This Annual Report includes
forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements
are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking
statements include the information concerning possible or assumed future results of operations of the Company set forth under the
heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements
also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements
are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company’s future results
and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not
to put undue reliance on any forward-looking statements.
ITEM 1 – BUSINESS
Corporate History
We were incorporated on
December 19, 2014 in the State of Nevada. Historically, we provided cloud-based software to detect advertising fraud on the internet.
We abandoned this business in early 2018.
On October 17, 2017, we
acquired Eqova Life Sciences, a Nevada corporation (“Eqova”). Eqova was a wholly-owned subsidiary through which we
conduct our hemp oil product business. We closed this business in the second quarter of 2019.
In November 2017, we formed
Healthy Extracts, LLC, a wholly-owned subsidiary through which we conduct some of our CBD business.
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.
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.
On October 23, 2020, we changed our name from
Grey Cloak Tech Inc. to Healthy Extracts Inc. to more accurately reflect our business. We
are currently waiting for The Financial Industry Regulatory Authority (FINRA) to issue our Company a new ticker symbol before we
file our 8-K for this change.
Overview
Beginning with the acquisition
of Eqova in 2017, we began to transition away from our software services business and shifted our focus to new lines of business.
Eqova was focused on the production and sale of hemp oil products through the medical practitioner market. The addition of BergaMet,
an established company that was already generating revenues when we acquired it, added unique products that fit nicely with our
existing business. We plan on expanding our product line to other nutraceuticals.
BergaMet NA, LLC
On February 4, 2019, we
issued and exchanged shares of our common stock for all of the outstanding equity securities of BergaMet.
Through the exchange, we
were able to secure funds in BergaMet to pay off debt and provide capital for operations. We paid an aggregate of over $500,000
to retire convertible debt. Prior to the exchange, we also entered into agreements with other holders of convertible debt to convert
their notes for an aggregate of 806,015 shares of common stock. We also entered into conversion agreements with the holders of
our Series A Convertible Preferred Stock whereby all of the outstanding preferred stock was converted for an aggregate of 15,592,986
shares of common stock. The conversion and repayment of the preferred stock and convertible debt have greatly improved our capitalization
structure.
The acquisition of BergaMet
has been extremely beneficial to us. In addition to paying off our convertible debt, we are now able to better position ourselves
in the market. BergaMet is an established company that was already generating revenues when we acquired it. BergaMet also has unique
products that will fit nicely with our existing business. We now plan on expanding our product line to other nutraceuticals.
Ultimate Brain Nutrients, LLC
On April 3, 2020, we entered
into a Share Exchange Agreement with Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”), and
the members of UBN, whereby we issued and exchanged 90,000,960 shares of our common stock for all of the outstanding equity securities
of UBN. UBN is now our wholly-owned subsidiary. The shares of common stock issued in the Exchange were equal to approximately 42.5%
of our outstanding common stock immediately following the exchange.
UBN is a science-based
company that develops unique, plant-based superior health technology neuro-products that provide natural brain solutions. UBN has
numerous proprietary products, with four unique patent-pending formulations and one patent issued.
The Market
Bergamot
BergaMet, LLC holds the
rights to distribute BergaMet products in the United States and Mexico.
Bergamot,
or citrus bergamia, is a rare citrus fruit native to the Calabrian region of Southern Italy. Due to sensitivity to the weather
and soil conditions, this region accounts for 80 percent of the worldwide production of bergamot. This superfruit 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[1].
Citrus bergamot contains five unique antioxidant polyphenols in unusually concentrated amounts, which help protect your 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. 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.
BergaMet sells its
bergamot products in capsule form on its website and on distribution sites such as Amazon.
Bergamot Products
Our bergamot products are
sold in capsule form under the following product labels:
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BergaMet Cholesterol Command
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Ultimate Brain Nutrients
Our UBN subsidiary is a
science-based company that develops unique, plant-based superior health technology neuro-products that improve brain health, including
memory, cognition, focus and neuro-energy.
UBN’s KETONOMICS®
proprietary formulations – targeting brain activity, focus, headache and cognitive behavior — provide multiple intellectual
property license opportunities for monetizing the company’s portfolio. Sales and licensing opportunities include multiple
beverage formats, individual products, proprietary mixtures and other food platforms.
[1] These statements have not been evaluated by the Food and
Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease.
UBN has five unique formulation
patents – one issued and four pending – targeting brain activity, focus, headache and cognitive behavior.
UBN's (http://UBNutrients.com)
mission is to naturally ‘Create Better Lifestyles with Superior Health Technology through our science-based products.”
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 Products
Over 50 million Americans
consume unhealthy energy shots and drinks each day, while the neuro/energy market generates over $16 billion per year in revenue[2].
Within this growing market, UBN is advancing its position to meet rising consumer demand for healthy, science-based options with
clinical studies. The company’s KETONOMICS® proprietary formulations have been proven to naturally elevate brain energy
and function, including memory, cognition and focus.
UBN’s KETONOMICS®
supplementation has also been studied in sports physiology, with specific regard to its potential benefits for competitive performance
and endurance.
Patents and Intellectual Property Rights
Our subsidiary, UBN, has
four unique patent-pending formulations and two patents issued. We have not otherwise filed for any intellectual property protection.
However, we rely on intellectual property law that may include a combination of copyright, trade secret and confidentiality agreements
to protect our intellectual property. Our employees and independent contractors will be required to sign agreements acknowledging
that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our
property, and assigning to us any ownership that they may claim in those works. Despite our precautions, it may be possible for
third parties to obtain and use without consent intellectual property that we own. Unauthorized use of our intellectual property
by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.
Status
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Serial No.
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Date Filed
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Title
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Pending
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15/743,448
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January 10, 2018
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PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES
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Pending/In Appeal
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16/501,502
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April 22, 2019
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PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES
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Pending
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16/350,663
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December 19, 2018
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COMPOSITIONS OF MEDIUM CHAIN TRIGLYCERIDES AND PLANT-BASED NUTRIENTS FOR BRAIN HEALTH
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Issuing
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16/350,664
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December 19, 2018
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COMPOSITIONS WITH KETOGENIC AGENTS, CANNABINOIDS, PLANT-DERIVED SUBSTANCES AND MICRONUTRIENTS
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Issued
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16/501,249
(Patent No. 10,500,182)
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December 17, 2018
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COMPOSITIONS OF KETOGENIC SOURCES, MICRONUTRIENTS AND HYTOCHEMICALS FOR PROPHYLAXIS AND MITIGATION OF MIGRAINE HEADACHE
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Pending
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17/011,650
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September 3, 2020
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PROPHYLAXIS AND MIIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTERS, AND OTHER KETOGENIC SOURCES
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[1] https://financial-news-now.com/nootropic-beverages-set-to-take-over-the-16-billion-dollar-energy-drink-market/
From
time to time, we may encounter disputes over rights and obligations concerning intellectual property. While we believe that our
product and service offerings do not infringe the intellectual property rights of any third party, we cannot assure you that we
will prevail in any intellectual property dispute. If we do not prevail in such disputes, we may lose some or all of our intellectual
property protection, be enjoined from further sales of the applications determined to infringe the rights of others, and/or be
forced to pay substantial royalties to a third party.
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, 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.
Competition
Nutritional Supplements
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. These 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 consolidation in the recent past and we expect that trend may continue in the near term.
Employees
As of the date hereof,
we do not have any employees other than our officers and directors. BergaMet has 2 employees, and UBN does not have any employees
but uses outside contract help on an as-needed basis. Our officers and directors will continue to work for us for the foreseeable
future. We anticipate hiring appropriate personnel on an as-needed basis, and utilizing the services of independent contractors
as needed.
ITEM 1A. – RISK FACTORS.
As a smaller reporting
company, we are not required to provide a statement of risk factors. Nonetheless, we are voluntarily providing risk factors herein.
Any investment in our common
stock involves a high degree of risk. You should consider carefully the following information, together with the other information
contained in this Annual Report, before you decide to buy our common stock. If one or more of the following events 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, if any, of our common stock could decline, and you could lose all or part of your investment in our common
stock.
We are providing services
to an industry that is heavily regulated and, in some respects, illegal under federal law and the laws of most states. We face
risks in developing our product candidates and services and eventually bringing them to market. We also face risks that our business
model may become obsolete. The following risks are material risks that we face. If any of these risks occur, our business, our
ability to achieve revenues, our operating results and our financial condition could be seriously harmed.
Risk Factors Related to the Business of the
Company
Our
operations rely on professionals all over the United States, which is impacted by the global pandemic, causing our resources to
be affected. Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease
COVID-19.
An
outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and has been expanding
globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.
Restrictive
measures have been imposed in major cities in the USA, including Los Angeles, New York, and Las Vegas, and throughout the world
in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and
evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of
the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse
public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets
and our business.
Throughout
2020, the COVID-19 outbreak has 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 will be effectively contained, nor can we predict the severity and duration of
its impact. If the outbreak of COVID-19 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.
The outbreak of the coronavirus (“COVID-19”)
has negatively impacted and could continue to negatively impact the global economy. In addition, the COVID-19 pandemic could disrupt
or otherwise negatively impact global credit markets, our operations and our efforts to identify, review and explore alternatives
for the Company, including a merger, acquisition, or a business combination.
The significant outbreak
of COVID-19 has resulted in a widespread health crisis, which has negatively impacted and could continue to negatively impact the
global economy. In addition, the global and regional impact of the outbreak, including official or unofficial quarantines and governmental
restrictions on activities taken in response to such event, could have a negative impact on our operations and our ability to identify,
review and explore alternatives for the Company. More broadly, the outbreak could potentially lead to an economic downturn that
could limit the potential opportunities available to us via merger, acquisition or business combination.
The COVID-19 outbreak could
disrupt or otherwise negatively impact credit and equity markets, which could adversely affect the availability and cost of capital.
Such impacts could limit our ability to obtain additional funding through various financing transactions or arrangements, including
joint venturing of projects, equity or debt financing or other means.
A pandemic typically results
in social distancing, travel bans and quarantines, and this may limit access to our management, support staff, professional advisors
and our independent auditors. These factors, in turn, may not only impact our operations, financial condition and our overall ability
to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with
the Securities and Exchange Commission.
The
extent and potential short- and long-term impact of the COVID-19 outbreak on our business will depend on future developments, including
the duration, severity and spread of the virus, actions that may be taken by governmental authorities and the impact on the financial
markets, all of which are highly uncertain and cannot be predicted. These and other potential impacts of an epidemic, pandemic
or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and
results of operations.
We have a limited operating history,
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 and we have not fully developed our proposed business operations and have not yet experienced significant revenue.
We have a limited operating history upon which an evaluation of our future success or failure can be made, and we recently shifted
focus to a new line of business with the acquisition of BergaMet and UBN. Our ability to continue as a going concern is dependent
upon our ability to obtain adequate financing and 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, 2020, was ($12,956,498). Based on our cash position of $59,201 as of December 31, 2020, 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 maintain
profitability and positive cash flow is dependent upon our ability to attract new customers who will buy our 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.
Our competitors may develop 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
products that are less expensive, safer or otherwise more appealing than our potential products, or that reach the market before
our 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:
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·
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develop and market products that are less expensive, safer, or otherwise more appealing than our
products;
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·
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commercialize competing products before we or our partners can launch our products; and
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initiate or withstand substantial price competition more successfully than we can.
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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
the Company.
Our officers and directors
own stock representing less than 4% of shareholder votes; however, if you add in our controlling shareholder, Jay Decker, they
hold approximately 58% of shareholder votes. As a result they will 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.
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. 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 incurred costs in completing
the transactions with BergaMet and UBN, and failure to successfully integrate those businesses into each other and with our own
will have an adverse impact on our financial position and prevent us from obtaining the benefits that the transaction would have
given us.
We have recently completed
our acquisitions of BergaMet and UBN. Our executives have spent considerable time and incurred legal and accounting costs in the
acquisitions. If we are unable to fully integrate those businesses into our business or maintain their existing customer base,
we will not be able to acquire the technologies, partnerships and potential customers that the transaction was intended given us.
The increase in acquisition and integration costs without the corresponding benefit will have an adverse impact on our financial
statements and foreclose potential revenue-producing opportunities in the near future.
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.
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, William Bossung. 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.
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.
Risks Related To Our Common Stock
The market price of our common stock
may be volatile and may be affected by market conditions beyond our control.
The market price of our
common stock is subject to significant fluctuations in response to, among other factors:
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variations in our operating results and market conditions specific to technology companies;
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changes in financial estimates or recommendations by securities analysts;
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announcements of innovations or new products or services by us or our competitors;
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the emergence of new competitors;
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operating and market price performance of other companies that investors deem comparable;
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changes in our board or management;
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sales or purchases of our common stock by insiders;
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commencement of, or involvement in, litigation;
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changes in governmental regulations; and
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general economic conditions and slow or negative growth of related markets.
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In addition, if the market
for stocks in our industry or the stock market in general, experiences a loss of investor confidence, the market price of our common
stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing
occurs, it could cause the price of our common stock to fall and may expose us to lawsuits that, even if unsuccessful, could be
costly to defend and a distraction to the board of directors and management.
If we are unable to pay the costs associated
with being a public, reporting company, we may be forced to discontinue operations.
Our common stock is quoted
on the OTC Pink tier of the marketplace maintained by OTC Markets Group, Inc. We expect to have significant costs associated with
being a public, reporting company, which may raise substantial doubt about our ability to sell our equity securities and/or continue
as a going concern. Our ability to continue as a going concern will depend on positive cash flow, if any, from future operations
and on our ability to raise additional funds through equity or debt financing. If we are unable to achieve the necessary product
sales or raise or obtain needed funding to cover the costs of operating as a public, reporting company, we may be forced to discontinue
operations.
Our common stock is listed for quotation
on the OTCQB tier of the marketplace maintained by OTC Markets Group, Inc., which may make it more difficult for investors to resell
their shares due to suitability requirements.
Our common stock is currently
quoted on the OTCQB tier of the marketplace maintained by OTC Markets Group, Inc. Broker-dealers often decline to trade in over-the-counter
stocks given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater.
These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make
it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This
could cause our stock price to decline.
Our principal stockholders have the ability
to exert significant control in matters requiring stockholder approval and could delay, deter, or prevent a change in control of
our company.
Jay Decker has beneficial
ownership of our common stock with over 56% of the shareholder votes. As a result, he has the ability to influence matters affecting
our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance
of our shares. Because he controls such shares, investors may find it difficult to replace our management if they disagree with
the way our business is being operated. Because the influence by these shareholders could result in management making decisions
that are in the best interest of those shareholders and not in the best interest of the investors, you may lose some or all of
the value of your investment in our common stock. Investors who purchase our common stock should be willing to entrust all aspects
of operational control to our current management team.
We do not intend to pay dividends in
the foreseeable future.
We do not intend to pay
any dividends in the foreseeable future. We do not plan on making any cash distributions in the manner of a dividend or otherwise.
Our Board presently intends to follow a policy of retaining earnings, if any.
Future sales and issuances of our capital
stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and
could cause our stock price to decline.
Future sales and issuances
of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders.
We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner
as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted.
New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common
stock.
In addition, changing laws,
regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies,
increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards
are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in
practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend
to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general
and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory
or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings
against us and our business may be adversely affected.
We also expect that being
a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors
could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve
on our audit committee and compensation committee, and qualified executive officers.
As a result of disclosure
of information in this Annual Report and in filings required of a public company, our business and financial condition will become
more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties.
If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not
result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert
the resources of our management and adversely affect our business and results of operations.
The market for penny stocks has suffered in recent years from
patterns of fraud and abuse
Stockholders should be
aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include:
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control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
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manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
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boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons;
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excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and,
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the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with consequential investor losses.
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Our management is aware of the abuses that
have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of
the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
Due to the lack of a developed trading
market for our securities, you may have difficulty selling your shares.
Our stock currently trades
on the OTCQB tier maintained by OTC Markets Group, Inc. There currently is a very limited public trading market for our common
stock. The lack of a developed public trading market for our shares may have a negative effect on your ability to sell your shares
in the future and it also may have a negative effect on the price, if any, for which you may be able to sell your shares. As a
result an investment in the shares may be illiquid in nature and investors could lose some or all of their investment.
Our status as an “emerging growth
company” under the JOBS Act OF 2012 may make it more difficult to raise capital when we need to do it.
Because of the exemptions
from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended
transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and
it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business
with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in
our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations
may be materially and adversely affected.
Our internal controls may be inadequate,
which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f),
internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal
financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements. Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable
and lead to misinformation being disseminated to the public.
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 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.
The forward looking statements contained
in this Annual Report report may prove incorrect.
This Annual Report contains
certain forward-looking statements, including among others: (i) anticipated trends in our financial condition and results of operations;
(ii) our business strategy for expanding distribution; and (iii) our ability to distinguish ourselves from our current and future
competitors. These forward-looking statements are based largely on our current expectations and are subject to a number of risks
and uncertainties. Actual results could differ materially from these forward-looking statements. In addition to the other risks
described elsewhere in this “Risk Factors” discussion, important factors to consider in evaluating such forward-looking
statements include: (i) changes to external competitive market factors or in our internal budgeting process which might impact
trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business
strategy or an inability to execute our strategy due to unanticipated changes in the biotechnology industry; and (iv) various competitive
factors that may prevent us from competing successfully in the marketplace. In light of these risks and uncertainties, many of
which are described in greater detail elsewhere in this “Risk Factors” discussion, there can be no assurance that the
events predicted in forward-looking statements contained in this Annual Report will, in fact, transpire.
General Risk Factors
We will incur ongoing costs and expenses
for SEC reporting and compliance, without increased revenue we may not be able to remain in compliance, making it difficult for
investors to sell their shares, if at all.
Going forward, we will
have ongoing SEC compliance and reporting obligations. Such ongoing obligations will require us to expend additional amounts on
compliance, legal and auditing costs. In order for us to remain in compliance, we will require increased revenues to cover the
cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate
sufficient revenues to remain in compliance, it may be difficult for you to resell any shares you may purchase, if at all.
We have the right to issue additional
common stock without consent of stockholders. This would have the effect of diluting investors’ ownership and could decrease
the value of their investment.
We are authorized to issue
2,500,000,000 shares of common stock. Of these authorized shares, 308,887,410 shares are issued and outstanding as of February
16, 2021. Therefore, we are authorized to issue up to an additional 2,191,112,590 unissued shares of our common stock that may
be issued by us for any purpose without the further consent or vote of our stockholders that would dilute stockholders’ percentage
ownership of our company.
Our officers and directors can sell some
of their stock, which may have a negative effect on our stock price and ability to raise additional capital, and may make it difficult
for investors to sell their stock at any price.
Our officers and directors,
as a group, are the beneficial owners of 11,370,139 shares of our common stock, representing less than 4% of our total issued
shares; however, with the addition of our largest shareholder, they own a combined 201,547,112 shares. Each individual officer,
director, and control party may be able to sell up to 1% of our outstanding stock (currently approximately 3,000,000 shares) every
90 days in the open market pursuant to Rule 144, which may have a negative effect on our stock price and may prevent us from obtaining
additional capital. In addition, if our officers and directors are selling their stock into the open market, it may make it difficult
or impossible for investors to sell their stock at any price.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking
statements in this Annual Report, 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 Annual Report.
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.