This was already disclosed in their May 27th S1 filing:
In connection with the Dutchess Investment Agreement, we also entered into a registration rights agreement with Dutchess, pursuant to which we are obligated to file a registration statement with the Securities and Exchange Commission (the “SEC”) covering 244,500,000 shares of our common stock underlying the Dutchess Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC and maintain the effectiveness of such registration statement until termination of the Dutchess Investment Agreement.
The Dutchess Investment Agreement is not transferable and any benefits attached thereto may not be assigned.
The 40,000,000 shares to be registered herein represent 17.9% of the shares then issued and outstanding, assuming that the selling stockholder will sell all of the shares offered for sale. The 40,000,000 shares to be registered herein represent 30% of the shares issued and outstanding held by non-affiliates of the Company.
At an assumed purchase price of $0.00396 (equal to 90% of the closing price of our common stock of $0.0044 on May 20, 2014), we will be able to receive up to $158,400 in gross proceeds, assuming the sale of the entire 40,000,000 shares being registered hereunder pursuant to the Dutchess Investment Agreement. Accordingly, we would be required to register additional 2,485,252,525shares to obtain the balance of $9,841,600 under the Dutchess Investment Agreement. We are currently authorized to issue 750,000,000 shares of our common stock. We may be required to increase our authorized shares in order to receive the entire purchase price. Dutchess has agreed to refrain from holding an amount of shares which would result in Dutchess owning more than 4.99% of the then-outstanding shares of our common stock at any one time.
There are substantial risks to investors as a result of the issuance of shares of our common stock under the Dutchess Investment Agreement. These risks include dilution of stockholders’ percentage ownership, significant decline in our stock price and our inability to draw sufficient funds when needed.
Dutchess will periodically purchase our common stock under the Dutchess Investment Agreement and will, in turn, sell such shares to investors in the market at the market price. This may cause our stock price to decline, which will require us to issue increasing numbers of common shares to Dutchess to raise the same amount of funds, as our stock price declines.
The aggregate investment amount of $10,000,000 was determined based on numerous factors, including the following: to develop brands and liquid nutritional beverages products that are natural and environmentally-focused; to bring new brands to market as well as increasing the size and diversity of the existing Nutraliquids product line; and to acquire, license and operate companies that seek distribution of liquid nutritional beverages in North America. The Company will need the full amount of $10,000,000 funding under the Dutchess Investment Agreement to fund the brand acquisition and product development plan. We may have to increase the number of our authorized shares in order to issue the shares to Dutchess if we reach our current amount of authorized shares of common stock. Accordingly, because our ability to draw down any amounts under the Dutchess Investment Agreement is subject to a number of conditions, there is no guarantee that we will be able to draw down any portion or all of the proceeds of $10,000,000 under the Dutchess Investment Agreement. We believe that it is likely that we will be able to drawn down on the full amount of the Agreement, however, prior to drawing down on the full amount, we may not be able to draw down on the full amount without filing an amendment to our Articles of Incorporation to increase the Company ’ s authorized shares of common stock. Pursuant to state law, the filing of the amendment to increase the authorized shares of common stock may require board and shareholder approval. As such, we cannot make any guarantee that we will be successful in accessing the full amount under the Dutchess Investment Agreement.
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