As filed with the Securities and Exchange Commission on October 30, 2015

 

Registration No.  333-206839

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

AMENDMENT NO. 1 TO FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

HEALTH-RIGHT DISCOVERIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   2834   45-3588650

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

 

18851 NE 29 th Avenue, Suite 700

Aventura, Florida 33180

(305) 705-3247

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive officer)

 

David Hopkins

President

18851 NE 29 th Avenue, Suite 700

Aventura, Florida 33180

(305) 705-3247

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

Copies to:

Dale S. Bergman, Esq.

Gutierrez Bergman Boulris, P.L.L.C.

100 Almeria Avenue, Suite 340

Coral Gables, Florida 33134

(305) 358-5100

 

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

 

 Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☒

(Do not check if a smaller reporting company) 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of Securities to be

Registered(1)

 

Amount

to be

Registered

   

Proposed

Maximum

Offering

Price Per

Share(2)(3)

   

Proposed

Maximum

Aggregate

Offering

Price

   

Amount of

Registration

Fee

 
                         
Common stock, par value $0.001 per share     5,309,152     $ 0.25     $   1,327,288     $ 133.71 (4)

 

(1) This registration statement covers the resale by our selling shareholders of up to 5,309,152 shares of common stock previously issued to such selling shareholders.

 

(2) The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457.  The proposed maximum offering price is based on the estimated high end of the range at which the common stock will initially be sold.

 

(3) The selling shareholders will offer their shares at $0.25 per share until the Company’s shares are quoted on the OTCQX or the OTCQB operated by OTC Markets Group and, assuming we secure this qualification, thereafter at prevailing market prices or privately negotiated prices.

 

(4) Previously paid.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 
 

 

The information in this preliminary prospectus is not complete and may be changed.  We may not sell these securities nor may offers to buy these securities be accepted until the registration statement filed with the Securities and Exchange Commission becomes effective.  This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED OCTOBER 30, 2015

 

PROSPECTUS

 

HEALTH-RIGHT DISCOVERIES, INC.

 

5,309,152 Shares of Common Stock

 

The selling shareholders named in this prospectus are offering up to 5,309,152 shares of common stock through this prospectus.  We will not receive any proceeds from this offering and have not made any arrangements for the sale of these securities.  

 

Our common stock is presently not traded on any market or securities exchange.  Given the foregoing, the selling shareholders will offer their shares at $0.25 per share until the shares are quoted on the OTCQX or the OTCQB operated by OTC Markets Group.  Although we intend to apply for quotation of our common stock on the OTCQX or the OTCQB operated by OTC Markets Group, we may not secure this qualification and even if we do an active public market for our common stock may never materialize.  If we secure this qualification, the sale price to the public of the shares registered hereunder will be at prevailing market prices or privately negotiated prices.

 

The Company is an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “ Jobs Act ”) and as such, may elect to comply with certain reduced public company reporting requirements for future filings.

 

The purchase of the shares of common stock offered through this prospectus involves a high degree of risk.  See the section of this prospectus entitled “Risk Factors” beginning at page 5.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offense.

 

The 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.

 

The date of this prospectus is ____________, 2015

 

 
 

 

TABLE OF CONTENTS

 

    Page
ABOUT THIS PROSPECTUS   1
PROSPECTUS SUMMARY   2
SUMMARY FINANCIAL INFORMATION   4
RISK FACTORS   5
USE OF PROCEEDS   11
DETERMINATION OF OFFERING PRICE   12
DILUTION   12
SELLING SHAREHOLDERS   12
PLAN OF DISTRIBUTION   13
PROPOSED BUSINESS   16
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS   22
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   24
MANAGEMENT   26
EXECUTIVE COMPENSATION   27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS   29
DESCRIPTION OF CAPITAL STOCK   30
LEGAL MATTERS   30
EXPERTS   30
AVAILABLE INFORMATION   30
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES   31
INDEX TO FINANCIAL STATEMENTS   F-1

 

 
 

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “ SEC ”) using the SEC’s registration rules for a delayed or continuous offering and sale of securities.  Under the registration rules, using this prospectus and, if required, one or more prospectus supplements, the selling shareholders named herein may distribute the shares of common stock covered by this prospectus.  This prospectus also covers any shares of common stock that may become issuable as a result of stock splits, stock dividends or similar transactions.  A prospectus supplement may add, update or change information contained in this prospectus.

 

You should rely only on the information contained in this prospectus. We have not authorized any dealer, salesperson or other person to provide you with information concerning us, except for the information contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless when the time of delivery of this prospectus or the sale of any common stock. This prospectus is not an offer to sell, nor is it a solicitation of an offer to buy, our common stock in any jurisdiction in which the offer or sale is not permitted.

 

  1  
 

 

PROSPECTUS SUMMARY

 

This summary provides an overview of all material information contained in this prospectus.  It does not contain all the information you should consider before making a decision to purchase the shares our selling shareholders are offering.  You should very carefully and thoroughly read the more detailed information in this prospectus and review our financial statements and all other information that is incorporated by reference in this prospectus.

 

Unless the context otherwise requires, references in this prospectus to “ HRD, ” “ Health-Right, ” “ the Company, ” “ we, ” “ our ” and “ us ” refers to Health-Right Discoveries, Inc. All share and per share information in this prospectus has been adjusted to give retroactive effect to a two-for-one stock split implemented in November 2014.

 

Overview

 

Health-Right is a natural biotech company that combines science and nutrition to develop branded ingredients, formulations and products that seek to provide a better quality of life for consumers who primarily suffer from stress-induced viruses and diseases. These formulations and products are developed naturally, by utilizing and scientifically combining various ingredients to help positively influence the interrelationship between stress and the immune system. The Company is planning to explore the application of its formulation platform to include cannabidiol (“ CBD ”) derived from industrial hemp. CBD, which is a cannabis-derived compound that may offer some of the benefits of medical marijuana without the side effects (i.e. the feeling of being “high” that comes from other cannabis compounds such as THC). The Company’s efforts in this regard will be dependent upon the U.S. Food and Drug Administration (“ FDA ”) clarifying its position with respect to the classification of hemp-derived CBD as a dietary supplement and an ingredient deemed to be Generally Described as Safe (“ GRAS ’), as opposed to cannabis-derived CBD, which is not so classified (the FDA has not as yet differentiated hemp-derived CBD from cannabis-derived CBD).

 

The Company believes the formulation platform it has developed in order to help address the negative nutritional interrelationship between stress, a weakened immune system and certain conditions and diseases is now in place. At the end of 2014, Health-Right completed initial test-marketing of Advanced H-Plex Defense Formula 11, its first product (“ H-Plex Defense ”), an all-natural dietary supplement whose formulation seeks to address less than optimal nutrition and nutritional deficiencies to aid persons afflicted with Herpes Simplex Virus 1 (“ HSV-1 ”). Based on customer feedback, including a reorder rate exceeding industry norms, HRD believes that it has developed an alternative approach to help counteract and improve the causes/triggers of HSV-1, a virus that affects over an estimated 100 million people in the U.S. alone with symptoms including tingling, itching, blisters, sores and rashes with an estimated $5 billion marketplace for treatments by 2017, according to Global Industry Analysts, Inc.

 

Notwithstanding the foregoing, the Company has not conducted formal clinical trials of H-Plex Defense. Subject to receipt of necessary funding, the Company intends to do so, utilizing the services of Miami Research Associates (“ MRA ”), one of the largest, multi-special clinical research centers in the United States. Management has had multiple meetings and discussion with MRA and has negotiated Protocol Development Agreement for clinical trials, the finalization and execution of which is subject to receipt of necessary funding.

 

We believe that Health-Right is uniquely positioned because its approach of not just responding to stress induced conditions and diseases, but proactively addressing stress-induced problems before they wreak havoc on multiple body systems. The Company’s research, formulation and nutritional theories offer wide ranging potential because we believe that our formulation platform has the potential to be successfully applied In the prescription nutritional/medical foods, OTC monograph drug and all-natural dietary supplement/nutraceutical arenas. HRD anticipates that it will be able to leverage the results of its planned clinical trials in order to market ingredients, branded ingredients, private label ingredients and finished products. We also believe that we will be positioned to license our formulations to strategic partners in order to expedite and achieve product commercialization and cross-promotion.

 

In addition to its initial product, the Company plans to focus its efforts on areas where it believes that HRD can commercialize and market products on an expedited basis. We believe that are other potential applications for our formulations that we have in the pipeline, including all-natural products designed to relieve symptoms associated with:

 

· compromised immune systems and related muscle and joint pain;
· the common cold and flu viruses; and
· constipation resulting from prescription medications.

 

By adapting its formulation platform to applications such as these, the Company believes that it will be able to generate revenues in the short term in the following markets:

 

  ·

the Over-the-Counter (“ OTC ”) monograph drug industry;

· the prescription nutritional marketplace; and
  · the natural products space.

 

  2  
 

 

The Company intends to use its contacts in the healthcare, medical foods and natural products industries to market and sell its proposed products either directly or through strategic partners and licensees.

 

To date, the Company has generated limited revenues and has operated with limited capital. The Company will require significant capital to implement its business plan.  There can be no assurance that the Company can raise the necessary funds, on favorable terms or otherwise.  Failure to obtain sufficient capital will substantially harm the Company’s prospects.

 

Corporate Information

 

The Company was incorporated in the state of Florida on October 11, 2011 under the name “ Four Plex Partners, Inc. ” and changed its name to “ Health-Right Discoveries, Inc. ” on March 22, 2012.

 

Our executive offices are located at 18851 NE 29 th Avenue, Suite 700, Aventura, Florida 33180 and our telephone number is (305) 705-3247.   Our corporate website is www.health-right.com . Information appearing on our corporate website is not part of this prospectus.

 

Selling Shareholders

 

The Company previously sold or issued an aggregate of 17,133,332 shares of common stock to its founders, investors in private transactions (the “ Private Placements ”) and service providers.

 

The Company issued an aggregate of 14,133,332 shares of common stock to its founders from inception to June 30, 2015 for capital contributions of $25,000 and for services rendered to the Company, including 6,766,666 shares to David Hopkins, 6,366,666 shares to James Pande and 1,000,000 shares to Michael Fabiano. Mr. Hopkins subsequently gifted 950,000 of the shares of common stock held by him to five non-affiliated parties in October and December 2013 and transferred 153,156 shares to one party in March 2015 a private transaction in satisfaction of obligations owed to it by Mr. Hopkins. The resale of 3,257,574 shares of common stock currently held by our founders and 551,578 of the 1,103,156 shares of common stock transferred by Mr. Hopkins to third parties is covered by this prospectus.

 

In the Private Placements which were conducted from December 2011 to September 2012, the Company sold an aggregate of 1,350,000 shares of common stock to seven investors from inception to June 30, 2015, which sales generated gross proceeds of $165,000.  The resale of 675,000 of these shares is covered by this prospectus.

 

We have also issued an additional 1,650,000 shares of common stock to third party service providers for legal and other business services. The resale of 825,000 of these shares is covered by this prospectus.

 

The Offering

 

This prospectus relates to the resale from time to time by the selling shareholders identified in this prospectus of 5,309,152 shares of our common stock, par value $0.001 per share.  No shares are being offered for sale by the Company.

 

Common stock offered by selling shareholders: 5,309,172 shares of common stock.
   
Common stock outstanding on October 30, 2015: 17,133,332 shares of common stock (1).
   
Terms of the Offering: The selling shareholders will determine when and how they will sell the shares of common stock offered in this prospectus.
   
Use of proceeds: We will not receive any proceeds from the sale of the shares of common stock offered by the selling shareholders under this prospectus.
   
Risk factors: The common stock offered hereby involves a high degree of risk and should not be purchase by investors who cannot afford the loss of their entire investment.

 

 

 

(1) Does not include 3,000,000 shares of our common stock reserved for issuance under our 2015 Stock Incentive Plan.

 

  3  
 

 

SUMMARY FINANCIAL INFORMATION

 

The following summary financial data should be read in conjunction with “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” and the Financial Statements and Notes thereto, included elsewhere in this prospectus.

 

    For the Years Ended
December 31,
   

For the Six Months Ended

June 30,

 
Statement Of Operations   2014     2013     2015     2014  
                (Unaudited)     (Unaudited)  
Revenues   $ 59,811     $ 12,724     $ 13,581     $ 26,199  
Cost of Sales   $ 10,276     $ 11,424     $ 2,664     $ 4,380  
Other Selling, General and Interest Expenses   $ 241,114     $ 340,977     $ 38,740     $ 75,490  
Net Loss   $ (191,579 )   $ (339,677 )   $ (27,823 )   $ (53,671 )

 

    As of  
    December 31, 2014     June 30, 2015  
Balance Sheet Data         (Unaudited)  
             
Cash   $ 609     $ 748  
Total Assets   $ 1,822     $ 5,413  
Total Liabilities   $ 201,133     $ 231,147  
Total Stockholders’ Deficiency   $ (199,311 )   $ (226,134 )

 

  4  
 

 

RISK FACTORS

 

The shares of our common stock being offered for resale by the selling shareholders are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested in the common stock.  Before purchasing any of the shares of common stock, you should carefully consider the following factors relating to our business and prospects.  If any of the following risks actually occurs, our business, financial condition or operating results could be materially adversely affected.  In such case, you may lose all or part of your investment.  You should carefully consider the risks described below and the other information in this process before investing in our common stock.

 

We are an early stage company with a limited operating history.

 

The Company was incorporated in 2011, is an early stage company and has generated only limited revenues to date, with its primary focus being applying its limited capital resources in large part to product development activities.  It is subject to all the problems, expenses, difficulties, complications and delays encountered in establishing a new business.  The Company does not know if it will become commercially viable and ever generate significant revenues or operate at a profit.

 

The Company will require additional financing to become commercially viable.

 

To date, the Company has funded its development activities primarily through the Private Placements, which have generated approximately $165,000 and from inception in 2011 through June 30, 2015, respectively, $25,000 in capital contributions from principal shareholders and additional loans from principal shareholders.  The Company will require additional financing to complete development of, commercially launch and market its planned products.  The Company incurred net losses of $191,579 and $339,677 for the years ended December 31, 2014 and 2013, respectively and $27,823 and $53,671 for the six months ended June 30, 2015 and 2014, respectively.  Moreover, as of June 30, 2015, we had a total shareholders’ deficiency of $226,134. Our independent auditors report for the year ended December 31, 2014 includes an explanatory paragraph stating that our lack of revenues and working capital raise substantial doubt about our ability to continue as a growing concern.  While we are seeking to raise additional financing through additional securities offerings, there can be no assurance that additional financing will be available to the Company when needed, on favorable terms or otherwise.  Moreover, any such additional financing may dilute the interests of purchasers of the shares offered hereby.  The absence of additional financing, when needed, could cause the Company to delay implementation of its business plan in whole or in part, curtail its business activities and seriously harm the Company and its prospects.

 

Our success will be dependent in part on our ability to successfully develop, commercialize and market a portfolio of products utilizing our formulation platform and market acceptance of our planned products.

 

To date, we have only developed and test marketed our initial product H-Plex Defense. Our ultimate success will be dependent in part on our ability to successfully develop, commercialize and market a portfolio of products utilizing our formulation platform. In addition, market acceptance by and demand for our planned products from consumers will also be key factors in our ability to succeed. If we are unable to develop, commercialize and market our portfolio of planned products or if they are not accepted by consumers, our business and financial condition could be seriously harmed.

 

We will be dependent on third parties to help formulate and manufacture our planned products.  

 

We intend to enter into agreements with third parties to assist in the formulation of and manufacture our planned products, including furnishing the necessary ingredients. While Health-Right believes that there are multiple firms who can provide such services, we have not entered into formal agreements with any such third parties. Should we not be able to do so on commercially reasonable terms or if subsequent to doing so, a good relationship with our formulation and manufacturing partners is not maintained or the supply of ingredients is interrupted, our business may be significantly harmed.

 

We have not undertaken any significant marketing efforts and we have only limited marketing experience.

 

As we are in the development stage, we have not undertaken any significant marketing efforts for our planned products beyond our initial trial marketing of H-Plex Defense.  Moreover, we have only limited marketing experience and will likely rely on third parties to assist with product marketing.  Accordingly, there is no assurance that any marketing strategy we develop can be successfully implemented or if implemented, that it will result in significant sales of our planned portfolio of products.

 

  5  
 

 

As we develop and commercialize our planned product portfolio, we may be increasingly subject to government regulation.

 

Although we do not anticipate that our planned products will be subject to the lengthy and costly FDA application processes for new drug approvals, we will be subject to some degree of regulation depending on the intended applications and markets our planned products. For example, our ability to manufacture and market products containing hemp-derived CBD will be dependent upon the FDA clarifying its classification of CBD, so that hemp-derived CBD (as opposed to cannabis-derived CBD), is classified as a dietary supplement and deemed to be an ingredient which is GRAS by the FDA (the FDA has not as yet differentiated hemp-derived CBD from cannabis-derived CBD, which is not classified as GRAS). All of our products will need to be manufactured in facilities that comply with current Good Manufacturing Processes (“ cGMP ”) as promulgated by the FDA from time to time. In addition, even though are planned products are expected to contain ingredients which are deemed to be GRAS by the FDA; we may need to conduct clinical trials to support our claims of efficacy. Moreover, we will be subject to various labeling requirements and registration requirements, such as securing a National Drug Code (“ NDC ”) for products we develop which are intended to be eligible for insurance reimbursement, such as those for the prescription nutritional marketplace. There can also be no assurance that future regulatory changes will be implemented and if implemented that we will be able to comply with such future regulations, at commercially reasonable cost, if at all.

 

As we develop and commercialize our planned products, we may become subject to risks entailed in securing reimbursement from private and public insurance plans.

 

To the extent that we formulate and commercialize products that may be eligible for insurance reimbursement, such as products for the prescription nutritional marketplace, we will be subject to various requirements in order to obtain reimbursement from private insurance or public insurance, such as Medicare and Medicaid. There is no certainty that we will be able to secure and maintain these requirements for insurance reimbursement. If we do not do so, we may not be able to successfully market these products and generate revenues therefrom. Even if we do so, revenues generated from these products will be subject to potential delays in receiving reimbursement payments from insurers.

 

Our business plan depends on our intellectual property rights and if we are unable to protect them, our competitive position may suffer.

 

Our business plan is predicated on part on our intellectual property rights, including our proprietary formulation platform and individual product formulations. Accordingly, protecting our intellectual property rights is critical to our continued success and our ability to maintain our competitive position. We protect our proprietary rights through a combination of trade secret and copyright law, confidentiality agreements and technical measures. We generally enter into non-disclosure agreements with our consultants and limit access to our trade secrets. We cannot assure you that the steps we have taken will prevent misappropriation of our proprietary property. Misappropriation of our intellectual property would have an adverse effect on our competitive position. In addition, we may have to engage in litigation in the future to enforce or protect our intellectual property rights or to defend against claims of invalidity, and we may incur substantial costs and the diversion of management’s time and attention as a result.

 

If we are deemed to infringe on the proprietary rights of third parties, we could incur unanticipated expense and be prevented from providing our planned products.

 

We could be subject to intellectual property infringement claims as the number of our competitors grows and our products overlap with competitive products. While we do not believe that we have infringed or are infringing on any proprietary rights of third parties, we cannot assure you that infringement claims will not be asserted against us or that those claims will be unsuccessful. We could incur substantial costs and diversion of management resources defending any infringement claims whether or not such claims are ultimately successful. Furthermore, a party making a claim against us could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief that could effectively block our ability to provide products or services. In addition, we cannot assure you that licenses for any intellectual property of third parties that might be required for our products or services will be available on commercially reasonable terms, or at all. 

 

The Company will face significant competition.

 

The markets for natural biotechnology products are and will continue to be highly competitive.  The Company will face significant competition from other companies who are developing, commercializing and marketing competitive products, as well as those who may elect to do so in the future.  Some of these competitors or potential competitors have greater experience, more extensive industry contacts and greater financial resources than the Company.  There can be no assurance that the Company can effectively compete.  

 

We currently rely on our President and his loss could have an adverse effect on the Company.

 

Until we build up our management infrastructure, our success depends upon our President, who is our sole executive officer.  The loss of his services would currently have a material adverse effect on HRD. We are not party to an employment agreement with our President and do not anticipate having key man insurance in place on him in the foreseeable future.

 

  6  
 

 

The Company’s success will be dependent in part upon its ability to attract qualified personnel and consultants.

 

The Company’s success will be dependent in part upon its ability to attract qualified management, administrative, product development and marketing and sales personnel and consultants.  The inability to do so on favorable terms may harm the Company’s proposed business.

 

We intend to become subject to the periodic reporting requirements of the Securities Exchange Act of 1934 that will require us to incur audit fees and legal fees in connection with the preparation of such reports.  These additional costs could reduce or eliminate our ability to earn a profit.

 

Following the effective date of our registration statement of which this prospectus is a part, we will be required to file periodic reports with the SEC pursuant to the Securities Exchange Act of 1934 (the “ Exchange Act ”) and the rules and regulations promulgated thereunder.  In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis.  Moreover, our legal counsel will have to review and assist in the preparation of such reports.  The costs charged by these professionals for such services cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys.  However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit.  If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.

 

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

  · pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

  · provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and

  

  · provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

We will be required to include a report of management on the effectiveness of our internal control over financial reporting.  We expect to incur additional expenses and diversion of management’s time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the management certification requirements.

 

We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees.  During the course of our testing, we may identify other deficiencies that we may not be able to timely remediate.  In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act (“ Sarbanes-Oxley ”).  Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.  If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.

 

  7  
 

 

The Jobs Act has reduced the information that the Company is required to disclose, which could adversely affect the price of the common stock.

 

Under the Jobs Act, the information that the Company will be required to disclose has been reduced in a number of ways.

 

Before the adoption of the Jobs Act, the Company was required to register the common stock under the Exchange Act within 120 days after the last day of the first fiscal year in which the Company had total assets exceeding $1,000,000 and 500 record holders of the common stock; the Jobs Act has changed this requirement such that the Company must register the common stock under the Exchange Act within 120 days after the last day of the first fiscal year in which the Company has total assets exceeding $10,000,000 and 2,000 record holders or 500 record holders who are not “ accredited investors .” As a result, the Company is now required to register the Common Stock under the Exchange Act substantially later than previously.

 

As a company that had gross revenues of less than $1 billion during the Company’s last fiscal year, the Company is an “ emerging growth company ,” as defined in the Jobs Act (an “ EGC ”). The Company will retain that status until the earliest of (a) the last day of the fiscal year which the Company has total annual gross revenues of $1,000,000,000 (as indexed for inflation in the manner set forth in the Jobs Act) or more; (b) the last day of the fiscal year of following the fifth anniversary of the date of the first sale of the common stock pursuant to an effective registration statement under the Securities Act; (c) the date on which the Company has, during the previous three year period, issued more than $1,000,000,000 in non-convertible debt; or (d) the date on which the Company is deemed to be a “ large accelerated filer ,” as defined in Rule 12b-2 under the Exchange Act or any successor thereto. As an EGC, the Company is relieved from the following:  

 

  The Company is excluded from Section 404(b) of Sarbanes-Oxley, which otherwise would have required the Company’s auditors to attest to and report on the Company’s internal control over financial reporting. The JOBS Act also amended Section 103(a)(3) of Sarbanes-Oxley to provide that (i) any new rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or changes to the auditor’s report to include auditor discussion and analysis (each of which is currently under consideration by the PCAOB) shall not apply to an audit of an EGC; and (ii) any other future rules adopted by the PCAOB will not apply to the Company’s audits unless the SEC determines otherwise.

 

  The Jobs Act amended Section 7(a) of the Securities Act to provide that the Company need not present more than two years of audited financial statements in an initial public offering registration statement and in any other registration statement, need not present selected financial data pursuant to Item 301 of Regulation S-K for any period prior to the earliest audited period presented in connection with such initial public offering. In addition, the Company is not required to comply with any new or revised financial accounting standard until such date as a private company (i.e., a company that is not an “ issuer ” as defined by Section 2(a) of Sarbanes-Oxley) is required to comply with such new or revised accounting standard. Corresponding changes have been made to the Exchange Act, which relates to periodic reporting requirements, which would be applicable if the Company were required to comply with them.

 

  As long as the Company is an EGC, the Company may comply with Item 402 of Regulation S-K, which requires extensive quantitative and qualitative disclosure regarding executive compensation, by disclosing the more limited information required of a “ smaller reporting company .”

 

  In the event that the Company registers the common stock under the Exchange Act as it intends to do, the Jobs Act will also exempt the Company from the following additional compensation-related disclosure provisions that were imposed on U.S. public companies pursuant to the Dodd-Frank Act: (i) the advisory vote on executive compensation required by Section 14A(a) of the Exchange Act; (ii) the requirements of Section 14A(b) of the Exchange Act relating to shareholder advisory votes on “golden parachute” compensation; (iii) the requirements of Section 14(i) of the Exchange Act as to disclosure relating to the relationship between executive compensation and our financial performance; and (iv) the requirement of Section 953(b)(1)of the Dodd-Frank Act, which requires disclosure as to the relationship between the compensation of the Company’s chief executive officer and median employee pay.

 

Since the Company is not required, among other things, to file reports under Section 13 of the Exchange Act or to comply with the proxy requirements of Section 14 of the Exchange Act until such registration occurs or to comply with certain provisions of Sarbanes-Oxley and the Dodd-Frank Act and certain provisions and reporting requirements of or under the Securities Act and the Exchange Act or to comply with new or revised financial accounting standards as long as the Company is an EGC, and the Company’s officers, directors and 10% shareholders are not required to file reports under Section 16(a) of the Exchange Act until such registration occurs, the Jobs Act has had the effect of reducing the amount of information that the Company and its officers, directors and 10% shareholders are required to provide for the foreseeable future.

 

As a result of such reduced disclosure, the price for the Common Stock may be adversely affected.

 

  8  
 

 

The costs of being a public company could result in us being unable to continue as a going concern.

 

As a public company, we will have to comply with numerous financial reporting and legal requirements, including those pertaining to audits and internal control.  The costs of this compliance could be significant.  If our revenues do not increase and/or we cannot satisfy many of these costs through the issuance of our shares, we may be unable to satisfy these costs in the normal course of business which would result in our being unable to continue as a going concern.

 

Our Articles of Incorporation and By Laws provide for indemnification of officers and directors at our expense and limit their liability that may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers and/or directors.

 

Our Articles of Incorporation and Bylaws provide for the indemnification of our officers and directors.  We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933 (the “ Securities Act ”) and is, therefore, unenforceable.

 

The offering price of the shares has been arbitrarily determined by the Company.

 

The offering price of the shares has been arbitrarily determined by the Company and bears no relationship to the Company’s assets, book value, potential earnings or any other recognized criterion of value.

  

Currently, there is no public market for our securities, and we cannot assure you that any public market will ever develop and it is likely to be subject to significant price fluctuations.

 

Currently, there is no public market for our common stock and our common stock may never be traded on any exchange, or, if traded, a public market may not materialize.  Even if we are successful in developing a public market, there may not be enough liquidity in such market to enable shareholders to sell their stock.

 

Our common stock is unlikely to be followed by any market analysts, and there may be few or no institutions acting as market makers for the common stock.  Either of these factors could adversely affect the liquidity and trading price of our common stock.  Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly.  Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception of the Company, and general economic and market conditions.  No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock.  

  

  9  
 

 

If a trading market should develop for our common stock, it is likely that it will initially be deemed to be a “penny stock.” Therefore, trading of our common stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a shareholder’s ability to buy and sell our common stock.

 

In addition to the “ penny stock ” rules promulgated by the SEC, the Financial Industry Regulatory Authority (“ FINRA ”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that 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, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.  FINRA’s 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 stock.

 

The market for penny stocks has experienced numerous frauds and abuses that could adversely impact investors in our stock.

 

Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse.  Such patterns include:

 

  · Control of the market for the security by one or a few broker-dealers that are often related to a promoter or issuer;

 

  · Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

 

  · “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by sales persons;

 

  · Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

 

  · Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

Any trading market that may develop for our common stock may be restricted by virtue of state securities “Blue Sky” laws that prohibit trading absent compliance with individual state laws.  These restrictions may make it difficult or impossible to sell shares in those states.

 

There is currently no established public market for our common stock, and there can be no assurance that any established public market will develop in the foreseeable future.  Transfer of our common stock may also be restricted under the securities laws and regulations promulgated by various states and foreign jurisdictions, commonly referred to as “ blue sky ” laws.  Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions.  Because the securities being registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares, 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 blue sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities.  These restrictions prohibit the secondary trading of our common stock.  We currently do not intend to and may not be able to qualify securities for resale in a number of states that do not offer manual exemptions and require shares to be qualified before they can be resold by our shareholders.  Accordingly, investors should consider the secondary market for our securities to be a limited one.  

 

Our board of directors has the authority, without shareholder approval, to issue preferred stock with terms that may not be beneficial to common shareholders and with the ability to affect adversely shareholder voting power and perpetuate their control over us.

 

Our Amended and Restated Articles of Incorporation allows us to issue shares of preferred stock without any vote or further action by our shareholders.  Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock.  As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

 

The ability of our executive officers and directors, who are our principal shareholders, to control our business may limit or eliminate minority shareholders’ ability to influence corporate affairs.

 

Our executive officers and directors, who are our principal shareholders, own and assuming the sale of the shares registered by them hereunder as selling shareholders, will continue to own a majority of our issued and outstanding common stock. Accordingly, they will be able to effectively control the election of directors, as well as all other matters requiring shareholder approval.  The interests of our principal shareholders may differ from the interests of other shareholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of other directors and other business decisions.  The minority shareholders have no way of overriding decisions made by our principal shareholders.  This level of control may also have an adverse impact on the market value of our shares because our principal shareholders may institute or undertake transactions, policies or programs that result in losses may not take any steps to increase our visibility in the financial community and / or may sell sufficient numbers of shares to significantly decrease our price per share.

 

  10  
 

 

We do not expect to pay cash dividends in the foreseeable future.

 

We have never paid cash dividends on our common stock.  We do not expect to pay cash dividends on our common stock at any time in the foreseeable future.  The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider.  Since we do not anticipate paying cash dividends on our common stock, return on your investment, if any, will depend solely on an increase, if any, in the market value of our common stock.

 

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protection against interested director transactions, conflicts of interest and similar matters.

 

Sarbanes-Oxley, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange/NYSE/AMEX and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance.  These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the Nasdaq Stock Market.  Because we are not presently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with voluntary compliance, we have not yet adopted these measures.

 

We do not currently have independent audit or compensation committees.  As a result, directors have the ability, among other things, to determine their own level of compensation.  Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our shareholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations as a result thereof.

 

We intend to comply with all corporate governance measures relating to director independence as and when required.  However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley enactment of Sarbanes-Oxley has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers.  The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.

 

USE OF PROCEEDS

 

We will not receive any proceeds from the sale of the common stock offered through this prospectus by the selling shareholders.  We have agreed to bear the expenses (other than any underwriting discounts or commissions or broker’s commissions) in connection with the registration of the common stock being offered hereby by the selling shareholders.  

 

  11  
 

 

 

DETERMINATION OF OFFERING PRICE

 

All shares being offered will be sold by selling shareholders without our involvement, consequently the actual price of the stock will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling shareholders.  The offering price will thus be determined by market factors and the independent decisions of the selling shareholders.

 

DILUTION

 

The common stock to be sold by the selling shareholders is common stock that is currently issued and outstanding.  Accordingly, there will be no dilution to our existing shareholders.

 

SELLING SHAREHOLDERS

 

This prospectus covers the resale from time to time by the selling shareholders identified in the table below of up to 5,309,152   shares of our common stock, which were issued in various transactions exempt from registration under the Securities Act.  We are registering the shares to permit the selling shareholders and any of their pledgees, donees, transferees, assignees and successors-in-interest to, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions when and as they deem appropriate in the manner described in “ Plan of Distribution .” As of the date of this prospectus there are 17,133,332 shares of our common stock issued and outstanding.

 

The following table sets forth, as of the date of this prospectus, the name of each selling shareholder, the number and percentage of shares of our common stock beneficially owned by each selling shareholder prior to the offering for resale of the shares under this prospectus, the number of shares of our common stock beneficially owned by each selling shareholder that may be offered from time to time under this prospectus, and the number and percentage of shares of our common stock beneficially owned by the selling shareholder after the offering of the shares (assuming all of the offered shares are sold by the selling shareholder.

 

There are no agreements between the Company and any selling shareholder pursuant to which the shares subject to this registration statement were issued.  Other than James Pande, a founder and director, David Hopkins, a founder, officer and director and Michael Fabiano, a founder, none of the selling shareholders ever been an officer or director of the Company and other than rendering services in the ordinary course of business, has had a material relationship with us at any time within the past three years.

 

Beneficial ownership is determined in accordance with the rules of the SEC, and includes any shares of common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within sixty (60) days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement.

 

  12  
 

 

Name of Selling Shareholder  

Total Shares

Owned by

Selling

Shareholder

   

Total Shares

to be Registered

Pursuant to this

Offering

   

Percentage of

Common Stock

Before Offering

   

Number of 

Shares

Owned by 

Selling

Shareholder After

Offering

 
                         
James Pande     6,366,666       1,591,696       37.2%       4,774,970  
                                 
David Hopkins     5,663,510       1,415,878       33.1%       4,247,632  
                                 
Michael Fabiano     1,000,000       250,000       5.8%       750,000  
                                 
Zach Hollman (1)     500,000       250,000       2.9%       250,000  
                                 
Dale S. Bergman (2)     400,000       200,000       2.3%       200,000  
                                 
John W. Koelle     400,000       200,000       2.3%       200,000  
                                 
Charlie Bird (3)     290,000       145,000       1.7%       145,000  
                                 
Dominic Joseph Lewis (4)     500,000       250,000       2.9%       250,000  
                                 
Douglas B. Porter (5)     250,000       125,000       1.4%       125,000  
                                 
Trenton Pande     200,000       100,000       1.2%       100,000  
                                 
Timothy and Kyle Crotty     200,000       100,000       1.2%       100,000  
                                 
David Petoskey     200,000       100,000       1.2%       100,000  
                                 
Julian Cameron (6)     200,000       100,000       1.2%       100,000  
                                 
Viviana Hammons     150,000       75,000                     *       75,000  
                                 
Robert Brenner     150,000       75,000                    *       75,000  
                                 
Jay Carr     150,000       75,000                     *       75,000  
                                 
Preston J. Fields     100,000       50,000                      *       50,000  
                                 
Brian K. Linstrand     100,000       50,000                      *       50,000  
                                 
Kevin Henderson     100,000       50,000                      *       50,000  
                                 
Joel Mayersohn     50,000       25,000       *       25,000  
                                 
Mark Purvis     10,000       5,000       *       5,000  
                                 
Blaine Heckaman (7)     153,156       76,578       *       76,578   

 

 

*Less than 1%.

(1) Represents shares held of record by NE1 Design Studios, LLC, of which firm Mr. Holman is a managing member.
(2) Represents shares held of record by Almeria Group Holdings, LLC, an affiliate of the Company’s legal counsel, of which firm Mr. Bergman is a managing member.
(3) Represents shares held of record by The Better Image Company, of which firm Mr. Bird is President.
(4) Includes 50,000 shares purchased by Dr. Lewis for the benefit of his daughter.
(5) Includes 200,000 shares held of record by William B. Porter Group, of which firm Mr. Porter is President.
(6) Represents shares held of record by the JA Cameron Revocable Trust, of which trust Mr. Cameron is Trustee.
(7) Represents shares held of record by Kaufman, Rossin & Company, P.A., of which firm Mr. Heckaman is Managing Principal.

  

PLAN OF DISTRIBUTION

 

The selling shareholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. As there is currently no trading market for our shares, the selling shareholders will offer their shares at $0.25 per share until the Company’s shares are quoted on the OTCQX or the OTCQB operated by the OTC Markets Group.  Assuming we secure this qualification, thereafter the shares may be sold these at fixed or negotiated prices.  The selling shareholders may use any one or more of the following methods when selling shares:

 

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

 

  · block trades in which the broker-dealer will attempt to sell the shares 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;

 

  13  
 

 

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

 

  · privately negotiated transactions;

 

  · to cover short sales made after the date that this registration statement is declared effective by the SEC;

 

  · broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share;

 

  · through the distribution of common stock by any selling shareholder to its partners, members or shareholders;

 

  · any other method permitted pursuant to applicable law; and

 

  · a combination of any such methods of sale.

 

Broker-dealers engaged by the selling shareholders may arrange for broker-dealers to participate in sales.  Broker-dealers may receive commissions or discounts the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.  The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

 

The selling shareholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of common stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.

 

Upon a selling shareholder’s notification to us that any material arrangement has been entered into with a broker-dealer for the sale of such shareholder’s common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act disclosing (i) the name of each such selling shareholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such shares of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon our being notified in writing by a selling shareholder that a donee or pledgee intends to sell more than 500 shares of common stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

 

The selling shareholders also may transfer the shares of common stock in other circumstances, in which case the donees, assignees, transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed any necessary supplements to this prospectus under Rule 424(b), or other applicable provisions of the Securities Act supplementing or amending the list of selling shareholders to include such donee, assignee, transferee, pledgee, or other successor-in-interest as a selling shareholder under this prospectus.

 

In the event that the selling shareholders are deemed to be “underwriters,” any broker-dealers or agents that are involved in selling the shares will be deemed to be “underwriters” within the meaning of the Securities Act, in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.  Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of the shares of common stock will be paid by the selling shareholder and/or the purchasers.  Each selling shareholder has represented and warranted to us that it acquired the securities subject to this registration statement for his/her own account for investment and not for the benefit of any other person and not with a view to distribute or sell in violation of the Securities Act or any state securities laws or rules and regulations promulgated thereunder.

 

  14  
 

 

If a selling shareholder uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities Act.  The selling shareholders will be responsible to comply with the applicable provisions of the Securities Act and the Exchange Act and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such selling shareholders in connection with resales of their respective shares under this registration statement.

 

We are required to pay all fees and expenses incident to the registration of the shares, but we will not receive any proceeds from the sale of the common stock.

 

  15  
 

 

PROPOSED BUSINESS

 

Overview

 

Health-Right is a natural biotech company that combines science and nutrition to develop branded ingredients, formulations and products that seek to provide a better quality of life for consumers who primarily suffer from stress-induced viruses and diseases. These formulations and products are developed naturally, by utilizing and scientifically combining various ingredients to help positively influence the interrelationship between stress and the immune system. The Company is planning to explore the application of its formulation platform to include CBD derived from industrial hemp. CBD, which is a cannabis-derived compound that may offer some of the benefits of medical marijuana without the side effects (i.e. the feeling of being “high” that comes from other cannabis compounds such as THC). The Company’s efforts in this regard will be dependent upon the FDA clarifying its position with respect to the classification of hemp-derived CBD as a dietary supplement and an ingredient deemed to be GRAS, which is not so classified (the FDA has not as yet differentiated hemp-derived CBD from cannabis-derived CBD).

 

The Company believes the formulation platform it has developed in order to help address the negative nutritional inter-relationship between stress, a weakened immune system and certain conditions and diseases is now in place. At the end of 2014, Health-Right completed initial test marketing of H-Plex Defense, its first product, an all-natural dietary supplement whose formulation seeks to address less than optimal nutrition and nutritional deficiencies to aid persons afflicted with HSV-1. Based on customer feedback, including a reorder rate exceeding industry norms, HRD believes that it has developed an alternative approach to help counteract and improve the causes/triggers of HSV-1, a virus that affects over an estimated 100 million people in the U.S. alone with symptoms including tingling, itching, blisters, sores and rashes with an estimated $5 billion marketplace for treatments by 2017, according to Global Industry Analysts, Inc.

 

Notwithstanding the foregoing, the Company has not conducted formal clinical trials of H-Plex Defense. Subject to receipt of necessary funding, the Company intends to do so, utilizing the services of MRA, one of the largest, multi-special clinical research centers in the United States. Management has had multiple meetings and discussion with MRA and has negotiated Protocol Development Agreement for clinical trials, the finalization and execution of which is subject to receipt of necessary funding.

 

We believe that Health-Right is uniquely positioned because its approach of not just responding to stress induced conditions and diseases, but proactively addressing stress-induced problems before they wreak havoc on multiple body systems. The Company’s research, formulation and nutritional theories offer wide ranging potential because we believe that our formulation platform has the potential to be successfully applied In the prescription nutritional/medical foods, OTC monograph drug and all-natural dietary supplement/nutraceutical arenas. HRD anticipates that it will be able to leverage the results of its planned clinical trials in order to market ingredients, branded ingredients, private label ingredients and finished products. We also believe that we will be positioned to license our formulations to strategic partners in order to expedite and achieve product commercialization and cross-promotion.

 

In addition to its initial product, the Company plans to focus its efforts on areas where it believes that HRD can commercialize and market products on an expedited basis. We believe that are other potential applications for our formulations that we have in the pipeline, including all-natural products designed to relieve symptoms associated with:

 

· compromised immune systems and related muscle and joint pain;
· the common cold and flu viruses; and
· constipation resulting from prescription medications.

 

By adapting its formulation platform to applications such as these, the Company believes that it will be able to generate revenues in the short term in the following markets:

 

  ·

the OTC monograph drug industry;

· the prescription nutritional marketplace; and
  · the natural products space.

 

The Company intends to use its contacts in the healthcare, medical foods and natural products industries to market and sell its proposed products either directly or through strategic partners and licensees.

 

To date, the Company has generated limited revenues and has operated with limited capital. The Company will require significant capital to implement its business plan.  There can be no assurance that the Company can raise the necessary funds, on favorable terms or otherwise.  Failure to obtain sufficient capital will substantially harm the Company’s prospects.

 

  16  
 

 

The Problem – Stress Contributing to Disease

 

Introduction

 

Stress may come to be seen as the primary contributing cause of most disease in the future. Today’s research continues to link stress to more and more symptoms and diseases, both acute and chronic.

 

So what exactly is stress? Stress is our reaction to our external environment as well as our inner thoughts and feelings. Simply put, stress is our body’s natural response to dangers, the “fight or flight” mechanisms—the body’s preparedness to do battle with or flee from danger. This response involves a complex biochemical-hormonal process that can offer different results for each individual.

 

Stress can generate a number of symptoms and diseases caused by changes in the immune system function, hormonal response and biochemical reactions. When this happens, it then can influence body functions in our digestive tract as well as our cardiovascular, neurological or musculoskeletal systems.

 

Types of Stress

 

Physical Stress— exercise, hard labor or even giving birth.

Mental Stress— high responsibility, long hours or fatigue, anxiety and worrying

Emotional Stress— anger, fear, sadness, frustration, betrayal or bereavement

Traumatic Stress— infection, injury, surgery or burns and extreme temperatures

Nutritional Stress— vitamin and mineral deficiencies, protein or fat excesses or deficiencies, even food allergies

Chemical Stress— environmental pollution such as exposure to pesticides and cleaning solvents, and the personal use of chemicals such as drugs, alcohol, caffeine and nicotine

Psycho-spiritual Stress— financial or career pressures, relationships, life goals, spiritual alignment and the general state of happiness.

 

The Compromised Immune System

 

Weaker immune systems can leave people more vulnerable to stress-related conditions, infections and diseases. Some common causes that may weaken the immune system are:

 

Causes of Physical and Emotional Stress
Pain and inflammation Lack of sleep
Viral infections Internal toxins
Poor dietary choices Chemicals
Worrying Excessive alcohol consumption
Sunburn Surgery
Allergic Reactions Fatigue

 

Our immune system becomes weaker when a free radical is attacking our body. This free radical is an atom or group of atoms that contains at least one unpaired electron. Free radicals have the ability to join easily with other compounds, which can create dramatic, negative changes in the body. Each free radical may only exist for a tiny fraction of a second, but the damage it leaves behind can be irreversible; particularly damage to heart muscle cells, nerve cells and certain immune system sensor cells. The formation of a large number of free radicals stimulates the formation of more free radicals, leading to even greater cellular damage and immune system impairment.

 

(GRAPHIC) (GRAPHIC)

 

People are routinely advised to “minimize negative stress” in an effort to improve their state of physical and emotional wellness. As most of us know, not all stress is negative. However, for the majority of people, the constant daily stress we endure damages our bodies and weakens immunity, thereby dramatically increasing our susceptibility to illness and disease. It is generally accepted in the medical community that stress contributes or exacerbates a wide spectrum of illnesses. Simply not getting enough quality, daily sleep can dramatically increase a person’s stress.

 

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Almost all body functions and organs react to stress. During stressful events, which can be mental/emotional and/or physical, the pituitary gland increases its production of adrenocorticotropic hormone (ACTH), which in turn stimulates the release of the hormones Cortisone and Cortisol. These two hormones have the effect of inhibiting the functioning of disease-fighting white blood cells and suppressing the immune response. A stressful event actually triggers a state of physical changes in the body, and this is called the “fight or flight” response, which is primarily designed to prepare a person to face or flee from immediate/eminent danger. The increased production of adrenal hormones like Cortisol is what is believed to be responsible for most of the symptoms associated with stress. This “fight or flight” response causes the body to step up its metabolism of proteins, fats and carbohydrates to quickly produce energy for the body. The response also causes the body to excrete amino acids, potassium and phosphorus, deplete magnesium stored in the muscle tissue and decreases calcium. Stress also promotes the formation of free radicals that can become oxidized and damage body tissues, especially cell membranes.

 

During a stress response, our bodies begin excreting potassium, magnesium and calcium. Although these essential minerals are essential to good health and wellness, poor dietary and lifestyle choices rob our bodies of these vital minerals. In terms of micro-nutrients, minerals can be even more important than vitamins. Potassium and magnesium are some of the more helpful minerals for rebalancing the electrical properties of our cells, in addition to helping balance calcium.

 

The Health-Right Solution

 

Introduction

 

Health-Right believes that through solid research, it has developed a formulation platform to address the less than optimal nutrition and the nutritional deficiencies resulting from a stress-induced state. Pending clinical research, the Company believes that there are a number of applications for our products that can be rolled out in three different areas:

 

·

the OTC monograph drug business;

· the niche prescription nutritionals/medical foods arena; and
· the natural markets for consumers who insist on natural alternatives.

 

OTC Monograph Drug Business

 

HRD has identified two monographs, which, subject to receipt of required funding, HRD believes should allow it to access the OTC monograph drug business mass marketplace in 2016 with oral and topical formulations of H-Plex Defense. Once funding is in place, Health-Right will complete any formulation adjustments and, if necessary, file a New Drug Application (“ NDA ”) with the FDA. As it is basing its products on monograph drugs for the OTC marketplace, the Company anticipates that the FDA approval process will be fairly rapid. Once approved, we believe that by utilizing existing relationships, we can gain access to the food and drug mass merchant distribution channel. If we are able to successfully market our initial product in this manner, we intend to apply its H-Plex Defense formulation platform to other monograph drugs in order to develop additional products for distribution in the OTC marketplace.

 

Prescription Nutritional/Medical Foods Market

 

As defined by the Orphan Drug Act (1988 Amendment), a prescription nutritional or a medical food is “a food which is formulated to be consumed or administered enterally (orally) under the supervision of a physician, and which is intended for specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation.”

 

Prescription nutritionals or medical foods must be shown by medical evaluation to meet the distinctive nutritional needs of a specific, diseased patient population being targeted, prior to marketing. In contrast, dietary supplements are intended for normal, healthy adults and require no pre-market efficacy tests. Furthermore, as indicated by their nomenclature, prescription nutritionals or medical foods require physician supervision and a prescription. Simply put, prescription nutritionals or medical foods are medical products for a specific nutritional purpose while dietary supplements are a consumer product to supplement the diet and maintain good health and regular function.

 

Subject to receipt of necessary funding, HRD intends to conduct clinical trials to demonstrate the benefits of its formulation platform. HRD believes that its formulation platform could be applicable to the development of various products designed specifically for the dietary management of disease. HRD has identified at least three potential applications for its formulation platform in the prescription nutritional/medical foods marketplace.

 

We would anticipate that our prescription nutritional products, when and if successfully developed, would be marketed through one or more strategic partners with experience and relationships in this marketplace, whom we intend to ally with. 

 

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Natural Market

 

Today’s life is faster than ever, filled with constant change, uncertainty and stress. It often results in a sleep-deprived, stressed and depressed population. Consumers spend literally billions of dollars annually to fight fatigue and stress through mood enhancers, sleep aids, energy drinks, coffee, etc. However, these “solutions” are not combating the problem, they’re compounding the problem. A large and rapidly growing number of consumers are desperately seeking healthier, alternative solutions to neutralize the negative impact their fast-paced and stressful lives take on their bodies.

 

Consumers also have more reinforcement of their interest in dietary supplements. CRN’s (Council for Responsible Nutrition) 2007 Healthcare Professionals Impact Study found that “more than three-quarters of U.S. physicians (79%) and nurses (82%) recommend dietary supplements to their patients.”  

 

Pipeline/Products/Methodology

 

Viral Marketplace

 

The first product we formulated and test marketed is H-Plex Defense, an oral natural product designed to help manage triggers that cause recurrent cold sore outbreaks in persons afflicted with HSV-1. A complementary topical version is currently in the development stage.

 

Our market test took place from July 2013 through December 2014. We marketed H-Plex Defense nationwide online through a website. During the market trial, 1,215 distinct customers purchased the product; 369 (or 30%) of these customers reordered the product or subscribed to a monthly purchase program and 846 customers (or 70%) did not reorder. The Company believes that the 30% reorder rate exceeds industry norms.

 

Of the reorder customers:

 

· 78% reordered at least one time;
· 41% reordered for 4-6 months; and
· 30% ordered for 6 months or more.

 

During the market test, feedback from reordering customers demonstrated that the product not only improved the quality of life for sufferers of HSV-1 (the cold sore virus) but also demonstrated that it afforded relief to those also discovered it helped consumers with Herpes Simplex Virus 2 (“ HSV-2 ”). More than 3.7 billion people under the age of 50 worldwide (including over 300 million people in the United States),, or 67% of the population, are infected with HSV-1 according to an October 2015 study from the World Health Organization (“ WHO ”), WHO’s first global estimates of the HSV-1 infection.

 

The new estimates highlight, however, that HSV-1 is also an important cause of genital herpes. Some 140 million people aged 15-49 years are infected with genital HSV-1 infection, primarily in the Americas, Europe and Western Pacific. Fewer people in high-income countries are becoming infected with HSV-1 as children, likely due to better hygiene and living conditions, and are instead at risk of contracting it genitally through oral sex after they become sexually active.

 

WHO also estimated that 417 million people aged 15-49 years have HSV-2 infection, which causes genital herpes. Taken together, the estimates reveal that over half a billion people between the ages of 15-49 years have genital infection caused by either HSV-1 or HSV-2. Given the lack of a permanent and curative treatment for both HSV-1 and HSV-2, WHO and partners are working to accelerate development of vaccines and topical microbicides, which will have a crucial role in preventing these infections in the future.

 

The WHO study highlights the significant potential for the Company’s H-Plex Defense, HSV-1 product.

 

Joint Pain/Arthritis Marketplace

 

With the help of Dr. Dominic Lewis, a prominent orthopedic surgeon who is also a shareholder of the Company, HRD was able to utilize its formulation platform for an application designed to help stabilize the immune system while simultaneously addressing arthritis and/or joint pain. Individuals who suffer from constant joint pain and arthritis are under a lot of stress, which in turn can cause their immune system to be severely compromised. Dr. Lewis consulted with the Company on the components of the formulation intended to address the joint pain/arthritis marketplace, appropriate dosage amounts and other aspects of product development and formulation.

 

Scientific research is pointing more and more ever year indicating that stress is becoming a significant contributing factor to major illness. A great majority of physicians believe that the reduction of stress leads to a healthier, stronger, more stable immune system. It sounds elementary but our Company knows of no pharmaceutical or drug companies addressing these serious issues with prescription medication.

 

HRD’s formulation can be adjusted in order to be marketable in the natural, OTC and prescription nutritional marketplaces. Management is not aware of any other product on the market that is taking this approach or has developed a research platform to address more than just consumer pain.

 

Much like the viral marketplace, HRD is developing a complimentary topical for specific pain management to provide direct relief to arthritis and joint sufferers. This topical could be used as a combination treatment in the prescription nutritional markets, as well as the OTC markets.

 

Gastrointestinal Marketplace

 

Using our formulation platform, the Company has developed and did some anecdotal testing of an application for people with digestive tract irregularities resulting from stress and prescription medication—they seem to go hand in hand. According to various sources, such as www.WEBMD.com , people who are under tremendous stress or take certain prescription medication, which can cause severe constipation problems. The anecdotal testing consisted of use of the product by approximately ten “ friends and family ” individuals who were taking prescription medication for post-surgery pain or anxiety. The anecdotal testing was not a clinical trial and the results thereof are in no manner a substitute for a formal clinical trial.

 

Stress is a known factor in constipation and many prescription medication side effects cause constipation. The stress is only increased when a person cannot have healthy bowel movements. We believe that by helping patients regain regularity, their stress levels will be reduced.

 

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Management believes this application can also be modified to help patients address post-surgery prescription constipation.

 

CBD, Stress/Anxiety and Immune System Health

 

The Company has commenced preliminary research to explore the development of a product portfolio that utilizes CBD from industrial hemp in powder form, in combination with certain other natural ingredients, to help combat the negative effects that stress and anxiety have on the immune system. This innovation could possibly play a part in changing the landscape regarding natural products assisting with quality of life issues for consumers who solely relied on prescription medication. We believe that the focus of this CBD-related product platform will involve improving anxiety and the interrelationship between stress, a compromised immune system and viruses.

 

What is the Nutritional Rationale Behind our Methodology?

 

HRD developed what it believes to be a synergistic and targeted formulation platform for stress-induced viruses and diseases that addresses multiple body systems in an effort to help neutralize certain negative effects of symptomatic stress. Based on a compendium of research we assembled with respect to the key components of H-Plex Defense, we believe that our formulation provides positive immune system benefits by supporting the elimination of harmful free radicals, boosting immune system defenses through the use of specific natural herbs which are shown to have anti-viral effects, providing a stress management component to help minimize the negative effects of Cortisol, and offering supplement minerals and Vitamin D to aid in the restoration of depleted minerals and maintenance of calcium balance.

 

Research and Development

 

We have developed our formulation platform and H-Plex Defense, our initial product, in conjunction with various consultants and third party research and development firms experienced in providing those services. We anticipate continuing to do so as well as performing any needed clinical trials through such third parties for the foreseeable future.

 

While there is no pre-approval mechanism at the FDA for medical food products, all such products must have validation of their effectiveness prior to being marketed. Because all medical food products are required to contain ingredients that are GRAS, there are no safety testing requirements. We plan to validate the efficacy of our products by clinical testing, including double blind, randomized clinical trials.

 

Manufacturing and Sources of Supply

 

We intend to outsource the manufacturing of our planned products to third parties whose facilities are cGMP compliant. While we have no formal contractual relationship with any such firm, we believe that there are numerous cGMP compliant third party manufacturers who can be secured on a short or long term basis at commercially reasonable cost. We utilized one such manufacturer located in Miami, Florida, for product in connection with our test marketing of H-Plex Defense. We expect to provide each contract manufacturer we use with a formula and manufacturing specifications. The manufacturer will then source and purchase raw ingredients and manufactures the products to our specifications. We believe that the raw materials used in our formulations are readily available from various sources. 

 

Sales and Marketing

 

We intend to distribute our products through a network of independent distributors, who market to the various industry segments who we intend to target, such as mass merchants, healthcare networks, chain drug stores and similar facilities. We do not as yet have agreements with any distributor and there can be no assurance that we will be able to enter into any such agreement on commercially reasonable terms. Subject to the availability of capital, we may supplement such efforts with an internal sales force. We also intend to market our products on line. We plan to support these sales efforts through marketing campaigns in both traditional broadcast and online media, including radio and television commercials, infomercials, print advertisements and social media and other online marketing campaigns. Our ability to undertake and the extent of marketing of our products we can undertake will be dependent in large part on our capital resources.

 

Government Regulation

 

Introduction

 

Although our planned products will not be subject to the lengthy and costly FDA application processes for new drug approvals, we will be subject to some degree of regulation depending on the intended applications and markets our planned products. There can be no assurance that future regulatory changes will be implemented and if implemented that we will be able to comply with such future regulations, at commercially reasonable cost, if at all.

 

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Dietary Supplements

 

Congress defined the term " dietary supplement " in the Dietary Supplement Health and Education Act (“ DSHEA ”) of 1994. A dietary supplement is a product taken by mouth that contains a "dietary ingredient" intended to supplement the diet. The " dietary ingredients " in these products may include: vitamins, minerals, herbs or other botanicals, amino acids, and substances such as enzymes, organ tissues, glandulars, and metabolites. Dietary supplements can also be extracts or concentrates, and may be found in many forms such as tablets, capsules, soft gels, gel caps, liquids, or powders. They can also be in other forms, such as a bar, but if they are, information on their label must not represent the product as a conventional food or a sole item of a meal or diet. Whatever their form may be, DSHEA places dietary supplements in a special category under the general umbrella of " foods ," not drugs, and requires that every supplement be labeled a dietary supplement.

 

The DSHEA, which amended the Federal Food, Drug, and Cosmetic Act, created a new regulatory framework for the safety and labeling of dietary supplements. Under DSHEA, a firm is responsible for determining that the dietary supplements it manufactures or distributes are safe and that any representations or claims made about them are substantiated by adequate evidence to show that they are not false or misleading. This means that dietary supplements do not need approval from FDA before they are marketed. Except in the case of a new dietary ingredient, where pre-market review for safety data and other information is required by law, a firm does not have to provide FDA with the evidence it relies on to substantiate safety or effectiveness before or after it markets its products. We believe that H-Plex Defense meets the definition of a dietary supplement under DSHEA as its formulation consists of existing (and no new dietary ingredients).

 

H-Plex Defense will be required to comply with FDA labelling regulations for dietary supplements. FDA regulations require that certain information appear on dietary supplement labels. Information that must be on a dietary supplement label includes: a descriptive name of the product stating that it is a " supplement; " the name and place of business of the manufacturer, packer, or distributor; a complete list of ingredients; and the net contents of the product. In addition, each dietary supplement (except for some small volume products or those produced by eligible small businesses) must have nutrition labeling in the form of a " Supplement Facts " panel. This label must identify each dietary ingredient contained in the product. Failure to comply with these regulations could result in an adverse impact on the Company’s business.

 

Prescription Nutritionals/Medical Foods

 

Prescription nutritionals or medical foods are deemed to be foods by the FDA and not drugs and, therefore, are not subject to any regulatory requirements that specifically apply to drugs.  For example, any of our planned prescription nutritional/medical foods products will not have to undergo premarket review or approval by the FDA. Prescription nutritionals or medical foods are exempt from the labeling requirements for health claims and nutrient content claims under the Nutrition Labeling and Education Act of 1990. Rather, their labeling must comply with all food labeling requirements except for those specific requirements from which medical foods are exempt.

 

OTC Monograph Drugs

 

OTC drugs are defined as drugs that are safe and effective for use by the general public without seeking treatment by a health professional. Because there are over 300,000 marketed OTC drug products, the FDA reviews the active ingredients and the labeling of over 80 therapeutic classes of drugs, for example analgesics or antacids, instead of individual drug products. For each category, an OTC drug monograph is developed and published in the Federal Register . OTC drug monographs are a kind of " recipe book " covering acceptable ingredients (those that are deemed to be GRAS), doses, formulations, and labeling. Once a final monograph is implemented, companies can make and market an OTC product without the need for FDA pre-approval. These monographs define the safety, effectiveness, and labeling of all marketing OTC active ingredients. New products that conform to a final monograph may be marketed without further FDA review. Those that do not conform must be reviewed by the New Drug Application (NDA) process. A drug company may also petition to change a final monograph to include additional ingredients or to modify labeling. As we intend to initially market OTC drugs that conform to existing monographs and use ingredients which are deemed to be GRAS by the FDA, we do not anticipate having to go through a lengthy approval process, if at all.

 

Clinical Trials

 

While we do not anticipate requiring clinical trials of our planned products in order to bring them to market, we do plan to conduct such trials to support our product efficacy claims.

 

cGMP Compliance

 

All of our products will need to be manufactured in facilities that comply with cGMP. The contract manufacturer we used for our initial test market, as well as those we are exploring in connection with commercial production of our planned products have facilities which are cGMP compliant.

 

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Insurance Reimbursement

 

To the extent that we formulate and commercialize products that may be eligible for insurance reimbursement, such as products for the prescription nutritional marketplace, we will be subject to various requirements in order to obtain reimbursement from private insurance or public insurance, such as Medicare and Medicaid. There is no certainty that we will be able to secure and maintain these requirements for insurance reimbursement. If we do not do so, we may not be able to successfully market these products and generate revenues therefrom. Even if we do so, revenues generated from these products will be subject to potential delays in receiving reimbursement payments from insurers.

 

Intellectual Property

 

Our business plan is predicated on part on our intellectual property rights, including our proprietary formulation platform and individual product formulations. Accordingly, protecting our intellectual property rights is critical to our continued success and our ability to maintain our competitive position. We currently protect our proprietary rights through a combination of trade secret and copyright law, confidentiality agreements and technical measures. We generally enter into non-disclosure agreements with our consultants and limit access to our trade secrets. To the extent our future development efforts result in patentable inventions or discoveries, we may seek patent and/or trademark protection. We cannot assure you that the steps we have taken will prevent misappropriation of our proprietary property. Misappropriation of our intellectual property would have an adverse effect on our competitive position. In addition, we may have to engage in litigation in the future to enforce or protect our intellectual property rights or to defend against claims of invalidity, and we may incur substantial costs and the diversion of management’s time and attention as a result.

 

Employees

 

As of the date of this prospectus the Company’s sole employee is its President and the Company relies on independent third party consultants in large part to perform additional services as needed. As we implement our business plan and subject to the availability of capital, additional employees will be hired in the future as our business expands.

 

Properties

 

We do not own any real property.  We maintain an office mailing address at 18829 NE 29 th Avenue, Suite 700, Aventura, Florida 33180 at nominal cost and pay for the utilization of office and conference space at such location on an as needed basis.  The Company anticipates renting commercial office and warehouse space in the South Florida area once it has raised sufficient capital. We believe that there is a significant amount of suitable space available at commercially reasonable cost.

 

Legal Proceedings

 

Currently there are no legal proceedings pending or threatened against us.  However, 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 any such matter may harm our business.

 

MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

 

There is presently no public market for our common stock and there has never been a market for our common stock. We anticipate applying for quotation of our common stock on the OTCQX or the OTCQB operated by OTC Markets Group following the effectiveness of the registration statement of which this prospectus forms a part. However, we cannot assure you that our shares will be quoted on any tier of OTC Markets Group or, if quoted, that a public market will develop and if developed, be liquid and be sustained.

 

A market maker sponsoring a company’s securities is required to obtain a quotation of the securities on any of the public trading markets, including the OTCQX or OTCQB. If we are unable to obtain a market maker for our common stock, we will be unable to develop a trading market for our common stock. We may be unable to locate a market maker that will agree to sponsor our securities. Even if we do locate a market maker, there is no assurance that our securities will be able to meet the requirements for a quotation or that the securities will be accepted for quotation by OTC Markets Group on the OTCQX or OTCQB.

 

We intend to apply for quotation of the securities on the OTCQX or OTCQB operated by OTC Markets Group, but there can be no assurance that we will be able to obtain either listing. OTCQX and OTCQB securities are not quoted and traded on the floor of an organized national or regional stock exchange. Instead, securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTCQX and OTCQB stocks are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.

 

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Holders of our Common Stock

 

As of the date of this prospectus, we had 17,133,332 shares of common stock issued and outstanding and 24 shareholders of record of our common stock.

 

Transfer Agent

 

Following effectiveness of this registration statement of which this prospectus forms a part, we intend to appoint VStock Transfer, LLC, Woodmere, New York, as transfer agent for our common stock.

 

Dividend Policy

 

The payment by us of dividends, if any, in the future rests within the discretion of our Board of Directors and will depend, among other things, upon our earnings, capital requirements and financial condition, as well as other relevant factors.  We have not paid any dividends since our inception and we do not intend to pay any cash dividends in the foreseeable future, but intend to retain all earnings, if any, for use in our business.

 

Rule 144 Shares

 

Rule 144 under the Securities Act provides that a person who is not an affiliate and has held restricted securities for a prescribed period of at least six months (if the issuer is a reporting company) or 12 months (if the issuer is a non-reporting company, as is the case herein), may, under certain conditions, sell all or any of his shares without volume limitation.  Affiliates, however, may not sell shares in excess of 1% of the Company’s outstanding common stock in any three month period.  There is no limit on the amount of restricted securities that may be sold by a non-affiliate (i.e., a shareholder who has not been an officer, director or control person for the three months prior to sale) after the restricted securities have been held by the owner for the aforementioned prescribed period of time. All of our remaining 11,824,180 shares of common stock not covered by this prospectus will be eligible for public sale pursuant to Rule 144, commencing 90 days after the date the registration statement of which this prospectus forms a part in declared effective by the SEC.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations

 

Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014

 

We had revenues of $13,581 for the six months ended June 30, 2015, as compared to revenues of $26,199 for the six months ended June 30, 2014, reflecting the completion of our trial-marketing of our initial planned product, H-Plex Defense in the 2015 period. Cost of sales similarly declined to $2,664 in the 2015 period from $4,380 in the 2014 period, resulting in a corresponding decline in gross profit to $10,917 in the 2015 period from $21,819 in the 2014 period.

 

General and administrative costs decreased to $36,355 in the 2015 period from $74,488 for the six months ended June 30, 2014, while interest expense increased to $2,385 for the six months ended June 30, 2015, from $1,002 for the six months ended June 30, 2014, reflecting the increased principal balance of shareholder loans.

 

Net losses for six months ended June 30, 2015 and June 30, 2014 were $27,823 and $53,671, respectively.

 

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

 

We had revenues of $59,811 for the year ended December 31, 2014, as compared to revenues of $12,724 for the year ended December 31, 2015, reflecting the increased trial-marketing of H-Plex Defense in 2014. Cost of sales declined to $10,276 in 2014 from $11,424 in 2013, offset by write-offs of obsolete inventory of $5,840 and $10,830 in 2014 and 2013, respectively, which resulted in gross profit of $49,535 in 2014, as compared to $1,300 in 2013.

 

General and administrative costs were $236,314 in 2014, as compared to $339,331 in 2013, while interest expense increased to $4,800 in 2014 from $1,626 in 2013, reflecting the increased principal balance of shareholder loans.

 

Net losses for the years ended December 31, 2014 and December 31, 2013, were $191,579 and $339,677, respectively.

 

Liquidity and Capital Resources

 

As of June 30, 2015, total current assets were $5,413 as compared to $1,822 on December 31, 2014.   Total current liabilities as of June 30, 2015 were $231,547, as compared to $201,133 as of December 31, 2014.

For the six month period ended June 30 2015, we raised $7,500 through a shareholder loan, which was offset by repayment of a $4,678 shareholder loan.

 

Net cash used in operating activities was $2,683 in the first six months of 2015 compared to $22,959 for the same period in 2014.

 

Net cash provided by financing activities in the first six months of 2015 was $2,822 compared to $3,720 in the first six months of 2014.  

 

Our primary source of capital to develop and implement our business plan has been from private placements of our securities and shareholder loans.

 

The Company will require additional financing to complete development to commercially launch and market its planned products.  Our independent auditors report for the year ended December 31, 2010 includes an explanatory paragraph strategy that our lack of revenues and working capital raise substantial doubt about our ability to continue a growing concern.  While we are seeking to raise additional financing, either through government grants and loans or additional securities or offerings, there can be no assurance that additional financing will be available to the Company when needed, on favorable terms or otherwise.  Moreover, any such additional financing may dilute the interests of existing shareholders.  The absence of additional financing, when needed, could cause the Company to delay implementation of its business plan in whole or in part, curtail its business activities and seriously harm the Company and its prospects.

 

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The Company will require additional financing to complete development of, commercially launch and market its planned products. Our independent auditors report for the year ended December 31, 2014 includes an explanatory paragraph stating that our lack of revenues and working capital raise substantial doubt about our ability to continue as a growing concern.  While we are seeking to raise additional financing through additional securities offerings, there can be no assurance that additional financing will be available to the Company when needed, on favorable terms or otherwise.  Moreover, any such additional financing may dilute the interests of purchasers of the shares offered hereby.  The absence of additional financing, when needed, could cause the Company to delay implementation of its business plan in whole or in part, curtail its business activities and seriously harm the Company and its prospects.

 

Critical Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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.  Significant estimates included deferred revenue, costs incurred related to deferred revenue, the useful lives of property and equipment, the useful lives of intangible assets and accounting for the business combination.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes.  Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws.  Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year.  In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies.  If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required.  Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.

 

ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.  For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

 

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MANAGEMENT

 

Directors and Executive Officers

 

Our directors and executive officers and their respective ages and titles are as follows:

 

Name   Age   Position(s) and Office(s) Held
David Hopkins   47   President and Director
James Pande   56   Director
         

Set forth below is a brief description of the background and business experience of our directors and executive officers.

 

David Hopkins founded Health-Right in 2011 and has served as President and a director since that time. From November 2009 until he founded the Company, Mr. Hopkins was a founder and managing member of Envirocare Solutions, LLC, a privately-held technology-driven manufacturer and wholesale distributor of products designed to deliver cold air micro-mist diffusion safely into the environment. In addition, since 2001, Mr. Hopkins has been a principal of Hopkins & Associates, a consulting firm providing turnaround and business development services to various private and public held companies engaged in a variety of industries, ranging from the production and distribution of soft drinks to biotechnology and environmental products. Mr. Hopkins holds a B.S. degree from Carroll University in Wisconsin.

 

James Pande has served as a director of the Company since its inception in 2011. Since 2010, he has served as Vice President of Marketing and Sales Aldora Aluminum and Glass Products, based in Miramar, Florida. Prior thereto, he owned Smith Mountain Impact Systems in Miami, Florida, which he built into a respected manufacturer of hurricane impact entrance doors. Mr. Pande holds a bachelor’s degree from the Cornell School of Hotel and Restaurant Management.

 

Following effectiveness of the registration statement of which this prospectus forms a part, we intend to seek to expand our board of directors to include additional members, including “i ndependent ” directors.

 

Terms of Office

 

Our directors are appointed for a one-year term to hold office until the next annual meeting of our shareholders and until a successor is appointed and qualified, or until their removal, resignation, or death.  Executive officers serve at the pleasure of the board of directors.

 

Board Committees

 

Our board of directors does not currently have an audit committee, a compensation committee, or a corporate governance committee.  We plan to establish such committees in the near future.

 

Code of Ethics

 

We do not currently have a Code of Ethics that applies to employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  We plan to adopt a Code of Ethics in near future.

 

Advisory Board

 

The Company plans to establish an advisory board, whose members will meet periodically in person or by telephone with management and/or the board of directors to advise on product development and marketing matters.  Members of the advisory board will serve at the pleasure of the board of directors. It is anticipated that members of the advisory board will be compensated through the grant of stock option awards under our 2015 Incentive Stock Plan.

 

  26  
 

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The table below summarizes all compensation awarded to, earned by, or paid to our President, who was our sole executive officer for 2014 and 2013, including amounts accrued but not paid.

 

SUMMARY COMPENSATION TABLE

 

Name and
principal
position
    Year     Salary
($)
      Bonus
($)
    Stock
Awards
(#)
    Option
Awards 
(#)
    Non-Equity
Incentive Plan
Compensation
($)
    Nonqualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
      Total
($)
 
David Hopkins, President
    2014     52,000 (1)     0     0     0     0     0     0       52,000 (1)
      2013     52,000 (1)     0     0     0     0     0     0       52,000 (1)

 

 

  (1) Represents $52,000 in salary accrued but not paid to Mr. Hopkins in each of 2014 and 2013.

 

Employment Agreements

 

The Company is presently not party to an employment agreement with its executive officer.

 

Outstanding Equity Awards at Fiscal Year-End Table

 

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer outstanding as of the end of our last completed fiscal year.  

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END  
OPTION AWARDS     STOCK AWARDS  
Name  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

   

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

   

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

   

Option

Exercise

Price

($)

   

Option

Expiration

Date

   

Number

of

Shares

or Shares

of

Stock That

Have

Not

Vested

(#)

   

Market

Value

of

Shares

or

Shares

of

Stock

That

Have

Not

Vested

($)

   

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Shares or

Other

Rights

That Have

Not

Vested

(#)

   

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Shares or

Other

Rights

That

Have Not

Vested

(#)

 
David Hopkins     0       0       0       0       0       0       0       0       0  
                                                                         

  Compensation of Directors Table

 

The table below summarizes all compensation paid to our directors for our last completed fiscal year.

 

DIRECTOR COMPENSATION

 
Name  

Fees Earned

or

Paid in

Cash

($)

   

Stock

Awards

($)

   

Option

Awards

($)

   

Non-Equity

Incentive

Plan

Compensation

($)

   

Non-Qualified

Deferred

Compensation

Earnings

($)

   

All

Other

Compensation

($)

   

Total

($)

 
David Hopkins     0       0       0       0       0       0       0  
                                                         
James Pande     0       0       0       0       0       0       0  

 

  27  
 

 

Narrative Disclosure to the Director Compensation Table

 

We currently do not compensate our non-employee directors. When we expand our board we will intend to implement a plan and compensate them with a combination of cash and stock option awards, depending on our financial resources at that time.  

 

2015 Incentive Stock Plan

 

Our 2015 Incentive Stock Plan provides for equity incentives to be granted to our employees, executive officers or directors or to key advisers or consultants.  Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the 2015 Incentive Stock Plan, restricted stock awards, other stock based awards, or any combination of the foregoing.  The 2015 Incentive Stock Plan is administered by the board of directors.  3,000,000 shares of our common stock are reserved for issuance pursuant to the exercise of awards under the 2015 Incentive Stock Plan.  The number of shares so reserved automatically adjusts upward on January 1 of each year, so that the number of shares covered by the 2015 Incentive Stock Plan is equal to 15% of our issued and outstanding common stock. No awards are outstanding as of the date of this prospectus.

 

  28  
 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of the date of this prospectus, the beneficial ownership of our common stock by each director and executive officer, by each person known by us to beneficially own 5% or more of the our common stock and by directors and executive officers as a group.  Unless otherwise stated, the address of the persons set forth in the table is c/o the Company, 18851 NE 29 th Avenue, Suite 700, Aventura, Florida 33180.

 

Names and addresses of

beneficial owners

 

Number of 

shares
of common stock

    Percentage of class (%)  
             
Directors and executive officers:            
             
David Hopkins     5,663,510        33.1%  
                 
James Pande      6,366,666       37.1%  
                 
All directors and executive officers as a group (two (2) persons)     12,030,176       70.2%  
                 
Other 5% or greater shareholders:              
                 

Michael Fabiano

    1,000,000       5.8%   

 

 

 
The persons named above have full voting and investment power with respect to the shares indicated.  Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security.  Accordingly, more than one person may be deemed to be a beneficial owner of the same security.  

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Related Party Transactions

 

Since inception, the Company has relied in large part on loans from James Pande and David Hopkins, its principal shareholders, to fund its operations.

 

From inception through December 31, 2014, the Company borrowed an aggregate of $76,385 from two of its shareholders. The amounts were recorded as a loan payable to related parties on the accompanying balance sheet. These loans are non-interest bearing and due on demand. The balance on these notes at December 31, 2014 and 2013 were $35,084 and $25,505, respectively.

 

One of the Company’s founders has made loan the Company through direct charges on the founders’ credit card to pay for Company expenses. The balance of this loan at December 31, 2014 and 2013 was $9,827 and $14,794, respectively. The founder is charging the Company 15.5% interest on the unpaid monthly balances associated with this loan.

 

The above loans are classified on the accompanying balance sheet as loans payable – related party.

 

In August, 2013 the Company converted certain loans payable referred to above and accrued salary and expenses to the shareholders in the aggregate amount of $82,499 into secured notes payable to the shareholders. The notes bear interest at 3% per annum, are secured by substantially all assets of the Company, and are due on demand. The balance on the notes at December 31, 2014 and 2013 were $49,200 and $67,499, respectively.

 

Accrued interest on the above debts to related parties aggregated $4,877 and $1,378 at December 31, 2014 and 2013, respectively.

 

The Company’s board of directors approved a salary to the Company’s president in the amount of $52,000 per annum plus a car allowance of $600 per month. As of December 31, 2014 and 2013 the amount unpaid and accrued amounted to$78,000 and $25,000, respectively, which is reflected on the accompanying Balance sheet at that date. Effective in August 2013, the president waived his car allowance which amount has not been accrued since that date.

 

Mr. Hopkins has also made a loan to the Company through direct charges on his credit card to pay for certain Company expenses. The balance of this loan at June 30, 2015 was $5,499. Mr. Hopkins is charging the Company 15.5% interest on the unpaid monthly balances associated with this loan, which is equal to the interest rate he pays on the credit card.

 

In August, 2013 the Company converted of the certain loans payable referred to above and accrued salary and expenses to Mr. Hopkins in the aggregate amount of $82,499 into secured notes payable to the shareholders. The notes bear interest at 3% per annum, are secured by substantially all assets of the Company, and are due on demand. The balance on the notes at June 30, 2015 was $48,850.

 

In July 2015, Mr. Pande extended a $75.000 one-year credit facility to the Company, pursuant to which the Company may, subject to Mr. Pande’s consent, borrow (but not reborrow) up to such amount in one or more installments during its term, which expires on July 30, 2016. Interest at the rate of 7-1/2% on the principal balance outstanding from time to time accrues and is payable monthly in arrears. The entire principal balance together with accrued but unpaid interest is due and payable at maturity and is mandatorily prepayable if the Company consummates a financing prior to maturity which generates gross proceeds of at least $500,000. The parties also entered into a security agreement pursuant to which the outstanding principal balance under the credit facility and the outstanding principal balance under the demand notes made in favor of Mr. Pande are secured by a first priority security interest in substantially all of the Company’s assets. 

 

  29  
 

 

Review, Approval and Ratification of Related Party Transactions

 

Given our small size and limited financial resources, we had not adopted formal policies and procedures for the review, approval or ratification of transactions with our executive officers, directors and significant shareholders.  However, we intend that such transactions will, on a going-forward basis, be subject to the review, approval or ratification of our board of directors, or an appropriate committee thereof.

 

DESCRIPTION OF CAPITAL STOCK

 

Capital Stock

 

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 and 5,000,000 shares of preferred stock, par value $0.001.

 

Common Stock

 

As of the date of this prospectus, 17,133,332 shares of common stock are issued as outstanding.  The shares of common stock presently outstanding are fully paid and non-assessable.  Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders.  In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation preference of any shares of preferred stock that may then be outstanding.  The common stock has no preemptive rights, no cumulative voting rights, and no redemption, sinking fund, or conversion provisions.

 

Holders of common stock are entitled to receive dividends, if and when declared by the board of directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any preferred stock that may then be outstanding.  

 

Preferred Stock

 

Our board of directors has the authority, without further action by the shareholders, to issue shares of preferred stock in one or more series and to fix the rights, preferences and the number of shares constituting any series or the designation of such series.  While our Amended and Restated Articles of Incorporation and bylaws do not contain any provisions that may delay, defer or prevent a change in control, the issuance of preferred stock may have the effect of delaying or preventing a change in control or make removal of our management more difficult. No shares of preferred stock are outstanding as of the date of this prospectus.

 

LEGAL MATTERS

 

The validity of the common stock being offered hereby has been passed upon by Gutierrez Bergman Boulris, P.L.L.C., Coral Gables, Florida.  A limited liability company affiliated with such law firm beneficially owns 400,000 shares of our common stock, whose resale is covered by the prospectus forming a part of this registration statement.

 

EXPERTS

 

The audited financial statements included in this prospectus and elsewhere in the registration have so been included in reliance upon the report of Paritz and Company, P. A., independent registered public accountants, upon the authority of said firm as experts in accounting and auditing in giving said report.

 

AVAILABLE INFORMATION

 

We have filed a registration statement on Form S-1 under the Securities Act with the SEC with respect to the shares of our common stock offered through this prospectus.  This prospectus is filed as a part of that registration statement, but does not contain all of the information contained in the registration statement and exhibits.  Statements made in the registration statement are summaries of the material terms of the referenced contracts, agreements or documents of the company.  We refer you to our registration statement and each exhibit attached to it for a more detailed description of matters involving the company.  You may inspect the registration statement, exhibits and schedules filed with the SEC at the SEC’s principal office in Washington, D.C.  Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the SEC, 100 F Street, N.E. Washington, D.C. 20549.  Please Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms.  The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy Statements and information regarding registrants that files electronically with the SEC.  Our registration statement and the referenced exhibits can also be found on this site.

 

  30  
 

 

DISCLOSURE OF SEC POSITION ON INDEMNIFICATION

FOR SECURITIES ACT LIABILITIES

 

In accordance with the provisions in our Amended and Restated Articles of Incorporation, we will indemnify an officer, director, or former officer or director, to the full extent permitted by law.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons 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.  

 

  31  
 

 

HEALTH-RIGHT DISCOVERIES, INC.

INDEX TO FINANCIAL STATEMENTS

 

    Page
Audited  Financial Statements :    
     
Report of Independent Registered Public Accounting Firm   F-2
     
Consolidated Balance Sheets at December 31, 2014 and 2013   F-3
     
Statements of Operations for the Years Ended December 31, 2014 and 2013   F-4
     
Statements of Cash Flows for the Years Ended December 31, 2014 and 2013   F-5
     
Statements of Stockholders’ Equity for the Years Ended December 31, 2014 and 2013   F-6
     
Notes to Financial Statements   F-7
     
Unaudited Financial Statements :    
     
Balance Sheets at June 30, 2015 (unaudited) and December 31, 2014   F-13
     
Statements of Operations for the Six Months Ended June 30, 2015 and 2013(unaudited)   F-14
     
Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 (unaudited)   F-15
     
Notes to Financial Statements (unaudited)   F-16

 

F- 1
 

 

  P aritz

 

 

& Company, P.A

15 Warren Street, Suite 25

Hackensack, New Jersey 07601

(201) 342-7753

Fax: (201) 342-7598

E-Mail: PARITZ@paritz.com

       
  Certified Public Accountants

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

Health-Right Discoveries, Inc.

 

We have audited the accompanying balance sheet of Health-Right Discoveries, Inc. as of December 31, 2014 and 2013 and the related statements of operations, changes in stockholders’ equity (deficiency) and cash flows for the years ended December 31, 2014 and 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Health-Right Discoveries, Inc.as of December 31, 2014 and 2013, and the results of its operations and cash flows for the years ended December 31, 2014 and 2013 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As disclosed in Note 3the Company has generated minimal revenue since inception, has sustained losses since inception, and has a stockholders’ deficiency of $199,311 at December 31, 2014. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

/S/ Paritz & Company, P.A.

 

Hackensack, New Jersey

September 1, 2015

 

F- 2
 

 

HEALTH-RIGHT DISCOVERIES, INC.
BALANCE SHEETS
         
  December 31, 2014   December 31, 2013
         
ASSETS                
CURRENT ASSETS:                
                 
Cash   $ 609     $ 21,792  
Inventories     1,213       8,342  
Prepaid expenses             49,583  
Total Current Assets     1,822       79,717  
                 
TOTAL ASSETS   $ 1,822     $ 79,717  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY                
                 
CURRENT LIABILITIES:                
                 
Credit card payable   $ 8,695     $ 8,273  
Loans payable - related parties     44,911       40,299  
Notes payable - related parties     49,200       67,499  
Accrued interest - related parties     4,877       1,378  
Accrued interest - other     450        
Salaries payable - related party     78,000       25,000  
Note payable     15,000        
Total Current Liabilities     201,133       142,449  
                 
STOCKHOLDERS’ DEFICIENCY                
Preferred Stock, .001 par value, 5,000,000 shares authorized No shares issued and outstanding December 31, 2014 and 2013            
Common Stock, .001 par value, 100,000,000 shares authorized 17,123,332 and 16,573,332 shares issued and outstanding December 31, 2014 and 2013, respectively     17,123       16,573  
Additional Paid in Capital     549,127       494,677  
Accumulated Deficit     (765,561 )     (573,982 )
TOTAL STOCKHOLDERS’ DEFICIENCY     (199,311 )     (62,732 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY   $ 1,822     $ 79,717  

 

The accompanying notes are an integral part of these financial statements

 

F- 3
 

 

HEALTH-RIGHT DISCOVERIES, INC.
STATEMENTS OF OPERATIONS
         
    Year ended December 31,
    2014   2013
         
Sales   $ 59,811     $ 12,724  
                 
Cost of Sales     10,276       11,424  
                 
Gross Profit     49,535       1,300  
                 
COSTS AND EXPENSES:                
General and administrative     236,314       339,351  
Interest expense - related parties     4,800       1,626  
Total Cost and expenses     241,114       340,977  
                 
Loss before income tax provision     (191,579 )     (339,677 )
                 
Income tax provision            
                 
NET LOSS   $ (191,579 )   $ (339,677 )
                 
Loss per common share     (0.01 )     (0.02 )
                 
Weighted average common shares outstanding     16,712,755       14,439,403  

 

The accompanying notes are an integral part of these financial statements

 

F- 4
 

 

 

HEALTH-RIGHT DISCOVERIES, INC.
 STATEMENTS OF CASH FLOWS

 

    Year ended De cember 31,
    2014   2013
         
OPERATING ACTIVITIES:                
Net loss   $ (191,579 )   $ (339,677 )
Adjustments to reconcile net loss to net cash used in operating activities:                
  Stock based compensation     89,583       225,417  
  Accrued salary to related party     53,000       59,200  
   Inventory write-off     5,840       10,830  
   Accrued interest     3,949          
Changes in operating assets and liabilities                
  Inventories     1,289       (811 )
  Prepaid expenses           3,507  
  Accrued expenses                
  Credit card payable     422       8,232  
NET CASH USED IN OPERATING ACTIVITIES     (37,496 )     (33,302 )
                 
FINANCING ACTIVITIES:                
    Proceeds from issuance common stock     15,000        
    Proceeds of loan from related parties     11,663       53,726  
    Proceeds from note payable     15,000          
    Repayment of related party loan     (25,350 )      
NET CASH PROVIDED BY FINANCING ACTIVITIES     16,313       53,726  
                 
INCREASE (DECREASE) IN CASH     (21,183 )     20,424  
                 
CASH - BEGINNING OF YEAR     21,792       1,368  
                 
CASH - END OF YEAR   $ 609     $ 21,792  
    $        
                 
Supplemental disclosures of cash flow information:                
  Non-cash financing activities                
     Issuance of common stock for services classified as prepaid expense   $     $ 70,000  

 

The accompanying notes are an integral part of these financial statements 

 

F- 5
 

HEALTH-RIGHT DISCOVERIES, INC.
 
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
 

  

          Additional                
    ------COMMON STOCK------     Paid-In     Accumulated          
    Shares     Amount         Capital     Deficit     Total  
                                         
BALANCE – January 1, 2013     13,823,332     $ 13,823     $ 222,427     $ (234,305 )   $ 1,945  
                                         
Common stock issued for services     2,750,000       2,750       272,250               275,000  
                                         
Net Loss                             (339,677 )     (339,677 )
                                         
BALANCE – December 31, 2013     16,573,332     $ 16,573     $ 494,677     $ (573,982 )   $ (62,732 )
                                         
Common stock issued in private placement     150,000       150       14,850               15,000  
                                         
Common stock issued for services     400,000       400       39,600               40,000  
                                         
Net loss                             (191,579 )     (191,579 )
                                         
BALANCE – December 31, 2014     17,123,332     $ 17,123     $ 549,127     $ (765,561 )   $ (199,311 )
                                         

 

The accompanying notes are an integral part of these financial statements

 

F- 6
 

 

HEALTH-RIGHT DISCOVERIES, INC.

Notes to Financial Statements

  

NOTE 1 – Business

 

Health-Right Discoveries, Inc. (the “ Company ”) was formed under the laws of the State of Florida on October 12, 2011 under the name Four Plex Partners, Inc. The company changed its name to Health-Right Discoveries, Inc. on March 22, 2012. The Company’s business is to develop and market an innovative portfolio of both prescription nutritional, OTC monograph and natural products that primarily focus on factors relating to stress-induced conditions and diseases. The Company believes it has developed a formulation platform to vastly improve the negative interrelationship between stress, a weakened immune system and certain stress-related conditions and diseases.

 

NOTE 2 - Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

 

Cash

 

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

 

Revenue Recognition

 

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”. We record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided.

 

Inventories

 

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

 

F- 7
 

 

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified.  Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations. During the year ended December 31, 2014 and 2013, the Company recorded a loss of $5,840 and $10,830, respectively due to management’s estimation of obsolete inventory.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, are comparable to rates of returns for instruments of similar credit risk.

 

ASC 820 defines fair value as the exchange price that would be 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

 

Stock-based compensation

 

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

 

F- 8
 

 

Advertising

 

Advertising and marketing expenses are charged to operations as incurred.

 

Income Taxes

 

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

  

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

NOTE 3 – Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues since inception. The Company has sustained losses since inception, and has a stockholders’ deficiency of $199,311 at December 31, 2014. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  

 

The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

NOTE 4 – Stockholders’ Equity

 

The Company has authorized 100,000,000 shares of common stock $.001 par value and 5,000,000 shares of preferred stock $.001 par value.

 

On October 31, 2014, the board of directors approved an amendment to the Company’s Certificate of Incorporation, as amended, to effect a 2-for-1 stock split on the issued and outstanding common shares. All relevant information relating to numbers of shares and per share information have been retrospectively adjusted to reflect the stock split for all periods presented.

 

F- 9
 

  

During the year ended December 31, 2013, the Company issued 2,750,000 shares of common stock for services rendered which were valued at $275,000. The Company valued these shares based on the per share price in which unaffiliated investors purchased shares of common stock in a private placement. Of the amount referred to above, $70,000 was recorded as a prepaid expense and amortized over the life of the specific agreement. During the year ended December 31, 2014 and 2013, $49,583 and $20,417, respectively of this amount was amortized and recorded in the statement of operations.

 

During the year ended December 31, 2014, the Company issued 150,000 shares of common stock in a private placement for proceeds of $15,000.

 

During the year ended December 31, 2014, the Company issued 400,000 shares of common stock for services rendered which were valued at $40,000. The Company valued these shares based on the per share price in which unaffiliated investors purchased shares of common stock in the private placement referred to above.

   

NOTE 5 – Related Party

 

From inception through December 31, 2014, the Company borrowed an aggregate of $76,385 from two of its shareholders. The amounts were recorded as a loan payable to related parties on the accompanying balance sheet. These loans are non-interest bearing and due on demand. The balance on these notes at December 31, 2014 and 2013 were $35,084 and $25,505, respectively.

 

One of the Company’s founders has made loan the Company through direct charges on the founders’ credit card to pay for Company expenses. The balance of this loan at December 31, 2014 and 2013 was $9,827 and $14,794, respectively. The founder is charging the Company 15.5% interest on the unpaid monthly balances associated with this loan.

 

The above loans are classified on the accompanying balance sheet as loans payable – related party.

 

In August, 2013 the Company converted certain loans payable referred to above and accrued salary and expenses to the shareholders in the aggregate amount of $82,499 into secured notes payable to the shareholders. The notes bear interest at 3% per annum, are secured by substantially all assets of the Company, and are due on demand. The balance on the notes at December 31, 2014 and 2013 were $49,200 and $67,499, respectively.

 

Accrued interest on the above debts to related parties aggregated $4,877 and $1,378 at December 31, 2014 and 2013, respectively.

 

The Company’s board of directors approved a salary to the Company’s president in the amount of $52,000 per annum plus a car allowance of $600 per month. As of December 31, 2014 and 2013 the amount unpaid and accrued amounted to$78,000 and $25,000, respectively, which is reflected on the accompanying Balance sheet at that date. Effective in August 2013, the president waived his car allowance which amount has not been accrued since that date.

  

NOTE 6 – Note payable

 

On January 10, 2014, the Company entered into a note payable to an unrelated party that bears interest at 3% per annum and is payable upon a funding event of at least $50,000 to the Company or 9 months after the date of issuance, whichever comes first. The maturity date has passed and the lender has verbally agreed to extend the note, which is now considered due on demand.

 

F- 10
 

 

NOTE 6 – Credit card payable

 

The Company utilizes a credit card for working capital purposes. The card has a credit limit of $9,000, $8,695 and $8,273 outstanding at December 31, 2014 and 2013, respectively and bears interest at 21.24%. 

 

NOTE 7 – Income Taxes

 

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the years ended December 31, 2013 and 2012 to the Company’s effective tax rate is as follows: 

                 
    Years Ended  
    December
31, 2014
  December
31, 2013
 
               
U.S. federal statutory rate     (34 )%   (34 )%
State income tax, net of federal benefit     (6 )%   (6 )%
Change in valuation allowance     (40 )%   (40 )%
Income Tax provision (benefit)     0 %     0 %

 

The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2014 and 2013 are as follows:    

                 
    Years Ended  
    December
31, 2014
  December
31, 2013
 
Deferred Tax Assets              
Net operating losses   $ 306,000   $ 230,000  
Less: Valuation allowance     (306,000 )   (230,000 )
    $   $  

  

As of December 31, 2014 and 2013, the Company had approximately $765,000 and $574,000 of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2031.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.  

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

F- 11
 

 

The Company files U.S. federal and state of Florida tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2011. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.  

 

NOTE 8 – Subsequent events

 

Management has evaluated subsequent events through September 1, 2015, the date which the financial statements were available to be issued.

 

F- 12
 

 

HEALTH-RIGHT DISCOVERIES, INC.
 BALANCE SHEETS
(Unaudited)

  

    June 30, 2015     December 31, 2014  
ASSETS                
                 
CURRENT ASSETS:                
                 
Cash   $ 748     $ 609  
Inventories     4,665       1,213  
Total Current Assets     5,413       1,822  
                 
TOTAL ASSETS   $ 5,413     $ 1,822  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY                
                 
CURRENT LIABILITIES:                
                 
Credit card payable   $ 8,817     $ 8,695  
Loans payable - related parties     48,083       44,911  
Notes payable - related parties     48,850       49,200  
Accrued interest - related parties     6,122       4,877  
Accrued interest - other     675       450  
Salaries payable - related party     104,000       78,000  
Note payable     15,000       15,000  
Total Current Liabilities     231,547       201,133  
                 
STOCKHOLDERS’ DEFICIENCY                
Preferred Stock, .001 par value, 5,000,000 shares authorized No shares issued and outstanding June 30, 2015 and December 31, 2014                
Common Stock, .001 par value, 100,000,000 shares authorized 17,133,332 and 16,573,332  shares issued and outstanding December 31, 2014 and 2013, respectively     17,133       17,123  
Additional Paid in Capital     550,117       549,127  
Accumulated Deficit     (793,384 )     (765,561 )
TOTAL STOCKHOLDERS’ DEFICIENCY     (226,134 )     (199,311 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY   $ 5,413     $ 1,822  

 

The accompanying notes are an integral part of these financial statements

 

F- 13
 

 

HEALTH-RIGHT DISCOVERIES, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

    Six Months Ended June 30     Three Months Ended June 30  
    2015     2014     2015     2014  
                         
Sales     13,581       26,199       5,887       11,849  
                                 
Cost of Sales     2,664       4,380       1,047       2,120  
                                 
Gross Profit     10,917       21,819       4,840       9,729  
                                 
COSTS AND EXPENSES:                                
General and administrative     36,355       74,488       18,156       32,753  
Interest expense - related parties     2,385       1,002       685       490  
Total Cost and expenses     38,740       75,490       18,841       33,243  
                                 
Loss before income tax provision     (27,823 )     (53,671 )     (14,001 )     (23,514 )
                                 
Income tax provision                        
                                 
NET LOSS     (27,823 )     (53,671 )     (14,001 )     (23,514 )
                                 
Loss per common share   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
Weighted average common shares outstanding     17,128,832       16,573,332       17,133,332       16,573,332  

 

The accompanying notes are an integral part of these financial statements

 

F- 14
 

 

HEALTH-RIGHT DISCOVERIES, INC.
 STATEMENTS OF CASH FLOWS
(Unaudited)

             
      Six months ended June 30   
    2015     2014  
             
OPERATING ACTIVITIES:                
Net loss   $ (27,823 )   $ (53,671 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Stock based compensation     1,000        
Accrued salary to related party     26,000       26,000  
Accrued interest     1,470       939  
Changes in operating assets and liabilities                
Inventories     (3,452 )     1,354  
Credit card payable     122       2,419  
NET CASH USED IN OPERATING ACTIVITIES     (2,683 )     (22,959 )
                 
FINANCING ACTIVITIES:                
Proceeds of loan from related parties     7,500       12,720  
Proceeds from note payable           15,000  
Repayment of related party loan     (4,678 )     (24,000 )
NET CASH PROVIDED BY FINANCING ACTIVITIES     2,822       3,720  
                 
INCREASE (DECREASE) IN CASH     139       (19,239 )
                 
CASH - BEGINNING OF YEAR     609       21,792  
                 
CASH - END OF YEAR   $ 748     $ 2,553  
    $        

 

The accompanying notes are an integral part of these financial statements

 

F- 15
 

 

HEALTH-RIGHT DISCOVERIES, INC.

Notes to Financial Statements

June 30, 2015

(Unaudited)

 

NOTE 1 – Business

 

Health-Right Discoveries, Inc. (“the Company”) was formed under the laws of the State of Florida on October 12, 2011 under the name Four Plex Partners, Inc. The company changed its name to Health-Right Discoveries, Inc. on March 22, 2012. The Company’s business is to develop and market an innovative portfolio of both prescription nutritional, OTC monograph and natural products that primarily focus on factors relating to stress-induced conditions and diseases. The Company believes it has developed a formulation platform to vastly improve the negative interrelationship between stress, a weakened immune system and certain stress-related conditions and diseases.

NOTE 2 - Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2015 and the results of operations and cash flows for the periods presented. The results of operations for the six and three months ended June 30, 2015 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements for the year ended December 31, 2014, and related notes thereto included in the elsewhere in this filing.

Use of Estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

 

F- 16
 

 

Cash

 

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

 

Revenue Recognition

 

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”. We record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided.

 

Inventories

 

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

 

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates, are comparable to rates of returns for instruments of similar credit risk.

 

ASC 820 defines fair value as the exchange price that would be 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

F- 17
 

 

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

 

Stock-based compensation

 

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

 

Advertising

 

Advertising and marketing expenses are charged to operations as incurred.

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

  

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

NOTE 3 – Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues since inception. The Company has sustained losses since inception, and has a stockholders’ deficiency of $226,134 at June 30, 2015. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  

 

F- 18
 

 

The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 4 – Stockholders’ Equity

 

The Company has authorized 100,000,000 shares of common stock $.001 par value and 5,000,000 shares of preferred stock $.001 par value.

 

On October 31, 2014, the board of directors approved an amendment to the Company’s Certificate of Incorporation, as amended, to effect a 2-for-1 stock split on the issued and outstanding common shares. All relevant information relating to numbers of shares and per share information have been retrospectively adjusted to reflect the stock split for all periods presented. 

 

In March 2015, the Company issued 10,000 shares of common stock for services rendered which were valued at $1,000. The Company valued these shares based on the per share price in which unaffiliated investors purchased shares of common stock in ae private placement.

 

NOTE 5 – Related Party

 

From inception through June 30, 2015, the Company borrowed an aggregate of $83,885 from two of its shareholders. The amounts were recorded as a loan payable to related parties on the accompanying balance sheet. These loans are non-interest bearing and due on demand. The balance on these notes at June 30, 2015 was 42,584

 

One of the Company’s founders has made loan the Company through direct charges on the founders’ credit card to pay for Company expenses. The balance of this loan at June 30, 2015 was 5,499. The founder is charging the Company 15.5% interest on the unpaid monthly balances associated with this loan.

The above loans a classified on the accompanying balance sheet as loans payable – related party.

In August, 2013 the Company converted certain loans payable referred to above and accrued salary and expenses to the shareholders in the aggregate amount of $82,499 into secured notes payable to the shareholders. The notes bear interest at 3% per annum, are secured by substantially all assets of the Company, and are due on demand. The balance on the notes at June 30, 2015 was 48,850.

 

Accrued interest on the above debts to related parties aggregated $6,122 and $4,877 at June 30, 2015 and December 31, 2014 respectively.

 

The Company’s board of directors approved a salary to the Company’s president in the amount of $52,000 per annum plus a car allowance of $600 per month. As June 30, 2015 the amount unpaid and accrued amounted to$104,000, which is reflected on the accompanying Balance sheet at that date. Effective in August 2013, the president waived his car allowance which has not been accrued since that date.

 

F- 19
 

 

NOTE 6 – Note payable

 

On January 10, 2014, the Company entered into a note payable to an unrelated party that bears interest at 3% per annum and is payable upon a funding event of at least $50,000 to the Company or 9 months after issuance, whichever comes first. The maturity date has passed and the lender has verbally agreed to extend the note, which is now considered due on demand.

NOTE 6 – Credit card payable

 

The Company utilizes a credit card for working capital purposes. The card has a credit limit of $9,000, $8,817 outstanding at June 30, 2015 and bears interest at 21.24%.

NOTE 7 – Income Taxes

 
As of June 30, 2015, the Company had approximately $793,000 of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2031.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.  

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

The Company files U.S. federal and state of Florida tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2011. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.  

 

NOTE 8 – Subsequent events

 

Management has evaluated subsequent events through September 1, 2015, the date which the financial statements were available to be issued.

 

F- 20
 

 

PART II

 

INFORMATION NOT REQUIRED IN THE PROSPECTUS

 

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

Registration Fees   $ 133.71  
Transfer Agent Fees   $ 1,500.00  
Accounting Fees and Expenses   $ 6,500.00  
Legal Fees and Expenses   $ 25,000.00  
Miscellaneous Fees and Expenses   $ 1,500.00  
Total   $ 34,633.71  

 

All amounts are estimates other than the SEC’s registration fee.  We are paying all expenses of the offering listed above.  No portion of these expenses will be borne by the selling shareholders.  The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.

 

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Our Amended and Restated Articles of Incorporation and bylaws provide for indemnification of our officers and directors to the fullest extent permitted by the Florida Business Corporation Act.

 

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

 

During the past three years, we effected the following transactions in reliance upon exemptions from registration under the Securities Act, as amended (all share numbers have been adjusted to give retroactive effect to a two-for-one stock split in the form of a stock dividend implemented by the Company on October 31, 2014 pursuant to the exemption from registration afforded by Section 3(a) (9) under the Securities Act):

 

On June 5, 2013, the Company issued 200,000 shares of common stock to one individual for advisory services.

 

On October 10, 2013, the Company issued 500,000 shares of common stock to one entity for technology/marketing services.

 

On October 23, 2013, the Company issued 800,000 and 1,200,000 shares of common stock to James Pande and David Hopkins, respectively, for services rendered to the Company.

 

On October 23, 2013, the Company issued 50,000 shares of common stock to one individual for legal services.

 

On July 12, 2014, the Company issued 100,000 shares of common stock to one individual for $10,000.

 

On September 2, 2014, the Company issued 50,000 shares of common stock to one individual for $5,000.

 

On October 22, 2014, the Company issued 400,000 shares of common stock to one entity for legal services.

 

On March 23, 2015, the Company issued 10,000 shares of common stock to one individual for consulting services.

 

All of the foregoing securities were issued in accordance with the exemption from registration pursuant to Section 4(a) (2) promulgated under the Securities Act, as amended, as the persons receiving such shares having provided the Company with appropriate investment representations.

 

  II- 1  
 

 

ITEM 16.  EXHIBITS

 

Exhibit

Number

  Description
     
3.1(i)   Amended and Restated Articles of Incorporation*
     
3.2   By-Laws*
     
5.1   Opinion of Gutierrez Bergman Boulris, P.L.L.C.**
     
10.1   2015 Stock Incentive Plan**
     
23.1   Consent of Paritz and Company, P.A.**
     
23.2   Consent of Gutierrez Bergman Boulris, P.L.L.C. (Included in Exhibit 5.1)**
     
24    Power of Attorney (included in signature page to this registration statement) 

 

 

*Previously filed .

**Filed herewith.

 

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;

 

(a)           to include any prospectus required by Section 10(a) (3) of the Securities Act of 1933;

 

(b)           to reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and Notwithstanding the forgoing, 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 prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.; and

 

(c)           to include any material information with respect to the plan of distribution not previously disclosed in this 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 herein, and the offering of such 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 hereby which remain unsold at the termination of the offering.

  

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, 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 one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we 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 is against public policy as expressed in the Securities Act of 1933, and we will be governed by the final adjudication of such issue.

 

  II-2  
 

 

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 of the Securities Act or other than prospectuses filed in reliance on Rule 430A of the Securities Act, 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.

 

  II-3  
 

 

SIGNATURES

 

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and authorized this registration statement to be signed on its behalf by the undersigned, in Aventura, Florida, on October 30, 2015.

 

  HEALTH-RIGHT DISCOVERIES, INC.
     
  By:  /s/  David Hopkins
    David Hopkins, President, Chief Executive Officer and Chief Financial Officer
    (Principal Executive, Financial and Accounting Officer)
     

POWER OF ATTORNEY

 

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Hopkins as a true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for each of them and in each name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this registration statement, and to file the same with all exhibits thereto, and 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 or necessary to be done in and about the premises, as fully to all intents and purposes as each might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute, may lawfully do or cause to be done by virtue hereof.  In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement was signed by the following person in the capacities and on the dates stated.

 

Signatures   Title(s)   Date
         
By:  /s/  David Hopkins  

President and Director

  October 30, 2015
   David Hopkins   (Principal Executive, Financial and Accounting Officer)    
           
By: /s/  James Pande   Director   October 30, 2015
   James Pande        

 

  II-4  

 

Exhibit 5.1

 

GUTIERREZ BERGMAN BOULRIS, P.L.L.C.

100 ALMERIA AVENUE, SUITE 340

CORAL GABLES, FL 33134

 

October 30, 2015

 

Health-Right Discoveries, Inc.

18851 NE 29 th Avenue

Suite 700

Aventura, Florida 33180

 

Re: Health-Right Discoveries, Inc. (the “ Company ”)

Registration Statement On Form S-1

File No. 333-206839 (the “ Registration Statement ”)

 

Ladies and Gentlemen:

 

You have requested our opinion with respect to the 5,309,152 shares of the Company’s common stock, par value $0.001 per share (the “ Shares ”) offered by certain of the Company’s shareholders and included in the Registration Statement filed with the U.S. Securities and Exchange Commission on September 9, 2015 and as subsequently amended, pursuant to the Securities Act of 1933, as amended (the “ Securities Act ”).

 

As counsel to the Company, we have examined the original or certified copies of such records of the Company, and such agreements, certificates of public officials, certificates of officers or representatives of the Company and others, and such other documents as we deem relevant and necessary for the opinion expressed in this letter. In such examination, we have assumed the genuineness of all signatures on original documents, and the conformity to original documents of all copies submitted to us as conformed or photostatic copies. As to various questions of fact material to such opinions, we have relied upon statements or certificates of officials and representatives of the Company and others.

 

Based on, and subject to the foregoing, we are of the opinion that the Shares are duly authorized, validly issued, fully paid and non-assessable.

 

In rendering this opinion, we advise you that members of this Firm are members of the Bar of the State of Florida. We express no opinion herein concerning the applicability or effect of any laws of any jurisdiction other than the laws of the State of Florida and the Federal laws of the United States of America.

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference of our Firm under the heading “ Legal Matters ” in the Prospectus constituting part of the Registration Statement. In giving such consent, we do not thereby admit that we are included within the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations promulgated thereunder.

 

 

 

 

Securities and Exchange Commission

Page 2

 

 

An entity which is an affiliate of our Firm holds 400,000 Shares, 200,000 of which Shares are included in the Registration Statement.

 

  Very truly yours,
   
  /s/ GUTIERREZ BERGMAN BOULRIS, P.L.L.C.

 

 

 

 

Exhibit 10.1

 

HEALTH-RIGHT DISCOVERIES, INC.

 

2015 STOCK INCENTIVE PLAN

 

1.            Purposes of the Plan . The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

 

2.            Definitions . The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2 .

 

(a)          “ Administrator ” means the Board or any of the Committees appointed to administer the Plan.

 

(b)          “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(c)          “ Applicable Laws ” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

 

(d)          “ Assumed ” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

 

(e)          “ Award ” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or other right or benefit under the Plan.

 

(f)          “ Award Agreement ” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

 

(g)          “ Board ” means the Board of Directors of the Company.

 

(h)          “ Cause ” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “ Cause ” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person; provided, however, that with regard to any agreement that defines “ Cause ” on the occurrence of or in connection with a Corporate Transaction or a Change in Control, such definition of “ Cause ” shall not apply until a Corporate Transaction or a Change in Control actually occurs.

 

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(i)          “ Change in Control means a change in ownership or control of the Company after the Registration Date effected through either of the following transactions:

 

(i)          the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or

 

(ii)         a change in the composition of the Board over a period of twelve (12) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

 

(j)          “ Code ” means the Internal Revenue Code of 1986, as amended.

 

(k)          “ Committee ” means any committee composed of members of the Board appointed by the Board to administer the Plan.

 

(l)           “ Common Stock ” means the common stock of the Company.

 

(m)         “ Company ” means Health-Right Discoveries, Inc., a Florida corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.

 

(n)          “ Consultant ” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(o)          “ Continuing Directors ” means members of the Board who either (i) have been Board members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

 

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(p)          “ Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). Notwithstanding the foregoing, except as otherwise determined by the Administrator, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award under the Plan. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three months and one day following the expiration of such three month period.

 

(q)          “ Corporate Transaction ” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

 

(i)         a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

 

(ii)         the sale, transfer or other disposition of all or substantially all of the assets of the Company;

 

(iii)        the complete liquidation or dissolution of the Company;

 

(iv)        any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

 

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(v)         acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

 

(r)          “ Covered Employee ” means an Employee who is a “covered employee” under Section 162(m) (3) of the Code.

 

(s)          “ Director ” means a member of the Board or the board of directors of any Related Entity.

 

(t)          “ Disability ” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(u)          “ Dividend Equivalent Right ” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.

 

(v)         “ Employee ” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “ employment ” by the Company.

 

(w)         “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(x)          “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

 

(i)          If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market of The NASDAQ Stock Market LLC, the New York Stock Exchange or the New York MKT, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

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(ii)         If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination or the average of any such prices for such period as determined by the Administrator in good faith not to exceed thirty (30) trading days prior to the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported) or the average thereof for such period prior to the date of determination as established by the Administrator above, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii)        In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

 

(y)           Good Reason means the occurrence after a Corporate Transaction or Change in Control of any of the following events or conditions unless consented to by the Grantee (and the Grantee shall be deemed to have consented to any such event or condition unless the Grantee provides written notice of the Grantee’s non-acquiescence within thirty (30) days of the effective time of such event or condition):

 

(i)          a change in the Grantee’s responsibilities or duties that represents a material and substantial diminution in the Grantee’s responsibilities or duties as in effect immediately preceding the consummation of a Corporate Transaction or Change in Control;

 

(ii)        a reduction in the Grantee’s base salary to a level below that in effect at any time within six months preceding the consummation of a Corporate Transaction or Change in Control or at any time thereafter; provided that an across-the-board reduction in the salary level of substantially all other individuals in positions similar to the Grantee’s by substantially the same percentage amount shall not constitute such a salary reduction; or

 

(iii)        requiring the Grantee to be based at any place outside a 50-mile radius from the Grantee’s job location or residence prior to the Corporate Transaction or Change in Control except for reasonably required travel on business that is not materially greater than such travel requirements prior to the Corporate Transaction or Change in Control.

 

(z)          “ Grantee ” means an Employee, Director or Consultant who receives an Award under the Plan.

 

(aa)        “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

(bb)       “ Non-Qualified Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.

 

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(cc)        “ Officer ” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(dd)       “ Option ” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

 

(ee)       “ Parent ” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(ff)         “ Performance-Based Compensation ” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

 

(gg)       “ Plan ” means this 2015 Stock Incentive Plan.

 

(hh)       “ Registration Date ” means the first to occur of (i) the closing of the first sale, subsequent to the date this Plan is adopted, to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, of (A) the Common Stock or (B) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Common Stock; (ii) the date the Common Stock is otherwise registered under and the Company becomes subject to the reporting requirements of Sections 13 or 15 (d) or the Exchange Act; and (iii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

 

(ii)         “ Related Entity ” means any Parent or Subsidiary of the Company.

 

(jj)         “ Replaced ” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

 

(kk)       “ Restricted Stock ” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

 

(ll)         “ Restricted Stock Units ” means an Award that may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and that may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

 

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(mm)     “ Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

(nn)       “ SAR ” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

 

(oo)       “ Share ” means a share of the Common Stock.

 

(pp)       “ Subsidiary ” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.            Stock Subject to the Plan .

 

(a)          Subject to the provisions of Section 10 , below, the maximum aggregate number of Shares that may be issued pursuant to all Awards is 3,000,000 Shares, plus an annual increase to be added on the first day of the calendar year beginning January 1, 2016, equal to 15% of the number of Shares outstanding as of such date or a lesser number of Shares determined by the Administrator. Notwithstanding the foregoing, subject to the provisions of Section 10 , below, of the number of Shares specified above, the maximum aggregate number of Shares available for grant of Incentive Stock Options shall be 1,000,000 Shares, plus an annual increase to be added on the first day of the calendar year beginning January 1, 2016, equal to the least of (x) 250,000 Shares, (y) 2% of the number of Shares outstanding as of such date, or (z) a lesser number of Shares determined by the Administrator. The Shares to be issued pursuant to Awards may be authorized, but unissued or reacquired Common Stock.

 

(b)         Any Shares covered by an Award (or portion of an Award) that is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares that may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lesser of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan

 

(c)          To the extent not prohibited by the listing requirements of The NASDAQ Stock Market LLC (or other established stock exchange or national market system on which the Common Stock is traded) or Applicable Law, any Shares covered by an Award that are surrendered (i) in payment of the Award exercise or purchase price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares that may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

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4.             Administration of the Plan .

 

(a)           Plan Administrator .

 

(i)           Administration with Respect to Directors and Officers . With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

 

(ii)          Administration With Respect to Consultants and Other Employees . With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

 

(iii)         Administration With Respect to Covered Employees . Notwithstanding the foregoing, as of and after the date that the exemption for the Plan under Section 162(m) of the Code expires, as set forth in Section 18 below, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) that is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “ Administrator ” or to a “ Committee ” shall be deemed to be references to such Committee or subcommittee.

 

(iv)         Administration Errors . In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a) , such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

 

(b)           Powers of the Administrator . Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

 

(i)          to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

 

(ii)         to determine whether and to what extent Awards are granted hereunder;

 

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(iii)        to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

 

(iv)        to approve forms of Award Agreements for use under the Plan;

 

(v)         to determine the terms and conditions of any Award granted hereunder;

 

(vi)        to amend the terms of any outstanding Award granted under the Plan, provided that

 

(A)        any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided , however , that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee;

 

(B)         the reduction of the exercise price of any Option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan shall be subject to stockholder approval; and

 

(C)         canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or for cash shall be subject to stockholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction. Notwithstanding the foregoing, canceling an Option or SAR in exchange for another Option, SAR, Restricted Stock, or other Award or for cash with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original Option or SAR shall not be subject to stockholder approval;

 

(vii)       to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

 

(viii)      to grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

 

(ix)         to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

 

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(c)           Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

5.            Eligibility . Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant, who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.

 

6.            Terms and Conditions of Awards .

 

(a)           Types of Awards . The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash, (iii) an Option, (iv) a SAR, or (v) a similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two or more of them in any combination or alternative.

 

(b)           Designation of Award . Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options that become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option. In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

 

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(c)           Conditions of Award . Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the performance criteria applicable to the Award intended to be performance-based compensation. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect to an Award intended to be performance-based compensation.

 

(d)           Acquisitions and Other Transactions . The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

 

(e)           Deferral of Award Payment . The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

 

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(f)           Separate Programs . The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

(g)           Individual Limitations on Awards .

 

(i)           Individual Limit for Options and SARs . Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be 100,000 Shares. In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options and SARs for up to an additional 150,000 Shares that shall not count against the limit set forth in the previous sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10 , below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee. For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 

(ii)          Individual Limit for Restricted Stock and Restricted Stock Units . Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, for awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be 250,000 Shares. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10 .

 

(h)           Deferral . If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

 

(i)           Early Exercise . The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

 

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(j)           Term of Award . The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than ten years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

 

(k)           Transferability of Awards . Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

 

(l)           Time of Granting Awards . The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.

 

7.            Award Exercise or Purchase Price, Consideration and Taxes .

 

(a)           Exercise or Purchase Price . The exercise or purchase price, if any, for an Award shall be as follows:

 

(i)          In the case of an Incentive Stock Option:

 

(A)         granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

 

(B)         granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii)         In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

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(iii)        In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iv)        In the case of SARs, the base appreciation amount shall not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(v)         In the case of other Awards, such price as is determined by the Administrator.

 

(vi)        Notwithstanding the foregoing provisions of this Section 7(a) , in the case of an Award issued pursuant to Section 6(d) , above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

 

(b)           Consideration . Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Florida Business Corporations Law:

 

(i)          cash;

 

(ii)         check;

 

(iii)        surrender of Shares, or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require, that have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

 

(iv)        with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

 

(v)         with respect to Options, payment through a “ net exercise ” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or

 

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(vi)        any combination of the foregoing methods of payment.

 

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b) (iv) , or by other means, grant Awards that do not permit all of the foregoing forms of consideration to be used in payment for the Shares or that otherwise restrict one or more forms of consideration.

 

(c)           Taxes . No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).

 

8.            Exercise of Award .

 

(a)           Procedure for Exercise; Rights as a Shareholder .

 

(i)          Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

 

(ii)         An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b) (iv) .

 

(b)           Exercise of Award Following Termination of Continuous Service . In the event of termination of a Grantee’s Continuous Service for any reason other than Disability or death (but not in the event of a Grantee’s change of status from Employee to Consultant or from Consultant to Employee), such Grantee may, but only during the post-termination exercise period (but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. The Grantee’s Award Agreement may provide that upon the termination of the Grantee’s Continuous Service for Cause, the Grantee’s right to exercise the Award shall terminate concurrently with the termination of Grantee’s Continuous Service. In the event of a Grantee’s change of status from Employee to Consultant, an Employee’s Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the day three months and one day following such change of status. To the extent that the Grantee’s Award was unvested at the date of termination, or if the Grantee does not exercise the vested portion of the Grantee’s Award within the post-termination exercise period, the Award shall terminate.

 

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(c)           Disability of Grantee . In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within six months from the date of such termination (or such longer period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three months and one day following such termination. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(d)           Death of Grantee . In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the post-termination exercise period or during the six month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination, within six months from the date of death (or such longer period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(e)           Extension if Exercise Prevented by Law . Notwithstanding the foregoing, if the exercise of an Award within the applicable time periods set forth in this Section 8 is prevented by the provisions of Section 9 below, the Award shall remain exercisable until one month after the date the Grantee is notified by the Company that the Award is exercisable, but in any event no later than the expiration of the term of such Award as set forth in the Award Agreement and only in a manner and to the extent permitted under Code Section 409A.

 

9.            Conditions Upon Issuance of Shares .

 

(a)          If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.

 

(b)          As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

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10.          Adjustments Upon Changes in Capitalization . Subject to any required action by the stockholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Award, and the number of Shares that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any calendar year, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares; (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; or (iii)  any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided , however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “ adjustments ”). Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards. In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

 

11.          Corporate Transactions and Changes in Control .

 

(a)           Termination of Award to Extent Not Assumed in Corporate Transaction . Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

 

(b)           Acceleration of Award Upon Corporate Transaction or Change in Control . The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Corporate Transaction or Change in Control or at the time of an actual Corporate Transaction or Change in Control and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Corporate Transaction or Change in Control, on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Corporate Transaction or Change in Control. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Change in Control, shall remain fully exercisable until the expiration or sooner termination of the Award.

 

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(c)           Effect of Acceleration on Incentive Stock Options . Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.

 

12.          Effective Date and Term of Plan . The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company. It shall continue in effect for a term of ten years unless sooner terminated. Subject to Section 17 , below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

 

13.          Amendment, Suspension or Termination of the Plan .

 

(a)          The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws.

 

(b)          No Award may be granted during any suspension of the Plan or after termination of the Plan.

 

(c)          No suspension or termination of the Plan (including termination of the Plan under Section 11 , above) shall adversely affect any rights under Awards already granted to a Grantee.

 

14.          Reservation of Shares .

 

(a)          The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

(b)          The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

15.          No Effect on Terms of Employment/Consulting Relationship . The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, including, but not limited to, Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

 

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16.          No Effect on Retirement and Other Benefit Plans . Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

 

17.          Shareholder Approval . The grant of Incentive Stock Options under the Plan shall be subject to approval of the Plan by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.

 

18.          Effect of Section 162(m) of the Code . Section 162(m) of the Code does not apply to the Plan prior to the Registration Date. Following the Registration Date, the Plan, and all Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year. The exemption is based on Treasury Regulation Section 1.162-27 (f), in the form existing on the effective date of the Plan, with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held. Under such Treasury Regulation, this exemption is available to the Plan for the duration of the period that lasts until the earlier of (i) the expiration of the Plan; (ii) the material modification of the Plan; (iii) the exhaustion of the maximum number of shares of Common Stock available for Awards under the Plan, as set forth in Section 3(a) ; (iv) the first meeting of shareholders at which Directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Company first becomes subject to the reporting obligations of Section 13 or 15(d) of the Exchange Act; or (v) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. To the extent that the Administrator determines as of the date of grant of an Award that (i) the Award is intended to qualify as Performance-Based Compensation; and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any stockholder approval required under Section 162(m) of the Code has been obtained.

 

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19.          Unfunded Obligation . Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

20.          Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “ or ” is not intended to be exclusive, unless the context clearly requires otherwise.

 

21.          Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

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15 Warren Street, Suite 25
Hackensack, NJ 07601
(201) 342-342-7753
Fax: (201) 342-7598
E-mail: paritz@paritz.com

 

Paritz & Company, P.A.

 

 

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

Board of Directors

Health-Right Discoveries, Inc.

18851 NE 29 th Avenue

Aventura, Florida 33180

 

Gentlemen:

 

We consent to the use in this amendment No. 1 to the Registration Statement on Form S-1 of our report dated September 1, 2015 relating to the financial statements of Health-Right Discoveries, Inc. as of December 31,2014 and 2013, and to the reference to us under the heading “Experts” in such Registration Statement.

 

 

/s/ Paritz & Company, P.A.

Paritz & Company, P.A.

Hackensack, New Jersey

October 30, 2015