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

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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.

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(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.

 

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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

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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.

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(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.

 

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(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 Unite