EDGAR 10-K Filing

Company CIK: 1563463
Filing Year: 2022
Filename: 1563463_10-K_2022_0001493152-22-009623.json

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ITEM 1. BUSINESS
Item 1. Business
Overview
NutraLife BioSciences, Inc., a Florida corporation (“us,” “we,” “our” or the “Company”) was founded in 2010 by Edgar Ward, the Company’s Chief Executive Officer, President & sole Director to engage in the development, manufacturing and distribution of nutritional and dietary nutritional supplement products. Since then, the Company has evolved into a branded and private label developer, manufacturer and distributor of a wide range of nutraceutical, wellness, and CBD products.
Amid the COVID-19 global pandemic, in 2020, the Company made a strategic pivot from our then-current nutraceutical manufacturing business by adding the manufacture of consumer sanitizer products utilizing the Company’s existing manufacturing capabilities and the Company’s ability to retrofit its operations and accommodate production due to the shortage of supply and increased demand for sanitizer products.
The Company’s manufacturing facility has been registered with the Food and Drug Administration and its manufacturing facility has operated in accordance with the Good Manufacturing Processes Standard (GMP) for more than five years. Our products adhere to high manufacturing standards throughout every step of the manufacturing and extraction process. Our products are formulated, developed, manufactured and produced under the supervision of Edgar Ward, our Chief Executive Officer, President and sole Director. Once produced, our products are tested by our in-house and third party laboratory chemists. We believe that our nutraceutical and industrial CBD products are of the highest-quality and are laboratory tested for strength, purity and contaminants such as microbials, heavy metals, pesticides, and solvents.
We offer a number of different core formulations which we modify to meet the specifications of our private label customers. We provide many different variations of our core formulations. Our private label ingestible and skincare products include CBD-infused oral sprays, tinctures, pet drops, pain balms, and face creams.
Our products are available in various formulations and strengths and are available for purchase online directly from the Company through its website at www.nutralifebiosciences.com, as well as through numerous other private label distributors, online retailers and retail outlets. Information available on, or accessible through the foregoing website is not a part of this Annual Report on Form 10-K and is not incorporated herein by reference.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We sustained a net loss of approximately $5.8 and $2.9 million for the years ended December 31, 2021 and 2020, respectively, negative cash flows from operations for both years and had an accumulated deficit of approximately $47.6 million at December 31, 2021. These conditions raise substantial doubt about our ability to continue as a going concern. The independent auditors’ report on our financial statements for the years ended December 31, 2021 and 2020 contain explanatory paragraphs expressing substantial doubt as to our ability to continue as a going concern.
In December 2019, a novel strain of coronavirus was reported to have surfaced in China and spread to the U.S. in early 2020. The spread of this virus caused various business disruptions including temporary closures to the Company’s offices and facilities.
The Company is currently in the process of raising capital to complete and finalize the build-out of its facility in Deerfield Beach for the purpose of consolidating its operations. The structure of the capital raise is currently in development. The Company is seeking to continue its path to profitability through increased business development, marketing and sales of the Company’s multiple lines of topical, ingestible and skincare health and wellness products. The Company is also focused on completing an efficacy clinical study on its patented mosquito bug patch with plans upon a successful conclusion to launch globally in the future, adding to the Company’s suite of wellness products. However, there can be no assurance that the foregoing can occur as planned, or at all.
Failure to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing sales channels.
We are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Corporate History
The Company was formed as a limited liability company in the state of Florida on April 1, 2010. On December 3, 2012, we converted from a limited liability company to a Florida corporation.
We have four wholly owned subsidiaries:
● Precision Analytic Testing, LLC, a Florida limited liability company (“PAT”) formed on May 11, 2019;
● NutraDerma Technologies, Inc., (“NutraDerma”) a Florida corporation formed on January 28, 2019;
● PhytoChem Technologies, Inc., a Florida corporation (“PhytoChem”) formed on February 4, 2019; and
● TransDermalRX, Inc., a Florida corporation (“TransDermal”) formed on February 8, 2019.
Smaller Reporting Company
The Company is a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. There are certain exemptions available to us as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years. As long as we maintain our status as a “smaller reporting company,” these exemptions will continue to be available to us.
Bankruptcy, Receivership or Similar Proceedings
We have not been involved in a bankruptcy receivership or similar proceeding. Additionally, we have not been involved in a reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.
Our Business
We are a manufacturer and distributor of nutraceutical, dietary, wellness and other products, such as skincare and sanitizer products. Our products are sold to private label distributors who sell the products we manufacture under their own brand names as well as under our own brand names. We generate revenues from the sales of our products.
For the years ending on December 31, 2021 and 2020, we generated revenues of $626,619 and $1,255,784, respectively, from the sale of our products.
In March 2017, we began selling CBD products. For the years ending on December 31, 2021 and 2020, we generated revenues of $516,747 and $66,807 respectively, from the sale of our CBD products, representing 98% and 5.65% of our revenues for such periods.
Our Products and Services
We manufacture and distribute private label and branded products. In both of the years ended December 31, 2021 and 2020, private label sales represented 82% of our revenue.
Our Products
Our CBD products are derived from the seeds and mature stalks of the Cannabis Sativa plant which includes all parts and varieties of the cannabis sativa plant also known as hemp, which contain a tetrahydrocannabinol concentration (“THC”) that does not exceed 0.3 percent on a dry-weight basis. In December of 2018, the U.S. Food and Drug Administration completed an evaluation of three generally recognized as safe (GRAS) notices for hemp seed-derived food ingredients. The FDA stated that hulled hemp seed (GRN765), hemp seed protein powder (GRN771), and hemp seed oil (GRN778) are GRAS under their intended conditions of use.
Our CBD products are made from seeds and mature stalks of hemp and contain only trace amounts of THC which are far below 0.3 percent, and we believe they qualify as GRAS products.
Our CBD products include:
● Cannabinoid-rich hemp oil derived from industrial hemp;
● Tinctures;
● Topical lotions and oils applied directly to the skin designed to treat pain or inflammation;
● Face creams;
● Massage oils;
● Nutraceutical Sprays with CBD as an added ingredient; and
● Pet products taken internally.
Our other products include:
● Eddie’s Clean Hands
● Eddie’s Immune Boost
● INVISIPatch Bug Patch
● PCR- Pure
Recent Developments
In November of 2018, PAT began providing bulk material analytical, identity, potency and purity testing of raw industrial hemp.
In January of 2019, NutraDerma acquired the patent for a natural dermal skin patch that is designed to prevent mosquito and other insect bites.
In February of 2019, Phytochem entered into an agreement with Owen Morgan, an individual, whereby Mr. Morgan agreed to provide certain know how and services to Phytochem for the commercialization of certain technologies to separate and/or process the components of hemp to remove and/or modify, purify, dilute and extract bioactive ingredients and/or remove unwanted substances to produce finished products for a variety of applications. This agreement is further described under the heading “Material Agreements” below.
In March of 2019, we licensed our technology for a unique system for pharmaceutical grade delivery of testosterone into the human body to licensed pharmacist, Orlando Pharmacy, as further described under the heading “Material Agreements” below.
In March of 2019, we entered into an agreement with NewLeaf Assets, LLC, a Delaware Limited Liability Company (“NewLeaf”) as amended, (the “Agreement”) whereby NewLeaf invested an aggregate of $1,380,000 (the “Investment”) in our securities. This Agreement is further described under the heading “Material Agreements” below.
On June 7, 2019, the Company granted a bonus to its Chief Executive Officer and President, Edgar Ward, of ten percent (10%) of the future gross revenue generated by PhytoChem for a period of seven (7) years from the date that PhytoChem receives its first revenue.
In June 2019, and as amended in November 2019, we entered into an investment agreement, note, Security Agreement, Purchase Royalty Agreement, Pledge Agreement, Pledgor Royalty Agreement with PhytoChem Technologies, Inc., Kahn Family Limited PT II., and Brenda Hamilton as the pledgor, which were subsequently amended in November of 2019. The foregoing agreements are further described under the heading “Material Agreements” below.
Amid the COVID-19 global pandemic, in 2020, the Company made a strategic pivot from our then-current nutraceutical manufacturing business by adding the manufacture of consumer sanitizer products utilizing the Company’s existing manufacturing capabilities and the Company’s ability to retrofit its operations and accommodate production due to the shortage of supply and demand for sanitizer products. To do so, consistent with Food and Drug Administration (FDA) requirements, the Company registered and obtained a labeler code as an over-the-counter (OTC) manufacturing facility and began manufacturing and distributing a line of liquid-based multi-use sanitizer spray products under the Company’s in-house brand, “Eddie’s Clean Hands,” packaged as a multi-use sanitizer spray, formulated per the CDC’s recommendation of containing at least 60-95% ethanol or isopropanol alcohol to be effective.
In May 2020, we secured a supplier agreement with Grainger, and began drop-shipping its sanitizer products that include a 10-pack of Eddie’s Clean Hands 2 oz. sanitizer spray along with a larger 8 oz. sanitizer spray directly to Grainger and its customers. Grainger is a broad line, business-to-business distributor of maintenance, repair, and operating (MRO) products and services with operations primarily in North America, Japan, and Europe.
On September 30, 2020, the Company filed Articles of Amendment (the “Amendment”) to its Articles of Incorporation with the Florida Department of State that contained a Certificate of Designations to designate one hundred and ten (110) shares of the preferred stock of the Company, par value $0.0001 as Series B Convertible Preferred Stock (the “Series B Preferred Stock”). The Amendment was effective on September 30, 2020.
On November 2, 2020, the Company entered into a Stock Purchase Agreement with Lord Global Corporation and its wholly owned subsidiary, 27 Health Inc., and also entered into a Manufacturing, Distribution and Sales Agreement (the “MDS”) with 27 Health Inc. The MDS is a multi-year production, fulfillment, and distribution agreement with 27 Health Inc. to launch its patent-pending Oral Sanitizer mouth spray which we hope will provide some protection from viruses by reducing viral transmission. The foregoing agreements are further described under the heading “Material Agreements” below.
On December 18, 2020, the Company received its product registration number from the Food and Drug Administration (FDA) and completed its first production run of Oral Shield antiseptic protection mouth spray. The Company along with its partners plans to market and distribute the product on a global scale and seeks to provide a convenient, travel-size, quality, multi-functioning antiseptic mouth spray for consumers to use throughout the day. We believe that mouthwash products can be effective at killing viruses, reducing the viral load within the mouth essentially supporting the reduction of virus transmissions.
In September 2021, the Company entered a strategic partnership with KOR Medical to produce an initial order for a line of cannabinoid-based wellness products. The initial products produced under this venture is a line of four ingestible items formulated to help improve overall health, including helping consumers sleep better, feel better, be calmer, and improve their quality of life.
In November 20, 2021 the Company executed a definitive agreement with Cookie Retail Products, LLC (“CRP”) for a strategic partnership with Cookies (branded) Retail Products. Under the terms of the agreement, CRP will provide the Company with branding and marketing guidance while the Company becomes a preferred research and development profit participant and partner of CRP. The Company will utilize its nutraceutical and research resources to design, create, and provide options for non-regulated, federally legal for sale, innovative product introductions to be used for the parent Cookies brand. Cookies is an iconic billion-dollar brand with retail, ecommerce, and direct-to-consumer verticals across multiple channels of trade.
Our Operating Strategy
The Company manufactures and distributes unique dietary supplements, sold directly to consumers, as well as through retail and wholesale outlets. We are dedicated to bringing the highest quality, most beneficial, effective nutrients and delivery systems to the market. With over 35 years’ experience in nutritional supplementation, we know the importance of products that are natural and highly effective in maintaining one’s healthy lifestyle.
The Company’s products are formulated to cater to the daily health needs of men and women, and feature revolutionary nutrient delivery systems, such as oral sprays, tincture droppers, blast caps and nutritional drinking straws. These methods are approved for pharmaceutical and nutraceutical use and have been hailed for their convenience and precision.
The Company entered into strategic partnership with Cookies (branded) Retail Products (CRP). Under the terms of the agreement, CRP will provide the Company with branding and marketing guidance while the Company becomes a preferred research and development profit participant and partner of CRP. The Company will utilize its nutraceutical and research resources to design, create, and provide options for non-regulated, federally legal for sale, innovative product introductions to be used for the parent Cookies brand. Cookies is an iconic billion-dollar brand with retail, ecommerce, and direct-to-consumer verticals across multiple channels of trade.
In conjunction with recent private-label agreements, the Company is in the process of expanding its manufacturing operations and capabilities to accommodate the production of several new products expected to be released in the near future. These products include an immune booster drink shot infused with CBDA. CBDA along with CGBA have been found to “bind to the SARS-CoV-2 spike protein, blocking a critical step in the process the virus uses to infect people.” Steve Lundeberg, Oregon State University.
The Company is also preparing an application for a planned uplisting to the OTCQB, with the objectives of increasing its visibility and exposure within the North American financial community, and creating additional value for shareholders.
We plan to continue the development, manufacturing and distribution of nutritional dietary and skincare products and we believe a number of current industry trends will increase demand for private label products particularly in the industrial hemp CBD market. Our operating strategy for such products consists of the following key elements:
● We purchase raw materials and produce goods only upon receipt of a firm commitment from our private label customers and we require payment in full prior to shipping. Once a product is shipped to a customer, we generally do not accept returns unless the product is defective or delivered late. These practices minimize our need to carry unsold inventories.
● We regularly update our product line to keep up with consumer trends and industry developments.
● We provide superior customer service by controlling the entire production process of our products. By controlling the production process, we have the ability to tailor products to a customer’s specific needs, offer customers rapid order turnaround time, maintain flexible scheduling and maintain higher standards of quality control.
● We seek to add value to customers’ overall merchandising effort. We work closely with our customers to develop distinctive product lines at their particular price points. We believe that this process allows our customers to achieve a degree of differentiation from their retail competitors. We believe our ability to develop, manufacture and offer high quality, all-natural products is a competitive advantage and will lead to increased orders.
● We emphasize the development of long-term relationships with our customers by providing a high level of customer service through our sales force. We seek to capitalize on our knowledgeable and experienced sales force by maintaining regular interaction with our customers which provides us with an understanding of which products will meet their particular needs.
Our Growth Strategy
We intend to grow our business by pursuing the following strategies:
● We plan to continue to expand our manufacture of consumer products.
● We also plan to continue to brand ourselves as a High Quality GMP Compliant manufacturer of industrial hemp CBD products. Many manufacturers of CBD based products do not operate in compliance with GMP standards. All of our CBD products are tested at multiple stages of the production process to ensure product quality and a THC content of less than 0.3%.
● We will seek to increase sales to our existing customers by expanding sales of additional products. Certain of our customers began their relationship with us by purchasing only one of our products. Since these initial purchases, we have been able to expand our sales to such customers to multiple products. This strategy has enabled us to expand our product sales to our existing customers over time. We aggressively pursue these cross-selling opportunities. Our range of products enables us to pursue many of these cross-selling opportunities.
● We seek to increase sales to customers by offering products in categories outside of our traditional product offerings.
● We plan to leverage our sales, reputation for quality all-natural products to expand our customer base to other private label customers within the industrial hemp CBD and Nutraceutical markets.
Our Customers
Our customers for our consumer sanitizer products include Grainger, Riverhead Chamber of Commerce and ecommerce direct to consumer consumers.
Our private label sales represent several different brands of products manufactured by us. Sales to private label customers represented approximately 82% and 99% of our revenues for the years ended December 31, 2021 and 2020, respectively. Our industrial hemp CBD products represented 98% and 100% of private label sales in the years ended December 31, 2021and 2020, respectively.
We do not enter into long term contracts with our private label distributors and all sales are made by purchase order. Our private label customers are not obligated to order a minimum amount of product from us and can discontinue purchasing our product at any time.
We believe our private label products offer numerous benefits to our customers:
● Our private label products are premium products.
● Our private label products offer the opportunity for higher profit margins than brand name products.
● Distributing private label products builds brand recognition for the retail as well as the wholesale customer.
● We are registered with the FDA and follow GMP in the manufacturing process ensuring high quality products and consistent standards for our private label customers.
● Businesses using our private label products avoid the additional expense of manufacturing and creating the finished product.
● Our private label customers are able to focus their attention and resources on their business and not on manufacturing a final product.
● We believe that we offer high quality unique products with enhanced delivery systems that are effective and appealing to consumers.
● We offer a wide range of private label products providing our customers with a variety of options.
Manufacturing
As noted above, the Company entered into strategic partnership with Cookies (branded) Retail Products (CRP). Under the terms of the agreement, CRP will provide the Company with branding and marketing guidance while the Company becomes a preferred research and development profit participant and partner of CRP. The Company will utilize its nutraceutical and research resources to design, create, and provide options for non-regulated, federally legal for sale, innovative product introductions to be used for the parent Cookies brand. Cookies is an iconic billion-dollar brand with retail, ecommerce, and direct-to-consumer verticals across multiple channels of trade.
Also noted above, in 2020, the Company made a strategic pivot from our then-current nutraceutical manufacturing business by adding the manufacture of consumer sanitizer products utilizing the Company’s existing manufacturing capabilities and the Company’s ability to retrofit its operations and accommodate production due to the shortage of supply and demand for sanitizer products. To do so, consistent with FDA requirements, the Company registered and obtained a labeler code as an OTC manufacturing facility and began manufacturing and distributing a line of liquid-based multi-use sanitizer spray products under the Company’s in-house brand, “Eddie’s Clean Hands,” packaged as a multi-use sanitizer spray, formulated per the CDC’s recommendation of containing at least 60-95% ethanol or isopropanol alcohol to be effective. We plan to continue manufacturing and distributing liquid-based multi-use sanitizer spray products under the Company’s in-house brand, “Eddie’s Clean Hands”.
Also, as discussed above, on December 18, 2020, the Company received its product registration number from the FDA and completed its first production run of Oral Shield antiseptic protection mouth spray. The Company along with its partners plans to market and distribute the product on a global scale and seeks to provide a convenient, travel-size, quality, multi-functioning antiseptic mouth spray for consumers to use throughout the day. We believe that mouthwash products can be effective at killing viruses, reducing the viral load within the mouth essentially supporting the reduction of virus transmissions.
Once developed, our products are manufactured at our facility in Coconut Creek, Florida. We obtain all raw materials and ingredients for our products from third party suppliers. For all orders we receive, we manufacture, package, label and ship the product to the customer. We lease an aggregate of six thousand four hundred (6,400) square feet of office and warehouse space at 6601 Lyons Rd, Suites L-6&7, Coconut Creek, Florida 33073. Approximately five thousand eight hundred (5,800) square feet at this location is used for manufacturing, storage and distribution of our products.
On June 6, 2017, we entered into an agreement to lease nineteen thousand eight hundred and thirty-one (19,831) square feet in Deerfield Beach, FL 33441. We plan to use seventeen thousand eight hundred (17,800) square feet of the new Deerfield Beach location for manufacturing, storage and distribution of our products. We expect to begin manufacturing at this location in July of 2022.
By manufacturing our own products, we believe that we maintain better control over product quality and availability while also reducing production costs. Our manufacturing process generally consists of the following operations: (a) sourcing ingredients for products, (b) warehousing raw ingredients, (c) efficacy testing and measuring ingredients for inclusion in products, and (d) blending using automatic equipment. The next step, bottling and packaging, involves filling, capping, coding, labeling and placing the product in packaging with appropriate tamper-evident features then sending the packaged product to our customers.
The FDA requires companies manufacturing homeopathic medicines to have their facilities certified as Good Manufacturing Practices (“GMPs”). Our manufacturing facility is registered with the FDA and is compliant with its GMP certification. Our quality control program seeks to ensure the superior quality of our products and that they are manufactured in accordance with current GMP. Our processing methods are monitored closely to ensure that only quality ingredients are used and to ensure product purity. Periodically, we retain the services of outside GMP audit firms to assist us in our efforts to comply with GMPs.
Sources and Availability of Raw Materials
The raw materials for our industrial hemp CBD products consist of Cannabidiol rich oil and isolate. We obtain the raw materials for our industrial hemp CBD products from state licensed suppliers. We obtain the raw materials for our other non-CBD based products from several ingredient suppliers located in the U.S. These raw materials consist of naturally derived vitamins and nutrients. The raw materials used by us are available from a variety of suppliers. We maintain a good relationship with our suppliers and do not anticipate that any of our suppliers will terminate their relationship with us in the near term. We have ongoing relationships with secondary and tertiary suppliers. In the event we are unable to obtain any of our raw materials from our suppliers; we believe that we could obtain alternative sources of any raw materials from other suppliers. We do not have contracts with our suppliers and we order our raw materials on an as needed basis. We have not experienced any material adverse effects on our business as a result of shortages of raw materials or packaging materials used in the manufacturing of our products. An unexpected interruption or a shortage in supply of raw materials could adversely affect our business derived from these products.
Shipping and Delivery of Finished Products
Upon completion of the manufacturing process, our products are shipped directly to customers. Private label products are packaged by us in the packaging provided by each customer. All shipping, bills of lading and invoices are generated by us from our Coconut Creek, Florida facility.
We ship the product ordered within forty-five (45) days to our private label distributors, thirty (30) days to retail customers and within thirty (30) days to wholesale and third party (non-private label) distributors. All orders are shipped by freight delivery at the cost of the customer. We require a deposit of fifty percent (50%) upon an order being placed from our private label customers and the balance prior to shipping. Our retail customers must pay for their order at the time that the order is placed.
Product Development & Quality
We have in place comprehensive quality control procedures seeking to ensure that raw materials and finished goods meet our exacting quality standards. Each product we offer is based upon the research of Mr. Ward, with the assistance of our team and in-house chemists. Our products are and, in the future, will continue to be identified by Mr. Ward based upon suggestions from customers, and from industry and market research he conducts on an ongoing basis. We do not employ medical professionals and our management does not have experience in the healthcare industry or in the treatment of disease. Our products have not been confirmed in any respect by the FDA or any other governmental agency and may not produce the results intended. In developing products, we require:
● ingredients that are supported with a certificate of analysis, publicly available scientific research and references which our Chief Executive Officer reviews with our in-house chemists who assist in developing our final products;
● ingredients that are combined so that their effectiveness is not impaired;
● the THC contained in our products is less than 0.3% and all other ingredients are in dosage levels that fall within tolerable upper intake levels established for healthy people by the Institute of Medicine of the National Academies and products with hemp;
● our products do not contain adulterated ingredients such as ephedra, androstenedione, aspartame, steroids, or human growth hormones; and
Sales and Marketing
Mr. Ward actively participates in the planning of our marketing and selling efforts. We employ 1 in house sales representative and use the services independent sales representatives on a commission basis. We believe that this sales structure enables us to effectively control our costs and sales efforts.
We believe that our marketing mix of social media promotions and search engine optimization is an optimal strategy to increase sales for both our private label and branded products. We use web-based marketing to promote our brands and products including social media and promotion of our website at www.nutralifebiosciences.com. The information available on or accessible through our website is not a part of and is not incorporated by reference into this Annual Report. Our website provides useful information about our industry, new developments and our products and allows visitors to order our retail and wholesale wellness, nutraceutical and CBD products. We use Search Engine Optimization (SEO) on an ongoing basis to drive traffic to our website and social media pages and enhance our presence on major search engines such as Google, Bing and Yahoo.
We aim to emphasize the development of long-term relationships with our customers. We believe that we have established strong relationships with individual buyers at each of our private label customers, and more importantly we have also established relationships with senior management of our key private label customers.
A key component of our ability to achieve long-term relationships is the high level of services that we provide to our customers. Each salesperson is responsible for all aspects of a customer’s needs, including product samples, obtaining orders, coordinating product selection, monitoring production and delivering finished products. During the production process, such salesperson is responsible for informing the customer about the progress of an order, including any difficulties that might affect delivery time. In this way, we and our customer can make appropriate arrangements regarding any delay or other change in the order. Further, we seek to ensure that multiple salespersons are familiar with each customer account so that they can work cooperatively to assist one another on a reciprocal basis. We believe that this sales management technique provides an advantage over our competitors because it ensures that our customers always have a knowledgeable salesperson available to discuss product orders and related issues.
Our sales force is in constant contact with our customers to develop an understanding of the customers’ retail strategies and production requirements. We use this information to provide our customers with products that meet their particular requirements efficiently. We require that our sales force be knowledgeable about all aspects of our products. We believe our knowledgeable sales force enables it to provide our customers immediate feedback as to the various costs and availability of various raw materials, and production times.
Employees
As of the date hereof, we have approximately 12 full-time and part-time employees. 1 employee is a chemist engaged in product development and testing, 3 are engaged in executive or administrative capacities, 7 employees are engaged in manufacturing, packaging, or distribution and 1 is engaged in sales.
From time to time, we employ temporary employees which provides us with flexibility to adjust staffing levels in response to demand.
None of our employees are employed under a collective bargaining agreement. We believe we have an excellent relationship with our employees and independent contractors.
Return and Refund Policy
We will exchange any product found to be defective. A written exchange request must be submitted when a customer returns defective or damaged products. Purchasers can apply for a refund in the full amount of purchased products within ten (10) days of purchase. All shipping fees for product exchanges or returns must be paid by the purchaser. Historically, product returns as a percentage of our net sales have been nominal.
Patents and Trademarks
NutraDerma holds patent number 7,754,237 from the U.S. Patent and Trademark office, for an all-natural dermal patch designed to prevent mosquito and other insect bites. We plan to begin to test, manufacture and distribute this product in the near future.
Backlog of Orders
We have no backlog of orders.
Seasonal Aspect of our Business
None of our products are affected by seasonal factors.
Status of any Publicly Announced New Product or Service
As noted above, the Company entered into a strategic partnership with Cookies (branded) Retail Products (CRP). Under the terms of the agreement, CRP will provide the Company with branding and marketing guidance while the Company becomes a preferred research and development profit participant and partner of CRP. The Company will utilize its nutraceutical and research resources to design, create, and provide options for non-regulated, federally legal for sale, innovative product introductions to be used for the parent Cookies brand. Cookies is an iconic billion-dollar brand with retail, ecommerce, and direct-to-consumer verticals across multiple channels of trade.
In September 2021, the Company entered a strategic partnership with KOR Medical to produce an initial order for a line of cannabinoid-based wellness products. The initial products produced under this venture is a line of four ingestible items formulated to help improve overall health, including helping consumers sleep better, feel better, be calmer, and improve their quality of life.
As noted above, in 2020, the Company made a strategic pivot from our then-current nutraceutical manufacturing business by adding the manufacture of consumer sanitizer products utilizing the Company’s existing manufacturing capabilities and the Company’s ability to retrofit its operations and accommodate production due to the shortage of supply and demand for sanitizer products. To do so, consistent with FDA requirements, the Company registered and obtained a labeler code as an OTC manufacturing facility and began manufacturing and distributing a line of liquid-based multi-use sanitizer spray products under the Company’s in-house brand, “Eddie’s Clean Hands,” packaged as a multi-use sanitizer spray, formulated per the CDC’s recommendation of containing at least 60-95% ethanol or isopropanol alcohol to be effective. We plan to continue manufacturing and distributing liquid-based multi-use sanitizer spray products under the Company’s in-house brand, “Eddie’s Clean Hands”.
Also, as discussed above, on December 18, 2020, the Company received its product registration number from the FDA and completed its first production run of Oral Shield antiseptic protection mouth spray. The Company along with its partners plans to market and distribute the product on a global scale and seeks to provide a convenient, travel-size, quality, multi-functioning antiseptic mouth spray for consumers to use throughout the day. We believe that mouthwash products can be effective at killing viruses, reducing the viral load within the mouth essentially supporting the reduction of virus transmissions.
Material Agreements
Cookies Retail Products
As noted above, the Company entered into strategic partnership with Cookies (branded) Retail Products (CRP). Under the terms of the agreement, CRP will provide the Company with branding and marketing guidance while the Company becomes a preferred research and development profit participant and partner of CRP. The Company will utilize its nutraceutical and research resources to design, create, and provide options for non-regulated, federally legal for sale, innovative product introductions to be used for the parent Cookies brand. Cookies is an iconic billion-dollar brand with retail, ecommerce, and direct-to-consumer verticals across multiple channels of trade.
NewLeaf Assets LLC
On March 10, 2019, we entered into an agreement with NewLeaf as amended, (the “Agreement”) whereby NewLeaf invested an aggregate of $1,380,000 (the “Investment”) in our securities (the “Securities”) as follows:
(a) NewLeaf invested the sums of $250,000, $130,000 and $1,000,000 on July 31, 2018, August 31, 2018 and March 15, 2019, respectively;
(b) On July 31, 2018 NewLeaf was granted 2,000,0000 shares of our common stock and warrants to purchase 625,000 shares at the price of $.20 per share at any time for a period of three (3) years;
(c)
On August 31, 2018 NewLeaf received warrants to purchase 325,000 shares of our common stock at the price of $.20 per share at any time for a period of three (3) years;
(d)
On March 15, 2019, NewLeaf invested the sum of $1,000,000; and
(e) On March 15, 2019, we issued 13,764,705 common shares, warrants to purchase an additional 10 million common shares at the price of $.20 per share at any time until March 4, 2022 and an option to purchase an aggregate of 7,647,058 common shares at the aggregate price of $650,000 at any time prior to April 8, 2019. This option was not exercised prior to such date.
As of the date of the filing of this report, NewLeaf holds an aggregate of 15,764,705 of our common shares. The warrants to purchase an additional 10,950,000 common shares for an aggregate price of $2,190,000 at any time until March 4, 2022 and the option to purchase an additional 7,647,058 common shares for an aggregate price of $650,000 at any time prior to April 8, 2019, were not exercised prior to such dates.
The Company paid a finder’s fee of 10% in connection with the Investment to Mitchell Pasin. Under the terms of the Agreement, if NewLeaf sells, assigns, gifts or otherwise transfers any portion of the Securities to any other person or entity (the “Transferees”), the aggregate amount of the Securities that may be sold by all NewLeaf and the Transferees in the aggregate shall be 1% of the Company’s then outstanding common shares every ninety (90) days.
June 2019 Investment Agreement, Note, Security Agreement, Purchase Royalty Agreement, Pledge Agreement, Pledgor Royalty Agreement and November 2019 Amendments Thereto
June 2019 Investment Agreement
On June 6, 2019, the Company entered into that and Investment Agreement (the “June 2019 Investment Agreement” and collectively with the June 2019 Note, the June 2019 Purchaser Royalty Agreement, the June 2019 Security Agreement, the June 2019 Pledgor Royalty Agreement and the June 2019 Mortgage, each as hereinafter defined, the “Transaction Documents” by and among the Company, PhytoChem and Kahn Family Limited PT II (the “Purchaser”). Pursuant to the terms of the June 2019 Investment Agreement, the Company agreed to issue and sell, and the Purchaser agreed to purchase, a full recourse secured convertible promissory note bearing interest at the rate of 8.5% per annum in the principal amount (the “Principal Amount”) of $1,000,000 (the “June 2019 Note”). In addition to repayment of the June 2019 Note and the payment of interest as set forth in the June 2019 Note, the Company agreed to pay the following consideration to the Purchaser: (i) 500,000 shares of the Company’s common stock, and (ii) 8.5% of the revenue generated from the first four of the Ennea Processors monetized and/or commercialized by the Company pursuant to an agreement by and between Owen J. Morgan and the Company dated February 4, 2019 (the “Collateral Processors”) while the Principal Amount of the June 2019 Note is outstanding and 5.0% thereafter as set forth in that certain Royalty Participation Agreement dated June 6, 2019 by and among the Company, PhytoChem and the Purchaser (the “June 2019 Purchaser Royalty Agreement”).
Pursuant to the terms of the June 2019 Investment Agreement, the Principal Amount of the June 2019 Note is secured by the Collateral Processors in accordance with the terms of the June 2019 Note and that certain Security Agreement (the “June 2019 Security Agreement”) dated June 6, 2019 by and among the Company, PhytoChem and the Purchaser. The Principal Amount of the June 2019 Note is also secured by certain real property (the “Real Property”) owned by Brenda Hamilton (the “Pledgor”) pursuant to the terms of that certain Pledge Agreement (the “June 2019 Pledge Agreement”) dated June 6, 2019 by and among NutraLife, PhytoChem, the Pledgor and the Purchaser. Pursuant to the terms of the June 2019 Investment Agreement and the mortgage on the Real Property (the “June 2019 Mortgage”), the June 2019 Mortgage will be reduced by any and all consideration of any nature that is paid to the Purchaser by the Company under the Transaction Documents.
The June 2019 Investment Agreement provides that any controversy or claim arising out of or relating to the June 2019 Investment Agreement will be settled by binding arbitration and judgment on the award entered in any court having jurisdiction.
The Agreement contains customary representations, warranties and conditions.
June 2019 Note
On June 6, 2019, the Company issued the June 2019 Note in the Principal Amount of $1,000,000. Pursuant to the terms of the June 2019 Note, the entire outstanding principal balance of the June 2019 Note matures on December 7, 2020. The June 2019 Note provides that until such time as the Principal Amount of the June 2019 Note has been paid in full, interest will accrue at the fixed rate of 8.5% per annum. Beginning July 7, 2019 and through December 7, 2019, the Company agreed to make interest only payments at a fixed rate of 8.5% per annum on the Principal Amount of the June 2019 Note. Beginning on January 7, 2020 and continuing until the maturity date, the Company agreed to make equal monthly installment payments of principal and interest at the fixed rate of 8.5% per annum in an amount sufficient to fully amortize the Principal Amount of the June 2019 Note and all accrued interest over an amortization period of 12 months, until the amounts due under the June 2019 Note are paid in full.
Pursuant to the terms of the June 2019 Note, all payments made by the Company to the Purchaser under the Transaction Documents, including but not limited to the June 2019 Note, will be first applied to the Principal Amount then to accrued interest outstanding. Any and all consideration paid by the Company to the Purchaser under the Transaction Documents will reduce the amounts secured by the June 2019 Mortgage without affecting the amounts owed by the Company to the Purchaser under the Transaction Documents. The June 2019 Note is secured by the Collateral Processors pursuant to the terms of the June 2019 Investment Agreement and the June 2019 Security Agreement. The Company agreed to deliver a pledge of the Real Property to secure the Principal Amount pursuant to the terms of the June 2019 Pledge Agreement and June 2019 Mortgage, and the June 2019 Mortgage will be reduced from time to time by the consideration paid by the Company to the Purchaser. Simultaneously with the payment of consideration equal to the Principal Amount of the June 2019 Note, the Purchaser will record with the Palm Beach County Property Appraiser’s Officer a Satisfaction of the Mortgage releasing the Purchaser’s June 2019 Mortgage on the Real Property.
In the event of a default of the June 2019 Note, Purchaser has full recourse to all the assets of the Company and the Purchaser will be required to proceed against or exhaust all remedies against both the Company and PhytoChem’s assets prior to proceeding against the June 2019 Mortgage and/or commencing an action to foreclose the June 2019 Mortgage.
At any time while the June 2019 Note is outstanding, the Purchaser will have the option of converting the Principal Amount and accrued interest due on the June 2019 Note into common stock of the Company at a price of $1.00 per share. Upon conversion of the Principal Amount and/or interest, the Company will be forever released from all of its obligations and liabilities under the June 2019 Note. In the event Purchaser converts less than all principal and interest outstanding, the amount converted under the June 2019 Note will be first applied to reduce the principal until it is paid in full. Additionally, upon conversion of all outstanding principal at the time of conversion, the June 2019 Mortgage will be released as security for the obligations and liabilities under the June 2019 Note.
For purposes of the June 2019 Note, an event of default means that the Company has failed to make any payment required under the June 2019 Note within 15 days after the date the payment is due. If the Company is in default under the June 2019 Note, the unpaid principal and accrued interests and any other unpaid amounts and costs due will bear interest at the rate of 10% (the “Default Rate”) until the event of default is cured. From and after the Maturity Date any unpaid principal and interest and any other unpaid amounts and costs under the June 2019 Note will bear interest at the Default Rate. Additionally, and without limitation, all amounts owed under any judgment obtained by Purchaser against the Company with respect to the June 2019 Note will bear interest at the Default Rate. The June 2019 Note provides that any controversy or claim arising out of or relating to the June 2019 Note will be settled by binding arbitration and judgment on the award entered in any court having jurisdiction.
June 2019 Security Agreement
Pursuant to the terms of the June 2019 Security Agreement, the Company assigned and granted to the Purchaser a continuing lien on and security interest in the Collateral. The Company agreed that it would not sell or offer to sell or otherwise transfer or grant or allow the imposition of a lien or security interest upon the Collateral or use any portion thereof in any manner inconsistent with the June 2019 Security Agreement or with the terms and conditions of any policy of insurance thereon. The Company also irrevocably authorized Purchaser at any time and from time to time to file in any Uniform Commercial Code (“UCC”) jurisdiction any initial financing statements and amendments thereto relating to the Collateral as provided in the June 2019 Security Agreement.
The Company will, at the Purchaser’s option, be in default under the June 2019 Security Agreement upon the happening of any of the following events or conditions (each, a “June 2019 Security Agreement Event of Default”): (a) a failure to pay any amount due under the June 2019 Note or the June 2019 Security Agreement within 15 days after the due date; (b) failure by the Company to perform any of its other obligations under the June 2019 Security Agreement within 30 days of notice from Purchaser of the same; (c) falsity, inaccuracy or material breach by the Company or any written warranty, representation or statement made or furnished to the Purchaser by or on behalf of the Company; (d) an uninsured material loss, theft, damage, or destruction to any of the Collateral, or the entry of any judgment against the Company or any lien against or making of any levy, seizure or attachment of or on the Collateral; or (e) the failure of the Purchaser to have a perfected first priority security interest in the Collateral.
Upon the occurrence of any June 2019 Security Agreement Event of Default and at any time thereafter, the Purchaser may declare all obligations secured by the June 2019 Security Agreement immediately due and payable and will have, in addition to any remedies provided in the June 2019 Security Agreement or by any applicable law or in equity, all the remedies of a secured party under the UCC. The June 2019 Security Agreement provides that any controversy or claim arising out of or relating to the June 2019 Security Agreement will be settled by binding arbitration and judgment on the award entered in any court having jurisdiction.
If the Company is in default under the June 2019 Note, the unpaid principal and accrued interests and any other unpaid amounts and costs due will bear interest at the rate of 10% (the “Default Rate”) until the event of default is cured. From and after the Maturity Date any unpaid principal and interest and any other unpaid amounts and costs under the June 2019 Note will bear interest at the Default Rate. Additionally, and without limitation, all amounts owed under any judgment obtained by Purchaser against the Company with respect to the June 2019 Note will bear interest at the Default Rate.
June 2019 Purchaser Royalty Agreement
Pursuant to the terms of the June 2019 Purchaser Royalty Agreement, which has a 10-year term, commencing upon the fiscal quarter in which revenue is derived directly or indirectly from any of the Collateral Processors, the Company will pay to the Purchaser non-refundable royalty payments consisting of 8.5% of all Net Revenue (as defined in the June 2019 Purchaser Royalty Agreement) received by the Company as a result of the commercialization and/or monetization of the Collateral Processors until such time as the Principal Amount has been paid. At such time as the Principal Amount has been paid to the Purchaser, Purchaser will receive non-refundable royalty payments consisting of 5.0% of Net Revenue received by the Company as a result of the commercialization and/or monetization of the first two processors of the Collateral Processors. The royalty payments will be paid by the Company to the Purchaser within 15 days after the end of the quarter in which the Company receives payment for any Net Revenue from the Collateral Processors. The June 2019 Purchaser Royalty Agreement provides that any controversy or claim arising out of or relating to the June 2019 Purchaser Royalty Agreement will be settled by binding arbitration and judgment on the award entered in any court having jurisdiction.
June 2019 Pledge Agreement
Pursuant to the terms of the Pledge Agreement, to induce Brenda Hamilton (the “Pledgor”) to enter into the June 2019 Pledge Agreement and the Mortgage, the Company represented and warranted to the Pledgor and the Purchaser that the Company will timely pay all amounts owing to the Purchaser, and that it will deliver full and timely payment of all and any amounts due and/or which may become due to the Purchaser from the Company from time to time in connection with the Transaction Documents without limitation. Purchaser agreed that it understood that all consideration delivered to the Purchaser by the Company pursuant to the Transaction Documents will be applied to the Principal Amount and as a result, the Mortgage will be reduced by any and all payments of consideration of any type made by the Company to the Purchaser under the Transaction Documents.
In addition, under the terms of the June 2019 Pledge Agreement, based upon the representations of the Company and the Purchaser that they will perform and comply with their obligations and duties under the Transaction Documents, the Pledgor agreed to provide the Purchaser with the June 2019 Mortgage which will secure the Company’s payment of the Principal Amount pursuant to the Transaction Document. The June 2019 Mortgage will be reduced from time to time by any and all payments made by the Company to the Purchaser under the Transaction Documents. In exchange for providing the Real Property collateral, the Pledgor agreed to receive:
(i) 500,000 shares of the Company’s common stock,
(ii) Commencing on December 5, 2019, monthly payments equal to the interest paid by the Company to the borrower under the June 2019 Note accruing from time of the Purchaser’s delivery of the Principal Amount to the Company until the June 2019 Note is paid in full, and
(iii) 8.5% of the Net Revenue while the Principal Amount is outstanding and 5.0% thereafter on the first two processors of the Collateral Processors as set forth in that certain Royalty Participation Agreement dated as of June 6, 2019 by and among the Company, PhytoChem and the Pledgor (the “June 2019 Pledgor Royalty Agreement”).
As set forth in the June 2019 Pledge Agreement, the terms including payment due dates and maturity dates of the June 2019 Note may not be extended by the Purchaser and the Company without the express written consent of the Pledgor. In the event that the June 2019 Note is amended or modified including to extend a payment due date or the maturity date of the June 2019 Note, without the Pledgor’s written consent, then Pledgor’s obligation to provide security under the June 2019 Pledge Agreement will automatically cease, and the June 2019 Mortgage will be deemed satisfied and released in full as security for the Principal Amount of the Amended Note, and (iii) the Purchaser will immediately record with the Palm Beach County Property Appraiser’s Officer a Satisfaction of Mortgage releasing the Purchaser’s lien on the Real Property.
Pursuant to the terms of the June 2019 Pledge Agreement, a default means that the Company has failed to make any payment required under the June 2019 Note, within 15 days after the date the payment is due. If after exhaustion of all other remedies, including enforcement of the lien against the Collateral and collection of all amounts due from the Company, there remains a default, then the Purchaser will provide written notice to the Pledgor of the default and the Pledgor will have the option but not the obligation to cure the default. In such event, the amounts paid by the Pledgor will bear interest at the highest rate allowed under Florida law. So long as the Company is in default of its obligations under the June 2019 Note, then the Company will pay the Pledgor interest on the amounts outstanding under the June 2019 Note at a rate of 10%.
If the Company defaults on its obligations under the June 2019 Note, the June 2019 Pledge Agreement or any of the other Transaction Agreements, the Company will reimburse the Pledgor on demand for (i) payments made by the Pledgor to Purchaser to cure a default by the Company under the June 2019 Investment Agreement and/or the June 2019 Note, and (ii) all costs and expenses, including attorneys’ fees and disbursements that the Pledgor incurs in exercising any right, power, or remedy provided by the June 2019 Note, the June 2019 Purchaser Royalty Agreement, the June 2019 Security Agreement, the June 2019 Pledgor Royalty Agreement, the June 2019 Mortgage or by law or defending any action arising out of the June 2019 Note, the June 2019 Purchaser Royalty Agreement, the June 2019 Security Agreement, the June 2019 Pledgor Royalty Agreement or the June 2019 Mortgage. Additionally, in the event of a default by the Company, all costs incurred and paid by the Pledgor will bear interest at the highest rate allowed under Florida law. The June 2019 Pledge Agreement provides that any controversy or claim arising out of or relating to the June 2019 Pledge Agreement will be settled by binding arbitration and judgment on the award entered in any court having jurisdiction.
June 2019 Pledgor Royalty Agreement
Pursuant to the terms of the June 2019 Pledgor Royalty Agreement, which has a 10-year term, commencing upon the fiscal quarter in which revenue is derived directly or indirectly from any of the Collateral Processors, the Company will pay to the Pledgor non-refundable royalty payments consisting of 8.5% of all Net Revenue received by the Company as a result of the commercialization and/or monetization of the Collateral Processors until such time as the Principal Amount has been paid. At such time as the Principal Amount has been paid to the Purchaser, the Pledgor will receive non-refundable royalty payments consisting of 5.0% of Net Revenue received by the Company as a result of the commercialization and/or monetization of the first two processors of the Collateral Processors. The royalty payments will be paid by the Company to the Pledgor within 15 days after the end of the quarter in which the Company receives payment for any Net Revenue from the Collateral Processors. The June 2019 Pledgor Royalty Agreement provides that any controversy or claim arising out of or relating to the June 2019 Pledgor Royalty Agreement will be settled by binding arbitration and judgment on the award entered in any court having jurisdiction.
Amended Investment Agreement
On November 13, 2019, the Company entered into an amended Investment Agreement (the “Amended Investment Agreement” and collectively with the Amended Note, the Amended Purchaser Royalty Agreement, the Amended Security Agreement, the Amended Pledgor Royalty Agreement and the Amended Mortgage, each as hereinafter defined, the “Amended Transaction Documents”) by and among the Company and the Purchaser. Pursuant to the terms of the Amended Investment Agreement, the Principal Amount of the Amended Note is secured by the current assets and future assets of the Company and its subsidiaries (the “Collateral”), including the Collateral Processors in accordance with the terms of provisions of the Amended Note and the Amended Security Agreement. Except as set forth herein, the terms of the Amended Investment Agreement are substantially similar to the terms of the June 2019 Investment Agreement.
Amended Note
Pursuant to the terms of the Amended Note dated November 13, 2019 from the Company to the Purchaser (the “Amended Note”), the entire outstanding principal balance of the Amended Note matured on December 7, 2020. The Amended Note provides that the Company make the first interest only payment on December 7, 2019 at the fixed rate of 5.75% per annum. Beginning January 7, 2020 and continuing until the maturity date, the Company agreed to make equal monthly instalment payments of principal and interest at the fixed rate of 5.75% per annum in an amount sufficient to fully amortize the Principal Amount of the Amended Note and all accrued interest over an amortization period of 18 months, until all amounts due under the Amended Note are paid in full. Interest will accrue from June 6, 2019 at the rate of 5.75% per annum until the maturity date of the Amended Note.
Pursuant to the terms of the Amended Note, all payments made by the Company to the Purchaser under the Transaction Documents, including but not limited to the Amended Note, will be first applied to the Principal Amount then to accrued interest outstanding. Any and all consideration paid by the Company to the Purchaser under the Transaction Documents will reduce the amounts secured by the Amended Mortgage without affecting the amounts owed by the Company to the Purchaser under the Transaction Documents.
The Amended Note is secured by the Collateral Processors, including the Collateral Processors. A pledge of the Real Property secures the Principal Amount pursuant to the terms of the Amended Pledge Agreement and Amended Mortgage, and the Amended Mortgage will be reduced from time to time by the consideration paid by the Company to the Purchaser. Simultaneously with the payment of consideration (whether interest, royalty and/or securities, as provided in the Amended Note and the Amended Investment Agreement) equal to the Principal Amount of the Amended Note, the Purchaser will record with the Palm Beach County Property Appraiser’s Officer a Satisfaction of the Mortgage releasing the Purchaser’s Amended Mortgage on the Real Property.
Pursuant to the terms of the Amended Note, Purchaser has full recourse to the Collateral and the Purchaser will be required to proceed against and exhaust all remedies against the Collateral prior to proceeding against the Amended Mortgage and/or commencing an action to foreclose the Amended Mortgage. Except as set forth herein, the terms of the Amended Note are substantially similar to the terms of the June 2019 Note.
Amended Security Agreement
Pursuant to the terms of an amended security agreement dated November 13, 2019 by and between the Company and the Purchaser (the “Amended Security Agreement”), the Company assigned and granted to the Purchaser a continuing lien on and security interest in the Collateral, including the Collateral Processors. Except as set forth herein, the terms of the Amended Security Agreement are substantially similar to the terms of the June 2019 Security Agreement.
Amended Purchaser Royalty Agreement
On November 13, 2019, the Company entered into that certain purchaser royalty agreement dated November 13, 2019 by and between the Company and the Purchaser (the “Amended Purchaser Royalty Agreement”). Aside from certain conforming changes, the terms of the Amended Purchaser Royalty Agreement are substantially similar to the terms of the June 2019 Purchaser Royalty Agreement.
Amended Pledge Agreement
On November 13, 2019, the Company entered into an amended pledge agreement by and among the Company, the Pledgor and the Purchaser (the “Amended Pledge Agreement”). Pursuant to the terms of the Amended Pledge Agreement, to induce Pledgor to enter into the Amended Pledge Agreement and the Mortgage, the Company and the Purchaser represented and warranted to the Pledgor that each of the Company and the Pledgor will timely comply with all requirements and obligations under the Transaction Documents and the Company will pay all amounts owing to the Purchaser, and that it will deliver full and timely payment of all and any amounts due and/or which may become due to the Purchaser from the Company from time to time in connection with the Transaction Documents without limitation. Purchaser agreed that it understood that all consideration delivered to the Purchaser by the Company pursuant to the Transaction Documents will be applied to reduce the Principal Amount secured by the Amended Mortgage and as a result, the Amended Mortgage will be reduced by any and all payments of consideration of any type (including cash or securities) made by the Company to the Purchaser under the Transaction Documents and the June 2019 Investment Agreement and June 2019 Note.
Pursuant to the terms of the Amended Pledge Agreement, based upon the representations of the Company and the Purchaser that they will perform and comply with their obligations and duties under the Transaction Documents, the Pledgor agreed to provide the Purchaser with the Amended Mortgage which will secure the Company’s payment of the Principal Amount pursuant to the Transaction Document. The Amended Mortgage will be reduced from time to time by any and all payments of any nature (including cash or securities) made by the Company to the Purchaser under the Transaction Documents. In exchange for providing the Real Property collateral, the Company agreed to pay to Pledgor:
(i) 500,000 shares of the Company’s common stock, which were issued upon execution of the June 2019 Pledge Agreement,
(ii) Commencing on December 7, 2019 and ending on the maturing date of the Amended Note, monthly payments equal to 5% interest on the Principal Amount accruing on the Principal Amount and accrued interest from June 6, 2019 until the maturity date of the Amended Note, and
(iii) 8.5% of the Net Revenue so long as any portion of the Principal Amount is outstanding and 5.0% thereafter on the first two processors of the Collateral Processors as set forth in that certain Amended Royalty Participation Agreement dated as of November 13, 2019 by and among NutraLife, PhytoChem and the Pledgor (the “Amended Pledgor Royalty Agreement”).
As set forth in the Amended Pledge Agreement, the terms set forth in the Transaction Documents may not be extended by the Purchaser and the Company without the express written consent of the Pledgor so long as any portion of the Principal Amount is outstanding. In the event that any of the Transaction Documents is amended and/or modified in any respect without the Pledgor’s written consent while any portion of the Principal Amount is outstanding then (i) Pledgor’s obligation to provide security under the Amended Pledge Agreement will automatically cease, (ii) the Amended Mortgage will be deemed satisfied and released in full as security for the Principal Amount of the Amended Note, and (iii) the Purchaser will immediately record with the Palm Beach County Property Appraiser’s Officer a Satisfaction of Mortgage releasing the Purchaser’s lien on the Real Property at the cost of the Company.
Pursuant to the terms of the Amended Pledge Agreement, a default means that the Company has failed to make any payment required under the Amended Note, within 15 days after the date the payment is due. If after exhaustion of all other remedies, including enforcement of the lien against the Collateral and collection of all amounts due from the Company, there remains a default owed to the Purchaser, then the Purchaser will provide written notice to the Pledgor of the default and the Pledgor will have the option but not the obligation to cure the default. In such event, the amounts paid by the Pledgor to enforce its rights under the Amended Pledge Agreement will bear interest at the highest rate allowed under Florida law. So long as the Company is in default of its obligations under the Transaction Documents, then the Company will pay the Pledgor interest on the Principal and accrued interest outstanding under the Amended Note at the highest rate allowed under Florida law.
If the Company defaults on its obligations under the Amended Note, the Amended Pledge Agreement or any of the other Transaction Agreements, the Company will reimburse the Pledgor on demand for (i) payments made by the Pledgor to Purchaser to cure a default by the Company under the Amended Investment Agreement and/or the Amended Note, and (ii) all costs and expenses, including attorneys’ fees and disbursements that the Pledgor incurs in exercising any right, power, or remedy provided by the Amended Note, the Amended Purchaser Royalty Agreement, the Amended Security Agreement, the Amended Pledgor Royalty Agreement, the Amended Mortgage or by law or defending any action arising out of the Amended Note, the Amended Purchaser Royalty Agreement, the Amended Security Agreement, the Amended Pledgor Royalty Agreement or the Amended Mortgage. Additionally, in the event of a default by the Company, all costs incurred and paid by the Pledgor including but not limited to attorney fees and any amounts Pledgor pays to cure a default by the Company of the Amended Note will bear interest at the highest rate allowed under Florida law. Except as set forth herein, the terms of the Amended Pledge Agreement are substantially similar to the terms of the June 2019 Pledge Agreement.
Amended Pledgor Royalty Agreement
On November 13, 2019, the Company entered into the Amended Pledgor Royalty Agreement. Aside from certain conforming changes, the terms of the Amended Pledgor Royalty Agreement are substantially similar to the terms of the June 2019 Pledgor Royalty Agreement.
Company Default
The Company has not made the principal and interest payments on the Amended Note as of the date of this Annual Report. The Company now believes that it may have defences to the enforcement of the Transaction Documents as written, however this may not be the case. Additionally, the Purchaser has not indicated to the Company that it will seek to enforce its rights under the Transaction Documents or that it will proceed against the Collateral.
Stock Purchase Agreement
On November 2, 2020 (the “Closing Date”), the Company entered into a Stock Purchase Agreement (the “SPA”) by and between the Company, Lord Global Corporation, a Nevada corporation (the “Lord Global”) and 27 Health, Inc., a wholly-owned subsidiary of Lord Global (“27 Health”). Pursuant to the SPA, the Company acquired from Lord Global 250 shares of Series X Convertible Preferred Stock of Lord Global (the “Series X Stock”) in exchange for the issuance by the Company to 27 Health of 12,500,000 shares of common stock, par value $0.0001 per share, of the Company (the “NutraLife Common Stock”). The transactions pursuant to the SPA closed on the Closing Date.
Each share of Series X Stock is convertible into shares of common stock, par value $0.001 per share, of Lord Global (the “Lord Global Common Stock”) at the rate of 1,000 shares of Lord Global Common Stock per share of Series X Stock, subject to customary adjustments for stock splits, stock dividend, stock combinations, recapitalizations or other similar transactions. The conversion of the Series X Stock is subject to a customary beneficial limitation such that the Company may not convert the Series X Stock into Lord Global Common Stock if such conversion would result in the Company and its affiliates having beneficial ownership of in excess of 4.99% of the outstanding shares of Lord Global Common Stock, provided that the Company may elect to waive this limitation on 61 days’ notice to Lord Global.
In addition to the Series X Stock issued to the Company, in the event that, on the first business day following the 180-day anniversary of the Closing Date, the average volume weighted average price of the Lord Global Common Stock for the 10 trading day period prior to that date is less than $4.00 (subject to customary adjustments), then Lord Global will issue to the Company, for no additional consideration payable by the Company, a number of shares of Lord Global Common Stock equal to (i) $1,000,000, divided by (ii) the share price as of such date, minus 250,000 (the “First Adjustment Shares”). A second such adjustment shall be completed on the first business day following the one-year anniversary of the Closing Date, provided that at this adjustment the number of First Adjustment Shares will also be deducted from any additional shares to be issued to the Company.
Manufacturing, Distribution and Sales Agreement
In connection with the SPA and the transactions as set forth therein, on the Closing Date the Company also entered into a Manufacturing, Distribution and Sales Agreement (the “MDS Agreement”) by and between the Company and 27 Health. 27 Health, together with Lord Global (referred to in this section jointly as “27 Health”) has developed and currently manufactures and markets certain products related to the testing and treatment of COVID-19 (the “Coviguard Products”).
Pursuant to the MDS Agreement, 27 Health engaged the Company to manufacture the Coviguard Products and granted the Company the right, on a non-exclusive basis, to sell and distribute the Coviguard Products manufactured by the Company though all channels of distribution on a worldwide basis and to undertake advertising and marketing as determined to be necessary by the Company, with written notice, in connection therewith.
During the term of the Agreement, the Company has the exclusive right to manufacture the Coviguard Products, subject to the Company’s continued ability to meet in all material respects the production requirements of 27 Health for the Coviguard Products. In the event that the Company is unable, in the sole determination of 27 Health, to meet the production requirements, 27 Health may seek other sources for the manufacturing of the Coviguard Products or may terminate the MDS Agreement.
Pursuant to the MDS Agreement, the Company may elect to market the Coviguard Products directly, without any requirement of an order for the manufacturing of the products being supplied by 27 Health or accepted by the Company. All such direct sales will be made by the Company to the recipient of the products, and the Company will pay to 27 Health a set distributor price for the products, and retain the balance paid by the buyer.
In the event that the Company identifies a potential third-party customer for the Coviguard Products, but does not elect to sell the Coviguard Products directly to the customer as set forth above, the Company may refer such potential customer to 27 Health. If the customer is a not a current customer of 27 Health, then for any and all sales of Coviguard Products to such new customers, 27 Health will pay to the Company 15% commissions on these sales. No commissions would be paid for sales to customers who were already customers of 27 Health at the time.
The MDS Agreement has an initial term of 5 years, with automatic extensions of 1 year each, subject to earlier expiration or termination as set forth therein.
Competitive Business Conditions
The nutritional, dietary supplement and industrial hemp CBD industries, as well as the sanitizer products industry, are highly competitive. Numerous manufacturers and distributors compete with us for customers throughout the United States selling products to private label customers and retailers such as mass merchandisers, drug store chains, independent pharmacies and health food stores. We are also vulnerable to competition from companies that can manufacture similar products to our products and compete for private label customers. The markets for our products are highly competitive. We seek to compete on the basis of customer service, product quality, pricing and marketing support.
We compete with major private label and broadline brand manufacturers many of which are larger and have access to greater resources than us. Among other factors, competition among private label manufacturers is based upon price. If one or more private label or broadline brand manufacturers significantly reduce their prices in an effort to gain market share, our results of operations or market position could be adversely affected. We also compete with manufacturers of nationally advertised brand name products which are larger and have resources substantially greater than us. In the future, one or more of these companies could seek to compete more directly with us by manufacturing private label products or by significantly lowering the prices of their national brand products.
Many of our indirect competitors are substantially larger, have more experience than us, have longer operating histories, and have materially greater financial and other resources than us.
Costs and Effects of Compliance with Environmental Laws
We are in a business that involves the use of raw materials in a manufacturing process, however, we believe that it is unlikely that such materials are likely to result in the violation of any existing environmental rules and/or regulations. Further, we do not own any real property that could lead to liability as a landowner. Therefore, we do not anticipate that there will be any material costs associated with compliance with environmental laws and regulations.
Product Liability Insurance
We maintain commercial liability, including product liability coverage, and property insurance. Our policy provides for a general liability of five million dollars ($5,000,000) per occurrence, and five million dollars ($5,000,000) annual aggregate coverage which includes our main corporate facility. We carry property coverage on our main office facility to cover our legal liability, tenant’s improvements, business property, and inventory.
Regulation of our Hemp Finished Products
The sale of our Hemp Finished Products is potentially subject to a complex web of federal and state regulations that are evolving at a rapid rate. The formulation, manufacturing, packaging, labeling, advertising, and distribution of our products are subject to regulation by one or more federal agencies, principally the Food and Drug Administration (“FDA”), the Federal Trade Commission (“FTC”), and, to a lesser extent, the Consumer Product Safety Commission (“CPSC”), the United States Department of Agriculture (“USDA”), Drug Enforcement Agency (“DEA”) and the Environmental Protection Agency (“EPA”). Our activities are also regulated by various governmental agencies for the states and localities in which our products are sold, as well as by governmental agencies in certain countries outside the United States in which our products are sold. These agencies can change their rules at any time. Should we become subject to FDA, DEA or other enforcement proceedings we would have to cease operations.
The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, distribution and sale of drugs, food, including dietary supplements, and over-the-counter drugs.
Until 2014, when 7 U.S. Code §5940 became federal law as part of the Agricultural Act of 2014 (the “2014 Farm Act”), products containing oils derived from hemp, notwithstanding a minimal or non-existing THC content, were classified as Schedule I illegal drugs. The 2014 Farm Act expired on September 30, 2018, and was thereafter replaced by the Agricultural Improvement Act of 2018 on December 20, 2018 (the “2018 Farm Act”), which amended various sections of the U.S. Code, thereby removing hemp, defined as cannabis with less than 0.3% of THC, from Schedule 1 status under the Controlled Substances Act (“CSA”), and legalizing the cultivation and sale of hemp at the federal level, subject to compliance with certain federal requirements and state law, amongst other things. THC is the psychoactive component of plants in the cannabis family generally identified as marihuana or marijuana. We believe that our hemp products are and will continue to be federally legal in the United States in that they contain and will continue to contain less than 0.3% of THC in compliance with the 2018 Farm Bill guidelines and will have no psychoactive effects on our customers’ bodies. Notwithstanding, there is no assurance that the 2018 Farm Act will not be repealed or amended such that our products containing hemp-derived CBD would once again be deemed illegal under federal law.
The 2018 Farm Bill also shifted regulatory authority from the Drug Enforcement Administration to the Department of Agriculture. The 2018 Farm Bill did not change the FDA’s oversight authority over hemp products. The 2018 Farm Act delegated the authority to the states to regulate and limit the production of hemp and hemp derived products within their territories. Although many states have adopted laws and regulations that allow for the production and sale of hemp and hemp derived products under certain circumstances, no assurance can be given that such state laws may not be repealed or amended such that our hemp products would once again be deemed illegal under the laws of one or more states now permitting such products, which in turn would render such products illegal in those states under federal law even if the federal law is unchanged. In the event of either repeal of federal or of state laws and regulations, or of amendments thereto that are adverse to our hemp products, we may be restricted or limited with respect to those products that we may sell or distribute, which could adversely impact our operations with respect to such products.
Additionally, the FDA has indicated its view that certain types of hemp products may not be permissible under the United States Federal Food, Drug and Cosmetic Act (“FDCA”). The FDA’s position is related to its approval of Epidiolex, a marijuana-derived prescription medicine to be available in the United States. The active ingredient in Epidiolex is CBD. On December 20, 2018, after the passage of the 2018 Farm Bill, FDA Commissioner Scott Gottlieb issued a statement in which he reiterated the FDA’s position that, among other things, the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce and that the FDCA prohibits introducing into interstate commerce food products containing added hemp, and marketing products containing hemp as a dietary supplement, regardless of whether the substances are hemp-derived. Although we believe our hemp product offerings comply with applicable federal and state laws and regulations, legal proceedings alleging violations of such laws could have a material adverse effect on our business, financial condition and results of operations.
We do not intend to offer and do not compete with companies that offer cannabis products containing high levels of psychoactive THC in the United States. Although legal in some states in the United States, we are not in, and do not intend to enter into this market. We offer hemp-based products to customers in the United States but do not compete with any medical or recreational marijuana sellers of products for high THC content sales due to legal and regulatory restrictions and uncertainty in the United States.
The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, distribution and sale of drugs, food, including dietary supplements, and over-the-counter drugs and any inclusion of cannabis or cannabis-derived compounds, like CBD, in such products would be regulated by the FDA regardless of the source of the cannabis substance, be it hemp or marijuana.
Our CBD products are derived from the seeds and mature stalks of the Cannabis Sativa plant which includes all parts and varieties of the cannabis sativa plant also known as hemp, which contain a tetrahydrocannabinol concentration (“THC”) that does not exceed 0.3 percent on a dry-weight basis. In December of 2018, the U.S. Food and Drug Administration completed an evaluation of three generally recognized as safe (GRAS) notices for hemp seed-derived food ingredients. The FDA stated that hulled hemp seed (GRN765), hemp seed protein powder (GRN771), and hemp seed oil (GRN778) are GRAS under their intended conditions of use. Some of the intended uses for these ingredients include adding them as source of protein, carbohydrates, oil, and other nutrients to beverages (juices, smoothies, protein drinks, plant-based alternatives to dairy products), soups, dips, spreads, sauces, dressings, plant-based alternatives to meat products, desserts, baked goods, cereals, snacks and nutrition bars. Our CBD products are made from seeds and mature stalks of hemp and contain only trace amounts of THC, we believe they qualify as GRAS products.
We have not obtained and do not plan to obtain FDA approval of our CBD products. As a result, we could be subject to enforcement proceedings by the FDA. We do not believe that FDA enforcement proceedings are likely since our products only contain trace elements of THC and do not cause the “high” associated with the THC in marijuana. Additionally, Hemp Finished Products like those sold by us are sold by large retailers online including Whole Foods, Publix, Wal-Mart and others. Despite the foregoing, should we become subject to FDA or other enforcement proceedings we could have to cease operations.
Other Regulations Impacting our Hemp Finished - CBD Products
Some states are considering various taxation of marijuana-related products including hemp finished products. These considerations seem to range from routine sales taxes to taxes similar to those imposed on tobacco products. Though, for the reasons described above, we do not believe the Hemp Finished Products to be subject to any marijuana-related taxation schemes, it is unclear whether Hemp Finished Products would fall under these tax plans if and when they are imposed.
IRS section 280(E) prevents cannabis companies from deducting expenses from their income, except for those considered cost of goods sold. No deduction or credit is allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by federal law or the law of any State in which such trade or business is conducted. Though, for the reasons described above, we do not believe the Hemp Finished Products to be appropriately treated as a controlled substance, if IRC 280(E) is enforced against us relating to deductions concerning our Hemp Finished Products, such tax treatment could create operating and cash flow problems in the future.
Cannabis versus Hemp
While hemp and cannabis are both derived from the same species (Cannabis sativa), there are major differences in the characteristics of the respective plant strains that produce industrial hemp on the one hand, and cannabis products on the other. In short, hemp is a strain of the Cannabis sativa plant that has been grown primarily for use in industrial applications and has been specifically cultivated to produce a low tetrahydrocannabinol (“THC”) content and a high cannabidiol (“CBD”) content. THC is the psychoactive constituent of cannabis and is responsible for producing the psychoactive effects of the drug. CBD is another active ingredient present in Cannabis sativa plants, and it largely acts to neutralize the psychoactive effects of THC and is not associated with psychoactive effects. Since hemp strains have very little THC and a lot of CBD, they do not produce psychoactive effects when ingested.
Regulation of our Products not Containing CBD
The formulation, manufacturing, packaging, labeling, advertising, and distribution of our non-hemp based products are subject to regulation by one or more federal agencies, principally the FDA, the FTC, and, to a lesser extent, the CPSC, the USDA, and the Environmental Protection Agency “EPA”. Our activities are also regulated by various governmental agencies for the states and localities in which our products are sold, as well as by governmental agencies in certain countries outside the United States in which our products are sold. Among other matters, regulation by the FDA and FTC are concerned with product safety and claims made with respect to a product’s ability to provide health-related benefits. Specifically, the FDA, under the FDCA, regulates the formulation, manufacturing, packaging, labeling, distribution and sale of food, including dietary supplements, and over-the-counter drugs. The FTC regulates the advertising of these products. The National Advertising Division (“NAD”) of the Council of Better Business Bureaus oversees an industry sponsored, self-regulatory system that permits competitors to resolve disputes over advertising claims. The NAD has no enforcement authority of its own, but may refer matters that appear to violate the Federal Trade Commission Act or the FDCA to the FTC or the FDA for further action, as appropriate.
Federal agencies, primarily the FDA and the FTC, have a variety of procedures and enforcement remedies available to them including initiating investigations, issuing warning letters and cease and desist orders, requiring corrective labeling or advertising, requiring consumer redress (for example, requiring that a company offer to repurchase products previously sold to consumers), seeking injunctive relief or product seizures, imposing civil penalties, or commencing criminal prosecution. In addition, certain state agencies have similar authority. These federal and state agencies have in the past used these remedies in regulating participants in the food, dietary supplement and over-the-counter drug industries, including the imposition of civil penalties in the millions of dollars against a few industry participants.
The Dietary Supplement Health and Education Act (“DSHEA”) was enacted in 1994, amending the FDCA. We believe DSHEA is generally favorable to consumers and to the dietary supplement industry. DSHEA establishes a statutory class of “dietary supplements”, which includes vitamins, minerals, herbs, amino acids and other dietary ingredients for human use to supplement the diet. Dietary ingredients marketed in the United States before October 15, 1994 may be marketed without the submission of a “new dietary ingredient” (“NDI”) premarket notification to the FDA. Dietary ingredients not marketed in the United States before October 15, 1994 may require the submission, at least seventy-five (75) days before marketing of an NDI notification containing information establishing that the ingredient is reasonably expected to be safe for its intended use. Among other things, DSHEA prevents the FDA from regulating dietary ingredients in dietary supplements as “food additives” and allows the use of statements of nutritional support on product labels and in labeling. The FDA has issued final regulations under DSHEA and has issued draft guidance on NDI notification requirements. Further guidance and regulations are expected. Several bills to amend DSHEA in ways that would make this law less favorable to consumers and industry have been proposed in Congress.
The Nutrition Labeling and Education Act of 1990 (“NLEA”) amended the FDCA to establish additional requirements for ingredient and nutrition labeling and labeling claims for foods. If the NLEA labeling requirements change at a future time, we may need to revise our product labeling. Our non-CBD products are classified as dietary supplements. The FDA has concluded that THC and CBD products are excluded from the definition of a dietary supplement. The FDA issued a Final Rule on GMPs for dietary supplements on June 22, 2007. The GMPs cover manufacturers and holders of finished dietary supplement products, including dietary supplement products manufactured outside the United States that are imported for sale into the United States. Among other things, the new GMPs: (a) require identity testing on all incoming dietary ingredients, call for a “scientifically valid system” for ensuring finished products meet all specifications, (b) include requirements related to process controls, including statistical sampling of finished batches for testing and requirements for written procedures, and (c) require extensive recordkeeping.
We have reviewed the GMPs and have taken steps to ensure compliance. While we believe we are in compliance, there can be no assurance that our operations or those of our suppliers will be in compliance in all respects at all times. Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance with the GMP’s.
On December 22, 2006, Congress passed the Dietary Supplement and Nonprescription Drug Consumer Protection Act, which went into effect on December 22, 2007. The law requires, among other things, that companies that manufacture or distribute nonprescription drugs or dietary supplements report serious adverse events allegedly associated with their products to the FDA and institute recordkeeping requirements for all adverse events (serious and non-serious). There is a risk that consumers, the press and government regulators could misinterpret reported serious adverse events as evidence of causation by the ingredient or product complained of, which could lead to additional regulations, banned ingredients or products, increased insurance costs and a potential increase in product liability litigation, among other things.
The Consumer Product Safety Improvement Act of 2008 (“CPSIA”) primarily addresses children’s product safety but also improves the administrative process of the CPSC. Among other things, the CPSIA requires testing and certification of certain products and enhances the CPSC’s authority to order recalls.
The FDA Food Safety Modernization Act (“FSMA”), enacted January 4, 2011, amended the FDCA to significantly enhance the FDA’s authority over various aspects of food regulation. The FSMA granted the FDA mandatory recall authority when the FDA determines if there is reasonable probability that a food is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse health consequences or death to humans or animals. Other changes include the FDA’s expanded access to records; the authority to suspend food facility registrations and require high risk imported food to be accompanied by a certification; stronger authority to administratively detain food; the authority to refuse admission of an imported food if it is from a foreign establishment to which a U.S. inspector is refused entry for an inspection; and the requirement that importers verify that the foods they import meet domestic standards.
One of the FSMA’s more significant changes is the requirement of hazard analysis and risk-based preventive controls (“HARBPC”) for all food facilities required to register with the FDA, except dietary supplement facilities in compliance with both GMPs and the serious adverse event reporting requirements. Although dietary supplement facilities are exempt from the HARBPC requirements, dietary ingredient facilities might not qualify for the exemption. The HARBPC requirements, which the FDA has yet to propose, are expected to be onerous because facilities will have to develop and implement preventive controls to assure that identified hazards are significantly minimized or prevented, monitor the effectiveness of the preventive controls and maintain numerous records related to the HARBPC. The HARBPC requirements may increase the costs of dietary ingredients and/or affect our ability to obtain dietary ingredients.
As required by Section 113(b) of the FSMA, the FDA published in July 2011, a draft guidance document clarifying when the FDA believes a dietary ingredient is an NDI, when a manufacturer or distributor must submit an NDI premarket notification to the FDA, the evidence necessary to document the safety of an NDI and the methods for establishing the identity of an NDI. The draft guidance, if implemented as proposed, could have a material impact on our operations. Although our industry has strongly objected to several aspects of the draft guidance, it is unclear whether the FDA will make changes to the final guidance. In addition, it is possible that the FDA will begin taking enforcement actions consistent with the interpretations in the draft guidance before issuing a final version. The new FSMA requirements, as well as the FDA enforcement of the NDI guidance as written, could require us to incur additional expenses, which could be significant, and negatively impact our business in several ways, including, but not limited to, the detention and refusal of admission of imported products, the injunction of manufacturing of any dietary ingredients or dietary supplements until the FDA determines that such ingredients or products are in compliance and the potential imposition of fees for re-inspection of noncompliant facilities. Each of these events would increase our liability and could have a material adverse effect on our financial condition, results of operations or cash flows.
The FTC and the FDA have pursued a coordinated effort to challenge what they consider to be unsubstantiated and unsafe weight-loss products, and have also coordinated enforcement against dietary supplement claims in other areas, including children’s products. Their efforts to date have focused on manufacturers and marketers as well as media outlets, and have resulted in a significant number of investigations and enforcement actions, some resulting in civil penalties of several million dollars under the Federal Trade Commission Act. We expect that the FTC and the FDA will continue to focus on health-related claims for dietary supplements and foods which could cause our non-CBD products to be the subject of an FTC/FDA inquiry.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS ANNUAL REPORT ON FORM 10-K BEFORE DECIDING WHETHER TO INVEST IN THE COMPANY’S COMMON STOCK. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO THE COMPANY OR THAT THE COMPANY CURRENTLY DEEMS IMMATERIAL MAY ALSO IMPAIR THE COMPANY’S BUSINESS OPERATIONS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THE COMPANY’S BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OR THE COMPANY’S COMMON STOCK COULD DECLINE AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT. THIS ANNUAL REPORT ON FORM 10-K ALSO CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. PLEASE SEE “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS”.
Risks Related to our Financial Condition
We are dependent on the sale of our securities to fund our operations.
During the years ended December 31, 2021 and 2020, we received $348,000 and $125,000 from the sale of our securities. For the years ended December 31, 2021 and 2020, our revenues were approximately $600,000 and $1,300,000, respectively from the sale of our products. Our operating expenses are presently approximately $380,000 per month or $4,600,000 annually which consist of rent, advertising, salaries and other general and administrative expenses. Our cash on hand as of the date of this Annual Report on Form 10-K is $135,769 which is not sufficient to pay our operating expenses. We are in the process of obtaining future financing and are dependent on the sale of our securities to help fund our operations. There is no assurance we will be able to obtain future funding for our operations from the sale of our securities. The future issuance of our securities will result in substantial dilution in the percentage of our common stock held by our then existing stockholders, and would likely have an adverse effect on any trading market for our common stock. Obtaining financing would be subject to a number of factors, including investor acceptance. These factors may adversely affect the timing, amount, terms, or conditions of any financing that we may obtain or make any additional financing unavailable to us. If we do not obtain additional financing to fund our future operations, our business could fail and you could lose your investment.
There is substantial doubt about our ability to continue as a going concern as a result of our limited operating history and financial resources, and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail our operations.
For the years ended December 31, 2021 and 2020, we incurred net losses of approximately $5,800,000 and $2,900,000. As a result, our auditor has rendered an opinion that we may be unable to continue as a going concern. Our limited operating history and financial resources raises substantial doubt about our ability to continue as a going concern and our financial statements contain a going concern qualification. Our financial statements do not include adjustments that might result from the outcome of this uncertainty and if we are unable to generate significant revenue or secure financing we may be required to cease or curtail or completely suspend our operations.
We will need additional capital to fund our operations, which, if obtained, could result in substantial dilution or significant debt service obligations. Our inability to procure additional financing, if required, may have a material adverse effect on us. We may not be able to obtain additional capital on commercially reasonable terms, which could adversely affect our liquidity and financial position.
We require additional equity and/or debt financing to continue our operations. There can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. We expect to have ongoing needs for working capital in order to fund operations and to continue to expand our operations. To that end, we may be required to raise additional funds through equity or debt financing. In order to continue operating, we may need to obtain additional financing, either through borrowings, private offerings, public offerings, or some type of business combination, such as a merger, or buyout, and there can be no assurance that we will be successful in such pursuits. We may be unable to acquire the additional funding necessary to continue operating. However, there can be no assurance that we will be successful in securing additional capital. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund liabilities, or (d) seek protection from creditors. Our inability to obtain any additional financing could have a material adverse effect upon us. We may not be able to secure any additional financing we may need on terms favorable to us, or at all. These conditions raise substantial doubt about our ability to continue as a going concern for at least one year from the date of this filing.
In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell one or more lines of business or all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our investors or that result in our investors losing all of their investment in our Company.
If we are able to raise additional capital, we do not know what the terms of any such capital raising would be. In addition, any future sale of our equity securities could be at prices substantially below prices at which our shares are currently valued. To the extent we require additional financing and cannot raise it, we may have to limit our then-current operations, curtail all or certain portions of our business objectives and plans or terminate our operations. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our investors. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure to raise additional funds on favourable terms could have a material adverse effect on our liquidity and financial condition.
If we are unable to generate sufficient revenues for our operating expenses we will need financing, which we may be unable to obtain; should we fail to obtain sufficient financing, our potential revenues will be negatively impacted.
For the years ended December 31, 2021 and 2020, our revenues were $626,619 and $1,255,784 respectively, from the sale of our products. For the years ended December 31, 2021 and 2020, we incurred net losses of $5,827,507 and $2,889,940.
Because we lack historical financial data, including revenue data, our future revenues are unpredictable.
Our operating expenses are presently approximately $380,000 per month or $4,600,000 annually which consist of rent, advertising, salaries and other general and administrative expenses. Our cash on hand as of the date of this Form 10-K is $135,769 which is not sufficient to pay our operating expenses. In the future, we may require additional debt or equity funding to continue our operations. We intend to raise additional funds from an offering of our stock in the future; however, this offering may never occur, or if it occurs, we may be unable to raise the required funding. Further new offerings of our common shares will dilute our existing shareholders and your investment in our common shares. We do not have any plans or specific agreements for new sources of funding and we have no agreements for financing in place.
Our liabilities could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our indebtedness.
As of December 31, 2021, our total liabilities were $5,563,655. Our liabilities could have important consequences for our investors, including: making it more difficult for us to make payments on indebtedness; increasing our vulnerability to general economic and industry conditions; requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on indebtedness when our indebtedness become due. This reduces our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; limiting our ability and the ability of our subsidiaries to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors which have fewer liabilities. We may incur substantial additional indebtedness in the future. If new indebtedness is added to our current debt levels, the related risks that we face could increase.
We are currently in default on certain secured debt obligations which could negatively affect our financial condition and may cause us to curtail or cease our operations.
As discussed above, the Company has not made the principal and interest payments on the Amended Note as of the date of this Annual Report. Accordingly, the Company is currently in default on these secured debt obligations.
We are subject to the periodic reporting requirements of the Exchange Act that require us to perform accounting and reporting obligations with limited resources.
We are subject to the reporting requirements of the Exchange Act and are required to file periodic reports with the Securities and Exchange Commission (the “SEC”) pursuant to the Exchange Act and the rules and regulations promulgated thereunder. The reporting obligations require additional staff or consulting expenses. In addition, we have limited resources to allocate to such compliance functions, which increase the possibility of non-compliance.
Risks Related to Our Business
We have been growing rapidly and expect to continue to invest in our growth for the foreseeable future. If we are unable to manage our growth effectively, our revenue and profits could be adversely affected.
We have experienced rapid growth in a relatively short period of time. Our revenues were approximately $600,000 and $1,300,000 for the years ended December 31, 2021 and 2020, respectively. We plan to continue to expand our operations, and we anticipate that further significant expansion will place additional demands on our resources and operations. We presently operate our manufacturing and distribution from a 6,400 square foot facility. We plan to begin manufacturing at a second facility consisting of 20,000 square feet in addition to our existing facility. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. Sustaining our growth will place significant demands on our management as well as on our administrative, operational, and financial resources. To manage our growth, we must continue to improve our sales and manage our operational systems. If we are unable to manage our growth successfully, our revenue and profits could be harmed. Risks that we face in undertaking future expansion include but are not limited to:
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effectively recruiting, integrating, training, and motivating new employees, including our sales force, while retaining existing private label distributors and effectively executing our new business plan focusing on the processing, extraction and sale of CBD products;
● satisfying existing customers and attracting new customers of our products and services;
● introducing new products and services;
● increasing our private label customers;
● controlling expenses and investments in expanded operations including our new manufacturing facility;
● implementing and enhancing our administrative, operational, and financial infrastructure, systems, and processes; and
● addressing new products to meet consumer preferences.
A failure to manage our growth effectively could harm our business, operating results and/or financial condition. Further, due to our recent rapid growth, we have limited experience operating at our current scale and potentially at a larger scale, and as a result, it may be difficult for us to fully evaluate future prospects and risks. Our recent and historical growth should not be considered indicative of our future performance. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our financial condition and operating results could differ materially from our expectations, our growth rates may slow and our business would by adversely impacted.
Our revenues are highly dependent upon two private label distributors, which represented 58%, and 24%, of our revenues for the year December 31, 2021 and should these distributors reduce their orders from us or should we lose these distributors; our revenues and results of operations would be negatively affected which could cause you to lose your investment.
Our revenues are concentrated and highly dependent on two (2) private label customers which represented 58%, and 24%, of our revenues for the year ended December 31, 2021. All sales made under a private label relationship are made on a purchase order basis and there are no long-term contracts with respect to any private label relationships. There can be no assurance that existing private label relationships will continue in the future or that we will be able to obtain new private label relationships on an ongoing basis, if at all. Our private label customers can reduce the products they order from us or cease ordering products from us at any time without notice. There can be no assurance that these private label customers will continue to place orders with us, that orders by such customers will continue at their previous levels or that we can replace any such lost business. Should this occur, our revenues and results of operations will be negatively affected which could cause you to lose your investment in our common shares.
As a result of our evolving business model, we have a limited operating history in our lines of business and, therefore, we may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.
Since our inception, our business model has evolved significantly. In 2017, we began selling CBD products and as a result our revenues increased from approximately $1,800,000 in 2017 to approximately $3,700,000 in 2018 and then decreased to $2,130,000 in 2019 and $1,300,000 in 2020, and 600,000 in 2021. CBD became our main source of income, and we focused on generating revenue through private label manufacturers. As a result of the change in our business model, our revenues have significantly increased from prior periods. We have a limited operating history for our CBD products from which to evaluate our business. Additionally, amid the COVID-19 global pandemic, in 2020, the Company made a strategic pivot from our then-current nutraceutical manufacturing business by adding the manufacture of consumer sanitizer products utilizing the Company’s existing manufacturing capabilities and the Company’s ability to retrofit its operations and accommodate production due to the shortage of supply and demand for sanitizer products. We also have a limited operating history for our sanitized products from which to evaluate our business. Our failure to successfully execute our business plan would have a material adverse effect on our ability to continue operating. Accordingly, our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in an early stage of development. We may not be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business, operating results and financial condition.
Our quarterly and annual expenses are likely to increase substantially over the next several years depending upon the level of capital spending required to grow our revenues. Our operating results in future quarters may fall below expectations. Any of these events could adversely impact our business prospects and make it more difficult to raise additional equity capital at an acceptable price per share.
We do not have many written contracts with our customers. This allows such customers to use other companies instead of us which may negatively impact on our sales.
Because we do not have many written contracts with our customers who are free to purchase products from other suppliers, our customers can choose to use other companies instead. If a significant number of our customers began to use competing companies instead of us, our sales would decrease significantly.
An unexpected interruption or shortage in the supply or significant increase in the cost of components could limit our ability to manufacture any products, which could reduce our sales and margins.
An unexpected interruption of supply or a significant increase in the cost of components, for any reason, such as regulatory requirements, import restrictions, loss of certifications, disruption of distribution channels as a result of weather, terrorism or acts of war, fire, earthquake, or other national disaster, a work stoppage or other labor-related disruption, failure in supply or other logistical channels, electrical outages, or other events, could result in significant cost increases and/or shortages of our products. Our inability to obtain a sufficient amount of products or to pass through higher cost of products we offer could have a material adverse effect on our business, financial condition or results of operations.
The COVID-19 pandemic has already begun to adversely affect the Company’s business and the ultimate effect of the COVID-19 pandemic on the Company’s operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. As a result, the Company’s business operations have been limited due to government actions or other restrictions in connection with the COVID-19 pandemic and may also be effected if Company’s personnel is unable to work effectively due to illness, quarantines, or other restrictions in connection with the COVID-19 pandemic. The COVID-19 pandemic has also already hindered the Company’s ability to raise capital and stay current in its reporting obligations with the SEC. If the COVID-19 pandemic continues for a prolonged period, the Company’s business, financial condition, results of operation and liquidity may be materially and adversely affected. The extent of the ultimate impact of the pandemic on the Company’s operational and financial performance will depend on various developments, including the duration and spread of the outbreak, and its impact on potential customers, employees, and vendors, all of which cannot be reasonably predicted at this time. These future developments will also include, but are not limited to, the actions taken by governmental authorities and other third parties in response to the pandemic. Disruptions and/or uncertainties related to the COVID-19 pandemic for a sustained period of time could result in delays or modifications to the Company’s strategic plans and initiatives and hinder the Company’s ability to achieve its goals.
Possible yet unanticipated changes in federal and state law in the U.S. could cause our products containing hemp to be illegal, or could otherwise prohibit, limit or restrict any of our products containing hemp.
Until 2014, when 7 U.S. Code §5940 became federal law as part of the Agricultural Act of 2014 (the “2014 Farm Act”), products containing hemp, notwithstanding a minimal or non-existing THC content, were classified as Schedule I illegal drugs. The 2014 Farm Act expired on September 30, 2018, and was thereafter replaced by the Agricultural Improvement Act of 2018 on December 20, 2018 (the “2018 Farm Act”), which amended various sections of the U.S. Code, thereby removing hemp, defined as cannabis with less than 0.3% of THC, from Schedule 1 status under the Controlled Substances Act (“CSA”), and legalizing the cultivation and sale of hemp at the federal level, subject to compliance with certain federal requirements and state law, amongst other things. THC is the psychoactive component of plants in the cannabis family generally identified as marihuana or marijuana. We anticipate that our hemp-based products are and will continue to be federally legal in the United States in that they do, and will contain less than 0.3% of THC in compliance with the 2018 Farm Bill guidelines and will have no psychoactive effects on our customers’ bodies. Notwithstanding, there is no assurance that the 2018 Farm Act will not be repealed or amended such that our products containing hemp would once again be deemed illegal under federal law.
The 2018 Farm Bill also shifted regulatory authority from the Drug Enforcement Administration to the Department of Agriculture. The 2018 Farm Bill did not change the FDA oversight authority over hemp-based products. The 2018 Farm Act delegated the authority to the states to regulate and limit the production of hemp and hemp derived products within their territories. Although many states have adopted laws and regulations that allow for the production and sale of hemp and hemp derived products under certain circumstances, no assurance can be given that such state laws may not be repealed or amended such that our products containing hemp would once again be deemed illegal under the laws of one or more states now permitting such products, which in turn would render such products illegal in those states under federal law even if the federal law is unchanged. In the event of either repeal of federal or of state laws and regulations, or of amendments thereto that are adverse to our hemp-based products, we may be restricted or limited with respect to those products that we may sell or distribute, which could adversely impact our business operations with respect to such products.
Additionally, the FDA has indicated its view that certain types of products containing hemp may not be permissible under the FDCA. The FDA’s position is related to its approval of Epidiolex, a marijuana-derived prescription medicine to be available in the United States. The active ingredient in Epidiolex is hemp-derived CBD. On December 20, 2018, after the passage of the 2018 Farm Bill, FDA Commissioner Scott Gottlieb issued a statement in which he reiterated the FDA’s position that, among other things, the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce and that the FDCA prohibits introducing into interstate commerce food products containing added hemp, and marketing products containing hemp-derived ingredients, including, but not limited to CBD, as a dietary supplement, regardless of whether the substances are hemp-derived. Although we believe our planned hemp-based product offerings do and will continue to comply with applicable federal and state laws and regulations, legal proceedings alleging violations of such laws could have a material adverse effect on our business, financial condition and results of operations.
FDA regulation could negatively affect the hemp industry, which would directly affect our financial condition.
The FDA may seek expanded regulation of hemp under the FDCA. Additionally, the FDA may issue rules and regulations, including certified good manufacturing practices, or cGMPs, related to the growth, cultivation, harvesting and processing of hemp. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where hemp is grown register with the FDA and comply with certain federally prescribed regulations. In the event that some or all of these regulations are imposed, we do not know what the impact would be on the hemp industry, including what costs, requirements and possible prohibitions may be enforced. If we or our partners are unable to comply with the regulations or registration as prescribed by the FDA, we and or our partners may be unable to continue to operate our and their business in its current or planned form or at all.
Confusion between legal hemp and illegal cannabis.
There is risk that confusion or uncertainty surrounding our products with regulated cannabis could occur on the state or federal level and impact us. We may have difficulty with establishing banking relationships, working with investment banks and brokers who would be willing to offer and sell our securities or accept deposits from stockholders, and auditors willing to certify our financial statements if we are confused with businesses that are in the cannabis business. Any of these additional factors, should they occur, could also affect our business, prospects, assets or results of operation could have a material adverse effect on the business, prospects, results of operations or financial condition of the Company.
Because we are subject to numerous laws and regulations we could incur substantial costs.
The manufacture, labeling and distribution of our products is regulated by various federal, state and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to sell our products in the future. The FDA regulates our nutraceutical and wellness products to ensure that the products are not adulterated or misbranded.
We are subject to additional regulation as a result of our CBD products. The shifting compliance environment and the need to build and maintain robust systems to comply with different compliance in multiple jurisdictions increase the possibility that we may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.
Failure to comply with FDA requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. Our advertising is subject to regulation by the FTC under the FTCA. In recent years, the FTC has initiated numerous investigations of dietary and nutrition supplement products and companies. Additionally, some states also permit advertising and labeling laws to be enforced by private attorney generals, who may seek relief for consumers, seek class action certifications, seek class wide damages and product recalls of products sold by us. Any actions against us by governmental authorities or private litigants could have a material adverse effect on our business, financial condition and results of operations.
Adverse publicity or consumer perception of our products and any similar products distributed by others could harm our reputation and adversely affect our sales and revenues.
We are highly dependent upon positive consumer perceptions of the safety and quality of our products as well as similar products distributed by other wellness, nutraceutical and CBD companies. Consumer perception of nutrition supplements and our products, in particular, can be substantially influenced by scientific research or findings, national media attention and other publicity about product use. Adverse publicity from these sources regarding the safety, quality or efficacy of nutritional supplements and our products could harm our reputation and results of operations. The mere publication of news articles or reports asserting that such products may be harmful or questioning their efficacy could have a material adverse effect on our business, financial condition and results of operations, regardless of whether such news articles or reports are scientifically supported or whether the claimed harmful effects would be present at the dosages recommended for such products.
If the products we sell do not have the healthful effects intended, our business may suffer.
In general, our products contain food, nutritional supplements which do not currently require approval from the FDA or other regulatory agencies prior to sale. Many of our products contain innovative ingredients or combinations of ingredients. There is little long term experience with human or other animal consumption of certain of these ingredients or combinations thereof in concentrated form. Our products could have certain side effects if not taken as directed or if taken by a consumer that has certain medical conditions. Furthermore, there can be no assurance that any of the products, even when used as directed, will have the effects intended or will not have harmful side effects. Should our products cause unwanted side effects or not have the results intended, it could have a material adverse effect on our business, financial condition and results of operations.
We could suffer reputational and financial damage in the event of injury from our products or product recalls.
As a manufacturer and distributor of products intended for human consumption, we are subject to product liability claims if the use of our products for others is alleged to have resulted in injury. Our products consist of vitamins, minerals, herbs, lotions and other ingredients that are not subject to pre-market regulatory approval in the United States or internationally. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur which would likely result in product liability claims against us which would increase our costs and adversely affect our reputation and harm our business. We may be held liable if any illness or injury caused by any product we develop, manufacture or distribute, if any such product is found to be unsuitable for use. In addition to any reputational damage we would suffer, we cannot guarantee that our product liability insurance or that of any of our suppliers would fully cover potential liabilities. In the event of litigation, any adverse judgments against us would have a material adverse effect on our financial condition, including our cash balances, and results of operations.
Our insurance coverage may not be sufficient to cover our legal claims or other losses that we may incur in the future.
We maintain insurance, including property, general and product liability, and workers’ compensation to protect ourselves against potential loss exposures. There is no assurance that our insurance will be sufficient to cover any claims that are asserted against us. In the future, insurance coverage may not be available at adequate levels or on adequate terms to cover potential losses, including on terms that meet our customer’s requirements. If insurance coverage is inadequate or unavailable, we may face claims that exceed coverage limits or that are not covered, which could increase our costs and adversely affect our operating results.
Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brand.
We manufacture products primarily for third parties who sell the products under their own brand names. We also sell products under our own brand names. Our product formulations are not patented and there are numerous companies selling similar products. As such, third parties could copy our products or sell similar products to our distributors and/or customers.
Our competitors may have or develop equivalent or superior manufacturing and design skills, and may develop an enhancement to our formulations that will be patentable or otherwise protected from duplication by others. Further, we may be unable or unwilling to strictly enforce our intellectual property rights, including our trademarks, from infringement. Our inability to obtain and/or failure to enforce our intellectual property rights could diminish the value of our product offerings and have a material adverse effect on our business, prospects, results of operations, and financial condition.
If we are unable to obtain and maintain protection of our intellectual property, the value of our products may be adversely affected.
Our business is dependent in part upon our ability to use intellectual property rights to protect our products from competition. To protect our products, we rely on a combination of patent and other intellectual property laws, employment, confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements and protective contractual provisions with our partners, licensors and other third parties. These methods, however, afford us only limited protection against competition from other products.
We attempt to protect our intellectual property position, in part, by filing patent applications related to our proprietary technology, inventions and improvements that are important to our business. However, our patent position is not likely by itself to prevent others from commercializing products that compete directly with our products. In addition, the patent owned by us or issued to us could be challenged, invalidated, or held to be unenforceable. We also note that any patent granted may not provide a competitive advantage to us. Our competitors may independently develop technologies that are substantially similar or superior to our technologies. Further, third parties may design around our patented or proprietary products and technologies.
We rely on certain trade secrets and we may not be able to adequately protect our trade secrets even with contracts with our personnel and third parties. Also, any third party could independently develop and have the right to use, our trade secret, know-how and other proprietary information. If we are unable to protect our intellectual property rights, our business, prospects, financial condition and results of operations could suffer materially.
We may be involved in lawsuits or proceedings to protect or enforce our intellectual property rights or to defend against infringement claims, which could be expensive and time consuming.
Our success depends in part on our products not infringing on the patents and proprietary rights of other parties. For instance, in the United States, patent applications filed in recent years are confidential for 18 months, while older applications are not published until the patent issues. As a result, there may be patents and patent applications of which we are unaware, and avoiding patent infringement may be difficult. Litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. Interference proceedings conducted by a patent and trademark office may be necessary to determine the priority of inventions with respect to our patent applications. Litigation or interference proceedings could result in substantial costs and diversion of resources and management attention. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. In addition, we may be enjoined from marketing one or more of our products if a court finds that such products infringe the intellectual property rights of a third party. During litigation, we may not be able to prevent the confidentiality of certain of our proprietary rights because of the substantial amount of discovery required in connection with intellectual property litigation. In addition, during the course of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors or customers perceive these results to be negative, it could have a material adverse effect on our business, prospects, financial condition and results of operations.
Our business is highly competitive, and our failure to compete effectively could adversely affect our market share, financial condition and future growth.
The nutritional supplement, wellness and CBD industries are highly competitive with respect to price, brand and product recognition and new product introductions. Many of our competitors are larger, more established and possess greater financial, personnel, distribution and other resources. We face competition (a) in the health food channel from a limited number of large nationally known manufacturers, private label brands and many smaller manufacturers of dietary and nutrition supplements; and (b) in the mass-market distribution channel from manufacturers, major private label manufacturers and others. Private label brands at mass-market chains represent substantial sources of income for these merchants and the mass-market merchants often support their own labels at the expense of other brands. As such, the growth of our brands within food, drug, and general mass-market merchants are highly competitive and uncertain. If we cannot compete effectively, we may not be profitable.
We may experience greater than expected product returns, which might adversely affect our sales and results of operations.
In the year ended December 31, 2021, product returns represented 2% of our sales. Products may be returned for various reasons, including expiration dates or lack of sufficient sales volume. Any increase in product returns could reduce our results of operations.
The purchase of many of our products is discretionary and may be negatively impacted by adverse trends in the general economy and make it more difficult for us to generate revenues.
Our business is affected by general economic conditions since our products are discretionary and we depend, to a significant extent, upon a number of factors relating to discretionary consumer spending. These factors include economic conditions and perceptions of such conditions by consumers, employment rates, the level of consumers’ disposable income, business conditions, interest rates, consumer debt levels and availability of credit. Consumer spending on our products may be adversely affected by changes in general economic conditions.
We may not be able to anticipate consumer preferences and trends within the diet and nutritional industry, which could negatively affect acceptance of our products by retailers and consumers and result in a significant decrease in our revenues.
Our products must appeal to a broad range of consumers, whose preferences cannot be predicted with certainty and are subject to rapid change. Our products will need to successfully meet constantly changing consumer demands. If our products are not successfully received by our private label distributors and their customers, our business, financial condition, results of operations and prospects may be harmed.
Risks Related to Our Management
Should we lose the services of Edgar Ward, our founder, Chief Executive Officer, President and sole Director, our financial condition and proposed expansion may be negatively impacted.
Our future depends on the continued contributions of Edgar Ward, our founder, Chief Executive Officer, President and sole Director who would be difficult to replace. The services of Mr. Ward are critical to the management of our business and operations. Additionally, we do not maintain key man life insurance on Mr. Ward. Should we lose the services of Mr. Ward, and be unable to replace his services with equally competent and experienced personnel, our operational goals and strategies would likely be adversely affected, which will negatively affect our revenues.
Edgar Ward, our founder, Chief Executive Officer, President and sole Director has voting control of the Company.
Edgar Ward, our founder, Chief Executive Officer, President and sole Director holds voting and dispositive control over 13.87% of our issued and outstanding common stock shares. Further he holds 100% of our issued and outstanding Series A Preferred stock. Each share of Series A Preferred Stock is entitled to 500,000 votes per share or an aggregate of 500,000,000 votes. Therefore, Edgar Ward effectively has voting control over the Company, which could lead to a conflict of interest where Mr. Ward’s interests do not align with those of ordinary shareholders of the Company.
Because we do not have an audit or compensation committee, shareholders will have to rely on the one member of our board of directors who is not independent to perform these functions.
We do not have an audit or compensation committee or board of directors as a whole that is composed of independent directors. These functions are performed by our sole director. Because our sole Director is not independent, there is a potential conflict between their or our interests and our shareholders’ interests since Edgar Ward, our sole Board Member, is also our Chief Executive Officer and President who will participate in discussions concerning management compensation and audit issues that may affect management decisions. Until we have an audit committee or independent directors, there may less oversight of management decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if they are not in the best interests of minority shareholders.
Our Vice-President devotes limited time to our business, which may negatively impact our plan of operations, implementation of our business plan and our potential profitability.
Neil Catania, our Vice-President currently devotes only ten (10) hours to our business each month. Our Chief Executive Officer and President, Edgar Ward, devotes full time to our business however, there is no assurance he will be able to do so in the future. Management time devoted to our business activities in the future may be inadequate to implement our plan of operations and develop a profitable business.
Risks Related to Our Common Stock
Our Chief Executive Officer, President and sole Director has voting control over all matters submitted to a vote of our common stockholders, which will prevent our minority shareholders from having the ability to control any of our corporate actions.
As of the date hereof, we had 174,968,516 shares of our common stock outstanding, each entitled to one vote per common share. Our Chief Executive Officer, President and sole Director, Edgar Ward, held 13.87% of our issued and outstanding common stock and 1,000 Series A Preferred which provide 500,000 votes per share or an aggregate of 500,000,000 votes on all matters submitted to our stockholders. As a result, Mr. Ward has voting control of the Company and has the ability to determine the outcome of all matters submitted to our stockholders for approval, including the election of directors. Mr. Ward’s control of our voting securities may make it impossible to complete some corporate transactions without his support and may prevent a change in our control. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.
We will, in the future, issue additional securities which would reduce investors’ percent of ownership and will cause dilution to our existing shareholders.
Our Articles of Incorporation authorize us to issue 499,990,000 shares of common stock. As of the date hereof, we had 174,968,516 shares of common stock outstanding. Accordingly, we may issue additional shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the effect of diluting the value of the shares held by our stockholders, and might have an adverse effect on any trading market for our common stock. Additionally, we are authorized to issue 10,000 shares of preferred stock, of which we currently have 1,000 shares of our Series A Preferred stock issued and outstanding and 20 shares of Series B Preferred stock issued and outstanding. Further, our board of directors may designate the rights, terms and preferences of our authorized but unissued preferred shares at our discretion including conversion and voting preferences without notice to our shareholders.
The sale of the additional shares of common stock could cause dilution as well as the value of our common stock to decline.
The sale of a substantial number of shares of our common stock, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish. Further, if we do sell or issue more common stock, any investors’ investment in the Company will be diluted. Dilution is the difference between what you pay for your stock and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in the Company’s common stock could seriously decline in value.
Our common stock is subject to the application of the “penny stock” rules which could adversely affect the market price of our common stock and increase transaction costs to sell those shares.
The SEC has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
● that a broker or dealer approve a person’s account for transactions in penny stocks, and
● the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
● obtain financial information and investment experience objectives of the person, and
● make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
● sets forth the basis on which the broker or dealer made the suitability determination and
● that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
The market price for our common stock is particularly volatile which could lead to wide fluctuations in our share price. You may be unable to sell your common stock shares at or above your purchase price, or at all, which may result in substantial losses to you.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common stock regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock shares will be at any time, or as to what effect the sale of shares or the availability of common stock shares for sale at any time will have on the prevailing market price.
FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted FINRA Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board of Directors.
If we are unable to comply with the financial reporting requirements mandated by the SEC’s regulations, investors may lose confidence in our financial reporting and the price of our common stock, if a market ever does develop for it, could decline.
If we fail to maintain effective internal controls over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired. If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not Applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
We lease an aggregate of 6,400 square feet of office and warehouse space at 6601 Lyons Rd, Suites L-6&7, Coconut Creek, FL 33073, with base rent at $6,100 per month from Lyons Corporate Park for our executive offices. Approximately 5,800 square feet is used for manufacturing, storage and distribution. The lease term has been renewed for a three year to expire in January of 2025.
On June 6, 2017, we entered into an agreement with Hillsboro Technology Center, LLC to lease an aggregate of 19,831 square feet at 448 Hillsboro Technology Drive, Deerfield Beach, FL 33441, with base rent at $14,447 per month plus 7.65% of common area and 13% of building operating expenses. We plan to use this location as a manufacturing, storage and distribution facility commencing in June 2022. The lease term commenced on January 1, 2018 and terminates eighty-six (86) months thereafter.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Litigations applicable to the Company are discussed as follows.
Ortiz v. the Company: Jose Ortiz v. Nutralife Biosciences, Inc. f/k/a Nutrafuels, Inc., Case No. CACE-29-017957, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, on October 28, 2020. In this matter, Mr. Ortiz is seeking a judgment for damages, attorneys’ fees, and other costs relating to defendant’s purported breach of an employment agreement dated March 18, 2015. We do not believe that this claim is valued at greater than $5,000. Ortiz’ claim was filed on October 28, 2020, asserting improper discharge from employment, and failure to pay wages and benefits, however, we believe (and have filed summary judgment asserting) that the claim was filed too late, in contravention of the applicable statute of limitations.
Hamilton v. the Company: Hamilton & Associates Law Group, P.A. v. Nutralife Biosciences, Inc. f/k/a Nutrafuels, Inc., Case No. 50-2020-CA-008435, was filed in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida on August 9, 2020. In the suit, Hamilton & Associates Law Group, P.A. sets forth purported claims for breach of contract, and in the alternative, account stated, open account, unjust enrichment, and quantum meruit. Plaintiff requests a judgment for damages in the principal sum of $150,000, plus an award of attorneys’ fees and costs pursuant to a legal services agreement dated January 7, 2019, as well as pre-judgment interest and post-judgment interest. The Hamilton matter filed directly against the Company initially included a claim against Edgar Ward, but the individual claim has been dropped. The prior engagement agreement between the Hamilton law firm and the Company (for 2018) was in the nature of a flat fee engagement, in which shares were provided in lieu of cash payments. The Company maintains that the change in the engagement of the law firm (from 2018 to 2019) in terms of the nature of payment was not disclosed or explained adequately, and the Company was unaware of any claim that sums remained unpaid, as all fees were understood to be paid as a result of the shares of stock provided. The claim was filed on August 9, 2020, and is not set for trial, and only documentary discovery has been conducted to date.
Native American Partners v. the Company: Native American Partners LLC, including NAVF Holdings and NAVF-Pharma, subsidiary companies, and Best Darn Brands, LLC, and its subsidiaries v. Nutralife Biosciences Inc., Case No. CACE-20-009352, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. This action was filed on June 5, 2020, against both the Company and Edgar Ward. However, the claim against Mr. Ward was later dropped. The claim asserted that the Company failed to comply with the confidentiality imposed by a non-disclosure agreement signed by plaintiff and defendant. Plaintiff claims that defendant proceeded with the development of a hand sanitizer product that was first revealed to defendant by the plaintiff, however, defendant asserted that the product produced was different (gel vs. spray) and that defendant had contemplated developing the product (the Covid 19 pandemic was already underway) well in advance of the signing of the NDA. In the Amended Complaint filed on July 9, 2020, plaintiffs demanded injunctive relief and damages for conversion, fraudulent misrepresentation, fraud in the inducement, equitable accounting, unjust enrichment, quantum meruit, breach of contract, and negligent misrepresentation. We obtained a dismissal of this Amended Complaint on February 8, 2021, based on the arbitration provision included in the written contract at issue between the parties. At this time, the plaintiffs have not filed another court action that we are aware of. We are also not yet aware of any arbitration initiated by the plaintiff.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Common Stock
Our common stock is quoted on the OTC Pink Limited Information Tier of OTC Markets under the symbol, “NLBS.” Our common stock shares were quoted with the symbol “NTFU” on the OTC Markets from May 19, 2014 until March 5, 2019. Trading in stocks quoted on the OTC Markets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. On March 23, 2022, the closing price of our common stock on the OTC Pink was $0.085 per share.
OTC Markets securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Markets securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Markets issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
Set forth below are the range of high and low prices for our common stock from the OTC Markets Pink Tier for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions:
PERIOD HIGH LOW
YEAR 2021
First Quarter 03/31/21 $ 0.179 $ 0.085
Second Quarter 06/30/21 $ 0.158 $ 0.090
Third Quarter 09/30/21 $ 0.138 $ 0.056
Fourth Quarter 12/31/21 $ 0.123 $ 0.073
YEAR 2020
First Quarter 03/31/20 $ 0.113 $ 0.007
Second Quarter 06/30/20 $ 0.099 $ 0.035
Third Quarter 09/30/20 $ 0.067 $ 0.021
Fourth Quarter 12/31/20 $ 0.175 $ 0.037
Transfer Agent
Our transfer agent is VStock Transfer LLC located at 18 Lafayette Place, Woodmere, NY 11598. Its telephone number is 212-828-8436 and its website is located at http://www.vstocktransfer.com. VStock Transfer is registered as a transfer agent with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Holders
As of the date hereof, we had 174,968,516 shares of common stock issued and outstanding. As of the date hereof, we had 141 record holders of our common stock. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Dividends
We have not paid any dividends to the holders of our common stock and we do not expect to pay any such dividends in the foreseeable future as we expect to retain our future earnings for use in the operation and expansion of our business.
Equity Compensation Plans
None.
Registration Rights
There are no agreements that require us to register securities under the Securities Act.
Stock Re-Purchases
We have not, and none of our affiliates have made re-purchases of shares of our common stock since our inception and we do not currently have any publicly-announced repurchase plans in effect.
Unregistered Securities
From March 2019 to present, we offered and sold the securities below which were not registered under the Securities Act of 1933, as amended. None of the issuances involved underwriters, underwriting discounts or commissions. We relied upon Sections 4(2) of the Securities Act, and Rule 506(b) of the Securities Act of 1933, as amended for the offer and sale of the securities.
We believed these exemptions were available because:
● We are not a blank check company;
● We filed a Form D, Notice of Sales, with the SEC;
● Sales were not made by general solicitation or advertising;
● All certificates had restrictive legends;
● Sales were made to persons with a pre-existing relationship to our Chief Executive Officer and Sole Director, Edgar Ward; and
● Sales were made to investors who represented that they were accredited investors.
On March 7, 2019, we issued 62,500 common shares to Austin Hunter for services rendered to us. We valued these shares at $.170 per share or an aggregate of $10,625.
On March 12, 2019, we issued 1,200,000 common shares to Bruce Burley for the purchase of certain assets. We value these shares at a price of $.177 per share or an aggregate of $212,760.
On March 12, 2019, we issued 300,000 common shares to Robert E. Borland Jr for the purchase of certain assets. We value these shares at a price of $.177 per share or an aggregate of $53,190.
On March 15, 2019, we issued 2,499,765 common shares to Orange Pumpkin Trust for a price of $.085 per share or an aggregate of $212,480.
On March 19, 2019, we issued 176,470 common shares to Antonio Morgado for services rendered to us. We valued these shares at $.085 per share or an aggregate of $15,000.
On March 22, 2019, we issued 117,647 common shares to Scott Mast for a price of $.085 per share or an aggregate of $10,000.
On March 22, 2019, we issued 117,647 common shares to Charles Mast for a price of $.085 per share or an aggregate of $10,000.
On April 2, 2019, we issued 2,352,941 common shares to Kahn Family Limited PT II in exchange for the aggregate principal and interest of $200,000 outstanding under a promissory note.
On April 2, 2019, we issued 200,000 common shares to Carmen Cortes for a price of $.085 per share or an aggregate of $17,000.
On April 9, 2019, we issued 117,647 common shares to Gerald Hersey for services rendered to us. We valued these shares at $.085 per share or an aggregate of $10,000.
On April 16, 2019, we issued 117,647 common shares to Gloria G. Ruiz for services rendered to us. We valued these shares at $.19 per share or an aggregate of $10,000.
On May 15, 2019, we issued 62,500 common shares to Sebastian Zagami for services rendered to us. We valued these shares at $.235 per share or an aggregate of $14,687.
On May 30, 2019, we issued 500,000 common shares to Owen Morgan for services rendered to us. We valued these shares at $.225 per share or an aggregate of $112,500.
On June 7, 2019, we issued 250,000 common shares to Nicholas Ward for services rendered to us. We valued these shares at $.195 per share or an aggregate of $48,750.
On June 7, 2019, we issued 62,500 common shares to Anthony Centorani for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Robert Patrick Scott for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Mary Ellen Mahon for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to John Gross for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Esco Bell for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Austin Hunter for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Cooper Dodd for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Karina Rodriguez for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 62,500 common shares to Liska Rodriguez for services rendered to us. We valued these shares at $.195 per share or an aggregate of $12,187.
On June 7, 2019, we issued 434,000 common shares to Sidnak Solutions Inc. for payment of the balance of invoices outstanding. We valued these shares at $.10 per share or an aggregate of $43,400.
On June 18, 2019, we issued 500,000 common shares to Brenda Hamilton for providing a pledge as collateral for a loan in the amount of $1,000,000 to us. We valued these shares at $.191 per share or an aggregate of $95,500.
On June 18, 2019, we issued 500,000 common shares to Kahn Family Limited PT II as additional consideration for a loan provided to us in the amount of $1,000,000 to us. We valued these shares at $.191 per share or an aggregate of $95,500.
On July 16, 2019, we issued 50,000 common shares to Milena Castaneda for services rendered to us We valued these shares at $.187 per share or an aggregate of $9,345.
On July 16, 2019, we issued 70,203 common shares to Paul R. Hermes in exchange for services rendered to us. We valued these shares at $.18 or an aggregate of $12,637.
On August 6, 2019, we issued 500,000 common shares to Sidnak Solutions, Inc. for the purchase raw materials. We valued these shares at $.10 per share or an aggregate of $50,000.
On August 28, 2019, we issued 470,588 shares of common shares to Barbara Ludwig for a price of $.085 per share or an aggregate of $40,000.
On September 6, 2019, we issued 248,948 shares of our common stock to Hamilton & Associates Law Group, P.A. for services rendered which we valued these shares at $.19 per share or an aggregate of $47,300.
On September 12, 2019, we issued 588,235 shares of our common stock to Gregory Ross for a price of $.085 per share or an aggregate of $50,000.
On September 13, 2019, we issued 588,240 shares of our common stock to Eileen Miller for a price of $.085 per share or an aggregate of $50,000.
On September 27, 2019, we issued 352,941 shares of our common stock to Rudolph Mass for a price of $.085 per share or an aggregate of $30,000.
On October 9, 2019, we issued 1,764,705 shares of our common stock to Randall Oostra for a price of $.085 per share or an aggregate of $150,000.
On October 9, 2019, we issued 1,764,705 shares of our common stock to Simon Guo for a price of $.085 per share or an aggregate of $150,000.
On December 3, 2019, we issued 218,800 shares of our common stock to EW STRATEGIES LLC for a price of $0.10 per share or aggregate of $21,880 as part of a promissory note agreement.
On December 3, 2019, we issued 200,000 shares of our common stock to Stephen O’Shaughnessy for a price of $0.10 per share or aggregate of $20,000 as part of a promissory note agreement.
On January 8, 2020, we issued 1,000,000 shares of our common stock to Gregory Ross for a price of $.105 per share or aggregate of $105,000 as part of a promissory note agreement.
On January 14, 2020, we issued 1,000,000 shares of our common stock to Walter Lundon for a price of $0.10 per share or aggregate of $100,000 as part of a promissory note agreement.
On January 23, 2020, we issued 500,000 shares of our common stock to Paul Botts for a price of $0.10 per share or aggregate of $50,000 as part of a promissory note agreement.
On February 12, 2020, we issued 350,000 shares of our common stock to Barbara Ludwig for a price of $.09 per share or an aggregate of $31,500 as part of a promissory note agreement.
On March 10, 2020 we issued 470,229 shares of our common stock to Brenda Hamilton in exchange for services rendered to us. We valued these shares at $.10 per share or an aggregate of $47,023.
On March 13, 2020, we issued 1,538,461 shares of our common stock to Gary Dailey for a price of $.065 per share or an aggregate of $100,000.
On March 16, 2020, we issued 400,000 shares of our common stock to Joseph Corso for a price of $0.069 per share or an aggregate of $27,600 as part of a promissory note agreement.
On April 7, 2020, we issued 384,615 shares of our common stock to Mark Muller for a price of $.065 per share or an aggregate of $25,000.
On August 21, 2020, we issued 80,000 shares of our common stock to Mohamad Hassan Ossiani for a price of $0.035 per share or aggregate of $2,800 as part of a promissory note agreement.
On September 8, 2020, we issued 100,000 shares of our common stock to James R. Stuart for a price of $0.045 per share or aggregate of $4,500 as part of a promissory note agreement.
On September 15, 2020, we issued 200,000 shares of our common stock to Nicholas Cirignano III for a price of $0.037 per share or aggregate of $7,400 as part of a promissory note agreement.
On September 15, 2020, we issued 400,000 shares of our common stock to Thomas Cirignano for a price of $0.037 per share or aggregate of $14,800 as part of a promissory note agreement.
On October 16, 2020, we issued 100,000 shares of our common stock to Pinnacle Medical Consulting LLC for a price of $0.059 per share or aggregate of $5,900 as part of a promissory note agreement.
On October 23, 2020, we issued 120,000 shares of our common stock to Frank Cannarozzo for a price of $0.09 per share or aggregate of $10,800 as part of a promissory note agreement.
On November 3, 2020, we issued 200,000 shares of our common stock to Kenneth Klimas for a price of $0.10 per share or aggregate of $20,000 as part of a promissory note agreement.
On November 17, 2020, we issued 100,000 shares of our common stock to Larraine Cullam for a price of $0.09 per share or aggregate of $9,000 as part of a promissory note agreement.
On December 28, 2020, we issued 12,500,000 shares of our common stock to 27 Health in exchange for 250 shares of Series X Convertible Preferred stock of Lord Global Corporation in connection with a stock purchase agreement. We valued the transaction at $383,326 using the Black-Scholes Merton valuation model.
On November 4, 2020, the Company issued 2 shares of its Series B Preferred stock to John Boldis in exchange for services rendered to us. We valued the shares at an aggregate of $45,469.
On November 4, 2020, the Company issued 2 shares of its Series B Preferred stock to Thomas Reid in exchange for services rendered to us. We valued the shares at an aggregate of 45,469.
On November 4, 2020, the Company issued 16 shares of its Series B Preferred stock to Draper, Inc. in exchange for services rendered to us. We valued these shares at an aggregate of $363,747.
On March 1, 2021, we issued 400,000 shares of our common stock to Joseph Corso for a price of $0.106 per share or aggregate of $42,400 as part of a promissory note agreement dated March 16, 2020.
On March 1, 2021, we issued 1,000,000 shares of our common stock to Gregory Ross for a price of $0.106 per share or aggregate of $106,000 as part of a promissory note agreement dated January 8, 2020.
On April 2, 2021, we issued 375,000 shares of our common stock to Glenn Morris for a price of $0.08 per share or an aggregate of $30,000.
On May 11, 2021, we issued 500,000 shares of our common stock to Frank Cannarozzo for a price of $0.08 per share or an aggregate of $40,000.
On June 1, 2021, we issued 475,000 shares of our common stock to Andrew O’Connor for a price of $0.08 per share or an aggregate of $38,000.
In March, 2021, the Company issued 10 shares of Series B Convertible Preferred Stock to three consultants, Thomas Reid, Draper Inc. and John Boldis as part of their compensation agreements. The consultant compensation was valued at $164,524 using the trading price of the equivalent common stock on the date of issuance.
In April 2021, the Company issued 2,000,000 warrants to Nicholas Ward, its Production Manager as compensation. The warrants have an exercise price of $0.1025 and expire 3 years after issuance.
In April through June 2021, the Company issued 2,412,000 shares of common stock and 9,650,000 warrants in exchange for $193,000 to Mitchell Pasin, Frank Cannarozzo, Glenn Morris, Andrew O’Connor and Kenneth Klimas. The warrants have an exercise price of $0.08 per share and expire 2 years after issuance.
In June 2021, the Company entered into two Note Exchange Agreements with Larraine Cullam and Eileen Miller. The note holders agreed to exchange their current notes that were in default, for new promissory notes, shares of common stock totalling 1,997,312, and warrants to acquire an aggregate of 7,989,250 shares of common stock. The warrants are exercisable at $0.08 per share and expire two years from the dates of the new promissory notes.
During the quarter ended September 30, 2021, the Company issued 1,937,500 shares of common stock and 7,750,000 warrants in exchange for cash totalling $155,000 to Jeffrey Vaughn, and Frank Cannarozzo. The warrants have an exercise price of $0.08 per share and expire two years after issuance.
In July 2021, the Company issued 1,000,000 shares of common stock with an aggregate value of $120,000 for consulting services to Kahn Family Limited PT II.
During the quarter ended September 30, 2021, the Company received proceeds aggregating $297,500 in connection with two convertible promissory notes issued to GC Capital Partners, LLC and Quick Capital, LLC with due dates ranging from August to September 2022. The notes contained original issue discounts totalling $30,000. Each noteholder has the right to convert any or all of the principal face amount of the notes to the Company’s common stock at a price of $0.08 per share.
During the quarter ended September 30, 2021, an aggregate of 4,187,500 warrants were issued to the above noteholders as additional consideration. The warrants are exercisable at $0.08 per share and expire three years from the date of each respective note.
In November, 2021 the Company entered into Note Exchange Agreement with Joseph Corso. The note holder agreed to exchange his current note that was in default for shares of common stock totaling 2,633,333, and warrants to acquire 2,633,333 shares of common stock. The warrants are exercisable at $0.08 per share and expire two years from the dates of the new promissory notes.
In December 2021, The Company issued 550,000 shares of common stock with an aggregate value of $55,000 for consulting services to David Hayek.
Our Securities
General
Our authorized capital stock consists of 499,990,000 shares of common stock, par value $0.0001 per share and 10,000,000 shares of preferred stock, $0.0001 par value per share. As of December 31, 2021, 171,398,834 shares of common stock are outstanding; and 1,000 shares of Series A Preferred stock and 27 shares of Series B Preferred stock are outstanding.
Common Stock
Each holder of our common stock is entitled to one vote for each share owned of record on all matters voted upon by shareholders, and a majority vote is required for actions to be taken by shareholders. The common stock has no preemptive rights, no cumulative voting rights and no redemption, sinking fund or conversion provisions.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock, $0.0001 par value per share and the Company’s Board of Directors is authorized to establish, from the authorized shares of preferred stock, one or more classes or series of shares, to designate each such class and series, and fix the rights and preferences of each such class of preferred stock, which shall have voting powers, preferences, participating, optional or other special rights, qualifications and limitations or restrictions as adopted by the Board of Directors prior to the issuance of any such preferred shares. We have designated 1,000 shares of Series A Preferred and 110 shares of Series B Preferred.
There are currently 1,000 shares of Series A Preferred stock and 27 shares of Series B Preferred stock issued and outstanding.
Series A Preferred
The Series A Shares have the following rights and preferences:
● Each one (1) share is entitled to 500,000 votes per share on all matters submitted to our common stockholders.
● The Series A Shares are not convertible into common shares;
● The holders of the Series A Shares are not entitled to receive dividends or any distribution upon our liquidation or dissolution;
● The holders of the Series A Shares cannot assign or sell the shares; and
● The Series A Shares are redeemable in whole by us for the price of $1,000 at the option of the holder.
So long as any of the Series A Shares are outstanding, we cannot take the following actions without the consent of the holders of 100% of the Series A Shares: amend, alter, waive or repeal, whether by merger consolidation, combination, reclassification or otherwise, the Articles of Incorporation or Bylaws; or create, authorize or issue any class, series or shares of any class of capital stock. The rights and preferences of the Series A Share cannot be amended without the consent of 100% of the holders of the Series A Shares.
Series B Preferred
We have designated one hundred and ten (110) shares of the preferred stock of the Company, par value $0.0001 as Series B Convertible Preferred Stock (the “Series B Preferred Stock”).
The shares of Series B Preferred Stock are convertible at a rate of 1 share of Series B Preferred Stock to 149,567 shares of common stock, par value $0.0001 per share of the Company (the “Common Stock”). Holders of Series B Preferred Stock of the Company may convert their shares of Series B Preferred Stock into Common Stock at any time following January 1, 2021 (the “Permitted Conversion Date”). The Series B Preferred Stock is subject to an ownership limitation, pursuant to which no holder of Series B Preferred Stock will be entitled to convert such investor’s shares of Series B Preferred Stock into shares of Common Stock if such conversion would result in ownership of more than 4.99% of the outstanding shares of Common Stock of the Company. Each share of Series B Preferred Stock will vote together with the holders of the Common Stock on any matter submitted to the shareholders of the Company. Each share of Series B Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which the Series B Preferred Stock may convert at the time such vote is made. The Series B Preferred Stock will participate in any dividends, distributions or payments to the holders of the Common Stock on an as-converted basis. The Series B Preferred Stock does not have any liquidation preference over the holders of Common Stock of the Company. Once issued, certain shares of the Series B Preferred Stock are redeemable at the election of the Company at any time prior to the Permitted Conversion Date pursuant to a separate written agreement between the holders of the Series B Preferred Stock and the Company.
Warrants
There are 80,837,314 outstanding warrants of the Company as of December 31, 2021. The warrants are exercisable at $0.08-$0.35 per share and expire two to three years from the date of each respective agreement.
Options
There are currently no options outstanding.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The financial data discussed below is derived from our audited consolidated financial statements for the fiscal years ended December 31, 2021 and 2020, which are found elsewhere in this Annual Report on Form 10-K. Our consolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States. The financial data discussed below is only a summary and investors should read the following discussion and analysis of our financial condition and results of our operations in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors,” and elsewhere in this Annual Report on Form 10-K.
Overview
The Company was formed as a limited liability company in the state of Florida on April 1, 2010, to engage in the development and distribution of nutritional and dietary oral spray products. On December 3, 2012, we converted from a Limited Liability Company to a Florida Corporation.
We manufacture, market, and distribute alternative wellness solutions with a mission to build an enterprise solution within the health and wellness industry.
Our objective is to uncover breakthrough, nutrient-rich formulations, using the most effective ingredients and delivery systems available to the nutraceutical industry, and offer alternative wellness solutions that help improve the quality of life. Our distribution strategy includes selling to private label customers, retailers, distributors, and consumers through retail outlets.
Years Ended December 31, 2021 and 2020
We had sales of $626,619 and $1,255,784 for the years ended December 31, 2021 and 2020, respectively, or a 50.1% decrease. This decrease is directly related to the decrease in sales and production volume resulting from the shutdowns and business disruptions due to the pandemic and overall industry changes as a result.
Cost of sales was $543,031 compared to $745,934 for the years ended December 31, 2021 and 2020, respectively, or a 27.2% decrease. This decrease is directly related to the decrease in sales and production volume resulting from the shutdowns and business disruptions from the pandemic and overall industry changes.
Gross profit was $83,588 and $509,850 for the years ended December 31, 2021 and 2020, respectively, or a 83.6% decrease. This is the result of the disruptions in operations resulting from the pandemic and overall industry changes.
General and administrative expenses were $1,849,371 compared to $1,804,765 for the years ended December 31, 2021 and 2020, respectively, or a 2.5% increase. This increase is primarily due to the disruptions in the Company’s operations from the pandemic overall industry changes.
Stock based compensation was $2,569,514 and $501,707 for the years ended December 31, 2021 and 2020, respectively, or a 412.2% increase. This increase was a result of business development and operational efforts.
Finance costs were $1,849,286 compared to $916,835 for the years ended December 31, 2021 and 2020, respectively, an increase of $932,451.
We incurred a net loss of approximately $5,800,000 compared to $2,900,000 for the years ended December 31, 2021 and 2020, respectively.
Liquidity and Capital Resources
Historically, the Company’s primary cash needs have been related to working capital items, which the Company has largely funded through our revenues, working capital, cash on hand, and proceeds from the issuance of stock.
The Company through its efforts has secured new business and expects to see a surge in its revenue from multiple channels providing the necessary cash flows to support its operations and debt commitments.
Cash Flow Activities
As of December 31, 2021, the Company had a cash balance of $135,769. Failure to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing sales channels.
We are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Operating Activities
Our cash increased $135,027 for the year ended December 31, 2021. Cash used in operating activities is net loss adjusted for certain non-cash items and changes in certain assets and liabilities, such as those included in working capital.
For the year ended December 31, 2021, the Company’s operating activities used cash of $487,386, compared to the year ended December 31, 2020 which used cash of $1,284,240. For details of the operating cash flows refer to the consolidated statements of cash flows in Item 8 - Financial Information and Supplementary Data.
Investing Activities
For the year ended December 31, 2021, the Company’s investing activities used cash of $675,000 for a deposit on an equity and license agreement.
Financing Activities
During the year ended December 30, 2021, we received an aggregate of $243,275 from SBA financing, under the Paycheck Protection Program and CARES act.
We also received $725,050 from financing from debt, and $348,000 from the sale of common stock.
Critical Accounting Policies and Estimates
In preparing the financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), we have adopted various accounting policies. Our most significant accounting policies are disclosed in Note 2 to the financial statements.
The preparation of the financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our estimates and assumptions, including those related to the ability to continue as going concern, legal proceedings, the recoverability of inventory, long-lived assets, the fair value of stock-based compensation and the fair value of warrant liabilities are updated as appropriate, which in most cases is at least quarterly. We base our estimates on historical experience, or various assumptions that are believed to be reasonable under the circumstances and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. Actual results may materially differ from these estimates.
Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. Our critical accounting estimates include the following:
Revenue Recognition: In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Provision for sales returns will be estimated based on the Company’s historical return experience.
Accounts Receivable and Allowance for Doubtful Accounts: Our accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.
Long-Lived Assets: The carrying value of long-lived assets is reviewed annually and on a regular basis for the existence of facts and circumstances that may suggest impairment. If indicators of impairment are present, we determine whether the sum of the estimated undiscounted future cash flows attributable to the long-lived asset in question is less than its carrying amount. If less, we measure the amount of the impairment based on the amount that the carrying value of the impaired asset exceeds the discounted cash flows expected to result from the use and eventual disposal of the impaired assets.
Derivative Financial Instrument: The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value measurement is recorded in the statement of operations as other income or expense. Upon conversion or exercise of the convertible note containing an embedded derivative instrument is marked to fair value at the conversion date and that the fair value is reclassified to equity. The shares issued upon conversion of this note are recorded at their fair value with a gain or loss recognition as applicable.
Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liabilities at the fair value of the instruments on the reclassification date/
Share-Based Compensation: We record share-based compensation in accordance with FASB ASC 718, Stock Compensation. FASB ASC 718 requires that the cost resulting from all share-based transactions are recorded in the financial statements over the respective service periods. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. FASB ASC 718 also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions.
Off-Balance Sheet Arrangements
We have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under whom we have:
● An obligation under a guarantee contract.
● A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets.
● Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument.
● Any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us.
We do not have any off-balance sheet arrangements or commitments that have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material, other than those which may be disclosed in this Management’s Discussion and Analysis of Financial Condition and the audited Consolidated Financial Statements and related notes.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Accounting Firm (Rotenberg Meril Solomon Bertiger & Guttilla, PC, Saddle Brook, NJ, PCAOB ID:361)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
NutraLife Biosciences, Inc.
Coconut Creek, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NutraLife Biosciences, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ (deficit) equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in the financial statements, the Company has suffered substantial net losses in recent years, has negative working capital and has an accumulated deficit at December 31, 2021 and 2020 and is dependent on debt and equity financing to fund its operations, all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are disclosed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the board of directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters.
/s/ ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.
ROTENBERG MERIL SOLOMON BERTIGER & GUTTILLA, P.C.
We have served as the Company's auditors since 2020.
Saddle Brook, New Jersey
April 11, 2022
NUTRALIFE BIOSCIENCES, INC.
Consolidated Balance Sheets
December 31,
Assets
Current Assets:
Cash and cash equivalents $ 135,769 $ 742
Accounts receivable, net of allowance for doubtful accounts in the amount of $0 and $0 44,198 154,193
Inventories 309,334 567,527
Prepaid and other current assets 28,997 -
Total current assets 518,298 722,462
Property and equipment, net 2,265,196 2,314,661
Operating lease right-of-use assets 449,155 661,141
Investment 383,326 383,326
Deposit on equity and license agreement 675,000 -
Intangible asset 525,150 590,118
Other assets 35,000 35,000
Total Assets $ 4,851,125 $ 4,706,708
Liabilities and Stockholders’ (Deficit) Equity
Current Liabilities:
Accounts payable 283,164 $ 173,925
Accrued expenses (related party $148,552 and $91,048) 1,043,891 786,495
Deferred revenue 70,521 -
Customer deposits - 22,700
Liability for stock to be issued 265,500 265,500
Current portion of SBA Note Payable - 148,000
Current portion of finance leases 17,161 20,000
Current portion of operating lease liability 141,911 214,000
Notes payable, net of unamortized discount of $200,524 and $206,542 (related party $1,000,000 and $1,000,000) 2,621,506 2,153,498
Other current liability 33,000
-
Revenue share agreements payable 725,000 -
Total current liabilities 5,201,654 3,784,118
Long-term Liabilities:
Notes payable - SBA, net of current portion 10,000 106,700
Operating lease liability, net of current portion 350,887 497,593
Finance leases, net of current portion 1,114 17,187
Total liabilities 5,563,655 4,405,598
Stockholders’ (Deficit) Equity
Preferred stock; $0.0001 par value, authorized 10,000 shares: 1,000 shares Series A issued and outstanding
27 and 20 shares Series B issued and outstanding - -
Preferred stock value
Common stock; $0.0001 par value, 499,990,000 authorized shares; 171,398,834 and 160,419,488 shares issued and outstanding 17,133 16,036
Additional paid-in-capital 46,828,644 42,015,874
Accumulated deficit (47,558,308 ) (41,730,801 )
Total stockholders’ (deficit) equity (712,530 ) 301,110
Total Liabilities and Stockholders’ (Deficit) Equity $ 4,851,125 $ 4,706,708
The accompanying notes are an integral part of these consolidated financial statements.
NUTRALIFE BIOSCIENCES, INC.
Consolidated Statements of Operations
Years Ended December 31,
Sales $ 626,619 $ 1,255,784
Cost of Sales 543,031 745,934
Gross Profit 83,588 509,850
Operating expenses
Advertising and promotion 22,913 176,430
Stock-based compensation 2,569,514 501,707
General and administrative 1,849,371 1,804,765
Depreciation and amortization 114,434 -
Total operating expenses 4,556,232 2,482,902
Loss from operations (4,472,644 ) (1,973,052 )
Other Income (expense)
Other income (expense) 6,448 (53 )
Income from debt forgiveness 487,975 -
Finance costs (1,849,286 ) (916,835 )
Total other income (expense) (1,354,863 ) (916,888 )
Loss before income taxes (5,827,507 ) (2,889,940 )
Income tax expense - -
Net loss $ (5,827,507 ) $ (2,889,940 )
Net loss per weighted average common share - basic and diluted $ (0.04 ) $ (0.02 )
Number of weighted average shares outstanding - basic and diluted 164,526,457 146,330,346
The accompanying notes are an integral part of these consolidated financial statements.
NUTRALIFE BIOSCIENCES, INC.
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity
Shares Amount Shares Amount Common Common Capital Deficit Equity
Preferred Stock
Series A Series B Number Par Additional
Total
Number Par Number Par Shares Amount Paid-in Accumulated Stockholders’
Shares Amount Shares Amount Common Common Capital Deficit Equity
Ending Balance, December 31, 2019 1,000 $ 1 $ - $ - 140,976,183 $ 14,092 $ 40,415,885 $ (38,840,861 ) $ 1,589,117
Preferred stock issued for services - - - - - 454,684 - 454,684
Shares issued for cash - - - - 1,923,076 124,808 - 125,000
Shares issued in connection with debt financing - - - - 4,550,000 390,645 - 391,100
Shares issued for services - - - - 470,229 46,976 - 47,023
Beneficial conversion feature - - - - - - 51,900 - 51,900
Warrants issued in connection with convertible debt - - - - -
143,900 - 143,900
Warrants issued for cash - - - - -
5,000 - 5,000
Investment in convertible preferred stock - - - - 12,500,000 1,250 382,076 - 383,326
Net Loss
(2,889,940 ) (2,889,940 )
Ending Balance, December 31, 2020 1,000 $ 1 $ - 160,419,488 $ 16,036 $ 42,015,874 $ (41,730,801 ) $ 301,110
Beginning balance, value 1,000 $ 1 $ - 160,419,488 $ 16,036 $ 42,015,874 $ (41,730,801 ) $ 301,110
Preferred stock issued for services
- - - 164,524 - 164,524
Conversion series B Preferred Stock to Common Stock - - (3 ) - 448,701 - -
Common stock and warrants issued for cash
- - 4,350,000 347,565 - 348,000
Common stock issued in connection with debt conversions and accrued interest
- - 4,630,645 369,989 - 370,452
Shares issued for services
- - 1,550,000 174,845 - 175,000
Warrants issued in connection with debt financing
- - - - 1,525,857 - 1,525,857
-
Warrants issued as compensation
- - - - 2,229,990 - 2,229,990
Net Loss
(5,827,507 ) (5,827,507 )
Ending Balance, December 31, 2021 1,000 $ 1 $ - 171,398,834 $ 17,133 $ 46,828,644 $ (47,558,308 ) $ (712,530 )
Ending Balance, value 1,000 $ 1 $ - 171,398,834 $ 17,133 $ 46,828,644 $ (47,558,308 ) $ (712,530 )
The accompanying notes are an integral part of these consolidated financial statements.
NUTRALIFE BIOSCIENCES, INC.
Consolidated Statements of Cash Flows
Years Ended December 31,
OPERATING ACTIVITIES
Net loss $ (5,827,507 ) $ (2,889,940 )
Adjustments to reconcile net loss to net cash used in operating activities:
Income from debt forgiveness (487,975 ) -
Depreciation 49,465 61,986
Stock-based compensation 2,569,514 501,707
Warrants issued in connection with debt conversion 1,155,590 -
Amortization of debt discount 438,235 671,319
Amortization of right of use asset 211,986 267,754
Amortization of intangible asset 64,968 64,968
Bad debt recoveries - (1,500 )
Changes in operating assets and liabilities:
Accounts receivable 109,995 (140,894 )
Inventories 258,193 (77,354 )
Prepaid expenses (28,997 ) 87,627
Accounts payable 109,239
Accrued expenses 302,882 373,301
Deferred revenue 70,521 -
Customer deposits (22,700 ) 13,350
Operating lease liabilities (218,795
) (217,502
)
Revenue share agreements payable 725,000
-
Other current liability 33,000 -
Net Cash Used in Operating Activities (487,386 ) (1,284,240 )
INVESTING ACTIVITIES
Deposit on equity and license agreement (675,000 ) -
Net Cash Used in Investing Activities (675,000 ) -
FINANCING ACTIVITIES
Proceeds from SBA financing 243,275 254,700
Proceeds from debt issuances 725,050 905,040
Proceeds from warrants issued for cash - 5,000
Common shares issued for cash 348,000 125,000
Payments on finance leases (18,912 ) (19,586 )
Net Cash Provided by Financing Activities 1,297,413 1,270,154
NET CHANGE IN CASH AND CASH EQUIVALENTS 135,027 (14,086 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,828
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 135,769 $ 742
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $ - $ -
Cash paid for interest $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
Shares issued in connection with debt $ - $ 391,100
Beneficial conversion feature $ - $ 51,900
Right of use asset addition under ASC 842 $ - $ 134,364
Operating lease liabilities under ASC 842 $ - $ 134,364
Debt and accrued interest converted to equity $ 370,452 $ -
Warrants issued for the issuance of debt $ 370,267 $ 143,900
Investment in convertible preferred stock $ - $ 383,326
The accompanying notes are an integral part of these consolidated financial statements.
NUTRALIFE BIOSCIENCES, INC.
Notes to the Consolidated Financial Statements
NOTE 1 - NATURE OF OPERATIONS
NutraLife BioSciences, Inc. (“We” or the “Company”) is the producer and distributor of nutritional supplements that uses micro molecular formulae and a utilization of an oral spray to provide faster and more efficient absorption. Our products are sold to private label distributers who sell the products we manufacture under their own brand name as well as under our own brand name.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America as promulgated by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.S Securities and Exchange Commission (“SEC”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Precision Analytic Testing, LLC, NutraDerma Technologies, Inc., PhytoChem Technologies, Inc., and TransDermalRX, Inc. We operate as one reportable segment. All intercompany transactions and balances have been eliminated in consolidation.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”, which amended the effective date of the various topics. As the Company is a smaller reporting company, the provisions of ASU 2016-13 and the related amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 (quarter ending March 31, 2023 for the Company). Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company will evaluate the impact of ASU 2016-13 on the Company’s consolidated financial statements in a future period closer to the date of adoption.
Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies and clarifies certain calculation and presentation matters related to convertible equity and debt instruments. Specifically, ASU-2020-06 removes requirements to separately account for conversion features as a derivative under ASC Topic 815 and removing the requirement to account for beneficial conversion features on such instruments. Accounting Standards Update 2020-06 also provides clearer guidance surrounding disclosure of such instruments and provides specific guidance for how such instruments are to be incorporated in the calculation of Diluted EPS. The guidance under ASU 2020-06 is effective for fiscal years beginning after December 15, 2021,
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted this standard using a modified retrospective approach effective January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.
Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents at December 31, 2021 consisted of a money market account.
Inventories
Inventories are stated at lower of cost or net realizable value utilizing the weighted average method of valuation and consist of raw materials and finished goods. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s inventories for such declines in value. Inventory consists of the following:
SCHEDULE OF INVENTORIES
December 31, 2021
December 31, 2020
Raw Materials $ 60,630 $ 356,901
Finished Goods 248,704 210,626
Inventories $ 309,334 $ 567,527
Allowance for Doubtful Accounts
We establish the existence of bad debts through a review of several factors including historical collection experience, current aging status of the customer accounts, and financial condition of our customers. The allowance for doubtful accounts is $0 as of both December 31, 2021 and 2020.
Property and Equipment
All property and equipment are recorded at cost and depreciated over their estimated useful lives, generally three, seven and twelve years, using the straight-line method. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred. Leasehold improvements are amortized over their estimated useful lives or the remaining term of the lease, whichever is shorter.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Impairment of Long-Lived Assets
A long-lived asset is tested for impairment whenever events or changes in circumstances indicate that its carrying value amount may not be recoverable. An impairment loss is recognized when the carrying amount of the asset exceeds the sum of the undiscounted cash flows resulting from its use and eventual disposition. The impairment loss is measured as the amount by which the carrying amount of the long-lived assets exceeds its fair value.
Impairment charges would be included with costs and expenses in the Company’s consolidated statements of operations and would result in reduced carrying amounts of the related assets on the Company’s consolidated balance sheets. No adjustments were made to long-lived assets during the years ended December 31, 2021 and 2020, respectively.
Revenue Recognition
The Company accounts for revenue under the guidance of FASB ASC 606, “Revenue from Contracts from Customers” (“ASC 606”).
ASC 606 prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. Under the ASC 606 guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company generates revenues from the sale of products. The product is invoiced, and the revenue is recognized upon shipment or once transfer of risk has passed to the customer, which is the point at which the Company has satisfied its performance obligation.
Payments received in advance from customers are recorded as customer deposits until earned, at which time revenue is recognized.
We recognize certain revenues under bill and hold arrangements with certain customers when the Company has fulfilled all of its performance obligations, the units are segregated for the specific customer only, and the goods are ready for physical transfer to the customer in accordance with their defined contract delivery schedule. For any requested bill and hold arrangement, we make an evaluation as to whether the bill and hold arrangement qualifies for revenue recognition. The customer must initiate the request for the bill and hold arrangement. The customer must make a fixed commitment to purchase the items. The risk of ownership is passed to the customer, and payment terms are not modified.
The Company’s revenues accounted for under ASC 606 do not require significant estimates or judgements based on the nature of the Company’s revenue. The Company’s contracts do not include multiple performance obligations or variable consideration. All of the Company’s sales resulted from contracts with customers for the years ended December 31, 2021 and 2020.
Shipping and Handling Costs
Shipping and handling costs are expensed as incurred and included in cost of sales. Billings for shipping and handling are reflected within sales in the accompanying consolidated statements of operations.
Income Taxes
The Company follows the provisions of ASC 740-10, “Accounting for Uncertain Income Tax Positions.” When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
The tax years 2018-2021 for the Company remain open for audit by federal and state tax authorities. The Company has received no notice of audit or any notifications from the IRS for any of the open tax years.
Net Loss Per Share
Basic loss per share excludes dilution and is computed by dividing the loss attributable to stockholders by the weighted-average number of shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the Company. Diluted loss per share is computed by dividing the loss available to stockholders by the weighted average number of shares outstanding for the year and dilutive potential shares outstanding unless consideration of such dilutive potential shares would result in anti-dilution. The following anti-dilutive equity and debt securities were excluded from the computation of net loss per share.
SCHEDULE OF ANTI-DILUTIVE EXCLUDED FROM COMPUTATION OF NET LOSS PER SHARE
December 31, 2021
December 31, 2020
(Shares) (Shares)
Warrants 80,837,314 30,560,598
Series B Preferred Stock 4,038,309 -
Convertible notes payable, and accrued interest 7,746,257 5,799,124
92,621,880 36,359,722
Related Party Transactions
All transactions with related parties are in the normal course of operations and are measured at the exchange amount.
Leases
The Company accounts for leases FASB ASU 2016-02, “Leases” (“ASC 842”) and other associated standards, which defines a lease as any contract that conveys the right to use a specific asset for a period of time in exchange for consideration. ASC 842 requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet and the disclosure of key information about certain leasing arrangements. As permitted by ASC 842, the Company elected the adoption date of January 1, 2019, which is the initial date of application. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases (formerly called capital leases). The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of-use asset is recorded in operating expenses and an implied interest component is recorded in interest expense.
Leases are classified as a finance lease if any of the following criteria are met:
1. The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
2. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
3. The lease term is for the major part of the remaining economic life of the underlying asset.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
4. The present value of the sum of lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.
5. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.
For any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases. As of December 30, 2021, the Company has two finance leases and three operating leases.
Under the ASC 842 guidance, both finance and operating leases are reflected on the balance sheet as lease or “right-of-use” assets and lease liabilities. There are some exceptions, which the Company has elected in its accounting policies. For leases with terms of twelve months or less, or below the Company’s general capitalization policy threshold, the Company elects an accounting policy to not recognize lease assets and lease liabilities for all asset classes. The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term.
The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain to be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for separately. In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining if the component should be included in the lease liability. For purposes of calculating the present value of the lease obligations, the Company utilizes the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes its incremental borrowing rate at the time of the lease agreement. The related right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability.
Lease expense for operating leases consists of the lease payments plus any initial direct costs and is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
Intangible Asset
Intangible asset represents the value assigned to intellectual property and is amortized based on the economic benefit expected to be realized.
NOTE 3 - LIQUIDITY AND GOING CONCERN CONSIDERATIONS
Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We sustained significant losses and negative cash flows from operations. We incurred a net loss of approximately $5.8 million and $2.9 million for the years ended December 31, 2021 and 2020, respectively. We had cash used in operating activities of approximately $487 thousand for the year ended December 31, 2021, and have an accumulated deficit of approximately $48 million at December 31, 2021. These conditions raise substantial doubt about our ability to continue as a going concern.
In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in China and began to spread around the world in early 2020. In reaction to decreased supply of and increased demand for sanitizer products, the Company shifted its manufacturing to produce sanitizer products. The Company’s other business operations have been impacted negatively by COVID-19 due to government restrictions and the overall adverse effect on the global economy. The Company expects COVID-19 to continue to negatively impact its operating results and its ability to obtain financing.
NOTE 3 - LIQUIDITY AND GOING CONCERN CONSIDERATIONS, CONTINUED
The Company is currently in the process of raising capital to complete and finalize the build-out of its facility in Deerfield Beach for the purpose of consolidating its operations. The structure of the capital raise is currently in
development. The Company is continuing its path to profitability through increased business development, marketing and sales of the Company’s multiple lines of topical, ingestible and skincare health and wellness products. The Company is also focused on completing an efficacy clinical study on its patented mosquito bug patch with plans upon a successful conclusion to launch globally in the very near future, adding to the Company’s suite of wellness products.
In January 2022, the Company entered into a license and ownership agreement in an effort to expand its sales and customer base. For the details of equity and license agreement refer to the Note 6-Investment.
The independent auditors’ report on our financial statements for the years ended December 31, 2021 and 2020 contain explanatory paragraphs expressing substantial doubt as to our ability to continue as a going concern.
Failure to successfully continue to grow operational revenues could harm our profitability and adversely affect our financial condition and results of operations. We face all of the risks inherent in a new business, including the need for significant additional capital, management’s potential underestimation of initial and ongoing costs, and potential delays and other problems in connection with establishing sales channels.
We are continuing our plan to further grow and expand operations and seek sources of capital to pay our contractual obligations as they come due. Management believes that its current operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing; however, there is no assurance this will occur. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
NOTE 4 - PROPERTY AND EQUIPMENT, NET
A summary of property and equipment at December 31, 2021 and 2020 is as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
December 31, 2021 December 31, 2020
Furniture and equipment $ 1,959,694 $ 1,959,694
Leasehold improvements 840,728 840,728
Property and equipment, at cost 2,800,422 2,800,422
Less: accumulated depreciation (535,226 ) (485,761 )
Property and equipment,net $ 2,265,196 $ 2,314,661
Depreciation expense for the years ended December 31, 2021 and 2020 totaled $49,465 and $61,986, respectively.
NOTE 5 - INTANGIBLE ASSET
In February 2019, the Company acquired certain intellectual property consisting of patent rights. The aggregate purchase price paid in connection with the patent purchase was $714,640, consisting of $130,000 cash, and 3,300,000 shares of the Company’s common stock valued at $0.177 per share or an aggregate of $584,640. Of the 3,300,000 shares, 1,800,000 shares were provided at closing and 1,500,000 were to be provided one year thereafter. These shares have not been issued and the Company is in negotiations with the seller to extend the issuance of the shares. As such, the Company recognized a liability for stock to be issued of $265,500 at both December 31, 2021 and 2020. The acquired patent is amortized over its remaining estimated useful life of approximately 11 years. Amortization expense is $64,968 for both of the years ended December 31, 2021 and 2020. The estimated annual amortization expense for the next five years and thereafter is as follows:
SCHEDULE OF ESTIMATE AMORTIZATION EXPENSE
$ 65,000
65,000
65,000
65,000
65,000
Thereafter 200,150
Estimated amortization expenses $ 525,150
NOTE 5 - INTANGIBLE ASSET, CONTINUED
A summary of the intangible asset at December 31, 2021 and 2020 is as follows:
SCHEDULE OF INTANGIBLE ASSET
December 31, 2021 December 31, 2020
Patent $ 714,640 $ 714,640
Less: accumulated amortization (189,490 ) (124,522 )
Total $ 525,150 $ 590,118
NOTE 6 - INVESTMENT
Distribution Agreement
On November 2, 2020 in connection with a manufacturing, distribution and sales agreement with a third party distributor (the “Distributor”), the Company issued 12.5 million of its common shares for 250 shares of non-trading convertible preferred stock of the Distributor. Each convertible preferred share is convertible into 1,000 shares of the Distributor’s common stock. The Distributor’s common shares are currently traded in the over the counter market. On the first business day following the 180-day anniversary of closing, if the share price of the Distributor is less than $4.00, the Distributor will provide the Company its common stock valued at $1 million, less 250,000 common shares, for no additional consideration. On the one-year anniversary of closing, if the share price of the Distributor is less than $4.00, the Distributor will provide the Company its common stock valued at $1 million, less 250,000 shares, less the number of shares provided on the 181st day anniversary, for no additional consideration.
As of December 31, 2021, the Company was entitled to 3,831,169 shares of the Distributor’s common stock. No shares have been received as of the date of the filing of this report.
The Company determined to initially value the convertible preferred stock investment using the Black-Scholes option pricing model using the following inputs: stock price: $4.00, exercise price: $4.00, expected term: one year, and risk free rate 0.17%.
The Company made this investment to realize strategic benefits for its business, rather than to generate income or capital gains. Because the Company owns less than 20% on an as converted basis of the Distributor, and cannot exercise significant influence over operating and financial policies of the Distributor, the Company accounts for the investment under ASC 321, “Equity Securities” (“ASC 321”). Under ASC 321, for each reporting period, the Company completes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.
The investment balance as of both December 31, 2021 and 2020 was $383,326. There is no impairment recorded for the years ended December 31, 2021 and 2020.
Deposit on Equity and License Agreement
In November 2021, the Company negotiated terms of a non-exclusive sub-license agreement with a third party (the “Party”) whereby the Party will grant the Company a limited, non-exclusive authority to purchase, distribute, market, make, and sell products in which the Party has authorized the Company to produce on a case-by-case basis, for a period of three years from the effective date of the definitive agreement. In exchange for the license, the Company agreed to pay $450,000 along with a monthly license royalty fee of 20% of the final sales price of licensed items to the end buyer.
The terms also allow the Company to purchase an equivalent ownership interest of the Party for an initial funding of $225,000, with the option to increase its investment up to $6,000,000. The Company provided an initial funding fee of $225,000 in exchange for the permission to purchase an equivalent ownership interest of the Party, which should equal to the appropriate preferred purchase price, based upon the stated current valuation. The total payment of $675,000 as of December 31, 2021 is classified as a Deposit on Equity and License Agreement on the consolidated balance sheet.
In January 2022, the Company entered into a definitive agreement with the Party. The definitive agreement defined an initial term of three years from December 30, 2021, with options to renew. The Company made additional payments to the Party in January in the amount of $725,000 toward the license fee and to purchase an equivalent ownership interest. The total funding to the Party of $1,400,000 was allocated $500,000 for the license, and equity participation of $900,000.
NOTE 7 - ACCRUED EXPENSES
A summary of accrued expenses is as follows:
SCHEDULE OF ACCRUED EXPENSES
December 31, 2021 December 31, 2020
Officer - Bonus $ 540,500 $ 400,000
Accrued Expenses - Other 30,912 15,456
Accrued Interest - Related Parties 148,552 91,048
Accrued Interest 230,203 103,811
Other Current Liabilities 93,724 52,849
Accrued Rent - 123,331
Accrued expenses $ 1,043,891 $ 786,495
NOTE 8 - NOTES PAYABLE
Notes Payable
During the quarter ended March 31, 2020, the Company received proceeds aggregating $345,000 in connection with multiple short-term promissory notes with due dates ranging from February to June 2020. The notes had interest at 0% to 12% for the terms of the notes. Each noteholder had the right to convert all the outstanding principal and accrued unpaid interest to the Company’s common stock at a price ranging from $.085 to $.10 per share, prior to the maturity date. Additionally, an aggregate of 3,250,000 shares were issued to the noteholders as additional consideration. The notes also included a beneficial conversion feature (BCF). These notes are currently in default.
During the quarter ended September 30, 2020, the Company received proceeds aggregating $230,000 in connection with multiple short-term promissory notes each with a term of one year, maturing in August or September 2021. The notes bear interest at 18%. Four of the five notes were issued under a subscription agreement whereby in addition to the promissory note, the note holder is offered up to four shares of common stock for each one dollar of principal amount of the note at a price of $0.0001 per share. Under the subscription agreement, a total of 780,000 shares were issued.
During the quarter ended December 31, 2020, the Company received proceeds aggregating $330,040 in connection with multiple short-term promissory notes each with a term of one year, maturing in October through December 2021. The notes bear interest at 10% to 18%. Each note was issued under a subscription agreement whereby in addition to the promissory note, the note holder is offered up to four shares of common stock for each one dollar of principal amount of the note at a price of $0.0001 per share. Under the subscription agreement, a total of 520,000 shares were issued. Additionally, an aggregate of 6,800,000 warrants were issued to five of the noteholders as additional consideration. The warrants are exercisable at $0.08 per share and expire three years from the date of each respective note.
The Company allocated $314,100 of the gross proceeds of the 2020 convertible notes to the stock issuances and $75,200 of the gross proceeds of the subscription agreement notes to the stock issuances on a relative fair value basis, which has been recorded as a debt discount.
The Company allocated $143,900 of the gross proceeds of the 2020 subscription agreement notes to the warrants on a relative fair basis. The warrants’ relative fair value was calculated using the Black-Scholes Merton valuation model with the following inputs: an expected and contractual life of 36 months, as assumed volatility of 189.9%, zero dividend rate, and a risk free rate of 0.17% - 0.22%. The warrants are classified in equity as additional paid-in capital.
Because the effective conversion prices of the convertible notes were less than the fair value of the underlying common stock on the issuance date, the Company allocated $51,900, the intrinsic value of that beneficial conversion feature, to additional paid-in capital.
In January 2021, the Company entered into a Note Exchange Agreement whereby a note holder of the Company agreed to exchange their current note that was in default, for a new promissory note and a warrant to acquire 1,200,000
NOTE 8 - NOTES PAYABLE, CONTINUED
shares of common stock. The warrant is exercisable at $0.08 per share and expires three years from the date of the new promissory note.
During the year ended December 31, 2021, the Company received proceeds aggregating $725,050 in connection with multiple short-term promissory notes with due dates ranging from January to December 2022. The notes have original issue discounts totaling $61,950 and bear interest at 8% to 12% for the terms of the notes.
An aggregate of 12,787,500 warrants were issued to the noteholders as additional consideration. The warrants are exercisable at $0.08 per share and expire three years from the date of each respective note.
The warrants to purchase common stock issued to the noteholders were treated as debt discounts. The gross proceeds of the notes were allocated to debt and warrants issued on a relative far value basis.
The Company allocated $370,267 of the gross proceeds to the warrants on a relative fair basis. The warrants’ relative fair value was calculated using the Black-Scholes Merton valuation model with the following inputs: an expected and contractual life of two years, an assumed volatility ranging from 191.0%-245.56%, zero dividend rate, and risk free rate ranging from 0.18%-0.73%.
The debt discounts associated with the BCF, warrants, and common stock issuances are amortized through the earlier of the conversion of the notes into common stock, or the maturity date of the notes, on a straight-line basis which approximates the effective interest method due to the short-term nature of the notes. Amortization of the debt discount is reported as finance costs in the Statement of Operations.
During the year ended December 31, 2021, the Company entered into debt settlement agreements with three of its noteholders whereby the Company issued 4,630,645 shares of its common stock as well as warrants to acquire 10,622,583 shares of common stock. The warrants are exercisable at $0.08 per share and expire two years from the date of issuance, and were recorded as finance cost.
The amount converted was an aggregate of $325,010 of principal and $45,441 of accrued interest.
The warrants’ relative fair value of $1,155,590 was calculated using the Black-Scholes Merton valuation model with the following inputs: an expected and contractual life of 24 months, as assumed volatility of 226.19%-249.44%, zero dividend rate, and a risk free rate of 0.17% - 0.28%. The warrants are classified in equity as additional paid-in capital.
Debt Discounts
Total amortization associated with all debt discounts was $438,235 and $671,319 for the years ended December 31, 2021 and 2020, respectively.
Convertible Note Payable to Shareholder
In June 2019, the Company entered into an Investment Agreement that included a secured convertible 5.75% promissory note payable for $1,000,000 with a shareholder. The note is subject to a security agreement whereby the
NOTE 8 - NOTES PAYABLE, CONTINUED
first four Ennea Processors the Company has committed to commercialize and monetize will be secured as collateral for the note as well as current and future assets of the Company and its subsidiaries. The payment terms of the note were interest only payments from July 7, 2019 through December 7, 2019 and commencing January 7, 2020, the Company was to make equal monthly installment payments that include principal and interest through the Maturity Date of December 7, 2020.
Included in the Investment Agreement is a royalty agreement whereby the investor received 500,000 shares of the Company’s common stock and will be entitled to a royalty of 8.5% from the revenue generated from the “collateral processors” while the principal is outstanding and 5% thereafter on the first two collateral processors for a period of 10 years.
In addition to the collateral, the note is secured by a Pledge Agreement from a related-party that included a mortgage lien on certain real property as additional collateral.
The collateral processors are not yet in service. Therefore, revenue generated from them and the related royalties due cannot be estimated at this time and will be expensed as incurred in the future.
The Company is currently in default of this note, however, the parties are in negotiation to reach settlement terms.
Note Payable, SBA
On April 23, 2020, the Company received an aggregate of $254,700 related to its filing under the Paycheck Protection Program (“PPP”) and Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) from Trust Bank, N.A. (the “Lender”). The Company elected to treat the loan debt under ASB ASC 470. As such, the Company would derecognize the liability when the loan was forgiven and the Company was legally released from the loan. The PPP loan of $244,700 was forgiven on March 12, 2021 and recognized as other income.
On February 26, 2021, the Company received an aggregate of $243,275 related to its filing under the PPP and CARES Act from the Lender. The PPP loan of $243,275 was forgiven on November 26, 2021 and recognized as other income.
NOTE 9 - REVENUE SHARE AGREEMENTS
During the year ended December 31, 2021, the Company entered into two revenue share agreements with third party investors (“Investors”) and received an aggregate of $725,000. In accordance with the agreements, the proceeds were primarily used to fund the third party license agreement as described in Note 6. The proceeds are non-refundable. In exchange, the Investors are entitled to a percentage of revenue collected by the Company as a result of its investments, ranging from 1.3% to 60% until the Investors’ proceeds are repaid, and 0.83% to 49% thereafter, for a minimum of 60 months. The proceeds of $725,000 was recorded as a liability in the accompanying consolidated balance sheet.
NOTE 10 - STOCKHOLDERS’ EQUITY
During the quarter ended March 31, 2020, the Company issued 470,229 shares of common stock for services aggregating $47,023, valued using the trading price on the date of issuance.
The Company issued 1,923,076 shares of common stock for $.065 per share for an aggregate of $125,000, during 2020.
During 2020 the Company recorded $51,900 to additional paid-in capital resulting from the beneficial conversion feature.
In July 2020, the Company issued 740,740 warrants in exchange for cash proceeds of $5,000. The warrants have an exercise price of $0.10 and expire two years after issuance.
In November 2020, the Company issued 12,500,000 shares of common stock in exchange for 250 shares of nontradable Convertible Preferred Stock of the Distributor in connection with a distribution agreement. See Note 6.
NOTE 10 - STOCKHOLDERS’ EQUITY, CONTINUED
In January 2021, the Company issued 15,000,000 warrants to its Chief Executive Officer, President and sole Director as compensation. The warrants are exercisable at $0.1025 per share and expire three years from issuance.
In January 2021, the Company issued 7,500,000 warrants to its Vice President, Neil Catania, as compensation. The warrants are exercisable at $0.1025 per share and expire three years from issuance.
In April 2021, the Company issued 2,000,000 warrants to its Production Manager as compensation. The warrants are exercisable at $0.125 per share and expire three years from issuance.
The warrants issued as compensation were valued at $2,229,990, calculated using the Black-Scholes Merton valuation model with the following in puts: an expected and contractual life of three years, an assumed volatility ranging from 191.0% to 224.75%, zero dividend rate, and a risk free rate ranging from 0.22% to 0.36%.
In April through September 2021, the Company issued 4,350,000 shares of common stock and 17,400,000 warrants in exchange for cash totaling $348,000. The warrants have an exercise price of $0.08 per share and expire two years after issuance.
In July 2021, the Company issued 1,000,000 shares of common stock with an aggregate value of $120,000 for consulting services.
In December 2021, The Company issued 550,000 shares of common stock with an aggregate value of $55,000 for consulting services.
Preferred Stock
The Company’s board of directors is authorized to issue, at any time, without further stockholder approval, up to 10,000 shares of preferred stock. The board of directors has the authority to fix and determine the voting rights, rights of redemption and other rights and preferences of preferred stock.
Series A Preferred Stock (“Series A Preferred”)
On November 30, 2012, the board of directors of the Company created Series A Preferred. The Series A Preferred has the following rights and preferences:
1. The shares are not entitled to dividends or liquidation preferences.
2. Each share has voting rights equal to 500,000 shares of the Company’s common stock.
3. So long as Series A Preferred shares are outstanding, the Company cannot take certain actions (as defined in the certificate of designation) without the consent of the holders of 100% of the Series A Preferred shares.
On November 30, 2012, Edgar Ward, the Company’s President, CEO, and director, was granted 1,000 shares of Series A Preferred for $1,000. At the option of Mr. Ward, the Series A Preferred shares are redeemable for $1,000.
As of December 31, 2021 and 2020, 1,000 shares of Series A Preferred are outstanding.
Series B Convertible Preferred Stock (“Series B Preferred”)
On September 30, 2020, the Company designated 110 shares of Preferred Stock as Series B Convertible Preferred Stock. A Series B Holder has the right from time to time, and at any time following January 1, 2021, to convert each outstanding share of Series B stock into shares of common stock at a rate of 149,567 shares of common stock for each share of Series B Preferred. Each share of Series B Preferred shall have a number of votes equal to the number of conversion shares which would be issuable as of the date of such vote. The Series B Preferred does not have any liquidation preferences. The Series B Preferred will participate in any dividends, distributions or payments to the holders of the common stock on an as-converted basis. The Series B Preferred is subject to an ownership limitation, pursuant to which no holder of Series B Preferred will be entitled to convert such investor’s shares of Series B Preferred Stock into shares of common stock if such conversion would result in ownership of more than 4.99% of the outstanding shares of common stock of the Company. Once issued, certain shares of the Series B Preferred are redeemable at the election of the Company at any time prior to the Permitted Conversion Date pursuant to separate written agreements that will be effectuated between holders of the Series B Preferred and the Company.
NOTE 10 - STOCKHOLDERS’ EQUITY, CONTINUED
In March 2021, the Company issued 10 shares of Series B Preferred to three consultants as part of their compensation agreements. The consultant compensation was valued at $164,524 using the trading price of the equivalent common stock on the date of issuance.
During the quarter ended September 30, 2021, three shares of Series B Preferred were converted to 448,701 shares of common stock.
As of December 31, 2021 and 2020, 27 and 20 shares, respectively, of Series B Preferred are outstanding.
NOTE 11 - LEASES
In conjunction with the new guidance for leases, as defined by the FASB with ASU 2016-02, Leases (Topic 842), the Company has designated the existing leases as operating as further described below:
The Company leases their office and warehouse facilities located in in Coconut Creek, Florida under a non-cancelable operating lease agreement. In January 2022, the lease term has been renewed for a three year to expire in January, 2025
In June 2017, the Company entered into a lease for an additional facility located in Deerfield Beach, Florida under a non-cancelable operating lease. The term of the lease is for 86 months beginning on January 1, 2018 and calls for yearly 3% increases to base rent, with monthly payments that commenced in March 2018.
In July and September of 2019, the Company’s wholly owned subsidiary, Phytochem, entered into two separate lease agreements for office and warehouse space located in Onalaska, Wisconsin, that commenced on August 1 and October 1, respectively. Each lease is for six-month terms with four (4) renewal options to extend for six additional months. The Company expects to occupy one of the spaces for the full term of the lease totaling 30 months. The Company terminated its lease on the other facility in May 2020, without penalty. The remaining lease calls for an annual 3% increase to base rent. In addition to rent, the Company pays certain insurance, maintenance, and other costs related to the rented spaces.
In June 2021, the Company entered into a verbal, month-to-month sub-lease agreement for the Wisconsin location. Rental income totalled $80,000 for the year ended December 31, 2021, and in included in general and administrative expenses.
As of December 31, 2021, in the consolidated balance sheet, the Company has recorded right-of-use assets of $449,155 and a lease liability of $492,798, of which $141,900 is reported as a current liability. The weighted average remaining lease term is 37 months and weighted average discount rate used is 10%.
The following table presents a reconciliation of the undiscounted future minimum lease payments remaining under the operating lease reported as operating lease liability on the consolidated balance sheet as of December 31, 2021:
SCHEDULE OF OPERATING LEASES UNDISCOUNTED FUTURE MINIMUM LEASE PAYMENTS
Undiscounted future minimum lease payments:
$ 199,000
189,400
195,100
Total undiscounted future minimum lease payments 583,500
Less: amount representing imputed interest (90,702 )
Operating lease liability $ 492,798
Supplemental cash flow information related to leases is as follows, for the years ended December 31,
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
Cash paid for amounts included in the measurement of operating lease liabilities $ 551,688 $ 262,214
Lease expense for operating leases was approximately $386,000 and $442,000 for the years ended December 31, 2021 and 2020.
Finance Leases:
The Company has acquired certain equipment under agreements that are classified as finance leases. The cost of the equipment under finance leases is included in the balance sheet as property and equipment. The finance lease equipment was $110,372 as of December 31, 2021 and December 31, 2020, with related accumulated depreciation of $12,786 and $8,950, respectively.
Minimum lease payments required by these finance leases are as follows:
Undiscounted future minimum lease payments:
SCHEDULE OF FINANCE LEASES UNDISCOUNTED FUTURE MINIMUM LEASE PAYMENTS
Undiscounted future minimum lease payments:
$ 17,000
2,100
Total undiscounted future minimum lease payments 19,100
Less: amount representing interest (825 )
Less: current portion (17,161 )
Present value of minimum lease payments, net of current portion $ 1,114
NOTE 12 - EQUITY WARRANTS
At December 31, our warrants outstanding are as follows:
SCHEDULE OF WARRANTS OUTSTANDING
By Exercise Price:
Warrants - $0.08 42,020,833 8,000,000
Warrants - $0.1025 24,500,000 -
Warrants - $0.10 3,240,740 3,240,740
Warrants - $0.20 10,352,941 13,302,941
Warrants - $0.30 722,800 722,800
Warrants - $0.35 - 5,294,117
Total outstanding 80,837,314 30,560,598
SCHEDULE OF WARRANTS ACTIVITY
Warrants
Balance, January 1, 2020 21,819,858
Warrants Issued 8,740,740
Warrants Exercised -
Warrants Expired -
Balance, December 30, 2020 30,560,598
Warrants Issued 66,510,083
Warrants Exercised (7,989,250 )
Warrants Expired (8,244,117 )
Balance, December 30, 2021 80,837,314
NOTE 13 - INCOME TAXES
The Company accounts for income taxes in accordance with FSB ASC 740 “Income Taxes”. Federal and state income taxes are calculated and recorded on the current period’s activity in accordance with the tax laws and regulations that are in effect. Deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rate in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assts will not be realized.
The components of the income tax provision are as follows at December 31, 2021 and 2020:
SCHEDULE OF INCOME TAX PROVISION
Current - -
Deferred - -
Total tax provision - -
The following is a reconciliation of the effective income tax rate with the statutory income tax rate at December 31, 2021 and 2020:
SCHEDULE OF RECONCILIATION OF STATUTORY FEDERAL INCOME TAX RATE
U.S. Federal statutory income tax rate (21.0 )% (21.0 )%
State income tax, net of federal benefit (3.5 )% (3.5 )%
Valuation allowance 24.5 % 24.5 %
Effective tax rate 0.0 % 0.0 %
The net deferred tax assets and liabilities included in the financial statements consist of the following amounts at December 31, 2021 and 2020:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets
Net operating loss carry forwards $ 10,788,000 $ 9,843,000
Accrued Wages 133,000 98,000
Accrued Interest 93,000 -
Less: valuation allowance (11,014,000 ) (9,941,000 )
Total - -
Deferred tax liabilities
Stock based compensation - -
Depreciation - -
Net deferred tax asset $ - $ -
The change in valuation allowance was $1,073,000 and $543,000 for the years ended December 31, 2021 and 2020, respectively. We recorded a 100% valuation allowance related to the deferred tax asset for the loss from operations.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which temporary differences become deductible. The Company has net operating loss carryforwards of approximately $44.0 million as of December 31, 2021, of which $32.6 million were incurred prior to 2018 that begin to expire in the year 2032 through 2036.
In accordance with the provisions of ASC 740: Income Taxes, we record a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. At December 31, 2021 and 2020, we have no liabilities for uncertain tax positions. We continually evaluate expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
NOTE 14 - CONTINGENCIES
The Company is subject to asserted claims and liabilities that arise in the ordinary course of business. The Company maintains insurance policies to mitigate potential losses from these actions. In the opinion of management, the amount of the ultimate liability with respect to those actions will not materially affect the Company’s financial position or results of operations.
Legal Proceedings:
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Litigations applicable to the Company are discussed as follows.
Hamilton v. the Company: Hamilton & Associates Law Group, P.A. v. Nutralife Biosciences, Inc. f/k/a Nutrafuels, Inc., Case No. 50-2020-CA-008435, was filed in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida on August 9, 2020. In the suit, Hamilton & Associates Law Group, P.A. sets forth purported claims for breach of contract, and in the alternative, account stated, open account, unjust enrichment, and quantum meruit. Plaintiff requests a judgment for damages in the principal sum of $150,000, plus an award of attorneys’ fees and costs pursuant to a legal services agreement dated January 7, 2019, as well as pre-judgment interest and post-judgment interest. The Hamilton matter filed directly against the Company initially included a claim against Edgar Ward, but the individual claim has been dropped. The prior engagement agreement between the Hamilton law firm and the Company (for 2018) was in the nature of a flat fee engagement, in which shares were provided in lieu of cash payments. The Company maintains that the change in the engagement of the law firm (from 2018 to 2019) in terms of the nature of payment was not disclosed or explained adequately, and the Company was unaware of any claim that sums remained unpaid, as all fees were understood to be paid as a result of the shares of stock provided. The claim was filed on August 9, 2020, and is not set for trial, and only documentary discovery has been conducted to date.
Native American Partners v. the Company: Native American Partners LLC, including NAVF Holdings and NAVF-Pharma, subsidiary companies, and Best Darn Brands, LLC, and its subsidiaries v. Nutralife Biosciences Inc., Case No. CACE-20-009352, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida. This action was filed on June 5, 2020, against both the Company and Edgar Ward. However, the claim against Mr. Ward was later dropped. The claim asserted that the Company failed to comply with the confidentiality imposed by a non-disclosure agreement signed by plaintiff and defendant. Plaintiff claims that defendant proceeded with the development of a hand sanitizer product that was first revealed to defendant by the plaintiff, however, defendant asserted that the product produced was different (gel vs. spray) and that defendant had contemplated developing the product (the Covid 19 pandemic was already underway) well in advance of the signing of the NDA. In the Amended Complaint filed on July 9, 2020, plaintiffs demanded injunctive relief and damages for conversion, fraudulent misrepresentation, fraud in the inducement, equitable accounting, unjust enrichment, quantum meruit, breach of contract, and negligent misrepresentation. We obtained a dismissal of this Amended Complaint on February 8, 2021, based on the arbitration provision included in the written contract at issue between the parties. At this time, the plaintiffs have not filed another court action that we are aware of. We are also not yet aware of any arbitration initiated by the plaintiff.
Ortiz v. the Company: Jose Ortiz v. Nutralife Biosciences, Inc. f/k/a Nutrafuels, Inc., Case No. CACE-29-017957, was filed in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida, on October 28, 2020. In this matter, Mr. Ortiz is seeking a judgment for damages, attorneys’ fees, and other costs relating to defendant’s purported breach of an employment agreement dated March 18, 2015. We do not believe that this claim is valued at greater than $5,000. Ortiz’ claim was filed on October 28, 2020, asserting improper discharge from employment, and failure to pay wages and benefits, however, we believe (and have filed summary judgment asserting) that the claim was filed too late, in contravention of the applicable statute of limitations.
NOTE 15 - CONCENTRATIONS OF CREDIT RISK:
Cash
The Company maintains principally all cash balances with various financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation. The exposure to the Company is solely dependent
upon daily bank balances and the respective strength of the financial institutions. The Company has not incurred any losses on these accounts. At both December 31, 2021 and 2020, there are no amounts in excess of insured limits.
Revenue
For the year ended December 31, 2021, two customers accounted for approximately 82% of sales. For the year ended December 31, 2020, two customers accounted for 28% of sales.
NOTE 16 - SUBSEQUENT EVENTS
In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in China, and began to spread around the world in early 2020. In reaction to decreased supply of and increased demand for sanitizer products, the Company shifted its manufacturing to produce sanitizer products. The Company’s other business operations have been impacted negatively by COVID-19 due to government restrictions and the overall adverse effect on the global economy. The Company expects COVID-19 to continue to negatively impact its operating results and its ability to obtain financing.
In January 2022, the Company received proceeds aggregating $110,000 in connection with two subscription agreements. Under the subscription agreements, a total of 1,375,000 shares of common stock and 1,375,000 warrants were issued. The warrants are exercisable at $0.08 per share and expire two years from the date of issuance.
In January 2022, the Company issued 1,100,000 shares of common stock for services aggregating $100,000.
In February 2022, the Company entered into a debt settlement agreement with its noteholder whereby the noteholder converted their two promissory notes into a revenue share agreement. The amount converted was an aggregate of $187,000 of principal and $18,700 of accrued interest. The total amount converted was $205,700.
In March 2022, the Company received proceeds of $15,000 in connection with the issuance of a promissory note with a due date in March 2023. The note bears interest at 20%.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Resignation of Independent Registered Public Accounting Firm
On September 11, 2020, Daszkal Bolton LLP (“Daszkal”) resigned its position as the independent registered public accounting firm of the Company.
Daszkal did not issue a report on the Company’s financial statements for the fiscal year ended December 31, 2019. Except as set forth herein, Daszkal’s report on the Company’s financial statements for the fiscal year ended December 31, 2018 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that such report expressed substantial doubt regarding our ability to continue as a going concern.
Furthermore, during the Company’s two most recent fiscal years and through September 11, 2020, there have been no disagreements with Daszkal on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Daszkal’s satisfaction, would have caused Daszkal to make reference to the subject matter of the disagreement in connection with its reports on the Company’s financial statements for such periods.
For the fiscal years ended December 31, 2019 and 2018 and through September 11, 2020, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.
Engagement of New Independent Registered Accounting Firm
On September 16, 2020, the Company’s Board of Directors appointed Rotenberg Meril Solomon Bertiger & Guttilla, P.C. (“Rotenberg”) as the Company’s new independent registered accounting firm. During the Company’s two most recent fiscal years and through September 16, 2020, neither the Company nor anyone acting on the Company’s behalf consulted Rotenberg with respect to any of the matters or reportable events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out an evaluation, with the participation of our management, including our CEO and sole Director, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO concluded that our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO as appropriate, to allow timely decisions regarding required disclosure for the reasons discussed below.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to our management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control - Integrated Framework” issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our President and Chief Financial Officer have determined and concluded that, as of December 31, 2021, our internal controls over financial reporting were not effective. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control our financial reporting as of December 31, 2021, we determined that the following items constituted a material weakness:
● We do not have an independent audit committee in place, which would provide oversight of our officers, operations and financial reporting function;
● We do not have anyone currently serving as our Chief Financial Officer;
● Our accounting department, which consists of a limited number of personnel, does not provide adequate segregation of duties; and
● We do not have effective controls over period end financial disclosure and reporting processes.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. Management plans to take action and implementing improvements to our controls and procedures when our financial position permits.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the permanent exemption of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The board of directors elect our executive officers annually. A majority vote of the directors who are in office are required to fill vacancies. Each director shall be elected for the term of one year, and until his successor is elected and qualified, or until his earlier resignation or removal. Our directors and executive officers are as follows:
Name
Age
Position
Edgar Ward
Chief Executive Officer, President, Director
Neil Catania
Vice President
Edgar Ward, Chief Executive Officer, President and Director
From April 1, 2010 to present, Edgar Ward has served as our Chief Executive Officer, President, and Director. Mr. Ward’s services to us include day to day operations of our manufacturing facility and management of our company.
As our chief executive officer, president and director Mr. Ward brings his experience in managing our day to day operations.
Neil Catania, Vice President
Neil Catania became our Vice-President on November 20, 2012. From May 2004 until present, Neil Catania has been the chief executive officer of TJM Investments DBA MND LLC, a financial services company located in New York.
Mr. Catania’s services to us include assisting Mr. Ward with our day to day operations. Neil Catania holds Series 7, Series 63, Series 24 and Series 55 licenses from the Financial Industry Regulatory Authority (“FINRA”).
As our Vice-President Mr. Catania brings his experience in the financial services industry and executive management to our day to day operations.
Involvement in Certain Legal Proceedings
No executive officer, member of the board of directors or control person of our Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
Committees
We do not have a standing nominating, compensation or audit committee. Rather, our sole director performs the functions of these committees. Additionally, because our common stock is not listed for trading or quotation on a national securities exchange, we are not required to have such committees.
Other Directorships
None of our other officers and directors are directors of other Securities and Exchange Commission reporting companies.
Conflicts of Interest
Our Chief Executive Officer, President, and sole Director, Edgar Ward devotes his full time to our business under the terms of his employment contract. Our only other executive officer, Neal Catania is not obligated to commit his full time and attention to our business; accordingly, he may encounter a conflict of interest in allocating his time between our operations and those of other businesses. Neal Catania spends on an average ten (10) hours each month to our business and is not contractually required to devote full time services to us. In the future, our officers and directors may engage in other business activities, investments and business opportunities that may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. Our officers and directors may also in the future become affiliated with entities, engaged in business activities similar to those we intend to conduct. In general, officers and directors of a corporation are required to present business opportunities to a corporation if:
● the corporation could financially undertake the opportunity;
● the opportunity is within the corporation’s line of business; and
● it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation.
Code of Ethics
We have not yet adopted a code of ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. We plan to adopt a Code of Ethics in the future, at the latest prior to our stock being listed on an exchange that requires us to have a formal Code of Ethics.
Director Independence
We do not have any independent directors, as such term is defined in the listing standards of The NASDAQ Stock Market, at this time. The Company is not quoted on any exchange that requires director independence requirements. For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 4200(a)(15). See “Directors, Executive Officers and Corporate Governance”- “Director Independence.”
Family Relationships
None.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended December 31, 2021, the Company believes that all person who, at any time during such fiscal year, was a director, officer or beneficial owner of more than 10% of the Company’s common stock failed to comply with all Section 16(a) filing requirements during such fiscal years.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our Principal Executive Officer, our two (2) most highly compensated executive officers who occupied such position at the end of our latest fiscal year that they were not executive officers at the end of our latest fiscal year, by us, or by any third party where the purpose of a transaction was to furnish compensation, for all services rendered in all capacities to us for the years ended December 31, 2021 and 2020.
Name Position Year Salary Bonus/
Stock Awards Options Non-Equity Incentive Plan Compensation Non-qualified deferred compensation All other compensation Total
Edgar Ward (1) Chief Executive Officer, $ 350,000
$ 350,000 (1)
President, Director $ 350,000
350,000 (1)
Neil Catania (2) Vice $ 5,000
$ 5,000 (2)
President $ 15,000
15,000 (2)
(1) Under the terms of his employment agreement, Mr. Ward receives an annual salary of $250,000 and an annual cash bonus of $100,000. For the years ended December 31, 2021 and 2020, Edgar Ward received $159,000 and $111,500, of the annual compensation of $300,000 due him, respectively.
(2) For the years ended December 31, 2021 and 2020 Neil Catania received cash compensation of $5,000 and $15,000, respectively.
Edgar Ward is the sole member of our board of Directors. Mr. Ward is not compensated for his service as a director.
Our board of directors determines the compensation paid to our executive officers based upon the years of service to us, whether services are provided on a full-time basis and the experience and level of skill required. Because Mr. Ward is our sole director, he determines his own compensation for his services as our Chief Executive Officer and President.
We may award our officers and directors shares of common stock as non-cash compensation as determined by the board of directors from time to time. The board will base its decision to grant common stock as compensation on the level of skill required to perform the services rendered and time committed to providing services to us.
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding equity awards at the 2021 fiscal year-end.
Compensation Plans
We have not adopted any compensation plan to provide for future compensation of any of our directors or executive officers.
Employment Agreements
On January 13, 2017, we entered into an employment agreement with our President and CEO, Edgar Ward. The term of this agreement began on January 13, 2017 and ends on January 1, 2027. Pursuant to this agreement, we agreed to compensate Mr. Ward for his services as an executive officer with a base salary of $250,000 per year and a bonus of $100,000 per year.
The Company is not currently party to any other employment agreements.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management
At March 23, 2022, we had 174,968,516 shares of our common stock issued and outstanding, 1,000 shares of our Series A Preferred stock issued and outstanding, and 27 shares of our Series B Preferred issued and outstanding. The following table sets forth information regarding the beneficial ownership of our common stock, Series A Preferred stock and Series B Preferred stock as of March 23, 2022 by:
● each person known by us to be the beneficial owner of more than 5% of our common stock;
● each of our directors;
● each of our named executive officers; and
● our executive officers and directors as a group.
Unless otherwise indicated, the business address of each person listed is in care of the Company, 6601 Lyons Road, Suite L-6, Coconut Creek Florida 33037. The amounts and percentages of our common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
Unless otherwise indicated below, to the best of our knowledge each beneficial owner named in the table has sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.
Common Stock Direct Indirect Total Percentage of Class(1)
Name & Address of Beneficial Owner
Edgar Ward, Founder, Chief Executive Officer, President & Sole Director(3) 38,274,792 (3) 1,000,000 39,274,792 24.43 %
Neil Catania Vice President(9) 16,270,571 - 16,270,571 10.12 %
All Executive Officers & Directors as a Group (2) Persons 54,545,363 1,000,000 55,545,363 34.56 %
5% Holders
Kahn Family Limited PT II(4) 25,136,439 - 25,136,439 15.64 %
NewLeaf Assets, LLC 15,764,705 - 15,764,705 9.01 %
27 Health Inc. (6) 12,500,000 - 12,500,000 7.78 %
Series A Preferred Stock Direct Indirect Total Percentage of Class(2)
Name & Address of Beneficial Owner
Edgar Ward, Founder, Chief Executive Officer, President & Sole Director 1,000 1,000 100 %
Neil Catania, Vice President 0
All Executive Officers & Directors as a Group (2) Persons 1,000 1,000 100 %
5% Holders
None.
Series B Preferred Stock Direct Indirect Total Percentage of Class(7)
Name & Address of Beneficial Owner
Edgar Ward, Founder, Chief Executive Officer, President & Sole Director 0
Neil Catania, Vice President 0
All Executive Officers & Directors as a Group (2) Persons 0
5% Holders
John Boldis 10.00 %
Draper Inc.(8) 80.00 %
Thomas Reid 10.00 %
(1) Based upon 174,968,516 shares of common stock issued and outstanding as of March 23, 2022.
(2) Based upon 1,000 shares of Series A Preferred Stock issued and outstanding as of 1,000. Each share of Series A Preferred Stock is entitled to 500,000 votes per share or an aggregate of 500,000,000 votes.
(3)
Our Founder, Chief Executive Officer, President and Director, Edgar Ward, holds all 1,000 shares of our Series A Preferred Stock which entitled him to an aggregate of 500,000,000 votes. Mr. Ward also holds 23,274,792 common shares directly and 1,000,000 shares indirectly which are held by Nicole Archon who is Mr. Ward’s fiancé. Mr. Ward also holds warrants for 15,000,000 common shares which are exercisable within 60 days of the date hereof.
(4) Kahn Family Limited PT II is a trust controlled by Harvey Kahn who has dispositive and voting power over the shares held by Kahn Family Limited PT II. Kahn Family Limited PT II also holds warrants to purchase 5,294,117 common shares which are exercisable within 60 days of the date hereof.
(6)
Health Inc. is owned and controlled by Joseph Frontiere, who has dispositive and voting power over the shares held by 27 Health Inc.
(7)
Based upon 27 shares of our Series B Preferred issued and outstanding as of March 23, 2022. Each share of Series B Preferred Stock will vote together with the holders of the Common Stock on any matter submitted to the shareholders of the Company.
(8)
Draper Inc. is owned and controlled by Denise Aversano, who has dispositive and voting control over the shares held by Draper Inc.
(9)
Neil Catania holds warrants for 7,500,000 common shares which are exercisable within 60 days of the date hereof.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
We do not have a written policy for the review, approval or ratification of transactions with related parties or conflicted transactions.
During the fiscal years ended December 31, 2021 and 2020, we had the following transactions with related persons.
As of December 31, 2021 and 2020, convertible notes payable to related parties, net of discounts totalled $1,000,000 and $1,000,000, respectively, and other notes payable to related parties, net of discounts, totalled $1,621,506 and $1,153,498, respectively.
Director Independence
We do not have any independent directors, as such term is defined in the listing standards of The NASDAQ Stock Market, at this time. The Company is not quoted on any exchange that requires director independence requirements. For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 4200(a)(15). See “Directors, Executive Officers and Corporate Governance”- “Director Independence.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
The following table sets forth the fees billed or to be billed to the Company for the years ended December 31, 2021 and 2020 for professional services rendered by our current independent registered public accounting firm Rotenberg was engaged by us effective as of September 16, 2020.
ACCOUNTING FEES AND SERVICES
Audit fees $ 80,000 $ 60,000
Audit-related fees
-
Tax fees
-
All other fees
-
Total $ 80,000 $ 60,000
Audit Fees
Audit fees to Rotenberg were for professional services rendered for the audit and reviews of our annual financial statements for the years ended December 31, 2021 and 2020.
Audit-Related Fees
None.
Tax Fees
None.
All Other Fees
None.
Pre-Approval of Services
We do not have an audit committee. As a result, our Board of Directors performs the duties of an audit committee. Our Board of Directors evaluates and approves in advance the scope and cost of the engagement of an auditor before the auditor renders the audit and non-audit services. We do not rely on pre-approval policies and procedures.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
EXHIBITS
Exhibit 3.1 Articles of Organization of Nutrafuels, LLC, a Florida Limited Liability Company (Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 3.2 Certificate of Conversion from a Florida Limited Liability Company to a Florida Corporation (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 3.3 Articles of Incorporation of Nutrafuels, Inc., a Florida Corporation (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 3.4 Certificate of Designation of Series A Preferred Shares (Incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 3.5 Bylaws of Nutrafuels, Inc (Incorporated by reference to Exhibit 3.5 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 3.6 Articles of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit A of the Company’s Definitive Schedule 14C filed with the SEC on February 15, 2019).
Exhibit 3.7 Articles of Amendment (Certificate of Designations for Series B Preferred Stock) filed September 30, 2020 with the Florida Department of State. (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 5, 2020).
Exhibit 4.1 Common Stock Purchase Warrant issued December 4, 2020 to Russel S. Smith Jr. (Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.2 Common Stock Purchase Warrant issued February 11, 2021 to Thomas Reid. (Incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.3 Common Stock Purchase Warrant issued December 24, 2020 to Nicholas Cirignano II. (Incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.4 Common Stock Purchase Warrant dated February 23, 2021 issued to Mark Wakeland. (Incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.5 Common Stock Purchase Warrant dated issued December 24, 2020 to Kenneth Klimas. (Incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.6 Common Stock Purchase Warrant issued January 27, 2021 to Frank Cannarozzo. (Incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.7 Common Stock Purchase Warrant issued December 21, 2018 to Kahn Family Limited PT II. (Incorporated by reference to Exhibit 4.7 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.8 Common Stock Purchase Warrant issued October 11, 2018 to Forage Complete, LLC. (Incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.9 Common Stock Purchase Warrant issued January 11, 2021 to Edgar Ward. (Incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.10 Common Stock Purchase Warrant issued July 31, 2018 to New Leaf Assets, LLC. (Incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.11 Common Stock Purchase Warrant issued July 21, 2020 to Mitchell Pasin. (Incorporated by reference to Exhibit 4.11 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.12 Common Stock Purchase Warrant issued October 11, 2018 to FMG LLC. (Incorporated by reference to Exhibit 4.12 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.13 Common Stock Purchase Warrant issued January 11, 2021 to Gregory Ross. (Incorporated by reference to Exhibit 4.13 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.14 Common Stock Purchase Warrant issued January 11, 2021 to Gregory Ross. (Incorporated by reference to Exhibit 4.14 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 4.15* Description of Securities.
Exhibit 10.1 Employment Agreement with Edgar Ward, dated October 10, 2017 (Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 10.2 Agreement with Neil Catania dated October 9, 2017 (Incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 10.3 Neil Catania Note Agreement in the amount of $160,000 (Incorporated by reference to Exhibit 99.23 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 10.4 Neil Catania Note Agreement in the amount of $50,000 (Incorporated by reference to Exhibit 99.24 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
Exhibit 10.5 Agreement between Owen Morgan & Phytochem Technologies, Inc. (Incorporated by reference to Exhibit 10.24 of the Company’s Current Report on Form 8-K filed with the SEC on February 7, 2019).
Exhibit 10.6 Agreement between Orlando Pharmacy Inc., and NutraLife BioSciences, Inc. (Incorporated by reference to Exhibit 10.25 of the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2019).
Exbibit 10.7 Agreement with NewLeaf Assets LLS dated March 14 2019 (Incorporated by reference to Exhibit 10.26 of the Company’s Current Report on Form 8-K filed with the SEC on March 18, 2019).
Exhibit 10.8 Stock Purchase Agreement by and among the Company, Lord Global Corporation, and 27 Health, Inc. dated November 2, 2020. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 5, 2020).
Exhibit 10.9 Manufacturing, Distribution and Sales Agreement by and between the Company, 27 Health, Inc. dated November 2, 2020. (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on November 5, 2020).
Exhibit 10.10 June 6, 2019 Investment Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.11 June 6, 2019 Note issued to Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.12 June 6, 2019 Security Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.13 June 6, 2019 Purchaser Royalty Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.14 June 6, 2019 Pledge Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II and Brenda Hamilton. (Incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.15 June 6, 2019 Pledgor Royalty Agreement with the Company, Phytochem Technologies, Inc., and Brenda Hamilton. (Incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.16 November 13, 2019 Amended Investment Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.17 November 13, 2019 Amended Note issued to Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.18 November 13, 2019 Amended Security Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.19 November 13, 2919 Amended Purchaser Royalty Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II. (Incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.20 November 13, 2019 Amended Pledge Agreement with the Company, Phytochem Technologies, Inc., Kahn Family Limited PT II and Brenda Hamilton. (Incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.21 November 13, 2019 Amended Pledgor Royalty Agreement with the Company, Phytochem Technologies, Inc., and Brenda Hamilton. (Incorporated by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.22 February 12, 2020 Convertible Promissory Note issued to Barbara Ludwig. (Incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.23 October 14, 2019 Convertible Promissory Note issued to Dennis Poland and Amendment to Convertible Promissory Note dated December 31, 2019. (Incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.24 October 22, 2019 Convertible Promissory Note issued to Eileen Miller. (Incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.25 November 18, 2019 Convertible Promissory Note issued to EW Strategies LLC. (Incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.26 December 31, 2019 Amendment to October 10, 2019 Convertible Promissory Note issued to Mike Farr. (Incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.27 January 22, 2020 Convertible Promissory Note issued to Paul R. Botts. (Incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.28 October 17, 2019 Convertible Promissory Note issued to Paul R. Botts. (Incorporated by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.29 November 21, 2019 Convertible Promissory Note issued to Stephen O’Shaughnessy. (Incorporated by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.30 January 8, 2020 Convertible Promissory Note issued to Walter Lundon. (Incorporated by reference to Exhibit 10.49 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.31 December 4, 2020 Subscription Agreement with Russel S. Smith Jr. (Incorporated by reference to Exhibit 10.50 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.32 December 4, 2020 Convertible Promissory Note issued to Russel S. Smith Jr. (Incorporated by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.33 December 2, 2020 Promissory Note issued to Draper, Inc. (Incorporated by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.34 December 2, 2020 Promissory Note issued to Carriage House. (Incorporated by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.35 October 22, 2020 Subscription Agreement with Frank Cannarozzo and October 22, 2020 Convertible Promissory Note issued to Frank Cannarozzo. (Incorporated by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.36 September 8, 2020 Convertible Promissory Note issued to James R. Stuart. (Incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.37 March 16, 2020 Convertible Promissory Note issued to Joseph Corso. (Incorporated by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.38 November 17, 2020 Subscription Agreement with Larraine Cullam and November 17, 2020 Convertible Promissory Note issued to Larraine Cullam. (Incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.39 August 21, 2020 Convertible Promissory Note issued to Mohamad Ossiani. (Incorporated by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.40 September 11, 2020 Subscription Agreement with Nicholas Cirgnano III and September 11, 2020 Convertible Promissory Note issued to Nicholas Cirgnano III. (Incorporated by reference to Exhibit 10. 59 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.41 October 8, 2020 Convertible Promissory Note issued to Pinnacle Medical Consulting LLC. (Incorporated by reference to Exhibit 10.60 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.42 November 3, 2020 Convertible Promissory Note issued to Kenneth R. Klimas. (Incorporated by reference to Exhibit 10.61 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.43 November 2, 2020 Subscription Agreement with Kenneth R. Klimas. (Incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.44 August 14, 2020 Convertible Promissory Note issued to Barbara Ludwig. (Incorporated by reference to Exhibit 10.63 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.45 February 11, 2021 Subscription Agreement with Thomas Reid. (Incorporated by reference to Exhibit 10.64 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.46 February 11, 2021 Convertible Promissory Note issued to Thomas Reid. (Incorporated by reference to Exhibit 10.65 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.47 Common Stock Purchase Warrant issued December 24, 2020 to Thomas Cirignano together with the Subscription Agreement for same with Thomas Cirignano. (Incorporated by reference to Exhibit 10.66 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.48 December 24, 2020 Subscription Agreement with Nicholas Cirignano II. (Incorporated by reference to Exhibit 10.67 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.49 December 24, 2020 Convertible Promissory Note issued to Nicholas Cirignano II. (Incorporated by reference to Exhibit 10.68 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.50 February 23, 2021 Subscription Agreement with Mark Wakeland. (Incorporated by reference to Exhibit 10.69 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.51 February 23, 2021 Convertible Promissory Note issued to Mark Wakeland. (Incorporated by reference to Exhibit 10.70 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.52 December 24, 2020 Convertible Promissory Note issued to Kenneth R. Klimas. (Incorporated by reference to Exhibit 10.71 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.53 January 27, 2021 Subscription Agreement with Frank Cannarozzo. (Incorporated by reference to Exhibit 10.72 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.54 January 27, 2021 Convertible Promissory Note issued to Frank Cannarozzo. (Incorporated by reference to Exhibit 10.73 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.55 January 21, 2021 Convertible Promissory Note issued to Albert Klimas together with subscription for same. (Incorporated by reference to Exhibit 10.74 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.56 March 14, 2019 Settlement Agreement with New Leaf assets, LLC together with Stock Purchase Warrant issued on March 15, 2019. (Incorporated by reference to Exhibit 10.75 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.57 January 11, 2021 Convertible Promissory Note issued to Gregory Ross. (Incorporated by reference to Exhibit 10.76 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.58 January 11, 2021 Subscription Agreement with Gregory Ross. (Incorporated by reference to Exhibit 10.77 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.59 January 11, 2021 Note Exchange Agreement with Gregory Ross. (Incorporated by reference to Exhibit 10.78 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 10.60 January 11, 2021 Promissory Note issued to Gregory Ross. (Incorporated by reference to Exhibit 10.79 to the Company’s Annual Report on Form 10-K filed with the SEC on March 19, 2021).
Exhibit 16.1 Letter of Daszkal Bolton LLP to the Commission dated November 3, 2020. (Incorporated by reference to Exhibit 16.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 3, 202).
Exhibit 21.1* List of subsidiaries of the registrant.
Exhibit 31.1* Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1* Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.1 Form of Purchase Order (Incorporated by reference to Exhibit 99.4 to the Company’s Registration Statement on Form 10 filed with the SEC on November 1, 2017).
101.INS* Inline XBRL INSTANCE
101.SCH* Inline XBRL TAXONOMY EXTENSION SCHEMA
101.CAL* Inline XBRL TAXONOMY EXTENSION CALCULATION
101.DEF* Inline XBRL TAXONOMY EXTENSION DEFINITION
101.LAB* Inline XBRL TAXONOMY EXTENSION LABELS
101.PRE* Inline XBRL TAXONOMY EXTENSION PRESENTATION
*Filed herewith.