Mellone gets away with all these phony companies by filings like this;
Initial Company Information and Disclosure Statement Mar 31, 2010 Jun 30, 2010
http://www.otcmarkets.com/otciq/ajax/showFinancialReportById.pdf?id=33485
I would bet that no MCDA shareholder has read the whole thing. It is chucked full of WARNINGS about buying shares of MCDA.
Here is just some of the RISKS listed. Anyone care to read this list and then tell me what the chances of MCDA being successful are?
RISK FACTORS ______
You should carefully consider the risks described below as well as the other information included or incorporated by reference in this document. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. Any of the following risks could materially adversely affect our business, financial condition or results of operations. In such case, investors may lose all or part of their original investment.
RISKS RELATED TO OUR COMPANY
We have a history of significant net operating losses and may never achieve profitability.
We have a history of significant net operating losses. We cannot assure you that we will ever achieve profitability. Even if we do achieve profitability, we cannot assure you that we will be able to sustain or increase profitability on a quarterly or annual basis in the future. Revenues and profits, if any, will depend upon various factors, including whether we will be able to successfully implement our sales, marketing, and advertising strategies. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us. In addition, an inability to achieve profitability could have a detrimental effect on the long term capital appreciation of our common stock.
Our independent auditors have expressed a reservation as to whether we can continue as a going concern. Our independent auditors’ report on our financial statements states that our recurring losses and lack of revenue generation to date raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital or generate revenues to sustain our operations. There is no guarantee that we will be able to raise enough capital or generate revenues to sustain our operations.
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There can be no assurance that we will be able to generate or secure sufficient funding to successfully execute our business plan. Currently, we only have negligible cash and we continue to incur significant losses. The working capital requirements associated with our business plan will continue to be significant. The primary requirements are for sales, marketing, and advertising efforts. We estimate that we will need to spend approximately $500,000 per year for the next two years to execute our business plan. We will need to raise additional capital in the next twelve months to fully implement our sales, marketing, and advertising strategy. If we do not have sufficient cash from operations, funds available under credit facilities and/or the ability to raise cash through the sale of debt and/or equity securities, or if we cannot issue our capital stock on terms suitable to us, we will be unable to pursue our business strategy, which could have a material adverse effect on our ability to increase our company’s revenue and net income (or reduce our net loss, as applicable) and on our company’s financial condition and results of operations.
If we are unable to attract and retain qualified personnel with experience in our industries, our business could suffer. Our current and future success depends in part on our ability to identify, attract, assimilate, hire, train and motivate professional, highly-skilled scientific and technical personnel for our research, development and engineering efforts, as well as managerial, and sales and marketing personnel with experience in our industries. If we fail to attract and retain the necessary technical, managerial, and sales and marketing personnel, we may not develop a sufficient customer base to adequately develop our proposed operations, and, as a result, could have a material adverse effect on our company.
Our success depends on our management team.
Our company’s operations are dependent on the continued efforts of our Board of Directors and our executive officers, including our President and Chief Executive Officer. If any of these individuals becomes unwilling or unable to continue their employment or association with us, our business could be affected materially and adversely. Furthermore, there can be no assurance that our management team will be successful in managing the operations of the company or be able to effectively implement our business strategy. Failure of our management group to successfully manage the operation of our company or to effectively implement our business strategy could have a material adverse effect on our company’s financial condition and results of operations. We have no key man life insurance on any of our executives.
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We currently have existing material weaknesses in our internal control over financial reporting. If we are unable to improve and maintain the quality of our system of internal control over financial reporting, any deficiencies could materially and adversely affect our ability to report timely and accurate financial information about us.
As a public company, we incur significant legal, accounting and other expenses that we would not incur as a private company. In addition, if we register our stock, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities and Exchange Commission and the NASDAQ Stock Market, have imposed various new requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage.
We are responsible for establishing and maintaining effective disclosure controls and procedures and adequate internal control over financial reporting, in each case as prescribed by applicable SEC rules and regulations. Together, these elements are intended to provide reasonable (but not absolute) assurance regarding the reliability of our financial reporting. Management has determined that our disclosure controls and procedures were not effective and that we have material weaknesses in our internal control over financial reporting. Since the time we determined that our disclosure controls and procedures were not effective and identified the material weaknesses in our internal control over financial reporting, we have devoted significant time to developing remedial measures to address these deficiencies. Although we believe that these measures have strengthened our disclosure controls and procedures and our internal control over financial reporting, we cannot be certain that they will ensure that we maintain effective disclosure controls and procedures or adequate internal control over our financial reporting in future periods. Any failure to maintain such effective disclosure controls and procedures or adequate internal control over financing reporting could adversely impact our ability to report our financial results on a timely and accurate basis. If we are no longer able to report our financial results on a timely and accurate basis, we may erode our investors’ understanding of and confidence in our financial reporting, as well as face severe consequences from regulatory authorities, either of which may have a material adverse affect on our business and a negative effect on the trading price of our stock.
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If the markets for our products do not develop and expand as we anticipate, demand for our products may decline, which would negatively impact our results of operations and financial performance. The markets for our products are characterized by rapidly changing technologies, evolving industry standards and frequent new product introductions. Our success is expected to depend, in substantial part, on the timely and successful introduction of new products, upgrades of current products to comply with emerging industry standards, our ability to acquire technologies needed to remain competitive and our ability to address competing technologies and products. In addition, the following factors related to our products and the markets for them could have an adverse impact on our results of operations and financial performance:
• The inability to maintain a favorable mix of products;
• The anticipated level of demand for our products by our customers does not continue. While this demand has been increasing in recent quarters, there is no assurance that this upward trend can be sustained. A leveling or declining demand or an unanticipated change in market demand for products based on a specific technology would adversely affect our ability to sustain recent operating and financial performance; and
• The inability to continue to develop new product lines to address our customers’ diverse needs and the several market segments in which we participate. This requires a high level of innovation, as well as the accurate anticipation of technological and market trends.
Changes in our manufacturing processes or those of our contractors and suppliers could significantly reduce our manufacturing yields and product reliability. The manufacture of our products involves highly complex and precise processes, requiring production in highly controlled, arid clean environments. In some cases, existing manufacturing techniques, which involve substantial manual labor, may be insufficient to achieve the volume or cost targets of our customers. We or our suppliers will need to develop new manufacturing processes and techniques to achieve targeted volume and cost levels. While we continue to devote substantial efforts to the improvement of our manufacturing techniques and processes, we may not achieve manufacturing volumes and cost levels in our manufacturing activities that will fully satisfy customer demands.
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We may experience difficulties that may delay or prevent our development, introduction or marketing of new or enhanced products. We intend to continue to invest in product and technology development. The development of new or enhanced products is a complex and uncertain process. We may experience research and development, manufacturing, marketing and other difficulties that could delay or prevent our development, introduction or marketing of new products or enhancements. We cannot be certain that:
• any of the products under development will prove to be effective in clinical trials;
• we will be able to obtain, in a timely manner or at all, regulatory approval to market any of our products that are in development or contemplated;
• any of such products can be manufactured at acceptable cost and with appropriate quality; or
• any such products, if and when approved, can be successfully marketed.
The factors listed above, as well as manufacturing or distribution problems, or other factors beyond our control, could delay new product launches. In addition, we cannot assure you that the market will accept these products. Accordingly, there is no assurance that our overall revenues will increase if and when new products are launched.
We currently have limited revenue sources. A reduction in revenues of any of our key products would cause our revenues to decline and could materially harm our business.
We expect a small number of our key products, which will likely shift over time, to continue to account for a significant portion of our net revenues for the foreseeable future. As a result, continued market acceptance and popularity of these products are critical to our success, and a reduction in demand due to, among other factors, the introduction of competing products by our competitors, the entry of new competitors, or end-users' dissatisfaction with the quality of our products, could materially and adversely affect our financial condition and results of operations.
We could be subject to costly and time-consuming product liability actions. We carry
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no insurance coverage.
If our products do not function as anticipated, whether as a result of the design of these products, unanticipated health consequences or side effects, or misuse or mishandling by third parties, of such products, or because of faulty or contaminated supplies, they could injure the vaccines and as a result subject us to product liability lawsuits. Claims against us also could be based on failure to perform as anticipated. Any product liability claim brought against us, with or without merit, could have a material adverse effect on us. Even a merit less or unsuccessful product liability claim could be time consuming, expensive to defend and could result in the diversion of management's attention from managing our core business or result in associated negative publicity.
Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of biopharmaceutical products. We cannot be certain that we will be able to maintain adequate product liability insurance at a reasonable cost. In addition, we have no clinical trial liability insurance for our clinical trials. Any insurance coverage we do have may not be sufficient to satisfy liability resulting from product liability claims. A successful product liability claim or series of claims could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to successfully compete in the highly competitive biopharmaceutical industry, our business could be harmed.
We operate in a highly competitive environment, and we expect the competition to increase further in the future. Our competitors include large pharmaceutical and biotechnology companies and academic research institutions worldwide. Many of these competitors have greater resources than us. New competitors may also enter into the markets in which we currently compete. Accordingly, even if we are successful in launching a product, we may not be able to outperform a competing product for any number of reasons, including the possibility that the competitor may: (1) have launched its competing product first or the competing product may have, or be perceived as having, better efficacy, stronger brand recognition, or other advantages; (2) have greater access to certain raw materials; (3) have more efficient manufacturing processes and greater manufacturing capacity; (4) have greater marketing capabilities; (5) have greater pricing flexibility; (6) have more extensive research and development and technical capabilities; (7) have proprietary patent portfolios or other intellectual property rights that may present an obstacle to our conduct of business; or (7) have greater knowledge of local market conditions where we seek to increase our international sales.
The technologies applied by our competitors and us are rapidly evolving, and new developments frequently result in price competition and product obsolescence. In
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addition, we may be impacted by competition from generic forms of our products, substitute products or imports of products from lower-priced markets.
We may not achieve our projected development goals in the time frames we announce and expect. If we fail to achieve one or more milestones as contemplated, the market price of our common shares could decline.
We set goals for and make public statements regarding our anticipated timing of the accomplishment of objectives material to our success, such as the commencement and completion of clinical trials and other milestones. The actual timing of these events can vary dramatically due to factors such as delays or failures in our clinical trials, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements sufficient to commercialize our products. We may not complete our clinical trials or make regulatory submissions or receive regulatory approvals as planned. Also, we may not be able to adhere to our currently anticipated schedule for the launch of any of our products. If we fail to achieve one or more milestones as contemplated, the market price of our shares could decline.
If any of our third-party suppliers or manufacturers cannot adequately meet our needs, our business could be harmed.
While we use raw materials and other supplies that are generally available from multiple commercial sources, certain raw materials that we use may be in short supply or difficult for suppliers to produce in accordance with our specifications. If the third-party suppliers were to cease production or otherwise fail to supply us with quality raw materials, and we were unable to contract on acceptable terms for these materials with alternative suppliers, our ability to deliver our products to the market would be adversely affected.
In addition, if we fail to secure long-term supply sources for some of the raw materials we use, our business could be harmed.
From time to time, concerns are raised with respect to potential contamination of biological materials that are supplied to us. These concerns can further tighten market conditions for materials that may be in short supply or available from limited sources. Moreover, regulatory approvals to market our products may be conditioned upon obtaining certain materials from specified sources. Any efforts to substitute material from an alternate source may be delayed by pending regulatory approval of such alternate source. Although we work to mitigate the risks associated with relying on sole suppliers, there is a possibility that material shortages could impact product development and production.
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We will need additional capital to expand the production capacity for our existing products, to continue development of our product pipeline and to market existing and future products on a large scale. We cannot guarantee that we will find adequate sources of capital in the future.
We will need to raise additional funds from the capital markets to finance equipment expenditures, to acquire intellectual property, to expand the production capacity for our existing products, to continue the development and commercialization of our product candidates and for other corporate purposes. Although we believe that we have adequate near-term cash resources, we will need to undertake significant future financings in order to: (1) establish and expand manufacturing capabilities; (2) proceed with the research and development of other vaccine products, including clinical trials of new products; (3) acquire interests in other companies. (4) Commercialize our products, including the marketing and distribution of new and existing products; (5) seek and obtain regulatory approvals; (6) develop or acquire other product candidates or technologies; (7) protect our intellectual property; and (8) finance general and administrative and research activities that are not related to specific products under development.
If we continue to raise additional funds by issuing equity securities, it will result in further dilution to our existing shareholders, because the shares may be sold at a time when the market price is low and shares issued in equity financing transactions will normally be sold at a discount to the current market price. Any additional equity securities issued also may provide for rights, preferences or privileges senior or otherwise preferential to those of holders of our existing common shares. Unforeseen problems including materially negative developments relating to, among other things, disease developments, product sales, new product rollouts, clinical trials, research and development programs, our strategic relationships, our intellectual property, litigation, regulatory changes in our industry, the market generally or general economic conditions, could interfere with our ability to raise additional funds or materially adversely affect the terms upon which such funding is available.
If we raise additional funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common shares, and the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to certain of our technologies, marketing territories, product candidates or products that we would otherwise seek to develop or commercialize ourselves, or be required to grant licenses on terms that are not favorable to us. In the past, we have also received research grants
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to finance the development of our products. We may not receive additional grants in the future.
We do not know whether additional financing will be available to us on commercially acceptable terms when needed. If adequate funds are not available or are not available on commercially acceptable terms, we may be unable to continue developing our products. In any such event, our ability to bring a product to market and obtain revenues could be delayed and competitors could develop products sooner than we do.
We depend on our key personnel, the loss of whom would adversely affect our operations. If we fail to attract and retain the talent required for our business, our business will be materially harmed.
We are a small company and we depend to a great extent on principal members of our management and scientific teams. If we lose the services of any key personnel, the loss could significantly impede the achievement of our research and development objectives and delay our product development programs and the approval and commercialization of our product candidates. We do not currently have any key man life insurance policies. We have entered into employment agreements with our executive officers under which they have agreed to restrictive covenants relating to non-competition and non- solicitation. These employment agreements do not, however, guarantee that we will be able to retain the services of our executive officers in the future. In addition, recruiting and retaining additional qualified scientific, technical and managerial personnel and research partners will be critical to our success. Competition among biopharmaceutical and biotechnology companies for qualified employees intense and turnover rates are high. There is currently a shortage of employees with expertise in our areas of research and clinical and regulatory affairs, and this shortage is likely to continue. We may not be able to retain existing personnel or attract and retain qualified staff in the future. If we fail to hire and retain personnel in key positions, we may be unable to develop or commercialize our product candidates in a timely manner.
We may encounter difficulties in managing our growth, which could adversely affect our results of operations.
We will experience a period of rapid and substantial growth that may place and, if such growth continues, will continue to place a strain on our administrative and operational infrastructure. If we are unable to manage this growth effectively, our business, results of operations or financial condition may be materially and adversely affected. Our ability to manage our operations and growth effectively requires us to continue to improve our operational, financial and management controls, reporting systems and
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procedures and hiring programs. We may not be able to successfully implement these required improvements.
International expansion may be costly, time consuming and difficult. If we do not successfully expand internationally, our growth strategy and prospects would be materially and adversely affected.
We may enter into selected international markets and intend to continue to expand the sales of our products into new international markets. In expanding our business internationally, we have entered and intend to continue to enter markets in which we have limited or no experience and in which our brand may be less recognized. To further promote our brand and generate demand for our products so as to attract distributors in international markets, we expect to spend significantly more on marketing and promotion than we do in our existing domestic markets. We may be unable to attract a sufficient number of distributors, and our selected distributors may not be suitable for selling our products. Furthermore, in new markets we may fail to anticipate competitive conditions that are different from those in our existing markets. These competitive conditions may make it difficult or impossible for us to effectively operate in these markets. If our expansion efforts in existing and new internal markets are unsuccessful, our growth strategy and prospects would be materially and adversely affected.
We are exposed to other risks associated with international operations, including: (1) political instability; (2) economic instability and recessions; (3) changes in tariffs; (4) difficulties of administering foreign operations generally; (5) limited protection for intellectual property rights; (6) obligations to comply with a wide variety of foreign laws and other regulatory approval requirements; (7) increased risk of exposure to terrorist activities; (8) financial condition, expertise and performance of our international distributors; (9) export license requirements; (10) unauthorized re-export of our products; (11) potentially adverse tax consequences; and (12) inability to effectively enforce contractual or legal rights.
We may undertake acquisitions, which may have a material adverse effect on our ability to manage our business, and may end up being unsuccessful.
Our growth strategy may involve the acquisition of new production lines, technologies, businesses, products or services or the creation of strategic alliances in areas in which we do not currently operate. These acquisitions could require that our management develop expertise in new areas, new geographies, manage new business relationships and attract new types of customers. Furthermore, acquisitions may require significant attention from our management, and the diversion of our management's attention and
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resources could have a material adverse effect on our ability to manage our business. We may also experience difficulties integrating acquisitions into our existing business and operations. Future acquisitions may also expose us to potential risks, including risks associated with: (1) the integration of new operations, services and personnel; (2) unforeseen or hidden liabilities; (3) the diversion of resources from our existing businesses and technologies; (4) our inability to generate sufficient revenue to offset the costs of acquisitions; and (5) potential loss of, or harm to, relationships with employees or customers, any of which could significantly disrupt our ability to manage our business and materially and adversely affect our business, financial condition and results of operations.
Increases in demand for our products could require us to expend considerable resources to meet the demand or harm our customer relationships if we are unable to meet demand. If we experience significant or unexpected increases in the demand for our products, we and our suppliers may not be able to meet that demand without expending additional capital resources. These capital resources could involve the cost of new machinery or even the cost of new manufacturing facilities. This would increase our capital costs, which could adversely affect our earnings. Our suppliers may be unable or unwilling to expend the necessary capital resources or otherwise expand their capacity. In addition, new manufacturing equipment or facilities may be required to meet required FDA standards before they can be used to manufacture our products. To the extent we are unable to obtain or are delayed in meeting such standards, our ability to meet the demand for our products could be adversely affected.
If we or our suppliers are unable to develop necessary manufacturing capabilities in a timely manner, our net sales could be adversely affected. Failure to cost-effectively increase production volumes, if required, or lower than anticipated yields or production problems encountered as a result of changes that we or our suppliers make in our manufacturing processes to meet increased demand, could result in shipment delays or interruptions and increased manufacturing costs, which could also have a material adverse effect on our revenues and profitability.
Our inability to meet customer demand for our products could also harm our customer relationships and impair our reputation within the industry. This, in turn, could have a material adverse effect on our business and prospects.
There can be no assurance that our distributors will be able to market our products.
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There is no assurance that our distributors will be able to successfully market our products. Our agreement with them is recent, and we do not have any relationship or history with the company prior to entering into the agreement. Further, we have not been provided with a letter of credit or other guarantees of their financial ability to successfully market our products.
Our current products may have certain side effects. If side effects associated with our current or future products are not identified prior to their marketing and sale, we may be required to withdraw such products from the market, perform lengthy additional clinical trials or change the labeling of our products, any of which could hinder or adversely affect our ability to generate revenues.
Our current products have certain side effects. If significant side effects of our medicines are identified after they are marketed and sold, regulatory authorities may withdraw or modify their approvals of such medicines; we may be required to reformulate these medicines, change the ways in which they are marketed, conduct additional clinical trials, change the labeling of these medicines or implement changes to obtain new approvals for our manufacturing facilities; we may be less successful in tendering processes used by hospitals for medicine purchases; we may have to recall these medicines from the market and may not be able to re-launch them; we may experience a significant decline in sales of the affected products; our reputation may suffer; and we may become a target of lawsuits.
The occurrence of any of these events would harm our sales of these medicines and substantially increase the costs and expenses of marketing these medicines, which in turn could cause our revenues and net income to decline. In addition, if any severe side effects are discovered to be associated with another manufacturer's used to treat medical conditions similar to those that our medicines are used to treat, the reputation and, consequently, sales of our medicines could be adversely affected.
We may not be able to obtain manufacturing or marketing approval for our future products, and failure to obtain approvals for our future products could materially harm our business prospects. All medicines must be approved by the Food and Drug Administration, or the FDA, before they can be manufactured, marketed or sold. The FDA requires a pharmaceutical manufacturer to have successfully completed clinical trials of a new medicine and demonstrated its manufacturing capability before approval to manufacture that new medicine is granted. Clinical trials are expensive and their results are uncertain. In addition, the FDA and other regulatory authorities may apply new standards for safety,
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manufacturing, labeling, marketing and distribution of future products. Complying with these standards may be time-consuming and expensive. Furthermore, our future products may not be efficacious or may have undesirable or unintended side effects, toxicities or other characteristics that may preclude us from obtaining approval or may prevent or limit their commercial use. As a result, we may not be able to obtain FDA or other governmental approvals for our future products on a timely basis or at all. Even if we do obtain approvals, such approvals may be subject to limitations on the indicated uses for which we may market a product, which may limit the size of the market for such a product.
The failure to maintain our relationships with our existing customers or the failure to obtain new customers could negatively affect our revenues and decrease our earnings or have an adverse impact on our business. We maintain purchase orders for the sales of our products to our customers. Although we have entered into agreements to supply our customers, we cannot assure that such agreements will be renewed when the terms of such agreements expire or that our relationships with our customers will be maintained on satisfactory terms or at all. The failure to maintain our relationships with our customers or the failure to obtain new customers could negatively affect our revenues and decrease our earnings or have an adverse impact on our business.
We rely on a limited number of suppliers and the loss of any of our suppliers, or delays or problems in the supply of materials used in our products, could materially and adversely affect our business, financial condition, results of operations and growth prospects.
We generally rely on a limited number of suppliers for most of the primary materials used in our products. Our suppliers may not be able to supply the necessary materials without interruption and we may not have adequate remedies for such failure, which could result in a shortage of our products. If one of our suppliers fails or refuses to supply us for any reason, it could take time and expense to obtain a new supplier. In addition, our failure to maintain existing relationships with our suppliers or to establish new relationships in the future could negatively affect our ability to obtain the materials used in our products in a timely manner. The search for new suppliers could potentially delay the manufacture of our products, resulting in shortages in the marketplace and may cause us to incur additional expense. Failure to comply with applicable legal requirements subjects our suppliers to possible legal or regulatory action, including shutdown, which may adversely affect their ability to supply us with the materials we need for our products. Any delay in supplying, or failure to supply, materials for our
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products by any of our suppliers could result in our inability to meet the commercial demand for our products, and could adversely affect our business, financial condition, results of operations and growth prospects.
Government regulators and regulations could adversely affect our business.
The formulation, manufacturing, packaging, labeling, advertising, distribution, and sale of our product, as well as other dietary supplements, are subject to regulation by a number of federal, state, and local agencies, including but not limited to the Food and Drug Administration (“FDA”) and the Federal Trade Commission (“FTC”). See “Business-Regulation” for more information. These agencies have a variety of procedures and enforcement remedies available to them, including but not limited to:
• Initiating investigations; • Issuing warning letters and cease and desist orders; • Demanding recalls; • Initiating adverse publicity; • Requiring corrective labeling or advertising; • Requiring consumer redress and/or disgorgement; • Seeking injunctive relief or product seizures; • Initiating judicial actions; and
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• Imposing civil penalties or commencing criminal prosecution.
Federal and state agencies have in the past used these types of remedies in regulating participants in the dietary supplement industry, including the imposition by federal agencies of monetary redress in the millions of dollars. Adverse publicity related to dietary supplements may result in increased regulatory scrutiny, undermine or eliminate the acceptance of our product by consumers and lead to the initiation of private lawsuits. Product recalls could result in unexpected expense of the recall and any legal proceedings that might arise in connection with the recall.
Our failure to comply with applicable laws could also subject us to severe legal sanctions that could have a material adverse effect on our business and results of operations. Specific action taken against us could result in a material adverse effect on our business and results of operations. Furthermore, a state could interpret product claims that are presumptively valid under federal law are nonetheless illegal under that state’s regulations.
Future laws or regulations may hinder or prohibit the production or sale of our existing product and any future products.
We may be subject to additional laws or regulations in the future, such as those administered by the FDA, FTC, or other federal, state, or local regulatory authorities. Laws or regulations that we consider favorable may be modified or repealed. Current laws or regulations may be amended or interpreted more stringently. The FDA has proposed extensive good manufacturing practice regulations for dietary supplements. We are unable to predict the nature of such future laws, regulations, or interpretations, nor can we predict what effect they may have on our business. Possible effects or requirements could include, but are not limited to, the following:
• • •
The reformulation of products to meet new standards; Additional ingredient restrictions; Additional claim restrictions;
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• The recall or discontinuance of products unable to be reformulated;
• Imposition of additional good manufacturing practices and/or record keeping requirements;
• Expanded documentation of the properties of products; and • Expanded or different labeling or scientific substantiation.
Any such requirements could have material adverse effects on our business, financial condition, or results of operations.
Unfavorable publicity could materially hurt our business and the value of your investment.
We are highly dependent upon consumers’ perceptions of the safety, quality, and efficacy of our products, as well as products distributed by other companies. Future scientific research or publicity may not be favorable to our industry or any particular product, or consistent with earlier research or publicity. Future reports or research that are perceived less favorably or that question such earlier research could have a material adverse effect on us. Because of our dependence upon consumer perceptions, adverse publicity associated with illness or other adverse effects resulting from the consumption of our product or any similar products distributed by other companies could have a material adverse impact on us. Such adverse publicity could arise even if the adverse effects associated with such products resulted from failure to consume such products as directed. We may be unable to counter the effects of negative publicity concerning the efficacy of our product. Adverse publicity could also increase our product liability exposure.
We are and will continue to be subject to the risk of investigatory and enforcement action by the FTC, which could have a negative impact upon the price of our stock.
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We will always be subject to the risk of investigatory and enforcement action by the FTC based on our advertising claims and marketing practices. The FTC routinely reviews product advertising, including websites, to identify significant questionable advertising claims and practices. The FTC has brought many actions against dietary supplement companies based upon allegations that applicable advertising claims or practices were deceptive and/or not substantiated. If the FTC initiates an investigation, the FTC can initiate pre-complaint discovery that may be nonpublic in nature. Such an investigation: (i) may be very expensive to defend, (ii) may be lengthy, and (iii) may result in an adverse ruling by a court, administrative law judge, or in a publicly disclosed consent decree.
If we are unable to attract, train, retain and motivate our prescription medicine and OTC medicine salespeople, sales of our products may be materially and adversely affected.
We rely on our salespeople and distributors, who will be dispersed across the country, to market our products to the regional distributors as well as hospitals and retail pharmacies. We believe that our current sales have resulted, to a significant extent, from the dedication, efforts and performance of our salespeople. We believe that our future success will depend on those same factors. If we are unable to attract, train, retain and motivate our prescription medicine and OTC medicine salespeople, sales of our products may be materially and adversely affected.
RISKS RELATED TO OUR INDUSTRY
Our industry is highly competitive.
We face intense competition in our business. We expect that we will face additional competition from large, existing competitors and from a number of companies that may enter our markets. Since some of the markets in which we compete are characterized by rapid growth and rapid technology changes, smaller niche and start-up companies may become our principal competitors in the future. We must invest in research and development, expand our manufacturing and marketing capabilities, and continue to improve customer service and support in order to remain competitive. While we expect to undertake the investment and effort in each of these areas, we cannot assure that we will be able to maintain or improve our competitive position. There can be no assurance that we will be able to compete successfully with such entities in the future.
Many of our competitors and potential competitors have superior resources, which
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could place us at a cost and price disadvantage. Thus, we may never realize revenues sufficient to sustain our operations, and we may fail in our business and cease operations. Many of our competitors and potential competitors may have significant competitive advantages, including greater market presence, name recognition, superior financial, technological and personnel resources, superior services and marketing capabilities, and superior manufacturing capabilities. Some of these competitors are household names. As a result, some of our competitors and potential competitors could raise capital at a lower cost than we can, and they may be able to adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisitions and other opportunities more readily, and devote greater resources to the development, marketing, and sale of products than we can. Market consolidation may create additional or stronger competitors and may intensify competition. Also, our competitors’ and potential competitors’ greater brand-name recognition may require us to price our services at lower levels in order to win business. Our competitors’ and potential competitors’ financial advantages may give them the ability to reduce their prices for an extended period of time if they so choose.
Technological advances and regulatory changes may erode revenues that could be derived from our proposed operations, which could increase competition and put downward pressure on prices for our proposed products. New technologies and regulatory changes, particularly those relating to pharmaceutical and biotech products, if any, could impair our prospects, put downward pressure on prices for our in vitro diagnostics products, and adversely affect our operating results. In addition, the competition in our market from the existing developers and manufacturers of in vitro diagnostics products with technologically advanced processes may place downward pressure on prices for such products, which can adversely affect our operating results. In addition, we could face competition from other companies we have not yet identified or which may later enter into the market with technologically advanced processes. If we are not able to compete effectively with these industry participants, our operating results would be adversely affected.
The need to obtain regulatory approvals and respond to changes in regulatory requirements could adversely affect our business. Many of our proposed and existing products are subject to regulation by the FDA and other governmental or public health agencies. In particular, we are subject to strict governmental controls on the development, manufacture, labeling, distribution and marketing of our products. In addition, we are often required to obtain approval or
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registration with foreign governments or regulatory bodies before we can import and sell our products in foreign countries.
The process of obtaining required approvals or clearances from governmental or public health agencies can involve lengthy and detailed laboratory testing, human clinical trials, sampling activities and other costly, time- consuming procedures. These approvals can require the submission of a large amount of clinical data which may require significant time to obtain. It is also possible that a product will not perform at a level needed to generate the clinical data required to obtain an approval or clearance. The submission of an application to the FDA or other regulatory authority does not guarantee that an approval or clearance to market the product will be received. Each authority may impose its own requirements and delay or refuse to grant approval or clearance, even though a product has been approved in another country or by another agency.
Moreover, the approval or clearance process for a new product can be complex and lengthy. This time span increases our costs to develop new products as well as the risk that we will not succeed in introducing or selling them in the United States or other countries.
Failure to comply with FDA or other regulatory requirements may require us to suspend production of our products or institute a recall which could result in higher costs and a loss of revenues. We can manufacture and sell many of our products, both in the United States and internationally, only if we comply with regulations of government agencies such as the FDA. We have implemented quality assurance and other systems that are intended to comply with applicable regulations.
\Although we believe that we have adequate processes in place to ensure compliance with these requirements, the FDA or other regulatory bodies could force us to stop manufacturing or selling our products if it concludes that we are out of compliance with applicable regulations. The FDA and other regulatory bodies could also require us to recall products if we fail to comply with applicable regulations, which could force us to stop manufacturing such products. Such actions by the FDA could adversely affect our revenues.
Our success depends on our ability to protect our proprietary technology.
Our industry places considerable importance on obtaining patent, trademark and trade secret protection, as well as other intellectual property rights, for new technologies,
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products and processes. Our success depends, in part, on our ability to develop and maintain a strong intellectual property portfolio or obtain licenses to patents for products and technologies both in the United States and in other countries.
As appropriate, we intend to file patent applications and obtain patent protection for our proprietary technology. These patent applications and patents will cover, as applicable, compositions of matter for our products, methods of making those products, methods of using those products and apparatus relating to the use or manufacture of those products. We will also rely on trade secrets, know-how and continuing technological advancements to protect our proprietary technology.
We do not currently have any confidentiality agreements with our employees, consultants, advisors and collaborators. However, in the future we intend to adopt a policy that would require such persons and entities to enter into such agreements with us. When we do this, these parties may not honor these agreements and we may not be able to successfully protect our rights to unpatented trade secrets and know-how. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.
Some of our current employees, including scientific and management personnel, were previously employed by competing companies. Although we encourage and expect all of our employees to abide by any confidentiality agreement with a prior employer, competing companies may allege trade secret violations and similar claims against us.
We may collaborate with universities and governmental research organizations which, as a result, may acquire part of the rights to any inventions or technical information derived from collaboration with them.
To facilitate development and commercialization of a proprietary technology base, we may need to obtain licenses to patents or other proprietary rights from other parties. Obtaining and maintaining such licenses may require the payment of substantial amounts. In addition, if we are unable to obtain these types of licenses, our product development and commercialization efforts may be delayed or precluded.
We may incur substantial costs and be required to expend substantial resources in asserting or protecting our intellectual property rights, or in defending suits against us related to intellectual property rights. Disputes regarding intellectual property rights could substantially delay product development or commercialization activities. Disputes regarding intellectual property rights might include state, federal or foreign court litigation, as well as patent interference, patent reexamination, patent reissue, or
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trademark opposition proceedings in the United States Patent and Trademark Office. Opposition or revocation proceedings could be instituted in a foreign patent office. An adverse decision in any proceeding regarding intellectual property rights could result in the loss or limitation of our rights to a patent, an invention or trademark.
RISKS RELATED TO GOVERNMENT REGULATION
We may not be able to comply with applicable good manufacturing practice requirements and other regulatory requirements, which could have a material adverse affect on our business, financial condition and results of operations.
We are required to comply with applicable good manufacturing practice regulations, which include requirements relating to quality control and quality assurance as well as corresponding maintenance, record-keeping and documentation standards. Manufacturing facilities must be approved by governmental authorities before we can use them to commercially manufacture our products and are subject to inspection by regulatory agencies.
If we fail to comply with applicable regulatory requirements at any stage during the regulatory process, including following any product approval, we may be subject to sanctions, including: (1) fines; (2) product recalls or seizure; (3) injunctions; (4) refusal of regulatory agencies to review pending market approval applications or supplements to approval applications; (5) total or partial suspension of production; (6) civil penalties; (7) withdrawals of previously approved marketing applications; and (8) criminal prosecution.
We could be adversely affected by healthcare reform legislation.
Third-party payers for medical products and services, including state and federal governments, are increasingly concerned about escalating health care costs and can indirectly affect the pricing or the relative attractiveness of our products by regulating the maximum amount of reimbursement they will provide for diagnostic testing services. In recent years, pressure has been increasing for the U.S. government to enact comprehensive healthcare reform. These proposals have been wide-ranging on both state and federal levels. We are unable to predict whether any such legislation may be enacted in the U.S. or elsewhere or what effect such legislation may have on reimbursement rates for our products. If reimbursement amounts for diagnostic testing services are decreased in the future, such decreases may reduce the amount that will be reimbursed to hospitals or physicians for such services and consequently could place constraints on the levels of overall pricing, which could have a material effect on our
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sales and/or results of operations.
The availability and amount of reimbursement for our products and services and the manner in which government and private payers may reimburse for our products is uncertain. Coverage and reimbursement for products and services under Medicare are determined pursuant to regulations promulgated by the Centers for Medicare & Medicaid Services (“CMS”) and pursuant to CMS’s sub regulatory coverage and reimbursement determinations. It is difficult to predict how CMS will apply those regulations and sub regulatory determinations to our products. Moreover, the methodology under which CMS makes coverage and reimbursement determinations is subject to change, particularly because of budgetary pressures facing the Medicare program.
Even if our products are approved for marketing in the U.S., if we are unable to obtain or retain coverage and adequate levels of reimbursement from Medicare or from private health plans, our ability to successfully market such products in the U.S. will be adversely affected. The manner and level at which the Medicare program reimburses for services related to our products (e.g., administration services) also may adversely affect our ability to market or sell any of our products that may be approved for marketing in the U.S.
Efforts to contain or reduce health care costs have resulted in many legislative and regulatory proposals at both the federal and state level, and it is difficult to predict which, if any, of these proposals will be enacted, and, if so, when. Cost control initiatives by governments or third party payers could decrease the price that we receive for any one or all of our products.
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RISKS RELATED TO OUR INTELLECTUAL PROPERTY
Some of our technology is not patented. If we are unable to protect our technologies from competitors with patents or other forms of intellectual property protection, our business may be harmed.
Our success depends, in part, on our ability to protect our proprietary technologies. We try to protect the technology that we consider important to our business by filing PRC patent applications and relying on trade secret and pharmaceutical regulatory protection.
The process of seeking patent protection can be lengthy and expensive, and we cannot assure you that our pending patent applications, or any patent applications we may make in the future in respect of other products, will result in issued patents, or that any patents issued in the future will be able to provide us with meaningful protection or commercial advantage. Our patent applications may be challenged, invalidated or circumvented in the future.
In addition to patents, we rely on trade secrets and proprietary know-how to protect our intellectual property. We have entered into confidentiality agreements (which include, in the case of employees, non-competition provisions) with many of our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors. These agreements provide that all confidential information developed or made known to the individual during the course of the individual's relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of our employees, the agreements provide that all of the technology which is conceived by the individual during the course of employment is our exclusive property. These agreements may not provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of our proprietary information. In addition, it is possible that third parties could independently develop information and techniques substantially similar to ours or otherwise gain access to our trade secrets.
We cannot assure you that our current or potential competitors, many of whom have substantial resources and have made substantial investments in competing technologies, do not have and will not develop, products that compete directly with our products despite our intellectual property rights.
Intellectual property rights and confidentiality protections may not be effective. Policing unauthorized use of proprietary technology is difficult and expensive, and we might need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. The experience and capabilities of the courts in handling intellectual property litigation
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varies, and outcomes are unpredictable. Further, such litigation may require significant expenditures of cash and management efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigation could materially impair our intellectual property rights and may harm our business, prospects and reputation.
We may be exposed to infringement or misappropriation claims by third parties, which, if determined adversely to us, could cause substantial liabilities to us, or we may be unable to sell some of our products.
Our commercial success also depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Even after reasonable investigation, we may not know with certainty whether we have infringed upon a third party's patent due to the complexity of patent claims, the inadequacy of patent clearance search procedures and the fact that a third party may have filed a patent application without our knowledge while that product was under development by us. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. There may also be technologies licensed to us or acquired by us that are subject to infringement, misappropriation or other claims by others which could damage our ability to rely on such technologies.
If a third party claims that we infringe upon its proprietary rights, any of the following may occur: (1) we may become involved in time-consuming and expensive litigation, even if the claim is without merit; (2) we may become liable for substantial damages for past infringement if a court decides that our technology infringes upon a competitor's patent; (3) a court may prohibit us from selling or licensing our product without a license from the patent holder, which may not be available on commercially reasonable terms, if at all, or which may require us to pay substantial royalties or grant cross licenses to our patents; (4) we may have to reformulate our product so that it does not infringe upon others' patent rights, which may not be possible or could be very expensive and time-consuming; and (5) we may be subject to injunctions prohibiting the manufacture and sale of our products or the use of our technologies.
If any of these events occurs, our business will suffer and the market price of our common shares could decline.
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FINANCIAL RISKS
We will need additional financing.
Our development schedule could be delayed if we are unable to fund our acquisition activities. We believe we will need to raise additional funds to achieve full commercial operation. We do not know whether we will be able to secure additional funding, or funding on terms acceptable to us.
We face financial risk, including the risk of high leverage.
Our development and operation will entail uncertain cash flows. We may spend relatively large amounts on marketing and other expenses. All of these factors and more will result in substantial financial risk. See "Business."
We may be subject to the risks normally associated with debt financing, including the risk that payments of principal and interest on borrowings may leave us with insufficient cash to operate or to pay distributions.
We intend to make use of a very high degree of financial leverage. We could become more highly leveraged because our organizational documents contain no limitation on the amount of debt we may incur.
The use of a high degree of leverage will increase our sensitivity to increases in interest rates. Increases in interest rates may increase our interest expense and adversely affect our cash flow and our ability to service our indebtedness and make distributions to our stockholders.
There is no assurance that we will profit from our recent sale of the Lyfetec, Inc. division assets. In February 2010, we sold the assets of our Lyfetec, Inc. division to Strata Capital Corporation in exchange for 50,000,000 shares (before the 1:15 reverse split) of Strata Capital common stock, par value $0.000001. These shares are restricted securities under Rule 144. Strata Capital has filed a registration statement with the Securities and Exchange Commission to obtain financing. There is no assurance that Strata Capital will be able to raise funds and there is no assurance that we will profit from the sale of the Strata Capital shares we have received.
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RISKS INHERENT IN THE COMPANY
We indemnify our officers and directors.
Our By-Laws provide for the indemnification of officers and directors relating to their activities for the Company to the fullest extent permitted under the Nevada General Corporation Code. These provisions may have the effect of providing indemnity in connection with suits brought by parties other than the Company against an officer or director who has been grossly negligent, though he acted in good faith and in the Company’s interests.
We rely upon a few officers.
We are wholly dependent on the personal abilities of our officers in order to develop and conduct our operations. Our success will be largely dependent on the personal efforts of our key officers and directors. The loss of the services of any of these officers would have a material adverse effect on our business and prospects. Our success also may be dependent, in part, upon our ability to hire and retain additional qualified sales and marketing personnel. There can be no assurance that we will be able to hire or retain such necessary personnel. See "Management."
Our present shareholders will retain control.
Our present control shareholders own a majority of the outstanding Common and Preferred Stock with a majority of the voting rights of the Company. As a result of this percentage of ownership, the existing shareholders will be able to control our management at least for the foreseeable future. The Common Stock purchasers will not have the right to elect our directors and the Company's control will stay with the current shareholders. These control shareholders will have full voting control of the Company and the Board of Directors.
The liability of our directors and officers is limited.
Our Articles of Incorporation include provisions to eliminate, to the full extent permitted by Nevada corporate law as in effect from time to time, the personal liability of our directors for monetary damages arising from a breach of their fiduciary duties as directors. The Articles of Incorporation also includes provisions to the effect that (subject to certain exceptions) the Company shall, to the maximum extent permitted
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from time to time under Nevada law, indemnify, and upon request shall advance expenses to, any director or officer to the extent that such indemnification and advancement of expenses is permitted under such law, as it may from time to time be in effect. In addition, our By-Laws require us to indemnify, to the full extent permitted by law, any of our directors, officers, employees or agents for acts which such person reasonably believes are not in violation of our corporate purposes as set forth in the Articles of Incorporation. As a result of such provisions in the Articles of Incorporation and the By-Laws, stockholders may be unable to recover damages against our directors and officers for actions taken by them which constitute negligence, gross negligence or a violation of their fiduciary duties, which may reduce the likelihood of stockholders instituting derivative litigation against directors and officers and may discourage or deter stockholders from suing our directors, officers, employees and agents for breaches of their duty of care, even though such action, if successful, might otherwise benefit us and our stockholders.
Our Board of Directors may unilaterally implement changes in our investment and financing policies that may affect the interests of our stockholders.
Our investment and financing policies, and our policies with respect to other activities, including growth, debt, capitalization, and operating policies, are determined by the Board of Directors. Although the Board of Directors has no present intention to do so, these policies may be amended or revised from time to time at the discretion of the Board of Directors without notice to stockholders or a vote of our stockholders. Accordingly, stockholders have no direct control over changes in our policies and changes in our policies may affect them.
We are dependent on external sources of capital.
In order to achieve our business plan and to grow, we will need constant infusions of additional capital. We will need to fund our future capital needs, including capital for property development and acquisitions, from sources other than income from operations. We therefore will have to rely on third-party sources of debt and equity capital financing, which may not be available on favorable terms or at all. Our access to third party sources of capital depends on a number of things, including conditions in the capital markets generally and the market’s perception of our growth potential and our current and potential future earnings. Additional equity offerings may result in substantial dilution of stockholders’ interests, and additional debt financings may substantially increase leverage. Further, there is no assurance that we will be able to successfully access capital.
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RISKS RELATED TO INVESTMENT IN OUR SECURITIES
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. The trading market for our common stock may depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
A significant portion of our total outstanding shares of Common Stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Common Stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of Common Stock intend to sell shares, could reduce the market price of our Common Stock.
The Common Stock may experience substantial dilution from conversion of the4 outstanding Preferred Stock and Convertible Debenture. The Company has 21 million shares of Convertible Preferred Stock outstanding and also a Convertible Debenture. The Convertible Preferred Stock is convertible on a share for share basis into Common Stock. The Convertible Debenture is convertible at the bid price of the Common Stock at the time of conversion. The conversion of one or both of these securities would result in substantial dilution to the existing holders of Common Stock.
A decline in the price of our Common Stock could affect our ability to raise further working capital and adversely impact our operations. A prolonged decline in the price of our Common Stock could result in the reduction in
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our ability to raise capital through the sale of equity securities. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
We do not intend to pay dividends; you will not receive funds without selling shares.
We have never declared or paid any cash dividends on our capital stock and do not intend to pay dividends in the foreseeable future. We intend to invest our future earnings, if any, to fund our growth. Therefore, you may not receive any funds without selling your shares.
You may experience dilution if we issue additional securities,
If we issue additional shares, you may find your holdings diluted, which if it occurs, means that you will own a smaller percentage of our company. Further, any issuance of additional securities to various persons or entities in lieu of cash payments will lead to further dilution.
Because we may be subject to the “penny stock” rules, you may have difficulty in selling our common stock. Because our stock price is less than $5.00 per share, our stock may be subject to the SEC’s penny stock rules, which impose additional sales practice requirements and restrictions on broker-dealers that sell our stock to persons other than established customers and institutional accredited investors. The application of these rules may affect the ability of broker-dealers to sell our common stock and may affect your ability to sell any common stock you may own.
According to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
· Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
· Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
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·“Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
· Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
·The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
Additionally, we may be subject to short selling, manipulation by others, defamation and other false statements by stock “bashers” on stock chat websites, and the regulations of the the Pink Sheets OTC markets, all of which may be outside our control.
As an issuer of “penny stock” the protection provided by the federal securities laws relating to forward looking statements does not apply to us.
Although the federal securities law provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock we will not have the benefit of this safe harbor protection in the event of any based upon an claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading.
The volatility of and limited trading market in our common stock may make it difficult for you to sell our common stock for a positive return on your investment.
The public market for our common stock has historically been very volatile. Any future market price for our shares is likely to continue to be very volatile. Further, our common stock is not actively traded, which may amplify the volatility of our stock. These factors may make it more difficult for you to sell shares of common stock.
The registration and potential sale, either pursuant to a prospectus or pursuant to Rule 144, by certain of our selling stockholders of a significant number of shares could encourage short sales by third parties.
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There may be significant downward pressure on our stock price caused by the sale or potential sale of a significant number of shares by certain of our selling stockholders which could allow short sellers of our stock an opportunity to take advantage of any decrease in the value of our stock. The presence of short sellers in our common stock may further depress the price of our common stock.
If the selling stockholders sell a significant number of shares of common stock, the market price of our common stock may decline. Furthermore, the sale or potential sale of the offered shares pursuant to a prospectus and the depressive effect of such sales or potential sales could make it difficult for us to raise funds from other sources.
Fluctuations in our operating results may affect our stock price and ability to raise capital.
Our operating results for any given quarter or fiscal year should not be relied upon as an indication of future performance. Quarter to quarter comparisons of our results of operations may not be meaningful as a result of (i) our limited operating history and (ii) the emerging nature of the markets in which we compete. Our future results will fluctuate, and those results may fall below the expectations of investors and may cause the trading price of our common stock to fall. This may impair our ability to raise capital, should we seek to do so. Our quarterly results may fluctuate based on, but not limited to, the following factors: (1) our ability to attract and retain customers; (2) negative publicity about our industry, events, or products; (3) seasonal fluctuations in our business; (4) intense competition; (5) changes in pricing policies; (6) regulatory actions and legal proceedings; (7) our ability to control certain costs; (8) our ability to attract, train and retain skilled management, as well as strategic, technical and creative professionals; (9) the availability of working capital and the amount and timing of costs relating to our expansion; and (10) general economic conditions and economic conditions specific to our businesses.
Our stock price could decline further because of the activities of short sellers.
Our stock has historically attracted significant interest from short sellers. The activities of short sellers could further reduce the price of our stock or inhibit increases in our stock price.
Our stock, the Company and its management have also been attacked by people who post negative comments on the Internet. These people are known collectively as “bashers.” They are often anonymous. Our stock may be adversely affected by such activities and we may not be able to take effective action against them.
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Our stock price and operations may be affected by potential stock manipulation.
We believe certain parties are acting in a manner to attempt to denigrate our business for personal profit. We believe certain parties may have engaged in actions intended to cause harm to the Company, and certain parties have made efforts to decrease the market price of our common stock. To the extent such parties engage in any such actions or take any other actions to interfere with our existing and/or prospective business relationships with regulators, vendors, media, partners, customers, lenders, or others, our business, prospects, financial condition and results of operations may suffer, and the price of our common stock may trade at prices below those that might prevail in the absence of any such efforts.
We will need to make additional investments in financial processes and staffing in order to ensure that our internal controls over financial reporting are effective.
We intend to assess its internal controls over financial reporting. Our internal controls over financial reporting had several material weaknesses, which we will need to correct in future periods, requiring us to invest additional resources in financial processes and staffing. If we attempt to list our stock on the OTC BB, current regulations of the Securities and Exchange Commission, or SEC, will require us to include this assessment in our future annual reports from now on. An independent attestation of the internal control over financial reporting will be required for our annual reports.
We cannot assure you that our stock price will not decline.
The market price of our Common Stock could be subject to significant fluctuations. Among the factors that could affect our stock price are:
• quarterly variations in our operating results; • changes in revenue or earnings estimates or publication of research reports by
analysts;
• failure to meet analysts’ revenue or earnings estimates;
• speculation in the press or investment community; 52
• strategic actions by us or our competitors, such as acquisitions or restructurings; • actions by institutional or mutual fund stockholders; • domestic and international economic factors unrelated to our performance; • our failure to achieve and maintain profitability;
• changes in market valuations of similar companies; • announcements by us or our competitors of significant contracts, new products,
acquisitions, commercial relationships, joint ventures or capital commitments;
• the loss of major customers or product or component suppliers;
• the loss of significant partnering relationships;
• product liability lawsuits or product recalls; and
• general market, political and economic conditions.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.
The stock markets in general, and the markets for biotechnology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Common Stock. In particular, we cannot assure you that you will be able to resell your shares at any particular price, or at all.
We presently do not intend to pay cash dividends on our Common Stock.
We currently anticipate that no cash dividends will be paid on the Common Stock in the foreseeable future. While our dividend policy will be based on the operating results and capital needs of the business, it is anticipated that all earnings, if any, will be retained to finance the future expansion of the our business.
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The volatility of our stock price could lead to losses by shareholders
The market price of our Common Shares has been subject to wide fluctuations. Such fluctuations in market price may continue in response to: (i) quarterly and annual variations in operating results; (ii) announcements of technological innovations or new products that are relevant to our industry; (iii)changes in financial estimates by securities analysts; or (iv)other events or factors. In addition, financial markets experience significant price and volume fluctuations that particularly affect the market prices of equity securities of many technology companies. These fluctuations have often resulted from the failure of such companies to meet market expectations in a particular quarter, and thus such fluctuations may or may not be related to the underlying operating performance of such companies. Broad market fluctuations or any failure of our operating results in a particular quarter to meet market expectations may adversely affect the market price of our Common Shares. Occasionally, periods of volatility in the market price of a company’s securities may lead to the institution of securities class action litigation against a company. Due to the volatility of our stock price, we may be the target of such securities litigation in the future. Such legal action could result in substantial costs to defend our interests and a diversion of management’s attention and resources, each of which would have a material adverse effect on our business and operating results.
We may become involved in litigation that may materially adversely affect us
From time to time in the ordinary course of our business, we may become involved in various legal proceedings, including commercial, product liability, employment, class action and other litigation and claims, as well as governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such actions may have a material adverse effect on our business, operations or financial condition.
We will trade on the Pink Sheets OTC Market which entails numerous risks.
We will trade on the Pink Sheets OTC Market which entails numerous risks, including but not limited to the following: Pink Sheets has experienced computer failures and
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malfunctions in the past, causing securities quoted there to be misquoted or not quoted at all. Pink Sheets has a system of rating companies and can rate our stock “Caveat Emptor” for many reasons which are out of our control, or for no reason at all. Pink Sheets can label us “Caveat Emptor” or “Toxic” for the actions of others, such as short selling, or making unauthorized spam promotional campaigns. There are no clear standards for being placed on Caveat Emptor and no clear standards for being removed. Generally, stock buyers will avoid buying Caveat Emptor stocks and the stocks experience substantial market declines after being so labeled. Finally, if the Company is unable to obtain the necessary audited financial statements, the Company may be unable to escape the Pink Sheets. In the last year, the Issuer was placed in “Caveat Emptor” status by Pink Sheets and this was removed after the Issuer posted certain disclosures on the Pink Sheets.
The price of our stock may be manipulated or affected by the actions of others beyond our control. Small companies such as ours may be subject to market manipulation, such as naked short selling, or having the Depository Trust Clearing Corporation place a “chill” on transferring the stock, or having broker-dealers place restrictions on trading the stock or by having clearing firms refuse to process stock transactions.. We may not have the resources to fight or stop these actions.
The price of our stock may be volatile, and a shareholder's investment in our common stock could suffer a decline in value.
There could be significant volatility in the volume and market price of our stock, and this volatility may continue in the future. Our stock is listed in the Pink Sheets OTC market and there is a greater chance for market volatility for securities that trade on the Pink Sheets as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of "bid" and "ask" quotations and generally lower trading volume. In addition, factors such as quarterly variations in our operating results, changes in financial estimates by securities analysts or our failure to meet our or their projected financial and operating results, litigation involving us, general trends relating to the beverage industry, actions by governmental agencies, national economic and stock market considerations as well as other events and circumstances beyond our control could have a significant impact on the future market price of our common stock and the relative volatility of such market price.
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The market for penny stocks has experienced numerous frauds and abuses which could adversely impact investors in our stock. Pink Sheets securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because reporting requirements are less stringent than those of the stock exchanges or NASDAQ.
Patterns of fraud and abuse include: (1) Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) “Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (5) Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
Our management is aware of the abuses that have occurred historically in the penny stock market.
Item X The nature and extent of the issuer’s facilities.
The goal of this section is to provide a potential investor with a clear understanding of all assets, properties or facilities owned, used or leased by the issuer.
In responding to this item, please clearly describe the assets, properties or facilities of the issuer, give the location of the principal plants and other property of the issuer and describe the condition of the properties. If the issuer does not have complete ownership or control of the property (for example, if others also own the property or if there is a mortgage on the property), describe the limitations on the ownership.
If the issuer leases any assets, properties or facilities, clearly describe them as above and the terms of their leases.
The Issuer's Lyfetec subsidiary has entered into a lease for 11,000 square feet of space at 760 East McNab Road, Pompano Beach, Florida 33062. The rent is $5,000 per month and the property consists of 11,000 square feet with 11 offices, a conference room with a
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kitchen area and three warehouses. The lease requires a deposit of $20,000 and is for a three-month term with a purchase agreement. There is litigation pending regarding this lease. The Issuer is in the process of moving to other premises.
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From my understanding most of the cast has been invited (Larry, Erik, Robert Pine, Paul Linke, Lou Wagner-not sure about Brodie Greer) along with Kent McCord from "Adam-12" and I know Larry will be there. 
AI
