ITEM 1. BUSINESS
Our Corporate History and Background
Overview
We are an emerging health and wellness company that has identified the need for a change to healthcare, where conventional medicine and alternative healing can both be drawn on to provide a world of integrated healing encompassing conventional medicine and alternative medicine.
Our intent is to build a community of integrated healing brands by identifying and acquiring early stage, high potential brands within selected wellness categories. Our plan is to build individual market impact through enhanced branding, a credible narrative, social conversation and improved accessibility by positioning all portfolio brands with a larger “healing community” of brands thus building exponential market impact.
In order to attain these goals during the period covered by this report, management entered into various contracts with employees and consultants all of whom have experience in marketing, wellness and health fields. With the acquisition of NOEO (discussed below), and the recent onboarding of a management team to undertake our operations, we have commenced operations in the health and wellness sector.
Historical Information
We were incorporated as Lake Forest Minerals Inc. in the State of Nevada on June 23, 2008.
During April 2021, our board of directors (the “Board”) and major shareholder approved a name change of our company from Lake Forest Minerals Inc. to The Healing Company Inc. Concurrently, the Board and majority shareholder approved a resolution to effect a forward stock split of our authorized and issued and outstanding shares of common stock on a four (4) new shares for one (1) share held. A Certificate of Amendment to effect the forward split and the change of name was filed with the Nevada Secretary of State on April 29, 2021. The name change and forward split were reviewed and approved by the Financial Industry Regulatory Authority (FINRA) with an effective date of June 2, 2021 at which time our authorized capital increased to 300,000,000 shares of common stock and our issued and outstanding shares of common stock increased from 11,000,000 to 44,000,000 shares of common stock, all with a par value of $0.001.
On October 7, 2021, our Board and major shareholder approved the adoption of our Amended and Restated Articles of Incorporation, which replaced our prior articles of incorporation in their entirety. Among other things, the Amended and Restated Articles of Incorporation authorize us to issue is 300,000,000 shares of stock, consisting of (a) 290,000,000 shares of common stock, $0.001 par value per share and (b) 10,000,000 shares of preferred stock, $0.001 par value per share, of which we designated 5,000,000 shares as Seed Preferred Shares as a first series of such preferred stock.
A Certificate of Amendment to accompany our Amended and Restated Articles of Incorporation was filed with the Nevada Secretary of State on October 7, 2021.
On October 7, 2021, our Board and major shareholder approved the adoption of our amended and restated bylaws, which have been updated in line with the changes to the Amended and Restated Articles of Incorporation and replace our prior bylaws in their entirety.
On October 8, 2021, we entered into share purchase agreements and share restriction agreements with investors and issued a first tranche of our Seed Preferred Shares, $0.001 par value per share (the “Seed Preferred Shares”), in a private placement, whereby the Company will sell a total of 5,000,000 shares of Seed Preferred Shares at $2.00 per share to raise $10,000,000 (the “Seed Preferred Offering”). As of June 30, 2022, the Company had issued a total of 4,660,000 Seed Preferred Shares under the Seed Preferred Offering for an aggregate dollar amount of $9,320,000. As of the date of this filing, the Seed Preferred Offering is fully subscribed, and the Company expects to close the remainder of the Seed Preferred Offering during the quarter ending December 31, 2022.
The Company, in cooperation with its major shareholder, determined to redefine its acquisition objectives to establish a platform of companies that source, harvest, and utilize the most natural compounds for holistic nutrition from around the world. Management determined to pursue these opportunities in the wellness sector based on their evaluation of a heightened and growing awareness and interest in wellness which management further believes has been stimulated by a values reset during the pandemic.
Current Information
Effective January 10, 2022, Mr. Larson Elmore resigned as the President, Chief Executive Officer and director of the Company. Mr. Elmore resigned as the Company’s Chief Financial Officer, Treasurer and Secretary on June 6, 2022. Simon Belsham was appointed as the Company’s President, Chief Executive Officer and a director on January 10, 2022 and Amit Kapur was appointed Chief Financial Officer, Treasurer and Secretary on June 6, 2022.
Concurrently in January 2022, members appointed to the Board include Simon Belsham, Steven Bartlett, Poonacha Machaiah and Anabel Oelmann.
On March 23, 2022, the Board appointed Kay Koplovitz to the Board and as Chairman of the Board effective April 1, 2022.
On March 10, 2022, the company entered into and closed a share purchase agreement with Anabel Oelmann pursuant to which the company acquired 100% of the issued and outstanding capital stock of NOEO GmbH, a German company (“NOEO”), involved in direct-to-consumer brand focusing on adaptogenic herbs and currently focused on three key products which include joint, memory and digestive complexes derived from mushrooms, in exchange for cash consideration of EUR25,000 (USD$29,800). Ms. Oelmann is a director of the Company and was the sole shareholder of NOEO. On closing, NOEO became a wholly owned subsidiary of the Company, and the Company exited from shell status on the closing date, March 10, 2022.
With the initial acquisition of NOEO the Company commenced the launch of it’s business plan. Having sufficient funds on hand to commence our plan, and with the recent expansion of our operational and management teams, the Company intends to fund the growth of NOEO and acquire other related projects in the health and wellness sector.
On June 22, 2022, with a market effective date of June 23 2022, FINRA approved a voluntary ticker change for The Healing Company Inc. from “THCC” to “HLCO.”
On June 10, 2022, the Board of the Company adopted The Healing Company Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Omnibus Plan”). Adoption of the 2022 Omnibus Plan was also approved on June 10, 2022 by the stockholders holding a majority of the outstanding voting capital stock of the Company. Under the 2022 Omnibus Plan, non-employee members of the Board and employees and officers of the Company and its affiliates, including all executive officers, are eligible to receive options, stock appreciation rights, restricted stock, restricted stock units, stock grants, stock units, performance shares and performance units (all capitalized terms shall have those meanings given to them in the 2022 Omnibus Plan). The 2022 Omnibus Plan will be administered by the Board. The total number of shares of common stock of the Company reserved and available for grant pursuant to the 2022 Omnibus Plan is ten million (10,000,000).
The Company received cash proceeds of $9,320,000 from non-US persons in respect to its private offering of Seed Preferred Shares for the purchase of 4,660,000 shares of Seed Preferred stock during fiscal 2022. The Private Offering of up to 5,000,000 Seed Preferred shares is fully subscribed, with $680,000 remaining proceeds for 340,000 seed preferred shares expected to be received during the quarter ending December 31, 2022.
On July 8, 2022, our Board and shareholders holding a majority of our common stock approved an amendment to our Amended and Restated Articles of Incorporation, as amended and restated on October 7, 2021, to increase the Preferred Shares designated as Seed Preferred Stock from 5,000,000 authorized shares of Seed Preferred Stock to 7,800,000 shares of Seed Preferred Stock. A Certificate of Amendment including amended articles of incorporation was filed with the Nevada Secretary of State on July 19, 2022.
On August 4, 2022, the Company entered into a credit agreement (the “Agreement”) with certain lenders (the “Lenders”) who agreed to extend a credit facility to the Company consisting of up to $75,000,000 (which amount may be increased up to $150,000,000 in accordance with the terms of the Agreement) in aggregate principal amount of term loan commitments (“Term Loans”), the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria established by an administrative agent (the “Administrative Agent”) party to the Agreement. Term Loans anticipated to be funded under the Agreement will be in a minimum principal amount of at least $400,000, bear an annual interest rate of 12% and will mature the earlier of 12 months following the final draw down under a Term Loan and a date on which an event of default, as defined in the Agreement, occurs. Term Loans will be repayable in full on their maturity dates and may be voluntarily prepaid in full (but not in part) at the option of the Company and prepaid on a mandatory basis on the sale of the assets underlying a particular Term Loan. Interest on any outstanding Term Loans will be paid monthly. The Company paid an upfront fee of $562,500 to the Administrative Agent for the benefit of the Lenders and will pay the Administrative Agent, for its own account, a quarterly fee of $12,500. The Company and each of its subsidiaries (the “Subsidiaries”) have agreed to secure all of their future anticipated obligations under the Agreement by granting the Lenders a first priority lien on substantially all of their assets and the Company has agreed to secure all future obligations to be incurred under the Agreement by granting to a collateral agent, for the benefit of the lenders, a first priority lien on all of the capital stock of the Subsidiaries held by the Company. In connection with the transactions contemplated by the Agreement, the Company has also issued to the Administrative Agent a seven-year warrant to purchase, for its own account, up to 1,300,123 shares of the Company’s Seed Preferred Stock at an exercise price of $2.00 per share. The Company formed a wholly owned subsidiary, HLCO Borrower, LLC to facilitate this agreement.
The Company has been negotiating a number of potential acquisitions, one of which has been with Your Super, Inc. and its indirectly wholly owned subsidiary, Your Superfoods, Inc, Delaware corporations (together, the “Your Super Companies”). On September 9, 2022, the Company entered into a loan purchase and sale agreement (the “Agreement”) with CircleUp Credit Advisors LLC (the “Seller”) pursuant to which it agreed to purchase from the Seller all loans and loan accommodations (the “Loan”) made by the Seller to the Your Super Companies. Pursuant to the terms of the Agreement, as consideration for purchase of the Loan, the Company made a cash payment of $2,000,000 to the Seller and issued the Seller a warrant (the “Warrant”) to purchase 1,500,000 restricted shares of the Company’s common stock. This Warrant will begin to vest on the one-year anniversary of the closing of the purchase of the Loan with 12.5% of the Warrant amount (187,500 shares) vesting on that date and the remaining portion of the Warrant vesting in seven quarterly installments of 187,500 shares each over the next seven quarters. Vesting of the Warrant will be accelerated upon the occurrence of a sale or merger of the Company. The Warrant will terminate on the seventh anniversary of the closing date and will be subject to customary adjustments of the warrant price and number of shares for splits, stock dividends, recapitalizations and the like. As of the date of the Agreement, the outstanding principal amount of the Loan along with accrued but unpaid interest was approximately $7.614 million. The Loan stopped accruing interest on July 22, 2022. The Company purchased the Loan to provide additional time for the negotiation of the Company’s possible acquisition of the assets of Your Super Inc.
The Company has entered into negotiations to acquire a health supplements company that is on a mission to significantly improve the lives of everyone it reaches. With focus on nutritional balance, transparency of ingredients, and optimizing of quality and efficacy, this strategic acquisition, if consummated, would allow the Company to expand its capabilities across both current and future brands. This target acquisition reported approximately $10 million in gross revenue last year, with strong profitability. The Company also expects to conclude this transaction during the second quarter of fiscal 2023, however, the transaction will be subject to the finalization of negotiations, several material closing conditions and the completion of a due diligence investigation and there can be no assurance that this transaction will be consummated.
The Company intends to build a community of integrated healing brands by identifying and acquiring early stage, high potential brands within selected wellness categories. Our plan is to build individual market impact through enhanced branding, a credible narrative, social conversation and improved accessibility by positioning. Our first acquisition was of NOEO, a company involved in direct-to-consumer brand focusing on adaptogenic herbs, and we are currently negotiating on a number of further acquisitions.
Current Operations - NOEO GmbH
Company Information
NOEO, our wholly owned subsidiary, is a company incorporated pursuant to the laws of Germany which commenced operations in early 2021 through direct-to-consumer sales of certain branded CDB oils and adaptogen products including mushroom complexes in the form of capsules. NOEO was originally founded by Greenstein Nutraceuticals Ltd. (“Greenstein), a German corporation also co-founded by Ms. Anabel Oelmann, a recently appointed director of our Company, and a certified nutritionist and health coach. Based on her passion for making alternative medicine more accessible, Ms. Oelmann founded NOEO for Greenstein, and subsequently acquired the shares of NOEO, including products marketed under the NOEO brand, certain formulations and recipes, trademarks and domains in a purchase and sale contract dated March 25, 2021. In March 2022, Ms. Oelmann and the Company entered into a purchase and sale agreement whereby the Company purchased NOEO in its entirety after Ms. Oelmann divested all inventory and IP rights relating to NOEO’s CBD line of products. NOEO offers three fully developed and marketable adaptogen products under the NOEO brand as more particularly described below, the domain www.noeo.co and certain trademarks as well as any product existing inventory. The Company intends to immediately undertake the ongoing sales of the recently acquired NOEO products, as well as enhanced marketing efforts to bring recognition to the brand across a wider consumer base. In line with the Company’s mandate to identify and acquire unique opportunities in naturally derived supplements, medicines, and alternative therapies, the Company may also undertake future product development to further expand its current product line and branded offerings. NOEO was originally created with the aim of providing daily wellness through natural and herbal-based products, and the Company will continue to foster that mission.
On July 27, 2022, the Company incorporated a Nevada Corporation, NOEO, Inc. and intends to transfer the assets of NOEO GMBH to the Nevada corporation where it will undertake the expansion of the NOEO business. Currently the Company is in the process of rebranding the NOEO product line in accordance with North American labeling standards and best practices.
General Information on our Business
NOEO originally launched its business in early 2021 and currently markets its retained line of adaptogen products direct to consumer across Europe and North America, with the initial sales of its line of mushroom complexes concentrated in Germany. Our ongoing sales effort will focus on the three key products which include mushroom joint, memory and digestive complexes. As stated above, NOEO may determine to undertake research and development and/or enter into licensing agreements to expand its current wellness focused product line, targeting complementary non-regulated herbs and products, such as Greek essential oils, Indian Ayurveda, and Chinese herbs. Our website is located at http://www.noeo.co.
Our Products
NOEO was created with the mission to support our environment. All NOEO products are formulated using natural and cruelty-free ingredients. All NOEO products are plant based and organic. We don’t use chemicals, pesticides, or other non-natural ingredients. Our products are lab-tested and manufactured in high-end medical grade facilities in Germany following Good Manufacturing Practices (“GMP”). We work together with labs that do not test on animals.
Product Portfolio
The Company currently offers three products that have been strategically developed to fit with its objective of delivering wellness products that meet its customers’ demands for stringent quality and consistency. The Company currently markets its products under the NOEO trade name. The Company’s current product category is human ingestible products. Our products are made with pharma grade materials and compounds to ensure the best quality for our customers. Our ingredients have been carefully selected with extensive research, effort, and lots of love. Our packaging is eco-friendly and biodegradable.
During NOEO’s financial year ended December 31, 2021, revenue derived from NOEO’s human ingestible products accounted for 100% of the Company’s total revenue.
Product Line
We presently focus on products which contain adaptogens, which are non-toxic plants that are believed to help the body adapt to stressors. These include substances that may also be considered food that provide medical or health benefits, including the possible prevention and treatment of disease. They may also include herbs and roots that have been around for centuries and used in Chinese and Ayurvedic healing traditions and recently have found their way back into the health industry. We focus our product line on extracts which are highly concentrated active ingredients, from which we create complexes which are combinations of more than one extract that synergize with each other.
We offer an initial product line consisting of three mushroom complexes composed of medicinal mushrooms and herbs: A joint complex, a digestive complex and a memory complex. The products are prepared as capsules which can be taken orally twice a day, with any liquid.
NOEO products and their material components are not intended to prevent, diagnose, treat or cure a disease. The Company advises customers to always seek the advice of a doctor for questions regarding a medical condition, and before undertaking any diet, exercise or other health related changes to lifestyle. We believe that food supplements are no substitute for a balanced diet. The Company recommends that customers follow the instructions on the product packaging and not to exceed the stated recommended daily doses.
Joints Complex
![thcc_10kimg2.jpg](https://content.edgar-online.com/edgar_conv_img/2022/10/12/0001477932-22-007571_thcc_10kimg2.jpg)
Our Mushroom Complex “Joints” is a composition of medicinal herbs, Shitake, Maitake and Auricularia mushrooms, and essential vitamins, formulated to soothe and help redevelop joints and cartilage tissue. This product is 100% Vegan.
It is estimated that one in four adults suffers from joint pain in the form of rheumatoid arthritis and/ or osteoarthritis. The main reason being the degeneration of joint cartilage. We’ve teamed up with a number of consultants in the field, to come up with our own, unique formula for Mushroom Complex Joints. The composition consists of medicinal herbs and mushrooms, and essential vitamins that help control inflammatory responses in the body while aiding mobility to keep joints healthy and strong both now and in later life. This product has been designed to protect joint cartilage and promote the buildup of new cartilage.
Key attributes:
The Joint complex:
| · | improves general blood circulation and counteracts the process of muscle reduction |
| · | Shiitake Mushroom: has been shown to reduce rheumatoid arthritis. |
| · | Maitake Mushroom: has been shown to reduce rheumatoid arthritis. |
| · | Auricularia Mushroom: has been shown to enhance blood flow. |
| · | Methylsulfonylmethane or “MSM”: has been shown to be effective for reducing symptoms of osteoarthritis and conferring antioxidant protection to the body. |
| · | Rose Hip: used to treat rheumatoid diseases like osteoarthritis and rheumatoid arthritis. It improves joint health by reducing pain and stiffness. |
| · | Curcumin: has anti-inflammatory and antioxidative properties. |
| · | Aceola/ Grape Seed Extract: may enhance flood flow. |
| · | Vitamin E: boosts the immune system. |
| · | Manganese: can reduce osteoarthritis pain. |
| · | Copper: is said to help reduce inflammation in the joints. |
| · | Selenium: is said to help prevent rheumatoid arthritis. |
Digestion Complex
![thcc_10kimg3.jpg](https://content.edgar-online.com/edgar_conv_img/2022/10/12/0001477932-22-007571_thcc_10kimg3.jpg)
Our Mushroom Complex “Digestion” is a composition of medicinal herbs, Hieracium erinaceous/Lion’s Mane mushrooms, and essential vitamins, formulated to aid your digestion and many associated issues, like bloating or cramps.
We believe Mushroom Complex Digestion to be a true cocktail of superfoods for your gut and digestive system. More and more people are suffering from digestive issues, like bloating, general unwellness or abdominal pain. Recent studies have shown how closely digestive issues are linked to people’s psyches. We’ve teamed up with experts in the field to come up with Mushroom Complex Digestion’s unique formula, consisting of medicinal herbs and mushrooms, and essential vitamins, that help support a happy gut, general wellbeing and healthy digestion. Mushroom Complex Digestion is 100% vegan.
Key attributes:
| · | Hieracium erinaceous/Lion’s Mane (Mushroom): has been shown to be beneficial for people with inflammatory bowel disease, may also boost immune function and encourage the growth of good bacteria in the gut. |
| · | Artichoke Extract: improves fat digestion. |
| · | Fennel extract: can help the smooth muscles of the gastrointestinal system relax and reduce gas, bloating, and stomach cramps. |
| · | Taraxacum officinale/ dandelion has a diuretic effect when ingested. |
| · | Broccoli: helps keep the stomach’s lining healthy. |
| · | Acerola/ Grape Seed Extract: is said to protect the gut from inflammation. |
| · | Vitamin C: is an essential vitamin with antioxidant properties. |
| · | Vitamin E: is an essential vitamin with antioxidant properties. |
| · | Thiamine (Vitamin B1): helps regulate appetite. |
| · | Riboflavin (Vitamin B2): helps break down proteins, fats, and carbohydrates. |
| · | Vitamin B6: helps process digested proteins. |
| · | Cobalamin (Vitamin B12): helps absorb vitamins properly. |
| · | Vitamin D3: improves gut flora and metabolic syndrome. |
| · | Niacin (Vitamin B3): is required for the proper function of fats and sugars in the body. |
| · | Pantothenic acid (Vitamin B5): helps maintain a healthy digestive system and assists the body in using other vitamins. |
| · | Folic acid: helps regulate digestion. |
Memory Complex
![thcc_10kimg4.jpg](https://content.edgar-online.com/edgar_conv_img/2022/10/12/0001477932-22-007571_thcc_10kimg4.jpg)
Our Memory Mushroom Complex is believed to be a true kickstarter for your cognitive functions. A composition of medicinal herbs, Hieracium erinaceous and Cordyceps mushrooms, and essential vitamins, formulated to give your brain a boost.
Our Mushroom Complex “Memory” is believed to be a true superfood for your brain and cognitive functions. A composition of medicinal herbs and mushrooms, and essential vitamins, formulated to aid people who are experiencing lack of concentration, general fatigue or have trouble remembering things. It’s also meant to be used by people who want to enhance their performance, in work life, academics or sports. We’ve teamed up with a number of experts in the field, to come up with our own, unique formula for Mushroom Complex Memory.
Memory Mushroom Complex is 100% vegan.
Key attributes:
| · | Hieracium erinaceous/Lion’s Mane: proven to be a powerful cognitive enhancer. |
| · | Cordyceps: has been shown to be anti-aging and pro-vitality. |
| · | Panax Ginseng: has shown to be effective for mood, immunity, and cognition. |
| · | Ginkgo biloba: most commonly ingested herb for brain health - said to boost cognition especially among the elderly. |
| · | Saffron: low dose supplementation appears to confer antidepressant properties. |
| · | Rho Diola rosea: proven to reduce fatigue and exhaustion in prolonged stressful situations - also said to have neuroprotective properties. |
| · | Acerola: is said to enhance blood flow. |
| · | Vitamin B1, B2, B3, B5, B6, B7, B9, B12: all of which are proven to promote the healthy development of brain cells and help to maintain memory and cognitive abilities. |
Our key product components are functional mushrooms:
What is Reishi?
The Reishi mushroom (Ganoderma lucidum) is an Asian natural remedy against a lot of ailments. It has been used for over 4,000 years and is also known as ‘mushroom for immortality.’ Traditional Chinese medicine claims that the Reishi is the most powerful resource for sustaining human health in all its forms.
What is Chaga?
The Chaga mushroom (Inonotus obliquus) is a parasite mushroom that grows exclusively on birch trees. Its origin is northeastern areas like the Baltics, Scandinavian countries, and Russia. However, Chaga can be found in Europe too. Chaga has been around for a long time in traditional nomads and Chinese medicine, it has various interesting qualities. The mushroom was mainly used as a tonic to balance the body functions. The high melatonin content, for example, helps to keep a healthy sleep-wake rhythm and improves the quality of sleep as well. It has high antioxidant potential and helps to protect the skin because of compounds like betulin and beta-glucan. It calms the guts and can help get rid of stomach issues faster.
What is Shiitake?
Also called the king of the mushrooms, Shiitake (Lentinula edodes) is already used for over 2,000 years and cultivated in eastern Asia since around 1.000 CE. Next to its medical value, it has an excellent taste and is often used in Asian dishes. The main effect of Shiitake is the perfectly balanced impact on the intestinal flora. Shiitake has a strong antimicrobial effect on harmful bacteria while simultaneously not acting against the beneficial intestinal bacteria like bifido- and lactic bacteria and helps rehabilitating the intestines. Additionally, Shiitake is an amazing mushroom for the regulation of lipid metabolism. It can help lowering cholesterol levels in the blood.
What is Maitake?
After the cultivation of Maitake (Grifola frondosa) was successful in the 1980s, the mushroom started its triumphal march around the world. Before, a legend states that Maitake was extremely rare, that when foragers found one, they danced of happiness. Hence, the nickname ‘dancing mushroom.’ Maitake can have a tremendous anti-diabetic effect caused by a specific glycoprotein that raises glucose tolerance while not affecting the insulin level. The potential to decrease blood sugar levels was also discovered in the mushroom, hence Maitake can be used as a preventive measure against diabetic risks. By influencing the renin-angiotensin-system Maitake can help lower high blood pressure and reduce the storage of fat into the tissue.
What is Lion’s Mane/Hieracium erinaceous?
Lion’s mane mushrooms, also known as hou tou gu or yamabushitake, are large, white, shaggy mushrooms that resemble a lion’s mane as they grow. With both culinary and medical uses they can be enjoyed raw, cooked, dried or steeped as a tea and contain bioactive substances that are believed to have beneficial effects on the body, especially the brain, heart and gut. Key benefits associated with Lion’s Mane are protection against dementia, relieve of mild symptoms of depression and/or anxiety, reduced risk of heart disease, protection against ulcers and improved management of symptoms of diabetes, among other benefits.
What is Cordyceps?
Cordyceps mushrooms are grown throughout the world. Though technically classified as entomopathogenic fungi, and not mushrooms, meaning that in nature, they grow as parasites on insects, there are two varieties of Cordyceps that have been extensively researched for their significant health and wellness properties. Cordyceps are recognized for their ability to support vitality, endurance, and stamina as a result of the naturally occurring compounds in the mushroom that are believed to improve the availability of oxygen in the blood. Used extensively in traditional Chinese and Tibetan medicine, Cordyceps is believed to be a vitality elixir that combats illness, improves stamina and increases longevity.
What is Auricularia?
Auricularia or “Wood Ear” mushrooms have also been a staple in Traditional Chinese Medicine for thousands of years. A mushroom species with a tough, gelatinous, elastic texture often resembling the appearance of an ear, Auricularia is bright reddish brown with a purplish tint. The genus Auricularia is comprised of 10–15 recognized species worldwide and believed to help improve blood circulation, reduce inflammation and improve heart health. Secondary benefits are believed to include potential antioxidant properties reducing the risk of chronic diseases and detoxifying the body.
What are Adaptogens?
It is possible to protect your body from both physical and mental stress by improving your tolerance level towards exhaustion. Adaptogens, as the name itself hints, are non-toxic plants that help the body adapt to stress. This can be all kinds of stress, whether it is physical, chemical, or biological. Especially current young professionals experience higher stress levels than previous generations, partly due to rushing lifestyles, tighter schedules and increasing competition. Adaptogens, also known as adaptogenic herbs, are not new. They have been used in Ayurvedic and Chinese traditional healing methods but have now gained popularity among the global health and wellness community.
Stress is a physiological condition, that is associated with the nervous, endocrine (hormones) and immune system. It can be an external event, environmental condition or a chemical or biological agent that triggers the body to release various hormones that result in physiological changes. A person’s response to stress that is not adequate, or too overwhelming or long term can have serious damage on the body such as disease or even death. This is referred to maladaptive stress, and it is what adaptogens are said to help the body to overcome.
Are adaptogens effective?
There is a range of adaptogens, each with a specific function. Their function with the human body can be compared to regular exercise. Each time you exercise your muscles adapt to the stress they experience and thus become stronger. Similarly, adaptogens interact with the pituitary gland, adrenal gland and hypothalamus to build resistance and improve the coping system of the body. A continuous treatment with these natural herbs helps the body achieve homeostasis and ensures the functioning of your immune and energy levels.
As a natural remedy, adaptogens can be added to your diet in various ways. You can add pre-mixed powders to your meals, drink adaptogen teas or take them in the form of supplements. Supplements are pre-measured capsules that have the advantage of providing the precise amount that your body needs. It is important to understand that adaptogens function best as an extension to a mindful and healthy lifestyle. If you do not take any other measures to managing your chronic stress, adaptogens will not provide you with the solution you are hoping to get.
Do adaptogens have side effects?
Always consult a doctor before introducing adaptogens to your diet or routine. There are some studies that suggest that common herbal supplements may interact negatively with prescription medications.
However, there is little evidence to suggest that adaptogens can cause side effects, though like any plant, they can be allergenic.
The most efficient way to include adaptogens to your lifestyle is by identifying specific ailments you are experiencing. We have sourced a comprehensive range of adaptogens allowing you to choose what is right for you.
The benefits of adaptogens:
| · | Improve attention |
| · | Increase endurance (in situations caused by fatigue) |
| · | Lower stress induced disorders and impairments in the body |
| · | Balance hormone levels |
| · | Keep cortisol (the stress hormone) levels and other hormone levels in check’ |
| · | Fight fatigue (that results from overkill of physical or emotional stress) |
| · | Combat the impact that stress has on cognitive function |
| · | Stimulate mental performance that has been impacted by stress |
| · | Normalize body functions |
| · | Boost the immune system (that has been impacted by stress) |
| · | Fight the symptoms caused by elevated cortisol levels (such as anxiety, depression, fatigue, high blood pressure, insulin resistance and obesity) |
| · | Increase physical stamina (improve energy levels) |
| · | Improve the function of organs (such as the liver and adrenal glands) |
| · | Improve the function of body systems (such as the gastrointestinal system) |
Marketing
We currently market our products online both directly and through an affiliate program. NOEO currently is able to ship within Europe, USA, Canada and Australia. We are working to further extend our shipping area. All of our orders are dispatched by DHL.
Data Protection
If a data subject wishes to make use of special services of our company via our website, it may be necessary to process personal data. If it is necessary to process personal data and there is no legal basis for such processing, we generally obtain the consent of the data subject.
The processing of personal data, for example the name, address, e-mail address or telephone number of a person concerned, is always in accordance with the basic data protection regulation and in compliance with the country-specific data protection regulations applicable to NOEO GmbH By means of this privacy policy, our company wishes to inform the public about the type, scope and purpose of the personal data collected, used and processed by us. Furthermore, this data protection declaration informs the persons concerned about their rights.
NOEO GmbH as the person responsible for processing has implemented numerous technical and organizational measures to ensure that the personal data processed via this website is protected as completely as possible. Nevertheless, Internet-based data transmissions can generally have security gaps, so that absolute protection cannot be guaranteed. For this reason, every person concerned is free to transmit personal data to us by alternative means, such as by telephone.
Information on our policies regarding the collection of personal data and provider information can be found on our website www.noeo.co under additional links – data protection declaration.
Associates Program
We are currently finalizing our associate’s program whereby companies, individuals, social influencers, bloggers, and others can join and earn commissions on qualifying products. By joining and linking to our website, the associates will be paid commissions of up to 20% on a monthly basis. Most advertising fees are calculated as a percentage of Qualifying Revenues as determined by company policies. We also may offer advertising fees in the form of bounties or other special offers. “Qualifying Revenues” mean amounts we receive from customers’ qualifying purchases, excluding shipping, handling, and gift-wrapping fees, taxes, and service charges, and less any rebates, credit card processing fees, returns, and bad debt.
Competition and Market Position
The Company plans to invest significantly in strengthening our NOEO brand in the global marketplace. We face competition from many other companies in this sector that are larger and better capitalized than we are. As we are fairly new to the market, and there are other companies that are vertically integrated we will need to grow substantially to gain market position for our products.
Competition in the field of mushroom supplements include a variety of options including powders, capsules, teas and other blends. Certain select competitors in the space include: MUD/MTR, FourSigmatic, Now Foods, Your Super, Vital Plan, ONNIT and Goldmine, not to mention all major vitamin and supplement brands such as Jamieson, Garden of Life and Pure Encapsulations, and many more.
Development
The Company is in the process of relocating the operations of NOEO to the United States.
Government Regulations
We are subject to various federal, state and local laws, regulations and administrative practices that may affect our business in each of the jurisdictions into which we sell our NOEO products. The safety, formulation, manufacturing, processing, packaging, importation, labeling, promotion, advertising and distribution of products we sell direct to consumer are potentially subject to regulation by several government agencies, including the German Food Supplements Regulation (NemV) and the Federal Office of Consumer Protection and Food Safety (BVL); in the European Union the European Food Safety Authority (“EFSA”), and Food Supplements directive 2002/46/EC as well as other potential European regulatory bodies, in United States, the Food and Drug Administration, the United States Department of Agriculture (the “USDA”), and the Federal Food, Drug, and Cosmetic Act (the FDCA), as well as by various state and local agencies. In Canada our products are considered Natural Health Products and regulated under the Food and Drugs Act. In all markets regulation of dietary supplements may include regulation of dietary ingredients, labeling and current good manufacturing practices, which includes quality control, packaging and labeling regulations. Claims and promotional statements describing how a product affects the structure, function and general well-being of the body require adequate scientific evidence to support the claim and no statement may expressly or implicitly represent that a dietary supplement will diagnose, cure, treat or prevent a disease
In addition, advertising for dietary supplements in all markets will have various rules and regulations including guidance and protocols for product claims, claims about whether product packaging is recyclable or compostable, as well as deceptive advertising methods. Governing bodies in all jurisdictions have the ability to levy monetary sanctions and impose penalties that could severely limit a company’s business practices in the event of noncompliance. Of key importance is adequate substantiation for all claims made in advertising to avoid the use of false or misleading advertising claims.
As is common in our industry, we rely on our suppliers and contract manufacturers to ensure that the products they manufacture and sell to us comply with all applicable regulatory and statutory requirements. In general, we seek certifications of compliance, representations and warranties, indemnification and insurance from our suppliers and contract manufacturers if available. However, even with adequate certifications, representations and warranties, insurance and indemnification, any claims of non-compliance could significantly damage our reputation and consumer confidence in the products we sell. In addition, the failure of such products to comply with applicable regulatory and legislative requirements could prevent us from marketing the products or require us to recall or withdraw such products from our stores. In order to comply with applicable statutes and regulations, our suppliers and contract manufacturers have from time to time reformulated, eliminated or relabeled certain of their products and we have revised certain provisions of our sales and marketing program.
New or revised federal, state and local laws and regulations affecting our business or our industry, such as those relating to adaptogenic products could result in additional compliance costs.
Environmental Regulations
We are not aware of any material violations of environmental permits, licenses or approvals that have been issued with respect to our operations. We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations or other requirements.
While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.
Intellectual Property
On April 8, 2020, Greenstein was granted registration of a European Union Word Trademark under registration number 0181128883 and on May 22, 2020, Greenstein was granted registration of a European Union Figurative Trademark under registration number 018132357. On February 1, 2022, pursuant to an assignment agreement, application was made to transfer the trademarks to NOEO GmbH. On February 4, 2022, the application was rejected for deficiencies. The applications were resubmitted, and the trademarks were assigned to NOEO on March 10, 2022.
Employees
We currently have seven (7) employees including our Chief Executive Officer and Chief Financial Officer. We have also retained various independent consultants to serve in key operational roles, such as marketing, strategy and implementation. Further we have engaged scientific advisors in order to assist our executive management with the ongoing execution of our business plan and expansion of our current product line.
ITEM 1A. RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this report, before purchasing our securities. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this report, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
Risks Related to our Business and Industry
We are an early-stage company with a limited operating history.
While we were incorporated in Nevada in 2008, we have a limited history upon which you can evaluate our business and prospects. Our prospects must be considered in light of the risks encountered by companies in the early stages of development in highly competitive markets, particularly the markets for nutraceuticals and other health and wellness products. You should consider the frequency with which early-stage businesses encounter unforeseen expenses, difficulties, complications, delays and other adverse factors. These risks are described in more detail below.
The Company has a history of losses and may continue to incur losses in the future.
The Company has incurred both operating and net losses in each of its last fiscal years, current fiscal year, and may continue to incur losses in the future as it continues to build its brand and invest in its products. This lack of profitability limits the resources available to the Company to fund its operations and to invest in new products and services and otherwise improve its business operations. The Company cannot assure you that it will be able to operate profitably or generate positive cash flows. If the Company cannot achieve profitability, it may be forced to cease operations and you may suffer a total loss of your investment.
We have limited revenues, are currently experiencing operating losses and we may not be able to manage our businesses on a profitable basis.
We had no revenues prior to our acquisition of NOEO GmbH in March 2022. Since that time, our revenues have been limited and we have generated losses. To support our operations, we have relied on short term loans from shareholders and proceeds from sale of stock. For the year ended June 30, 2022, we generated an operating loss of $8,261,868 and a net loss of $8,264,200. For the year ended June 30, 2021, we generated an operating loss of $113,347 and a net loss of $113,347. We cannot assure you that we will achieve profitably, that we will have adequate working capital to meet our obligations as they become due or that any revenues generated will be sufficient to fund our current and planned operations. Management believes that our success will depend on our ability to successfully complete additional acquisitions of profitable nutraceutical and other health and wellness product companies. We cannot guarantee that we will be successful in completing acquisitions of any other companies or that we will successfully integrate acquired companies. We cannot assure you that even if we are successful in completing the acquisitions, we will be successful in profitably managing such companies, acquired assets and brands. We cannot assure you that we will maintain profitability for any period of time or that investors will not lose their entire investment.
If we fail to implement our business plan and complete acquisitions as planned, our mission will fail and our business will suffer accordingly.
Our mission is the creation of a world-class nutraceutical company engaged in the development, manufacture and sales of quality nutraceutical and related health and lifestyle products for distribution to an expanding global marketplace. We expect that our holding company strategy through which we plan to acquire profitable but undervalued target companies and products will enable us to accelerate the development and expansion of our product portfolio, manufacturing capacity and distribution channels. If we are unable execute our strategy of completing acquisitions as planned, we will not be able to fulfill our mission or grow our business.
We are a holding company and thus dependent on acquired subsidiaries to fund operations
Our business plan is based on our finding and acquiring high potential wellness product companies, starting in the supplement and nutraceuticals space. We define high potential as companies that have significant growth, profit and health impact potential.
If we are unable to find appropriate companies that we define as high potential in an adequate time period it may mean that we will be unable to sustain operations. Further, we will be dependent on revenues generated by our acquired subsidiaries which may not be sufficient to sustain operations and may make it more difficult to acquire additional targeted business opportunities. This may put us under operational pressure to reduce costs or raise more financing.
Our acquisitions may result in significant transaction expenses, integration and consolidation risks, and we may be unable to profitably operate our consolidated company.
We are engaged in the business of acquisition, operation and management of nutraceutical and related products. Our acquisitions may result in significant transaction expenses and present new risks associated with entering additional markets or offering new products and services and integrating the acquired companies. We may not have sufficient management, financial and other resources to integrate companies we acquire or to successfully operate new businesses and we may be unable to profitably operate our expanded company. Moreover, any new businesses that we may acquire, once integrated with our existing operations, may not produce expected or intended results.
If the large consumer packaged goods businesses or investment funds make substantial investments in the market sector in which we will operate it could push up asset prices making acquisitions harder to complete and more expensive for us.
Our growth is dependent on management’s ability to identify and acquire suitable companies for acquisition
Management will be working to identify business acquisitions and to negotiate agreements favorable to the Company. These potential acquisitions, once identified, will require financial, legal and operational due diligence. If management fails to perform this due diligence adequately then there is a risk that the acquired businesses may unfavorably impact on our operations.
Loss of members of our executive team will impact our growth
We are very reliant on our team and partners (marketing, product development, technology, sales distribution) to support companies with their growth. If we are unable to retain and motivate our core executive team or the partners that we have commercial services contracts with, then we will struggle to support the companies that we acquire with the growth to fulfill our business plan.
The growth of our acquired businesses will be dependent on the management of those businesses as well as our ability to support their growth
Our business model is reliant on the founders or executives of the companies we acquire continuing to operate the business and working with us to grow their businesses. If these founders or executives choose to leave unexpectedly post-acquisition it will create operational pressures on us to operate in their absence, and could negatively impact the culture, operation and performance at the acquired company. This could have a material impact on sales and profitability.
We may not be able to manage future growth effectively.
We expect to continue to experience significant growth. Should we keep growing rapidly, our financial, management and operating resources may not expand sufficiently to adequately manage our growth. If we are unable to manage our growth, our costs may increase disproportionately, our future revenues may not grow or may decline, and we may face dissatisfied customers. Our failure to manage our growth may adversely impact our business and the value of your investment.
Our ability to obtain continued financing is critical to the growth of our business. We will need additional financing to fund operations, which additional financing may not be available on reasonable terms or at all.
Our future growth, including the potential for future market expansion will require additional capital. We will consider raising additional funds through various financing sources, including the procurement of commercial debt financing. However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to execute our growth strategy, and operating results may be adversely affected. Any additional debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.
Our ability to obtain financing may be impaired by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.
Even if the Company obtains financing for its near-term operations, it expects that it will require additional capital thereafter. The capital needs of the Company will depend on numerous factors including: (i) profitability; (ii) the release of competitive products by competitors; (iii) the level of investment in R&D; and (iv) the amount of the Company’s capital expenditures, including acquisitions. There can be no assurance that the Company will be able to obtain capital in the future to meet its needs.
Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our business.
We believe the nutritional supplement market is highly dependent upon consumer perception regarding the safety, efficacy and quality of nutritional supplements generally, as well as of products distributed specifically by us. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, national media attention and other publicity regarding the consumption of nutritional supplements. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the nutritional supplement market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows. Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on us, the demand for our products, and our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of nutritional supplements in general, or our products specifically, or associating the consumption of nutritional supplements with illness, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products appropriately or as directed.
There is significant growth in the wellness market at the moment, especially emerging from the COVID pandemic. However, if consumer sentiment changes and people revert back from a heathy lifestyle focus then it could cause the market to decline (or grow at a slower rate than forecast) and some businesses will fail.
Our success is linked to the size and growth rate of the vitamin, mineral and supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.
An adverse change in size or growth rate of the vitamin, mineral and supplement market could have a material adverse effect on us. Underlying market conditions are subject to change based on economic conditions, consumer preferences, the impact of COVID-19 and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative.
General economic conditions, including a prolonged macroeconomic downturn, may negatively affect consumer purchases, which could adversely affect our sales, as well as our ability to access credit on terms previously obtained.
Our results are dependent on a number of factors impacting consumer spending, including general economic and business conditions; consumer confidence; wages and employment levels; the housing market; consumer debt levels; availability of consumer credit; credit and interest rates; fuel and energy costs; energy shortages; taxes; and general political conditions, both domestic and abroad. Consumer product purchases, including purchases of our products, may decline during recessionary periods. A prolonged downturn or an uncertain outlook in the economy may materially adversely affect our business, revenues and profits and the market price of our common stock, and we cannot be certain that funding for our capital needs will be available from our existing financial institutions and the credit markets if needed, and if available, to the extent required and on acceptable terms. If we cannot obtain funding when needed, in each case on acceptable terms, we may be unable to adequately fund our operating expenses and fund required capital expenditures, which may have an adverse effect on our revenues and results of operations.
We operate in highly competitive and fast-evolving industries, and our failure to compete effectively could affect our market share, financial condition and growth prospects adversely.
The markets in which we operate are characterized by rapid technological changes, frequent new product introductions, established and emerging competition, extensive intellectual property disputes and litigation, price competition, aggressive marketing practices, evolving industry standards and changing customer preferences. Accordingly, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies operating in rapidly changing and competitive markets.
The nutritional supplement industry is a large and growing industry and is highly fragmented in terms of both geographical market coverage and product categories. The market for nutritional supplements is highly competitive in all our channels of distribution. We compete with companies that may have broader product lines or larger sales volumes, or both, than we do, and our products compete with nationally advertised brand name products. These national brand companies have resources greater than ours. Numerous companies compete with us in the development, manufacture and marketing of nutritional supplements worldwide. The market is highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. We also may face competition from low-cost entrants to the industry, including from international markets. Increased competition from companies that distribute through the wholesale channel, especially the private label market, could have a material adverse effect on our business, results of operations, financial condition and cash flows as these competitors may have greater financial and other resources available to them and possess extensive manufacturing, distribution and marketing capabilities far greater than ours. We are also subject to competition in the attraction and retention of employees. Many of our competitors have greater financial resources and can offer employees compensation packages with which it is difficult for us to compete.
Our failure to appropriately respond to changing consumer preferences and demand for new products and services could harm our customer relationships and product sales significantly. The success of our new product offerings depends upon a number of factors, including our ability to:
| · | accurately anticipate customer needs; |
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| · | innovate and develop new products; |
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| · | successfully commercialize new products in a timely manner; |
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| · | price our products competitively; |
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| · | partnerships with manufacturers for our products and deliver our products in sufficient volumes and in a timely manner; and |
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| · | differentiate our product offerings from those of our competitors. |
We have also entered the digital marketing industry as a way to promote the products and brands that we sell. We compete with other advertising service providers that may reach our target audience by means that are more effective than our services. Further, if such other providers of advertising have a long operating history, large product and service suites, more capital resources and broad international or local recognition, our operating results may be adversely affected if we cannot successfully compete.
The digital advertising market is rapidly developing. Accordingly, the development of the markets in which we operate makes it difficult to evaluate the viability and sustainability of our business and its acceptance by advertisers and clients. We cannot assure you that we will be profitable every year. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in operating losses.
We may not be able to compete effectively in some or all our markets, and our attempt to do so may require us to reduce our prices, which may result in lower margins. Failure to compete effectively could have a material adverse effect on our market share, business, results of operations, financial condition, cash flows and growth prospects.
Growth in a digital world is very reliant on a limited number of marketing platforms and their operational changes.
Google and Meta Group still command >50% of all digital marketing spent in the US and Europe. They are key to attract consumers to our products. In addition, Apple is an important operator that facilitates these businesses and has recently made significant changes to its data privacy rules that have impacted many companies’ abilities to operate efficiently. Changes to the operation or algorithm of any of these companies could significantly impact our ability to grow any acquired businesses if we fail to anticipate and plan for changes that may occur.
In additional variations on marketing costs through these platforms could impact our marketing expenditure and therefore ability to generate revenues.
Significant changes in costs or material disruptions to our service providers could negatively impact our ability to sell or achieve profitability
We will largely be working with Shopify and other partners for our e-commerce infrastructure. Any significant changes in costs or material disruptions in service would greatly impact our ability to sell our products or to achieve profitability.
We face significant competition in the wellness industry
There is significant competitor risk in this industry. Barriers to entry are low there is minimal regulation that governs the space and new entrants every week. This may impact on our ability to grow our business as it may impact sales of our existing products or the acquisition or introduction of new products with companies better funded than ours.
We may face increased competition from smaller companies in our industry which could impact our business
Increased competition from smaller companies in our market space could also impact our business. This competition could drive up customer acquisition costs, reduce customer loyalty, and push up supply prices. Further, should these competitors experience health or safety issues, that could also impact the reputation of the overall market segment and thus impact our operations.
New entrants may have better products or more effective marketing than us for similar products which could impact sales of existing products and businesses we may have acquired
An inability to obtain profitable operating margins could adversely affect our results of operations.
The success of any of our acquired entities, including NOEO, our initial controlled and operating subsidiary, will depend on the development of operating parameters to ensure our product expansion provides profitable margins by leveraging efficiencies of scale, operating cost discipline, negotiating suitable contract terms with contract manufacturers and working to secure ingredients at acceptable costs. If we are unable to successfully manage the potential difficulties associated with growth, we may not be able to capture the efficiencies of scale that we expect from expansion and we may not be able to achieve our goals with respect to operating margins. As a result, our operating margins may not provide the expected profitability which could have a material adverse effect on our business, financial condition and results of operations and adversely affect the price of our common stock.
COVID 19 or another pandemic could greatly impact our business
While we believe we are emerging from the restrictions of COVID 19, there can be no assurance that we will not be impacted by a resurgence of this virus or another pandemic. Any such events could place substantive restrictions and impact on the industry. We could face closing of borders, restricting of supply chains, closing of shops and reductions in sales.
The efficacy of our ingredients may be limited
Many of the ingredients used in supplements haven’t undergone significant clinical or laboratory testing like pharmaceutical drugs do and therefore there are some risks that they may not have the efficacy or the impact that the general wisdom or science suggests they might. This is a risk for the entire market or for individual products.
Related to this there is often “fads” where some products are popular for short periods of time based on celebrity marketing which may increase their profile and popularity. Investing in fads carries significant risks that you may buy at peak valuations and then the valuation may decline over time as the fad becomes unpopular or a new fad captures consumer interest.
Supply chain disruptions could impact our business
If there are shortages of supply, delay in supply chains or increases in supply costs then all of these could mean the acquired businesses in our portfolio run out of stock which could impact revenue, profitability or both. Should we expand our business to include retailers of our products, we can expect that there will be supply contracts and that those contracts will have service and supply and quality requirements. These will likely incur penalties should we fail to meet these requirements that could impact profitability and future revenue with these retailers.
Our inability to accurately forecast demand for our products could impact our profitability
Our business will be dependent on maintaining in-stock products for distribution. Should we fail to accurately forecast demand for our products resulting in over or under stocking of products we could impact on our revenues due to product wastage, missed sales due to our inability to deliver product timely, and the limitation placed on our available working capital due to overstocking of products.
We rely on our manufacturing operations to produce the vast majority of the nutritional supplements that we sell, and disruptions in our manufacturing system or losses of manufacturing certifications could affect our results of operations adversely.
Our products will be manufactured from raw ingredients in to powders and capsules. Errors or defects in our manufacturing or packaging operations could our product efficacy, our reputation and possibly consumer’s health. These sorts of errors could also result in litigation from our consumers. We currently operate manufacturing facilities in [Germany?]. All our domestic and foreign operations manufacturing products for sale to the United States are subject to good manufacturing practices, or GMPs, promulgated by the FDA and other applicable regulatory standards, including in the areas of environmental protection and worker health and safety. Any significant disruption in our operations at any of these facilities, including any disruption due to any regulatory requirement, could affect our ability to respond quickly to changes in consumer demand and could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, we may be exposed to risks relating to the transfer of work between facilities or risks associated with opening new facilities or closing existing facilities that may cause a disruption in our operations. Although we have implemented GMPs in our facilities, there can be no assurance that products manufactured in our plants will not be contaminated or otherwise fail to meet our quality standards. Any such contamination or other quality failures could result in costly recalls, litigation, regulatory actions or damage to our reputation, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We are dependent on certain third-party contract manufacturers and suppliers.
All of our current and planned products are expected to be produced by third party contract manufacturers. We also purchase certain important ingredients and raw materials from third-party suppliers.. Real or perceived quality control problems with products manufactured by contract manufacturers or raw materials outsourced from certain suppliers could negatively impact consumer confidence in our products or expose us to liability. In addition, disruption in the operations of any such manufacturer or supplier or material increases in the price of raw materials, for any reason, such as changes in economic and political conditions, tariffs, trade disputes, regulatory requirements, import restrictions, loss of certifications, power interruptions, fires, earthquakes, hurricanes, drought or other climate-related events, war or other events, could have a material adverse effect on our business, results of operations, financial condition and cash flows. Our products planned for sale in the United States will be subject to good manufacturing practices, or GMPs, promulgated by the FDA and other applicable regulatory standards, including in the areas of environmental protection and worker health and safety. Any significant disruption in our operations at any of our selected contract manufacturing facilities, including any disruption due to any regulatory requirement, could affect our ability to respond quickly to changes in consumer demand and could have a material adverse effect on our business, results of operations, financial condition and cash flows. Additionally, we may be exposed to risks relating to the transfer of work between facilities or risks associated with opening new facilities or closing existing facilities that may cause a disruption in our operations. Although we have implemented GMPs in our facilities, there can be no assurance that products manufactured in our plants will not be contaminated or otherwise fail to meet our quality standards. Any such contamination or other quality failures could result in costly recalls, litigation, regulatory actions or damage to our reputation, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Should we fail to ensure that our information on our products is compliant we may face a loss of business, regulatory sanctions or investigations and litigation
Products, websites and marketing materials will require compliant wording around ingredients and claims. Failure to be compliant or misleading images and words may result in litigation, reputation impact, lost sales or regulatory investigation
We may not raise sufficient capital to undertake our planned operations and thus we are at risk of being unable to maintain the continuity of our planned business
Our business plan initially requires completion of the financing undertaken to raise $10,000,000 by way of the sale of our Seed Preferred Stock of which $9,320,000 was raised as of June 30, 2022. We will require further equity financing in 2022 and 2023 to sustain operations until we have acquired operating companies and grown their operations to a significant enough scale that we can be viable as a standalone business. Volatility in the macroeconomic and geopolitical environment could negatively impact our ability to raise further equity financing which would put pressure on our operations, existing businesses, shareholders and ultimately cause further dilution or cash flow issues that may mean we cannot maintain continuity of our business operations
Our management is domiciled in the United State and Europe which may present some limited risk to operations
Our management team is spread out geographically across the US and Europe and so any further restrictions in travel due to a pandemic may present some limited risk to our ability to operate, build a team culture and effectively operate our business.
Our success depends on the experience and skill of our board of directors, executive officers and key personnel, whom we may not be able to retain and we may not be able to hire enough additional personnel to meet our needs.
We are dependent on Simon Belsham (President, Chief Executive Officer) and Amit Kapur (Chief Financial Officer). There can be no assurance that they will continue to be employed by us for a particular period of time. The loss of any member of the board of directors or executive officer or advisors could harm our business, financial condition, cash flow and results of operations.
The success of our strategy will depend on a well-defined management structure and the availability of a management team with proven competencies in the identification, acquisition and integration of complementary companies and assets. To implement our business plan, we will need to keep the personnel that we currently have and, if our business is to grow as planned, we will need additional personnel. We cannot assure you that we will be successful in retaining our present team or in attracting and retaining additional personnel. If we are unable to attract and retain key personnel or are unable to do so in a cost-effective manner, our business may be materially and adversely affected.
A potential major customers account for a significant portion of our consolidated net sales and the loss from any major customer could have a material adverse effect on our results of operations.
We do not have a long-term contract with any major customer, and the loss of any major customer could have a material adverse effect on our results of operations. In addition, our results of operations and ability to service our debt obligations would be impacted negatively to the extent that any major customer is unable to make payments to us or does not make timely payments on outstanding accounts receivables.
If we experience product recalls, we may incur significant and unexpected costs, and our business reputation could be adversely affected.
We may be exposed to product recalls and adverse public relations if our products are mislabeled or alleged to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating income.
As a distributor of products designed for human consumption, we are subject to product liability claims if the use of our products is alleged to have resulted in injury. Our products consist of vitamins, minerals, dietary supplements and other ingredients that are classified as foods and dietary supplements, and, in most cases, are not necessarily subject to pre-market regulatory approval in the United States. Some of our products contain innovative ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. As a marketer of products manufactured by third parties, we also may be liable for various product liability claims for products we do not manufacture. We have been in the past, and may be in the future, subject to various product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. A product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which, in turn, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Insurance coverage, even where available, may not be sufficient to cover losses we may incur.
Our business exposes us to the risk of liabilities arising from our operations. For example, we may be liable for claims brought by users of our products or by employees, customers or other third parties for personal injury or property damage occurring in the course of our operations. We seek to minimize these risks through various insurance contracts from third-party insurance carriers. However, our insurance coverage is subject to large individual claim deductibles, individual claim and aggregate policy limits, and other terms and conditions. We retain an insurance risk for the deductible portion of each claim and for any gaps in insurance coverage. We do not view insurance, by itself, as a material mitigant to these business risks.
We cannot assure that our insurance will be sufficient to cover our losses. Any losses that insurance does not substantially cover could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Natural disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, terrorist acts and global political events could cause permanent or temporary facility closures, impair our ability to purchase, receive or replenish raw materials or cause customer traffic to decline, all of which could result in lost sales and otherwise adversely affect our financial performance.
The occurrence of one or more natural disasters, such as hurricanes, fires, floods and earthquakes (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks (including the recent outbreak of COVID-19), terrorist acts or disruptive global political events, such as civil unrest in locations where our facilities, contract manufacturers or suppliers are located, or similar disruptions could adversely affect our operations and financial performance. To the extent these events result in the closure of one or more of our manufacturing facilities or our corporate headquarters, or impact one or more of our contract manufacturers or key suppliers, our operations and financial performance could be materially adversely affected through lost sales. In addition, these events could result in increases in fuel (or other energy) prices or a fuel shortage, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas suppliers, the temporary disruption in the transport of goods from overseas, delay in the delivery of goods to our customers, the temporary reduction in the availability of our products, expiration of inventory, future long-lived asset impairment charges and disruption to our information systems. These events also could have indirect consequences, such as increases in the cost of insurance, if they were to result in significant loss of property or other insurable damage.
An increase in the price and shortage of supply of key raw materials could adversely affect our business.
Our products are composed of certain key raw materials. If the prices of these raw materials were to increase significantly, the costs of purchasing products from our contract manufacturers could increase significantly and we may not be able to pass on such increases to our customers. Additionally, in the event any of our, or our contract manufacturer’s, third-party suppliers or vendors become unable or unwilling to continue to provide raw materials in the required volumes and quality levels or in a timely manner, we, or our contract manufacturers, would be required to identify and obtain acceptable replacement supply sources. If we, or they, are unable to identify and obtain alternative supply sources in a timely manner or at all, our business could be adversely affected. A significant increase in the price of raw materials that cannot be passed on to customers could have a material adverse effect on our results of operations and financial condition. Events such as COVID-19, the threat of political or social unrest, or the perceived threat thereof, may also have a significant impact on raw material prices and transportation costs for our products. In addition, the interruption in supply of certain key raw materials essential to the manufacturing of our products may have an adverse impact on us and our suppliers’ ability to provide us with the necessary products needed to maintain our customer relationships and an adequate level of sales.
General trade tensions between the U.S. and China have been escalating since 2018, with multiple rounds of U.S. tariffs on Chinese goods taking effect, with some subsequently being de-escalated. Furthermore, China or other countries may institute retaliatory trade measures in response to existing or future tariffs imposed by the U.S. that could have a negative impact on our business. If any of these events continue as described, we may need to seek alternative suppliers or vendors, raise prices, or make changes to our operations, any of which could have a material adverse effect on our sales and profitability, results of operations and financial condition.
Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology and any interruption in these systems could have a material adverse effect on our business, financial condition, and results of operations.
Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology. Our information technology systems are designed and selected to facilitate order entry and customer billing, maintain customer records, accurately track purchases, manage accounting, finance and manufacturing operations, generate reports, and provide customer service and technical support. Any interruption in these systems or any interruption associated with the transition of these systems to a new information technology platform could have a material adverse effect on our business, financial condition, and results of operations.
System interruptions or security breaches may affect sales.
Customer access to, and ability to use, our websites affects our sales. If we are unable to maintain and continually enhance the efficiency of our systems, we could experience system interruptions or delays that could affect our operating results negatively. In addition, we could be liable for breaches of security on our websites, loss or misuse of our customers’ personal information or payment data. Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent credit card transactions and other security breaches, failure to prevent or mitigate such fraud or breaches may negatively affect our operating results.
We must successfully maintain and/or upgrade our information technology systems, and our failure to do so could have a material adverse effect on our business, financial condition or results of operations.
We rely on various information technology systems to manage our operations. Recently, we have implemented, and we continue to implement, modifications and upgrades to such systems and acquired new systems with new functionality. These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems. These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have a material adverse effect on our business, financial condition or results of operations.
Risks Relating to the Regulatory & Environment
Compliance with new and existing laws and governmental regulations could increase our costs significantly and adversely affect our results of operations.
The processing, formulation, safety, manufacturing, packaging, labeling, advertising and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including the FDA, the Federal Trade Commission, or the FTC, the Consumer Product Safety Commission, or the CPSC, the U.S. Department of Agriculture, or the USDA, and U.S. Environmental Protection Agency, or the EPA. These activities are also regulated by various state, local and international laws and agencies of the states and localities in which our products are sold. Government regulations may prevent or delay the introduction, or require the reformulation, of our products, which could result in lost revenues and increased costs to us. For instance, the FDA regulates, among other things, the composition, safety, manufacture, labeling and marketing of dietary ingredients and dietary supplements (including vitamins, minerals, herbs, and other dietary ingredients for human use). Dietary supplements and dietary ingredients that do not comply with FDA’s regulations and/or the Dietary Supplement Health and Education Act of 1994 will be deemed adulterated or misbranded. Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded, and the FDA may take enforcement action against any adulterated or misbranded dietary supplement on the market. The FDA has broad enforcement powers. If we violate applicable regulatory requirements, the FDA may bring enforcement actions against us, which could have a material adverse effect on our business, prospects, financial condition, and results of operations. The FDA may not accept the evidence of safety for any new ingredient that we may wish to market, may determine that a particular supplement or ingredient presents an unacceptable health risk based on the required submission of serious adverse events or other information, and may determine that a particular claim or statement of nutritional value that we use to support the marketing of a supplement is an impermissible drug claim, is not substantiated, or is an unauthorized version of a “health claim.” Any of these actions could prevent us from marketing particular nutritional supplement products or making certain claims or statements with respect to those products. The FDA could also require us to remove a particular product from the market. Any future recall or removal would result in additional costs to us, including lost revenues from any products that we are required to remove from the market, any of which could be material. Any product recalls or removals could also lead to an increased risk of litigation and liability, substantial costs, and reduced growth prospects.
Additional or more stringent laws and regulations of dietary supplements and other products have been considered from time to time. These developments could require reformulation of some products to meet new standards, recalls or discontinuance of some products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of some products, additional or different labeling, additional scientific substantiation, or other new requirements. Any of these developments could increase our costs significantly. In addition, regulators’ evolving interpretation of existing laws could have similar effects.
Our failure to comply with FTC regulations could result in substantial monetary penalties and could adversely affect our operating results.
The FTC exercises jurisdiction over the advertising of dietary supplements and requires that all advertising to consumers be truthful and non-misleading. The FTC actively monitors the dietary supplement space and has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. Failure to comply with applicable regulations could result in substantial monetary penalties, which could have a material adverse effect on our financial condition or results of operations.
Our operations are subject to environmental and health and safety laws and regulations that may increase our cost of operations or expose us to environmental liabilities.
We are subject, directly or indirectly, to numerous federal, state, local and foreign environmental and health and safety laws and regulations governing our operations, including the handling, transportation and disposal of our non-hazardous and hazardous substances and wastes, as well as emissions and discharges from our operations into the environment, including discharges to air, surface water and groundwater. Failure to comply with such laws and regulations could result in costs for remedial actions, penalties or the imposition of other liabilities. New laws, changes in existing laws or the interpretation thereof, or the development of new facts or changes in their processes could also cause us to incur additional capital and operating expenditures to maintain compliance with environmental laws and regulations and environmental permits. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of our operations, including operations at our manufacturing facility. We also could incur monetary fines, civil or criminal sanctions, third-party claims or cleanup or other costs as a result of violations of or liabilities under such requirements.
We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or for properties to which substances or wastes that were sent in connection with current or former operations at our facilities. The presence of contamination from such substances or wastes could also adversely affect our ability to sell or lease our properties, or to use them as collateral for financing.
Failure to comply with federal, state and international privacy, data protection, marketing and consumer protection laws, regulations and industry standards, or the expansion of current or the enactment or adoption of new privacy, data protection, marketing and consumer protection laws, regulations or industry standards, could adversely affect our business.
We are subject to a variety of federal, state and foreign laws, regulations and industry standards regarding privacy, data protection, data security, marketing and consumer protection, which address the collection, storing, sharing, using, processing, disclosure and protection of data relating to individuals, as well as the tracking of consumer behavior and other consumer data. We are also subject to laws, regulations and industry standards relating to endorsements and influencer marketing. Many of these laws, regulations and industry standards are changing and may be subject to differing interpretations, are costly to comply with or inconsistent among jurisdictions. For example, the FTC expects companies like ours to comply with guidelines issued under the Federal Trade Commission Act that govern the collection, use, disclosure, and storage of consumer information, and establish principles relating to notice, consent, access and data integrity and security. The laws and regulations in many foreign countries relating to privacy, data protection, data security, marketing and consumer protection often are more restrictive than in the United States, and may in some cases be interpreted to have a greater scope. Additionally, the laws, regulations and industry standards, both foreign and domestic, relating to privacy, data protection, data security, marketing and consumer protection are dynamic and may be expanded or replaced by new laws, regulations or industry standards.
We strive to comply with applicable laws, policies, contractual and other legal obligations and certain applicable industry standards of conduct relating to privacy, data security, data protection, marketing and consumer protection. However, these obligations and standards of conduct often are complex, vague, and difficult to comply with fully, and it is possible that these obligations and standards of conduct may be interpreted and applied in new ways and/or in a manner that is inconsistent with each other or that new laws, regulations or other obligations may be enacted. It is possible that our practices may be argued or held to conflict with applicable laws, policies, contractual or other legal obligations, or applicable industry standards of conduct relating to privacy, data security, data protection, marketing or consumer protection. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, FTC, other regulatory requirements or orders or other federal, state or, as we continue to expand internationally, international privacy, data security, data protection, marketing or consumer protection-related laws, regulations, contractual obligations or self-regulatory principles or other industry standards could result in claims, proceedings or actions against us by governmental entities or others or other liabilities or could result in a loss of consumers. Any of these circumstances could adversely affect our business.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For instance, with the increased focus on the use of data for advertising, the anticipation and expectation of future laws, regulations, standards and other obligations could impact us. In addition, as we expand our data analytics and other data related product offerings there may be increased scrutiny on our use of data and we may be subject to new and unexpected regulations. Future laws, regulations, standards and other obligations could, for example, impair our ability to collect or use information that we utilize to provide targeted digital promotions and media to consumers, thereby impairing our ability to maintain and grow our total customers and increase revenues. Future restrictions on the collection, use, sharing or disclosure of our users’ data or additional requirements for express or implied consent of users for the use and disclosure of such information could require us to modify our solutions, possibly in a material manner, and could limit our ability to develop or outright prohibit new solutions and features. Any such new laws, regulations, other legal obligations or industry standards, or any changed interpretation of existing laws, regulations or other standards may require us to incur additional costs and restrict our business operations. If our measures fail to comply with current or future laws, regulations, policies, legal obligations or industry standards relating to privacy, data protection, data security, marketing or consumer protection, we may be subject to litigation, regulatory investigations, fines or other liabilities, as well as negative publicity and a potential loss of business. Moreover, if future laws, regulations, other legal obligations or industry standards, or any changed interpretations of the foregoing limit our ability to store, process and share personally identifiable information or other data, demand for our products could decrease, our costs could increase, our revenue growth could slow, and our business, financial condition and operating results could be harmed.
We are exposed to potential liability for information on our customers’ websites and for products and services sold through their websites and we may incur significant costs and damage to our reputation as a result of defending against such potential liability.
We are exposed to potential liability for information on our customers’ websites. We could be exposed to liability with respect to such third-party information such as their products, links to third-party websites, advertisements and content provided by customers. Among other things, we may face assertions that, by directly or indirectly providing such third-party content or links to other websites, we should be liable for defamation, negligence, copyright or trademark infringement, or other actions by parties providing such content or operating those websites. We may also face assertions that content on our publishers and advertisers’ websites, including statistics or other data we compile internally, or information contained in websites linked to our websites contains false information, errors or omissions, and users and our customers could seek damages for losses incurred as a result of their reliance upon or otherwise relating to incorrect information. We may also be subject to fines and other sanctions by the government for such incorrect information. In addition, our services could be used as a platform for fraudulent transactions and third party products and services sold through us may be defective. The measures we take to guard against liability for third-party content, information, products and services may not be adequate to exonerate us from relevant civil and other liabilities.
Any such claims, with or without merit, could be time-consuming to defend and result in litigation and significant diversion of management’s attention and resources. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against these claims and suffer damage to our reputation.
If the use of third-party cookies or other tracking technology is rejected by Internet users, restricted by third parties outside of our control, or otherwise subject to unfavorable regulation, our performance could decline and we could lose customers and revenue.
We use a number of technologies to collect information about our customers. For instance, we use small text files (referred to as "cookies"), placed through an Internet browser on an Internet user’s machine which corresponds to a data set that we keep on our servers, to gather important data. Our cookies collect anonymous information, such as when an Internet user views an advertisement, clicks on an advertisement, or visits one of our advertisers’ websites. In some countries, including countries in the European Economic Area, this information may be considered personal information under applicable data protection laws. On mobile devices, we may also obtain location-based information about the user’s device through our cookies or other tracking technologies. We use these technologies to achieve our campaign goals, to ensure that the same Internet user does not unintentionally see the same media too frequently, to report aggregate information regarding the performance of our digital promotions and marketing campaigns, and to detect and prevent fraudulent activity throughout our network.
Cookies may easily be deleted or blocked by Internet users. All of the most commonly used Internet browsers (including Chrome, Firefox, Internet Explorer, and Safari) allow Internet users to prevent cookies from being accepted by their browsers. Internet users can also delete cookies from their computers at any time. Some Internet users also download “ad blocking” software that prevents cookies from being stored on a user’s computer. If more Internet users adopt these settings or delete their cookies more frequently than they currently do, our business could be harmed. In addition, the Safari and Firefox browsers blocks third-party cookies by default, and other browsers may do so in the future. Unless such default settings in browsers were altered by Internet users to permit the placement of third-party cookies, we would be able to set fewer of our cookies in users’ browsers, which could adversely affect our business. In addition, companies such as Google have publicly disclosed their intention to move away from cookies to another form of persistent unique identifier, or ID, to identify individual Internet users or Internet-connected devices in the bidding process on advertising exchanges. If companies do not use shared IDs across the entire ecosystem, this could have a negative impact on our ability to find the same anonymous user across different web properties, and reduce the effectiveness of our marketing efforts.
In addition, in the European Union, or EU, Directive 2009/136/EC, commonly referred to as the “Cookie Directive,” directs EU member states to ensure that collecting information on an Internet user’s computer, such as through a cookie, is allowed only if the Internet user has appropriately given his or her prior freely given, specific, informed and unambiguous consent. Similarly, this Directive which also contains specific rules for the sending of marketing communications, limits the use of marketing texts messages and e-mails. Additionally, an e-Privacy Regulation, which will replace the Cookie Directive with requirements that could be stricter in certain respects, apply directly to activities within the EU without the need to be transposed in each member state’s law, and could impose stricter requirements regarding the use of cookies and marketing e-mails and text messages and additional penalties for noncompliance, has been proposed, although at this time it is unclear whether it will be approved as it is currently drafted or when its requirements will be effective. We may experience challenges in obtaining appropriate consent to our use of cookies from consumers or to send marketing communications to consumers within the EU, which may affect our ability to run promotions and our operating results and business in European markets, and we may not be able to develop or implement additional tools that compensate for the lack of data associated with cookies. Moreover, even if we are able to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies.
We may face economic, political and other risks associated with international operations should we determine to expand into the international marketplace, which may adversely affect our revenues and international growth prospects.
NOEO GmbH, a German company and our wholly owned subsidiary, originally launched its business in early 2021 and up until June 2022 has marketed its line of adaptogen products direct to consumer across Europe and North America. While NOEO is in the process of being relocated to the United States, we may determine to continue to market these products or new products to international locations. International operations will be subject to a number of risks inherent to operating in foreign countries, and any expansion of our international operations will amplify the effects of these risks, which include, among others:
| · | differences in culture, economic and labor conditions and practices; |
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| · | the policies of the U.S. and foreign governments; |
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| · | disruptions in trade relations and economic instability; |
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| · | differences in enforcement of contract and intellectual property rights; |
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| · | social and political unrest; |
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| · | natural disasters, terrorist attacks, pandemics or other catastrophic events; |
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| · | complex, varying and changing government regulations and legal standards and requirements, particularly with respect to tax regulations, price protection, competition practices, export control regulations and restrictions, customs and tax requirements, immigration, anti-boycott regulations, data privacy, intellectual property, anti-corruption and environmental compliance, including the Foreign Corrupt Practices Act; |
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| · | greater difficulty enforcing intellectual property rights and weaker laws protecting such rights; and |
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| · | greater difficulty in accounts receivable collections and longer collection periods; |
We may also be affected by domestic and international laws and regulations applicable to companies doing business abroad or importing and exporting goods and materials. These include tax laws, laws regulating competition, anti-bribery/anti-corruption and other business practices, and trade regulations, including duties and tariffs. Compliance with these laws is costly, and future changes to these laws may require significant management attention and disrupt our operations. Additionally, while it is difficult to assess what changes may occur and the relative effect on our international tax structure, significant changes in how U.S. and foreign jurisdictions tax cross-border transactions could materially and adversely affect our results of operations and financial position.
Our results of operations and financial position may also be impacted by changes in currency exchange rates. Unfavorable currency exchange rates between the US Dollar and foreign currencies, could adversely affect us in the future. Fluctuations in currency exchange rates may present challenges in comparing operating performance from period to period.
There are other risks that may be inherent to international operations, including the potential for changes in socio-economic conditions, laws and regulations, including, among others, competition, import, export, labor and environmental, health and safety laws and regulations, and monetary and fiscal policies, protectionist measures that may prohibit acquisitions or joint ventures, or impact trade volumes, unsettled political conditions; government-imposed plant or other operational shutdowns, backlash from foreign labor organizations related to our restructuring actions, corruption; natural and man-made disasters, hazards and losses, violence, civil and labor unrest, and possible terrorist attacks.
Additionally, if the opportunity arises, we may expand our operations into new and high-growth international markets. However, there is no assurance that we will expand our operations in such markets in our desired time frame. To expand our operations into new international markets, we may enter into business combination transactions, make acquisitions or enter into strategic partnerships, joint ventures or alliances, any of which may be material. We may enter into these transactions to acquire other businesses or products to expand our products or take advantage of new developments and potential changes in the industry. Our lack of experience operating in new international markets and our lack of familiarity with local economic, political and regulatory systems could prevent us from achieving the results that we expect on our anticipated time frame or at all. If we are unsuccessful in expanding into new or high-growth international markets, it could adversely affect our operating results and financial condition.
Future planned international operations may require us to comply with anti-corruption laws and regulations of the U.S. government and various international jurisdictions in which we do business.
Doing business on a worldwide basis will require us to comply with the laws and regulations of the U.S. government and various international jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations apply to companies, individual directors, officers, employees, and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the Foreign Corrupt Practices Act, or the FCPA. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment, and requires us to maintain adequate record- keeping and internal accounting practices to accurately reflect our transactions. As part of our business, we may deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA. In addition, some of the international locations in which we may operate lack a developed legal system and have elevated levels of corruption. As a result of the above activities, we are exposed to the risk of violating anti-corruption laws. Violations of these legal requirements are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures. We expect to establish policies and procedures designed to assist us and our personnel in complying with applicable U.S. and international laws and regulations should this be required. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations.
Privacy protection is increasingly demanding, and we may be exposed to risks and costs associated with security breaches, data loss, credit card fraud and identity theft that could cause us to incur unexpected expenses and loss of revenue, suffer reputational harm with our customers, as well as other risks.
The protection of customer, employee, vendor and other business data is critical to us. We receive confidential customer data, including payment card and personally identifiable information, in the normal course of customer transactions. In order for our sales channels to function, we and other parties involved in processing customer transactions must be able to transmit confidential information, including credit card information, securely over public networks. While we have taken significant steps to protect customer and confidential information, the intentional or negligent actions of employees, business associates or third parties may undermine our security measures and result in unauthorized parties obtaining access to our data systems and misappropriating confidential data. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent a compromise of our customer transaction processing capabilities and personal data. Because the techniques used to obtain unauthorized access to, disable, degrade, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any compromise of our data security could result in a violation of applicable privacy and other laws or standards, significant legal and financial exposure beyond the scope or limits of our insurance coverage, interruption of our operations, increased operating costs associated with remediation, equipment acquisitions or disposal, added personnel, and a loss of confidence in our security measures, which could harm our business or investor confidence. Any security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could attract a substantial amount of media attention, damage our reputation, expose us to risk of litigation and material liability, disrupt our operations and harm our business.
Federal, state, provincial and international laws and regulations govern the collection, retention, sharing and security of data that we receive from and about our employees, customers and vendors. The regulatory environment surrounding information security and privacy has been increasingly demanding in recent years, including the recent implementation of the California Consumer Privacy Act. The costs of compliance with, and other burdens imposed by, these and other international data privacy and security laws may limit our business and services and could have a materially adverse impact on our business.
We believe that we are in material compliance with all laws, regulations and self-regulatory regimes that are applicable to us. However, the laws, regulations, and self-regulatory regimes may be modified, and new laws may be enacted in the future that may apply to us and affect our business. Further, data protection authorities may interpret existing laws in new ways. We may deploy new services from time to time, which may also require us to change our compliance practices. Any such developments (or developments stemming from enactment or modification of other laws) or the failure to anticipate accurately the application or interpretation of these laws could create liability for us, result in adverse publicity, increase our future compliance costs, make our products and services less attractive to our customers, or cause us to change or limit our business practices, and materially affect our business and operating results. Further, any failure or perceived failure by us or third-party service providers to comply with international data privacy and security laws may lead to regulatory enforcement actions, fines, private lawsuits or reputational damage.
We may not be able to protect our intellectual property rights.
We regard our trademarks, service marks, copyrights, patents, trade secrets, proprietary technologies, domain names and similar intellectual property as important to our success. We rely on trademark, copyright and patent law, trade secret protection and confidentiality agreements with our future employees, consultants, vendors, customers and others to protect our proprietary rights. Many of the trademarks that we use contain words or terms having a somewhat common usage and, as a result, we may have difficulty registering them in certain jurisdictions. We have not yet obtained registrations for our most important marks. If other companies have registered or have been using in commerce similar trademarks for products similar to ours, we may have difficulty in registering, or enforcing an exclusive right to use, our marks.
There can be no assurance that our efforts to protect our proprietary rights will be sufficient or effective, that any pending or future patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior technologies, products, or that our patents, trademarks, and other intellectual property will not be challenged, invalidated, misappropriated or infringed by others. Additionally, the intellectual property laws and enforcement practices of other countries in which our product is or may in the future be offered may not protect our products and intellectual property rights to the same extent as the laws of the United States. If we are unable to protect our intellectual property from unauthorized use, our brand image may be harmed, and our business and results of operations may suffer.
Assertions by third parties of infringement, misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.
In recent years, there has been significant litigation involving intellectual property rights in many technology-based industries. Any infringement, misappropriation or related claims, whether or not meritorious, is time-consuming, diverts technical and management personnel and is costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing our product or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. Any of these events could result in increases in operating expenses, limit our product offerings or result in a loss of business.
We may be required to indemnify our vendors and/or customers, the payment of which could have a material adverse effect on our business, financial condition, and operating results.
We may provide certain rights of indemnification to our vendors and/or customers in certain circumstances. If any plaintiff is successful in certifying a class and thereafter prevailing on the merits of their complaint, such an adverse result could have a material adverse effect on us. In addition, due to the nature and scope of the indemnity and defense we will likely need to provide, the legal fees associated with such indemnification could be significant enough to have a material adverse effect on our cash flows until such matters are fully and finally resolved.
Although dependent on certain key personnel, we do not have any key man life insurance policies on any such people.
We are dependent on our management team to conduct our operations and execute our business plan, however, we have not purchased any insurance policies with respect to the management in the event of the death or disability of any of our key managers. Therefore, if any of the members of our management team dies or becomes disabled, we will not receive any compensation to assist with his absence.
We may be a party to lawsuits that arise in the ordinary course of business.
We may be a party to lawsuits in the future (including product liability, false advertising, and intellectual property claims) that arise in the ordinary course of business. The possibility of such litigation, and its timing, is in large part outside our control. It is possible that future litigation could arise that could have material adverse effects on us.
Risks Relating to Our Common Shares
The Company has discretion in the use of proceeds from its securities issuances.
Generally, when the Company issues securities, management of the Company will have broad discretion with respect to the application of net proceeds received by the Company from the sale of the securities and may spend such proceeds in ways that do not improve the Company’s results of operations or enhance the value of the securities issued and outstanding from time to time. Any failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on the Company’s business or cause the price of the securities of the Company issued and outstanding from time to time to decline.
There is a limited market for the Company’s Common Shares
Our Common Shares are currently quoted on OTC Markets under the trading symbol “HLCO”. There can be no assurance that an active and liquid market for the Common Shares will be maintained, and an investor may find it difficult to resell any securities of the Company.
In addition, there is no public market for our securities and such a public market may never develop. The securities are not registered under the Securities Act and, therefore, cannot be resold unless they are later registered or unless an exemption from registration is available. Rule 144 under the Securities Act permits limited public resale of unregistered securities if certain conditions are satisfied. These conditions include, among other things, (i) the resale occurring not less than six months after the holder has acquired and made full payment for the security, (ii) the availability of certain public information about the issuer, and (iii) in the case of an affiliate, or of a non-affiliate who has held the security less than one year, (a) the sale being made through a broker in an unsolicited “broker’s transaction” or in a transaction directly with a market maker and (b) the amount of securities being sold in any three-month period not exceeding certain specified limitations. The information required for Rule 144 to apply is not currently available and may not be available in the future.
The market price of our Common Shares may be volatile.
The market price of the Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control. This volatility may affect the ability of holders of the Common Shares to sell their securities at an advantageous price. Such volatility could be subject to significant fluctuations in response to numerous factors including:
· | the public’s reaction to the Company’s press releases, announcements and filings with regulatory authorities and those of its competitors; |
· | fluctuations in broader stock market prices and volumes or adverse changes in general market conditions or economic trends or as a result of the COVID-19 pandemic and/or social unrest generally; |
· | changes in market valuations of similar companies; |
· | investor perception of the Company, its prospects or the industry in general; |
· | additions or departures of key personnel; Commencement of or involvement in litigation; |
· | changes in the regulatory landscape applicable to the Company, the dietary supplement and/or the hemp industry; |
· | media reports, publications or public statements relating to, or public perceptions of, the regulatory landscape applicable to the Company, the dietary supplement and/or the hemp industry, whether correct or not; |
· | announcements by the Company or its competitors of strategic alliances, significant contracts, new technologies, acquisitions, dispositions, commercial relationships, joint ventures or capital commitments; |
· | variations in the Company’s quarterly results of operations or cash flows or those of other comparable companies; |
· | revenues and operating results failing to meet the expectations of securities analysts or investors in a particular quarter; |
· | downward revision in securities analysts’ estimates; |
· | changes in the Company’s pricing policies or the pricing policies of its competitors; |
· | future issuances and sales of Common Shares or other securities of the Company, including as a result of the conversion of Seed Preferred Shares and sale of Common Shares issuable thereafter; |
· | sales of Common Shares by insiders of the Company; |
· | third party disclosure of significant short positions; |
· | demand for and trading volume of Common Shares of the Company; |
· | short-term fluctuation in share price caused by changes in general conditions in the domestic and worldwide economies or financial markets; |
· | consequences of government action in response to COVID-19; changes in global financial markets and global economics and general market conditions, such as interest rates and product price volatility, and including those caused by COVID-19 |
The realization of any of these risks and other factors beyond the Company’s control could cause the market price of the Common Shares to decline significantly.
In addition, broad market, societal and industry factors may harm the market price of the Common Shares of the Company. Hence, the price of the Common Shares could fluctuate based upon factors that have little or nothing to do with the Company, and these fluctuations could materially reduce the price of the Common Shares regardless of the Company’s operating performance. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, the Company’s operations could be adversely impacted, and the trading price of the Common Shares of the Company may be materially adversely affected.
In the past, following a significant decline in the market price of a company’s securities, there have been instances of securities class action litigation having been instituted against that company. If the Company were involved in any similar litigation, it could incur substantial costs, management’s attention and resources could be diverted and it could harm the Company’s business, operating results and financial condition.
We do not intend to pay dividends on its Common Shares and, consequently, the ability of investors to achieve a return on their investment will depend entirely on appreciation in the price of the Company’s Common Shares.
We do not anticipate paying cash dividends on the Common Shares in the foreseeable future. The Company currently intends to retain all future earnings to fund the development and growth of its business. Any payment of future dividends will be at the discretion of the directors and will depend on, among other things, the Company’s earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that the directors deem relevant. Investors must rely on sales of their Common Shares after price appreciation, which may never occur, as the only way to realize a return on their investment.
We have not paid any cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements, which we may enter into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and any other factors that the board of directors decides is relevant. Therefore, any return on your investment in our capital stock must come from increases in the fair market value and trading price of the capital stock.
We are a holding company and our earnings depend on the earnings and distributions of its subsidiaries.
The Company has limited assets other than cash, and will conduct substantially all of its business through its current subsidiary and any newly acquired subsidiaries, which will generate all or substantially all our revenues. Our current ability and that of our acquired subsidiaries to distribute funds to us will depend on operating results, tax considerations (both domestic and foreign) and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by these subsidiaries and contractual restrictions contained in the instruments governing their debt, existing or if incurred. In the event of a bankruptcy, liquidation or reorganization of the Company’s subsidiary, or any other future subsidiary, holders of indebtedness and trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to the Company.
Future sales of Common Shares by Shareholders, directors or officers could create volatility in the Company’s share price.
Subject to compliance with applicable securities laws and the terms of any applicable lock-up arrangements, the Company’s officers, directors, promoters and their affiliates may sell some or all of their Common Shares in the future. No prediction can be made as to the effect, if any, such future sales of Common Shares will have on the market price of the Common Shares prevailing from time to time. However, the future sale of a substantial number of Common Shares by the Company’s officers and directors, promoters and their affiliates, or the perception that such sales could occur, could materially adversely affect prevailing market prices for the Common Shares of the Company.
Certain outstanding Common Shares of the Company are, subject to applicable securities laws, generally immediately available for resale in the public markets. Additional Common Shares issuable upon the exercise of stock options may also become available for sale in the public market, which may also cause the market price of the Common Shares to fall. Accordingly, if substantial amounts of Common Shares are sold in the public market, the market price could fall.
A small number of Shareholders may exercise significant influence on matters submitted to Shareholders for approval.
The Company has a small number of Shareholders who own, in the aggregate, approximately 50% equity interest in the Company. As a result, although such Shareholders may not have an agreement to act in concert, such Shareholders have the ability to exercise significant influence over matters submitted to Shareholders for approval, whether subject to approval by a majority of the Shareholders or special resolution.
The Company may issue additional shares and additional issuances could dilute a Shareholder’s holdings.
The Company may issue additional Common Shares in the future which may dilute a Shareholder’s holdings in the Company. The Articles permit the issuance of 290,000,000 Common Shares and 10,000,000 Preferred Shares, and Shareholders have no pre-emptive rights in connection with any further issuances. The directors of the Company have the discretion to determine the provisions attaching to the Common Shares and the price and the terms of issue of further Common Shares and Preferred Shares.
Additional equity financing, including pursuant to an at-the-market offering, may be dilutive to Shareholders and could contain rights and preferences superior to those of the Common Shares. Debt financing may involve restrictions on the Company’s financing and operating activities. Debt financing may be convertible into other securities of the Company which may result in immediate or resulting dilution. In either case, additional financing may not be available to the Company on acceptable terms or at all. If the Company is unable to raise additional funds as needed, the scope of its operations or growth may be reduced and, as a result, the Company may be unable to fulfil its long-term goals. In this case, investors may lose all or part of their investment. Any default under such debt instruments could have a material adverse effect on the Company, its business, or the results of operations.
Purchasers of the Company’s Common Shares may experience immediate and substantial dilution of their investment.
The offering price of Common Shares may significantly exceed the net tangible book value per share of the Common Shares. Accordingly, a purchaser of Common Shares may incur immediate and substantial dilution of his, her or its investment. If outstanding options and warrants to purchase Common Shares are exercised or securities convertible into Common Shares are converted, additional dilution will occur. The Company may sell additional Common Shares or other securities that are convertible or exchangeable into Common Shares in future offerings or may issue additional Common Shares or other securities to finance future acquisitions.
The Company cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of the Common Shares. Sales or issuances of substantial numbers of Common Shares or other securities that are convertible or exchangeable into Common Shares, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the Common Shares. With any additional sale or issuance of Common Shares or other securities that are convertible or exchangeable into Common Shares, investors will suffer dilution to their voting power and economic interest in the Company. Furthermore, to the extent holders of the Company’s stock options or other convertible securities convert or exercise their securities and sell the Common Shares they receive, the trading price of the Common Shares may decrease due to the additional number of Common Shares available in the market.
Our management has broad discretion as to the use of the net proceeds from this offering allocated to working capital and general corporate purposes.
Our management will have broad discretion in the application of the net proceeds that are allocated to working capital and general corporate purposes. Accordingly, you will have to rely upon the judgment of our management with respect to the use of these proceeds. Our management may spend a portion or all of the net proceeds from this offering that are allocated to working capital and general corporate purposes in ways that holders of our common stock may not desire or that may not yield a significant return or any return at all. Our management not applying these funds effectively could harm our business. Pending their use, we may also invest the net proceeds from this offering that are allocated to working capital and general corporate purposes in a manner that does not produce income or that loses value.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline and would result in the dilution of your holdings.
Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common stock.
Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.
In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common shares.