As filed with the Securities and Exchange Commission on November 7, 2019

 

Registration No. 333-_______

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

New You, Inc.

(Exact name of registrant as specified in its charter)

  

Nevada

(State or other jurisdiction incorporation or organization)

 

5960

(Primary Standard Industrial Classification Code Number)

 

26-3062661
(I.R.S. Employer Identification Number)

 

3246 Grey Hawk Court

Carlsbad, California 92010

(866) 611-4694 

(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)

  

VCorp Services, LLC

702 S. Carson St., Ste. 200

Carson City, NV 89701

(888) 528-2677

 

(Name including zip code and telephone number, including area code, of agent for service)

With copies to:  
 
 
Joe Laxague.  
Laxague Law,  Inc.  
1 East Liberty, Suite 600  
Reno, Nevada 89501  
(206) 522-2256  

 

 

Approximate date of proposed sale to the public: From time to time after the effective date of this registration statement.

 

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. ☒

 

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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer   Accelerated filer
  Non-accelerated filer   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. [  ]


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CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of Securities to be Registered Number of shares  to be Registered Proposed Offering Price
Per Share(1)
Proposed Maximum Aggregate Offering Price Amount of Registration Fee
Common stock, $0.00001 par value per share 5,823,576 (2) $1.23 $7,162,998.48 $929.76 (3)

 

(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the “Securities Act”), based on the average of the bid and asked price as of a specified date within 5 business days prior to the date of the filing of this Registration Statement.

 

(2)  Represents shares of common stock held by certain selling stockholders and issued by the registrant in private placements and otherwise as described herein.

 

(3)  Computed in accordance with Section 6(b) of the Securities Act as in effect on December 22, 2014. Pursuant to Rule 457(a), a registration fee of $929.76 will be paid by the Company.

 

In accordance with Rule 416(a) under the Securities Act, the registrant is also registering hereunder an indeterminate number of shares that may be issued and resold resulting from stock splits, stock dividends or similar transactions.

 

 

WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE 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, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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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 SEC is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED November 7, 2019 PROSPECTUS

5,823,576 Shares of Common Stock

 

New You, Inc.

 

This prospectus relates to the resale, from time to time, by the selling stockholders identified in this prospectus under the caption “Selling Stockholders,” of up to 5,823,576 shares of the common stock of New You, Inc., a Nevada corporation. The prices at which the selling stockholders may sell such shares will be determined by prevailing market prices or at prices that may be obtained in negotiated transactions.

 

This prospectus covers any additional shares of common stock that may become issuable by reason of stock splits, stock dividends, and other events described therein.

 

Unless otherwise noted, the terms “the Company,” “our Company,” “we,” “us” and “our” refer to New You, Inc. and its subsidiary.

 

We are not selling any shares under this prospectus and will not receive any proceeds from any sale or disposition by the selling stockholders of the shares covered by this prospectus. In addition, we will pay all fees and expenses incident to the registration of the resale of shares under this prospectus. The selling stockholders may offer their shares from time to time directly or through one or more underwriters, broker-dealers or agents, in the over-the-counter market at market prices prevailing at the time of sale, or in one or more privately negotiated transactions at prices acceptable to the selling stockholders. Our common stock is presently quoted on the “Pink – Current Information” tier of the over-the-counter market operated by OTC Markets Group, Inc. under the symbol “NWYU”. On November 7, 2019, the last reported sale price for our common stock on the OTC Markets was $1.23 per share.

  

Investing in our Common Stock involves a high degree of risk. See “Risk Factors” beginning on page 6 of this Prospectus.

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this Prospectus is November 7, 2019.

 

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TABLE OF CONTENTS

 
  Page

PART I - INFORMATION REQUIRED IN PROSPECTUS

Prospectus Summary 5
Summary Financial Data 5
Risk Factors 6
Risks Related to Our Business and Industry 6
Risks Related to An Investment in Our Securities 10
Selling Stockholders 12
Use of Proceeds 14
Market for Common Equity and Related Stockholder Matters 14
Quantitative and Qualitative Disclosures About Market Risk 15
Cautionary Note Regarding Forward-Looking Statements 15
Description of Business 15
Description of Properties 16
Legal Proceedings 17
Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Directors and Executive Officers 20
Executive Compensation 22
Security Ownership Of Certain Beneficial Owners And Management 22
Certain Relationships And Related Party Transactions And Director Independence 23
Description of Securities to be Registered 23
Plan of Distribution 24
Shares Eligible for Future Sale 25
Legal Matters 25
Experts 25
Disclosure Of Commission Position Of Indemnification For Securities Act Liabilities 26
Where You Can Find More Information 26
Financial Statements 27

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS 

Other Expenses of Issuance and Distribution II-1
Indemnification of Directors and Officers II-1
Recent Sales of Unregistered Securities II-1
Exhibit Index II-2
Undertakings II-2
Signatures II-3
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You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with information that is different from that contained in this Prospectus. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. The information in this Prospectus is complete and accurate only as of the date on the front cover regardless of the time of delivery of this Prospectus or of any sale of our securities.

  

PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this Prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire Prospectus, including our financial statements and the documents to which we refer you. The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Registration Statement of which this Prospectus is a part.

 

Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” or the “Registrant” refer to New You, Inc., a Nevada corporation. , and its wholly-owned subsidiary, New You, LLC, see merger information below.

 

Business Overview

  

New You, Inc.’s principal business is the development and marketing of unique and proprietary cannabidiol (“CBD”) products. New You, Inc. through its wholly owned subsidiary, New You LLC, markets and sells its products through a multi-level marketing and direct sales opportunity afforded to independent business owners called “Brand Partners”. Commissions are earned on product sales to Brand Partners and their customers at a rate of 10% for every transaction, plus a specified spread on recurring sales. Brand Partners earn a 5% commission on sales by other team members at lower levels up to nine level below the Brand Partner. Brand Partners can earn an additional bonus for customer sales and team sales. The team bonus is $400 for each and every time the team bonus volume reaches a certain amount in a 30 day period. Brand Partners can also earn an initial bonus of 20% of the transaction value for qualifying Brand Partners in the Brand Partner’s first 30 days. The business opportunity we provide allows customers and Brand Partners to make a difference in both the world and their personal lives. We conduct our principal operations through one operating subsidiary, New You LLC, a Wyoming limited liability company.

 

Change In Control and Transition to the New You LLC Business

 

We were originally incorporated as Nova Mining Corporation in Nevada December 29, 2005 and after a change in control the Company changed its name to “The Radiant Creations Group, Inc.” Prior to our transition to the New You LLC business, we were focused on developing and marketing a skin crème and other cosmetic and over-the-counter personal enhancement products and devices.

 

On July 11, 2018, we closed our Subscription and Securities Purchase Agreement (the “SPA”) with three investors, Carlsbad Naturals, LLC, Ray Grimm, and Nish Mehta. Under the SPA, the investors were issued a (collectively) controlling interest in the Company consisting of a total of 9,695,328 shares of common stock. These shares were issued in exchange for a total Purchase Price of $95,000. The Purchase Price was used to settle and retire our notes payable, for certain compliance costs, and for general working capital. In conjunction with the SPA, our formerly controlling shareholder, Biodynamic Molecular Technologies, LLC, exchanged its preferred stock for a total of 269,315 shares of common stock. Upon issue, these shares were transferred to principal of Biodynamic Molecular Technologies, LLC, Michael Alexander. This common stock position, which represented 2.5% of our post-closing common stock, was formerly non-dilutable for a period of one (1) year.

 

On January 9, 2019, The Radiant Creations Group, Inc. completed a reverse recapitalization (“Recapitalization”) with New You LLC, a privately held Wyoming limited liability company in accordance with the terms of a share exchange agreement (“Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, The Radiant Creations Group, Inc. issued 15,974,558 common shares in exchange for one hundred percent (100%) of the outstanding units of New You LLC (11,450 units), with New You LLC becoming a wholly-owned operating subsidiary of the consolidated company. The transaction was accounted for as a reverse recapitalization because The Radiant Creations Group, Inc. was a shell company prior to the transaction. For accounting purposes, New You LLC is considered to have obtained the net monetary assets of The Radiant Creations Group, Inc. in exchange for equity. Upon the consummation of the Recapitalization, the historical financial statements of New You LLC became the consolidated company’s historical financial statements. Accordingly, we have included in this filing (1) the financial statements of The Radiant Creations Group, Inc. as of and for the six months ended June 30, 2019 and 2018, which include the historical balances and operating results of New You LLC, except that the capital structure of New You LLC has been adjusted based on the ratio of common shares issued and units transferred in accordance with the Share Exchange Agreement, (approximately 1,395 shares per member unit), (2) the financial statements of New You LLC as of and for the years ended December 31, 2018 and 2017, which include the historical balances and operating results of New You LLC, except that the capital structure of New You LLC has been adjusted based on the ratio of common shares issued and units transferred in accordance with the Share Exchange Agreement, and (3) the standalone financial statements of The Radiant Creations Group, Inc. as of and for the years ended December 31, 2018 and 2017, which include the historical balances and operating results of The Radiant Creations Group, Inc. Following the New You LLC acquisition, the Company has focused exclusively on developing and expanding New You LLC’s multi-level marketing and direct sales operation for CBD products.

 

On March 8, 2019, pursuant to stockholder consent, we changed our name to New You, Inc. and approved a reverse split of our common stock on a 1 for 50 basis. Except where otherwise indicated, all share and per share amounts in this filing have been retrospectively adjusted to reflect this reverse split..

 

Corporate Information

 

Our principal executive offices are located at 3246 Grey Hawk Court, Carlsbad, California 92010. Our telephone number is (866) 611-4694. We maintain a corporate website at www.newyounow.com.

 

Transfer Agent

 

The transfer agent for our Common Stock is Action Stock Transfer at 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, Utah 84121. The transfer agent’s telephone number is (801) 274-1088.

 

  

 

 

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Summary of the Offering

 

Securities offered by the Selling Stockholders

Up to 5,823,576 shares of common stock previously issued in exempt private offerings

 

Use of Proceeds

All proceeds from the sale of the shares of common stock under this prospectus will be for the account of the selling stockholders. We will not receive any proceeds from the sale of our shares of common stock offered pursuant to this prospectus.

 

Common Stock Outstanding

32,985,200 shares of common stock are currently issued and outstanding. No new shares of common stock are being offering under this prospectus.

 

Risk Factors

An investment in our common stock involves a high degree of risk and could result in a loss of your entire investment. Prior to making an investment decision, you should carefully consider all of the information in this Prospectus and, in particular, you should evaluate the risk factors set forth under the caption “Risk Factors” beginning on page 6.

 

OTC Markets Trading Symbol NWYU

 

Summary Financial Data

 

The following tables summarize our financial data for the periods indicated. We derived our summary statements of operations data for the year ended December 31, 2018 and our balance sheet data as of December 31, 2018 from our audited financial statements included elsewhere in this prospectus. The statement of operations data for the six months ended June 30, 2019 and the balance sheet data as of June 30, 2019 are derived from our unaudited financial statements that are included elsewhere in this prospectus. In the opinion of management, the unaudited financial statements have been prepared on the same basis as our audited financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the information set forth therein. The results for any interim period are not necessarily indicative of the results that may be expected for a full year. Our historical results are not necessarily indicative of the results that may be expected in any future period.

 

The summary financial data below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

    Consolidated        
    Six Months Ended   Year Ended   Year Ended
    June 30,   December 31,   December 31,
Statements of Operations Data:   2019   2018   2017
      (Unaudited)                  
Total revenues   $ 1,458,901     $ 898,153     $ —    
Cost of goods sold   $ 300,864     $ 197,415     $ —    
Net gain (loss)   $ (190,805 )   $ (428,006 )   $ —    
Net loss per share attributable to common stockholders, basic and diluted   $ (0.01 )   $ (0.05 )   $ —    
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted     25,087,820       8,218,053          
                         
      Consolidated                  
      Six Months Ended                  
      June 30,       December 31,       December 31,  
Balance Sheet Data:     2019       2018       2017  
      (unaudited)                  
Cash   $ 13,079     $ 27,310     $ —    
Current assets   $ 194,892     $ 141,672     $ —    
Long-Term Assets   $ 163,488     $ 31,587          
Total assets   $ 358,380     $ 173,259     $ —    
Current liabilities   $ 716,983     $ 474,265     $ —    
Long-Term Liabilities   $ 69,777       —            
Stockholders’ equity (deficit)   $ (428,361 )   $ (301,006 )   $ —    
Total liabilities and stockholders’ deficit   $ 358,380     $ 173,259     $ —    

 

RISK FACTORS

 

An investment in our securities is subject to numerous risks, including the risk factors described below. You should carefully consider the risks, uncertainties, and other factors described below, in addition to the other information set forth in this Prospectus, before making an investment decision with regard to our securities. Any of these risks, uncertainties, and other factors could materially and adversely affect our business, financial condition, results of operations, cash flows, or prospects. In that case, the trading price of our Common Stock could decline, and you may lose all or part of your investment. See also “Cautionary Note Regarding Forward-Looking Statements.”

 

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

 

We have a limited operating history, which may make it difficult for investors to predict future performance based on current operations.

 

We have a limited operating history upon which investors may base an evaluation of our potential future performance. In particular, we have not proven that the Company’s multi-level marketing business model will work. As a result, there can be no assurance that we will be able to develop or maintain consistent revenue sources, or that our operations will be profitable and/or generate positive cash flows.

 

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Any forecasts we make about our operations may prove to be inaccurate. We must, among other things, determine appropriate risks, rewards, and level of investment in our product lines, respond to economic and market variables outside of our control, respond to competitive developments and continue to attract, retain, and motivate qualified employees. There can be no assurance that we will be successful in meeting these challenges and addressing such risks and the failure to do so could have a materially adverse effect on our business, results of operations, and financial condition. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in the early stage of development. As a result of these risks, challenges, and uncertainties, the value of your investment could be significantly reduced or completely lost.

 

We have incurred significant losses in prior periods, and losses in the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flows.

 

We have incurred significant losses in prior periods. For the six months ended June 30, 2019, we incurred a net loss of $190,805 and, as of that date, we had an accumulated deficit of $618,811. For the year ended December 31, 2018, we incurred a net loss of $428,006 and, as of that date, we had an accumulated deficit of $428,006. Any losses in the future could cause the quoted price of our Common Stock to decline or have a material adverse effect on our financial condition, our ability to pay our debts as they become due, and on our cash flows.

 

We will likely need additional capital to sustain our operations and will likely need to seek further financing, which we may not be able to obtain on acceptable terms or at all. If we fail to raise additional capital as needed, our ability to implement our business model and strategy could be compromised.

 

We have limited capital resources and operations. To date, our operations have been funded entirely from the proceeds of debt and equity financings. We expect to require substantial additional capital in the near future to expand our product lines, develop our intellectual property base, and establish our targeted levels of commercial production. We may not be able to obtain additional financing on terms acceptable to us, or at all.

 

Even if we obtain financing for our near-term operations, we expect that we will require additional capital thereafter. Our capital needs will depend on numerous factors including: (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

 

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership held by our existing stockholders will be reduced and our stockholders may experience significant dilution. In addition, new securities may contain rights, preferences or privileges that are senior to those of our Common Stock. If we raise additional capital by incurring debt, this will result in increased interest expense. If we raise additional funds through the issuance of securities, market fluctuations in the price of our shares of Common Stock could limit our ability to obtain equity financing.

 

We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us. If we are unable to raise capital when needed, our business, financial condition, and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.

 

We face intense competition and many of our competitors have greater resources that may enable them to compete more effectively.

 

The industries in which we operate in general are subject to intense and increasing competition. Some of our competitors may have greater capital resources, facilities, and diversity of product lines, which may enable them to compete more effectively in this market. Our competitors may devote their resources to developing and marketing products that will directly compete with our product lines. Due to this competition, there is no assurance that we will not encounter difficulties in obtaining revenues and market share or in the positioning of our products. There are no assurances that competition in our respective industries will not lead to reduced prices for our products. If we are unable to successfully compete with existing companies and new entrants to the market this will have a negative impact on our business and financial condition.

 

If we fail to protect our intellectual property, our business could be adversely affected.

 

Our viability will depend, in part, on our ability to develop and maintain the proprietary aspects of our technology to distinguish our products from our competitors’ products. We rely on, trade secrets and confidentiality provisions to establish and protect our intellectual property.

 

Any infringement or misappropriation of our intellectual property could damage its value and limit our ability to compete. We may have to engage in litigation to protect the rights to our intellectual property, which could result in significant litigation costs and require a significant amount of our time. In addition, our ability to enforce and protect our intellectual property rights may be limited in certain countries outside the United States, which could make it easier for competitors to capture market position in such countries by utilizing technologies that are similar to those developed or licensed by us.

 

Competitors may also harm our sales by designing products that mirror the capabilities of our products or technology without infringing on our intellectual property rights. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively enforce our intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue.

 

We may also find it necessary to bring infringement or other actions against third parties to seek to protect our intellectual property rights. Litigation of this nature, even if successful, is often expensive and time-consuming to prosecute and there can be no assurance that we will have the financial or other resources to enforce our rights or be able to enforce our rights or prevent other parties from developing similar technology or designing around our intellectual property.

 

Although we believe that our technology does not and will not infringe upon the patents or violate the proprietary rights of others, it is possible such infringement or violation has occurred or may occur, which could have a material adverse effect on our business.

 

We are not aware of any infringement by us of any person’s or entity’s intellectual property rights. In the event that products we sell are deemed to infringe upon the patents or proprietary rights of others, we could be required to modify our products, or obtain a license for the manufacture and/or sale of such products, or cease selling such products. In such event, there can be no assurance that we would be able to do so in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon our business.

 

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There can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. If our products or proposed products are deemed to infringe or likely to infringe upon the patents or proprietary rights of others, we could be subject to injunctive relief and, under certain circumstances, become liable for damages, which could also have a material adverse effect on our business and our financial condition.

 

Our trade secrets may be difficult to protect.

 

Our success depends upon the skills, knowledge, and experience of our scientific and technical personnel, our consultants and advisors, as well as our licensors and contractors. Because we operate in several highly competitive industries, we rely in part on trade secrets to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We enter into confidentiality or non-disclosure agreements with our corporate partners, employees, consultants, outside scientific collaborators, developers, and other advisors. These agreements generally require that the receiving party keep confidential and not disclose to third parties confidential information developed by the receiving party or made known to the receiving party by us during the course of the receiving party’s relationship with us. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to us will be our exclusive property, and we enter into assignment agreements to perfect our rights.

 

These confidentiality, inventions, and assignment agreements may be breached and may not effectively assign intellectual property rights to us. Our trade secrets also could be independently discovered by competitors, in which case we would not be able to prevent the use of such trade secrets by our competitors. The enforcement of a claim alleging that a party illegally obtained and was using our trade secrets could be difficult, expensive, and time consuming and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. The failure to obtain or maintain meaningful trade secret protection could adversely affect our competitive position.

 

Our business, financial condition, results of operations, and cash flows have been, and may in the future be, negatively impacted by challenging global economic conditions.

 

The recent global economic slowdown has caused disruptions and extreme volatility in global financial markets, increased rates of default and bankruptcy, and declining consumer and business confidence, which has led to decreased levels of consumer spending. These macroeconomic developments have and could continue to negatively impact our business, which depends on the general economic environment and levels of consumer spending. As a result, we may not be able to maintain our existing customers or attract new customers, or we may be forced to reduce the price of our products. We are unable to predict the likelihood of the occurrence, duration or severity of such disruptions in the credit and financial markets and adverse global economic conditions. Any general or market-specific economic downturn could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

 

Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.

 

Our future success largely depends upon the continued services of our executive officers and management team, especially our President and Chief Executive Officer, Mr. Ray Grimm Jr. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new executive officers. If any of our executive officers joins a competitor or forms a competing company, we may lose some or all of our customers. Finally, we do not maintain “key person” life insurance on any of our executive officers. Because of these factors, the loss of the Services of any of these key persons could adversely affect our business, financial condition, and results of operations, and thereby an investment in our Common Stock.

 

Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel as our business grows. There can be no assurance that we will be able to attract or retain highly qualified personnel. We face significant competition for skilled personnel in our industry. This competition may make it more difficult and expensive to attract, hire, and retain qualified managers and employees. Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. As a result, the value of your investment could be significantly reduced or completely lost.

 

Government regulations may change how we do business

 

The effect of existing or probable government regulations on our business is not known at this time. Due to the nature of our business, it is anticipated that there may be increasing government regulation that may cause us to have to take serious corrective actions or make changes to the business plan.

 

 

We may not be able to effectively manage our growth or improve our operational, financial, and management information systems, which would impair our results of operations.

 

In the near term, we intend to expand the scope of our operations activities significantly. If we are successful in executing our business plan, we will experience growth in our business that could place a significant strain on our business operations, finances, management and other resources. The factors that may place strain on our resources include, but are not limited to, the following:

 

· The need for continued development of our financial and information management systems;

 

· The need to manage strategic relationships and agreements with manufacturers, customers and partners; and

 

·                    Difficulties in hiring and retaining skilled management, technical, and other personnel necessary to support and manage our business.

 

Additionally, our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources. Our ability to effectively manage growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage, and retain qualified management and other personnel. There can be no assurance that we will be successful in recruiting and retaining new employees or retaining existing employees.

 

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We cannot provide assurances that our management will be able to manage this growth effectively. Our failure to successfully manage growth could result in our sales not increasing commensurately with capital investments or otherwise materially adversely affecting our business, financial condition, or results of operations.

 

If we are unable to continually innovate and increase efficiencies, our ability to attract new customers may be adversely affected.

 

In the area of innovation, we must be able to develop new technologies and products that appeal to our customers. This depends, in part, on the technological and creative skills of our personnel and on our ability to protect our intellectual property rights. We may not be successful in the development, introduction, marketing, and sourcing of new technologies or innovations, that satisfy customer needs, achieve market acceptance, or generate satisfactory financial returns.

 

Litigation may adversely affect our business, financial condition, and results of operations.

 

From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the results of our operations.

 

Our officers and directors have significant control over stockholder matters and the minority stockholders will have little or no control over our affairs.

 

Our officers and directors currently own approximately 90.13% of our outstanding Common Stock, and thus significant control over stockholder matters, such as election of directors, amendments to the Articles of Incorporation, and approval of significant corporate transactions. As a result, our minority stockholders will have little or no control over its affairs.

 

Our internal controls and accounting methods may require modification.

 

We continue to review and develop controls and procedures sufficient to accurately report our financial performance on a timely basis.  If we do not develop and implement effective controls and procedures, we may not be able to report our financial performance on a timely basis and our business and stock price would be adversely affected.

 

 

If we fail to implement and maintain proper and effective internal controls and disclosure controls and procedures pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our ability to produce accurate and timely financial statements and public reports could be impaired, which could adversely affect our operating results, our ability to operate our business, and investors’ views of us.

 

The Sarbanes-Oxley Act of 2002 requires that we report annually on the effectiveness of our internal control over financial reporting. Among other things, we must perform systems and processes evaluation and testing. We must also conduct an assessment of our internal controls to allow management to report on our assessment of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. We are required to provide management’s assessment of internal controls in conjunction with the filing our Annual Report on Form 10-k. The failure to implement and maintain proper and effective internal controls and disclosure controls could result in material weaknesses in our financial reporting such as errors in our financial statements and in the accompanying footnote disclosures that could require restatements. Investors may lose confidence in our reported financial information and disclosure, which could negatively impact our stock price.

 

We do not expect that our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Due to limited accounting department resources, the Company's processes lack segregation of duties, monitoring controls, and consistent, effective review controls over the company's financial statements and accounting records. These deficiencies are considered material weakness in the Company’s financial reporting process.

 

Our insurance coverage may be inadequate to cover all significant risk exposures.

 

We will be exposed to liabilities that are unique to the products we provide. While we intend to maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from risks and uncertainties of our business. It is also not possible to obtain insurance to protect against all operational risks and liabilities. The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition, and results of operations. We do not have any business interruption insurance. Any business disruption or natural disaster could result in substantial costs and diversion of resources.

 

Our failure to maintain and expand our distributor relationships could adversely affect our business.

 

We distribute our products through independent distributors, and we depend upon them directly for all of our sales in most of our markets.  Accordingly, our success depends in significant part upon our ability to attract, retain and motivate a large base of distributors.  Our direct selling organization is headed by a relatively small number of key distributors.  The loss of a significant number of distributors, especially key distributors, could materially and adversely affect sales of our products and could impair our ability to attract new distributors.  Moreover, the replacement of distributors could be difficult because, in our efforts to attract and retain distributors, we compete with other direct selling organizations, including but not limited to those in the personal care, cosmetic product and nutritional supplement industries.  Our distributors may terminate their services with us at any time and, in fact, like most direct selling organizations, we have a high rate of attrition.

 

  9  

 

The number of active distributors or their productivity may not increase and could decline in the future.  We cannot accurately predict any fluctuation in the number and productivity of distributors because we primarily rely upon existing distributors to sponsor and train new distributors and to motivate new and existing distributors. Operating results could be adversely affected if our existing and new business opportunities and products do not generate sufficient economic incentive or interest to retain existing distributors and to attract new distributors.

 

The number and productivity of our distributors could be harmed by several factors, including:

 

  adverse publicity or negative perceptions regarding us, our products, our method of distribution or our competitors;
  lack of interest in, or the technical failure of, existing or new products;

  lack of interest in our existing compensation plan for distributors or in enhancements or other changes to that compensation plan;
  our actions to enforce our policies and procedures;

  regulatory actions or charges or private actions against us or others in our industry;
  general economic and business conditions;

  changes in management or the loss of one or more key distributor leaders;
  entry of new competitors, or new products or compensation plan enhancements by existing competitors, in our markets; and

 

potential saturation or maturity levels in a given country or market which could negatively impact our ability to attract and

retain distributors in such market.

 

An increase in the amount of compensation paid to distributors would reduce profitability.

 

A significant expense is the payment of compensation to our distributors, which represented approximately 49%, and 33% of net sales during 2018, and the first six months of 2019, respectively.  We compensate our distributors by paying commissions, bonuses, and certain awards and prizes.  Factors impacting the overall commission payout include the growth and depth of the distributor network, the distributor retention rate, the level of promotions, local promotional programs and business development agreements.  Any increase in compensation payments to distributors as a percentage of net sales will reduce our profitability.

 

Failure of new products to gain distributor and market acceptance could harm our business.

 

An important component of our business is our ability to develop new products that create enthusiasm among our distributor force.  If we fail to introduce new products on a timely basis, our distributor productivity could be harmed.  In addition, if any new products fail to gain market acceptance, are restricted by regulatory requirements, or have quality problems, this would harm our results of operations.  Factors that could affect our ability to continue to introduce new products include, among others, limited capital and human resources, government regulations, proprietary protections of competitors that may limit our ability to offer comparable products and any failure to anticipate changes in consumer tastes and buying preferences.

 

Although our distributors are independent contractors, improper distributor actions that violate laws or regulations could harm our business.

 

Our distributors are independent contractors and, accordingly, we are not in a position to directly provide the same direction, motivation and oversight as we would if distributors were our own employees.  As a result, there can be no assurance that our distributors will participate in our marketing strategies or plans, accept our introduction of new products, or comply with our distributor policies and procedures.  Extensive federal, state and local laws regulate our business, our products and our network marketing program.  Given the size and diversity of our distributor force, we experience problems with distributors from time to time, especially with respect to our distributors in foreign markets.  Distributors often desire to enter a market, before we have received approval to do business, to gain an advantage in the marketplace.  Improper distributor activity in new geographic markets could result in adverse publicity and can be particularly harmful to our ability to ultimately enter these markets.  Violations by our distributors of applicable law or of our policies and procedures in dealing with customers could reflect negatively on our products and operations and harm our business reputation.  In addition, it is possible that a court could hold us civilly or criminally accountable based on vicarious liability because of the actions of our distributors.  If any of these events occur, our business, financial condition, or results of operations could be materially adversely affected.

 

Because we do not have an audit or compensation committee, stockholders will have to rely on our officers and directors, most of whom are not independent, to perform these functions.

 

Because we do not have an audit or compensation committee, stockholders will have to rely on our officers and directors, most of whom are not independent, to perform these functions. Thus, there is a potential conflict of interest in that our officers and directors have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.

 

RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES

 

We expect to experience volatility in the price of our Common Stock, which could negatively affect stockholders’ investments.

 

The trading price of our Common Stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. All of these factors could adversely affect your ability to sell your shares of Common Stock or, if you are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.

  10  

 

 

The relative lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. securities laws.

 

Our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of 2002. Our senior management has little experience in managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance, and reporting requirements, including the establishing and maintaining of internal controls over financial reporting. Any such deficiencies, weaknesses, or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy, we could be subject to the imposition of fines and penalties and our management would have to divert resources from attending to our business plan.

 

Our Common Stock is categorized as “penny stock,” which may make it more difficult for investors to sell their shares of Common Stock due to suitability requirements.

 

Our Common Stock is categorized as “penny stock”. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The price of our Common Stock is significantly less than $5.00 per share and is therefore considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser, and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks. These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell our Common Stock, either directly or on behalf of their clients, may discourage potential stockholders from purchasing our Common Stock, or may adversely affect the ability of stockholders to sell their shares.

 

Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock, which could depress the price of our Common Stock.

 

In addition to the “penny stock” rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.

 

The elimination of monetary liability against our directors, officers, and employees under Nevada law and the existence of indemnification rights for our obligations to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees.

 

Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Nevada law. We may also have contractual indemnification obligations under any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us and our stockholders.

 

We may issue additional shares of Common Stock or preferred stock in the future, which could cause significant dilution to all stockholders.

Our Articles of Incorporation authorize the issuance of up to 1.4 billion shares of Common Stock and 100 million shares of preferred stock, with a par value of $0.00001 per share. As of November 7, 2019, we had 32,985,200 shares of Common Stock, 0 shares of Series A Preferred Stock and 0 shares of Series B Preferred Stock outstanding; however, we may issue additional shares of Common Stock or preferred stock in the future in connection with a financing or an acquisition. Such issuances may not require the approval of our stockholders. In addition, certain of our outstanding rights to purchase additional shares of Common Stock or securities convertible into our Common Stock are subject to full-ratchet anti-dilution protection, which could result in the right to purchase significantly more shares of Common Stock being issued or a reduction in the purchase price for any such shares or both. Any issuance of additional shares of our Common Stock, or equity securities convertible into our Common Stock, including but not limited to, preferred stock, warrants, and options, will dilute the percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impact the market price of our Common Stock.

 

Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us.

 

Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after an “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then-outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquiror to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

 

  11  

 

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our Board. Both of these provisions could limit the price investors would be willing to pay in the future for shares of our Common Stock.

 

Because we do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them.

 

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Declaring and paying future dividends, if any, will be determined by our Board, based upon earnings, financial condition, capital resources, capital requirements, restrictions in our Articles of Incorporation, contractual restrictions, and such other factors as our Board deems relevant. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.

 

SELLING STOCKHOLDERS

 

The table below presents information regarding the Selling Stockholders and the shares of Common Stock that they may offer from time to time under this Prospectus. This table is prepared based on information supplied to us by the Selling Stockholders, and reflects holdings as of November 7, 2019. As used in this Prospectus, the term “Selling Stockholders” includes the named stockholders, and any donees, pledgees, transferees, or other successors-in-interest selling shares received after the date of this Prospectus from the Selling Stockholders as a gift, pledge, or other non-sale related transfer. The number of shares in the column “Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus” represents all of the shares of Common Stock that the Selling Stockholders may offer under this Prospectus. The Selling Stockholders may sell some, all, or none of their shares offered by this Prospectus. We do not know how long the Selling Stockholders will hold the shares before selling them, and we currently have no agreements, arrangements, or understandings with the Selling Stockholders regarding the sale of any of the shares.

 

Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of Common Stock with respect to which the Selling Stockholders have voting and investment power. The percentage of shares of Common Stock beneficially owned by the Selling Stockholders prior to the Offering shown in the table below is based on an aggregate of 32,985,200 shares of our Common Stock outstanding on November 7, 2019.

 

  12  

 

Name of Selling Shareholder Shares Owned Prior to this Offering Total Number of Shares to be Offered for Selling Shareholder Account Total Shares to be Owned Upon Completion of this Offering Percent Owned Upon Completion of this Offering
         
Erika Bankowski 1,000 1,000                                               -    0.00%
Robert Brian Beeson 20,000 20,000                                               -    0.00%
David Bezeau 60,000 60,000                                               -    0.00%
Laura Kelly Binney 12,400 12,400                                               -    0.00%
Leslie Blackwell 400 400                                               -    0.00%
Peter Chu 279,032 279,032                                               -    0.00%
Brenda K Corsi 3,000 3,000                                               -    0.00%
Kelly J Davis 10,000 10,000                                               -    0.00%
David Dennert 2,000 2,000                                               -    0.00%
Josie Gallegos 1,000 1,000                                               -    0.00%
Max Gallegos 2,000 2,000                                               -    0.00%
Brittany Gallegos 1,000 1,000                                               -    0.00%
Colton Gallegos 3,000 3,000                                               -    0.00%
Carol Goddard 10,000 10,000                                               -    0.00%
D Hansen & S Hansen TTEES, The Doug Hansen Family Tr. U/A dated 03/23/2004 60,000 60,000                                               -    0.00%
IRAR Trust FBO Mehul Mehta 100,000 100,000                                               -    0.00%
Sharyn Jones 54,000 54,000                                               -    0.00%
Geoff Leibl 69,758 69,758                                               -    0.00%
Lucas Montoya 10,000 10,000                                               -    0.00%
Martin P Olson 10,000 10,000                                               -    0.00%
Robert Overman 69,758 69,758                                               -    0.00%
Ron Partridge 20,000 20,000                                               -    0.00%
David Silverman 50,000 50,000                                               -    0.00%
Silverman Holdings APS 50,000 50,000                                               -    0.00%
James Sinkes 110,000 10,000 100,000 0.30%
James L Sinkes Jr. 10,000 10,000                                               -    0.00%
Christopher Steensma 8,000 8,000                                               -    0.00%
Pamela K. Stonebreaker 40,000 40,000                                               -    0.00%
Shain Thakrar 60,000 60,000                                               -    0.00%
Shameel Thakrar 60,000 60,000                                               -    0.00%
PAG Group LLC 719,228 719,228                                               -    0.00%
Frederick Paul Walker 20,000 20,000                                               -    0.00%
Pamel Zboch Irrevocable Trust 200,000 200,000                                               -    0.00%
Normand Turgeon 2,000 2,000                                               -    0.00%
Aaron M Pietsch and Karen E. Pietsch 40,000 40,000                                               -    0.00%
Matthew Allen Pyle 4,000 4,000                                               -    0.00%
Armand Dischavi 100,000 100,000                                               -    0.00%
Paul Bontempo 20,000 20,000                                               -    0.00%
David Delano 20,000 20,000                                               -    0.00%
John Zihla 20,000 20,000                                               -    0.00%
Joe Caracciolo 20,000 20,000                                               -    0.00%
Charles Lindquist 150,000 150,000                                               -    0.00%
Robert Aitcheson 5,000 5,000                                               -    0.00%
Tammie Thomas 100,000 25,000 75,000 0.20%
Tracy Byrd 25,000 25,000                                               -    0.00%
James E Gilliland 3,000 3,000                                               -    0.00%
RTBDWIS TRUST 2,000 2,000                                               -    0.00%
Keola Ragudo 2,000 2,000                                               -    0.00%
Bernard R O'Donnell 418,548 100,000 318,548 1.00%
Dan R. Walters 462,548 100,000 362,548 1.10%
Joseph Edward Lindquist Separate Property Trust 418,548 100,000 318,548 1.00%
Nish Mehta 2,620,691 1,000,000 1,620,691 4.90%
Ray Grimm Jr. 10,641,109 1,000,000 9,641,109 29.20%
Jared Berry 6,278,211                                                   -    6,278,211 19.00%
Carlsbad Naturals LLC 4,362,898 1,000,000 3,362,898 10.20%
Robert Young 50,000 50,000                                               -    0.00%
Tim Anders 10 ,000 10,000                                               -    0.00%
Total 27,901,129 5,823,576 22,077,553  

  

  14  

 

 

USE OF PROCEEDS

 

This Prospectus relates to shares of our Common Stock that may be offered and sold from time to time by the Selling Stockholders. We will receive no proceeds from the sale of shares of Common Stock by the Selling Stockholders in this Offering.

 

The amounts and timing of our actual expenditures will depend on numerous factors, including the status of our product sales and marketing efforts.

 

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information

 

Our Common Stock is quoted on the OTC Markets Group, Inc.’s “Pink – Current Information” tier under the symbol “NWYU.” The following is a summary of the high and low closing bid prices of our Common Stock for the periods indicated, as reported by the OTC Markets Group, Inc. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

 

      CLOSING BID PRICE PER SHARE  
      HIGH       LOW  

Year ended December 31, 2019

First Quarter

  $ 25.50     $ 7.61  
Second Quarter   $ 22.75     $ 1.01  

Year ended December 31, 2018

First Quarter

  $ 9.75     $ 3.5  
Second Quarter   $ 10.00     $ 5.00  
Third Quarter   $ 14.25     $ 5.00  
Fourth Quarter   $ 14.75     $ 9.35  

Year ended December 31, 2017

First Quarter

  $ 11.00     $ 1.32  
Second Quarter   $ 11.00     $ 5.00  
Third Quarter   $ 10.50     $ 3.75  
Fourth Quarter   $ 6.00     $ 3.50  

 

On November 7, 2019, the closing bid price on the OTC Markets for our Common Stock was $1.23.

 

Stockholders

 

As of November 7, 2019, there were 32,985,200 shares of Common Stock issued and outstanding, held by approximately 179 shareholders of record.

 

Dividends

 

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future. There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:

 

· we would not be able to pay our debts as they become due in the usual course of business; or

 

· our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution, unless otherwise permitted under our Articles of Incorporation.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have in effect any compensation plans under which our equity securities are authorized for issuance.

 

Penny Stock Regulations

 

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

 

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.

 

 

  15  

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by Item 304 of Regulation S-K.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Except for statements of historical facts, this Prospectus contains forward-looking statements involving risks and uncertainties. The words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions or variations thereof are intended to identify forward-looking statements. Such statements reflect our current view with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the risks contained in the section of this Prospectus entitled “Risk Factors”) relating to our industries, operations, and results of operations and any businesses that may be acquired by us. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. You are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with our financial statements and the related notes included in this Prospectus.

 

DESCRIPTION OF BUSINESS

 

Company Overview

 

New You, Inc.’s principal business is the development and marketing of unique and proprietary cannabidiol (“CBD”) products. New You LLC markets and sells its products through a multi-level marketing and direct sales opportunity afforded to independent business owners called “Brand Partners”. Commissions are earned on product sales to Brand Partners and their customers at a rate of 10% for every transaction, plus a specified spread on recurring sales. Brand Partners earn a 5% commission on sales by other team members at lower levels up to nine level below the Brand Partner. Brand Partners can earn an additional bonus for customer sales and team sales. The team bonus is $400 for each and every time the team bonus volume reaches a certain amount in a 30 day period. Brand Partners can also earn an initial bonus of 20% of the transaction value for qualifying Brand Partners in the Brand Partner’s first 30 days. The New You LLC business opportunity allows customers and Brand Partners to make a difference in both the world and their personal lives. We conduct our principal operations through one operating subsidiary, New You LLC, a Wyoming limited liability company.

 

History and Background

 

We were incorporated in Nevada on December 29, 2005 as Nova Mining Corporation. Our original principal business activity was the acquisition and exploration of mineral resources. On June 20, 2013, following a change of control, we changed our name to “The Radiant Creations Group, Inc. and focused on developing and marketing a skin crème and other cosmetic and over-the-counter personal enhancement products and devices. Following the acquisition of New You LLC on January 9, 2019, we have focused exclusively on the New You LLC business as described in this prospectus. Effective, April 30, 2019, we changed our name to “New You, Inc.”

 

Our Business

 

Current Product Offerings

 

Our products are variations on the Canna-actives™ concentrated THC-Free complex of Phytocannabinoid-Rich Hemp CBD products, which we are offering in the form of either infused products or concentrate products. We currently offer the following products:

 

· DROPS ™ - This 220 mgs Canna-active™ CBD Beverage Enhancer is tasteless, flavorless and instantaneously adds the wellness benefits of USA-grown organic Cannabinoids to any beverage or liquid.
· CB2™ & CBD 2 Plus™ - A Multi Spectrum Hemp-extracted CBD and Hops-extracted Beta-Caryophyllene. Naturally blended with the added benefits of coconut-derived MCT and a tasty hint of peppermint.
· Drops for Pets - Animals can benefit from Cannabinoids in many of the same ways that people do, yet animals continue to suffer from many of the same health issues such as anxiety, pain, skin sensitivity, seizures and more. This 50 mgs of Canna-actives™ product is designed to be used by pets as a pet supplement.
· ENDO30 – This line of products is designed to help people use our other Canna-active™ CBD products for weight loss. CBD products can help our customers with appetite, glycemic and mood control.
o CAFFE CANNA™ - Caffe Canna is a deliciously rich organic Cannabinoid-infused non-gmo dark roast coffee with Clinically Proven active ingredients to help promote fast and steady weight loss naturally.
o ABSORB – This product tells your stomach you’re not hungry. Sometimes called nature’s “skinny sponge” this appetite suppressing Japanese root can absorb more than 200 times its weight in water creating a sense of fullness while helping your body soak up and eliminate extra carbs and cholesterol in the process.
o RELEASE ™ - This product is designed to remove the belly bloat, constipation, and the toxic build-up in all the wrong places. This natural phytonutrient cleanse is made with organic Clove, Cascara Sagrada, Agave Inulin, Rhubarb Root Extract, Slippery Elm Bark, Aloe Vera and other beneficial herbs to help you safely and effectively detox.
· Drops FX – This product is designed to provide the user with an energy boost with our proprietary blend of Canna-actives™ Vitamins B3, B6, B9 & B12, that you can drop it in any drink or liquid.

  16  

 

· Drops FX Sleep – This product is desiged to help the user get the SLEEP they need to wake up refreshed and tested with our proprietary blend of proven fast-acting sleep aids: GABA, Melatonin, Valerian Root.


Marketing and Sales

 

We market and sell our products through a multi-level marketing and direct sales opportunity afforded to independent business owners called “Brand Partners”. Commissions are earned on product sales to Brand Partners and their customers at a rate of 10% for every transaction, plus a specified spread on recurring sales. Brand Partners earn a 5% commission on sales by other team members at lower levels up to nine level below the Brand Partner. Brand Partners can earn an additional bonus for customer sales and team sales. The team bonus is $400 for each and every time the team bonus volume reaches a certain amount in a 30 day period. Brand Partners can also earn an initial bonus of 20% of the transaction value for qualifying Brand Partners in the Brand Partner’s first 30 days.

 

As of June 2019, we had 3,692 Brand Partners, of which 636 joined in the second quarter of 2019, 697 joined in the first quarter of 2019, and 756 joined in the fourth quarter of 2018. On top of the Brand Partners that have joined, there are also 1,963 customers that have placed orders through Brand Partners.

 

The process of becoming a New You LLC Brand Partner or Customer begins with viewing the company website which gives information on all of the products. Brand Partners are introduced to the business and products through word of mouth, tradeshows, and local events. When Brand Partners decide to join, they are required to read and agree to the terms and conditions of the Company prior to signing up. All Brand Partners are supplied with training videos, weekly conference calls, and training seminars to teach them about the products.

 

Suppliers and Production

 

Carlsbad Naturals is a wholesale supplier of bulk CBD, CBG, CBD, full-spectrum and broad-spectrum cannabinoid extracts and emulsions along with a wide range of private label and white label CBD consumer products including beverages tinctures, skincare, pain cream, supplements. Carlsbad Naturals manufactures Drops, Energy FX, and Sleep FX. In addition to Carlsbad Naturals, New You, Inc. has made arrangements with one additional supplier as a backup. The contract with Carlsbad Naturals is a traditional vendor relationship, there is no formal agreement in place.

 

Kelker Pharma, Inc., is a cGMP certified contract manufacturer of capsules, tablets, powders and nutritional bars. Kelker manufactures our Absorb and Release capsules. The contract with Kelker Pharma is a traditional vendor relationship, there is no formal agreement in place.

 

Orders from Brand Partners and Customers are placed through our online website and phone application. Once a customer or Brand Partner places an order, our warehouse staff will receive that order and fulfill that order on the same day or within one business day.

 

Regulatory Requirements

 

We are subject to numerous federal, state, local, and foreign laws and regulations, including those relating to:

 

· The production of foods, beverages and other related products;

 

· The preparation and sale of foods and beverages;

 

· Environmental protection;

 

· Interstate commerce and taxation laws; and

 

· Workplace and safety conditions, minimum wage and other labor requirements

 

Our hemp and CBD products are derived from industrial hemp, not marijuana. There is a clear scientific distinction between the two plants: Our products contain less than 0.3% tetrahydrocannabinol (“THC”), the psychoactive compound found in marijuana. (Most marijuana contains over 10% THC). There is also a clear legal distinction between the two plants. While marijuana is illegal under U.S. federal law, the industrial hemp used in our products is 100% legal at the federal level. It is grown under a duly-licensed state agricultural pilot program conducted by the Colorado Department of Agriculture, as authorized by the 2014 U.S. Farm Bill. The Farm Bill explicitly exempts hemp products from the definition of “marijuana” and explicitly exempts hemp products from the purview and regulation of the Controlled Substances Act. Furthermore, the 2016 Omnibus Appropriations Act specifically instructs federal agencies not to interfere with the transport or sale of pilot program hemp products such as the ones sold by the Company. The 2018 Farm Bill specifically removed hemp from Schedule 1 of the Controlled Substances Act. The law also prohibits states from interfering with the transportation of hemp and hemp products from one state to another. Our food and beverage products are not subject to direct FDA approval as the FDA does not perform review testing or approval of food, beverages or dietary supplements. The FDA requires that we manufacture our products in commercial manufacturing facilities that are annually audited to ensure that they pass inspection based on Good Manufacturing Practices for food safety. Management confirms with all manufacturers on an annual basis that they have passed inspection. Testing for THC contents is done by both Carlsbad Naturals and the Company to ensure that the THC content is below legal limits.

 

Employees

 

As of the date hereof, we have six full-time employees.

 

Intellectual Property

 

The Company does not have any trademarks or patents.

 

DESCRIPTION OF PROPERTIES

 

We do not own any real estate or other physical properties material to our operations. We operate from leased space. Our executive offices are located at 3246 Grey Hawk Court, Carlsbad, California 92010, and our telephone number is (866) 611-4694. The lease is for an initial term of three years and expires on July 31, 2021. The current monthly base rent amount equals $5,720.

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LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of financial condition and results of operations should be read together with our financial statements and accompanying notes appearing elsewhere in this Prospectus. This Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” set forth in the beginning of this Prospectus, and see “Risk Factors” beginning on page 6 for a discussion of certain risk factors applicable to our business, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occur in future periods.

 

On January 9, 2019, New You, Inc. completed a reverse recapitalization (“Recapitalization”) with New You LLC, a privately held Wyoming limited liability company in accordance with the terms of a share exchange agreement (“Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, New You, Inc. issued 15,974,558 common shares (798,727,886 pre-reverse stock split) in exchange for one hundred percent (100%) of the outstanding units of New You LLC (11,450 units), with New You LLC becoming a wholly-owned operating subsidiary of the consolidated company. The transaction was accounted for as a reverse recapitalization because New You, Inc. was a shell company prior to the transaction. For accounting purposes, New You LLC is considered to have obtained the net monetary assets of New You, Inc. in exchange for equity. Upon the consummation of the Recapitalization, the historical financial statements of New You LLC became the consolidated company’s historical financial statements. Accordingly, we have included in this filing (1) the financial statements of New You, Inc. as of and for the six months ended June 30, 2019 and 2018, which include the historical balances and operating results of New You LLC, except that the capital structure of New You LLC has been adjusted based on the ratio (approximately 1,395 common shares per member unit) of common shares issued and units transferred in accordance with the Share Exchange Agreement, (2) the financial statements of New You LLC as of and for the years ended December 31, 2018 and 2017, which include the historical balances and operating results of New You LLC, except that the capital structure of New You LLC has been adjusted based on the ratio of common shares issued and units transferred in accordance with the Share Exchange Agreement, and (3) the standalone financial statements of New You, Inc. as of and for the years ended December 31, 2018 and 2017, which include the historical balances and operating results of New You, Inc.

 

RESULTS OF OPERATIONS

 

Results of Consolidated Operations for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 (see F-pages below):

 

Revenues. For the six months ended June 30, 2019, we generated revenues of $1,458,901, an increase of $1,458,901 compared to June 30, 2018. The increase was primarily due to revenue generated by New You LLC beginning operations in the later part of 2018. There were no sales prior to August 2018. At this stage in our development, revenues are not yet sufficient to cover ongoing operating expenses.

 

Gross Margin. Our gross margin for the six months ended June 30, 2019 was $ 1,158,037, an increase of $ 1,158,037 compared to June 30, 2018. Our gross margin percentage for the six months ended June 30, 2019 was 79%, compared to 0% for the six months ended June 30, 2018. The increase in gross margin was primarily due to revenue generated by New You LLC beginning operations in the later part of 2018. There were no sales prior to August 2018.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the six months ended June 30, 2019 were

$ 1,348,822, an increase of $1,278,966 compared to June 30, 2018. For the six months ended June 30, 2019, the components of selling, general and administrative expenses were: (i) increase in commission expenses; (ii) payroll expenses; and (iii) and other selling general and administrative expenses. There were few expenses prior to August of 2018 due to New You LLC having very little activity prior to August 2018.

 

Operating Loss. We realized an operating loss of $190,805 for the six months ended June 30, 2019.

 

Net Loss. We incurred a net loss of $190,805, for the six months ended June 30, 2019. The primary reason for the increase in net loss is due to New You LLC beginning operations in the later part of 2018.

 

Management will continue to make an effort to lower operating expenses and increase revenue. We will continue to invest in further expanding our operations and a comprehensive marketing campaign with the goal of accelerating the education of potential clients and promoting our name and our products. Given the fact that most of the operating expenses are fixed or have quasi-fixed character management expects them to significantly decrease as a percentage of revenues as revenues increase.

 

Results of New You LLC Operations for the year ended December 31, 2018 compared to the year ended December 31, 2017 (see F-pages below):

 

Revenues. For the year ended December 31, 2018, we generated revenues of $898,153, an increase of $898,153 or 100%. The increase was due the New You LLC starting its current operations in 2018.

 

Gross Margin. For the year ended December 31, 2018, we had gross profits of $700,738, an increase of $700,738. Our gross margin for the year ended December 31, 2018 was 78% compared to 0% for the year ended December 31, 2017. The increase was due to New You LLC starting its current operations in 2018.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the year ended December 31, 2018 were $689,991, an increase of $689,991. The major components that make up this amount are:, Consulting Expenses of $380,361, Salary expenses of $56,194, and Rent Expenses of $22,946. The increase was due to New You LLC starting its current operations in 2018.

 

Commission Expense. Commission Expenses for the year ended December 31, 2018 were $437,953, an increase of $437,953. The increase was due to New You LLC starting its current operations in 2018

 

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Operating Loss. We realized an operating loss of $427,206 for the year ended December 31, 2018, an increase of $427,206. The increase was due to New You LLC starting its current operations in 2018.

 

Net Loss. For the year ended December 31, 2018, we incurred a net loss of $428,006. At this stage in our development, revenues are not yet sufficient to cover ongoing operating expenses. Management will continue to make an effort to lower operating expenses and increase revenue. In order to increase revenue, we plan to continue to invest in further expanding its operations and engage in a comprehensive marketing campaign with the goal of accelerating the education of potential clients and promoting our name and our products. Most of our operating expenses are fixed or have a quasi-fixed character, such as energy and labor costs. As a result, management expects them to significantly decrease as a percentage of revenues as revenues increase.

 

Results of New You, Inc. Operations for the year ended December 31, 2018 compared to the year ended December 31, 2017 (see F-pages below):

 

Revenues. For the year ended December 31, 2018, we generated revenues of $0, a decrease of $12,734 or 100%. The decrease was due the Company discontinuing operations in 2018.

 

Gross Margin. For the year ended December 31, 2018, we had gross profits of $0, an increase of $35,479. Our gross margin for the year ended December 31, 2018 was 0% compared to a gross loss of 278% for the year ended December 31, 2017. The improvement was due to the Company discontinuing operations in 2018 and due to a write off of $43,916 of inventory.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the year ended December 31, 2018 were $40,416 compared to $231,789, a decrease of $191,373. The decrease was due the Company discontinuing operations in 2018.

 

Operating Income (Loss). We realized an operating loss of $40,416 for the year ended December 31, 2018 compared to $267,266 for the year ended December 31, 2017, an increase of $226,850. The increase was due the Company discontinuing its current operations in 2018.

 

Net Income (Loss). We realized a net income of $283,218 for the year ended December 31, 2018 compared to a loss of ($491,224) for the year ending December 31,2017 , an increase of $774,442. The increase was due the Company discontinuing its current operations in 2018 and a total of $409,443 gain was recognized on the settlement of various debts.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We have never reported net income. We incurred a net loss for the six months ended June 30, 2019 and had an accumulated deficit of $618,811 at June 30, 2019. At June 30, 2019, we had a cash balance of approximately $13,079, compared to a cash balance of $27,310 at December 31, 2018. At June 30, 2019, we had a working capital deficit of $552,091, compared to a working capital deficit of $332,593 at December 31, 2018. Our existing and available capital resources are not expected to be sufficient to satisfy our funding requirements through one year from the date of this filing in the absence of share issuances or other sources of financing. See note 1 to our financial statements for the six months ended June 30, 2019 and 2018.

 

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. Since our inception, we have raised capital through private sales of preferred stock, common stock, and debt securities.

 

We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements until we are able to raise revenues to a point of positive cash flow. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support its operations.

 

The issuance of additional securities may result in a significant dilution in the equity interests of our current stockholders. Obtaining loans, assuming these loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available for use when needed or, if available, that it can be obtained on commercially reasonable terms.

 

The effect of existing or probable government regulations on our business is not known at this time. Due to the nature of our business, it is anticipated that there may be increasing government regulation that may cause us to have to take serious corrective actions or make changes to the business plan.

 

Known Trends and Uncertainties Expected to Have a Material Impact on Revenues

 

Our ability to continue to add and maintain Brand Partners and Customers on a consistent basis will have a material impact on revenues. We will be increasing our marketing efforts in the upcoming year. Due to this, we expect to see our customer base and number of Brand Partners to grow consistently over the next few quarters and expect those numbers to grow even more as we continue to expand our marketing efforts and add to our product portfolio. We expect to continue to see high retention rates as we continue to train our Brand Partners and provide them with a support system that promotes success and strong partnerships.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We have no off-balance sheet arrangements.

 

CRITICAL ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of the financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although we believe that these estimates are reasonable, actual results could differ from those estimates given in conditions or assumptions that have been consistently applied.

  

Cash

 

Cash includes cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.

 

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Accounts Receivable

 

We do not have Accounts receivable. All sales are paid by the customer and brand partner at the time of order through a credit card processor. An allowance for doubtful accounts is not required. We do not accrue interest receivable on past due accounts receivable.

 

Property and Equipment

 

Property and equipment are carried at cost less accumulated depreciation and impairment losses, if any. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of five years, which includes warehouse equipment and furniture and fixtures.

 

Revenue Recognition

 

Revenue is recognized in accordance with ASC 606, Contracts with Customers, by analyzing exchanges with the Company’s customers and Brand Partners using a five-step analysis such as identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

 

The Company recognizes revenue when the promised goods are shipped to the customer. Revenue is recognized at an amount that reflects the consideration the Company receives by credit card payment in exchange for those services.

 

The Company records sales of finished products once the customer or Brand Partner places and pays for the order and the product is simultaneously shipped. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, which is upon shipment of the product.

 

The Company and its Brand Partners provide customers with a 100% satisfaction guaranteed policy that allows the customer 60 days to return the product and receive a 100% refund and allows customers that are also Brand Partners twelve months to return the product and receive a 90% refund, as long as the product remains in saleable condition and the Brand Partner or the Company have not cancelled the Brand Partner agreement. The Company records an estimate for provisions of discounts, returns, allowances, customer rebates and other adjustments for each shipment, which are netted with gross sales. The Company accounts for such provisions during the same period in which the related revenues are earned. The Company has determined that the population of contracts with the Company’s customers and Brand Partners tends to be homogenous, so that review of the contracts and estimate of various revenue related adjustments can be applied to the entire population. The Company has not recorded a reserve for returns, since it does not believe such returns will be material.

 

Research and Development

 

The Company has not incurred any research and development expenditures to date.

 

Fair Value of Financial Instruments

 

We apply fair value accounting in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), which provides the framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would have been received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable.

 

Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

 

Our valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

 

In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. We have not elected the fair value option for any eligible financial instruments.

 

Income Taxes

 

We provide for income taxes based on enacted tax law and statutory tax rates at which items of income and expenses are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We have incurred net operating losses for financial-reporting and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the six months ended June 30, 2019 and the year ended December 31, 2018.

 

Loss Per Common Share

 

The Company reports net income (loss) per common share in accordance with FASB ASC 260, “Earnings per Share”. This statement requires dual presentation of basic and diluted earnings with a reconciliation of the numerator and denominator of the earnings per share computations. Net loss per share, in accordance with the provisions, “Earnings Per Share” is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period. During a loss period, the effect of the potential exercise of stock options, warrants, convertible preferred stock and convertible debt are not considered in the diluted income (loss) per share calculation since the effect would be anti-dilutive. The results of operations were a net loss for the six months ended June 30, 2019 and the year ended December 31, 2018, and therefore the basic and diluted weighted average common shares outstanding were the same.

 

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Recently Issued Accounting Standards

 

See Part I, Financial Statements.

  

Implications of Smaller Reporting Company Status

 

Because the worldwide market value of our common stock held by non-affiliates, or public float, is below $75 million, we are a “smaller reporting company” as defined under the Exchange Act. Certain reduced disclosure and other requirements are available to us because we are a smaller reporting company and may continue to be available to so long as we remain a smaller reporting company under the Exchange Act. As a smaller reporting company we are not required to:

 

  Present more than two years of audited financial statements in our registration statements and annual reports on Form 10-K and present any selected financial data in such registration statements and annual reports.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person:

 

Name   Age   Positions
Ray Grimm, Jr.   74   Chief Executive Officer, Chairman of the Board, and Director
Nish Mehta   53   Director
Greg Montoya   56   President
James Sinkes   35   Chief Accounting Officer

 

Ray Grimm, Jr.

Chief Executive Officer and Chairman of the Board

 

Ray Grimm, Jr. has served as Chief Executive Officer since 2018. Ray Grimm, Jr. is a veteran entrepreneur with more than a quarter century experience building some of the top nutritional and weight loss companies in direct dales history, three of which exceeded $50 million in sales within their first five years. Those companies include: Univite, Inc where Ray was CEO from 1987-1988, Body Wise International where he was Co-founder and President from 1989-1999 and spearheaded that company's growth to $5 million in monthly sales within its first 3 years, and Cal Nutrisciences (sold to Xyngular, Inc.) where he was Co-founder and CEO from 2009-2010. Cal Nutrisciences did $10 million in its first 10 months and as Xyngular did $70 million in its fifth year. His vision, leadership and expertise in nutrition, weight loss and Direct Sales are unmatched and so is his unique formula for success all of which have benefited the physical and financial health of thousands. In addition to being an established entrepreneur, Ray Grimm Jr. continues to be deeply committed to his 25 plus years of philanthropic work with Childhelp and the many abused and neglected children it has served for more than 50 years. He also served as President of Childhelp’s California State Board. Ray has been a proud member of the DSA (Direct Selling Association) for more than 15 years and founding member and current member of the MLMIA (Multilevel Marketing International Association).

 

Nish Mehta

Director

 

Nish Mehta is a seasoned financial professional. Nish has raised over $100m in venture backed capital for technology-based start-up companies. Nish’s past and current ventures include several high-profile VC backed companies including Nuvve Corp., HomeSpace.com, Envestnet (IPO, July 2010), Rayspan Corporation, Wildcat Discovery Technologies and others. Nish has also provided services for several network marketing companies in San Diego. Nish is a Canadian Chartered Accountant as well as a CPA and has served 7.5 years with KPMG. Nish graduated from Acadia University (Hons) with a major in Accounting and Finance.

 

Greg Montoya

President

 

Greg Montoya has served as New You LLC’s Company’s President since 2018. Prior thereto, he was involved in several successful direct marketing businesses in North America and abroad, including Alpine Industries (Presidential Master Manager 1995-2000 – played a major role in the company achieving revenues to become an Inc. 500 fastest growing company), EcoQuest International (Presidential Master Manager 2000-2010), and Vollara LLC, (Presidential Ambassador 2010-2018). He co-founded two successful international direct marketing sales, consulting and training companies, Seventh Success, Inc. (President 1997-present), and Unovis, Inc. (President 2008-2010); co-founded Ageless Impact – A USA based health and wellness company specializing in anti-aging and energy drink products (President 2010 – present); and co-founded Tiny Treasure Home, Inc. – A tiny house on wheels manufacturing company (President 2015 - present).

 

Greg’s turn-key automated conventional and online marketing systems have collectively helped generate approximately $374 million in system sales globally.

 

Greg has over 35 years of experience as an entrepreneur, corporate executive, sales manager and trainer, including 25 years of experience in the network marketing industry. He’s well respected for his exemplary international leadership, entrepreneurial development and business expansion capabilities. His expertise has made him a sought-after industry consultant, and speaker at direct marketing business workshops and seminars throughout the country and worldwide.

 

Greg has hosted his own radio talk show and has been heard on hundreds of other radio broadcasts. He has also been seen by millions of people on major television networks such as CNBC, MSNBC, HGTV, and has appeared in numerous infomercials. Popular business magazines have featured him on their covers, including Success, Business Connection, and Cutting Edge Opportunities.

 

As President of New You LLC, Greg is instrumental in facilitating the speed necessary to capitalize on the fast-emerging and vast opportunities in the CBD and Direct Sales spaces.

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James Sinkes,

Chief Accounting Officer

 

Mr. Sinkes has served as the Company’s Chief Accounting Officer since 2018. With over 10 years of accounting and finance experience, James has been the Controller for WCG Cares, a non-profit that works in the health and wellness sector in multiple countries all over the world, from 2016 through 2017. Prior to his work at WCG, Mr. Sinkes was a Senior accountant at Alliant Insurance for over five years, 2010 – 2015, where he managed the financials of the largest property and casualty program in the nation. Mr. Sinkes graduated from California State University San Bernardino while excelling as a Student Athlete.

 

Director Qualifications

 

We believe that our directors should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have broad experience at the policy-making level in business or banking. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties for us. Each director must represent the interests of all stockholders. When considering potential director candidates, the Board also considers the candidate’s character, judgment, diversity, age, and skills, including financial literacy and experience in the context of our needs and the needs of the Board.

  

Employment Agreements

 

We currently do not have any employment agreements with any of our directors or executive officers.

 

Family Relationships

 

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

To our knowledge, our directors and executive officers have not been involved in any of the following events during the past ten years:

 

·     Any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

·     Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

·     Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;

 

·     Being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

·     Being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

·     Being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity, or organization that has disciplinary authority over its members or persons associated with a member.

 

Code of Ethics

 

We have not adopted a Code of Ethics, but we expect to adopt a Code of Ethics in fiscal 2018 and will post such code to our website.

 

Term of Office

 

Our directors are appointed to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our Bylaws. Our officers are appointed by the Board and hold office until removed by the Board, absent an employment agreement.

Conflicts of Interest

 

Since we do not have an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our directors. The Board has not established an audit committee and does not have an audit committee financial expert, nor has the Board established a nominating committee. The Board is of the opinion that such committees are not necessary since we are in the earlier stages of operations. We have seven directors, and to date, such directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.

 

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EXECUTIVE COMPENSATION

 

As a smaller reporting company, we are required to disclose for fiscal years 2017 and 2018 the executive compensation of our “Named Executive Officers,” which consist of the following individuals: (i) any individual serving as our principal executive officer or acting in a similar capacity; (ii) the two other most highly compensated executive officers of the Company serving as executive officers at the most recently completed fiscal year; and (iii) any additional individuals for whom disclosure would have been provided but for the fact the individual was not serving as an executive officer at the end of the most recently completed fiscal year.

 

Summary Compensation Table

 

The following Summary Compensation Table sets forth for fiscal years 2017 and 2018, the compensation, awarded to, paid to, or earned by our Named Executive Officers. There were no Executives or Officers in 2017.

 

                    Non-Equity   Deferred        
            Stock   Option   Incentive Plan   Compensation   All Other    
Name and Principal Position Year   Salary ($)   Bonus ($)   Awards ($)   Awards ($)   Compensation ($)   Earnings ($)   Compensation ($)   Total($)
Ray Grimm, Jr. - Chief Executive Officer   $ 52,500     $ —       $ —       $ —       $ —       $ —       $ —       $ 52,500  
Greg Montoya - President     —         —         —         —         —         —         —       $ —    
James Sinkes - Chief Accounting Officer   $ 12,000       —         —         —         —         —         —       $ 12,000  
    $ 64,500     $ —       $ —       $ —       $ —       $ —       $ —       $ 64,500  

 

Employment Contracts, Termination of Employment, Change-in-Control Arrangements

 

As of the date hereof, we have not entered into any employment agreements with any of our Named Executive Officers.

 

Director Compensation

 

The following table sets forth director compensation as of December 31, 2018 and 2017:

 

                                      Non-Equity       Deferred                  
                      Stock       Option       Incentive Plan       Compensation       All Other          
Name and Principal Position Year     Salary ($)       Bonus ($)       Awards ($)       Awards ($)       Compensation ($)       Earnings ($)       Compensation ($)       Total($)  
Ray Grimm, Jr.  - Chairman   $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    
Nish Mehta - Board Member     —         —         —         —         —         —         —       $ —    
    $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of November 7, 2019, the beneficial ownership of the Company’s capital stock by each Executive Officer and Director, by each person known to beneficially own more than 5% of our common stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly and the percentage shown is based on 32,985,200 shares of common stock issued and outstanding.

 

Title of class Name and address of beneficial owner(1) Amount of beneficial ownership Percent of class
Current Executive Officers & Directors:
Common Stock

Ray Grimm, Jr.

P.O. Box 8501

Rancho Santa Fe, CA 92067

10,641,107 32.26%
Common Stock

Greg Montoya

3246 Grey Hawk

Carlsbad, CA 92010

1,080,000 3.27%
Common Stock

James Sinkes

4305 Saddlehorn Way

Oceanside, CA 92057

110,000 0.33%
Common Stock

Nish Mehta

8152 Run of the Knolls

San Diego, CA 92127

2,620,691 7.95%
Common Stock Total of All Current Directors and Officers: 14,451,798 43.81%
     
More than 5% Beneficial Owners    
Common Stock

Jared Berry

701 Palomar Airport Rd., Ste. 300

Carlsbad, CA 92010

10,641,107(2) 32.26%

 

(1)       As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have “beneficial ownership” of any security that such person has the right to acquire within 60 days after such date.

 

(2)       Consists of 6,278,210 shares held by Mr. Berry and 4,362,897 shares held in the name of Carlsbad Naturals, Inc.

 

There are no arrangements known to the Company, which may at a subsequent date result in a change-in-control.

 

 

 

 

  23  

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Related Party Transactions

 

Except as described below, during the past two fiscal years, there have been no transactions, whether directly or indirectly, between us and any of our respective officers, directors, beneficial owners of more than 5% of our outstanding Common Stock or their family members, that exceeded the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years:

 

1. During 2018, a director and the CEO loaned or paid for various expenses of the Company. These loans contained no interest, term or due date. As of December 31, 2018, these loans had a balance of $104,123 and $125,549 for the director and CEO, respectively.

 

2. The Company leases and pays for a certain business facility on behalf of Carlsbad Naturals, LLC, a related party in exchange for the Company using a lease that Carlsbad Naturals, LLC pays for on behalf of the Company, the “Related Party Lease.” As a result of this arrangement, the Company has recorded the lease and rental expense in the accompanying statement of operations. The Company’s net rent expense for the year ended December 31, 2018 was $22,946 and is included in general and administrative expense on the accompanying statement of operations.

 

3. On July 11, 2018, we closed our Subscription and Securities Purchase Agreement (the “SPA”) with three investors, Carlsbad Naturals, LLC, Ray Grimm, our CEO, and Nish Mehta, a former officer. Under the SPA, the investors were issued a (collectively) controlling interest in the Company consisting of a total of 9,695,328 shares of common stock. These shares were issued in exchange for a total Purchase Price of $95,000. The Purchase Price was used to settle and retire our notes payable, for certain compliance costs, and for general working capital. In conjunction with the SPA, our formerly controlling shareholder, Biodynamic Molecular Technologies, LLC, exchanged its preferred stock for a total of 269,315 shares of common stock. Upon issue, these shares were transferred to principal of Biodynamic Molecular Technologies, LLC, Michael Alexander. This common stock position, which represented 2.5% of our post-closing common stock, was formerly non-dilutable for a period of one (1) year.

 

4. On January 9, 2019, we acquired one hundred percent (100%) of the outstanding membership interests in our current operating subsidiary, New You LLC, under a Share Exchange Agreement. Pursuant to the Share Exchange Agreement, we issued 15,974,558 shares of common stock to the former members of New You LLC. The members of New You LLC included our current CEO, Ray Grimm, Jr., and certain other affiliates of the Company.

 

Director Independence

We are not a “listed issuer” within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The NASDAQ Stock Market, Inc., we do have any independent directors.

The Board currently does not have any separately designated standing committees.

  

DESCRIPTION OF SECURITIES TO BE REGISTERED

 

General

 

The following summary includes a description of material provisions of our capital stock, however the description does not purport to be complete and is subject to, and is qualified by, our Articles of Incorporation and Bylaws, which are filed as exhibits to the Registration Statement of which this Prospectus is a part.

 

Authorized and Outstanding Securities

 

We have the authority to issue up to 1.4 billion shares of Common Stock, $0.00001 par value. As of August 14, 2019, there were 27,408,200 shares of Common Stock issued and outstanding.

 

Common Stock

 

The holders of our Common Stock are entitled to one vote per share on all matters requiring a vote of the stockholders, including the election of directors. Holders of Common Stock do not have cumulative voting rights. Holders of Common Stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board in its discretion from funds legally available therefore, subject to preferences that may be applicable to preferred stock, if any, then-outstanding. At present, we have no plans to issue dividends. See “Dividend Policy” for additional information. In the event of a liquidation, dissolution, or winding up of the Company, the holders of Common Stock are entitled to share pro-rata all assets remaining after payment in full of all liabilities, subject to prior distribution rights of preferred stock, if any, then-outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. There is a limited public market for our Common Stock.

 

Dividends

 

Dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements, and financial conditions. The payment of dividends, if any, will be within the discretion of our Board. We intend to retain earnings, if any, for use in our business operations and accordingly, our Board does not anticipate declaring any dividends in the foreseeable future.

 

Indemnification of Directors and Officers

 

Neither our articles of incorporation, nor our bylaws, prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statutes (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.

 

  24  

 

NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

 

NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.

 

Our charter provides that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification. We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.

 

Our bylaws provide that a director or officer of the Company shall have no personal liability to the Company or its stockholders for damages for breach of fiduciary duty as a director or officer, except for damages for breach of fiduciary duty resulting from (a) acts or omissions which involve intentional misconduct, fraud, or a knowing violation of law, or (b) the payment of dividends in violation of section 78.3900 of the NRS as it may from time to time be amended or any successor provision thereto.

 

 

Transfer Agent

 

The transfer agent for our Common Stock is Action Stock Transfer at 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, Utah 84121. The transfer agent’s telephone number is (801) 274-1088.

 

 

PLAN OF DISTRIBUTION

 

Each selling stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

  block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

  an exchange distribution in accordance with the rules of the applicable exchange;

 

  privately negotiated transactions;

 

  settlement of short sales;

 

  in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

 

  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

  a combination of any such methods of sale; or

 

  any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

  25  

 

 

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

 

The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

SHARES ELIGIBLE FOR FUTURE SALE

 

We cannot predict the effect, if any, that market sales of shares of our Common Stock or the availability of shares of our Common Stock for sale will have on the market price of our Common Stock prevailing from time to time. Future sales of our Common Stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. The availability for sale of a substantial number of shares of our Common Stock acquired through the exercise of outstanding warrants could materially adversely affect the market price of our Common Stock. In addition, sales of our Common Stock in the public market after the restrictions lapse as described below, or the perception that those sales may occur, could cause the prevailing market price to decrease or to be lower than it might be in the absence of those sales or perceptions.

 

Rule 144

 

In general, under Rule 144 as currently in effect, a person (or persons whose shares are required to be aggregated), including a person who may be deemed an “affiliate” of a company, who has beneficially owned restricted securities for at least six months may sell, within any three- month period, a number of shares that does not exceed the greater of: (1) 1% of the then-outstanding shares of common stock, or (2) if and when the common stock is listed on a national securities exchange, the average weekly trading volume of the common stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144. Sales of shares held by our affiliates that are not “restricted” are subject to such volume limitations, but are not subject to the holding period requirement. Sales under Rule 144 are also subject to certain requirements as to the manner of sale, notice, and availability of current public information about our company. A person who is not deemed to have been an affiliate of us at any time during the 90 days preceding a sale by such person, and who has beneficially owned the restricted shares for at least one year, is entitled to sell such shares under Rule 144 without regard to any of the restrictions described above.

 

We cannot estimate the number of shares of our Common Stock that our existing stockholders will elect to sell under Rule 144.

  

LEGAL MATTERS

 

Unless otherwise indicated in the applicable prospectus supplement, Laxague Law, Inc., will provide opinions regarding the validity of the shares of our Common Stock. Laxague Law, Inc. may also provide opinions regarding certain other matters. Any underwriters will also be advised about legal matters by their own counsel, which will be named in the prospectus supplement.

 

EXPERTS

 

The financial statements of New You, Inc. at December 31, 2018 and 2017, and for each of the two years in the period ended December 31, 2018, appearing in this prospectus and related registration statement have been audited by Marcum, LLP, independent registered public accounting firm, as set forth in its report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

The financial statements of New You LLC at December 31, 2018 and for the one year in the period ended December 31, 2018, appearing in this prospectus and related registration statement have been audited by Marcum, LLP, independent registered public accounting firm, as set forth in its report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing..

 

  26  

 

DISCLOSURE OF THE SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Sections 78.7502 and 78.751 of the Nevada Revised Statutes authorizes a court to award, or a corporation’s board of directors to grant indemnity to directors and officers in terms sufficiently broad to permit indemnification, including reimbursement of expenses incurred, under certain circumstances for liabilities arising under the Securities Act. In addition, our Bylaws provide that we have the authority to indemnify our directors and officers and may indemnify our employees and agents (other than officers and directors) against liabilities to the fullest extent permitted by Nevada law. We are also empowered under our Bylaws to purchase insurance on behalf of any person whom we are required or permitted to indemnify.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer, or controlling person in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby in the Securities Act and we will be governed by the final adjudication of such issue.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed this Registration Statement, together with all amendments and exhibits, with the SEC. This Prospectus, which forms a part of the Registration Statement, does not contain all information included in the Registration Statement. Certain information is omitted and you should refer to the Registration Statement and its exhibits. With respect to references made in this Prospectus to any of our contracts or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the Registration Statement for copies of the actual contracts or documents. You may read and copy any document that we file at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings and the Registration Statement, of which this Prospectus is a part, can also be reviewed by accessing the SEC’s website at www.sec.gov.

 

We file periodic reports and other information with the SEC. Such periodic reports and other information are available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.newyounow.com. You may access our annual reports 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 SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information and other content contained on any of our websites are not part of this Prospectus.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  27  

 

 

Index to Financial Statements Required by Article 8 of Regulation S-X:

 

Index to Financial Statements

 

Unaudited Condensed Consolidated Financial Statements of New You, Inc. for the Six Months Ended June 30, 2019 and 2018
F-1 New You, Inc. Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018
F-2 New You, Inc. Condensed Consolidated Statements of Operations for the six months ended June 30, 2019 and 2018 (unaudited)
F-3 New You, Inc. Condensed Consolidated Statements of Stockholders’ Deficit for the six months ended June 30,2019 and June 30, 2018 (unaudited)
F-4 New You, Inc. Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (Unaudited)
F-5 New You, Inc. Notes to the Unaudited Condensed Consolidated Financial Statements
Audited Financial Statements of New You LLC for Year Ended December 31, 2018
F-11 Report of Independent Registered Public Accounting Firm
F-12 New You LLC Balance Sheet as of December 31, 2018
F-13 New You LLC Statement of Operations for the year ended December 31, 2018
F-14 New You LLC Statement of Stockholders’ Deficit for the year ended December 31, 2018
F-15 New You LLC Statement of Cash Flows for the year ended December 31, 2018
F-16 New You LLC Notes to Financial Statements
Audited Financial Statements of New You, Inc. for Years Ended December 31, 2018 and 2017
F-21 Report of Independent Registered Public Accounting Firm
F-22 New You, Inc. Balance Sheets as of December 31, 2018 and 2017
F-23 New You, Inc. Statements of Operations for the years ended December 31, 2018 and 2017
F-24 New You, Inc. Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2018 and 2017
F-25 New You, Inc. Statements of Cash Flows for the years ended December 31, 2018 and 2017
F-26 New You, Inc. Notes to Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  28  

 

 

New You, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    June 30,   December 31,
    2019   2018
ASSETS     (UNAUDITED)          
Current Assets:                
Cash   $ 13,079     $ 27,310  
Credit Card Receivable     37,390       19,603  
Due from Merger Partner     —         10,482  
Inventory     120,464       49,862  
Prepaid Expenses and Other Current Assets     23,959       34,415  
Total Current Assets     194,892       141,672  
                 
Property and Equipment, Net     29,952       31,587  
Operating Lease Right of Use Asset     133,536       —    
                 
TOTAL ASSETS   $ 358,380     $ 173,259  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
LIABILITIES:                
Current Liabilities:                
Accounts Payable and Other Accrued Expenses   $ 290,715     $ 90,359  
Accounts Payable Due to Related Party     53,857       154,234  
Operating Lease Liability     63,759       —    
Related party debt     308,652       229,672  
Total Current Liabilities     716,983       474,265  
                 
Operating Lease Liability, Net of Current Portion     69,777          
Total Liabilities     786,760       474,265  
                 
COMMITMENTS AND CONTINGENCIES – SEE NOTE 5                
                 
STOCKHOLDERS’ DEFICIT:                
Common stock at $0.00001 par value: 1,400,000,000 and 9,000,000 shares authorized as of June 30, 2019 and December 31, 2018, respectively, 27,336,600 and 15,974,558 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively     274       160  
Additional paid in capital     190,157       126,840  
Accumulated Deficit     (618,811 )     (428,006 )
Total Stockholders' Deficit     (428,380 )     (301,006 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ 358,380     $ 173,259  

 

  

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

 

 

  F-1  

 

New You, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

    Six Months Ended   Six Months Ended
    June 30,   June 30,
    2019   2018
Net Revenues   $ 1,458,901     $ —    
                 
Cost of Goods Sold     300,864       —    
                 
Gross Profit     1,158,037       —    
                 
Selling, General and Administrative Expenses     1,348,842       69,876  
                 
Loss from Operations     (190,805 )     (69,876 )
                 
Net Loss   $ (190,805 )   $ (69,876 )
                 
                 
 NET LOSS PER COMMON SHARE                
- Basic and Diluted     (0.01 )     (0.03 )
                 
Weighted Average Common Shares Outstanding                
  - Basic and Diluted     25,087,820       2,389,497  

 

The accompanying notes are an integral part of the Unaudited Condensed Consolidated financial statements.

 

 

  F-2  

 

 New You, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(UNAUDITED)

  

      Common     Additional Paid       Accumulated        
    Shares       Par Value        in Capital       Deficit       Total  
Balance as of December 31, 2018     15,974,558     $ 160     $ 126,840     $ (428,006 )   $ (301,006 )
Reverse Recapitalization     10,772,587       108       (16,677 )     —         (16,569 )
Shares issued pursuant to anti-dilution provision     409,605       4       (4 )     —         —    
Sales of common shares     179,850       2       79,998       —         80,000  
Net loss     —         —         —         (190,805 )     (190,805 )
Balance as of June 30, 2019     27,336,600     $ 274     $ 190,157     $ (618,811 )   $ (428,380 )

 

      Common       Additional Paid       Accumulated        
    Shares       Par Value        in Capital       Deficit       Total  
Balance as of December 31, 2017     —       $ —       $ —       $ —       $ —    
Share issuances     13,951,579       140       (140 )     —         —    
Net loss     —         —         —         (69,876 )     (69,876 )
Balance as of June 30, 2018     13,951,579     $ 140     $ (140 )   $ (69,876 )   $ (69,876 )

 

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

 

 

  F-3  

 

 

New You, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Six Months Ended

June 30,

 

Six Months Ended

June 30,

      2019       2018  
Operating activities                
Net loss   $ (190,805 )   $ (69,876 )
Adjustments to reconcile net loss to net cash provided                
   by operating activities:                
Depreciation and amortization     1,636       —    
Changes in operating assets and liabilities:                
Trade and other receivables     (17,787 )     —    
Inventories     (70,602 )     —    
Prepaid expenses and other current assets     10,456       —    
Accounts payable and other current liabilities     93,888       —    
Net cash used in operating activities     (173,214 )     (69,876 )
Investing activities                
                 
Net cash used in investing activities     —         —    
Financing activities                
Proceeds from Related Party Debt     78,983       69,876  
Sale of shares     80,000       —    
Net cash provided by financing activities     158,983       69,876  
Net (decrease) increase in cash and cash equivalents     (14,231 )     —    
Cash                
Beginning of period     27,310       —    
End of period   $ 13,079     $ —    
Supplemental Disclosures                
Cash Paid for Interest     —         —    
Cash Paid for Income Taxes     —         —    

 

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

  

  F-4  

 

New You, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – Organization and Significant Accounting Policies

Nature of Business

New You, Inc., formerly known as The Radiant Creations Group, Inc.(the “Company”) was incorporated in Nevada on December 29, 2005. From inception, the Company's principal business activity was the acquisition and exploration of mineral resources. On June 20, 2013, following a change of control and subsequent acquisition of an exclusive license agreement, the Company changed its principal business to the development and marketing of cosmetics and over-the-counter personal enhancement products and devices. After a change in control on July 11, 2018, the Company changed its principal business to selling cannabidiol (“CBD”) hemp oil-based products through independent business owners (called “Brand Partners”).

 

The Company, through its wholly owned subsidiary New You LLC, markets and sells its products through a direct sales opportunity afforded to Brand Partners through a multi-level marketing sales opportunity.

 

Recent Developments

On January 9, 2019, the Company completed a reverse recapitalization (“Recapitalization”) with New You LLC, a privately held Wyoming limited liability company in accordance with the terms of a share exchange agreement (“Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, the Company issued 15,974,558 common shares in exchange for one hundred percent (100%) of the outstanding units of New You LLC (11,450 units), with New You LLC becoming a wholly-owned operating subsidiary of the consolidated company. The transaction was accounted for as a reverse recapitalization because the Company was a shell company prior to the transaction. For accounting purposes, New You LLC is considered to have obtained the net monetary assets of the Company in exchange for equity. Upon the consummation of the Recapitalization, the historical financial statements of New You LLC became the consolidated company’s historical financial statements. Accordingly, these financial statements reflect the financial position and operations of New You LLC, except that the capital structure of New You LLC has been adjusted based on the ratio of common shares issued and units transferred in accordance with the Share Exchange Agreement.

 

Basis of Presentation

The unaudited condensed consolidated financial statements include the operations of New You, Inc. (the “Company”) and its wholly-owned subsidiary. These unaudited condensed consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Article 10 of Regulation S-X of the SEC for Interim Reporting. All intercompany transactions, accounts and profits, if any, have been eliminated in the unaudited condensed consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair statement have been included.

 

These unaudited condensed consolidated financial statements do not include all disclosures required by GAAP, therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the more detailed audited financial statements of New You LLC for the year ended December 31, 2018, and the audited financial statements of New You, Inc for the years ended December 31, 2018 and 2017, included elsewhere herein this document. The December 31, 2018 condensed balance sheet was derived from the New You LLC’s audited financial statements for the year ended December 31, 2018.

 

The results for the six months ended June 30, 2019 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period.

 

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include the valuation of stock-based compensation and derivative liabilities, estimates for future charge-backs, and allowance for slow moving or obsolete inventory.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. As of June 30, 2019, the Company had no cash equivalents.

Credit Card Receivables

Credit card receivable consists of only the amount due from the credit card processing companies. There is no need for an allowance for doubtful accounts, the system and processor makes sure that the transaction is successful prior to the sale being finalized. Accordingly, no allowance was recorded as of December 31, 2018.

Concentration of Credit Risk

The Company monitors its positions with, and the credit quality of, the financial institutions with which it invests.

  F-5  

 

Substantially all of the Company’s revenues are to unique customers or Brand Partners. Since the Company sells its products to a large number of customers, there is no revenue concentration from customers. However, the Company uses merchant processors to charge customer credit cards and does contain concentration risk between credit card processors. As of December 31, 2018, one credit card processor accounted for 100% of Credit Card Receivables. We are in the process of adding more processors when they become available.

Inventory

Inventory consists of finished goods and is valued at the lower of cost or net realizable value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts.

Prepaid Expenses

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses primarily consist of deposits on inventory yet to be delivered or shipped.

Property and Equipment

Property and equipment are stated at cost, net of depreciation provided by use of a straight-line method over the estimated useful lives of the assets, of five years. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable.

Impairment of Long-Lived Assets

We evaluate the recoverability of long-lived assets in accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets. We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Such impairment is recognized in the event the net book value of such assets exceeds their fair value. If the carrying value of the net assets assigned exceeds the fair value of the assets, then the second step of the impairment test is performed in order to determine the implied fair value. No impairment of long-lived assets occurred in the years presented.

Basic and diluted net loss per share

Basic income per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, Earnings Per Share. Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents on an “as if converted” basis. To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted income per share. There were no dilutive shares in 2017 or 2018.

 

Revenue Recognition

Revenue is recognized in accordance with ASC 606, Contracts with Customers, by analyzing exchanges with the Company’s customers and Brand Partners using a five-step analysis that includes identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

The Company recognizes revenue when the customer receives the promised good and all performance obligations are met. Revenue is recognized at an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services.

The Company records sales of finished products once the customer or Brand Partner places and pays for the order and the product is shipped. Delivery is considered to have occurred when title and risk of loss have transferred to the customer, which is upon shipment of the product.

The Company and its Brand Partners agree to provide customers with a 100% satisfaction guaranteed policy that allows the customer or Brand Partner sixty days within the sales transaction to return the product and receive a 100% refund, and one year for a Brand Partner to get a 90% refund, as long as the product remains in saleable condition and the Brand Partner or the Company have not cancelled the Brand Partner agreement. The Company records an estimate for provisions of returns and other adjustments for each shipment, and are netted with gross sales. The Company accounts for such provisions during the same period in which the related revenues are earned. The Company has determined that the population of contracts with the Company’s customers and Brand Partners tends to be homogenous, so that review of the contracts and estimate of various revenue related adjustments can be applied to the entire population. The Company had customer discounts, returns and rebates of approximately $39,000 for the six months ended June 30, 2019 and $0 for the six months ended June 30, 2018. The Company has not recorded a reserve for returns at June 30, 2019, December 31, 2018, or June 30, 2018, since it does not believe such returns will be material.

As of June 30, 2019, the Company did not have any in-process or prepaid sales orders or transactions that would require the recognition of a contract liability.

Cost of Revenue

Amounts recorded as cost of revenue relate to direct expenses incurred in order to fulfill orders of our products. Such costs are recorded as incurred. Our cost of revenue consists primarily of the cost of product; and the cost of product samples.

Commission Expense and Contract Acquisition Costs

The Company’s markets and sells its products through a direct sales opportunity afforded to Brand Partners through a multi-level marketing sales platform. Commissions are earned on product sales to Brand Partners and their customers at a rate of 10% for every transaction plus a specified spread on recurring sales. Brand Partners earn a 5% commission on sales by other team members at lower levels up to nine level below the Brand Partner. Brand Partners can earn an additional bonus for customer sales and team sales. The team bonus is $400 for each time their team bonus volume reaches a certain amount in a 30 day period. Brand Partners can also earn an initial bonus for qualifying customer purchases in the Brand Partners’ first 30 days of 20% of the transaction value.

The Company expenses commissions in accordance with ASC 606, Contracts with Customers. Commissions are accrued upon shipment of the product to either the Brand Partner or the customer.

  F-6  

 

Advertising Expenses

The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.” Advertising expenses totaled $10,543 for the six months ending June 30, 2019 and $0 for the six months ended June 30, 2018.

Recently issued accounting pronouncements

FASB ASU No. 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606” – Issued in November 2018, ASU 2018-18 provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for within revenue under Topic 606 in order to provide for better comparability among entities. The guidance clarifies which transactions should be accounted for as revenue under Topic 606 and provides unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 regarding distinct goods or services. The guidance also specifies that transactions with a collaborative arrangement not directly related to sales to third parties may not be presented together with revenue recognized under Topic 606. The guidance will be effective for the Company on January 1, 2020, including interim periods, and must be applied retrospectively. An entity may apply the guidance to either all contracts or to only contracts that are not completed as of the date of the initial application of Topic 606. The Company has early adopted this standard. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)” – In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2017. Adoption of ASU 2016-15 did not have a significant impact on the Company’s financial statements.

 

FASB ASU No. 2014-09, “Revenue from Contracts with Customers” – In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 to defer the effective date for annual reporting to periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of the original effective date in ASU 2014-09, which is annual reporting periods beginning after December 15, 2016, which the Company has chosen to early adopt. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients, which amends and clarifies certain aspects in ASU 2014-09 that include collectability, presentation of sales and other taxes collected from customers, noncash consideration, contract modifications and completed contracts at transition. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, which amends the guidance in ASU 2014-09 on accounting for licenses of intellectual property and identifying performance obligations. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal versus agent guidance in ASU 2014-09. The standards are to be applied retrospectively and the Company has elected to utilize the full retrospective method. Adoption of ASU 2014-09 and related amendments did not have a significant impact on the Company’s financial statements.

 

FASB ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share- Based Payment Accounting” – Issued in June 2018, ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606. The new standard will be effective for the Company on January 1, 2019. The Company has early adopted this standard using the full retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU No. 2018-13 (Topic 820), “Fair Value Measurement” – Issued in August 2018, ASU 2018-13 modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company does not expect the standard to have a material impact on our financial statements and related disclosures

 

FASB ASU No. 2018-09, “Codification Improvements” - In July 2018, the FASB issued ASU 2018-09, Codification Improvements (“ASU 2018-09”). This standard does not prescribe any new accounting guidance, but instead makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. Certain updates are applicable immediately, but the majority of the amendments in ASU 2018-09 will be effective for annual periods beginning after December 15, 2018. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

 

FASB ASU No. 2018-02, (Topic 220), “Income Statement – Reporting Comprehensive Income” - In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), to simplify the accounting for share-based payments made to nonemployees. Under ASU 2018-07, accounting for share-based payments made to nonemployees is substantially the same as the accounting for share-based payments made to employees. Share based awards to nonemployees will be measured at fair value on the grant date of the awards, with the need to assess the probability of satisfying performance conditions, if any are present. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The Company has early adopted this standard using the full retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

  F-7  

 

 

FASB ASU No. 2016-02 (Topic 842), “Leases” – Issued in February 2016, ASU No. 2016-02 established ASC Topic 842, Leases, as amended by subsequent ASUs on the topic, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to apply a two-method approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. Lessees are required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by the lessor is largely unchanged from that applied under the existing lease standard. We will be required to record a right-of-use asset and lease liability equal to the present value of the remaining minimum lease payments and will continue to recognize expense on a straight-line basis upon adoption of this standard. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued an update ASU 2018-11 Leases: Targeted Improvements, which provides companies with an additional transition option that would permit the application of ASU 2016-02 as of the adoption date rather than to all periods presented. We adopted this standard on January 1, 2019 and elected to use the transition practical expedients package available to us under this new standard.

 

2. GOING CONCERN

 

We have never reported net income. We incurred a net loss for the six months ended June 30, 2019 and had an accumulated deficit of $618,811 at June 30, 2019. At June 30, 2019, we had a cash balance of approximately $13,079, compared to a cash balance of $27,310 at December 31, 2018. At June 30, 2019, we had a working capital deficit of $552,091, compared to a working capital deficit of $332,593 at December 31, 2018.

 

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements until we are able to raise revenues to a point of positive cash flow. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support its operations.

 

Based on the above factors, substantial doubt exists about our ability to continue as a going concern for one year from the issuance of these financial statements.

 

3. CONCENTRATIONS OF BUSINESS AND CREDIT RISK

 

The Company monitors its positions with, and the credit quality of, the financial institutions with which it invests. The Company, at times, maintains balances in various operating accounts in excess of federally insured limits.

 

The Company grants credit in the normal course of business to its customers and Brand Partners. The Company periodically performs credit analysis and monitors the financial condition of its customers to reduce credit risk.

 

Since the Company sells its products to a large number of customers, there is no accounts receivable concentration from customers. However, the Company uses merchant processors to charge customer credit cards and does contain concentration risk between credit card processors. As of December 31, 2018, one credit card processors accounted for 100% of accounts receivable.

 

 

4. EQUITY

 

On January 9, 2019, the Company purchased one hundred percent (100%) of the outstanding units of New You LLC. Pursuant to the terms and conditions of the Share Exchange Agreement, the Company issued 15,974,558 common shares in exchange for one hundred percent (100%) of New You LLC outstanding units. As a result of the Share Exchange Agreement, New You LLC became a wholly owned subsidiary of the Company. New You LLC began operations in August 2018.

 

On March 8, 2019, pursuant to stockholder consent, our Board of Directors authorized an amendment (the "Amendment") to our Certificate of Incorporation, as amended, to (i) change the name of the Company from The Radiant Creations Group to New You, Inc. and (ii) effect a reverse stock split of the issued and outstanding shares of our common stock, par value $0.00001, on a 1 for 50 basis (the "Reverse Stock Split"). We filed the Amendment with the Nevada Secretary of State reflecting the name change on March 27, 2019. On April 29, 2019, the Financial Industry Regulatory Authority, Inc. notified us that the Name Change and Reverse Stock Split would take effect on April 30, 2019 (the "Effective Date"). On the Effective Date, each holder of common stock received 1 share of our common stock for each 50 shares of our common stock they owned immediately prior to the Reverse Stock Split. We did not issue fractional shares in connection with the Reverse Stock Split. Fractional shares will be rounded up to the nearest whole share. In addition, on the Effective Date the Company’s trading symbol changed to “RCGPD” for a period of 20 business days, after which the "D" will be removed from the Company’s trading symbol and will begin trading under new trading symbol “NWYU”. Unless otherwise indicated, the information in these unaudited consolidated financial statements gives effect to the 1-for-50 reverse stock split of the Company’s common stock, par value $0.00001 per share and name change from The Radiant Creations Group to New You, Inc. effected on April 30, 2019.

 

During the six months ended June 30, 2019, the Company issued 179,850 common shares which resulted in raising $80,000 in additional capital.

 

5. COMMITMENTS AND CONTINGENCIES

 

Operating Lease Commitments

 

A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. ROU assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. The lease term used to calculate the ROU asset includes any renewal options or lease termination that the Company expects to exercise.

 

The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its estimated incremental secured borrowing rate. ROU assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both ROU assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company's lease agreements do not contain significant residual value guarantees, restrictions or covenants.

 

The Company leases a warehouse facility under a lease agreement that expires July 31, 2021. The Company does not have any significant finance leases.

 

The components of total lease cost were as follows:

 

   

Six Months Ended

June 30,

    2019
Operating lease cost     37,164  
Total lease cost   $ 37,164  

 

  F-8  

 

 

Cash paid for amounts included in operating lease liabilities was $37,164 for the six months ended June 30, 2019. The table below presents total operating lease ROU assets and lease liabilities as of June 30, 2019:

     
    Six Months Ended
  June 30,
    2019
Operating lease ROU assets   $ 133,536  
Operating lease liabilities     133,536  

  

The table below presents the maturities of operating lease liabilities as of June 30, 2019: 

 

2019 (Remaining Months)            $              32,132
2020                          77,277
2021                          45,801
Total Lease Payments                        155,210
Less: Discount                    (21,674)
Total Operating Lease Payments          $            133,536

 

The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease right-of-use assets:

 

    Six Months Ended
June 30,
    2019
Weighted average remaining lease term (years)     2.1
Weighted average discount rate     7%

 

Litigation and Claims

 

The Company may be involved in of lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for the Company’s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no matters that required an accrual as of June 30, 2019 or December 31, 2018 nor were there any asserted or unasserted material claims for which material losses are reasonably possible.

 

6. RELATED PARTY TRANSACTIONS

 

During the six months ended June 30, 2019, the Directors provided loans to the Company or paid for various expenses of the Company. These loans contained no interest, term or due date. As of June 30, 2019, these loans had a combined balance of $308,652 for the director and CEO and one other board member. There are also payable items in the amounts of $5,000 for consulting payments to the director and $48,857 of expenses paid by the CEO.

 

The Company leases and pays for a warehouse facility where it shares space with CBD Naturals, LLC, a related party. In exchange, CBD Naturals, LLC leases and pays for an office facility where it shares space with the Company. As a result of this arrangement, the Company has recorded rent expense in the accompanying statements of operations for the lease that it is responsible for paying.

 

The Company purchases product from CBD Naturals LLC, which is owned by a shareholder of the Company. Drops, Drops For Pets, Energy FX, Sleep FX are manufactured by CBD Naturals, LLC.

 

During 2018 and the first 5 months of 2019, all credit card receivable payments were processed through the bank account of one of the founding members due to the frequent bank account changes that were occurring with the Company’s accounts. All funds received into the founder’s bank account was transferred directly to the Company’s account on a weekly basis and has been accounted for. As of May 2019, all credit card receivables are deposited by the credit card processor directly into the Company’s bank account.

  F-9  

 

 

7. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through November 7, 2019, which is the date the financial statements were issued. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements, except as disclosed below.

 

Subsequent to June 30, 2019, the Company issued 6,398,600 common shares which resulted in raising $229,894 in additional capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  F-10  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Members and Directors of

New You LLC

 

Opinion on the Financial Statements

We have audited the accompanying balance sheet of New You LLC (the “Company”) as of December 31, 2018, the related statements of operations, stockholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

/s/ Marcum llp

 

Marcum llp

 

We have served as the Company’s auditor since 2019.

 

Costa Mesa, California
November 7, 2019

 

 

 

  F-11  

 

New You LLC

BALANCE SHEET

AS OF DECEMBER 31, 2018

ASSETS        
Current Assets:        
Cash   $ 27,310  
Credit Card Receivable     19,603  
Due from New You, Inc.     10,482  
Inventory     49,862  
Prepaid Expenses and Other Current Assets     34,415  
Total Current Assets     141,672  
         
Property and Equipment, Net     31,587  
TOTAL ASSETS   $ 173,259  
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
LIABILITIES:        
Current Liabilities:        
Accounts Payable and Other Accrued Expenses   $ 208,477  
       (including $154,234 due to related parties)        
Commission Payable     36,116  
Related Party Debt     229,672  
Total Current Liabilities     474,265  
         
         
TOTAL LIABILITIES     474,265  
         
COMMITMENTS AND CONTINGENCIES – See Note 4        
         
STOCKHOLDERS’ DEFICIT:        
Common Stock at $0.00001 par value; 900,000,000 shares authorized, 15,974,558 shares issued and outstanding     160  
Additional Paid in Capital     126,840  
Accumulated Deficit     (428,006 )
TOTAL STOCKHOLDERS’ DEFICIT     (301,006 )
         
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 173,259  
         

 

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

 

  F-12  

 

New You LLC

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

 

Total Revenues   $ 898,153  
         
Cost of Goods Sold     197,415  
         
Gross Profit     700,738  
         
Selling, General and Administrative Expenses     689,991  
Commission Expense     437,953  
         
Loss from Operations     (427,206 )
         
Income Tax Expense     800  
         
Net Loss   $ (428,006 )
         
 NET LOSS PER COMMON SHARE        
- Basic and Diluted   $ (0.05 )
         
Weighted Average Common Shares Outstanding        
  - Basic and Diluted     8,218,053  

 

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

 

  F-13  

 

 

New You LLC

STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE YEAR ENDED DECEMBER 31, 2018

    Common            
    Shares   Par Value   Additional Paid-in Capital   Accumulated Deficit   Total Stockholders’ Deficit
                     
Balance as of January 1, 2018     —       $ —       $ —       $ —       $ —    
                                         
Share issuances to Founding Members     13,951,579       140       (140 )     —         —    
Share issuances for Cash     2,022,979       20       126,980       —         127,000  
Net loss     —         —         —         (428,006 )     (428,006 )
                                         
Balance as of December 31, 2018     15,974,558     $ 160     $ 126,840     $ (428,006 )   $ (301,006 )

  

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

  F-14  

 

 

New You LLC

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2018

 

 

 

Operating activities        
Net loss   $ (428,006 )
Adjustments to reconcile net loss to net cash used in        
operating activities:        
Depreciation and amortization     2,414  
Changes in operating assets and liabilities:        
Credit Card Receivables     (19,603 )
Due to New You, Inc.     (10,482 )
Inventories     (49,862 )
Prepaid expenses and other current assets     (34,415 )
Accounts payable and other current liabilities (including change in commissions payable of $36,116)     244,593  
Net cash used in operating activities     (295,361 )
Investing activities        
Purchases of property and equipment     (34,001 )
Net cash used in investing activities     (34,001 )
Financing activities        
Proceeds from related party debt     229,672  
Owner's Investment     127,000  
Net cash provided by financing activities     356,672  
Net (decrease) increase in cash     27,310  
         
Beginning of year     —    
End of year   $ 27,310  
         
         
Supplemental Disclosures        
Cash Paid for Interest     —    
Cash Paid for Income Taxes     —    

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

  F-15  

 

New You LLC

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2018

  

NOTE 1 – DESCRIPTION OF BUSINESS

 

Organization

 

New You LLC, a Wyoming limited liability company was formed on November 15, 2017 (the date of inception) as X Shipping, LLC (the “Company”). On May 4, 2018, the Company changed its name to New You LLC. The Company is in the business of selling cannabidiol (“CBD”) hemp oil-based products. The Company’s principal business is the development and marketing of CBD products and it currently sells its products through a direct sales opportunity afforded to independent business owners (called “Brand Partners”). While the entity was formed in November of 2017, the Company did not have any activity or transactions from the date of inception to December 31, 2017. On May 30, 2018, three investors were issued units in the Company with ownership percentages of 45%, 45% and 10%.

  

Going Concern

 

We have never reported net income. We incurred a net loss for the year ended December 31, 2018 and had an accumulated deficit of $428,006 at December 31, 2018. At December 31, 2018, we had a cash balance of $27,310. We had a working capital deficit of $332,953 at December 31, 2018.

 

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements until we are able to raise revenues to a point of positive cash flow. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support its operations.

 

Based on the above factors, substantial doubt exists about our ability to continue as a going concern for one year from the issuance of these financial statements.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) to reflect the accounts and operations of the Company.

 

On January 9, 2019, related party New You, Inc. completed a reverse recapitalization (“Recapitalization”) with New You LLC in accordance with the terms of a share exchange agreement (“Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, New You, Inc. issued 798,727,886 common shares (15,974,558 shares as adjusted for the 1-for-50 reverse common stock split New You, Inc. performed in April 2019) in exchange for one hundred percent (100%) of the outstanding units of New You LLC (11,450 units), with New You LLC becoming a wholly-owned operating subsidiary of the consolidated company. The transaction was accounted for as a reverse recapitalization because New You, Inc. was a shell company prior to the transaction. For accounting purposes, New You LLC is considered to have obtained the net monetary assets of New You, Inc. in exchange for equity. Upon the consummation of the Recapitalization, the historical financial statements of New You LLC became the consolidated company’s historical financial statements. Accordingly, these financial statements, reflect the financial position and operations of New You LLC, except that the capital structure of New You LLC has been adjusted based on the ratio of common shares issued and units transferred in accordance with the Share Exchange Agreement. As a result, the balance sheet and statement of stockholders’ deficit include common share information, in spite of the fact that New You LLC is not a corporation.

 

Use of Estimates

 

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of total net revenue and expenses in the reporting periods. The Company regularly evaluates estimates and assumptions related to revenue recognition, useful lives of fixed assets, sales returns, inventory valuation, and litigation and other loss contingencies. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company 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 and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

 

Cash and Cash Equivalents

 

The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company considers cash deposits in banks as cash and investments with original maturities at purchase of three months or less as cash equivalents. There were no cash equivalents as of December 31, 2018.

 

Credit Card Receivables

 

Credit card receivable consists of only the amount due from the credit card processing companies. There is no need for an allowance for doubtful accounts, the system and processor makes sure that the transaction is successful prior to the sale being finalized. Accordingly, no allowance was recorded as of December 31, 2018.

 

Concentration of Credit Risk

 

The Company monitors its positions with, and the credit quality of, the financial institutions with which it invests.

 

Substantially all of the Company’s revenues are to unique customers or Brand Partners. Since the Company sells its products to a large number of customers, there is no revenue concentration from customers. However, the Company uses merchant processors to charge customer credit cards and does contain concentration risk between credit card processors. As of December 31, 2018, one credit card processor accounted for 100% of Credit Card Receivables. We are in the process of adding more processors when they become available.

 

  F-16  

 

Inventory

 

Inventory is primarily comprised of finished goods and packaging, and is valued at the lower of cost or net realizable value, with cost being determined by using the first-in, first-out method.

 

Prepaid Expenses

 

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses primarily consist of deposits on inventory yet to be delivered or shipped.

 

Property and Equipment

 

Property and equipment are carried at cost less accumulated depreciation and impairment losses, if any. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of five years, which includes warehouse equipment and furniture and fixtures.

 

Property and equipment, net was comprised of warehouse equipment and furniture and fixtures with a gross value of $34,001 and accumulated depreciation of $2,414 as of December 31, 2018. Depreciation expense related to property and equipment for the year ended December 31, 2018 was $2,414.

 

Impairment

 

Long-lived assets are reviewed for impairment in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances that indicate that their carrying value may not be recoverable. Long-lived assets are reported at the lower of carrying amount or fair value less cost to sell. For the fiscal year ended December 31, 2018, there were no indicators of impairment of the value of our long-lived assets.

 

Revenue Recognition and Performance Obligations

 

Revenue is recognized in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 606, Contracts with Customers, by analyzing exchanges with the Company’s customers and Brand Partners using a five-step analysis such as identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

 

The Company recognizes revenue when the promised goods are shipped and all performance obligations are met. Revenue is recognized at an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services.

 

The Company records sales of finished products once the customer or Brand Partner places and pays for the order and the product is simultaneously shipped. Control is deemed transferred when title and risk of loss have transferred to the customer, which is upon shipment of the product.

 

The Company and its Brand Partners provide customers with a 100% satisfaction guaranteed policy that allows the customer 60 days to return the product and receive a 100% refund and allows customers that are also Brand Partners twelve months to return the product and receive a 90% refund, as long as the product remains in saleable condition and the Brand Partner or the Company have not cancelled the Brand Partner agreement. The Company records an estimate for provisions of returns, and other adjustments for each shipment, which are netted with gross sales. The Company accounts for such provisions during the same period in which the related revenues are earned. The Company has determined that the population of contracts with the Company’s customers and Brand Partners tends to be homogenous, so that review of the contracts and estimate of various revenue related adjustments can be applied to the entire population. The Company had returns of approximately $14,000 for the year ended December 31, 2018. The Company has not recorded a reserve for returns at December 31, 2018, since it does not believe such returns will be material.

 

As of December 31, 2018, the Company did not have any in-process or prepaid sales orders or transactions that would require the recognition of a contract liability.

 

Commission Expense and Contract Acquisition Costs

 

The Company markets and sells its products through a direct sales opportunity afforded to Brand Partners through a multi-level marketing sales opportunity. Commissions are earned on product sales to first level Brand Partners and their customers at a rate of 10% on the sales price for every transaction plus a specified spread on recurring sales. Brand Partners also earn a 5% commission on sales price by other team members at lower levels up to nine levels below the Brand Partner. Brand Partners can earn an additional bonus for customer sales and team sales. The team bonus is $400 every time their team bonus volume reaches a certain amount in a 30 day period. Brand Partners can also earn an initial bonus for qualifying customer purchases in the Brand Partners first 30 days of 20% of the transaction value.

 

The Company expenses commissions in accordance with ASC 606, Contracts with Customers. Commissions are accrued upon shipment of the product.

 

Advertising Expenses

 

The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.” Advertising expenses totaled $19,105 the year ended December 31, 2018.

 

Fair Value of Financial Instruments

 

The carrying amounts in the accompanying balance sheet for cash, credit card receivable, Due from New You, Inc., accounts payable and accrued expenses, commissions payable, and related party debt approximate their fair values due to their short-term maturities.

 

Fair Value

 

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

  F-17  

 

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

 

In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments.

Income Taxes

The Company has elected to be treated as a partnership for federal income tax purposes and generally does not incur income taxes. Instead, profits and losses are included in the respective income tax returns of the members.  The Company may be liable for certain state and local income taxes.

The Company’s tax returns and the amount of the Company’s revenue, expenses, and taxes are subject to examination by federal and state taxing authorities. Such examinations could result in adjustments to revenue or expenses, and the tax liability of the members could be impacted accordingly.  The Company will reflect the impact of such examinations, if any, in the financial statements in the year in which the adjustments are finalized between the Company and the taxing authority.

The Company files federal and California state income tax returns. While no income tax returns are currently being examined and the Company has not been notified of a pending examination, the Company’s initial federal and state income tax returns for 2017 and 2018 will remain open and subject to examination by the appropriate governmental agencies once filed.

The Company provides for income taxes utilizing the asset and liability method of accounting. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that future tax benefits associated with a deferred tax asset will not be realized, a valuation allowance is provided. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in the statement of operations as an adjustment to income tax expense in the period that includes the enactment date.

The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

 

Recently Adopted Accounting Standards

 

FASB ASU No. 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606” – Issued in November 2018, ASU 2018-18 provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for within revenue under Topic 606 in order to provide for better comparability among entities. The guidance clarifies which transactions should be accounted for as revenue under Topic 606 and provides unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 regarding distinct goods or services. The guidance also specifies that transactions with a collaborative arrangement not directly related to sales to third parties may not be presented together with revenue recognized under Topic 606. The guidance will be effective for the Company on January 1, 2020, including interim periods, and must be applied retrospectively. An entity may apply the guidance to either all contracts or to only contracts that are not completed as of the date of the initial application of Topic 606. The Company has early adopted this standard. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)” – In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2017. Adoption of ASU 2016-15 did not have a significant impact on the Company’s financial statements.

 

FASB ASU No. 2014-09, “Revenue from Contracts with Customers” – In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 to defer the effective date for annual reporting to periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of the original effective date in ASU 2014-09, which is annual reporting periods beginning after December 15, 2016, which the Company has chosen to early adopt. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients, which amends and clarifies certain aspects in ASU 2014-09 that include collectability, presentation of sales and other taxes collected from customers, noncash consideration, contract modifications and completed contracts at transition. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, which amends the guidance in ASU 2014-09 on accounting for licenses of intellectual property and identifying performance obligations. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal versus agent guidance in ASU 2014-09. The standards are to be applied retrospectively and the Company has elected to utilize the full retrospective method. Adoption of ASU 2014-09 and related amendments did not have a significant impact on the Company’s financial statements.

 

FASB ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share- Based Payment Accounting” – Issued in June 2018, ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606. The new standard will be effective for the Company on January 1, 2019. The Company has early adopted this standard using the full retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU No. 2018-13 (Topic 820), “Fair Value Measurement” – Issued in August 2018, ASU 2018-13 modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

 

  F-18  

 

 

FASB ASU No. 2018-09, “Codification Improvements” - In July 2018, the FASB issued ASU 2018-09, Codification Improvements (“ASU 2018-09”). This standard does not prescribe any new accounting guidance, but instead makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. Certain updates are applicable immediately, but the majority of the amendments in ASU 2018-09 will be effective for annual periods beginning after December 15, 2018. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

 

FASB ASU No. 2018-02, (Topic 220), “Income Statement – Reporting Comprehensive Income” - In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), to simplify the accounting for share-based payments made to nonemployees. Under ASU 2018-07, accounting for share-based payments made to nonemployees is substantially the same as the accounting for share-based payments made to employees. Share based awards to nonemployees will be measured at fair value on the grant date of the awards, with the need to assess the probability of satisfying performance conditions, if any are present. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The Company has early adopted this standard using the full retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

 

FASB ASU No. 2016-02 (Topic 842), “Leases” – Issued in February 2016, ASU No. 2016-02 established ASC Topic 842, Leases, as amended by subsequent ASUs on the topic, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to apply a two-method approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. Lessees are required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by the lessor is largely unchanged from that applied under the existing lease standard. We will be required to record a right-of-use asset and lease liability equal to the present value of the remaining minimum lease payments and will continue to recognize expense on a straight-line basis upon adoption of this standard. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued an update ASU 2018-11 Leases: Targeted Improvements, which provides companies with an additional transition option that would permit the application of ASU 2016-02 as of the adoption date rather than to all periods presented. We adopted this standard on January 1, 2019 and elected to use the transition practical expedients package available to us under this new standard.

 

NOTE 3 – EQUITY

 

On May 30, 2018, three founding members were issued shares in the Company with ownership percentages of 45%, 45% and 10% for no consideration. Later in 2018, 2,022,979 shares were issued to multiple investors, separate from the founding members, for $127,000 cash.

 

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

Operating Lease Commitments

 

The Company leases and pays for a warehouse facility where it shares space with CBD Naturals, LLC, a related party. In exchange, CBD Naturals, LLC leases and pays for an office facility where it shares space with the Company. As a result of this arrangement, the Company has recorded rent expense in the accompanying statement of operations for the lease that it is responsible for paying. The Company’s rent expense for the year ended December 31, 2018 was $22,946 and is included in general and administrative expense on the accompany statement of operations.

Future minimum lease payments under non-cancelable operating leases having an initial or remaining term of more than one year are as follows:

 

 

Year Ending December 31, Payments
2019 $ 69,296
2020 77,277
2021 45,801
Total Future Minimum Lease Payments $192,374

 

NOTE 5 - LITIGATION AND CLAIMS

 

The Company may be involved in lawsuits and claims arising in the ordinary course of business from time to time. The Company reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for the Company’s financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company determined that there were no matters that required an accrual as of December 31, 2018 nor were there any asserted or unasserted material claims for which material losses are reasonably possible.

 

 

  F-19  

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

During 2018, the directors provided loans to the Company or paid for various expenses of the Company. These loans had no interest, term, or due date. As of December 31, 2018, these loans had a balance of $104,123 and $125,549 for the director and CEO, respectively. During 2018, the Company paid several expenses on behalf of New You, Inc., which subsequently became the parent of the Company (See Note 6). As of December 31, 2018, these advances totaled $10,482.

 

As discussed above in Note 3, the Company leases space on behalf of CBD Naturals, LLC, a related party, in exchange for the related party leasing premises for the Company.

 

The Company purchases product from CBD Naturals LLC, which is owned by a shareholder of the Company. Drops, Drops For Pets, Energy FX, Sleep FX are manufactured by CBD Naturals, LLC.

 

During 2018 and the first 5 months of 2019, all credit card receivable payments were processed through the bank account of one of the founding members due to the frequent bank account changes that were occurring with the Company’s accounts. All funds received into the founder’s bank account was transferred directly to the Company’s account on a weekly basis and has been accounted for. As of May 2019, all credit card receivables are deposited by the credit card processor directly into the Company’s bank account.

 

NOTE 7 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through November 7, 2019, which is the date the financial statements were issued. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements except as discussed in Note 1 under Basis of Presentation and in Note 6.

 

 

 

 

 

 

 

  F-20  

 

  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and Board of Directors of

New You, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of New You, Inc. (the “Company”) as of December 31, 2018 and December 31, 2017, the related statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2018 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

 

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Marcum llp

 

Marcum llp

 

We have served as the Company’s auditor since 2019.

 

Costa Mesa, California
November 7, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  F-21  

 

New You, Inc.

BALANCE SHEETS

 

    December 31,   December 31,
    2018   2017
                 
ASSETS                
Current Assets                
Cash   $ —       $ 157  
Total current assets     —         157  
                 
TOTAL ASSETS     —         157  
                 
                 
LIABILITIES & STOCKHOLDERS' DEFICIT                
LIABILITIES:                
Current Liabilities:                
Accounts payable     6,088       5,646  
Due to New You LLC     10,482       —    
Accrued interest     —         46,000  
Liability to issue shares     —         147,067  
Notes payable     —         220,000  
Credit line due to related party     —         49,580  
Total current liabilities     16,570       468,293  
                 
TOTAL LIABILITIES     16,570       468,293  
COMMITMENTS AND CONTINGENCIES – SEE NOTE 7                
STOCKHOLDERS' DEFICIT                
Series A Preferred* at $0.00001 par value, 0 and 3,000,000 shares were issued and outstanding as of December 31, 2018 and 2017, respectively     —         30  
Series B Preferred* at $0.00001 par value, 0 and 20,000,000 shares were issued and outstanding as of December 31, 2018 and 2017, respectively     —         200  
Common stock at $0.00001 par value: 900,000,000 shares authorized, 10,772,587 and 739,117 shares issued and outstanding as of December 31, 2018 and 2017, respectively     107       7  
Additional paid in capital     16,560,469       16,391,989  
Accumulated deficit     (16,577,146 )     (16,860,362 )
                 
TOTAL STOCKHOLDERS' DEFICIT     (16,570 )     (468,136 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ —       $ 157  

*100,000,000 Total Series A and B Preferred Shares Authorized

 

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


 

  F-22  

 

 New You, Inc.

STATEMENTS OF OPERATIONS

 

    For the Year Ended   For the Year Ended
    December 31, 2018   December 31, 2017
                 
REVENUE, NET   $ —       $ 12,734  
                 
COST OF REVENUE     —         48,211  
                 
GROSS LOSS     —         (35,477 )
                 
Operating Expenses:                
General and administrative expenses     40,416       231,789  
Total operating expenses     40,416       231,789  
                 
Operating loss     (40,416 )     (267,266 )
                 
Other Income (Expense):                
Interest expense, net     (85,809 )     (223,958 )
Gain on settlement of debt     409,443       —    
  Total other income (expense)     323,634       (223,958 )
NET INCOME (LOSS)   $ 283,218     $ (491,224 )
                 
 NET LOSS PER COMMON SHARE                
- Basic and Diluted   $ 0.05     $ (0.68 )
                 
Weighted Average Common Shares Outstanding                
  - Basic and Diluted     6,074,968       720,328  

The accompanying notes are an integral part of the financial statements

 

 

  F-23  

 

 

New You, Inc.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

 

Preferred Common        
    Series A       Series B       Par Value        Shares       Par Value      

 Additional Paid

in Capital

     

Accumulated

Deficit

     

 Total

Deficiency

 
Balance as of January 1, 2017     3,000,000       27,000,000       300       676,117     $ 7     $ 16,220,419     $ (16,369,140 )   $ (148,414 )
Common stock issued as compensation     —         —         —         11,000       —         27,500       —         27,500  
Common stock issued for website development     —         —         —         40,000       —         100,000       —         100,000  
Common stock issued to note holders     —         —         —         19,000       —         38,000       —         38,000  
Common stock purchase     —         —         —         3,000       —         6,000       —         6,000  
Shares cancelled     —         (7,000,000 )     (70 )     (10,000 )     —         70       —         —    
Net loss     —         —         —         —         —         —         (491,224 )     (491,224 )
Balance as of December 31, 2017     3,000,000       20,000,000       230       739,117     $ 7     $ 16,391,989     $ (16,860,364 )   $ (468,138 )
Common stock issued as compensation     —         —         —         4,827       —         12,078       —         12,078  
Issuance of Shares due to debt extinguishment     —         —         —         44,000       —         30,000       —         30,000  
Exchange of preferred shares for common stock     (3,000,000 )     (20,000,000 )     (230 )     269,315       3       227       —         —    
Issuance of shares for majority purchase     —         —         —         9,695,328       97       94,903       —         95,000  
Cancellation of debt for shares     —         —         —         20,000       —         13,600       —         13,600  
Shares transferred from shareholder for services provided to the company     —         —         —         —         —         17,672       —         17,672  
Net income     —         —         —         —         283,218       283,218                  
Balance as of December 31, 2018     —         —         —         10,772,587     $ 107     $ 16,560,469     $ (16,577,146 )   $ (16,570 )

 

 

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


  F-24  

 

 New You, Inc.
STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:  

For the Year Ended

December 31, 2018

 

For the Year Ended

December 31, 2017

 Net Income (Loss)     283,228       (491,224 )
 Adjustments to reconcile net income (loss) to net cash used in operating activities:                
 Shares issued as a late payment penalty on notes payable     —         38,000  
 Shares transferred from shareholder as compensation     17,752       —    
 Common stock issued as compensation     12,078       27,500  
 Common stock issued for website development     —         100,000  
 Amortization of debt discount     —         22,875  
 Gain on settlement of debt     (409,443 )     —    
 Changes in operating assets and liabilities:     —         —    
 Accounts receivable     —         2,044  
 Due to New You LLC     10,482       —    
 Prepaid expenses     —         11,500  
 Other assets     —         56,501  
 Accounts payable and accrued interest     55,746       (15,759 )
 Liability to issue shares     —         147,067  
 NET CASH USED IN OPERATING ACTIVITIES     (30,157 )     (101,496 )
 CASH FLOWS FROM INVESTING ACTIVITIES:     —         —    
 CASH FLOWS FROM FINANCING ACTIVITIES:                
 Payments on promissory notes     (65,000 )     —    
 Issuance of shares for majority purchase     95,000       —    
 Issuance of shares for cash     —         6,000  
 Proceeds from loan payable to related party     —         64,255  
 Repayments of loan payable to related party     —         (14,675 )
 NET CASH PROVIDED BY FINANCING ACTIVITIES     30,000       55,580  
 NET CHANGE IN CASH     (157 )     (45,916 )
 Cash at Beginning of Period     157       46,073  
 Cash at End of Period     —         157  
Supplemental Disclosures                
   Cash Paid for Interest     —         —    
   Cash Paid for Income Taxes     —         —    
   Debt and Accrued Interest Settled in Exchange for Equity Method Investment     —         271,452  
   Debt and Accrued Interest Settled in Exchange for Inventory     25,000       —    
   Debt and accrued interest settled in exchange for shares     175,000       —    

 

  

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

 

  F-25  

 

New You, Inc.

NOTES TO FINANCIAL STATEMENTS

 

1. DESCRIPTION OF BUSINESS

Unless the context indicates or suggests otherwise, references to “we,” “our,” “us,” the “Company,” or the “Registrant” refer to New You, Inc., a Nevada corporation, and its wholly-owned subsidiary,

 

New You, Inc. formerly known as The Radiant Creations Group, Inc., was originally incorporated in Nevada on December 29, 2005 under the name of Nova Mining Corporation. From inception, the Company's principal business activity was the acquisition and exploration of mineral resources. On June 20, 2013, following a change of control, the Company changed its principal business to the development and marketing of cosmetics and over-the-counter personal enhancement products and devices. After a change in control on July 11, 2018, the Company changed its principal business to selling cannabidiol (“CBD”) hemp oil-based products through independent business owners (called “Brand Partners”).

 

Recent Developments

 

On July 11, 2018, the Company entered into a Subscription and Securities Purchase Agreement (the “SPA”) with three investors. Under the SPA, the investors were collectively issued a controlling interest in the Company consisting of a total of 9,695,328 shares of common stock. These shares were issued in exchange for a total Purchase Price of $95,000. The Purchase Price was used to settle and retire the Company’s then outstanding notes payable, for certain compliance costs, and for general working capital for the Company. In conjunction with the SPA, the formerly controlling shareholder, Biodynamic Molecular Technologies, LLC, exchanged its preferred stock for a total of 269,315 shares of common stock. Upon issuance, these shares were transferred to the principal of Biodynamic Molecular Technologies, LLC. This common stock position, which represents 2.5% of the Company’s post-closing common stock, is non-dilutable for a period of one (1) year. As part of the transaction, the former officers of the Company and majority shareholders have agreed to indemnify the Company against certain liabilities of the Company for one year after the transaction.

On January 9, 2019, the Company completed a reverse recapitalization (“Recapitalization”) with New You LLC, a privately held Wyoming limited liability company in accordance with the terms of a share exchange agreement (“Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, the Company issued 15,974,558 common shares in exchange for one hundred percent (100%) of the outstanding units of New You LLC (11,450 units), with New You LLC becoming a wholly-owned operating subsidiary of the consolidated company. The transaction was accounted for as a reverse recapitalization because the Company was a shell company prior to the transaction. For accounting purposes, New You LLC is considered to have obtained the net monetary assets of the Company in exchange for equity. Upon the consummation of the Recapitalization, the historical financial statements of New You LLC became the consolidated company’s historical financial statements. Accordingly, financial statements for periods ending after the Recapitalization, including comparative statements presented, will reflect the financial position and operations of New You LLC, except that the capital structure of New You LLC will be adjusted based on the ratio of common shares issued and units transferred in accordance with the Share Exchange Agreement.

On March 8, 2019, pursuant to stockholder consent, the Company’s Board of Directors authorized an amendment (the "Amendment") to the Company’s Certificate of Incorporation, as amended, to (i) change the name of the Company from The Radiant Creations Group, Inc. to New You, Inc. and (ii) effect a reverse stock split of the issued and outstanding shares of the Company’s common stock, par value $0.00001, on a 1 for 50 basis (the "Reverse Stock Split"). The Company filed the Amendment with the Nevada Secretary of State reflecting the name change on March 27, 2019. On April 29, 2019, the Financial Industry Regulatory Authority, Inc. notified us that the Name Change and Reverse Stock Split would take effect on April 30, 2019 (the "Effective Date"). On the Effective Date, each holder of common stock received 1 share of the Company’s common stock for each 50 shares of common stock the investor owned immediately prior to the Reverse Stock Split. The Company did not issue fractional shares in connection with the Reverse Stock Split. Fractional shares will be rounded up to the nearest whole share. In addition, on the Effective Date the Company’s trading symbol changed to “RCGPD” for a period of 20 business days, after which the "D" was removed and the Company began trading under new trading symbol “NWYU.”

Going Concern

 

We incurred an operating loss of $40,416 and negative operating cash flows of $30,157 in the year ended December 31, 2018. At December 31, 2018, we had a cash balance of $0, and a working capital deficit of $16,570.

 

We have not been able to generate sufficient cash from operating activities to fund our ongoing operations. We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements until we are able to raise revenues to a point of positive cash flow. We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support its operations.

 

Based on the above factors, substantial doubt exists about our ability to continue as a going concern for one year from the issuance of these financial statements.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) to reflect the accounts and operations of the Company.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

  F-26  

 

Cash and Cash Equivalents

 

The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company considers cash deposits in banks as cash and investments with original maturities at purchase of three months or less as cash equivalents. There were no cash equivalents as of December 31, 2018 and 2017.

 

Inventory

 

Inventory consists of finished goods and is valued at the lower of cost or net realizable value. Cost is determined using the first in first out (FIFO) method. Provision for potentially obsolete or slow moving-inventory is made based on management analysis or inventory levels and future sales forecasts.

 

Prepaid Expenses

 

Prepaid expenses consist of various payments that the Company has made in advance for goods or services to be received in the future. These prepaid expenses primarily consist of deposits on inventory yet to be delivered or shipped.

 

Property and Equipment

 

Property and equipment are stated at cost net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets generally ranging from three to five years. Leasehold improvements are amortized over the shorter of the estimated useful life or the remaining lease term. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the consolidated statements of operations. Maintenance and repairs that do not improve or extend the lives of the respective assets are charged to expense in the period incurred. The Company had no property and equipment as of December 31, 2018 and 2017.

 

Impairment

 

We evaluate the recoverability of long-lived assets in accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets. We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Such impairment is recognized in the event the net book value of such assets exceeds their fair value. If the carrying value of the net assets assigned exceeds the fair value of the assets, then the second step of the impairment test is performed in order to determine the implied fair value. No impairment of long-lived assets occurred in the years presented.

 

Basic And Diluted Net Loss Per Share

 

Basic income per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, Earnings Per Share. Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents on an “as if converted” basis. To the extent stock options, stock equivalents and warrants are anti-dilutive, they are excluded from the calculation of diluted income per share. In conjunction with the July 11, 2018 SPA, the formerly controlling shareholder, Biodynamic Molecular Technologies, LLC, exchanged its preferred stock for a total of 269,315 shares of common stock. Upon issuance, these shares were transferred to the principal of Biodynamic Molecular Technologies, LLC. This common stock position, which represents 2.5% of the Company’s post-closing common stock, is non-dilutable for a period of one (1) year. There were no dilutive securities in 2017 and 2018.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, Contracts with Customers, using a five-step analysis that includes identifying the contract, identifying performance obligations in the contract, determining the transaction price, allocating the transaction price among the performance obligations, and recognizing revenue as or when control of goods or services is transferred to the customer.

 

Cost of Goods Sold

 

Amounts recorded as cost of revenue relate to direct expenses incurred in order to fulfill orders of the Company’s products. Such costs are recorded as incurred. The Company’s cost of revenue consists primarily of the cost of product; refunds and chargebacks; processing fees; and the cost of product samples.

 

Advertising Expenses

 

The Company expenses advertising costs as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.” Advertising expenses recognized totaled $0 and $7,346 for the year ended December 31, 2018 and 2017, respectively.

 

Research and Development

 

Research and development costs are expensed as incurred.

 

Income Taxes

 

The Company provides for income taxes utilizing the asset and liability method of accounting. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that future tax benefits associated with a deferred tax asset will not be realized, a valuation allowance is provided. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in the statements of operations as an adjustment to income tax expense in the period that includes the enactment date. Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions.

  F-27  

 

The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

 

Stock Compensation Expense

 

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date. Share-based expense for the year ended December 31, 2018 and 2017 was $29,750 and $127,500.

 

Recently Issued Accounting Standards

 

FASB ASU No. 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606” – Issued in November 2018, ASU 2018-18 provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for within revenue under Topic 606 in order to provide for better comparability among entities. The guidance clarifies which transactions should be accounted for as revenue under Topic 606 and provides unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 regarding distinct goods or services. The guidance also specifies that transactions with a collaborative arrangement not directly related to sales to third parties may not be presented together with revenue recognized under Topic 606. The guidance will be effective for the Company on January 1, 2020, including interim periods, and must be applied retrospectively. An entity may apply the guidance to either all contracts or to only contracts that are not completed as of the date of the initial application of Topic 606. The Company has early adopted this standard. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments (a Consensus of the Emerging Issues Task Force)” – In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies how certain cash receipts and payments should be presented in the statement of cash flows. This standard is effective for fiscal years beginning after December 15, 2017. Adoption of ASU 2016-15 did not have a significant impact on the Company’s financial statements.

 

FASB ASU No. 2014-09, “Revenue from Contracts with Customers” – In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 to defer the effective date for annual reporting to periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of the original effective date in ASU 2014-09, which is annual reporting periods beginning after December 15, 2016, which the Company has chosen to early adopt. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers which affect narrow aspects of the guidance issued in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Narrow Scope Improvements and Practical Expedients, which amends and clarifies certain aspects in ASU 2014-09 that include collectability, presentation of sales and other taxes collected from customers, noncash consideration, contract modifications and completed contracts at transition. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing, which amends the guidance in ASU 2014-09 on accounting for licenses of intellectual property and identifying performance obligations. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal versus agent guidance in ASU 2014-09. The standards are to be applied retrospectively and the Company has elected to utilize the full retrospective method. Adoption of ASU 2014-09 and related amendments did not have a significant impact on the Company’s financial statements.

 

FASB ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share- Based Payment Accounting” – Issued in June 2018, ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606. The new standard will be effective for the Company on January 1, 2019. The Company has early adopted this standard using the full retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

FASB ASU No. 2018-13 (Topic 820), “Fair Value Measurement” – Issued in August 2018, ASU 2018-13 modifies, removes and adds certain disclosure requirements on fair value measurements based on the FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. The Company does not expect the standard to have a material impact on our financial statements and related disclosures

 

FASB ASU No. 2018-09, “Codification Improvements” - In July 2018, the FASB issued ASU 2018-09, Codification Improvements (“ASU 2018-09”). This standard does not prescribe any new accounting guidance, but instead makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification. Certain updates are applicable immediately, but the majority of the amendments in ASU 2018-09 will be effective for annual periods beginning after December 15, 2018. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

 

FASB ASU No. 2018-02, (Topic 220), “Income Statement – Reporting Comprehensive Income” - In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), to simplify the accounting for share-based payments made to nonemployees. Under ASU 2018-07, accounting for share-based payments made to nonemployees is substantially the same as the accounting for share-based payments made to employees. Share based awards to nonemployees will be measured at fair value on the grant date of the awards, with the need to assess the probability of satisfying performance conditions, if any are present. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The Company has early adopted this standard using the full retrospective method. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

  F-28  

 

FASB ASU 2017-04 (Topic 350), “Intangibles - Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. The Company does not expect the standard to have a material impact on our financial statements and related disclosures.

 

FASB ASU No. 2016-02 (Topic 842), “Leases” – Issued in February 2016, ASU No. 2016-02 established ASC Topic 842, Leases, as amended by subsequent ASUs on the topic, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to apply a two-method approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. Lessees are required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by the lessor is largely unchanged from that applied under the existing lease standard. We will be required to record a right-of-use asset and lease liability equal to the present value of the remaining minimum lease payments and will continue to recognize expense on a straight-line basis upon adoption of this standard. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued an update ASU 2018-11 Leases: Targeted Improvements, which provides companies with an additional transition option that would permit the application of ASU 2016-02 as of the adoption date rather than to all periods presented. We adopted this standard on January 1, 2019 and elected to use the transition practical expedients package available to us under this new standard.

 

 

3. NOTES PAYABLE

 

In October 2014, the Company issued a demand note in the amount of $50,000 for cash. The note was due on demand and accrued interest at an annual rate of 12%. During the year ended December 31, 2018, the Company issued 44,000 shares of common stock to settle the outstanding note of $30,000 as part of the purchase. As of December 31, 2018 and 2017, the principal balance on the note was $0 and $30,000, respectively.

 

In April 2015, the Company issued a note payable in the amount of $150,000 for cash. The note matured in 24 months and accrued interest at an annual rate of 12%. The holder of the note also received 240 shares of common stock. On July 11, 2018, the Company paid $50,000 of the outstanding principal and issued 20,000 shares common stock to settle the outstanding liability, including $100,000 of principal and $45,000 of interest. As of December 31, 2018 and 2017, the principal balance on the note was $0 and $150,000, respectively.

 

In March 2016, the Company issued a promissory note in the amount of $25,000 for cash. The note matured in 12 months and did not accrue interest. The holder of the note also received 2,200 shares of common stock. In March 2017, the creditor agreed to extend the due date to March 2018 in exchange for 1,000 shares. In early 2018, the Company agreed with the creditor to assign the note and all of the inventory owned by the Company at that point in time to Palm Beach Pure, Inc., an entity owned by the Company’s then-CEO, Gary Alexander. As of December 31, 2018 and 2017, the principal balance on the note was $0 and $25,000, respectively.

 

In March 2016, the Company issued a promissory note in the amount of $15,000 for cash. The note matured in 8 months and did not accrue interest. The holder of the note also received 6,000 shares of common stock. In lieu of interest, the Company would issue penalty shares to the note holder if the debt was not paid off prior to the maturity date. The note required issuance of 2,000 shares of common stock for the first month delinquent, 4,000 shares of common stock for the second month delinquent, and 6,000 shares of common stock for every month after that. The Company recorded a liability for shares based on the fair value of the shares in the month that the shares were supposed to be issued. The Company issued 12,000 common shares in 2016 and 18,000 common shares in 2017 to the creditor as a late payment penalty. In early 2018, the Company agreed with the creditor to cancel the debt in exchange for payment of the original $15,000 balance. As of December 31, 2018 and 2017, the principal balance on the note was $0 and $15,000, respectively. As of December 31, 2018 and 2017, the liability to issue shares was $0, and $135,000, respectively. The company paid the $15,000 and recorded the difference between the book value of the note, accrued interest, and share liability, and the $15,000 cash paid in settlement, as gain on extinguishment of debt.

 

All notes payable were settled prior to the transfer in control on July 11, 2018. The settlement of the above notes payable was treated as a debt extinguishment resulting in a gain of $409,443 in the year ended December 31, 2018.

 

 

4. CONVERTIBLE NOTES

 

On May 21, 2013 and June 12, 2013, the Company signed two convertible note agreements with a third party in which the party loaned $200,000 subject to annual interest of 10%. On July 28, 2014, the Company amended the terms of one of the two loans and fixed the maturity date of the loan to May 20, 2015. On February 26, 2014, the Company entered into a loan modification and addendum with the holder of the notes, and adjusted the conversion price to $0.075. Prior to the modifications on July 28, 2014 and February 26, 2014, one of the convertible notes did not contain a maturity date and the conversion price for both notes was based on a 50% discount from the five day average trading price prior to conversion. On January 24, 2017, the Company and related Affiliates entered into a Settlement Agreement and General Release with this lender where in the Company owed the Lender $200,000 plus accrued interest. The Company agreed to pay $25,000 and to deliver its remaining shares of NIT Enterprises, Inc., a former minority held investment, and in exchange, NIT Enterprises, Inc. agreed to assume the entire $200,000 debt obligation from the Company. Additional consideration was to be provided directly by NIT Enterprises, Inc. As of December 31, 2018 and 2017, the principal balance on these convertible notes was $0 and $0, respectively. No gain or loss was recognized on this debt extinguishment since the value of the minority held investment approximated the value of the convertible notes and related accrued interest.

 

All convertible notes were settled prior to the transfer in control on July 11, 2018.

 

5. COMMON STOCK

 

During the year ended December 31, 2017, the Company issued 3,000 shares of common stock to investors according to the terms provided in the Company’s stock subscription agreement.

 

During the year ended December 31, 2017, the Company issued 18,000 shares to the Company’s promissory note holders as penalty for late payment, and

  F-29  

 

1,000 shares to the Company’s promissory note holders in exchange for extending the term of a note as described in Note 3. The Company valued the shares at fair value on the date of grant, which was $38,000.

 

During the year ended December 31, 2017, the Company issued 40,000 shares of common stock to a third party for website development services provided by consultants. The Company valued the shares at $100,000 or $2.50 per share; the fair value on the date of grant which management believes approximates the value of the services rendered.

 

During the year ended December 31, 2017, the Company issued 11,000 shares of common stock to various non-employees for their services rendered. The Company valued these shares at $27,500 or an average of $2.50 per share; the fair value on the date of grant which management believes approximates the value of the services rendered.

 

During the year ended December 31, 2017, the Company cancelled 7,000,000 shares of Series B preferred stock and 10,000 common stock.

 

On July 11, 2018, the Company closed on the SPA with three investors. Under the SPA, the investors were issued 9,695,328 shares of common stock. These shares were issued in exchange for a total Purchase Price of $95,000. As part of the SPA, the Company consented to enter into an agreement to exchange 3,000,000 shares of Series A preferred stock and 20,000,000 shares of Series B preferred stock for 269,315 shares of common stock held by the Company’s previous majority owner.

 

As part of the SPA, the Company consented to enter into an agreement to settle a promissory note with a creditor for the issuance of 20,000 shares of common stock for the cancellation of liabilities of approximately $145,000.

 

During the year ended December 31, 2018, the Company issued 4,827 shares of common stock to various non-employees for their services rendered. The Company valued these shares at $12,067 or an average of $2.50 per share; the fair value on the date of grant which management believes approximates the value of the services rendered.

 

During the year ended December 31, 2018, the Company issued 44,000 shares of common stock to a third party in satisfaction of principal and interest of $30,000. The Company valued these shares at $30,000 or $0.68 per share; the fair value on the date of grant.

 

On March 8, 2019, pursuant to stockholder consent, the Company’s Board of Directors authorized an amendment to the Company’s Certificate of Incorporation, as amended, to effect a Reverse Stock Split of the issued and outstanding shares of common stock, par value $0.00001, on a 1 for 50 basis. All share and per share information has been retrospectively adjusted to reflect the Reverse Stock Split.

 

 

6. INCOME TAXES

 

The Company incurred no current or deferred tax expense during the years ended December 31, 2018 and 2017. The components of deferred tax assets and liabilities:

    12/31/2018   12/31/2017
Deferred income tax assets:                
Net operating loss carryforwards   $ —       $ 1,677,028  
Total deferred income tax assets   $ —       $ 1,677,028  
Deferred income tax liabilities:   $ —       $ —    
Net deferred income tax assets     —         1,677,028  
Valuation allowance   $ —       $ (1,677,028 )
Net deferred income taxes   $ —       $ —    

 

For the years ended December 31, 2018 and 2017, a reconciliation of the federal statutory tax rate to the Company's effective tax rate is as follows:

 

    12/31/2018   12/31/2017
U.S. Federal Statutory Income Tax Rate     59,476       (167,016 )
State income tax, net of federal benefit     12,306       (17,831 )
Other     (3,268 )     —    
Write off NOL's due to ownership change     1,608,514       —    
Change in federal tax rate     —         843,228  
Valuation Allowance     (1,677,028 )     (658,381 )
Income Tax Expense     —         —    

Permanent differences include ordinary and necessary business expenses deemed by the Company as a non-allowable deduction and tax deductions related to equity compensation that are less than the compensation recognized for financial reporting purposes.

 

As of December 31, 2018, and December 31, 2017, the Company had federal net operating loss carryforwards of approximately $0 and $6,787,443, respectively, and state net operating loss carryforwards of $0 and $5,792,061, respectively. These tax attributes are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under Internal Revenue Code Section 382. The full amount of the NOLs are limited based on section 382 of the tax code. On July 11, 2018, there was an ownership change which reduced the NOLs to zero.

 

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative losses incurred through the period ended December 31, 2018. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth. On the basis of this evaluation, management has determined to record a full valuation allowance on its deferred tax assets. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

 

  F-30  

 

7. COMMITMENTS AND CONTINGENCIES

 

From time to time, the Company may be involved in various legal proceedings and claims arising in the ordinary course of business. Depending on the amount and timing of such disposition, an unfavorable resolution of some or all of these matters could materially affect the future results of operations or cash flows in a particular period.

 

As of December 31, 2018 and 2017, there was no accrual recorded for any potential losses related to pending litigation, and no such losses were recorded for the years then ended.

 

8. SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through November 7, 2019, which is the date the financial statements were issued. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements except as discussed below and in the section “Recent Developments” under Note 1 above.

 

In January 2019, the Company entered into the Recapitalization described in Note 1, pursuant to which the Company issued 15,974,558 common shares.

 

Subsequent to December 31, 2018, the Company issued 409,605 common shares pursuant to the 2.5% anti-dilution provision described in Note 1.

 

Subsequent to December 31, 2018, the Company issued 6,578,358 common shares that resulted in raising $309,894 in additional capital.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  F-31  

 

 PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution

 

The following table sets forth all expenses to be paid by the Registrant, other than estimated placement agents’ fees and commissions, in connection with our public offering. All amounts shown are estimates except for the SEC registration fee:

 

SEC registration fee   $ 929.76  
Legal fees and expenses     19,000  
Accounting fees and expenses     158,000  
Printing and engraving expenses     1,500  
Total   $ 179,429.76  

 

Item 14. Indemnification of Directors and Officers

 

Neither our articles of incorporation, nor our bylaws, prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statutes (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.

 

NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

 

NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

 

NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.

 

Our charter provides that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification. We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.

Our bylaws provide that a director or officer of the Company shall have no personal liability to the Company or its stockholders for damages for breach of fiduciary duty as a director or officer, except for damages for breach of fiduciary duty resulting from (a) acts or omissions which involve intentional misconduct, fraud, or a knowing violation of law, or (b) the payment of dividends in violation of section 78.3900 of the NRS as it may from time to time be amended or any successor provision thereto.

 

Item 15. Recent Sales of Unregistered Securities

 

1. On July 11, 2018, we closed our Subscription and Securities Purchase Agreement (the “SPA”) with three investors, Carlsbad Naturals, LLC, Ray Grimm, our CEO, and Nish Mehta, a former officer. Under the SPA, the investors were issued a (collectively) controlling interest in the Company consisting of a total of 9,695,328 shares of common stock. These shares were issued in exchange for a total Purchase Price of $95,000. The Purchase Price was used to settle and retire our notes payable, for certain compliance costs, and for general working capital. In conjunction with the SPA, our formerly controlling shareholder, Biodynamic Molecular Technologies, LLC, exchanged its preferred stock for a total of 269,315 shares of common stock. Upon issue, these shares were transferred to principal of Biodynamic Molecular Technologies, LLC, Michael Alexander. This common stock position, which represented 2.5% of our post-closing common stock, was formerly non-dilutable for a period of one (1) year. The issuances made in connection with these transactions did not involve any public offering and were exempt under Section 4(a)(2) of the Securities Act.

 

2. On January 9, 2019, we acquired one hundred percent (100%) of the outstanding membership interests in our current operating subsidiary, New You LLC, under a Share Exchange Agreement. Pursuant to the Share Exchange Agreement, we issued 15,974,558 shares of common stock to the former members of New You LLC. The members of New You LLC included our current CEO, Ray Grimm, Jr., and certain other affiliates of the Company. The issuances made in connection with these transactions did not involve any public offering and were exempt under Section 4(a)(2) of the Securities Act.

 

3. Beginning in February of 2019 and continuing through November 7, 2019, we conducted private offering of common shares at a $0.50 per share pursuant to Rule 506(b) under Regulation D. Shares were offered to accredited investors and we engaged in no general solicitation or advertising in connection with the offering. We sold a total of 639,558 shares for total proceeds of $309,894.
  II - 1  

 

Item 16. Exhibits and Financial Statement Schedules

 

(a) Exhibits.

 

  3.1 Articles of Incorporation, as Amended
     
  3.2 Amended and Restated Bylaws
     
  5.1 Opinion of Laxague Law, Inc.
     
  10.1 Subscription and Securities Purchase Agreement
     
  10.2 Share Exchange Agreement
     
  10.3 Lease
     
  10.4 New You Brand Partner Agreement
     
  21.1 List of Subsidiaries
     
  23.1 Consent of Independent Registered Public Accounting Firm
     

Item 17. Undertakings.

 

The undersigned registrant hereby undertakes:

 

(1)        To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.

 

(4) That, for the purpose of determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the securities:

 

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

 

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

  II - 2  

 

 

In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Newport Beach, State of California, on November 7, 2019.

 

 

 

New You, Inc.,

a Nevada corporation

   
 

By: /s/ Ray Grimm

Name: Ray Grimm

Title: Chief Executive Officer, and Director

(principal executive officer)

 

   
 

By: /s/ James Sinkes

Name: James Sinkes

Title: Chief Accounting Officer

(principal accounting officer and principal financial officer)

 

   
 

By: /s/ Nish Mehta

Name: Nish Mehta

Title: Director

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  II - 3  

 

POWER OF ATTORNEY

 

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ray Grimm, Jr. his true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for him/her and in his name, place and stead, in any and all capacities to sign any or all amendments (including, without limitation, post-effective amendments) to this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933 and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorney-in-fact and agent, or any substitute or substitutes for him, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the following persons in the capacities and on the dates indicated have signed this Registration Statement below.

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

 

 

By: /s/ Ray Grimm

Name: Ray Grimm

Title: Chief Executive Officer, and Director

(principal executive officer)

 

November 7, 2019

   
 

By: /s/ James Sinkes

Name: James Sinkes

Title: Chief Accounting Officer

(principal accounting officer and principal financial officer)

 

November 7, 2019

   
 

By: /s/ Nish Mehta

Name: Nish Mehta

Title: Director

 

November 7, 2019

 

 

  II - 4  

 

 

 

 

 

 

 

 

 

 

 

 

AMENDED AND RESTATED BY-LAWS

OF 

New You, Inc.

 

(A NEVADA CORPORATION)

 

 

ARTICLE I

 

OFFICES

 

Section 1. Registered Office. The registered office of the corporation in the State of Nevada shall be at such place as the board shall resolve.

 

Section 2. Other Offices. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Nevada as the Board of Directors may from time to time determine or the business of the corporation may require.

 

 

ARTICLE II

 

CORPORATE SEAL

 

Section 3. Corporate Seal. The corporate seal shall consist of a die bearing the name of the corporation and the inscription, "Corporate Seal-Nevada." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

 

ARTICLE III

 

STOCKHOLDERS' MEETINGS

 

Section 4. Place of Meetings. Meetings of the stockholders of the corporation shall be held at such place, either within or without the State of Nevada, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the corporation required to be maintained pursuant to Section 2 hereof.

 

Section 5. Annual Meeting.

 

(a) The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.

 

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(b)       At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not later than the close of business on the sixtieth (60th) day nor earlier than the close of business on the ninetieth (90th) day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholder to be timely must be so received not earlier than the close of business on the ninetieth (90th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or, in the event public announcement of the date of such annual meeting is first made by the corporation fewer than seventy (70) days prior to the date of such annual meeting, the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the corporation. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder's meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (b). The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (b), and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

 

(c)       Only persons who are confirmed in accordance with the procedures set forth in this paragraph (c) shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (c). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation in accordance with the provisions of paragraph (b) of this Section 5. Such stockholder's notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (c) the class and number of shares of the corporation which are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming

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such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (b) of this Section 5. At the request of the Board of Directors, any person nominated by a stockholder for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in the stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (c). The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded.

 

(d)       For purposes of this Section 5, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

 

Section 6. Special Meetings.

 

(a)       Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption), and shall be held at such place, on such date, and at such time, as the Board of Directors shall determine.

 

(b)       If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by tele-graphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. If the notice is not given within sixty (60) days after the receipt of the request, the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this paragraph (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

 

Section 7. Notice of Meetings. Except as otherwise provided by law or the Articles of Incorporation, written notice of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour and purpose or purposes of the meeting.

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Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

 

Section 8. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Articles of Incorporation, or by these Bylaws, the presence, in person or by proxy duly authorized, of the holder or holders of not less than fifty percent (50%) of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, all action taken by the holders of a majority of the votes cast, excluding abstentions, at any meeting at which a quorum is present shall be valid and binding upon the corporation; provided, however, that directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Articles of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and, except where otherwise provided by the statute or by the Articles of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of the votes cast, including abstentions, by the holders of shares of such class or classes or series shall be the act of such class or classes or series.

 

Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares casting votes, excluding abstentions. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

Section 10. Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person or by an agent or agents authorized by a proxy granted in accordance with Nevada law. An agent so appointed need not be a stockholder. No proxy shall be voted after three (3) years from its date of creation unless the proxy provides for a longer period.

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Section 11. Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally. If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.

 

Section 12. List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of meeting during the whole time thereof and may be inspected by any stockholder who is present.

 

Section 13. Action Without Meeting.  No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, or by the written consent of the stockholders setting forth the action so taken and signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote upon were present and voted.

 

Section 14. Organization.

 

(a)       At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

 

(b)       The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof,

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limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

 

 

ARTICLE IV

 

DIRECTORS

 

Section 15. Number and Qualification. The authorized number of directors of the corporation shall be not less than one (1) nor more than thirteen (13) as fixed from time to time by resolution of the Board of Directors; provided that no decrease in the number of directors shall shorten the term of any incumbent directors. Directors need not be stockholders unless so required by the Articles of Incorporation. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.

 

Section 16. Powers. The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Articles of Incorporation.

 

Section 17. Election and Term of Office of Directors. Members of the Board of Directors shall hold office for the terms specified in the Articles of Incorporation, as it may be amended from time to time, and until their successors have been elected as provided in the Articles of Incorporation.

 

Section 18. Vacancies. Unless otherwise provided in the Articles of Incorporation, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholder vote, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director's successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

 

Section 19. Resignation. Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term

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of the director whose place shall be vacated and until his successor shall have been duly elected and qualified.

 

Section 20. Removal. Subject to the Articles of Incorporation, any director may be removed by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation then entitled to vote, with or without cause.

 

Section 21. Meetings.

 

(a)       Annual Meetings. The annual meeting of the Board of Directors shall be held immediately after the annual meeting of stockholders and at the place where such meeting is held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it.

 

(b)       Regular Meetings. Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the office of the corporation required to be maintained pursuant to Section 2 hereof. Unless otherwise restricted by the Articles of Incorporation, regular meetings of the Board of Directors may also be held at any place within or without the state of Nevada which has been designated by resolution of the Board of Directors or the written consent of all directors.

 

(c)       Special Meetings. Unless otherwise restricted by the Articles of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Nevada whenever called by the Chairman of the Board, the President or any two of the directors.

 

(d)       Telephone Meetings. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

(e)       Notice of Meetings. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, facsimile, email or sms text message, during normal business hours, at least twenty-four (24) hours before the date and time of the meeting, or sent in writing to each director by first class mail, charges prepaid, at least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

(f)       Waiver of Notice. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.

 

Section 22. Quorum and Voting.

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(a)       Unless the Articles of Incorporation requires a greater number and except with respect to indemnification questions arising under Section 43 hereof, for which a quorum shall be one-third of the exact number of directors fixed from time to time in accordance with the Articles of Incorporation, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Articles of Incorporation provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

 

(b)       At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Articles of Incorporation or these Bylaws.

 

Section 23. Action Without Meeting. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

 

Section 24. Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 25. Committees.

 

(a)       Executive Committee. The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, including without limitation the power or authority to declare a dividend, to authorize the issuance of stock and to adopt a certificate of ownership and merger, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Articles of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets,

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recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the bylaws of the corporation.

 

(b)       Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall such committee have the powers denied to the Executive Committee in these Bylaws.

 

(c)       Term. Each member of a committee of the Board of Directors shall serve a term on the committee coexistent with such member's term on the Board of Directors. The Board of Directors, subject to the provisions of subsections (a) or (b) of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

 

(d)       Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 25 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

 

Section 26. Organization. At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or if the President is absent, the most senior Vice President, or, in the absence of any such officer, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.

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ARTICLE V

 

OFFICERS

 

Section 27. Officers Designated. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the Controller, all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

 

Section 28. Tenure and Duties of Officers.

 

(a)       General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

 

(b)       Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section 28.

 

(c)       Duties of President. The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. Unless some other officer has been elected Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. The President shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

 

(d)       Duties of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

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(e)       Duties of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The Secretary shall perform all other duties given him in these Bylaws and other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

(f)       Duties of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

 

Section 29. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

 

Section 30. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.

 

Section 31. Removal. Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.

 

 

ARTICLE VI

 

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING

OF SECURITIES OWNED BY THE CORPORATION

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Section 32. Execution of Corporate Instrument. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.

 

Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, or the President or any Vice President, and by the Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiting the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.

 

All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person .or persons as the Board of Directors shall authorize so to do.

 

Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

Section 33. Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.

 

ARTICLE VII

 

SHARES OF STOCK

 

Section 34. Form and Execution of Certificates. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Articles of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and

  12  

 

rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

Section 35. Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

 

Section 36. Transfers.

 

(a)       Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

 

(b)       The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Nevada Revised Statutes (“N.R.S.”), Chapter 78.

 

Section 37. Fixing Record Dates.

 

(a)       In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

  13  

 

 

(b)       In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is filed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

Section 38. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada.

 

  14  

 

 

ARTICLE VIII

 

OTHER SECURITIES OF THE CORPORATION

 

Section 39. Execution of Other Securities. All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 34), may be signed by the Chairman of the Board of Directors, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

 

 

ARTICLE IX

 

DIVIDENDS

 

Section 40. Declaration of Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Articles of Incorporation.

 

Section 41. Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

 

 

 

ARTICLE X

  15  

 

 

FISCAL YEAR

 

Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

 

 

ARTICLE XI

 

INDEMNIFICATION

 

Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees and Other Agents.

 

(a)       Directors and Officers. The corporation shall indemnify its directors and officers to the fullest extent not prohibited by N.R.S. Chapter 78; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under N.R.S. Chapter 78 or (iv) such indemnification is required to be made under subsection (d).

 

(b)       Employees and Other Agents. The corporation shall have power to indemnify its employees and other agents as set forth in N.R.S. Chapter 78.

 

(c)       Expense. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the corporation, or is or was serving at the request of the corporation as a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said mounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise.

 

Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Bylaw, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

  16  

 

 

(d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or officer. Any right to indemnification or advances granted by this Bylaw to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standard of conduct that make it permissible under N.R.S. Chapter 78 for the corporation to indemnify the claimant for the amount claimed. In connection with any claim by an officer of the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed in the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful. Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in N.R.S. Chapter 78, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Article XI or otherwise shall be on the corporation.

 

(e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by N.R.S. Chapter 78.

 

(f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

(g) Insurance. To the fullest extent permitted by N.R.S. Chapter 78, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.

 

  17  

 

(h) Amendments. Any repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

 

(i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Bylaw that shall not have been invalidated, or by any other applicable law.

 

(j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall apply:

 

(i)       The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(ii)       The term "expenses" shall be broadly construed and shall include, without limitation, court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

(iii)       The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent or another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

 

(iv)       References to a "director," "executive officer," "officer," "employee," or "agent" of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.

 

(v)       References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Bylaw.

 

ARTICLE XII

 

NOTICES

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Section 44. Notices.

 

(a)       Notice to Stockholders. Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, it shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the corporation or its transfer agent.

 

(b)       Notice to directors. Any notice required to be given to any director may be given by the method stated in subsection (a), by telephone, facsimile, email or by sms text message, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.

 

(c)       Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

 

(d)       Time Notices Deemed Given. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing, and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at time of transmission.

 

(e)       Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

 

(f)       Failure to Receive Notice. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him ill the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such director to receive such notice.

 

(g)       Notice to Person with Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Articles of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be require and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of N.R.S. Chapter 78, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

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(h)       Notice to Person with Undeliverable Address. Whenever notice is required to be given, under any provision of law or the Articles of Incorporation or Bylaws of the corporation, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve-month period, have been mailed addressed to such person at his address as shown on the records of the corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth his then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of N.R.S. Chapter 78, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this paragraph.

 

 

ARTICLE XIII

 

AMENDMENTS

 

Section 45. Amendments.

 

The Board of Directors shall have the sole power to adopt, amend, or repeal the Bylaws as set forth in the Articles of Incorporation.

 

 

ARTICLE XIV

 

LOANS TO OFFICERS

 

Section 46. Loans to Officers. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

 

 

ARTICLE XV

 

BOARD OF ADVISORS

 

Section 47. Board of Advisors. The Board of Directors, in its discretion, may establish a Board of Advisors consisting of individuals who may or may not be stockholders or directors of the

  20  

 

corporation. The purpose of the Board of Advisors would be to advise the officers and directors of the corporation with respect to such matters as such officers and directors shall choose, and any other such matters which the members of such Board of Advisors deem appropriate in furtherance of the best interest of the corporation. The Board of Advisors shall meet on such basis as the members thereof may determine. The Board of Directors may eliminate the Board of Advisors at any time. No member of the Board of Advisors, nor the Board of Advisors itself, shall have any authority within the corporation or any decision making power and shall be merely advisory in nature. Unless the Board of Directors determines another method of appointment, the President shall recommend possible members to the Board of Directors, who shall approve or reject such appointments.

 

 

 

 

Declared and certified as the Amended and Restated Bylaws of New You, Inc. on October 17, 2019.

 

 

Signature of Officer: /s/ Ray Grimm, Jr.

 

Name of Officer: Ray Grimm, Jr.

 

Position of Officer: Chief Executive Officer

 

 

  21  

 

Laxague Law, Inc.

1 East Liberty, Suite 600

Reno, NV 89501

(775) 234-5221

Email: joe@laxaguelaw.com

November 7, 2019

 

New You, Inc.

3246 Grey Hawk Court

Carlsbad, California 92010

 

Ladies and Gentlemen:

 

We have acted as counsel to New You, Inc., a Nevada corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission of a Registration Statement on Form S-1 (the “Registration Statement”). The Company is filing the Registration Statement in connection with the offering from time to time, pursuant to Rule 415 promulgated under the Securities Act of 1933, as amended, by certain selling stockholders of up to 5,823,576 shares of the Company’s common stock, par value $0.00001 per share (the “Shares”). The offering of the Shares will be as set forth in the prospectus contained in the Registration Statement, as amended, and as supplemented from time to time.

 

In rendering these opinions, we have examined the Company’s Articles of Incorporation and Bylaws, both as amended and currently in effect, the Registration Statement, and the exhibits thereto, and such other records, instruments and documents as we have deemed advisable in order to render these opinions. In such examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photo static copies and the authenticity of the originals of such latter documents. In providing these opinions, we have further relied as to certain matters on information obtained from officers of the Company.

 

As a result of and subject to the foregoing, we are of the opinion that the Shares are validly issued, fully paid and non-assessable shares of common stock in the Company.

 

The foregoing opinions are qualified to the extent that the enforceability of any applicable agreement, document, or instrument discussed herein may be limited by or subject to bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally, and general equitable or public policy principles.

 

We have relied as to certain matters on information obtained from officers of the Company, and other sources believed by us to be responsible.

 

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Page | 2

New You, Inc.

November 6, 2019

 

Our opinion letter is expressly limited to the matters set forth above, and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company, the Shares, or the agreements and instruments addressed herein, or in the Registration Statement. This opinion is based upon currently existing statutes, regulations, rules and judicial decisions, and we disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein.

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to this firm under the caption “Legal Matters” in the Prospectus which is a part of the Registration Statement.

 

Very truly yours,

 

Laxague Law, Inc.

 

 

By:/s/ Joe Laxague
Joe Laxague, Esq.

 

 

  2  

 

 

SUBSCRIPTION AND SECURITIES PURCHASE AGREEMENT

by and among

The Radiant Creations Group, Inc.,

and

Ray Grimm, Nish Mehta, and Carlsbad Naturals, LLC, as Subscribers

June 20, 2018

 

 
  i  
 

 

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS 5
Section 1.1   Definitions. 5
ARTICLE II SUBSCRIPTION FOR SHARES 9
Section 2.1   Subscription 9
Section 2.2   Payment of Purchase Price; Use of Proceeds. 9
Section 2.3   Treatment of Down Payment If No Closing 9
Section 2.4   Effective Time 10
Section 2.5   Closing. 10
ARTICLE III TRANSACTIONS TO BE COMPLETED ON OR BEFORE THE EFFECTIVE DATE 10
Section 3.1   Settlement of Murphy Note 10
Section 3.2   Settlement of George Berry Note 10
Section 3.3   Share Exchange Agreement with Biodynamic Molecular Technologies, LLC 11
Section 3.4   Acquisition and Exchange of Justin Doll Note 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS 11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY 13
Section 5.1   Organization.. 13
Section 5.2   Authorization; Validity of Agreement. 13
Section 5.3   Consents and Approvals; No Violations. 13
Section 5.4   Litigation.. 14
Section 5.5   No Default; Compliance with Applicable Laws. 14
Section 5.6   Broker’s and Finder’s Fees; Broker/Dealer Ownership.  . 14
Section 5.7   Capitalization of Company 14
Section 5.8   Validity of Shares. 15
Section 5.9   Reporting and Compliance. 15
Section 5.10   No General Solicitation 16
Section 5.11   Financial Statements. 16
Section 5.12   Absence of Undisclosed Liabilities. 16
Section 5.13   Changes. 16
Section 5.14   Tax Returns and Audits. 24
Section 5.15   Employee Benefit Plans; ERISA. 17
Section 5.16   Interested Party Transactions.  . 18
Section 5.17   Questionable Payments.  . 18
Section 5.18   Obligations to or by Stockholders. 18
Section 5.19   Schedule of Assets and Contracts. 19
Section 5.20   Environmental Matters. 19
Section 5.21   Employees. 20
  ii  
 
Section 5.22   Title to Property and Encumbrances. 20
Section 5.23   Condition of Properties. 20
Section 5.24   Insurance Coverage. 20
Section 5.25   Disclosure 21
Section 5.26   No Liabilities 21
ARTICLE VI CONDUCT OF BUSINESSES PENDING THE CLOSING 21
Section 6.1   Conduct of Business by the Company Pending the Closing. 21
ARTICLE VII ADDITIONAL AGREEMENTS 22
Section 7.1   Access and Information. 22
Section 7.2   Additional Agreements. . 23
Section 7.3   Publicity 23
Section 7.4   Appointment of Directors and Officers . 23
ARTICLE VIII CONDITIONS OF PARTIES’ OBLIGATIONS 24
Section 8.1   Subscriber Obligations. 24
Section 8.2   Company Obligations. 24
ARTICLE IX INDEMNIFICATION AND RELATED MATTERS 26
Section 9.1   Indemnification by Company. 26
Section 9.2   Survival. 26
Section 9.3   Time Limitations. 26
Section 9.5   Notice of Claims. 27
ARTICLE X TERMINATION PRIOR TO CLOSING 27
Section 10.1   Termination of Agreement. 27
Section 10.2   Termination of Obligations. 28
ARTICLE XI MISCELLANEOUS 28
Section 11.1   Amendments. 28
Section 11.2   Notices. 28
Section 11.3   Entire Agreement. 29
Section 11.4   Expenses. 29
Section 11.5   Severability. 29
Section 11.6   Successors and Assigns; Assignment 29
Section 11.7   No Third Party Beneficiaries. 30
Section 11.8   Counterparts; Delivery by Facsimile. 30
Section 11.9   Waiver. 30
Section 11.10   No Constructive Waivers. 30
Section 11.11   Further Assurances. 30
Section 11.12   Recitals. 30
Section 11.13   Headings. 31
Section 11.14   Governing Law. 31
Section 11.15   Dispute Resolution. 31
Section 11.16   Interpretation. 31
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LIST OF SCHEDULES AND EXHIBITS

Schedule 1 Issuances of Company Common Stock to be made to the Subscribers at the Effective Time
Exhibit A Officers and Directors of the Company Pre-Effective Time and Post-Effective Time
Exhibit B Form of Promissory Note to be Delivered If No Closing
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subscription and securities purchase agreement

THIS SUBSCRIPTION AND SECURITIES PURCHASE AGREEMENT is entered into as of June 20, 2018 by and among The Radiant Creations Group, Inc., a Nevada corporation (the “Company”), and Ray Grimm, Nish Mehta, and Carlsbad Naturals, LLC, (each a “Subscriber” and, collectively, the “Subscribers”).

W I T N E S S E T H:

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Company desires to issue a total of 484,766,388 shares of its common stock, par value $0.00001 per share (the “Shares”) in exchange for a total purchase price of $95,000 (the “Purchase Price”); and

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Subscribers desire to acquire the Shares in exchange for the Purchase Price in the respective denominations set forth on Schedule 1 hereto,

NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1      Definitions. Capitalized terms used in this Agreement shall have the following meanings:

Acquisition Proposal” shall have the meaning given to such term in Section 6.1 hereof.

Action” shall mean any claim, action, suit, proceeding, investigation or order.

Affiliate” shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such Person. For the purposes of this definition, “control” (including, with correlative meaning, the terms “controlling,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person through the ownership of voting securities, by contract or otherwise.

Agreement” shall mean this Subscription and Securities Purchase Agreement, including the exhibits attached hereto or referred to herein, as the same may be amended or modified from time to time in accordance with the provisions hereof.

Closing” shall have the meaning given to such term in Section 2.5 hereof.

Closing Date” shall have the meaning given to such term in Section 2.5 hereof.

Commission” shall mean the United States Securities and Exchange Commission.

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Company” shall have the meaning given to such term in the preamble to this Agreement.

Company Capital Stock” shall mean, collectively, the Company Common Stock and the Company Preferred Stock, if any.

Company Common Stock” shall mean the common stock, par value $0.00001, of the Company.

Company Balance Sheet” shall have the meaning assigned to such term in Section 5.12 hereof.

Company Balance Sheet Date” shall have the meaning assigned to it in Section 5.12 hereof.

Company Employee Benefit Plans” shall have the meaning assigned to such term in Section 5.15 hereof.

Company Financial Statements” shall have the meaning assigned to such term in Section 5.11 hereof.

Company Material Adverse Effect” shall mean any change, effect or circumstance that is materially adverse or is reasonably likely to be materially adverse to the business, assets, liabilities, condition (financial or otherwise) or operations of the Company and its subsidiaries, taken as a whole, other than any such change, effect or circumstance relating to general economic, regulatory or political conditions, except to the extent such change, effect or circumstance disproportionately affects the Company and its subsidiaries, taken as a whole.

Company OTC Documents” shall have the meaning assigned to such term in Section 5.9 hereof.

Company Preferred Stock” shall mean the Preferred Stock of the Company, as currently designated and issued.

Contract” shall mean any material note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument to which the Company or any its subsidiaries or any of their respective properties may be bound.

Consents” shall mean any permits, filings, notices, licenses, consents, authorizations, accreditation, waivers, approvals and the like of, to, with or by any Person.

Effective Time” shall have the meaning given to such term in Section 2.4 hereof.

Employee Benefit Plans” shall have the meaning assigned to it in Section 5.15 hereof.

Environmental Law” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Resource Conservation

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and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136 et seq. and comparable state statutes dealing with the registration, labeling and use of pesticides and herbicides; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq., as any of the above referenced statutes have been amended as of the date hereof, all rules, regulations and policies promulgated pursuant to any of the above referenced statutes, and any other foreign, federal, state or local law, statute, ordinance, rule, regulation or policy governing environmental matters, as the same have been amended as of the date hereof.

ERISA” shall mean the Employee Retirement Income Securities Act of 1974, as amended, and the regulations issued thereunder.

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations issued thereunder.

Federal Securities Laws” means the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder.

GAAP” shall mean generally accepted accounting principles as in effect from time to time in the United States consistently applied.

Hazardous Material” means any substance or material meeting any one or more of the following criteria: (a) it is or contains a substance designated as or meeting the characteristics of a hazardous waste, hazardous substance, hazardous material, pollutant, chemical substance or mixture, contaminant or toxic substance under any Environmental Law; (b) its presence at some quantity requires investigation, notification or remediation under any Environmental Law; (c) it contains, without limiting the foregoing, asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived substances or waste, pesticides, herbicides, crude oil or any fraction thereof, nuclear fuel, natural gas or synthetic gas; or (d) mold.

Indebtedness” shall mean any obligation of the Company that under GAAP is required to be shown on the Balance Sheet of the Company as a Liability. Any obligation secured by a Lien on, or payable out of the proceeds of production from, property of the Company shall be deemed to be Indebtedness even though such obligation is not assumed by the Company.

Indebtedness for Borrowed Money” shall mean (a) all Indebtedness in respect of money borrowed including, without limitation, Indebtedness which represents the unpaid amount of the purchase price of any property and is incurred in lieu of borrowing money or using available funds to pay such amounts and not constituting an account payable or expense accrual incurred or assumed in the ordinary course of business of the Company, (b) all Indebtedness evidenced by a promissory note, bond or similar written obligation to pay money, or (c) all such Indebtedness guaranteed by the Company or for which the Company is otherwise contingently liable.

Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

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Liability” shall mean any and all liability, debt, obligation, deficiency, Tax, penalty, fine, claim, cause of action or other loss, cost or expense of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.

Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law.

Permitted Liens” shall mean (a) Liens for taxes and assessments or governmental charges or levies not at the time due or in respect of which the validity thereof shall currently be contested in good faith by appropriate proceedings; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’ and materialmens’ and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings; and (c) Liens incidental to the conduct of the business of the Company that were not incurred in connection with the borrowing of money or the obtaining of advances or credits and which do not in the aggregate materially detract from the value of its property or materially impair the use made thereof by the Company in its business.

Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, trust or other entity or organization, including any government or political subdivision or an agency or instrumentality thereof.

Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations issued thereunder.

Stockholder” shall mean any record holder of Company Capital Stock.

Tax” or “Taxes” shall mean (a) any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp), together with any interest thereon, penalties, fines, damages costs, fees, additions to tax or additional amounts with respect thereto, imposed by the United States (federal, state or local) or other applicable jurisdiction; (b) any liability for the payment of any amounts described in clause (a) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group or as a result of transferor or successor liability, including, without limitation, by reason of Code Section 1.1502-6; and (c) any liability for the payments of any amounts as a result of being a party to any tax sharing greement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in either clauses (a) or (b).

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Tax Return” shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns (including Form 1099 and partnership returns filed on Form 1065)) required to be supplied to a Tax authority relating to Taxes.

ARTICLE II
SUBSCRIPTION FOR SHARES

Section 2.1      Subscription. Upon the terms and subject to the conditions of this Agreement, at the Effective Time, the Company shall issue the Shares to the Subscribers in the denominations set forth in Schedule 1 hereto, in exchange for payment of the Purchase Price.

Section 2.2      Payment of Purchase Price; Use of Proceeds. The $95,000 Purchase Price shall be paid as follows:

(a)           Concurrently with the parties’ execution of this Agreement, the Subscribers shall pay $15,000 to the Company as an advance against the Purchase Price (the “Down Payment”). The Company covenants and agrees that the Down Payment shall be used by the Company for payment of the following expenses:

(i)               All required filings with the Nevada Secretary of State necessary to bring the Company’s filings current prior to the Closing Date and to place the Company in good standing with the State of Nevada;

(ii)             Such accounting and other fees as are necessary to prepare and file the Company’s required periodic reports with OTC Markets Group, Inc., such the Company shall be current in its OTC Markets filings prior to the Closing Date; and

(iii)           All subscription or related fees due to OTC Markets Group, Inc. as are necessary for the Company to have an active subscription with OTC Markets Group, Inc.

(b)             On the Closing Date, the Subscribers shall pay the remaining $80,000 of the Purchase Price as follows:

(i)               $50,000 shall be paid to Andrew Murphy under the Agreement described in Section 3.1;

(ii)             $15,000 shall be paid to George Berry under the Agreement described in Section 3.2; and

(iii)           $15,000 shall be paid to the Company for use as general working capital.

Section 2.3      Treatment of Down Payment If No Closing. In the event that the Closing does not occur, whether by reason of the parties’ termination of this Agreement, failure of any condition precedent set forth herein, or otherwise, the Down Payment shall be converted to a debt obligation of the Company to the Subscribers, to be documented by a Promissory Note in the form and substance attached hereto as Exhibit B.

Section 2.4     

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Effective Time. The Company shall cause stock certificates representing the Shares to be issued by its transfer agent to the Subscribers in the denominations set forth in Schedule 1 hereto, each such certificate to bear an appropriate restrictive legend. The time at which such stock certificates have been issued by the Company is hereinafter referred to as the “Effective Time.”

Section 2.5      Closing. The consummation of the transactions contemplated by this Agreement (the “Closing”), shall take place: (a) at the offices of Laxague Law, Inc., 1 East Liberty, Suite 600, Reno, Nevada 89501 on the date on which all of the conditions to the Closing set forth in Article VIII hereof shall be fulfilled or waived in accordance with this Agreement (other than conditions that can be satisfied only at the Closing, but subject to the fulfillment or waiver of those conditions at the Closing); or (b) at such other place, time and date as the Company and the Subscribers may agree in writing (the “Closing Date”).

ARTICLE III
TRANSACTIONS TO BE COMPLETED ON OR BEFORE THE CLOSING DATE

On or before the Closing Date, each of the following transactions shall be completed:

Section 3.1      Settlement of Murphy Note. The Demand Promissory Note in the initial principal amount of $150,000 due and owing to Andrew Murphy dated April 21, 2015 (the “Murphy Note”) shall be settled in full upon the following terms:

(a)             Cash Payment. Andrew Murphy shall receive a cash payment in the amount of $50,000, with such funds to be paid by the Subscribers as part of the Purchase Price;

(b)             Issuance of New Shares; Lock-up Agreement. Andrew Murphy shall be issued 1,000,000 shares of the Company’s common stock, par value $0.00001 per share (the “Murphy Shares”). Such shares shall be subject to a lock-up agreement executed by the Company and Mr. Murphy and having the following terms:

(i)               No Murphy Shares may be sold, transferred, or encumbered except as permitted in the lock-up agreement,

(ii)             500,000 of the Murphy Shares will be released from restrictions imposed by the lock-up agreement on that date which is six (6) months from the Closing Date,

(iii)           In each of the seventh (7th) through the eighteenth (18th) month following the Closing Date, an additional 41,666 of the Murphy Shares shall be released from the restrictions imposed by the lock-up agreement; and

(c)             Release of Murphy Note. The Murphy Note shall be released and satisfied in full on the Closing Date.

Section 3.2      Settlement of George Berry Note. The Demand Promissory Note dated November 4, 2016 in the initial principal amount of $15,000 due and owing to the Berry Living Trust dated January 4, 2008 (the “Berry Note”) shall be settled in full and released in exchange

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for a cash payment in the amount of $15,000, with such funds to be paid by the Subscribers as part of the Purchase Price.

Section 3.3      Share Exchange Agreement with Biodynamic Molecular Technologies, LLC. The Company shall enter into a Share Exchange Agreement with shareholder Biodynamic Molecular Technologies, LLC (“Biodynamic”), with such agreement to close on the Closing Date and having the following material terms:

(a)             Exchange of Series A Super Voting Preferred Stock and Series B Preferred Stock. The 3,000,000 shares of Series A Super Voting Preferred Stock and the 20,000,000 shares of Series B Preferred Stock held by Biodynamic shall be exchanged with the Company for 13,465,733 shares of common stock to be issued to, or to the order of, Biodynamic (the “Biodynamic Shares”); and

(b)             Non-dilution Agreement. The Company, Biodynamic, and/or any parties to which shares of common stock have been issued per the order of Biodynamic, shall enter into a Non-dilution Agreement pursuant to which the Biodynamic Shares, collectively, shall at all times constitute 2.5% of the issued and outstanding capital stock of the Company during the twelve (12) months following the Closing Date. If, any time during the twelve (12) months following the Closing Date, the Biodynamic Shares fall below 2.5% of the Company’s issued and outstanding capital stock, the Company shall issue such additional shares as are required to return the total Biodynamic Shares to 2.5% of the Company’s issued and outstanding capital stock.

(c)             Lock-Up Agreement. The 13,465,733 shares to be issued to Biodynamic shall be subject to a lock-up agreement executed by the Company and Biodynamic and having the following terms:

(i)               No Biodynamic Shares may be sold, transferred, or encumbered except as permitted in the lock-up agreement,

(ii)             3,366,434 of the Biodynamic Shares will be released from restrictions imposed by the lock-up agreement on that date which is one year from the Closing Date, and

(iii)           On the last day of each of the 3rd, 6th, and 9th month following the closing date an additional 3,366,433 of the Biodynamic Shares shall be released from the restrictions imposed by the lock-up agreement

Section 3.4      Acquisition and Conversion of Justin Doll Note. The Company has issued a Demand Promissory Note in the initial principal amount of $50,000 to Justin Doll dated October 6, 2014 and modified March 5, 2015 (the “Doll Note”). The parties acknowledge that the Doll Note has been acquired by Dan Walters and has been converted in whole by Mr. Walters to a total of 2,200,000 shares of common stock.

ARTICLE IV

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REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS

The Subscribers hereby represent and warrant to the Company as follows:

Section 4.1      Subscribers acknowledge that the purchase of the Shares involves a high degree of risk in that the Company may require substantial additional funds.

Section 4.2      Subscribers recognize that an investment in the Company is highly speculative and only investors who can afford the loss of their entire investment should consider investing in the Company and the Shares;

Section 4.3      Subscribers have such knowledge and experience in finance, securities, investments, including investment in unregistered securities, and other business matters so as to be able to protect their interests in connection with this transaction;

Section 4.4      The Subscribers are each an "Accredited Investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended;

Section 4.5      Subscribers acknowledge that the shares are subject to significant restrictions on transfer as imposed by state and Federal Securities Laws, including but not limited to a minimum holding period of at least one (1) year;

Section 4.6      Subscribers hereby acknowledge (i) that this offering of Shares has not been reviewed by the United States Securities and Exchange Commission ("SEC") or by the securities regulator of any state; (ii) that the Shares are being issued by the Company pursuant to an exemption from registration provided by Section 4(2) of the Securities Act of 1933; and (iii) that any certificate evidencing the Shares received by Subscriber will bear a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER UNLESS IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER AND THAT SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

Section 4.7      Subscribers are s acquiring the Shares as principals for Subscribers’ own benefit;

Section 4.8      Subscribers are not aware of any advertisement of the Shares or any general solicitation in connection with any offering of the Shares;

Section 4.9     

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Subscribers acknowledge receipt and review of the Company’s filings with the Securities and Exchange Commission, and of both the Articles of Incorporation and bylaws of the Company, together with the opportunity and the Company’s encouragement to seek the advice and consultation of independent investment, legal and tax counsel;

Section 4.10  Subscribers acknowledge and agree that the Company has previously made available to Subscriber the opportunity to ask questions of and to receive answers from representatives of the Company concerning the Company and the Shares, as well as to conduct whatever due diligence the Subscribers, in their discretion, deem advisable.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Subscribers as follows:

Section 5.1      Organization. The Company (i) is duly organized, validly existing and in good standing under the laws of the State of Nevada, (ii) has all licenses, permits, authorizations and other Consents necessary to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and (iii) has all requisite corporate or other applicable power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted and presently proposed to be conducted, in each case except where such failures would not have, or be reasonably likely to have an apparent Material Adverse Effect. The Company is duly qualified or authorized to conduct business and is in good standing (or its equivalent) as a foreign corporation or other entity in all jurisdictions in which the ownership or use of its assets or nature of the business conducted by it makes such qualification or authorization necessary, except where the failure to be so duly qualified, authorized and in good standing would not have an apparent Material Adverse Effect.

Section 5.2      Authorization; Validity of Agreement. The Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and all other agreements and instruments to be executed pursuant to this Agreement, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the Board of Directors of each of the Company, and no other action on the part of the Company is necessary to authorize the execution and delivery of this Agreement and all other agreements and instruments to be executed pursuant to this Agreement and the consummation by the Company of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company and (assuming due and valid authorization, execution and delivery hereof by the Company) is a valid and binding obligation of each of the Company, enforceable against the Company in accordance with its terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

Section 5.3      Consents and Approvals; No Violations. Neither the execution, delivery or performance of this Agreement by the Company nor the consummation of the transactions contemplated hereby will (i) violate any provision of the articles of incorporation or by-laws of the Company; (ii) violate, conflict with or result in a breach of any provision of, or constitute a

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default (or an event which, with notice or lapse of time or both, would constitute a default) under, require the consent of or result in the creation of any Lien upon any of the properties of the Company under any Contract to which the Company or any of its properties may be bound; (iii) require any Consent, approval or authorization of, or notice to, or declaration, filing or registration with, any governmental entity by or with respect to the Company, or (iv) violate any order, writ, judgment, injunction, decree, law, statute, rule or regulation applicable to the Company or any of its properties or assets; except, in the cases of clauses (ii), (iii) and (iv), any such violations, conflicts, breaches, defaults or encumbrances, or any failure to receive any such Consent, approval or authorization, or to make any such notice, declaration, filing or registration as will not result in, or could reasonably be expected to result in, a Company Material Adverse Effect.

Section 5.4      Litigation. There is no Action pending or, to the knowledge of the Company, threatened, involving the Company or any subsidiary of the Company or affecting the officers, directors or employees of the Company or any subsidiary of the Company with respect to the Company’s, or any of the Company’s subsidiaries’, businesses by or before any governmental entity or by any third party and none of the Company nor any subsidiary of the Company has received written notice that any such Action is threatened. None of the Company nor any subsidiary of the Company is in default under any judgment, order or decree of any governmental entity applicable to its business which could reasonably be expected to have a Company Material Adverse Effect.

Section 5.5      No Default; Compliance with Applicable Laws. Neither the Company nor any of the Company’s subsidiaries is in default or violation of any material term, condition or provision of (i) their respective articles of incorporation, by-laws or similar organizational documents or (ii) any law applicable to the Company or any of the Company’s subsidiaries or its property and assets and neither the Company nor any of the Company’s subsidiaries has received written notice of any violation of or Liability under any of the foregoing (whether material or not).

Section 5.6      Broker’s and Finder’s Fees; Broker/Dealer Ownership. No person(s), firm, corporation or other entity is entitled by reason of any act or omission of the Company to any broker’s or finder’s fees, commission or other similar compensation, nor, with respect to the execution, delivery and performance of this Agreement or with respect to the consummation of the transactions contemplated hereby will any such person have any right or valid claim against the Company or the Subscribers to any such payment.

Section 5.7      Capitalization of Company. As of the date hereof, the authorized capital stock of the Company consists of 900,000,000 shares of Company Common Stock and 100,000,000 shares of Company Preferred Stock, 1,000,000 shares of which are designated as Series A Super Voting Preferred Stock, and 20,000,000 of which are designated as Series B Preferred Stock. Immediately prior to the Effective Time, there shall be 37,197,199 shares of Company Common Stock, par value $0.00001, issued and outstanding, 3,000,000 shares of Series A Super Voting Preferred Stock, and 20,000,000 shares of Series B Preferred Stock issued and outstanding. Other than as provided in Article II of this Agreement in connection with securities to be issued or to become issuable in connection with or as a result of this Agreement and the transactions contemplated by this Agreement, the Company has no outstanding options,

  14  
 

warrants, rights or commitments to issue shares of Company Common Stock or any capital stock or other securities of the Company, and there are no outstanding securities convertible or exercisable into or exchangeable for shares of Company Common Stock or any capital stock or other securities of the Company. There is no voting trust, agreement or arrangement among any of the beneficial holders of Company Common Stock affecting the nomination or election of directors or the exercise of the voting rights of Company Common Stock. There are no registration rights or similar rights applicable to any shares of Company Common Stock or any capital stock or other securities of the Company. All outstanding shares of the capital stock of the Company are validly issued and outstanding, fully paid and non-assessable, and none of such shares have been issued in violation of the preemptive rights of any person. All of the shares of Company Common Stock issued and outstanding immediately prior to the Effective Time have been issued in compliance with the Securities Act and applicable state securities laws and (i) pursuant to effective registration statements filed with the Securities and Exchange Commission and/or (ii) in reliance on valid exemptions from registration or qualification thereunder.

Section 5.8      Validity of Shares. The shares of Company Common Stock to be issued in accordance with Article II hereof, when issued and delivered in accordance with the terms hereof, shall be duly authorized, validly issued, fully paid and non-assessable.

Section 5.9      Reporting and Compliance.

(a)             The Company is not a reporting company under the Securities Act and/or the Securities Exchange Act. Prior to the Effective Time, The Company shall have filed with OTC Markets Group, Inc. all information statements and reports required to be filed by The Company pursuant to be quoted on the OTC Pink – Current Information tier of the over-the-counter markets (collectively, the “Company OTC Documents”).

(b)             None of the Company OTC Documents, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained therein not misleading. Each of the Company OTC Documents complied, and each Company OTC Document to be filed with OTC Markets Group, Inc. prior to the Effective Date shall comply, in all material respects, with all applicable requirements. Each of the financial statements (including, in each case, any related notes), contained in the Company OTC Documents, including any Company OTC Documents filed after the date of this Agreement until the Closing, complied, as of its respective filing date, in all material respects with all applicable accounting requirements and the published rules and regulations of OTC Markets Group, Inc. with respect thereto.

(c)             Prior to and until the Closing, the Company will provide to the Subscribers copies of any and all amendments or supplements to the Company OTC Documents filed with OTC Markets Group, Inc. and all reports filed by the Company subsequent to the filing of the Company OTC Documents and any and all subsequent information statements, reports or notices filed by the Company with OTC Markets Group, Inc. or delivered to the stockholders of Company.

(d)             The Company is not an “investment company” within the meaning of Section 3 of the Investment Company Act.

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(e)             The Company Common Stock shall, prior to the Effective Time, be eligible for quotation and trading on the OTC Pink – Current Information tier of the electronic quotation system operated by OTC Markets, Inc.

(f)              Between the date hereof and the Closing Date, the Company shall continue to satisfy any applicable filing requirements of OTC Markets Group, Inc., and all other requirements of applicable securities laws.

(g)             To the knowledge of the Company, the Company has complied with the Securities Act, Exchange Act and all other applicable federal and state securities laws.

Section 5.10  No General Solicitation. In issuing Company Common Stock hereunder, neither the Company nor anyone acting on its behalf has offered to sell Company Common Stock by any form of general solicitation or advertising.

Section 5.11  Financial Statements. The balance sheets, and statements of income, stockholders’ equity and cash flows (including any notes thereto) contained in the Company OTC Documents (the “Company Financial Statements”) (i) have been prepared in accordance with GAAP, (ii) are in accordance with the books and records of the Company, and (iii) present fairly in all material respects the financial condition of the Company at the dates therein specified and the results of its operations and changes in financial position for the periods therein specified.

Section 5.12  Absence of Undisclosed Liabilities. Currently, the Company does not have any Liability except: (a) as disclosed in the Company OTC Documents, (b) to the extent set forth on or reserved against in the balance sheet of the Company as of February 28, 2018 (the “Company Balance Sheet”) or the notes to the Company Financial Statements, (c) current Liabilities incurred and obligations under agreements entered into in the usual and ordinary course of business, consistent with past practice, since February 28, 2018 (the “Company Balance Sheet Date”), none of which, individually or in the aggregate, constitutes a Company Material Adverse Effect, (d) attorney’s fees and accounting fees incurred by the Company since the Company Balance Sheet Date, including those related to this Agreement and all of the transactions related thereto and contemplated thereby, including but not limited to preparation and filing of disclosures with OTC Markets Group, Inc., and (e) by the specific terms of any written agreement, document or arrangement attached as an exhibit to the Company OTC Documents..

Section 5.13       Changes. Since the Company Balance Sheet Date, except as disclosed in the Company OTC Documents, Company has not (a) incurred any debts, obligations or Liabilities, absolute, accrued or, to the Company’s knowledge, contingent, whether due or to become due, except for current Liabilities incurred in the usual and ordinary course of business, (b) discharged or satisfied any Liens other than those securing, or paid any obligation or Liability other than, current liabilities shown on the Company Balance Sheet and current Liabilities incurred since the Company Balance Sheet Date, in each case in the usual and ordinary course of business, (c) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, other than in the usual and ordinary course of business, (d) sold, transferred or leased any of its assets, except in the usual and ordinary course of business, (e) cancelled or compromised any

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debt or claim, or waived or released any right of material value, (f) suffered any physical damage, destruction or loss (whether or not covered by insurance) that could reasonably be expected to have a Company Material Adverse Effect, (g) entered into any transaction other than in the usual and ordinary course of business, (h) encountered any labor union difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension, retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary course of business consistent with past practice, or entered into any employment agreement, (j) issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted any options (including employee stock options), warrants or other rights with respect thereto, (k) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered or experienced any change in, or condition affecting, the financial condition of the Company other than changes, events or conditions in the usual and ordinary course of its business, none of which (either by itself or in conjunction with all such other changes, events and conditions) could reasonably be expected to have a Company Material Adverse Effect, (m) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted, (n) made or permitted any amendment or termination of any material Contract, agreement or license to which it is a party, (o) suffered any material loss not reflected in the Company Balance Sheet or its statement of income for the year ended on the Company Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, director, employee, stockholder or consultant, (q) made or agreed to make any charitable contributions or incurred any non-business expenses in excess of $1,000 in the aggregate, or (r) entered into any Contract, agreement or license, or otherwise obligated itself, to do any of the foregoing.

Section 5.14  Tax Returns and Audits. All required federal, state and local Tax Returns of the Company have been accurately prepared in all material respects and duly and timely filed, and all federal, state and local Taxes required to be paid with respect to the periods covered by such returns have been paid to the extent that the same are material and have become due, except where the failure so to file or pay could not reasonably be expected to have a Company Material Adverse Effect. The Company is not and has not been delinquent in the payment of any Tax. The Company has not had a Tax deficiency assessed against it. None of the Company’s federal income Tax Returns nor any state or local income or franchise Tax Returns has been audited by governmental authorities. The reserves for Taxes reflected on the Company Balance Sheet are sufficient for the payment of all unpaid Taxes payable by the Company with respect to the period ended on the Company Balance Sheet Date. There are no federal, state, local or foreign audits, actions, suits, proceedings, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns of the Company now pending, and the Company has not received any notice of any proposed audits, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns.

Section 5.15  Employee Benefit Plans; ERISA.

(a)             Except as disclosed in the Company OTC Documents, there are no “employee benefit plans” (within the meaning of Section 3(3) of ERISA) nor any other employee

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benefit or fringe benefit arrangements, practices, contracts, policies or programs other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by the Company, whether written or unwritten and whether or not funded. Any plans listed in the Company OTC Documents are hereinafter referred to as the “Company Employee Benefit Plans.”

(b)             Any current and prior material documents, including all amendments thereto, with respect to each Company Employee Benefit Plan have been made available to the Company.

(c)             All Company Employee Benefit Plans are in material compliance with the applicable requirements of ERISA, the Code and any other applicable state, federal or foreign law.

(d)             There are no pending, or to the knowledge of the Company, threatened, claims or lawsuits that have been asserted or instituted against any Company Employee Benefit Plan, the assets of any of the trusts or funds under the Company Employee Benefit Plans, the plan sponsor or the plan administrator of any of the Company Employee Benefit Plans or against any fiduciary of a Company Employee Benefit Plan with respect to the operation of such plan.

(e)             There is no pending, or to the knowledge of the Company, threatened, investigation or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Company Employee Benefit Plan and the Company has no knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to trigger such an investigation or enforcement action.

(f)              No actual or, to the knowledge of the Company, contingent Liability exists with respect to the funding of any Company Employee Benefit Plan or for any other expense or obligation of any Company Employee Benefit Plan, except as disclosed on the Company Financial Statements or the Company OTC Documents, and to the knowledge of the Company, no contingent Liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.

Section 5.16  Interested Party Transactions. Except as disclosed in the Company OTC Documents, no officer, director or stockholder of the Company or any Affiliate of any such Person or the Company has or has had, either directly or indirectly, (a) an interest in any Person that (i) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by the Company or (ii) purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial interest in any Contract to which the Company is a party or by which it may be bound or affected.

Section 5.17  Questionable Payments. Neither the Company, nor to the knowledge of the Company, any director, officer, agent, employee or other Person associated with or acting on behalf of the Company, has used any corporate funds for (a) unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) made any direct or indirect unlawful payments to government officials or employees from corporate funds, (c)

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established or maintained any unlawful or unrecorded fund of corporate monies or other assets, (d) made any false or fictitious entries on the books of record of any such corporations, or (e) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

Section 5.18  Obligations to or by Stockholders. Except as disclosed in the Company OTC Documents, the Company has no Liability or obligation or commitment to any stockholder of the Company or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any stockholder of the Company, nor does any stockholder of the Company or any such Affiliate or associate have any Liability, obligation or commitment to the Company.

Section 5.19  Schedule of Assets and Contracts. Except as expressly set forth in this Agreement, the Company Balance Sheet or the notes thereto, the Company is not a party to any Contract not made in the ordinary course of business that is material to the Company. The Company does not own any real property. The Company is not a party to any Contract (a) with any labor union, (b) for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (c) for the employment of any officer, individual employee or other Person on a full-time basis or any contract with any Person for consulting services, (d) with respect to bonus, pension, profit sharing, retirement, stock purchase, stock option, deferred compensation, medical, hospitalization or life insurance or similar plan, contract or understanding with any or all of the employees of the Company or any other Person, (e) relating to or evidencing Indebtedness for Borrowed Money or subjecting any asset or property of the Company to any Lien or evidencing any Indebtedness, (f) guaranteeing of any Indebtedness, (g) under which the Company is lessee of or holds or operates any property, real or personal, owned by any other Person, (h) under which the Company is lessor or permits any Person to hold or operate any property, real or personal, owned or controlled by the Company, (i) granting any preemptive right, right of first refusal or similar right to any Person, (j) with any Affiliate of the Company or any present or former officer, director or stockholder of the Company, (k) obligating the Company to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (1) containing a covenant not to compete or other restriction on the Company’s ability to conduct a business or engage in any other activity, (m) with respect to any distributor, dealer, manufacturer’s representative, sales agency, franchise or advertising contract or commitment, (n) regarding the registration of securities under the Securities Act, (o) characterized as a collective bargaining agreement, or (p) with any Person continuing for a period of more than three months from the Closing Date that involves an expenditure or receipt by the Company in excess of $1,000. The Company maintains no insurance policies and insurance coverage of any kind with respect to the Company, its business, premises, properties, assets, employees and agents. the Company has furnished to the Company true and complete copies of all agreements and other documents requested by the Company.

Section 5.20  Environmental Matters.

(a)             The Company has never generated, used, handled, treated, released, stored or disposed of any Hazardous Materials on any real property on which it now has or previously had any leasehold or ownership interest, except in compliance with all applicable Environmental Laws.

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(b)             The historical and present operations of the business of the Company compliance with all applicable Environmental Laws, except where any non-compliance has not had and would not reasonably be expected to have a Company Material Adverse Effect.

(c)             (i) The Company has not, sent or disposed of, otherwise had taken or transported, arranged for the taking or disposal of (on behalf of itself, a customer or any other party) or in any other manner participated or been involved in the taking of or disposal or release of a Hazardous Material to or at a site that is contaminated by any Hazardous Material or that, pursuant to any Environmental Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list, or any similar state or federal list, or (B) is subject to or the source of a claim, an administrative order or other request to take “removal”, “remedial”, “corrective” or any other “response” action, as defined in any Environmental Law, or to pay for the costs of any such action at the site; (ii) the Company is not involved in (and has no basis to reasonably expect to be involved in) any suit or proceeding and has not received (and has no basis to reasonably expect to receive) any written notice, request for information or other communication from any governmental authority or other third party with respect to a release or threatened release of any Hazardous Material or a violation or alleged violation of any Environmental Law, and has not received (and has no basis to reasonably expect to receive) written notice of any claims from any Person relating to property damage, natural resource damage or to personal injuries from exposure to any Hazardous Material; and (iii) the Company has timely filed every report required to be filed, acquired all necessary certificates, approvals and permits, and generated and maintained all required data, documentation and records under all Environmental Laws, in all such instances except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(d)             There are no material pending or, to the knowledge of Company, threatened, demands, claims, information requests or notices of noncompliance or violation against or to the Company relating to any Environmental Law; and, to the knowledge of the Company, there are no conditions or occurrences on any of the real property used by the Company in connection with its business that would reasonably be expected to lead to any such demands, claims or notices against or to the Company, except such as have not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

Section 5.21  Employees. Other than pursuant to ordinary arrangements of employment compensation, the Company is not under any obligation or liability to any officer, director, employee or Affiliate of the Company.

Section 5.22  Title to Property and Encumbrances. The Company has good and valid title to all properties and assets used in the conduct of its business (except for property held under valid and subsisting leases which are in full force and effect and which are not in default) free of all Liens except Permitted Liens and such ordinary and customary imperfections of title, restrictions and encumbrances as do not, individually or in the aggregate constitute a Company Material Adverse Effect.

Section 5.23  Condition of Properties. All facilities, machinery, equipment, fixtures and other properties owned, leased or used by the Company are in operating condition, subject to ordinary wear and tear, and are adequate and sufficient for the Company’s existing business.

Section 5.24 

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Insurance Coverage. The Company does not have in full force and effect any one or more policies of insurance issued by insurers of recognized responsibility insuring the Company and its properties, products and business against such losses and risks, and in such amounts, as are customary for corporations of established reputation engaged in the same or similar business and similarly situated. The Company has not been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable to renew any existing insurance coverage as and when the same shall expire upon terms at least as favorable to those currently in effect, other than possible increases in premiums that do not result from any act or omission of the Company. No suit, proceeding or action or, to the best current actual knowledge of the Company, threat of suit, proceeding or action has been asserted or made against the Company due to alleged bodily injury, disease, medical condition, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by the Company.

Section 5.25  Disclosure. There is no fact relating to the Company that the Company has not disclosed to the Company in writing that has had, is having or is reasonably likely to have a Company Material Adverse Effect. No representation or warranty by the Company herein and no information disclosed in the exhibits hereto by the Company contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.

Section 5.26  No Liabilities. Except as described in Section 5.12 hereto, as of the Closing Date, there shall be no Liabilities or Indebtedness of the Company of any kind whatsoever, whether recorded on the Balance Sheet of the Company or not, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such Liability or Indebtedness. The Company is not a guarantor of any Indebtedness of any other person, firm or corporation.

ARTICLE VI
CONDUCT OF BUSINESSES PENDING THE CLOSING

Section 6.1      Conduct of Business by the Company Pending the Closing. Prior to the Effective Time, unless the Subscribers shall otherwise agree in writing or as otherwise contemplated expressly permitted by this Agreement:

(i)                                   the business of the Company shall be conducted only in the ordinary course consistent with past practice;

(ii)                                 the Company shall not (A) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (B) amend its articles of incorporation or by-laws; or (C) split, combine or reclassify its capital stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to such stock; and

(iii)                               the Company shall not (A) issue or agree to issue any additional shares of, or options, warrants or rights of any kind to acquire shares of, its capital stock;

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(B) acquire or dispose of any assets other than in the ordinary course of business; (C) incur additional Indebtedness or any other Liabilities or enter into any other transaction except in the ordinary course of business; (D) enter into any Contract, agreement, commitment or arrangement with respect to any of the foregoing except this Agreement, or (E) except as contemplated by this Agreement, enter into any Contract, agreement, commitment or arrangement to dissolve, merge; consolidate or enter into any other material business contract or enter into any negotiations in connection therewith.

(iv)                                The Company shall use its best efforts to preserve intact the business of the Company, to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with the Company and to file all required OTC Reports;

(v)                                  The Company will not, nor will it authorize any director or authorize or permit any officer or employee or any attorney, accountant or other representative retained by them to, make, solicit, encourage any inquiries with respect to, or engage in any negotiations concerning, any Acquisition Proposal (as defined below). The Company will promptly advise the Subscribers in writing of any such inquiries or Acquisition Proposal (or requests for information) and the substance thereof. As used in this paragraph, “Acquisition Proposal” shall mean any proposal for a merger or other business combination involving the Company or for the acquisition of a substantial equity interest in it, or any material assets of it other than as contemplated by this Agreement. The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person conducted heretofore with respect to any of the foregoing; and

(vi)                                The Company will not enter into any new employment agreements with any of their officers or employees or grant any increases in the compensation or benefits of their officers and employees.

ARTICLE VII
ADDITIONAL AGREEMENTS

Section 7.1      Access and Information. The Company shall afford to the Subscribers and to their accountants, counsel and other representatives reasonable access during normal business hours throughout the period prior to the Effective Time of all of its properties, books, contracts, commitments and records (including but not limited to Tax Returns) and during such period, shall furnish promptly to the Subscribers all information concerning its business, properties and personnel as the Subscribers may reasonably request, provided that no investigation pursuant to this Section 7.1 shall affect any representations or warranties made herein. Each party shall hold, and shall cause its employees and agents to hold, in confidence all such information (other than such information that (i) becomes generally available to the public other than as a result of a disclosure by such party or its directors, officers, managers, employees, agents or advisors, or (ii) becomes available to such party on a non-confidential basis from a source other than a party hereto or its advisors, provided that such source is not known by such party to be bound by a confidentiality agreement with or other obligation of secrecy to a party hereto or another party until such time as such information is otherwise publicly available; provided, however, that: (A)

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any such information may be disclosed to such party’s directors, officers, employees and representatives of such party’s advisors who need to know such information for the purpose of evaluating the transactions contemplated hereby (it being understood that such directors, officers, employees and representatives shall be informed by such party of the confidential nature of such information); (B) any disclosure of such information may be made as to which the party hereto furnishing such information has consented in writing; and (C) any such information may be disclosed pursuant to a judicial, administrative or governmental order or request provided, that the requested party will promptly so notify the other party so that the other party may seek a protective order or appropriate remedy and/or waive compliance with this Agreement and if such protective order or other remedy is not obtained or the other party waives compliance with this provision, the requested party will furnish only that portion of such information which is legally required and will exercise its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the information furnished. If this Agreement is terminated, each party will deliver to the other all documents and other materials (including copies) obtained by such party or on its behalf from the other party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof.

Section 7.2      Additional Agreements. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its commercially reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using its commercially reasonable best efforts to satisfy the conditions precedent to the obligations of any of the parties hereto to obtain all necessary waivers, and to lift any injunction or other legal bar to this Agreement (and, in such case, to proceed with this Agreement as expeditiously as possible). In order to obtain any necessary governmental or regulatory action or non-action, waiver, Consent, extension or approval, each of the Company and the Subscribers agrees to take all reasonable actions and to enter into all reasonable agreements as may be necessary to obtain timely governmental or regulatory approvals and to take such further action in connection therewith as may be necessary. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of the Company shall take all such necessary action.

Section 7.3      Publicity. No party shall issue any press release or public announcement pertaining to this Agreement that has not been agreed upon in advance by the Company and the Subscribers, except as the Company reasonably determines to be necessary in order to comply with the rules of the Commission; provided that in such case the Company will use its best efforts to allow the Subscribers to review and reasonably approve any of the same prior to its release.

Section 7.4      Appointment of Directors and Officers. Immediately upon the Effective Time, the Company shall require and accept the resignations of those officers and directors of the Company listed on Exhibit A hereto under the heading “Pre-Effective Time,” and shall immediately upon the Effective Time, cause the appointments of those officers and directors of the Company identified in Exhibit A hereto under the heading “Post-Effective Time”, subject to any notice and waiting period requirements of federal law. At the first annual meeting of the

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Company’s stockholders and thereafter, the election of members of the Company’s Board of Directors shall be accomplished in accordance with the by-laws of the Company.

ARTICLE VIII
CONDITIONS OF PARTIES’ OBLIGATIONS

Section 8.1      Company Obligations. The obligations of the Company under this Agreement are subject to the fulfillment by the Subscribers at or prior to the Closing of the following conditions, any of which may be waived in whole or in part by the Company.

(a)             No Errors, etc. The representations and warranties of the Subscribers under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.

(b)             Compliance with Agreement. The Subscribers shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by them on or before the Closing Date.

(c)             Deliver of the Purchase Price. The Subscribers shall have delivered the full Purchase Price, subject to the Company’s issuance of the Shares.

(d)             No Restraining Action. No Action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

Section 8.2      Company Obligations. The obligations of the Subscribers under this Agreement are subject to the fulfillment by the Company at or prior to the Closing of the following conditions any of which may be waived in whole or in part by the Company:

(a)             No Errors, etc. The representations and warranties of the Company under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.

(b)             Execution of Related Agreements. Each of the related transactions and agreements set forth in Article III of the Agreement shall have been fully documented and executed by all necessary parties thereto.

(c)             Good Standing. The Company shall be in good standing with the State of Nevada, with fees and charges owing to the Nevada Secretary of State paid in full.

(d)             Current OTC Markets Filings. The Company shall be current in its periodic filings with OTC Markets Group, Inc., and its common stock shall be designated “Pink – Current Information” on the OTC Markets tier system.

(e)             No Liabilities. Other than with respect to the Doll Note, as amended as set forth in Section 3.4., the Company shall not have any Liabilities, Indebtedness, or Indebtedness for Borrowed Money as of the Effective Time.

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(f)              Compliance with Agreement. The Company shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.

(g)             No Company Material Adverse Effect. Since the date hereof, there shall not have been any event or circumstance that has resulted in a Company Material Adverse Effect and no event has occurred or circumstance exists that would be reasonably expected to result in such a Company Material Adverse Effect.

(h)             Certificate of Officers. The Company shall have delivered to the Subscribers a certificate dated the Closing Date, executed on its behalf by its President, certifying the satisfaction of the conditions specified in paragraphs (a) through (g) of this Section 8.2.

(i)               Supporting Documents. The Subscribers shall have received the following:

(1)                                                      Copies of resolutions of the Company’s board of directors, certified by its Secretary, authorizing and approving this Agreement and the execution, delivery and performance of this Agreement and all other documents, agreements, and instruments to be delivered by them pursuant hereto.

(2)                                                      A certificate of incumbency executed by the Secretary of the Company certifying the names, titles and signatures of the officers authorized to execute the documents referred to in paragraph (1) above and further certifying that the articles of incorporation and by-laws of the Company appended thereto have not been amended or modified.

(3)                                                      A certificate, dated the Closing Date, executed by the Secretary of the Company, certifying that: (i) all consents, authorizations, orders and approvals of, and filings and registrations with, any court, governmental body or instrumentality that are required to be obtained by the Company for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been duly made or obtained; and (ii) no action or proceeding before any court, governmental body or agency has been threatened, asserted or instituted against the Company to restrain or prohibit, or to obtain substantial damages in respect of, this Agreement or the carrying out of the transactions contemplated by this Agreement.

(4)                                                      A certificate of the Company’s transfer agent and registrar, certifying as of the business day prior to the Closing Date, a true and complete list of the names and addresses of the record owners of all of the outstanding shares of Company Common Stock and Company Preferred Stock, together with the number of shares held by each record owner.

(5)                                                      The executed resignations of all directors and officers of the Company, with the director resignations to take effect following the notice period

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required by federal law, if any, and (ii) executed releases from each such director and officer in the form and substance acceptable to the subscribers in their sole discretion.

(6)                                                      Evidence as of a recent date of the good standing and corporate existence of the Company issued by the Secretary of State of the State of Nevada.

(7)                                                      Such additional supporting documentation and other information with respect to the transactions contemplated hereby as the Subscribers may reasonably request.

ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS

Section 9.1      Indemnification by Michael Alexander. Michael Alexander shall indemnify and hold harmless each of the Subscribers and the Company (collectively, the “Indemnified Parties”), and shall reimburse the Indemnified Parties for, any loss, liability, claim, damage, expense (including, but not limited to, costs of investigation and defense and reasonable attorneys’ fees) or diminution of value in excess of a total monetary amount of $25,000 (collectively, “Damages”) arising from or in connection with (a) any inaccuracy, in any material respect, in any of the representations and warranties of the Company in this Agreement or in any certificate delivered by the Company to the Subscribers pursuant to this Agreement, or any actions, omissions or statements of fact inconsistent with any such representation or warranty, (b) any failure by the Company to perform or comply in any material respect with any covenant or agreement in this Agreement, (c) any claim for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such party with the Company in connection with any of the transactions contemplated by this Agreement, (d) Taxes attributable to any transaction or event occurring on or prior to the Closing, (e) any claim relating to or arising out of any Liabilities of the Company on or prior to Closing or with respect to accounting fees arising thereafter, or (f) any litigation, action, claim, proceeding or investigation by any third party relating to or arising out of the business or operations of the Company, or the actions of the Company or any holder of Company capital stock prior to the Effective Time.

Section 9.2      Survival. All representations, warranties, covenants and agreements of the Company contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive until twelve (12) months after the Effective Date.

Section 9.3      Time Limitations. Mr. Alexander shall have no liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or agreement to be performed and complied with prior to the Effective Time, unless on or before the twelve month anniversary of the Effective Time (the “Claims Deadline”), Mr. Alexander is given notice of a claim with respect thereto, in accordance with Section 9.4, specifying the factual basis therefore in reasonable detail to the extent then known by the Indemnified Parties.

Section 9.4     

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Notice of Claims.

(a)             If, at any time on or prior to the Claims Deadline, the Indemnified Parties shall assert a claim for indemnification pursuant to Section 9.1, such Indemnified Parties shall submit to Mr. Alexander a written claim stating: (i) that an Indemnified Party incurred or reasonably believes it may incur Damages and the amount or reasonable estimate thereof of any such Damages; and (ii) in reasonable detail, the facts alleged as the basis for such claim and the section or sections of this Agreement alleged as the basis or bases for the claim.

(b)             In the event that any action, suit or proceeding is brought against any Indemnified Party with respect to which Mr. Alexander may have liability under this Article IX, Mr. Alexander shall have the right, at his cost and expense, to defend such action, suit or proceeding in the name and on behalf of the Indemnified Party; provided, however, that an Indemnified Party shall have the right to retain its own counsel, with fees and expenses paid by Mr. Alexander, if representation of the Indemnified Party by counsel retained by Mr. Alexander would be inappropriate because of actual or potential differing interests between Mr. Alexander and the Indemnified Party. In connection with any action, suit or proceeding subject to this Article IX, Mr. Alexander and each Indemnified Party agree to render to each other such assistance as may reasonably be required in order to ensure proper and adequate defense of such action, suit or proceeding. Mr. Alexander shall not, without the prior written consent of the applicable Indemnified Parties, which consent shall not be unreasonably withheld or delayed, settle or compromise any claim or demand if such settlement or compromise does not include an irrevocable and unconditional release of such Indemnified Parties for any liability arising out of such claim or demand.

ARTICLE X
TERMINATION PRIOR TO CLOSING

Section 10.1  Termination of Agreement. This Agreement may be terminated at any time prior to the Closing:

(a)             by the mutual written consent of the Company and the Subscribers;

(b)             by the Subscribers, if the Company (i) fails to perform in any material respect any of its agreements contained herein required to be performed by it on or prior to the Effective Time, (ii) materially breaches any of its representations, warranties or covenants contained herein, which failure or breach is not cured within thirty (30) days after the Subscribers have notified the Company of their intent to terminate this Agreement pursuant to this paragraph (b);

(c)             by the Company, if the subscribers (i) fail to perform in any material respect any of their agreements contained herein required to be performed by it on or prior to the Closing Date, (ii) materially breach any of their representations, warranties or covenants contained herein, which failure or breach is not cured within thirty (30) days after the Company has notified the Subscribers of its intent to terminate this Agreement pursuant to this paragraph (c);

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(d)             by either the Company, on the one hand, or the Subscribers, on the other hand, if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on the Subscribers or the Company, which prohibits or materially restrains any of them from consummating the transactions contemplated hereby; provided that the parties hereto shall have used their best efforts to have any such order, writ, injunction or decree lifted and the same shall not have been lifted within ninety (90) days after entry, by any such court or governmental or regulatory agency;

(e)             by either the Company, on the one hand, or the Subscribers, on the other hand, if the Closing has not occurred on or prior to June 15, 2018, for any reason other than delay or nonperformance of the party seeking such termination;

(f)              by the Company if the Board of Directors of the Company determines in good faith, based upon advice of legal counsel, that termination pursuant to this Section 10.1(f) is necessary to comply with its fiduciary duties under applicable law.

Section 10.2  Termination of Obligations. Termination of this Agreement pursuant to Section 10.1 hereof shall terminate all obligations of the parties hereunder, except for the obligations under Article IX, Article X, and Sections 11.4, 11.7, 11.14, 11.15 and 11.16 hereof; provided, however, that termination pursuant to paragraphs (b) or (c) of Section 10.1 shall not relieve the defaulting or breaching party or parties from any liability to the other parties hereto.

ARTICLE XI
MISCELLANEOUS

Section 11.1  Amendments. Subject to applicable law, this Agreement may be amended or modified by the parties hereto by written agreement executed by each party to be bound thereby and delivered by duly authorized officers of the parties hereto at any time prior to the Effective Time.

Section 11.2  Notices. Any notice, request, instruction, other document or communications to be given hereunder by any party hereto to any other party hereto shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) upon confirmation of delivery if by electronic mail, (c) upon receipt of a transmission confirmation (with a confirming copy delivered personally or sent by overnight courier) if sent by facsimile or like transmission, or (d) on the next business day when sent by Federal Express, United Parcel Service, U.S. Express Mail or other reputable overnight courier for guaranteed next day delivery, as follows:

If to the Company, to:

The Radiant Creations Group, Inc.

Attention: Michael Alexander

10380 SW Village Center Dr. Ste. 352

Port St. Lucie, FL 34987

 

   
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If to the Subscribers, to:

Ray Grimm, Jr.

3246 Grey Hawk Ct

Carlsbad, Calif 92010

 

With a copy to:

 

Laxague Law, Inc.

Attn: Joe Laxague, Esq.

1 East Liberty, Suite 600

Reno, NV 89501

or to such other persons or addresses as may be designated in writing by the party to receive such notice. Nothing in this Section 11.2 shall be deemed to constitute consent to the manner and address for service of process in connection with any legal proceeding (including arbitration arising in connection with this Agreement), which service shall be effected as required by applicable law.

Section 11.3  Entire Agreement. This Agreement and the exhibits attached hereto or referred to herein constitute the entire agreement of the parties hereto, and supersede all prior agreements and undertakings, both written and oral, among the parties hereto, with respect to the subject matter hereof and thereof.

Section 11.4  Expenses. Except as otherwise expressly provided herein, whether or not the Closing occurs, all expenses and fees incurred by the Subscribers on one hand, and the Company on the other, shall be borne solely and entirely by the party that has incurred the same; provided, that if the Closing occurs, the Company agrees to pay any unpaid fees and expenses of the Subscribers (including fees and expenses of their counsel and other advisors) in connection with the consummation of the transactions contemplated by this Agreement.

Section 11.5  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to amend or modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

Section 11.6  Successors and Assigns; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any of the parties hereto without, in the case of the Subscribers, the prior written approval of the Company and, in the case of the Company, the prior written approval of the Subscribers.

Section 11.7 

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No Third Party Beneficiaries. Except as set forth in Section 9.1 and Section 11.6, nothing herein expressed or implied shall be construed to give any person other than the parties hereto (and their successors and assigns as permitted herein) any legal or equitable rights hereunder.

Section 11.8  Counterparts; Delivery by Facsimile. This Agreement may be executed in multiple counterparts, and by the different parties hereto in separate counterparts, each of which when executed will be deemed to be an original but all of which taken together will constitute one and the same agreement. This Agreement and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or by electronic mail, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

Section 11.9  Waiver. At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto; (b) waive any inaccuracies in the representations and breaches of the warranties of the other party contained herein or in any document delivered pursuant hereto; and (c) waive compliance by the other party with any of the agreements or conditions contained herein. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby.

Section 11.10    No Constructive Waivers. No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, agreement or covenant herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

Section 11.11    Further Assurances. The parties hereto shall use their commercially reasonable efforts to do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments or documents as any other party hereto may reasonably request in order to carry out fully the intent and purposes of this Agreement and the consummation of the transactions contemplated hereby.

Section 11.12    Recitals. The recitals set forth above are incorporated herein and, by this reference, are made part of this Agreement as if fully set forth herein.

Section 11.13   

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Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 11.14    Governing Law. This Agreement and the agreements, instruments and documents contemplated hereby shall be governed by and construed and enforced in accordance with the laws of the State of Nevada without regard to its conflicts of law principles.

Section 11.15    Dispute Resolution. The parties hereto shall initially attempt to resolve all claims, disputes or controversies arising under, out of or in connection with this Agreement by conducting good faith negotiations amongst themselves. If the parties hereto are unable to resolve the matter following good faith negotiations, the matter shall thereafter be resolved by binding arbitration and each party hereto hereby waives any right it may otherwise have to the resolution of such matter by any means other than binding arbitration pursuant to this Section 11.15. Whenever a party shall decide to institute arbitration proceedings, it shall provide written notice to that effect to the other parties hereto. The party giving such notice shall, however, refrain from instituting the arbitration proceedings for a period of sixty (60) days following such notice. During this period, the parties shall make good faith efforts to amicably resolve the claim, dispute or controversy without arbitration. Any arbitration hereunder shall be conducted in the English language under the commercial arbitration rules of the American Arbitration Association. Any such arbitration shall be conducted in San Diego, California by a panel of three arbitrators: one arbitrator shall be appointed by each of the Subscribers, collectively, and Company; and the third shall be appointed by the American Arbitration Association. The panel of arbitrators shall have the authority to grant specific performance. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based on the claim, dispute or controversy in question would be barred under this Agreement or by the applicable statute of limitations. The prevailing party in any arbitration in accordance with this Section 11.15 shall be entitled to recover from the other party, in addition to any other remedies specified in the award, all reasonable costs, attorneys’ fees and other expenses incurred by such prevailing party to arbitrate the claim, dispute or controversy.

Section 11.16    Interpretation.

(a)             When a reference is made in this Agreement to a section or article, such reference shall be to a section or article of this Agreement unless otherwise clearly indicated to the contrary.

(b)             Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

(c)             The words “hereof”, “hereby”, “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified.

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(d)             The words “knowledge,” or “known to,” or similar terms, when used in this Agreement to qualify any representation or warranty, refer to the knowledge or awareness of certain specific facts or circumstances related to such representation or warranty of the persons in the Applicable Knowledge Group (as defined herein) which a prudent business person would have obtained after reasonable investigation or due diligence on the part of any such person. For the purposes hereof, the “Applicable Knowledge Group” with respect to the Company shall be Michael Alexander and Gary Alexander. For the purposes hereof, the “Applicable Knowledge Group” with respect to the Subscribers shall be each of the named Subscribers.

(e)             The word “subsidiary” shall mean any entity of which at least a majority of the outstanding shares or other equity interests having ordinary voting power for the election of directors or comparable managers of such entity is owned, directly or indirectly by another entity or person.

(f)              For purposes of this Agreement, “ordinary course of business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

(g)             The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.

(h)             A reference to any legislation or to any provision of any legislation shall include any modification or re-enactment thereof, any legislative provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto, unless the context requires otherwise.

(i)               The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

[The remainder of this page is intentionally left blank]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized.

    COMPANY:  
       
    The Radiant Creations Group, Inc.  
       
   

 

By:

 

/s/ Michael Alexander

 
   

 

Name:

 

Michael Alexander

 
   

 

Title:

 

CEO

 
   

 

Michael Alexander, as to Article IX only

 
   

 

 

/s/ Michael Alexander

Michael Alexander

 

 
    SUBSCRIBERS:  
       
     

 

/s/ Ray Grimm

 
      Ray Grimm  
         
         
     

 

/s/ Nish Metha

 
      Nish Mehta  
         
     

 

Carlsbad Naturals, LLC

 
     

 

 

By: /s/ Jared Berry

 

 

 

 
     

 

Name: Jared Berry

 

Title: Manager

   
         
             
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Schedule 1

 

Issuances of Company Common Stock to be made to the Subscribers

at the Effective Time

 

Name Shares of Company Common Stock
Carlsbad Naturals, LLC 218,144,874
Ray Grimm 218,144,874
Nish Mehta 48,476,639
Total 484,766,387

 

   
 

 

Exhibit A

 

Officers and Directors of Company

— Pre-Effective Time and Post-Effective Time—

 

 

Pre-Effective Time:

 

Michael Alexander – Chief Executive Officer and Chairman

Gary Alexander – Secretary and Director

 

Post-Effective Time:

 

The following persons shall be appointed as Officers and Directors of Parent:

 

Ray Grimm, Jr. – Chief Executive Officer, Chairman of the Board, and Director

Nish Mehta – Chief Financial Officer, Secretary, Treasurer, and Director

 

   
 

Exhibit B

 

Form of Promissory Note to be Delivered If No Closing —

 

(attached)

 

 

 

 

 

 

   

 

EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (this “Agreement”), dated as of January 9, 2019, is by and among The Radiant Creations Group, Inc., a Nevada corporation (the “Parent”), New You, LLC, a Wyoming limited liability company (the “Company”), and the members of the Company (each a “Member” and collectively the “Members”). Each of the parties to this Agreement is individually referred to herein as a “Party” and collectively as the “Parties.”

BACKGROUND

 

The Company has 11,450 units of membership interest, (the “Company Interests”) outstanding, all of which are held by the Members. The Members have agreed to transfer the Company Interests in exchange for an aggregate of 798,727,886 newly issued shares of common stock of the Parent, par value $0.00001 (the “Parent Stock”).

The Board of Directors of the Parent and the Managers of the Company have determined that it is desirable to affect this plan of reorganization and share exchange.

AGREEMENT

 

NOW THEREFORE, for good and valuable consideration the receipt and sufficiency is hereby acknowledged, the Parties hereto intending to be legally bound hereby agree as follows:

ARTICLE I


Exchange of Shares

SECTION 1.01.                  (a) Exchange by the Members. At the Closing (as defined in Section 1.02), the Members shall sell, transfer, convey, assign and deliver to the Parent all of the Company Interests free and clear of all Liens in exchange for an aggregate of 798,727,886 shares of Parent Stock, as set forth on Exhibit A, attached hereto.

SECTION 1.02.                  Closing. The closing (the “Closing”) of the transactions contemplated by this Agreement (the “Transactions”) shall take place at such location to be determined by the Company and Parent, commencing upon the satisfaction or waiver of all conditions and obligations of the Parties to consummate the Transactions contemplated hereby (other than conditions and obligations with respect to the actions that the respective Parties will take at Closing) or such other date and time as the Parties may mutually determine (the “Closing Date”).

ARTICLE II

Representations and Warranties of the Members

Each Member individually, hereby represents and warrants to the Parent, as follows:

SECTION 2.01.                  Good Title. The Member is the record and beneficial owner, and has good and marketable title to its Company Interests, with the right and authority to sell and deliver such Company Interests to Parent as provided herein. Upon registering of the Parent as the new owner of such Company Interests in the membership register of the Company, the Parent will receive good title to such Company Interests, free and clear of all liens, security interests, pledges, equities and claims of any kind, voting trusts, member agreements and other encumbrances (collectively, “Liens”).

SECTION 2.02.              Power and Authority. All acts required to be taken by the Member to enter into this Agreement and to carry out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Member, enforceable against such Member in accordance with the terms hereof.

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SECTION 2.03.                  No Conflicts. The execution and delivery of this Agreement by the Member and the performance by the Member of his obligations hereunder in accordance with the terms hereof: (i) will not require the consent of any third party or any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (“Governmental Entity”) under any statutes, laws, ordinances, rules, regulations, orders, writs, injunctions, judgments, or decrees (collectively, “Laws”); (ii) will not violate any Laws applicable to such Member; and (iii) will not violate or breach any contractual obligation to which such Member is a party.

SECTION 2.04.                  No Finder’s Fee. The Member has not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the Transactions that the Company or the Parent will be responsible for.

SECTION 2.05.                  Purchase Entirely for Own Account. The Parent Stock proposed to be acquired by the Member hereunder will be acquired for investment for his own account, and not with a view to the resale or distribution of any part thereof, and the Member has no present intention of selling or otherwise distributing the Parent Stock, except in compliance with applicable securities laws.

SECTION 2.06.                  Available Information. The Member has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Parent.

SECTION 2.07.                  Non-Registration. The Member understands that the Parent Stock has not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and, if issued in accordance with the provisions of this Agreement, will be issued by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Member’s representations as expressed herein.

SECTION 2.08.                  Restricted Securities. The Member understands that the Parent Stock is characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Member pursuant hereto, the Parent Stock would be acquired in a transaction not involving a public offering. The Member further acknowledges that if the Parent Stock is issued to the Member in accordance with the provisions of this Agreement, such Parent Stock may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Member represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

SECTION 2.09.                  Legends. It is understood that the Parent Stock will bear the following legend or another legend that is similar to the following:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF

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AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

and any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented by the certificate so legended.

SECTION 2.10.                  Member Acknowledgment. Each of the Members acknowledges that he or she has read the representations and warranties of the Company set forth in Article III herein and such representations and warranties are, to the best of his or her knowledge, true and correct as of the date hereof.

ARTICLE III

Representations and Warranties of the Company

The Company represents and warrants to the Parent, except as set forth in the disclosure schedules provided in connection herewith (the “Company Disclosure Schedules”), as follows:

SECTION 3.01.                  Organization, Standing and Power. The Company is duly organized, validly existing and in good standing under the laws of the State of Wyoming and has the corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on the Company, a material adverse effect on the ability of the Company to perform its obligations under this Agreement or on the ability of the Company to consummate the Transactions (a “Company Material Adverse Effect”). The Company is duly qualified to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties make such qualification necessary, except where the failure to so qualify would not reasonably be expected to have a Company Material Adverse Effect. The Company has delivered to the Parent true and complete copies of the articles of organization and operating agreement of the Company, each as amended to the date of this Agreement (as so amended, the “Company Charter Documents”). The Company has no direct or indirect subsidiaries.

SECTION 3.02.                  Capital Structure. The share capital of the Company consists of 10,250 units of membership interest issued and outstanding. No other membership interests or other voting securities of the Company are issued, reserved for issuance or outstanding. All outstanding Company Interests are duly authorized, validly issued, fully paid and non-assessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporate laws of its state of incorporation, the Company Charter Documents or any Contract (as defined in Section 3.04) to which the Company is a party or otherwise bound. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Interests may vote (“Voting Company Debt”). As of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Company is a party or by which the Company is bound (i) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional membership

  3  

 

interests or other equity interests in, or any security convertible or exercisable for or exchangeable into any membership interest or other equity interest in, the Company or any Voting Company Debt, (ii) obligating the Company to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the membership interests or capital stock of the Company.

SECTION 3.03.                  Authority; Execution and Delivery; Enforceability. The Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by the Company of this Agreement and the consummation by the Company of the Transactions have been duly authorized and approved by the Managers of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the Transactions. When executed and delivered, this Agreement will be enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency and similar laws of general applicability as to which the Company is subject.

SECTION 3.04.                  No Conflicts; Consents.

(a)              The execution and delivery by the Company of this Agreement does not, and the consummation of the Transactions and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company under any provision of (i) the Company Charter Documents, (ii) any material contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument (a “Contract”) to which the Company is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 3.04(b), any material judgment, order or decree (“Judgment”) or material Law applicable to the Company or its properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(b)              Except for required filings with the Securities and Exchange Commission (the “SEC”) and applicable “Blue Sky” or state securities commissions, no material consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to the Company in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.

SECTION 3.05.                  Taxes.

(a)              The Company has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

(b)              If applicable, the Company has established an adequate reserve reflected on its financial statements for all Taxes payable by the Company (in addition to any reserve for deferred Taxes to

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reflect timing differences between book and Tax items) for all Taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against the Company, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.

(c)              For purposes of this Agreement:

Taxes” includes all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, federal or other Governmental Entity, or in connection with any agreement with respect to Taxes, including all interest, penalties and additions imposed with respect to such amounts.

Tax Return” means all federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes.

SECTION 3.06.                  Benefit Plans. The Company does not have or maintain any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, share ownership, share purchase, share option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of the Company (collectively, “Company Benefit Plans”). As of the date of this Agreement there are no severance or termination agreements or arrangements between the Company and any current or former employee, officer or director of the Company, nor does the Company have any general severance plan or policy.

SECTION 3.07.                  Litigation. There is no action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing against or affecting the Company, or any of its properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility (“Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Parent Stock or (ii) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Company Material Adverse Effect. Neither the Company nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.

SECTION 3.08.                  Compliance with Applicable Laws. The Company is in compliance with all applicable Laws, including those relating to occupational health and safety and the environment, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. This Section 3.08 does not relate to matters with respect to Taxes, which are the subject of Section 3.05.

SECTION 3.09.                  Brokers; Schedule of Fees and Expenses. Except for those brokers as to which the Company and Parent shall be solely responsible, no broker, investment banker, financial advisor or other person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company.

SECTION 3.10.                  Contracts. Except as disclosed in the Company Disclosure Schedule, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise),

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results of operations or prospects of the Company and its subsidiaries taken as a whole. The Company is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect.

SECTION 3.11.                  Title to Properties. The Company does not own any real property. The Company has sufficient title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses all of which are set forth on the Company Disclosure Schedule. All such assets and properties, other than assets and properties in which the Company has leasehold interests, are free and clear of all Liens other than those Liens that, in the aggregate, do not and will not materially interfere with the ability of the Company to conduct business as currently conducted.

SECTION 3.12.                  Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Company Material Adverse Effect. None of the Company’s or its subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such subsidiary, and neither the Company nor any of its subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its subsidiaries to any liability with respect to any of the foregoing matters. The Company and its subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

SECTION 3.13.                  Insurance. The Company does not hold any insurance policy.

SECTION 3.14.                  Transactions With Affiliates and Employees. Except as set forth on the Company Disclosure Schedule, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

SECTION 3.15.                  Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter documents or the laws of its state of incorporation that is or could become applicable to the Members as a result of the Members and the Company fulfilling their obligations or exercising their rights under this Agreement, including, without limitation, the issuance of the Parent Stock and the Members’ ownership of the Parent Stock.

SECTION 3.16.                  No Additional Agreements. The Company does not have any agreement or understanding with any Member with respect to the Transactions other than as specified in this Agreement.

SECTION 3.17.                  Investment Company. The Company is not, and is not an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

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SECTION 3.18.                  Disclosure. The Company confirms that neither it nor any person acting on its behalf has provided the Members or their respective agents or counsel with any information that the Company believes constitutes material, non-public information, except insofar as the existence and terms of the proposed transactions hereunder may constitute such information and except for information that will be disclosed by the Parent under a current report on Form 8-K filed no later than four (4) business days after the Closing. The Company understands and confirms that the Parent will rely on the foregoing representations and covenants in effecting transactions in securities of the Parent. All disclosure provided to the Parent regarding the Company, its business and the Transactions, furnished by or on behalf of the Company (including the Company’s representations and warranties set forth in this Agreement) are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

SECTION 3.19.                  Absence of Certain Changes or Events. Except in connection with the Transactions and as disclosed in the Company Disclosure Schedule, since inception, the Company has conducted its business only in the ordinary course, and during such period there has not been:

(a)              any change in the assets, liabilities, financial condition or operating results of the Company, except changes in the ordinary course of business that have not caused, in the aggregate, a Company Material Adverse Effect;

(b)              any damage, destruction or loss, whether or not covered by insurance, that would have a Company Material Adverse Effect;

(c)              any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

(d)              any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Company Material Adverse Effect;

(e)              any material change to a material Contract by which the Company or any of its assets is bound or subject;

(f)               any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and does not materially impair the Company’s ownership or use of such property or assets;

(g)              any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(h)              any alteration of the Company’s method of accounting or the identity of its auditors;

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(i)               any declaration or payment of dividend or distribution of cash or other property to the Members or any purchase, redemption or agreements to purchase or redeem any Company Interests;

(j)               any issuance of equity securities to any officer, director or affiliate; or

(k)              any arrangement or commitment by the Company to do any of the things described in this Section.

SECTION 3.20.                  Foreign Corrupt Practices. Neither the Company, nor, to the Company’s knowledge, any member, director, officer, agent, employee or other person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

SECTION 3.21 Compliance. Neither the Company nor any subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any subsidiary under), nor has the Company or any subsidiary received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Company Material Adverse Effect.

 

SECTION 3.22 Regulatory Permits. The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described on the Company Disclosure Schedule, except where the failure to possess such permits could not reasonably be expected to result in a Company Material Adverse Effect (“Material Permits”), and neither the Company nor any subsidiary has received any written notice of proceedings relating to the revocation or modification of any Material Permit.

 

SECTION 3.23 Intellectual Property. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses and which the failure to so have could have a Company Material Adverse Effect (collectively, the “Intellectual Property Rights”). All Intellectual Property Rights are set forth on the Company Disclosure Schedule. None of, and neither the Company nor any subsidiary has received a written notice that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any subsidiary has received a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any person, except as could not have or reasonably be expected to not have a Company Material Adverse Effect. All such Intellectual Property Rights are enforceable and there is no existing infringement by another person of any of the Intellectual Property Rights. The Company and its subsidiaries have taken

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reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

SECTION 3.24 Office of Foreign Assets Control. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any member, director, officer, agent, employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

SECTION 3.25 U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended.

 

Section 3.26 Bank Holding Company Act. Neither the Company nor any of its subsidiaries or affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its subsidiaries or affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

SECTION 3.27 Money Laundering. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any subsidiary, threatened

 

ARTICLE IV

Representations and Warranties of the Parent

The Parent represents and warrants as follows to the Members and the Company, that, except as set forth in the reports, schedules, forms, statements and other documents filed by the Parent with OTC Markets Group, Inc. and publicly available prior to the date of the Agreement (the “Parent OTC Documents”) or specifically referenced on a disclosure schedule (the “Parent Disclosure Schedules”):

SECTION 4.01.                  Organization, Standing and Power. The Parent is duly organized, validly existing and in good standing under the laws of the State of Nevada and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on the Parent, a material adverse effect on the ability of the Parent to perform its obligations under this Agreement or on the ability of the Parent to consummate the Transactions (a “Parent Material Adverse Effect”). The Parent is duly qualified to do business in each jurisdiction where the nature of its business or their ownership or leasing of its properties make such qualification necessary and where the failure to so qualify would reasonably be expected to have a Parent Material Adverse Effect. The Parent

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has delivered to the Company true and complete copies of the articles of incorporation of the Parent, as amended to the date of this Agreement (as so amended, the “Parent Charter”), and the Bylaws of the Parent, as amended to the date of this Agreement (as so amended, the “Parent Bylaws”).

SECTION 4.02.                  Subsidiaries; Equity Interests. Except as set forth in the Parent OTC Documents, the Parent does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.

SECTION 4.03.                  Capital Structure. The authorized capital stock of the Parent consists of Nine Hundred Million (900,000,000) shares of Parent Common Stock, par value $0.00001 per share, of which 538,629,319 shares are outstanding, and One Hundred Million (100,000,000) shares of preferred stock, par value $0.00001 per share, of which 0 shares are issued and outstanding, and no shares of Parent Common Stock or preferred stock are held by the Parent in its treasury. Except as set forth in the OTC Documents, no other shares of capital stock or other voting securities of the Parent were issued, reserved for issuance or outstanding. All outstanding shares of the capital stock of the Parent are, and all such shares that may be issued prior to the date hereof will be when issued, duly authorized, validly issued, fully paid and non-assessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Nevada Revised Statutes, the Parent Charter, the Parent Bylaws or any Contract to which the Parent is a party or otherwise bound. Except as set forth in the OTC Documents, there are no bonds, debentures, notes or other indebtedness of the Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Parent Stock may vote (“Voting Parent Debt”). Except in connection with the Transactions, the Parent Disclosure Schedules or as described in the OTC Documents, as of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Parent is a party or by which it is bound (i) obligating the Parent to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Parent or any Voting Parent Debt, (ii) obligating the Parent to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the Parent. As of the date of this Agreement, there are no outstanding contractual obligations of the Parent to repurchase, redeem or otherwise acquire any shares of capital stock of the Parent. Other than as set forth in the OTC Documents, the Parent is not a party to any agreement granting any security holder of the Parent the right to cause the Parent to register shares of the capital stock or other securities of the Parent held by such security holder under the Securities Act. The stockholder list provided to the Company is a current stockholder list generated by its stock transfer agent, and such list accurately reflects all of the issued and outstanding shares of the Parent Stock as at the Closing.

SECTION 4.04.                  Authority; Execution and Delivery; Enforceability. The execution and delivery by the Parent of this Agreement and the consummation by the Parent of the Transactions have been duly authorized and approved by the Board of Directors of the Parent and no other corporate proceedings on the part of the Parent are necessary to authorize this Agreement and the Transactions. This Agreement constitutes a legal, valid and binding obligation of the Parent, enforceable against the Parent in accordance with the terms hereof.

SECTION 4.05.                  No Conflicts; Consents.

(a)              The execution and delivery by the Parent of this Agreement, does not, and the consummation of Transactions and compliance with the terms hereof and thereof will not, conflict with, or

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result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien upon any of the properties or assets of the Parent under, any provision of (i) the Parent Charter or Parent Bylaws, (ii) any material Contract to which the Parent is a party or by which any of its properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 4.05(b), any material Judgment or material Law applicable to the Parent or its properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(b)              No Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to the Parent in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.

SECTION 4.06.                  OTC Documents; Undisclosed and Liabilities.

(a)              The Parent has filed all Parent OTC Documents required to be quoted on the Pink-Current tier of the OTC Markets electronic quotation system.

(b)              As of its respective filing date, each Parent OTC Documents complied in all material respects with the applicable requirements and guidelines of OTC Markets Group, Inc., and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Parent OTC Document has been revised or superseded by a later filed Parent OTC Document, none of the Parent OTC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Parent included in the Parent OTC Documents have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the financial position of Parent as of the dates thereof and the results of its operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(c)              Except as set forth in the Parent OTC Documents, the Parent has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by GAAP to be set forth on a balance sheet of the Parent or in the notes thereto. The Parent OTC Documents sets forth all financial and contractual obligations and liabilities (including any obligations to issue capital stock or other securities of the Parent) due after the date thereof.

SECTION 4.07.                  Information Supplied. None of the information supplied or to be supplied by the Parent for inclusion or incorporation by reference in any Parent OTC Document or report contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

SECTION 4.08.                  Absence of Certain Changes or Events. Except as disclosed in the filed Parent OTC Documents, from the date of the most recent audited financial statements included in the filed Parent OTC Documents to the date of this Agreement, the Parent has conducted its business only in the ordinary course, and during such period there has not been:

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(a)              any change in the assets, liabilities, financial condition or operating results of the Parent from that reflected in the Parent OTC Documents, except changes in the ordinary course of business that have not caused, in the aggregate, a Parent Material Adverse Effect;

(b)              any damage, destruction or loss, whether or not covered by insurance, that would have a Parent Material Adverse Effect;

(c)              any waiver or compromise by the Parent of a valuable right or of a material debt owed to it;

(d)              any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Parent, except in the ordinary course of business and the satisfaction or discharge of which would not have a Parent Material Adverse Effect;

(e)              any material change to a material Contract by which the Parent or any of its assets is bound or subject;

(f)               any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

(g)              any resignation or termination of employment of any officer of the Parent;

(h)              any mortgage, pledge, transfer of a security interest in, or lien, created by the Parent, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the Parent’s ownership or use of such property or assets;

(i)               any loans or guarantees made by the Parent to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;

(j)               any declaration, setting aside or payment or other distribution in respect of any of the Parent’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Parent;

(k)              any alteration of the Parent’s method of accounting or the identity of its auditors;

(l)               any issuance of equity securities to any officer, director or affiliate, except pursuant to existing Parent stock option plans; or

(m)            any arrangement or commitment by the Parent to do any of the things described in this Section 4.08.

SECTION 4.09.                  Taxes.

(a)              The Parent has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file, any delinquency in filing or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, has been timely paid, except

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to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(b)              The most recent financial statements contained in the Parent OTC Documents reflect an adequate reserve for all Taxes payable by the Parent (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all Taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against the Parent, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(c)              There are no Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of the Parent. The Parent is not bound by any agreement with respect to Taxes.

SECTION 4.10.                  Absence of Changes in Benefit Plans. From the date of the most recent financial statements included in the Parent OTC Documents to the date of this Agreement, there has not been any adoption or amendment in any material respect by Parent of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of Parent (collectively, “Parent Benefit Plans”). Except as set forth in the Parent OTC Documents, as of the date of this Agreement there are not any employment, consulting, indemnification, severance or termination agreements or arrangements between the Parent and any current or former employee, officer or director of the Parent, nor does the Parent have any general severance plan or policy.

SECTION 4.11.                  ERISA Compliance; Excess Parachute Payments. The Parent does not, and since its inception never has, maintained, or contributed to any “employee pension benefit plans” (as defined in Section 3(2) of ERISA), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) or any other Parent Benefit Plan for the benefit of any current or former employees, consultants, officers or directors of Parent.

SECTION 4.12.                  Litigation. Except as disclosed in the Parent OTC Documents, there is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Parent Stock or (ii) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Parent Material Adverse Effect. Neither the Parent nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.

SECTION 4.13.                  Compliance with Applicable Laws. Except as disclosed in the Parent OTC Documents, the Parent is in compliance with all applicable Laws, including those relating to occupational health and safety, the environment, export controls, trade sanctions and embargoes, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Except as set forth in the Parent OTC Documents, the Parent has not received any written communication during the past two years from a Governmental Entity that alleges that the Parent is not in compliance in any material respect with any applicable Law.

SECTION 4.14.                  Contracts. Except as disclosed in the Parent OTC Documents, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of the Parent taken as a whole. The Parent is not in violation of or in default

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under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Parent Material Adverse Effect.

SECTION 4.15.                  Title to Properties. The Parent has good title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which the Parent has leasehold interests, are free and clear of all Liens and except for Liens that, in the aggregate, do not and will not materially interfere with the ability of the Parent to conduct business as currently conducted. The Parent has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. The Parent enjoys peaceful and undisturbed possession under all such material leases.

SECTION 4.16.                  Intellectual Property. The Parent owns, or is validly licensed or otherwise has the right to use, all Intellectual Property Rights which are material to the conduct of the business of the Parent taken as a whole. No claims are pending or, to the knowledge of the Parent, threatened that the Parent is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right. To the knowledge of the Parent, no person is infringing the rights of the Parent with respect to any Intellectual Property Right.

SECTION 4.17.                  Labor Matters. There are no collective bargaining or other labor union agreements to which the Parent is a party or by which it is bound. No material labor dispute exists or, to the knowledge of the Parent, is imminent with respect to any of the employees of the Parent.

SECTION 4.18.                  Transactions With Affiliates and Employees. Except as set forth in the Parent OTC Documents, none of the officers or directors of the Parent and, to the knowledge of the Parent, none of the employees of the Parent is presently a party to any transaction with the Parent or any subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Parent, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

SECTION 4.19.                  Application of Takeover Protections. The Parent has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Parent’s charter documents or the laws of its state of incorporation that is or could become applicable to the Members as a result of the Members and the Parent fulfilling their obligations or exercising their rights under this Agreement, including, without limitation, the issuance of the Parent Stock and the Members’ ownership of the Parent Stock.

SECTION 4.20.                  No Additional Agreements. The Parent does not have any agreement or understanding with the Members with respect to the Transactions other than as specified in this Agreement.

SECTION 4.21.                  Investment Company. The Parent is not, and is not an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

SECTION 4.22.                  Disclosure. The Parent confirms that neither it nor any person acting on its behalf has provided any Member or its respective agents or counsel with any information that the Parent believes constitutes material, non-public information except insofar as the existence and terms of the

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proposed transactions hereunder may constitute such information and except for information that will be disclosed by the Parent under a current report on Form 8-K filed after the Closing. All disclosure provided to the Members regarding the Parent, its business and the transactions contemplated hereby, furnished by or on behalf of the Parent (including the Parent’s representations and warranties set forth in this Agreement) are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

SECTION 4.23.                  Certain Registration Matters. Except as specified in the Parent OTC Documents or on the Parent Disclosure Schedules, the Parent has not granted or agreed to grant to any person any rights (including “piggy-back” registration rights) to have any securities of the Parent registered with the SEC or any other governmental authority that have not been satisfied.

SECTION 4.24.                  Quotation Requirements. The Parent is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the requirements to maintain quotation on the Pink-Current tier of the electronic marketplace maintained by OTC Markets Group, Inc.

SECTION 4.25.                  Parent Stock. Upon issue to the Members, the Parent Stock will be duly and validly issued, fully paid and non-assessable shares of preferred stock in the capital of the Company.

 

ARTICLE V

Deliveries

SECTION 5.01.                  Deliveries of the Members.

(a)              Concurrently herewith the Members are delivering to the Parent this Agreement executed by the Members.

(b)              At or prior to the Closing, the Members shall deliver to the Parent:

(i) This Agreement, executed by the Members
(ii) this Agreement which shall constitute a duly executed share transfer power for transfer by the Members of their Company Interests to the Parent (which Agreement shall constitute a limited power of attorney in the Parent or any officer thereof to effectuate any Share transfers as may be required under applicable law, including, without limitation, recording such transfer in the share registry maintained by the Company for such purpose).

SECTION 5.02.                  Deliveries of the Parent.

(a)              Concurrently herewith, the Parent is delivering to the Members and to the Company, a copy of this Agreement executed by the Parent.

(b)              Promptly following the Closing, the Parent shall deliver to the Members, certificates representing the new shares of Parent Stock issued to the Members set forth on Exhibit A.

 

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SECTION 5.03.                  Deliveries of the Company.

(a)              Concurrently herewith, the Company is delivering to the Parent this Agreement executed by the Company.

(b)              At or prior to the Closing, the Company shall deliver to the Parent:

(i) a certificate from the Company, signed by its Secretary or Assistant Secretary certifying that the attached copies of the Company’s Charter Documents and resolutions of the Board of Directors of the Company approving this Agreement and the Transactions, are all true, complete and correct and remain in full force and effect; and
(ii) A Member list, certified by the Company’s Manager.

ARTICLE VI

Conditions to Closing

SECTION 6.01.                  Members and Company Conditions Precedent. The obligations of the Members and the Company to enter into and complete the Closing is subject, at the option of the Members and the Company, to the fulfillment on or prior to the Closing Date of the following conditions.

(a)              Representations and Covenants. The representations and warranties of the Parent contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. The Parent shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Parent on or prior to the Closing Date. The Parent shall have delivered to the Member and the Company, a certificate, dated the Closing Date, to the foregoing effect.

(b)              Litigation. No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion of the Company or the Members, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise) of the Parent.

(c)              No Material Adverse Change. There shall not have been any occurrence, event, incident, action, failure to act, or transaction since August 31, 2018 which has had or is reasonably likely to cause a Parent Material Adverse Effect.

(d)              Post-Closing Capitalization. At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of capital stock of the Parent, on a fully-diluted basis, shall be as described in the Parent OTC Documents.

(e)              OTC Reports. The Parent shall have filed all reports and other documents required to be filed by Parent under the U.S. federal securities laws through the Closing Date.

(f)               OTC Quotation. The Parent shall have maintained its status as a Company whose common stock is quoted on the Pink-Current Information tier of the OTC Markets, and Parent shall not

  16  

 

have received any notice that any reason shall exist as to why such status shall not continue immediately following the Closing.

(g)              Deliveries. The deliveries specified in Section 5.02 shall have been made by the Parent.

(h)              No Suspensions of Trading in Parent Stock. Trading in the Parent Common stock shall not have been suspended by the SEC or any trading market (except for any suspensions of trading of not more than one trading day solely to permit dissemination of material information regarding the Parent) at any time since the date of execution of this Agreement.

(i)               Satisfactory Completion of Due Diligence. The Company and the Members shall have completed their legal, accounting and business due diligence of the Parent and the results thereof shall be satisfactory to the Company and the Members in their sole and absolute discretion.

SECTION 6.02.                  Parent Conditions Precedent. The obligations of the Parent to enter into and complete the Closing are subject, at the option of the Parent, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Parent in writing.

(a)              Representations and Covenants. The representations and warranties of the Members and the Company contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. The Members and the Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Members and the Company on or prior to the Closing Date. The Company shall have delivered to the Parent a certificate, dated the Closing Date, to the foregoing effect.

(b)              Litigation. No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion of the Parent, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise) of the Company.

(c)              No Material Adverse Change. There shall not have been any occurrence, event, incident, action, failure to act, or transaction since the date hereof which has had or is reasonably likely to cause a Company Material Adverse Effect.

(d)              Deliveries. The deliveries specified in Section 5.01 and Section 5.03 shall have been made by the Members and the Company, respectively.

(e)              Post-Closing Capitalization. At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the Company, on a fully-diluted basis, shall be described herein.

(f)               Satisfactory Completion of Due Diligence. The Parent shall have completed its legal, accounting and business due diligence of the Company and the results thereof shall be satisfactory to the Parent in its sole and absolute discretion.

ARTICLE VII

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Covenants

SECTION 7.01.                  Public Announcements. The Parent and the Company will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press releases or other public statements with respect to the Agreement and the Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law.

SECTION 7.02.                  Fees and Expenses. All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses, whether or not this Agreement is consummated.

SECTION 7.03.                  Continued Efforts. Each Party shall use commercially reasonable efforts to (a) take all action reasonably necessary to consummate the Transactions, and (b) take such steps and do such acts as may be necessary to keep all of its representations and warranties true and correct as of the Closing Date with the same effect as if the same had been made, and this Agreement had been dated, as of the Closing Date.

SECTION 7.04.                  Exclusivity. Each of the Parent and the Company shall not (and shall not cause or permit any of their affiliates to) engage in any discussions or negotiations with any person or take any action that would be inconsistent with the Transactions and that has the effect of avoiding the Closing contemplated hereby. Each of the Parent and the Company shall notify each other immediately if any person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing.

SECTION 7.05.                  Filing of Supplemental Report. The Parent shall file, no later than four (4) business days of the Closing Date, a supplemental report with OTC Markets disclosing the terms of this Agreement and other requisite disclosure regarding the Transactions.

SECTION 7.06.                  Access. Each Party shall permit representatives of any other Party to have full access to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to such Party.

SECTION 7.07.                  Preservation of Business. From the date of this Agreement until the Closing Date, the Company shall operate only in the ordinary and usual course of business consistent with their respective past practices, and shall use reasonable commercial efforts to (a) preserve intact their respective business organizations, (b) preserve the good will and advantageous relationships with customers, suppliers, independent contractors, employees and other persons material to the operation of their respective businesses, and (c) not permit any action or omission that would cause any of their respective representations or warranties contained herein to become inaccurate or any of their respective covenants to be breached in any material respect.

 

 

ARTICLE VIII

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Miscellaneous

SECTION 8.01.                  Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

If to the Parent, to:

 

The Radiant Creations Group

3246 Greyhawk Court

Carlsbad, CA 92010

 

With a copy to (which shall not constitute notice):

 

Laxague Law, Inc.

1 East Liberty, Suite 600

Reno, NV 89501

Attn: Joe Laxague, Esq.

 

If to the Company, to:

 

New You, LLC

1712 Pioneer Ave., Ste. 115

Cheyenne, WY 82001

 

If to the Members at the addresses set forth in Exhibit A hereto.

SECTION 8.02.                  Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company, Parent and the Members. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

SECTION 8.03.                  Replacement of Securities. If any certificate or instrument evidencing any Parent Stock is mutilated, lost, stolen or destroyed, the Parent shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefore, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Parent of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Parent Stock. If a replacement certificate or instrument evidencing any Parent Stock is requested due to a mutilation thereof, the Parent may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

SECTION 8.04.                  Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Members, Parent and the Company will be entitled to specific performance under this Agreement. The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the

  19  

 

foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

SECTION 8.05.                  Limitation of Liability. Notwithstanding anything herein to the contrary, each of the Parent and the Company acknowledge and agree that the liability of the Members arising directly or indirectly, under any transaction document of any and every nature whatsoever shall be satisfied solely out of the assets of the Members, and that no trustee, officer, other investment vehicle or any other affiliate of the Members or any investor, Member or holder of shares of beneficial interest of the Members shall be personally liable for any liabilities of the Members.

SECTION 8.06.                  Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

SECTION 8.07.                  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that Transactions contemplated hereby are fulfilled to the extent possible.

SECTION 8.08.                  Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.

SECTION 8.09.                  Entire Agreement; Third Party Beneficiaries. This Agreement, taken together with the Company Disclosure Schedule, (a) constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the Transactions and (b) are not intended to confer upon any person other than the Parties any rights or remedies.

SECTION 8.10.                  Governing Law. This Agreement, the legal relations between the parties and any Action, whether contractual or non-contractual, instituted by any party with respect to any matter arising between the parties, including but not limited to matters arising under or in connection with this Agreement, such as the negotiation, execution, interpretation, coverage, scope, performance, breach, termination, validity, or enforceability of this Agreement, shall be governed by and construed in accordance with the internal laws of the State of Nevada without reference to principles of conflicts of laws. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of Nevada and the Federal Courts of the United States of America located within Washoe County, Nevada with respect to any matter arising between the parties, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or thereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Nevada State or Federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or

  20  

 

proceeding in any manner as may be permitted by applicable Law, shall be valid and sufficient service thereof. With respect to any particular action, suit or proceeding arising between the parties, including but not limited to matters arising under or in connection with this Agreement, venue shall lie solely in any State of Nevada or any Federal Court of the United States of America sitting in Washoe County Nevada.

SECTION 8.11.                  Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Exchange Agreement as of the date first above written.

 

The Parent:

THE RADIANT CREATIONS GROUP

By: /s/ Ray Grimm

Name: Ray Grimm

Title: President

The Company:

NEW YOU, LLC

By: /s/ Nish Mehta

Name: Nish Mehta

Title: Manager

 

The Members:

 

 

/s/ Ray Grimm

Ray Grimm

4,500 units

 

 

/s/ Jared Berry

Jared Berry

4,500 units

 

 

/s/ Nish Mehta

Nish Mehta

1,000 units

 

 

/s/ Peter Chu

Peter Chu

200 units

 

 

/s/ Geri Sibilla

Geri Sibilla

300 units

/s/ Geoff Leibl

Geoff Leibl

50 units

 

 

/s/ Bernard O’Donnell

Bernard R. O’Donnell

300 units

 

 

/s/ Daniel Walters

Daniel Walters

300 units

 

Joseph Edward Lindquist Separate Property Trust

 

By: /s/ Joseph Edward Lindquist 

Print name: Joseph Edward Lindquist 

Title: Trustee

 

 

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Company Disclosure Schedules

 

These Company Disclosure Schedules and all listings or descriptions of documents contained herein are qualified in their entirety by reference to the documents so listed or described. The inclusion of any document or other item in this Company Disclosure Schedule shall not constitute an admission by the Company or its Subsidiary, including an admission that such document or other item is material. These Company Disclosure Schedules are qualified in its entirety by reference to the specific provisions of the Share Exchange Agreement to which they relate (the “Agreement”) and the representations and warranties to which the disclosures herein pertain and are not intended to constitute, and shall not be construed as constituting, any separate representation or warranty of the Company or its Subsidiary. Capitalized terms used but not defined in these Company Disclosure Schedules have the meanings given to them in the Agreement. The headings in these Company Disclosure Schedules are for convenience only, do not constitute a part of these Company Disclosure Schedules and shall not be deemed to affect the meaning of any disclosures herein.

 

 

Section 3.10 – Material Contracts

 

 

 

 

 

 

Section 3.23 – Intellectual Property

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Parent Disclosure Schedules

 

These Parent Disclosure Schedules and all listings or descriptions of documents contained herein are qualified in their entirety by reference to the documents so listed or described. The inclusion of any document or other item in this Parent Disclosure Schedule shall not constitute an admission by the Company or its Subsidiary, including an admission that such document or other item is material. These Parent Disclosure Schedules are qualified in its entirety by reference to the specific provisions of the Share Exchange Agreement to which they relate (the “Agreement”) and the representations and warranties to which the disclosures herein pertain and are not intended to constitute, and shall not be construed as constituting, any separate representation or warranty of the Company or its Subsidiary. Capitalized terms used but not defined in these Parent Disclosure Schedules have the meanings given to them in the Agreement. The headings in these Parent Disclosure Schedules are for convenience only, do not constitute a part of these Parent Disclosure Schedules and shall not be deemed to affect the meaning of any disclosures herein.

 

Section 4.03 – Capital Structure

 

Under the Share Exchange Agreement dated July 9, 2018, Michael Alexander, as the assignee of Biodynamic Molecular Technologies, LLC is entitled to maintain, for one year, and non-dilutable holding equal to 2.5% of the common stock of the Parent.

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EXHIBIT A

 

Members of New You, LLC

 

 

 

 

 

Name and Address of Member

 

 

Tax ID Number of Member

 

Number of Company Interests Being Exchanged

 

Number of Shares of Parent Stock to be Received by Member

Ray Grimm

____________

____________

  4,500 313,910,523

Jared Berry

____________

____________

  4,500 313,910,523

Nish Mehta

____________

____________

  1,000 69,757,894

Peter Chu

-____________

____________

  200 13,951,579

Geoff Leibl

____________

____________

  50 3,487,895

Bernard R. O’Donnell

____________

____________

  300 20,927,368

Daniel Walters

____________

____________

  300 20,927,368

Joseph Edward Lindquist Separate Property Trust

____________

____________

  300 20,927,368

Geri Sibilla

____________

____________

  300 20,927,368
Totals   11,450 798,727,886

 

 

 

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NEWYOU BRAND PARTNER AGREEMENT

 

1. Authorization and Contract. By executing the NewYou Brand Partner Agreement (“Agreement”), you apply for legal authorization to become a NewYou business owner and enter into contract with NewYou, LLC, hereinafter “NewYou.” You acknowledge that prior to signing you have received, read and understood the NewYou Income Disclosure Statement, that you have read and understood the NewYou Policies and Procedures, which are incorporated into this Agreement and made part of it as if restated in full, as posted on http://newyoupro.com/new/, and that you have read and agree to all terms set forth in this Agreement. NewYou reserves the right to reject any application for any reason within thirty (30) days of receipt.

 

2. Expiration, Renewal, and Termination. The term of this Agreement is one year (subject to prior cancellation or disqualification as provided in the Policies and Procedures). If you fail to annually renew your NewYou business, or if it is canceled or terminated for any reason, you understand that you will permanently lose all rights as a Brand Partner. You shall not be eligible to sell NewYou products nor shall you be eligible to receive royalties, bonuses, or other income resulting from the activities of your former downline sales organization. In the event of cancellation, termination or nonrenewal, you waive all rights you have, including but not limited to property rights, to your former downline organization and to any bonuses, commissions or other remuneration derived through the sales and other activities of your former downline organization. NewYou reserves the right to terminate all Brand Partner Agreements upon thirty (30) days’ notice if the Company elects to: (1) cease business operations; (2) dissolve as a business entity; or (3) terminate distribution of its products via direct selling channels. You may cancel this Agreement at any time, and for any reason, upon written notice to NewYou at its principal business address. NewYou may cancel this Agreement for any reason upon advance written notice to you. NewYou may also take actions short of termination of the Agreement if you breach any of the provisions found in this Agreement or the Policies and Procedures.

 

3. Independent Contractor Status. You agree this authorization does not make you an employee, agent, or legal representative of NewYou or your Sponsoring Brand Partner. As a self-employed independent contractor, you will be operating your own independent business, buying and selling products available through NewYou on your own account. You have complete freedom in determining the number of hours that you will devote to your business, and you have the sole discretion of scheduling such hours. You will receive IRS Form 1099-MISC reflecting the amount of income paid to you during the calendar year. By agreeing to these terms, you agree to receive the 1099-MISC form via electronically. It will be your sole responsibility to account for such income on your individual income tax returns.

 

4. Refunds and Product Returns. You agree that if you sell product directly to a customer, you will adhere to NewYou’s 100% satisfaction guarantee policy and shall provide the customer a full refund of all monies paid if the customer returns the product to you within thirty (30) days of the sales transaction. If you are not 100% satisfied with our products, you may return the items for a refund if: (i) neither you nor we have terminated the Agreement; (ii) the products were purchased within twelve months; and (iii) the products remain in resalable condition (as defined in the Policies and Procedures). The refund shall be 90% of the purchase price. Shipping and handling charges incurred will not be refunded.

 

5. Presenting the Plan. You agree when presenting the NewYou Compensation Plan to present it in its entirety as outlined in official NewYou materials, emphasizing that sales to end consumers are required to receive compensation in the form of bonuses on downline volume. In presenting the plan to prospects, you agree not to utilize any literature, materials or aids not produced or specifically authorized in writing by NewYou. You agree to instruct all prospective Brand Partners to review the NewYou Income Disclosure Statement.

 

Rev. 8/19

  1  

 

6. Selling Product. You agree to make no representations or claims about any products beyond those shown on product labels and/or in official NewYou literature. Claims (which include personal testimonials) as to therapeutic, curative or beneficial properties of any NewYou products may not be made except those contained in official NewYou materials. You may not make any claim that Company products are useful in the cure, treatment, diagnosis, mitigation or prevention of any diseases. Such statements can be perceived as medical or drug claims. Not only do such claims violate this Agreement, but also potentially violates federal and state laws and regulations, including the federal Food, Drug, and Cosmetic Act and Federal Trade Commission Act.

 

7. NewYou’s Proprietary Information and Trade Secrets. You recognize and agree that, as further set forth in the Policies and Procedures, information compiled by or maintained by NewYou, including Line of Sponsorship (LOS) information (i.e., information that discloses or relates to all or part of the specific arrangement of sponsorship within the NewYou business including, without limitation, Brand Partner lists, sponsorship trees, and all NewYou Brand Partner information generated therefrom, in its present or future forms), constitutes a commercially advantageous, unique and proprietary trade secret of NewYou, which it keeps as proprietary and confidential and treats as a trade secret. During the term of your contract with NewYou, NewYou grants you a personal, non-exclusive, non-transferable and revocable right to use trade secret, confidential, and proprietary business information (Proprietary Information), which includes, without limitation, LOS information, business reports, manufacturing and product developments, and Brand Partner sales, earnings and other financial reports to facilitate your NewYou business.

 

8. Non-Competition Agreement. In accordance with the Policies and Procedures, you agree that during the period while you are a Brand Partner, and for six (6) months following resignation, non-renewal, or termination of your business, you will not compete with NewYou. This covenant shall survive the expiration or termination of your authorization and contract with NewYou.

 

9. Non-Solicitation Agreement. In accordance with the Policies and Procedures, you agree that during the period while you are a Brand Partner, and for one (1) calendar year following resignation, non-renewal, or termination of your business, you will not encourage, solicit, or otherwise attempt to recruit or persuade any other NewYou Brand Partner to compete with the business of NewYou.

 

10. Images / Recordings / Consents. You agree to permit NewYou to obtain photographs, videos, and other recorded media of you or your likeness. You acknowledge and agree to allow any such recorded media to be used by NewYou for any lawful purpose, and without compensation.

 

11. Modification of Terms. With the exception of the dispute resolution section in Policies and Procedures, which can only be modified by way of mutual consent, the terms of this Agreement may be modified as specified in Rule 1 in the Policies and Procedures.

 

12. Jurisdiction and Governing Law. The formation, construction, interpretation, and enforceability of your contract with NewYou as set forth in this Brand Partner Agreement and any incorporated documents shall be governed by and interpreted in all respects under the laws of the State of California without regard to conflict of law provisions. Louisiana residents: notwithstanding the foregoing, Louisiana residents may bring an action against NewYou LLC with jurisdiction and venue as provided by Louisiana law.

 

13. Dispute Resolution. All disputes and claims relating to NewYou, its products, the rights and obligations of a Brand Partner and NewYou, or any other claims or causes of action relating to the performance of either a Brand Partner or NewYou under the Agreement or the NewYou Policies and Procedures shall be settled totally and finally by arbitration as enumerated in the Policies and Procedures in San Diego, California, or such other location as NewYou prescribes, in accordance with the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association, except that all parties shall be entitled to discovery rights allowed under the Federal Rules of Civil Procedure.

 

Rev. 8/19

  2  

 

Additionally, you agree not to initiate or participate in any class action proceeding against NewYou, whether in a judicial or mediation or arbitration proceeding, and you waive all rights to become a member of any certified class in any lawsuit or proceeding. This agreement to arbitrate shall survive any termination or expiration of the Agreement. Nothing in the Agreement shall prevent NewYou from applying to and obtaining from any court having jurisdiction a writ of attachment, garnishment, temporary injunction, preliminary injunction, permanent injunction or other equitable relief available to safeguard and protect its interest prior to, during or following the filing of any arbitration or other proceeding or pending the rendition of a decision or award in connection with any arbitration or other proceeding.

 

14. Time Limitation. If a Brand Partner wishes to bring an action against NewYou for any act or omission relating to or arising from the Agreement, such action must be brought within one (1) year from the date of the alleged conduct giving rise to the cause of action. You waive all claims that any other statutes of limitations apply.

 

15. Miscellaneous. If any provision of the Agreement is held to be invalid or unenforceable, such provision shall be reformed only to the extent necessary to make it enforceable, and the balance of the Agreement will remain in full force and effect. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. The provisions of this Agreement, including all documents incorporated herein by reference, embody the whole agreement between you and NewYou and supersedes any prior agreements, understandings and obligations between you and NewYou concerning the subject matter of your contract with NewYou.

 

16. Notice of Right to Cancel. You may request a refund on your enrollment fee if it’s done within three (3) business days from the date of the initial enrollment. If you cancel, any enrollment fees paid will be returned within TEN (10) BUSINESS DAYS following receipt by the seller of your cancellation notice. To cancel this transaction, deliver written notice to cancel@newyounow.com no later than midnight of the third business day following the date of this Agreement. Please note: Monthly back office fees are not refundable except where required by state law.

 

17. Submission of Electronic W-9. Under penalty of perjury, I certify that (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and (2), I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) I am a U.S. Citizen or other U.S. person.

 

Rev. 8/19

  3  

 

 

List of Subsidiaries

New You, LLC, a Wyoming limited liability company

 

 

 

 

  1  

 

Independent Registered Public Accounting Firm’s Consent

 

We consent to the inclusion in this Registration Statement of New You, Inc. on Form S-1 of our report dated November 7, 2019, which includes an explanatory paragraph as to the ability of New You, Inc. to continue as a going concern, with respect to our audits of the financial statements of New You, Inc. as of December 31, 2018 and December 31, 2017 and for each of the two years in the period ended December 31, 2018, which report appears in the Prospectus, which is part of this Registration Statement.

 

We also consent to the inclusion in this Registration Statement of New You, Inc. on Form S-1 of our report dated November 7, 2019, which includes an explanatory paragraph as to the ability of New You LLC to continue as a going concern, with respect to our audit of the financial statements of New You LLC as of December 31, 2018 and for the year then ended, which report appears in the Prospectus, which is part of this Registration Statement.

 

We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.

 

/s/ Marcum llp

 

Marcum llp

Costa Mesa, California

November 7, 2019

 

 

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