 

 

Statements of Operations for the nine months ended September 30, 2022 and 2021 (Audited)

F-33

 

 

Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Audited)

F-34

 

 

Notes to Financial Statements

F-35

 

For the Years ended December 31, 2021 and 2020

 

Report of Independent Registered Public Accounting Firm

F-39

 

 

Balance Sheets as of December 31, 2021 and 2020 (Audited)

F-40

 

 

Statements of Operations for the years ended December 31, 2021 and 2020 (Audited)

F-41

 

 

Statements of Cash Flows for the years ended December 31, 2021 and 2020 (Audited)

F-42

 

 

Notes to Financial Statements

F-43


F-2



Online Publishing & Marketing, LLC:

 

For the Nine Months ended September 30, 2022 and 2021

 

Balance Sheets as of September 30, 2022 and December 31, 2021 (Audited)

F-47

 

 

Statements of Operations for the nine months ended September 30, 2022 and 2021 (Audited)

F-48

 

 

Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Audited)

F-49

 

 

Notes to Financial Statements

F-50

 

For the Years ended December 31, 2021 and 2020

 

Report of Independent Registered Public Accounting Firm

F-54

 

 

Balance Sheets as of December 31, 2021 and 2020 (Audited)

F-55

 

 

Statements of Operations for the years ended December 31, 2021 and 2020 (Audited)

F-56

 

 

Statements of Cash Flows for the years ended December 31, 2021 and 2020 (Audited)

F-57

 

 

Notes to Financial Statements

F-58


F-3



Pro Forma:

 

Combined Balance Sheet as of December 31, 2020

F-63

 

 

Combined Statements of Operations for the year ended December 31, 2020

F-64

 

 

Combined Balance Sheet as of December 31, 2021

F-65

 

 

Combined Statements of Operations for the year ended December 31, 2021

F-66

 

 

Combined Balance Sheet as of September 30, 2022

F-67

 

 

Combined Statements of Operations for the nine months ended September 30, 2022

F-68

 

 

Footnotes to Unaudited Pro Forma Condensed Combined Financial Statements

F-69


F-4



HEALTHY EXTRACTS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

SEPTEMBER 30,

 

DECEMBER 31,

 

 

 

 

 

 

 

2022

 

2021

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

  Cash

 

 

 

$73,884 

 

$222,098  

  Accounts receivable

 

 

 

100,755  

 

133,340  

  Inventory

 

 

 

1,866,442  

 

1,957,966  

 

Total current assets

 

 

 

2,041,081  

 

2,313,404  

 

 

 

 

 

 

 

 

 

 

  Fixed assets, net of accumulated depreciation of $49,547 and
$45,944, respectively

 

 

6,050  

 

1,035  

  Patents/Trademarks

 

 

 

521,881  

 

521,881  

  Deposit

 

 

 

16,890  

 

 

  Goodwill

 

 

 

193,260  

 

193,260  

 

Total other assets

 

 

 

738,080  

 

716,175  

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

$2,779,161  

 

$3,029,579  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

  Accounts payable

 

 

 

$114,066  

 

$37,267  

  Accrued liabilities

 

 

 

6,934  

 

59,264  

  Notes payable

 

 

 

93,174  

 

 

  Notes payable - related party

 

 

 

866  

 

170,866  

  Convertible debt, net of discount of $0.00 and $0.00, respectively

 

360,750  

 

171,750  

  Convertible debt - related party, net of discount of $0.00 and $0.00, respectively

 

 

 

 

 

  Accrued interest payable

 

 

 

29,671  

 

13,050  

  Accrued interest payable - related party

 

 

 

 

14,118  

  Derivative liabilities

 

 

 

338,787  

 

92,527  

 

Total current and total liabilities

 

 

944,248  

 

558,841  

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

  Preferred stock, $0.001 par value, 75,000,000 shares authorized, none and none shares issued and outstanding, respectively

 

 

 

 

  Common stock, $0.001 par value, 2,500,000,000 shares authorized, 345,172,442 and 338,384,171 shares issued and outstanding, respectively

 

 

345,172  

 

338,384  

  Additional paid-in capital

 

 

 

17,459,899  

 

17,075,974  

  Accumulated deficit

 

 

 

(15,970,158) 

 

(14,943,620) 

 

Total stockholders' equity (deficit)

 

 

1,834,913  

 

2,470,738  

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

$2,779,161  

 

$3,029,579  

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.


F-5



HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDING SEPTEMBER 30,

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR THE 3 MONTHS ENDING

 

FOR THE 9 MONTHS ENDING

 

 

 

 

 

SEPTEMBER 30,

 

SEPTEMBER 30,

 

 

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

   Gross revenue

 

 

 

$573,967  

 

$447,986  

 

$1,668,105  

 

$903,142  

   Less selling fees

 

 

 

(74,315) 

 

(68,111) 

 

(235,255) 

 

(108,949) 

 

Net revenue

 

 

 

499,653  

 

379,875  

 

1,432,850  

 

794,193  

 

 

 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

 

 

 

 

 

 

 

 

   Cost of goods sold

 

 

 

68,551  

 

72,250  

 

382,038  

 

147,456  

   Written off inventory

 

 

 

 

 

 

 

20,750  

 

 

 

Total cost of revenue

 

 

 

68,551  

 

72,250  

 

402,788  

 

147,456  

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

 

431,102  

 

307,625  

 

1,030,062  

 

646,737  

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

   General and administrative

 

 

 

485,568  

 

692,940  

 

1,744,326  

 

1,873,858  

 

Total operating expenses

 

 

 

485,568  

 

692,940  

 

1,744,326  

 

1,873,858  

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

   Interest expense, net of interest income

 

 

(11,336) 

 

(19,242) 

 

(68,657) 

 

(48,598) 

   Change in fair value on derivative

 

 

 

(104,421) 

 

(307,746) 

 

(246,260) 

 

(1,287,971) 

   Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

   SBA loan forgiveness

 

 

 

 

 

39,833  

 

 

 

39,833  

   Gain on sale of asset

 

 

 

 

 

 

 

2,643  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

(115,757) 

 

(287,155) 

 

(312,274) 

 

(1,296,736) 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain/(loss) before income tax provision

 

 

(170,223) 

 

(672,470) 

 

(1,026,538) 

 

(2,523,857) 

 

 

 

 

 

 

 

 

 

 

 

 

NET GAIN/(LOSS)

 

 

 

$(170,223) 

 

$(672,470) 

 

$(1,026,538) 

 

$(2,523,857) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

 

 

$(0.00) 

 

$(0.00) 

 

$(0.00) 

 

$(0.01) 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - basic and diluted

 

341,619,198  

 

316,650,804  

 

342,514,810  

 

317,363,964  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 


F-6



HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDING DECEMBER 31, 2022 AND 2021

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Paid-In

 

Accumulated

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

Balance - December 31, 2020

 

- 

 

$- 

 

308,887,410  

 

$308,887  

 

15,501,436  

 

$(12,956,498) 

 

$2,853,826  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

- 

 

- 

 

900,000  

 

900  

 

44,100  

 

 

 

45,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

- 

 

- 

 

300,000  

 

300  

 

14,700  

 

 

 

15,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

- 

 

- 

 

3,300,000  

 

3,300  

 

161,700  

 

 

 

165,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

- 

 

- 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for debt

 

- 

 

- 

 

1,200,000  

 

1,200  

 

85,200  

 

 

 

86,400  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

715,000  

 

715  

 

50,765  

 

 

 

51,480  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

2,000,000  

 

2,000  

 

142,000  

 

 

 

144,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

1,000,000  

 

1,000  

 

59,000  

 

 

 

60,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

1,177,778  

 

1,178  

 

90,778  

 

 

 

91,956  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for debt

 

- 

 

- 

 

1,200,000  

 

1,200  

 

58,800  

 

 

 

60,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

3,500,000  

 

3,500  

 

171,500  

 

 

 

175,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

- 

 

- 

 

2,000,000  

 

2,000  

 

98,000  

 

 

 

100,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for debt

 

- 

 

- 

 

12,203,983  

 

12,204  

 

597,995  

 

 

 

610,199  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) gain for the period

 

- 

 

- 

 

 

 

 

 

 

 

(1,987,122) 

 

(1,987,122) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2021

 

- 

 

$- 

 

338,384,171  

 

$338,384  

 

17,075,974  

 

$(14,943,620) 

 

$2,470,738  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelation of common stock for debt

 

- 

 

- 

 

(200,267) 

 

(200) 

 

(9,813) 

 

 

 

(10,013) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

- 

 

- 

 

507,917  

 

508  

 

24,888  

 

 

 

25,396  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelation of common stock for debt

 

- 

 

- 

 

(600,000) 

 

(600) 

 

(43,200) 

 

 

 

(43,800) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

1,000,000  

 

1,000  

 

63,000  

 

 

 

64,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

1,000,000  

 

1,000  

 

56,100  

 

 

 

57,100  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

4,400,000  

 

4,400  

 

259,600  

 

 

 

264,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock-Note Conversion

 

- 

 

- 

 

340,621  

 

341  

 

16,690  

 

 

 

17,031  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

- 

 

- 

 

340,000  

 

340  

 

16,660  

 

 

 

17,000  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) gain for the period

 

 

- 

 

- 

 

 

 

 

 

 

 

(1,026,538) 

 

(1,026,538) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - August 31, 2022

 

 

- 

 

$- 

 

345,172,442  

 

$345,173  

 

17,459,899  

 

$(15,970,158) 

 

$1,834,913  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these  financial statements.


F-7



HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

FOR THE 9 MONTHS

 

 

ENDING

 

 

SEPTEMBER 30,

 

2022

 

2021

Cash Flows from Operating Activities:

 

 

 

 

Net Gain/(Loss)

 

$(1,026,538) 

 

$(2,523,857) 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

329  

 

3,825  

Warrants issued for services

 

402,100  

 

434,836  

Non-cash compensation

 

 

 

 

Change in fair value on derivative liability

 

246,260  

 

1,287,971  

Loss on extinguishment of debt

 

 

 

 

Gain on sale of asset

 

2,643  

 

 

Impairment of goodwill

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

32,585  

 

(70,311) 

Inventory

 

91,523  

 

(115,487) 

Accrued interest receivable

 

 

 

 

Deposits

 

(16,890) 

 

 

Accounts payable

 

76,799  

 

(41,678) 

Accounts payable - related party

 

 

 

 

Accrued liabilities

 

(52,330) 

 

44,913  

Accrued interest payable

 

16,621  

 

27,450  

Accrued interest payable - related party

 

(14,118) 

 

10,162  

Net Cash used in Operating Activities

 

(241,015)