RISK FACTORS

 

Any investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and all other information contained in this registration statement, before you decide whether to purchase our common stock. The occurrence of any of the following risk factors could harm our business. You may lose part or all of your investment due to any of these risks or uncertainties.

 

RISKS RELATED TO OUR PRIOR OFFERINGS

 

We admit that we may have inadvertently issued Type A Warrants and Type B Warrants to U.S. citizens or residents which may have been done unintentionally in violation of federal securities laws and may subject us to sanctions for such violations, including the suspension of this offering or injunctive or financial penalties, which would seriously impact our ability to implement our business plan.

 

Federal securities laws govern the manner in which offers and sales of securities may be legally made. For example, there was no registration statement in effect for the Type A Warrants and Type B Warrants at the time they were issued to U.S. Members. The Company admits that all of the referenced offerings of securities described herein, including the exchange of the warrants for common shares, may have been done in violation of federal securities laws. In connection therewith, the Company admits that the offering could be deemed to have involved “a general solicitation of the public at large.” The Company admits that it solicited members through a public website and warrants were part of the membership package. The Company assumed if the persons acquiring the securities were sophisticated enough to understand and buy the Company’s products, the investors could be deemed by the Company to be sophisticated, although the Company made no independent investigation or verification thereof.  Specifically, the Company admits that securities were being offered through its website and that our presumption of sophistication was solely based on the fact that individuals were signing up to be members.

Thus, there is a risk that former warrant holders may bring legal action against the Company, its officers and directors for securities law violations which if successful would seriously impact our ability to implement our business plan. We may also be subject to sanctions for such violations, including the suspension of this offering or injunctive or financial penalties, which would seriously impact our ability to implement our business plan. We used fair value to estimate maximum potential liabilities incurred from the rescission. The fair value of this liability was $7,167,663 and $7,167,663 as of September 30, 2013 and December 31, 2012, respectively and is included in the rescission liability in the consolidated balance sheet.

  

We inadvertently stated or implied in our Information Statement provided to Warrant Holders concerning their exercise of Warrants that the SEC had taken a position with respect to the exercise of the Warrants and in fact the SEC has not taken any position that would prevent such holders from taking action against the Company and its affiliates resulting from any securities law violations in connection with the offering or sale of the warrants or their subsequent exercise.

 

We inadvertently stated on the cover page of the Information Statement that we provided to warrant holders concerning the exercise of the warrants that it was the SEC’s position that required warrant holders to exercise their warrants. In fact, the SEC did not take a position requiring warrant holders to exercise their warrants, that the information statement distributed to warrant holders incorrectly asserted this, and that the SEC has not taken any position that would prevent such holders from taking action against the Company and its affiliates resulting from any securities law violations in connection with the offering or sale of the warrants or their subsequent exercise.

 

RISKS RELATED TO OUR BUSINESS

 

The market place in the nutritional supplement and personal care industry is very competitive and the failure to successfully compete could reduce our revenues.

 

 

The Company faces intense competition in the nutritional supplement and personal care industry. Many other competitors are well established, have greater resources and have a name and brand recognition. These companies also have member bases that are much larger than ours. We cannot be sure that our members won’t leave and join other programs. If the member base declined and failed to grow, the negative financial impact on the Company could be significant.

 

In addition to competition from companies offering competing products, we are subject to the risk of losing our members if they leave and join other non-related network or multi-level marketing companies. The home-based business industry is immense and offers many alternatives, especially for members looking for new opportunities.

 

A significant portion of our revenues is from customers in foreign markets. If we cannot successfully understand and survive the volatility of doing business in foreign countries, our revenues could be reduced.

 

A significant portion of our business is from customers in foreign markets, which was approximately 96.9% for the year ended December 31, 2012 and 91.6% for the year ended December 31, 2011. Essentially, all of our products are manufactured and purchased in the United States and all payments for product purchases are made through our website in U.S. dollars, but the products are shipped to these customers located in both domestic and foreign countries.

 

If foreign governments in countries where we sell our products changed import regulations and did not allow our product to enter the country, we could suffer significant financial losses. We could lose our members in the country and sales could disappear in that market.

 

The lack of registered trademarks and trade names could potentially harm the business.

 

Trademarks and trade names distinguish the various companies from each other. If potential customers and members get confused as to which company and product are offered by us, then we could lose sales and members to competitors. The Company does not have any registered trademarks and trade names, so it only has common law rights with respect to infractions or infringements on its products. Many subtleties exist in product descriptions, offering and names that can easily confuse members and customers. The name of the Company’s principal products may be found in numerous variations of the name and descriptions in various media and product labels. This presents a risk of losing potential customers looking for our products and buying someone else’s because they cannot differentiate between them. In addition, the Company’s products could infringe on the intellectual property rights of others, although the Company is not aware of any such infringement. If such infringement were to occur, the Company might have to alter its product labeling or content, and accordingly, could lose sales in the process. Also, monetary reimbursement could be required to be paid to the Company whose products were infringed.

  

Disruption to our supply chain of products and/or ingredients could negatively affect our sales.

 

The Company has not as yet experienced significant problems in obtaining its products from suppliers. However, there is no guarantee that some of the ingredients in the formulizations of the products will not become scarce, or that current suppliers may not be able to continue to provide our products or ingredients.

 

If the manufactured products do not meet quality standard, the product is not accepted by us. This could cause a shortage of those products in inventory resulting in back orders and even cancellations of orders. Sales of existing products in inventory may not be sufficient to use all stock on hand before the ‘best by’ date expires. This causes a write off of inventory that is not salable resulting in negative financial results.

 

Damage claims against our products could reduce our sales and revenues.

 

If any of our products are found to cause injury or damage, the Company could suffer financial damages. We have not had significant claims for damages or losses from our products to date. The Company does not carry product liability insurance.

 

 

Our products contain many ingredients. If any of the ingredients were found to be harmful or were no longer available, then our formulizations would have to change. The acceptance of the new product formula may not be supported, which could create negative publicity and in reduce our sales and revenues.

 

There is substantial doubt about our ability to continue as a going concern as a result of our lack of significant revenues and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.

 

Our lack of significant revenues raises substantial doubt about our ability to continue as a going concern. Our financial statements do not include adjustments that might result from the outcome of this uncertainty and if we are unable to generate significant revenue or secure financing, we may be required to cease or curtail our operations.

 

Fluctuations in growth in membership may cause our revenues to fluctuate.

 

As our members are under no obligation to remain with the Company, the retention of members within our organization is not certain. If the Company cannot attract additional new members and cannot retain existing members, then the growth trend can be expected to decline resulting in reduced revenues for the Company. Although we have seen a growth of new members in 2012 compared to 2011 with 679 new members in 2012 and 318 new members in 2011, we had 1,590 total members in 2012 and 6,671 total members in 2011. This trend of slower growth of new and existing members may continue. Fluctuations in growth in membership may cause our revenues to fluctuate.

 

In 2012 and 2011, one supplier accounted for approximately 58% and 71% of our purchases. The Company does not have agreements with this major or any other suppliers, which exposes us to greater risk of sales disruptions and reduced revenues.

 

In 2012, one supplier, SUSS Technology Corp., accounted for approximately 58% of our purchases. In 2011, one supplier, Health One Pharmaceutical Inc., accounted for approximately 71% of our purchases. The loss of this supplier could result in a loss of sales and revenues. The Company does not have a written or contractual agreement with any Health One Pharmaceuticals or any of our other suppliers, or with any of our secondary or tertiary suppliers, suppliers who supply our primary and secondary suppliers, respectively. Our product sourcing and other manufacturing requirements are conducted on a purchase-order basis. If one or more of our current suppliers stopped selling us ingredients and manufacturing our products, we would be forced to find other suppliers or re-allocate our manufacturing requirements among our existing suppliers. Although we have identified four alternative suppliers, the time needed to re-allocate our manufacturing requirements could outlast the inventory on hand and result in loss of sales.

   

RISKS RELATED TO OUR INDUSTRY

 

If our multi-level marketing program were found to violate laws, rules and regulations governing multi-level marketing programs such as ours, our revenues could be reduced.

 

Substantially all of our entire sales and distribution channel is based upon our multi-level network marketing program. We are subject to various regulations governing multi-level marketing by federal, state and local agencies in the U.S.  We are also subject to various regulations governing multi-level marketing in the foreign jurisdictions in which we operate.  We are at risk in that one or more areas, our marketing system might not have been or are not currently compliant with U.S. federal, state and local regulations as well as regulations in applicable foreign jurisdictions.  The only potential regulatory issue of which we are aware concerning our multi-level marketing program is that we have been advised by Canadian counsel that under one interpretation of applicable Canadian law, a type of purchase requirement that we did use (but no longer use as of the date of this registration statement) may have violated Canada’s Competition Act applicable to our marketing activities in Canada.  We are also subject to private claims from individuals, including members challenging our network marketing program. However, to date, we have received no notices of potential violations, challenges, or legal or regulatory proceedings, whether from individuals or U.S. or foreign regulatory authorities in all the countries where we operate, and we are not aware of any of the foregoing that are pending or that have actually occurred. We could also be affected by actions or claims against competitors’ network marketing programs as their outcomes could be used against us. We are not aware of any aspect of our marketing program that as of the date of this registration statement is not in compliance with any U.S. or foreign laws, rules or regulations relating to our business. If we were found not to have complied with applicable laws, rules or regulations in the past or if in the future we were required but were not able to bring into compliance our network marketing program, it could subject us to regulatory or private action resulting in litigation, fines or penalties as well as otherwise reducing our revenues.

 

 

Failure to retain and attract our independent members could reduce our revenues.

 

The sales of our products are made through a network of independent members. Members voluntarily sign up with the Company to buy our products. There is no guarantee that the members will continue to work the business. Our sales growth depends upon expanding our member base, and upon the continued involvement of the current members. Our members have many alternative opportunities to join other multi-level marketing companies. If we are not able to retain these members and to recruit new members, then the lack of growth and sustained sales could have adverse financial effects on the Company.

 

The retention and the productivity of our members are affected by many factors including:

 

·

Competitors’ programs

·

Publicity or negative publicity of our products

·

Enforcement of our policies and procedures

·

Members’ individual success or lack of success in our program

·

The negative influence from former members

·

Lack of interest in continuing to work the business

·

Perceived deficiencies in our compensation plan

·

Economic conditions that may discourage members from continuing

·

The obstacles presented by a perceived saturation of network or multi-level programs in the market place that make recruiting new members difficult.

 

If we cannot retain our high level members or attract new members that can attain a high level position, then our sales could decline resulting in financial losses. It takes time for members to establish an organization that pays them dividends and that generates sales for the Company. If high level members leave the Company due to some of the factors mentioned, there is no assurance that the Company would be able to replace those leaders, their organization and the sales volume that attends that organization.

 

Independent members may not comply with Company policies which could have severe consequences to our business, our reputation and the morale of the members.

 

We cannot exert the same type of control over our network of independent members as we can with our employees. We cannot be sure that our members will comply with the guidelines set by the Company on the use of the products, the claims they may make about the benefits of the products or the manner in which they conduct their business. The Company’s compliance department is constantly training members and reviewing their practices, we cannot monitor everything that our members do. If an action were brought against a member, then we could also be named. A finding against us could have severe consequences to our business, our reputation and the morale of the members.

 

Failure to comply with the many regulations governing our business could significantly damage our business.

 

The Company is subject to various federal, state, local and foreign regulations. Various governmental agencies have an impact on our business. The regulations cover product ingredients, manufacture, distribution, marketing, sales, compensation and taxation, to name a few. If the Company were to fail to meet standards set by these regulations, then the Company could be prohibited from selling its products.

 

 

If one or more of the ingredients of our products become subject to regulatory action, then the Company suffers the risk of having to re-formulate its product, if allowed, in order to put it on the market. The cost of this process may be substantial. The future acceptance of the re-formulated product by its members cannot be assured.

 

Foreign jurisdictions may pass laws that would prohibit the use of certain ingredients in their particular market. If the Company were not able to satisfy the various regulations, then it would have to cease sales of that product in that location.

 

RISKS RELATED TO MANAGEMENT AND PERSONNEL

 

We depend heavily on key personnel, and turnover of key senior management could harm our business.

 

Our future business and results of operations depend in significant part upon the continued contributions of Ding Hua Wang, Director, President & CEO. If we lose Ding Hua Wang, President and CEO, or if he fails to perform in his current positions, or if we are not able to attract and retain skilled employees as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key employees in managing the product acquisition, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future.

 

Our management has limited experience in managing the day to day operations of a public company and, as a result, we may incur additional expenses associated with the management of our company.

 

Ding Hua Wang, President and CEO, is responsible for the operations and reporting of the combined company. The requirements of operating as a small public company are new to the management team and the employees as a whole. This may require us to obtain outside assistance from legal, accounting, investor relations, or other professionals that could be more costly than planned. We may also be required to hire additional staff to comply with additional SEC reporting requirements and compliance under the Sarbanes-Oxley Act of 2002. Our failure to comply with reporting requirements and other provisions of securities laws could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition.

In our prior registration statement on Form S-1, our internal disclosure controls and procedures were inadequate resulting in the failure to discover an unauthorized legal opinion and consent in a Registration Statement until after the Registration Statement was declared effective, leading to the withdrawal of that Registration Statement, and a similar failure of our new disclosure controls could result in a future adverse consequences as a result of actions of regulators or of incurring liability for significant amounts as the result of any litigation resulting from our including unauthorized information from third parties or any material false or misleading information in any filings with the SEC.

Prior to instituting an internal disclosure control and procedure system in 2013, the Company did not have an adequate disclosure control system, which led to the Company being the victim of a fraud perpetrated by a third party hired by the Company to obtain information in the form of an opinion and related consent which was included in the withdrawn Registration Statement.  The Company thus withdrew the offering under that Registration Statement due to this situation.   No securities were sold pursuant to that Registration Statement.

 

In the past our internal financial controls were inadequate resulting in the failure to discover an embezzlement of $815,144 by our third party accountant, and a similar failure of our new financial controls could result in a future loss.

 

Prior to instituting an internal control system in 2011 at the direction and under the supervision of the Company’s current internal accounting personnel, the Company did not have an adequate internal control system, which led to the discovery of an embezzlement by prior external accountant of $815,144 in the years prior to 2011. In 2011, we instituted additional internal controls. However, if these new controls also prove inadequate, we could suffer similar financial loss in the future.

 

It is difficult for us to predict how long it will take to complete management's assessment of the effectiveness of our internal control over financial reporting for each year and to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and process on a timely basis. In the event that our Chief Executive Officer/Chief Financial Officer determines that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our shares will be affected.

Our management has a history of investing in business ventures that ultimately fail and currently lacks of ability of to protect the company from resulting losses by taking ordinary steps to document and oversee business relationships.

 

Our management has a history of investing in business ventures that ultimately fail, including 5 Continents TV Corp. (“5CTV”) and Mobile Internet Information Technology, Inc. (“MIIT”). We had resulting aggregate losses of approximately $5,681,518. Although we are taking remedial action to address these issues specifically by adopting a policy that we will not invest in other business ventures such as these in the future, management currently lacks ability to protect the company from resulting losses by taking ordinary steps to document and oversee business relationships. This prior history and lack of ability could reduce our assets or revenues if reoccurring in the future.

 

Because we do not have an audit or compensation committee, shareholders will have to rely on the entire board of directors, none of which are independent, to perform these functions.

 

We do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee. These functions are performed by the board of directors as a whole. No members of the board of directors are independent directors. Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning management compensation and audit issues that may affect management decisions.

 

Certain of our stockholders hold a significant percentage of our outstanding voting securities which could reduce the ability of minority shareholders to effect certain corporate actions .

 

Our officers, directors and majority shareholders are the beneficial owners of 78.38% of our outstanding voting securities. As a result, they possess significant influence and can elect a majority of our board of directors and authorize or prevent proposed significant corporate transactions. Their ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer.

 

Mr. Wang previously used personal funds on behalf of the Company and received cash proceeds from product or warrant sales.

 

Mr. Wang previously has utilized his personal funds to acquire product for the Company and has personally received direct payment from product or warrant sales. The net result of these transactions is that the Company owes Mr. Wang $298,677 and $75,115 as of September 30, 2013 and December 31, 2012, respectively. Mr. Wang appreciates that it is important to separate his funds and transactions from those of the Company and has committed to maintaining separate accounts and transactions, but any future commingling of corporate and personal funds could raise questions about Mr. Wang’s fiduciary duty to the Company and could have a material adverse impact on the Company.

   

 

RISKS RELATED TO OUR STOCK

 

Investors may have difficulty in reselling their shares due to the lack of market or state Blue Sky laws.

 

Our common stock is currently not quoted on any market. No market may ever develop for our common stock, or if developed, may not be sustained in the future.

 

The holders of our shares of common stock and persons who desire to purchase them in any trading market that might develop in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful in having the Shares available for trading on the OTCBB, investors should consider any secondary market for the Company's securities to be a limited one. We intend to seek coverage and publication of information regarding the company in an accepted publication which permits a "manual exemption." This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. We may not be able to secure a listing containing all of this information. Furthermore, the manual exemption is a non issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities. Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

 

Accordingly, our shares should be considered totally illiquid, which inhibits investors’ ability to resell their shares.

 

We will be subject to penny stock regulations and restrictions,  and you may have difficulty selling shares of our common stock.

 

The SEC has adopted regulations which generally define so-called “penny stock” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. We anticipate that our common stock will become a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

 

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

 

 

We do not anticipate that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

 

Sales of our common stock under Rule 144 could reduce the price of our stock.

 

We are registering 2,125,708 shares of common stock held by U.S. non-affiliate shareholders in the registration statement. All 131,492,720 shares of common stock held by affiliates and all  34,914,281 shares of common stock held by non-affiliates not registered in this registration statement are subject to the resale restrictions of Rule 144.

 

In general, persons holding restricted securities, including affiliates, must hold their shares for a period of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price. The availability for sale of substantial amounts of common stock under Rule 144 could reduce prevailing market prices for our securities.

 

We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock held by non-affiliates exceeds $700 million as of any March 31 before that time, in which case we would no longer be an emerging growth company as of the following March 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

Because we lack certain internal controls over financial reporting in that we do not have an audit committee and our Board of Directors has no technical knowledge of U.S. GAAP and internal control of financial reporting and relies upon the Company’s financial personnel to advise the Board on such matters, we are subject to increased risk related to financial statement disclosures.

 

We lack certain internal controls over financial reporting in that we do not have an audit committee and your Board of Directors has no technical knowledge of U.S. GAAP and internal control of financial reporting and relies upon the Company’s financial personnel to advise the Board on such matters. Accordingly, we are subject to increased risk related to financial statement disclosures.