ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On November 1, 2016, Energy Alliance Labs Inc., a Delaware corporation (“Energy Alliance”), a wholly owned subsidiary of MJP International Ltd., a Nevada corporation (the “Company”), closed an agreement with certain shareholders of Human Energy Alliance Laboratories Corp., an Idaho corporation (“HEAL”) in which Energy Alliance purchased 80% of the outstanding equity interests of HEAL.
The completion of the Share Exchange Agreement acquisition results in the Company changing its line of business, and, as a result, the Company has included below the information that would be required if the Company were filing a general form for registration of securities on From 10 under the Securities Exchange Act of 1934.
Current Business
On December 10, 2012, we entered into a share exchange agreement with MJP Lighting Solutions Ltd. and the shareholders of MJP Lighting Solutions pursuant to which we acquired MJP Lighting Solutions and MJP Holdings Ltd., as our wholly owned subsidiaries. As a result of the acquisition, we issued 12,000,000 shares of common stock in exchange for 100% of the outstanding common shares of MJP Lighting Solutions and MJP Holdings.
Our current business is the sale and distribution of LED lighting and technology solutions. This business is conducted through our indirect wholly-owned subsidiary, MJP Holdings, of Alberta, Canada. MJP Holdings was incorporated on July 19, 2010 under the laws of the province of Alberta, Canada, and is the wholly-owned subsidiary of MJP Lighting Solutions, a British Virgin Islands company, with its main office located in Hong Kong, which was incorporated in October 31, 2012. MJP Lighting Solutions is our wholly-owned subsidiary
On January 1, 2012 we received a letter of authorization from Gysun Opto-Electronic Co. Ltd. pursuant to which we were designated as an authorized dealer in Canada for all LED products produced by Gysun Opto-Electronic. The letter of authorization entitles us to market and distribute products of Gysun Opto-Electronic in Canada. All purchase orders made by us are negotiated and determined on a case by case basis. The letter of authorization has no fixed term and is valid until revoked.
FORM 10 INFORAMTION
Item 1. Business.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. These statements relate to future events or our future financial performance. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
The Company
The Company was incorporated in the State of Nevada on October 24, 2012.
On October 28, 2016, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Liao Zu Guo, a director of the Company, whereby on the same date the Company issued 4,000,000 shares of its common stock in exchange for 100% of the issued and outstanding equity interests of Energy Alliance Labs Inc., a Delaware corporation (“Energy Alliance”).
On November 1, 2016, Energy Alliance closed the transactions contemplated under an agreement with certain shareholders of Human Energy Alliance Laboratories Corp., an Idaho corporation (“HEAL”), in which the shareholders holding 80% of the outstanding equity interests of HEAL sold all of their shares of HEAL to Energy Alliance.
As a result of such transactions the Company became the owner of 100% of the issued and outstanding equity interests of Energy Alliance and Energy Alliance became the owner of 80% of the issued and outstanding equity interests of HEAL.
HEAL was incorporated in the state of Idaho on March 7, 2014 and is in the business of re-selling mid-sized wind turbines, small solar panels, and related controllers and inverters (“Energy Products”).
HEAL is a “Green” technology and retail company with the mission of developing and distributing technologies that ease the life of their customers, and decrease the energy usage from the energy grid by the human population.
Product
HEAL’s primary products are mid-sized wind turbines, small solar panels, and related controllers and inverters. These products are highly rated by their customers and follow HEAL’s strategy of being very ergonomically pleasing, easy to set up, and cost-efficient to their customer base.
Pricing
Due to the overall strategy of HEAL to offer products that appeal to a specific niche, initial pricing will be high enough to be comparable to industry leaders, yet but within reach of potential customers still on the fence. We believe that the products offered by HEAL are currently priced at the low end of the market. HEAL also offers bundles and exclusive offers of promotional combinations.
If demand for HEAL’s products grows, HEAL intends to increase prices in such a manner that does not compromise its revenue, but there can be no assurances that they will be successful in doing so. Further, any price increases may negatively impact HEAL’s revenues.
Branding Strategy
In terms of branding, HEAL will focus on promoting a cohesive image through all of its marketing campaigns, and relations with customers. The image HEAL will seek to promote will be a company that is the image of reliability, innovation, progress, revolution, and an elite vision for a bright future for humanity.
With respect to marketing, HEAL intends to promote a healthy and developed relationship with every customer, keeping a database of their information, and frequently mining this information for their tastes, and shopping history. HEAL intends to offer customers unique promotions, and rewards geared towards enhancing their relationship with each and every customer.
In marketing images, HEAL intends to appeal to the emotions of superiority and revolutionary vision, rather than the specific details of the functionality of the products. HEAL believes that the appeal of their cause and vision will be more successful in promotion than the specifics of how well the products they offer perform.
Target Market
HEAL is currently focused on the following three target markets:
Do-It-Yourselfers
: Males in the middle class that are in their mid-twenties to thirties in terms of age, who care about green energy or upgrading their homes. These private consumers tend to buy small solar panels and wind turbines for private use.
Distributers and Suppliers
: Companies in the business of retailing, repairing, and installing solar panel and wind turbine systems. They work with governments, businesses, and individuals in geographic areas that need larger amounts and sizes of these products installed in an area.
Retailers
: Local/regional retailers that specialize in selling green technology, usually alongside other types of hardware and energy products.
Item 1A. Risk Factors.
Risks Related to Our Business
RISKS RELATED TO OUR BUSINESS AND OUR FINANCIAL CONDITION
We depend on a limited number of suppliers of solar panels, wind turbines and other system components to adequately meet anticipated demand for our energy products. Any shortage, delay or component price change from these suppliers could result in lost sales, cancellations and loss of market share
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We purchase solar panels, wind turbines, and other system components from a limited number of suppliers, making us susceptible to quality issues, shortages and price changes. If we fail to develop, maintain and expand our relationships with these or other suppliers, we may be unable to adequately meet anticipated demand for our energy products, or we may only be able to offer energy products at higher costs. If one or more of the suppliers that we rely upon to meet anticipated demand ceases or reduces production, we may be unable to quickly identify alternate suppliers or to qualify alternative products on commercially reasonable terms, and we may be unable to satisfy this demand. In particular, there are a limited number of inverter suppliers, and we currently have only one (1) wind turbine supplier which is in China. Any decline in the exchange rate of the U.S. dollar compared to the functional currency of our component suppliers could increase our product prices. In addition, the U.S. government has imposed tariffs on solar cells manufactured in China. Based on determinations by the U.S. government, the applicable anti-dumping and countervailing tariff rates on such solar cells can be as high as approximately 239%. Such anti-dumping and countervailing tariffs are subject to annual review and can be increased if deemed necessary. Because we currently purchase solar panels containing cells manufactured inside of China, our purchase price would reflect the tariff penalties mentioned above. Any of these shortages, delays or price changes could limit our growth, cause cancellations or adversely affect our profitability, and result in loss of market share and damage to the HEAL brand.
Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory and economic barriers to the purchase and use of solar or wind energy products that may significantly reduce demand for our energy products.
Federal, state and local government regulations and policies concerning the electric utility industry, and internal policies and regulations promulgated by electric utilities, heavily influence the market for electricity generation products and services. These regulations and policies often relate to electricity pricing and the interconnection of customer-owned electricity generation. In the United States, governments and utilities continuously modify these regulations and policies. These regulations and policies could deter customers from purchasing renewable energy products, including solar or wind energy systems. This could result in a significant reduction in the potential demand for our energy products.
A material drop in the retail price of utility-generated electricity or electricity from other sources would harm our business, financial condition and results of operations
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We believe that a customer’s decision to buy energy products from us is significantly driven by their desire to pay less for electricity. The customer’s decision may also be affected by the cost of other renewable energy sources. Decreases in the retail prices of electricity from the utilities or from other renewable energy sources would harm our business. The price of electricity from utilities could decrease as a result of:
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the construction of a significant number of new power generation plants, including nuclear, coal, natural gas or renewable energy technologies;
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the construction of additional electric transmission and distribution lines;
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a reduction in the price of natural gas as a result of new drilling techniques or a relaxation of associated regulatory standards;
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the energy conservation technologies and public initiatives to reduce electricity consumption; and
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development of new renewable energy technologies that provide less expensive energy.
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A reduction in utility electricity prices would make the purchase of our solar or wind energy products less economically attractive, and reduce demand for our products. If the retail price of energy available from utilities were to decrease due to any of these reasons, or others, we would be at a competitive disadvantage, we may be unable to attract new customers and our growth would be limited.
Problems with product quality or performance may cause us to incur warranty expenses and may damage our market reputation and cause our financial results to decline.
HEAL has a “no questions asked” one (1) year 110% satisfaction warranty. Customer dissatisfaction or failures of the products HEAL sells could result in substantial expense to replace defective solar or wind energy products or refund customers 110% of their purchase. Any significant product returns or deficiencies may damage our market reputation and adversely impact our financial results. Product refund allowances were 18.12% and 9.73% for the fiscal years end December 31, 2014 and 2015, respectively.
We have a new business model and a short operating history, which makes it difficult to evaluate our prospects and future financial results and may increase the risk that we will not be successful.
HEAL didn’t begin operations in in the solar and wind energy products business until March 2014, and we have a short operating history and a new business model, which makes it difficult to effectively assess our future prospects.
Any unauthorized disclosure or theft of personal information we gather, store and use could harm our reputation and subject us to claims or litigation
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We receive, store and use personal information of our customers, including names, addresses, e-mail addresses, and credit information. Unauthorized disclosure of such personal information, whether through breach of our systems by an unauthorized party, employee theft or misuse, or otherwise, could harm our business. If we were subject to an inadvertent disclosure of such personal information, or if a third party were to gain unauthorized access to customer personal information we possess, our operations could be seriously disrupted and we could be subject to claims or litigation arising from damages suffered by our customers. In addition, we could incur significant costs in complying with the multitude of federal, state and local laws regarding the unauthorized disclosure of personal information. Finally, any perceived or actual unauthorized disclosure of such information could harm our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business.
We face significant competition and there are low barriers to entry in the retail solar and wind energy product business
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The solar and wind energy product business is highly competitive, and we expect more competitors to emerge. We face competition from a number of competitors who offer solar and wind energy products. Some of these current, emerging and potential competitors have significant resources for marketing, and have a more diversified set of revenue sources than we do and may be less severely affected by changes in consumer preferences, regulations or other developments that may impact the solar and wind energy product business. Increased competition could result in loss of existing customers or reduce our ability to acquire new customers, both of which could harm our business.
A relatively small percentage of the products we sell account for a large portion of our revenue, and if we are unable to continue to attract customers for such products, our revenue could be harmed
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A relatively small portion of the products HEAL sells
account for a large portion of HEAL’s revenue. For example, the wind turbines and related inverters and controllers HEAL sells accounted for approximately eighty-five percent (85%) of their revenue in 2015. If we cannot obtain additional products that generate significant revenue, our business would be harmed.
HEAL has yet to make a profit and there could develop doubt about our ability to continue as a going concern.
HEAL has incurred recurring losses to date and as of December 31, 2015 had an accumulated deficit of $36,833. Our auditors have included an explanatory paragraph in their audit opinion regarding substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or, obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There can be no assurances that the Company will become profitable or obtain financing necessary to continue as a going concern.
We will require additional funds in the future (either through profitable operations, or obtaining the necessary financing) to achieve our current business strategy and our inability to obtain funding will cause our business to fail.
Since we have incurred recurring losses to date, we may therefore need to raise additional funds through public or private debt or equity sales in order to fund our future operations and fulfill our business plan in the future. These financings may not be available when needed. Even if these financings are available, they may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing could have an adverse effect on our ability to implement our current business plan and expand existing product lines, and as a result, could require us to diminish or suspend our operations and possibly cease our existence.
We may experience fluctuations in our quarterly operating results due to a number of factors, which make our future results difficult to predict.
Our revenue and other operating results could vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control. In addition, we may not be able to accurately predict our future revenue or results of operations. We base our current and future expense levels on our internal operating plans and forecasts, and some of our operating costs are to a large extent fixed in the near term. As a result, we may not be able to reduce our costs quickly enough to compensate for an unexpected shortfall in revenue, and even a small shortfall in revenue could adversely affect financial results for that quarter.
HEAL’s one (1) employee is only part-time and the loss of the one key employee, or failure to attract and retain other highly qualified personnel in the future, could harm our business.
HEAL currently depends on the continued services and performance of its one (1) employee, Christopher Hudson. Although we have agreed to cause HEAL to enter into an employment agreement with Christopher Hudson, he currently devotes only approximately fifteen (15) hours per week of working time and attention to our business. There can be no assurance that HEAL will enter into an employment agreement on terms favorable to it or that will cause Mr. Hudson to devote more time to our business. The loss of Mr. Hudson, or any other future employees, could disrupt HEAL’s business and have a negative impact on its results of operations. Even if HEAL enters into an employment agreement with Mr. Hudson, it cannot prevent Mr. Hudson from terminating his employment at any time.
As we grow, we cannot guarantee we will be able to attract the personnel we need to maintain our competitive position. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively.
If we fail to maintain our brand or further develop widespread brand awareness cost-effectively, our business may suffer.
We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solar and wind energy products and attracting new customers. Brand promotion activities may not generate consumer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. In addition, our brand can be harmed if we experience adverse publicity for our solar or wind energy products for any reason. If we fail to successfully promote and maintain our brand, or incur substantial expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad user adoption of solar and wind energy products.
Because the Company’s executive officers and directors are located in China and Canada, investors may experience difficulties in attempting to effect service of process and to enforce judgments based upon U.S. federal securities laws against the company and its officers and directors.
While we are organized under the laws of State of Nevada, our executive officers and directors are non-U.S. residents located outside the United States (specifically in China and Canada). Consequently, it may be difficult for investors to effect service of process on our officers and sole director in the United States and to enforce in the United States judgments obtained in United States courts against any of them based on the civil liability provisions of the United States securities laws, enforce United States judgments in a Chinese or Canadian court based on the civil liability provisions of the United States securities laws or bring an original action against any of them in a Chinese or Canadian court to enforce liabilities based upon the United States federal securities laws.
We may need to raise additional funds in the future to achieve our current business strategy and our inability to obtain funding will cause our business to fail.
We may need to raise additional funds through public or private debt or equity sales in order to fund our future operations and fulfill our business plan in the future. These financings may not be available when needed. Even if these financings are available, they may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing could have an adverse effect on our ability to implement our current business plan and develop our properties and products, and as a result, could require us to diminish or suspend our operations and possibly cease our existence.
RISKS RELATED TO OUR COMMON STOCK
Even if there is no immediate need for capital, we may choose to issue debt or shares of our common stock in the future and such issuances, if any, could have a dilutive effect on your investment.
We may choose to issue debt or shares of our common stock for investment, acquisition or other business purposes. Even if there is not an immediate need for capital, we may choose to issue securities to sell in public or private equity markets if and when conditions are favorable. In the event that future events occur that negatively affect our business, we may be forced to raise funds at times where the price we receive is unfavorable to current stockholders. Raising funds by issuing securities would dilute the ownership interests of our existing stockholders. Additionally, certain types of equity securities we may issue in the future could have rights, preferences or privileges senior to the rights of existing holders of our common stock.
We cannot assure you that we will declare dividends or have the available cash to make dividend payments, and as a result you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
Although we do not currently intend to pay dividends, to the extent we decide in the future to pay dividends on our common stock, we will pay such dividends at such times and in such amounts as the board of directors determines appropriate and in accordance with applicable law. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our board of directors may deem relevant. There can be no assurance that we will pay dividends going forward or as to the amount of such dividends. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.
We are heavily dependent on cash flow from Energy Alliance through its eighty percent (80%) ownership interest in HEAL to meet our obligations, and any inability of HEAL to pay our wholly-owned subsidiary, Energy Alliance, dividends or make other payments to us when needed could disrupt or have a negative impact on our business.
We have limited business operations of our own. Our only significant assets are the eighty percent (80%) ownership stake Energy Alliance owns in HEAL. Accordingly, our ability to pay our obligations is largely dependent upon dividends and other distributions from HEAL. The ability of HEAL to pay dividends or make other payments or distributions to Energy Alliance, will depend on its operating results, and the terms of any current and future financing agreements, which may preclude dividends, distributions or other payments.
Our common stock is and will be subordinate to all of our existing and future indebtedness.
Shares of our common stock are common equity interests in us and, as such, will rank junior to all of our existing and future indebtedness and other liabilities. Additionally, our right to participate in a distribution of assets upon any of our subsidiaries’ liquidation or reorganization is subject to the prior claims of that subsidiary’s creditors.
Because we may be subject to the “penny stock” rules, you may have difficulty in selling our common stock
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Our common stock may be subject to regulations of the SEC relating to the market for penny stocks. Penny stock, as defined by the Penny Stock Reform Act, is any equity security not traded on a national securities exchange that has a market price of less than $5.00 per share. The penny stock regulations generally require that a disclosure schedule explaining the penny stock market and the risks associated therewith be delivered to purchasers of penny stocks and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. The broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures, including the actual sale or purchase price and actual bid offer quotations, as well as the compensation to be received by the broker-dealer and certain associated persons. The regulations applicable to penny stocks may severely affect the market liquidity for your common stock and could limit your ability to sell your securities in the secondary market.
The Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit your ability to buy and sell our common stock, which could depress the price of our shares.
FINRA has adopted rules that require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the 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 and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares, and thereby depress our share price.
RISKS RELATED TO AN EMERGING GROWTH COMPANY
We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any December 31.
Our status as an “emerging growth company” under the JOBS Act of 2012 may make it more difficult to raise capital as and when we need it.
Because of the exemptions from various reporting requirements provided to us as an “emerging growth company”, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
