Healing Co Inc. - Annual Report: 2023 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended June 30, 2023

For the transition period from__________ to ____________    

Commission file number 333-152805

(866) 241-0670

Registrant's telephone number   

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐     No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes ☒    No ☐ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes ☐     No ☐  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 

Yes ☐     No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was $142,518,000.

As of October 19, 2023, the Issuer had 57,474,920 common shares issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains predictions, estimates and other forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Annual Report. You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect.

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.

Use of Certain Defined Terms

Except where the context otherwise requires and for the purposes of this report only:

AVAILABLE INFORMATION

We file annual, quarterly and special reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt of a written request to us at The Healing Company Inc., 135 W 50^th Street, 2^nd Floor, New York, New York 10020.

PART I

ITEM 1. BUSINESS

Overview

We are entrepreneurs, storytellers, operators, healers, humans—united by a common vision: Bring integrated healing to the world.

Our mission and vision is to bring integrative healing to the world.

We are an emerging health and wellness company that has identified the need for a change in healthcare, where conventional medicine and alternative healing can co-exist to provide a world of integrated healing.

Compelled by the global healthcare crisis and a deep belief in a different way—one which draws on conventional medicine and ancient wisdom, science and nature—we look to democratize access to integrated healing methods, while helping the world evolve how it thinks about health and healthcare.

Our Strategy

To achieve our objectives, we are building a community of integrated wellness focused, healing brands committed to a more sustainable, healthy and joyful world. We identify and acquire early stage, high potential brands within selected health and wellness categories, such as supplements and nutraceuticals, to help grow their healing practices and products.

Our Brands

Your Super

Your Super is a leading plant-based superfoods brand featuring organic, delicious, and functional superfood blends to help women eat more plants and thrive. Born out of a mission to improve people’s health through the power of super plants, Your Super manufactures and sells products that are nutritionally formulated with only five to six ingredients and nothing else added—no additives, fillers, gums, artificial sweeteners, or preservatives. Containing just the good stuff, every ingredient is certified organic, non-GMO certified, glyphosate-free, plant based, and gluten free. Your Super’s effective superfood blends are designed to unlock vibrant health—from glowing skin to mental focus.

Your Super, prior to its acquisition by us in 2022, had sold more than 5,000,000 products and served more than 1,000,000 customers across the United States and in Europe through retail and DTC (direct to consumer) channels such as Amazon. In 2021, Your Super ranked 25th on Inc. magazine’s fastest growing companies list and first in the food and beverage category.

Our Your Super brand is focused on two high-growth wellness sectors, superfoods and plant-based nutrition, representing more than $200 billion¹ in of global market potential.

Your Super - Products

Our Your Super brand currently offers twelve superfood blends covering five different categories: Detox and Energize, Calm and Clarity, Digest and Reset, Radiance and Vitality, and Balance and Flow. Each blend is formulated specifically around a functional need.  Each of our Your Super blends is categorized under one of the five categories as indicated in the chart below:

_________________

¹Statista for superfoods market, Research and Markets for plant-based food market

Chopra

We purchased our Chopra line of products from Chopra Group, founded by the world-renowned pioneer integrative medicine, Dr. Deepak Chopra, MD. As the original integrative health experts Chopra blends modern well-being practices with Ayurveda - a centuries-old system of health and healing - to offer a whole-self approach. By focusing on physical, mental, and spiritual health, with our Chopra products we empower people to create self-care routines as unique as they are, unlocking their body’s natural healing abilities.

Chopra – Products

Our Chopra products and services listed below provide our customers the tools and confidence to help them take control of their health:

In addition to our Chopra Detox Kit and Chopra body oils, we have a significant number of Chopra consumer products in development for launching later in 2023 and in early 2024.  Many of these are being developed as part of our strategic partnership with Althea Life Sciences, the R&D division of the world’s largest Ayurvedic producer, Dabur.

Our Segments

We use the so called “management approach” to identify our reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying our reportable segments. Using this approach, we have determined that we currently do business in three operating segments:

Our Corporate History and Structure

We were incorporated as Lake Forest Minerals Inc. in the State of Nevada on June 23, 2008. We were originally formed to engage in the acquisition, exploration and development of natural resource properties of merit; however; our former management was not successful in those endeavors and discontinued that business. With the acquisition of NOEO on March 10, 2022, and the onboarding of a new management team, we commenced operations in the health and wellness sector. We changed our name to The Healing Company Inc. in April 2021 and we changed our ticker symbol to “HLCO” on June 23, 2022. 

Our Acquisition Credit Facility

To facilitate our acquisitions program, in August 2022, we entered into a credit agreement with certain lenders who agreed to extend a credit facility to us consisting of up to $150,000,000 (under certain circumstances) in aggregate principal amount of term loan commitments which we can use to acquire assets that meet certain criteria specified in the agreement.  Individual term loans under this facility will be in a minimum principal amount of at least $400,000, bear an annual interest rate of the Secured Overnight Financing Rate (SOFR) plus 12% and will mature in 12 months or less. We have established a wholly owned subsidiary, HLCO Borrower LLC, which will be the “borrower” under this term loan facility. When we acquire a business whose acquisition is to be funded, in part, through this credit facility, the term loan is made to HLCO Borrower LLC which, in turn disburses the borrowed funds at our instruction and the acquired assets are held in, and operated through, a newly formed wholly owned subsidiary of HLCO Borrower LLC. The term loans will be secured by a first priority lien on the assets of HLCO Borrower LLC, including all of the assets of the operating subsidiaries owned by HLCO Borrower LLC and funded through the term loan facility.

Our Acquisitions under the Credit Facility

On October 14, 2022, we acquired all of the assets of Your Super, Inc., a super foods company founded by Michael Kuech and Kristel De Groot. Included in the Your Super, Inc. assets we acquired three Your Super operating subsidiaries - Your Superfoods B.V., Your Superfoods GmbH and Your Superfoods, Inc. The total consideration we paid for this acquisition consisted of (i) 3,200,000 shares of our restricted common stock valued at $2.50 per share for an aggregate value of $8 million and (ii) the forgiveness of $7,614,444.40 of outstanding debt of Your Super, Inc. owed to us. The outstanding debt was originally an obligation of Your Super, Inc. to a third-party lender. We acquired this loan obligation from the lender on September 9, 2022, for cash consideration of $2,000,000 and a seven-year warrant to purchase up to 1,500,000 shares of our common stock at an exercise price of $2.00 per share. In connection with our acquisition of the Your Super assets, we borrowed $3,000,000 under the term loan credit facility.  Our Your Super business is now operated through Your Super HLCO, LLC, a Delaware limited liability company that we established to hold and operate the Your Super acquired assets. Your Super HLCO LLC is a wholly owned subsidiary of HLCO Borrower LLC and all of the Your Super HLCO assets are now pledged to the term loan lenders under the credit facility agreement.

On March 3, 2023, we acquired certain assets of Chopra Global, LLC, a health and wellness company founded by Dr. Deepak Chopra, MD.  These assets were components of Chopra Global’s digital, licensing and consumer products divisions. The consideration paid and payable by us for the Chopra assets we purchased is an aggregate purchase price of up to $5,000,000 in cash plus newly issued shares of our restricted common stock. $1,000,000 of the cash portion of the purchase price was paid to Chopra Global on March 3, 2023, along with the issuance of 1,400,000 shares of our restricted common stock. A deferred cash payment of $2,500,000 was paid to Chopra Global during the three months ended March 31, 2023.  Additionally, we may pay to Chopra Global up to three (3) earnout payments of $1,000,000 in value each, subject to and payable in accordance with earnout thresholds specified in the purchase agreement with Chopra Global. Each of these earnout payments will be comprised of 50% in cash and 50% in shares of our restricted common stock. These earnout payments will be earned (i) for the period starting March 1, 2023 and ending December 31, 2023 if net revenue generated by the Chopra business operated by us exceeds $5,900,000; (ii) for the calendar year ending December 31, 2024 if such net revenue for that year exceeds $11,000,000; and (iii) for the calendar year ending December 31, 2025 if such net revenue for that year exceeds $15,000,000. The earnout shares will be valued at the market price at the time of issuance based on the five-day volume weighted average price of our common stock prior to the last day of the applicable measurement year. If we are taken private or undergo a change of control (as defined in our agreement with Chopra Global), any subsequent earnout payment(s) will be paid 100% in cash.  In connection with our acquisition of the Chopra Global assets, we borrowed $1,582,000 under the term loan credit facility.  Our Chopra business is now operated through Chopra HLCO, LLC, a Delaware limited liability company that we established to hold and operate the Chopra acquired assets. Chopra HLCO LLC is a wholly owned subsidiary of HLCO Borrower LLC and all of the Chopra HLCO assets are now pledged to the term loan lenders under the credit facility agreement.

The following charts depict our organization structure.  

NOEO

On March 10, 2022, we acquired NOEO GmbH (“NOEO”) from our director and co-founder, Anabel Oelmann, for cash consideration of EUR 25,000.  Ms. Oelmann founded NOEO to manufacture and market direct to consumers in Europe NOEO branded adaptogen herbal supplements. We have determined not to pursue the NOEO line of business and we are winding down our NOEO operations.

For Further Information

For a more detailed discussion of our development during our fiscal year ended June 30, 2022, including relating to our NOEO business, we direct you to our annual report on Form 10-K for the fiscal year ended June 30, 2022, which we filed with the SEC on October 12, 2022, available at the following link:

https://www.sec.gov/ix?doc=/Archives/edgar/data/0001441082/000147793222007571/hlco_10k.htm

Our Industry

Our strategy, to first build a community of powerful healing brands, and second, connect them into a closed loop wellness system that prevents disease & unlocks thriving wellbeing, places us at the intersection of three vast & growing industries:

We’ve opted to place our primary focus initially on investments in the supplements & nutraceuticals market, which is characterized by high fragmentation and vague & changing regulation, but also strong unit economics and the opportunity to be the foundation of consumer habit building. The supplements & nutraceuticals industry is $165 billion globally, and projected to grow at a 9% CAGR through 2030.

Historically, the supplements & nutraceuticals market has been recession buoyant, with the industry growing 8% during the 2008-09 economic crisis, and recent study showing the last area consumers will cut spending is on health & wellness.

Each of the markets in which we operate are characterized by rapid technological changes, frequent new product introductions, fragmentation, extensive intellectual property disputes and litigation, price competition, aggressive marketing practices, evolving industry standards, and changing customer preferences. Accordingly, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies operating in rapidly changing and competitive markets. 

Equally, the lack of an established, leading player operating at the intersection of these sectors creates immense opportunity to foster consumer trust & credibility, benefit from shared resource & data, and the higher impact, stickier experience generated from an ecosystem model.

Supplements & Nutraceutical Industry

The supplements & nutraceutical industry focuses on nutritional supplements intended to improve longevity, sports fitness, and provide health benefits in addition to the basic nutritional value present in food. Most people are familiar with various supplement and nutraceutical products—and have likely used them—even if they are unfamiliar with the industry name. Supplements and nutraceuticals comprise such commonly used items as herbal products, specific diet products, vitamins, processed foods.

The Superfoods Market

The global superfoods market reached a value of $162.6 billion in 2022. As per the analysis by IMARC Group, the leading manufacturers in the superfoods market are focusing on product improvements to expand their product portfolio and increase their existing sales. They are consequently launching plant-based food variants to meet the nutritional requirements of the vegan population. Product manufacturers are also financing advertising campaigns, such as celebrity endorsements and social media campaigns. Moreover, cafes, restaurants, hotels, and quick-service restaurants (QSRs) are incorporating superfoods in their dishes to expand their consumer base. In addition, the advent of superfood powders that can be added to prepare smoothies, juices, and shakes is influencing the market positively. In addition, leading players are introducing ready-to-eat (RTE) superfood products on account of rapid urbanization, busy lifestyles, and expanding purchasing power of consumers. They are also extensively using superfoods in the production of dietary supplements, such as capsules and gummies, to meet the daily nutritional requirements of individuals. Looking forward, the market value is expected to reach $226.3 billion by 2028, growing at a CAGR of 5.5% during the forecast period (2023-2028).²

Our Manufacturing and Distribution

Manufacturing. We rely on contract manufacturers to manufacture our products. The contract manufacturers schedule and receive ingredient and packaging inventory according to parameters set in their contracts and forecasts we provide. Some ingredients and packaging are purchased by our contract manufacturers pursuant to framework contracts we have with the applicable suppliers. Our contract manufacturers are regularly audited by third parties and are required to follow rigorous food safety guidelines. We believe our contract manufacturers have capacity to meet our anticipated supply needs, although short-term high demand can cause disruptions. We monitor both near-term and long-term capacity as well as fulfillment rates and overall performance of our manufacturing partners and qualify alternate suppliers as needed. In general, we purchase finished products from our contract manufacturers, which includes all packaging and ingredients used, as well as an agreed-upon tolling charge for each item produced. These finished products are then shipped directly to our distribution centers or shipped directly from the contract manufacturer to the customer.

Sales and Marketing

We employ many different techniques and strategies within our marketing initiatives. These include direct-to-consumer outreach, use of influencers through social media, Facebook targeting, focused e-mail campaigns, and traditional media. Our marketing goal is always to increase visibility and relevance of our brands in the minds of our customers and potential customers. We hope to expand our programs to include experimental marketing techniques in the future.

With our Chopra and Your Super brands, we leverage a full-funnel, multi-channel strategy across owned, earned, and paid market resources, with a focus on strategies that fuel organic growth.

Your Super Marketing

Our Your Super owned channels include email, SMS, app, social (Instagram, TikTok, Facebook group, LinkedIn), blog, and our YourSuper.com website; our paid channels include Meta, Google, our Your Super store on Amazon, and influencers.

Our marketing messaging typically centers around need (functional and/or emotional) + benefit, though central to our strategy is continual creative + message testing.

An example of our full-funnel marketing approach for our Your Super clinically-proven hormonal health and PMS product, Moon Balance starts with paid creative advertising on various social media platforms, which attracts potential consumers to our YourSuper.com website landing page where we provide additional Moon Balance product information leading to a call-to-action product purchase option.

Chopra Marketing

Our Chopra product marketing typically leverages the very large “owned” audiences that Chopra has – a more that 4,000,000 emailable data base contact list, 20,000,000 social media followers on @chopra and @deepakchopra handles across Facebook, Instagram, Twitter, LinkedIn, Medium and other social medium channels as well as the 7,000,000 engaged unique visitors to chopra.com annually. Chopra.com and the Chopra blog command significant domain authority with more than 300,000 important health and wellbeing related keywords and topics. We believe that his natural organic SEO and social reach is equivalent to tens of millions of dollars of marketing spend for this standalone brand.

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²IMARC Impactful Insights

Customers

Your Super – Customer Focus

Your Super has a focused customer target: health motivated, though not health expert, suburban middle to upper class mothers who shop for Your Super primarily for the health benefits she will experience from the products. The demographic is middle age, middle-class females that live in suburban or rural communities.

Chopra – Customer Focus

While the US and North America are the anchor markets for our Chopra brand, Chopra reaches far around the world including Europe, South America, Southern Africa, India and Australia.

The Chopra consumer is predominantly female and typically over the age of 40. The prime motivations for coming to Chopra are for seeking ways to manage stress and tension, emotional balance, general health and wellness and for deepening the experience with meditation and exploring further health and wellness related teachings. People often come to the Chopra brand after reading one of Deepak’s books or seeing his teachings on social media or elsewhere. We categorize three core psychographics:

Together these three psychographics represent about 10% of the US population.

Seasonality

The market for our Your Super and Chopra products displays some underlying seasonality, with the first half of the calendar year, January through June, typically outpacing the second half of the calendar year, July through December, and the most notable peak and trough months being January and December, respectively. Accordingly, we architect both campaigns designed to ride market tailwinds, such as community live detoxes and new product releases around new year and spring/early summer market peaks, as well as campaigns designed to stem troughs (e.g. limited edition re-releases of popular products around holiday, promotions, and/or challenges through summer months).

Competition

We are not aware of any other public companies that are acquiring health and wellness brands and building a community of businesses in this space. At the brand level, we consider the following factors in analyzing our competition:

Your Super

Due to the fragmented nature of the supplements, nutraceuticals, and superfoods spaces, as well as the functional design of our products, each formulated to address a single health need, we believe that our Your Super brand faces a broad range of competitors from manufacturers and marketers of superfood, protein, and collagen powder based products - from large agri-industry public companies with almost unlimited resources, such as Archer-Daniels-Midland Company, to small private start-up companies just entering our markets.

Chopra

We breakdown the competition to our Chopra brand along functional lines relating to our individual Chopra product offerings as follows:

Due to Chopra’s vast product and service lines, it faces a variety of different competitors. For its meditation app, Chopra’s largest competitors are Calm, Headspace, and Betterup, all apps that focus on promoting mental health through different provided services. All three companies are high profile and thus are large competitors to Chopra. For Chopra’s products, its largest competitors are Ritual and Goop. Both companies provide products that incorporate Ayurvedic herbs in their products that rival the products that Chopra produces. For Chopra’s blog, its largest competitors include well+good and mindbodygreen, both companies that blog about health.

Competitive Strengths

Our Overarching Strategic Advantage

In a highly competitive acquisitions market, we are building what we believe to be a focused and effective competitive advantage which makes us an attractive acquisition partner for smaller companies operating in the health and wellness space.

We are building a team bringing deep expertise in S-commerce (social media commerce), marketing, brand development, distribution, and international operations, with a track record of building & growing thriving consumer products companies, adding value in three key areas:

Based on management’s belief and experience in the industry, we believe that the following competitive strengths enable us to compete effectively.

Your Super

Your Super - Brand Differentiators

Our Your Super brand is characterized by two primary differentiators:

We are committed to creating superfood mixes and plant protein powders without additives, fillers, sweeteners, or artificial ingredients to help our customers improve their health.

We are committed to creating superfood mixes and plant protein powders without additives, fillers, sweeteners, or artificial ingredients to help you improve our customers’ health.

Chopra

Chopra - Brand Differentiators

Our Chopra brand is characterized by the following key differentiators:

Growth Strategies

We will strive to grow our business by pursuing the following growth strategies:

Our overarching strategic objectives are:

We intend to grow our existing brands through the following strategies:

Growing our Your Super Brand

Our growth strategy for our Your Super brand is grounded in three tenets:

Growing our Chopra Brand

Our Chopra brand’s growth strategy is based around four core pillars:

Intellectual Property

We believe trademark protection is particularly important to the maintenance of the recognized brand names under which we market our products.

We protect our intellectual property rights through a variety of methods, including trademark, patent and trade secret laws, as well as confidentiality agreements and proprietary information agreements with vendors, employees, consultants and others who have access to our proprietary information. Protection of our intellectual property often affords us the opportunity to enhance our position in the marketplace by precluding our competitors from using or otherwise exploiting our brands. We are also a party to several intellectual property license agreements relating to certain of our products. The duration of our trademark registrations is generally 10, 15 or 20 years, depending on the country in which the marks are registered, and we can renew the registrations. The scope and duration of our intellectual property protection varies throughout the world by jurisdiction and by individual product. Our global trademark portfolio, with the aforementioned registration durations, consists of our core marks for our business and our proprietary product brands which drive significant brand awareness for all of our businesses.  Our proprietary product formulas and recipes, maintained as trade secrets, are significant to our growth and success as they form the foundation for our production and sales of effective, high quality products.

Employees

We currently have twenty employees including our Chief Executive Officer. We have also retained various independent consultants to serve in key operational roles, such as Chief Financial Officer, and other executives in marketing, strategy and implementation.  Further, we have engaged advisors to assist our executive management with the ongoing execution of our business plan and expansion of our current product lines.

Regulation

The supplement and nutrition sector of the health and wellness industry, in general, is subject to varying degrees of regulation by a number of government authorities in the United States, including the FDA, the Federal Trade Commission, or the FTC, the Consumer Product Safety Commission, or the CPSC, the U.S. Department of Agriculture, or the USDA, and U.S. Environmental Protection Agency, or the EPA.  Various agencies of the state and localities in which we operate and in which our products are sold also regulate our business.

The areas of our business that these and other authorities regulate include, among others:

In addition, our products sold in foreign countries are also subject to regulation under various national, local and international laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution of dietary supplements and over-the-counter drugs.

Particular Regulations Applicable to our Your Super Brand

Overview

Your Super is subject to health claim regulations that differ in each of its major markets, including the US, EU, and UK, and which dictate if and how we are able to speak to the benefits of our Your Super products. Currently, we are generally able to speak to structure/functional benefits of our Your Super product formulations, in certain cases subject to meeting minimum nutrient thresholds.

Details

The regulatory environment for the supplements, nutraceuticals, superfoods, and plant-based nutrition industries varies across the US, UK, and Europe. While there are similarities, there are also notable differences in how regulations impact the sale and marketing of products in these industries.

The United States

In the US, the regulation of these industries primarily falls under the purview of the Food and Drug Administration (FDA). Dietary supplements are regulated under the Dietary Supplement Health and Education Act (DSHEA) of 1994. Under DSHEA, supplements are considered a category of food and are not subject to pre-market approval by the FDA. Whether a supplement or a food product, companies are responsible for ensuring the safety and labeling compliance of their products. The FDA can take action against products that are deemed unsafe or misbranded.

Regarding marketing, companies are prohibited from making certain specific health claims about their products unless they have been approved by the FDA. However, they can make general structure/function claims that do not claim to diagnose, treat, cure or prevent specific disease, which is what Your Super does today. The FDA has the authority to take action against companies making false or misleading claims.

The Federal Food, Drug and Cosmetic Act, or the FDA Act, permits structure/function claims to be included in labels and labeling which are truthful and not misleading.  Permissible structure/function claims may describe how a particular nutrient or dietary ingredient affects the structure, function or general well-being of the body, or characterize the documented mechanism of action by which a nutrient or dietary ingredient acts to maintain such structure or function. The label or labeling of a product marketed as a dietary supplement may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat or prevent a disease (i.e. a disease claim). If the FDA determines that a particular structure/function claim is an unacceptable disease claim that causes the product to be regulated as a drug, a conventional food claim or an unauthorized version of a “health claim,” or, if the FDA determines that a particular claim is not adequately supported by existing scientific data or is false or misleading in any particular, we would be prevented from using the claim and would have to update our product labels and labeling accordingly.  We take a number of actions to ensure that our labeling complies with this regulatory framework, including, undertaking third-party review of our labeling. 

United Kingdom

In the UK, the regulation of these industries is overseen by several authorities, including the Food Standards Agency (FSA) and the Medicines and Healthcare products Regulatory Agency (MHRA). The FSA primarily regulates food safety and labeling, while the MHRA oversees medicines and medical devices.

Supplements and nutraceuticals are generally classified as food products in the UK. Companies must comply with food safety regulations and ensure accurate labeling. Health claims made on products must be authorized by the European Food Safety Authority (EFSA) or be on the list of permitted claims. The MHRA regulates products that are considered medicinal, and these require specific authorization. Currently all of the Your Super products are classified as food products in the UK.

Europe

In Europe, the regulation of these industries is governed by the European Union (EU) and its member states. The EU has established regulations for food safety, labeling, and health claims through various directives and regulations. The EFSA plays a crucial role in evaluating health claims and determining their scientific substantiation.

Companies must comply with EU regulations on food safety and labeling. Health claims must be authorized by the EFSA, and only those on the authorized list can be used. The EU also has specific regulations for novel foods, including superfoods and plant-based products, which require pre-market authorization.

Federal Trade Commission and State Authorities

The FTC exercises jurisdiction over the advertising of all consumer products and requires that all advertising to consumers be truthful and non-misleading. The FTC actively monitors the advertising of dietary supplements, nutraceuticals and health-related products and has instituted numerous enforcement actions against companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims.  FTC enforcement actions may result in consent decrees, cease and desist orders, judicial injunctions and the payment of fines with respect to advertising claims that are found to be unsubstantiated.

Additionally, U.S. State consumer protection authorities prohibit deceptive and unfair practices and may take action against companies deemed to defraud or deceive consumers. 

We take a number of actions to ensure that our advertising and marketing is not false or misleading, including, undertaking third-party review of our labeling.

New Legislation or Regulation

Legislation may be introduced which, if passed, would impose substantial new regulatory requirements on dietary supplements and other health products. We cannot determine what effect additional domestic or international governmental legislation, regulations, or administrative orders, when and if promulgated, would have on our business in the future. New legislation or regulations may require the reformulation of certain products to meet new standards, require the recall or discontinuance of certain products not capable of reformulation, impose additional record keeping or require expanded documentation of the properties of certain products, expanded or different labeling or scientific substantiation.

ITEM 1A. RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this report, before purchasing our securities. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable to us. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this report, including statements in the following risk factors, constitute forward-looking statements. [Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”]

Risks Related to our Business and Industry

We are an early-stage company with a limited operating history.

While we were incorporated in Nevada in 2008, we have a limited operating history upon which you can evaluate our business and prospects. Our prospects must be considered in light of the risks encountered by companies in the early stages of development in highly competitive markets, particularly the markets for health and wellness products. You should consider the frequency with which early-stage businesses encounter unforeseen expenses, difficulties, complications, delays and other adverse factors. These risks are described in more detail below.

We have a history of losses and may continue to incur losses in the future.

We have incurred both operating and net losses in each of our last two fiscal years and current fiscal year and may continue to incur losses in the future as we continue to build our brand and invest in our products and acquisitions. This lack of profitability limits the resources available to us to fund our operations and to invest in new products and services and otherwise improve our business operations. We cannot assure you that we will be able to operate profitably or generate positive cash flows. If we cannot achieve profitability, we may be forced to cease operations and you may suffer a total loss of your investment.  

We have limited revenues, are currently experiencing operating losses and we may not be able to manage our businesses on a profitable basis.

We had no revenues prior to our acquisition of Your Super in October 2022. Since then, and taking into account our acquisition of the Chopra Assets in March 2023, our revenues have been limited and we have generated losses. To support our operations, we have relied on proceeds from sale of stock and a credit facility dedicated to support the acquisition of new brands. For the year ended June 30, 2023, we generated an operating loss of $24,238,407 and a net loss of $21,308,823. For the year ended June 30, 2022, we generated an operating loss of $8,261,868 and a net loss of $8,264,200. We cannot assure you that we will achieve profitably, that we will have adequate working capital to meet our obligations as they become due or that any revenues generated will be sufficient to fund our current and planned operations. Management believes that our success will depend on our ability to successfully complete additional acquisitions of profitable health and wellness product companies. We cannot guarantee that we will be successful in completing acquisitions of any other companies or that we will successfully integrate acquired companies. We cannot assure you that even if we are successful in completing the acquisitions, we will be successful in profitably managing such companies’ acquired assets and brands. We cannot assure you that we will achieve or maintain profitability for any period of time or that investors will not lose their entire investment.

If we fail to implement our business plan and complete acquisitions as planned, our business will suffer accordingly.

Our mission is the creation of a world-class health and wellness company engaged in the development, manufacture and sales of quality health, wellness and lifestyle products for distribution to an expanding global marketplace. We expect that our holding company strategy through which we plan to acquire profitable but undervalued target companies and products will enable us to accelerate the development and expansion of our brand and product portfolio and distribution channels. If we are unable execute our strategy of completing acquisitions as planned, we will not be able to fulfill our mission or grow our business as fast as we expected. 

We are a holding company and thus dependent, in part, on acquired businesses to fund operations.

Our business plan is based on our finding and acquiring high potential health and wellness product companies. We define high potential as companies that have significant growth, profit and health and wellness impact potential.

If we are unable to find appropriate companies that we define as high potential in an adequate time period it may mean that we will be unable to sustain operations. Further, in addition to third-party funding sources, which may not be available to us on favorable terms, it at all, we will be dependent on revenues generated by our acquired businesses which may not be sufficient to sustain operations and may make it more difficult to acquire additional targeted business opportunities. This may put us under operational pressure to reduce costs or raise more financing.

Our acquisitions may result in significant transaction expenses and integration and consolidation risks, and we may be unable to profitably operate our consolidated company.

We are engaged in the business of acquisition, operation and management of health and wellness companies and brands. Our acquisitions may result in significant transaction expenses and present new risks associated with entering additional markets or offering new products and services and integrating the acquired companies or brands.  We may not have sufficient management, financial and other resources to integrate companies we acquire or to successfully operate new businesses and we may be unable to profitably operate our expanded company.  Moreover, any new businesses that we may acquire, once integrated with our existing operations, may not produce expected or intended results. 

If the large consumer goods businesses or investment funds make substantial investments in the market sector in which we operate, this could push up asset prices making acquisitions harder to complete and more expensive for us.

Our growth is dependent on management’s ability to identify and acquire suitable companies for acquisition.

Management will be working to identify business acquisitions and to negotiate purchase agreements favorable to the Company. These potential acquisitions, once identified, will require financial, legal and operational due diligence. If management fails to perform this due diligence adequately, there is a risk that the acquired businesses may unfavorably impact our operations.

Our recently completed acquisitions are subject to uncertainties and risks.

We recently completed the acquisition of the Your Super superfoods business and a suite of operating assets from Chopra Group under the Chopra brand. There is no assurance that we will realize the benefits anticipated from our acquisition of these two businesses. There is no assurance that we will be able to successfully integrate these two new business lines into our management and organizational structure. The process of combining the operations of Your Super and the Chopra business lines that we acquired could prove difficult or unsuccessful and this could have a material adverse effect on us and our financial condition.

The growth of our acquired businesses will be dependent on the management of those businesses as well as our ability to support their growth.

Our business model is reliant, in part, on the founders or executives of the companies we acquire continuing to operate the business and working with us to grow their businesses. If these founders or executives choose to leave unexpectedly post-acquisition it will create operational pressures on us to operate in their absence, and could negatively impact the culture, operation and performance of the acquired company. This could have a material negative impact on sales and profitability.

We may not be able to manage future growth effectively.

We expect to continue to experience significant growth. Should we keep growing rapidly, our financial, management and operating resources may not expand sufficiently to adequately manage our growth.  If we are unable to manage our growth, our costs may increase disproportionately, our future revenues may not grow or may decline, and we may face dissatisfied customers.  Our failure to manage our growth may adversely impact our business and the value of your investment.

Our success depends on the experience and skill of our board of directors, executive officers, and key personnel, whom we may not be able to retain, and we may not be able to hire enough additional personnel to meet our needs.

We are very dependent on Simon Belsham, our co-founder, Chief Executive Officer, President and Director, and Justin Figgins, our Chief Financial Officer, Treasurer, Secretary and Head of Strategy and Mergers and Acquisitions.  We are also very reliant on our board of directors, to set policy and provide strategic guidance, and to the rest of our management team and other partners who provide marketing, product development, technology, sales distribution and general management services to our acquired businesses to support their integration and growth. There can be no assurance that any of these persons will continue to be employed with or engaged by us for a particular period of time.  The loss of any member of our board of directors or executive officer or any of our senior management team or advisors could harm our business, financial condition, cash flow and results of operations.     

The success of our strategy will depend on a well-defined management structure and the availability of a management team with proven competencies in the identification, acquisition and integration of complementary companies and assets.  To implement our business plan, we will need to keep the personnel that we currently have and, if our business is to grow as planned, we will need additional personnel.  We cannot assure you that we will be successful in retaining our present team or in attracting and retaining additional personnel.  If we are unable to attract and retain key personnel or are unable to do so in a cost-effective manner, our business may be materially and adversely affected.

Our management is domiciled in the United State and Europe which may present some limited risk to operations.

Our management team is spread out geographically across the US and Europe and so any further restrictions in travel due to a pandemic may present some limited risk to our ability to operate, build a team culture and effectively operate our business.

Although dependent on certain key personnel, we do not have any key man life insurance policies on any such people.

We are dependent on our executive officers and management team to conduct our operations and execute our business plan, however, we have not purchased any insurance policies with respect to our executives and senior managers in the event of the death or disability of any of these persons. Therefore, if any of our executive officers or other members of our management team dies or becomes disabled, we will not receive any compensation to assist with any such created absence.

Our ability to obtain continued financing is critical to the growth of our business. We will need additional financing to fund operations, which additional financing may not be available on reasonable terms or at all.

Our future growth, including the potential for future market expansion will require additional capital. We will consider raising additional funds through various financing sources, including the procurement of commercial debt financing. However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to execute our growth strategy, and operating results may be adversely affected. Any additional debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.

Our ability to obtain financing may be impaired by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.

Even if we obtain financing for our near-term operations, we expect that we will require additional capital thereafter, in part to support any future acquisitions. Our capital needs will depend on numerous factors including: (i) profitability; (ii) the release of competitive products by competitors; (iii) the level of investment in R&D; and (iv) the amount of our capital expenditures, including acquisitions. There can be no assurance that we will be able to obtain capital in the future to meet our needs.

If we lose our existing business acquisition credit line our plan of operations could be negatively affected.

We have entered into a credit agreement with certain lenders who agreed to extend a credit facility to us consisting of up to $150 million in accordance with the terms of the agreement) in aggregate principal amount of term loan commitments, the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria. To date, we have drawn down $4.87 million under the terms of this agreement in order to facilitate the purchase of our first two acquisitions. We expect to be able to access this credit facility for future acquisitions that we may determine to pursue but we cannot be sure that this credit facility will remain available to us under all circumstances.  If we were to lose access to this source of acquisition related loans, our plans for future acquisitions could be jeopardized, we may not be able to raise required funding from other sources for the completion of planned acquisitions and our results of operations and general business prospects could suffer, our stock price could decline and your investment in our common stock could be lost.  

A default on the terms of a senior secured credit facility could result in acceleration of our loans or foreclosure on our assets.

As of September 20, 2023, we were out of compliance for the month ended August 31, 2023 with a financial covenant in our credit agreement requiring us to maintain at least $2,000,000 in unrestricted and unencumbered cash.  Additionally, as of September 30, 2023, our monthly EBITDA for Your Super was less than $75,000 which, under our credit agreement, resulted in a borrowing base deficiency with respect to the Your Super acquisition.  These two defaults entitled our lenders, upon notice to us, to take action to enforce their rights against us including, but not limited to, demanding immediate payment of their outstanding loans to us in the principal amount of $4,873,163, as of September 30, 2023, and enforcing their liens on our Your Super and Chopra operating assets. 

On October 12, 2023, we entered into a limited waiver to the credit agreement with our lenders, waiving  the two breaches referenced above provided that (i) we regain compliance with our cash covenant referenced above no later than, and remain compliant after, November 30, 2023, and (ii) we deposit $150,000 into a special reserve collection account on behalf of the secured lenders prior to the earlier to occur of (x) November 30, 2023 and (y) the closing of a sale of our equity in an amount of not less than $2,000,000. Our failure to comply with either of these two new covenants will constitute an event of default under the credit agreement entitling our secured lenders to pursue all rights and remedies against us under the credit agreement, including acceleration of our loans, foreclosure and collection actions.  

As of the date of this Annual Report, we have a limited amount of cash available to us for operations and additional acquisitions. While management is confident about a near-term equity raise, we cannot guarantee at this time that we will be able to raise sufficient funds in the near term, on terms favorable to us, if at all, to comply with the terms of the limited waiver or to continue our business growth strategy.   If we are unable to timely raise additional equity financing and our secured lenders exercise their right to accelerate our loan or foreclose on our assets, you may lose your investment in us.     

Our success is linked to the size and growth rate of the markets in which we are currently operating, health and wellness and super foods, and an adverse change in the size or growth rate of those markets could have a material adverse effect on us.

An adverse change in size or growth rate of the health and wellness and super foods markets could have a material adverse effect on us. Underlying market conditions are subject to change based on economic conditions, consumer preferences, the lingering impact of COVID-19 or other possible pandemics and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative.

General economic conditions, including a prolonged macroeconomic downturn, may negatively affect consumer purchases, which could adversely affect our sales, as well as our ability to access credit on terms previously obtained.

Our results are dependent on a number of factors impacting consumer spending, including general economic and business conditions, consumer confidence, wages and employment levels, the housing market, consumer debt levels, availability of consumer credit, credit and interest rates, fuel and energy costs, energy shortages, taxes, and general political conditions, both domestic and abroad. Consumer product purchases, including purchases of our products, may decline during recessionary periods. A prolonged downturn or an uncertain outlook in the economy may materially adversely affect our business, revenues and profits and the market price of our common stock, and we cannot be certain that funding for our capital needs will be available from our existing financial institutions and the credit markets if needed, and if available, to the extent required and on acceptable terms. If we cannot obtain funding when needed, in each case on acceptable terms, we may be unable to adequately fund our operating expenses or our planned capital expenditures, which, taken together, may have an adverse effect on our revenues and results of operations.

We operate in highly competitive and fast-evolving industries, and our failure to compete effectively could affect our market share, financial condition and growth prospects adversely.

The markets in which we operate are characterized by rapid changes, frequent new product introductions, established and emerging competition, price competition, aggressive marketing practices, evolving industry standards and changing customer preferences. Accordingly, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies operating in rapidly changing and competitive markets.

The health and wellness industry is a large and growing industry and is highly fragmented in terms of both geographical market coverage and product categories. The market for health and wellness products is highly competitive in all our channels of distribution. We compete with companies that may have broader product lines or larger sales volumes, or both, than we do, and our products compete with nationally advertised brand name products. These national brand companies have resources greater than ours. Numerous companies compete with us in the development, manufacture and marketing of health and wellness products worldwide. The market is highly sensitive to the introduction of new products, which may rapidly capture a significant share of the market. We also may face competition from low-cost entrants to the industry, including from international markets. Increased competition from companies that distribute through the wholesale channel, especially the private label market, could have a material adverse effect on our business, results of operations, financial condition and cash flows as these competitors may have greater financial and other resources available to them and possess extensive manufacturing, distribution and marketing capabilities far greater than ours. We are also subject to competition in the attraction and retention of employees.  Many of our competitors have greater financial resources and can offer employees compensation packages with which it is difficult for us to compete.

Our failure to appropriately respond to changing consumer preferences and demand for new products and services could harm our customer relationships and product sales significantly. The success of our new product offerings depends upon a number of factors, including our ability to:

We may not be able to compete effectively in some or all our markets, and our attempt to do so may require us to reduce our prices, which may result in lower margins. Failure to compete effectively could have a material adverse effect on our market share, business, results of operations, financial condition, cash flows and growth prospects.

We face significant competition in the health and wellness industry and we may face increased competition from smaller companies in our industry which could impact our business.

There is significant competitor risk in the health and wellness industry. Barriers to entry are low, there is minimal regulation that governs a large portion of the product offerings in this space and new entrants enter the market regularly. These factors may impact our ability to grow our business as they may negatively affect sales of our existing products or our ability to acquire or introduce new products as we compete with new companies better funded than we are that begin to enter our market.

Also, Increased competition from smaller companies in our market space could negatively impact our business. This competition could drive up customer acquisition costs, reduce customer loyalty, and push up supply prices. Further, should these competitors’ products experience health or safety issues, that could impact the reputation of the overall market segment and thus impact our operations.

New entrants may have better products than ours or more effective marketing for similar products.  This could impact our sales of existing products and businesses we may have acquired.

Growth in a digital world is very reliant on a limited number of marketing platforms and their operational changes. 

Google and Meta Group still command more than 50% of all digital marketing spent in the US and Europe. These platforms are key to attracting consumers to our products. In addition, Apple is an important operator that facilitates these businesses and has recently made significant changes to its data privacy rules that have impacted many companies’ abilities to operate efficiently. Changes to the operation or algorithm of any of these companies could significantly impact our ability to grow any acquired businesses if we fail to anticipate and plan for changes that may occur.

In addition, variations in marketing costs through these platforms could impact our marketing expenditure and therefore ability to generate revenues.

Significant changes in costs or material disruptions to our service providers could negatively impact our ability to sell or achieve profitability.

From our Direct-to-Consumer channels, we will largely work with Shopify and other partners for our e-commerce infrastructure. Any significant changes in costs or material disruptions in service would greatly impact our ability to sell our products or to achieve profitability.

Market adoption of online and app-based self-care and wellness solutions is relatively new and may not continue to grow, which may harm our business and results of operation.

Our future success will depend in part on the growth, if any, in the demand for online and app based self-care and wellness solutions. While the COVID-19 pandemic has accelerated the market for online self-care and wellness solutions, the online and app-based health and wellness market is still less mature than the market for in-person wellness centers, which many businesses currently utilize, and these businesses may be slow or unwilling to migrate from these legacy approaches. As such, it is difficult to predict user demand for our web- and app-based platforms (including our Chopra app), user adoption and renewal, the rate at which existing users expand their engagement with our platform, the size and growth rate of the market for our platform, the entry of competitive offerings into the market, or the success of existing competitive offerings. Furthermore, even if users want to adopt an online self-care or wellness solution, it may take them a substantial amount of time and effort to fully transition to such virtual self-care solutions, or they could be prevented from accessing a platform due to budget constraints, weakening economic conditions, or other factors. Even if market demand for online self-care and wellness solutions generally increases, we cannot assure you that adoption of our platforms will also increase. If the market for online self-help and wellness solutions declines in growth or our platforms do not achieve widespread adoption, this could result in reduced customer spending, user attrition, and decreased revenue, any of which would adversely affect our business and results of operations.

Our failure to appropriately respond to changing consumer trends, preferences, and demand for new health and wellness products and product enhancements could materially harm our customer relationships, and product sales or otherwise materially harm our business, financial condition, and operating results.

Our health and wellness business is subject to rapidly changing consumer trends and preferences and product introductions, especially with respect to our superfood products and our Chopra signature product line. Our continued success depends in part on our ability to anticipate and respond to these changes and introductions, and we may not respond or develop new products or product enhancements in a cost-effective, timely, or commercially appropriate manner, or at all. Current consumer trends and preferences have evolved and will continue to evolve as a result of, among other things, changes in consumer tastes; health, wellness, and nutrition considerations; competitive product and pricing pressures; changes in consumer preferences for certain sales channels; shifts in demographics; and concerns regarding the environmental and sustainability impact of the product manufacturing process.

The success of our response to changing consumer trends and preferences and product introductions, including any new product offerings and enhancements, depends on a number of factors, including our ability to:

Our failure to accurately predict changes in consumer demand and technological advancements could negatively impact consumer opinion of our products or our business, which in turn could harm our relationships with our customers and cause a loss of sales. In addition, if we do not introduce new products or make enhancements to meet the changing needs of our customers in a cost-effective, timely, and commercially appropriate manner, or if our competitors release new products or product enhancements before we do, some of our product offerings could be rendered obsolete, which could cause our market share to decline and negatively impact our business, financial condition, and operating results.

The success of our Your Super business is linked to the size and growth rate of the superfoods market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.

An adverse change in size or growth rate of the superfoods market could have a material adverse effect on us. Underlying market conditions are subject to change based on economic conditions, consumer preferences and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative.

Our licensed Chopra Experiences partners may fail to maintain the quality of our brand and we may not be successful with our expansion plans.

We currently operate our Chopra Experiences business by licensing this product to carefully selected partners including the Chopra Health Retreat at the CIVANA wellness resort in Carefree, Arizona and the Chopra Mind-Body-Zone at the Lake Nona Performance Club in Lake Nona, Florida. We license our Chopra Experiences brand to these partners, and we prescribe and train them to implement our methods and contents to deliver our Chopra Experiences in its intended fashion. It is possible that the staff at these locations may not fully implement our methods in our prescribed manner or fail to maintain quality control of the Chopra Experiences. As a result, this could have a negative impact on our Chopra Experiences business and our results of operations.

Further, part of our future plans involves licensing our Chopra Experiences to additional partners. We cannot guarantee we will be successful in this endeavor. Failure to successfully build new Chopra Experiences licensing relationships could result in our business and financial condition being materially adversely affected.

If we fail to develop our brands cost-effectively, our business may suffer.

We believe that developing and maintaining awareness of our Your Super and Chopra brands and any other brands that we might acquire in the future in a cost-effective manner will be critical to achieving widespread acceptance of our existing and future products and services and is an important element in attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our market develops. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and on our ability to provide reliable, secure and useful products and services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brands. If we fail to successfully promote and maintain our brands or incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, and our business could suffer.

Our financial performance depends heavily on our ability to recruit potential users to be involved in our online self-care and wellness platforms, and our ability to do so may be affected by circumstances beyond our control.

Building awareness of our offerings is critical to our ability to recruit prospective users and generate revenue. A substantial portion of our expenses are attributable to marketing and sales efforts dedicated to attracting potential users to our offerings. Because we generate a portion of our revenue based on a subscription model, specifically with respect to the Chopra app, it is critical to our success of this product line that we identify prospective users who will take advantage of the platform for pre-recorded, and self-paced wellness opportunities, and that such users remain enrolled and active in these offerings.

We have experienced, and may in the future experience, fluctuations in our user subscriptions based on a variety of factors.

The following factors, many of which are largely outside of our control, may prevent us from successfully driving and maintaining user enrollment in our online and app offerings in a cost-effective manner or at all, which would adversely affect our revenue and ability to achieve profitability:

Unfavorable publicity or consumer perception of our products and any similar products distributed by other companies could have a material adverse effect on our business.

We believe the health and wellness market is highly dependent upon consumer perception regarding the safety, efficacy and quality of health and wellness products generally, as well as of products distributed specifically by us. Consumer perception of our products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, national media attention and other publicity regarding the consumption and use of health and wellness products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the health and wellness products market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for our products and our business, results of operations, financial condition and cash flows. Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on us, the demand for our products, and our business, results of operations, financial condition and cash flows. Further, adverse publicity reports or other media attention regarding the safety, efficacy and quality of health and wellness products in general, or our products specifically, or associating the use of health and wellness products with illness, could have such a material adverse effect. Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers' failure to consume such products appropriately or as directed.

There is significant growth in the health and wellness market at the moment, especially emerging from the COVID pandemic. However, if consumer sentiment changes and people turn away from a heathy lifestyle focus, this could cause the market to decline (or grow at a slower rate than forecast) and some businesses will fail.

An inability to obtain profitable operating margins could adversely affect our results of operations.

The success of any of our acquired entities, including Your Super and our Chopra assets, will depend on the development of operating parameters to ensure our product expansion provides profitable margins by leveraging efficiencies of scale, operating cost discipline, negotiating suitable contract terms with contract manufacturers, advertising platforms and retail outlets and working to secure ingredients at acceptable costs. If we are unable to successfully manage the potential difficulties associated with growth, we may not be able to capture the efficiencies of scale that we expect from expansion and we may not be able to achieve our goals with respect to operating margins. As a result, our operating margins may not provide the expected profitability which could have a material adverse effect on our business, financial condition and results of operations and adversely affect the price of our common stock.

COVID 19 or another pandemic could greatly impact our business.

While we believe we are emerging from the impact and restrictions of COVID 19, there can be no assurance that we will not be impacted by a resurgence of this virus or another pandemic. Any such events could place substantive restrictions and impact on the industry. We could face closing of borders, restricting of supply chains, closing of shops and reductions in sales.

The efficacy of our ingredients may be limited.

Many of the ingredients used in Your Super superfoods and in our Chopra product line haven’t undergone significant clinical or laboratory testing like pharmaceutical drugs do and therefore there are some risks that they may not have the efficacy or the impact that the general wisdom or science suggests they might. This is a risk for the entire market or for individual products.

Related to this there are often “fads” where some products are popular for short periods of time based on celebrity marketing which may increase their profile and popularity. Investing in fads carries significant risks that you may buy at peak valuations and then the valuation may decline over time as the fad becomes unpopular or a new fad captures consumer interest.

Our inability to accurately forecast demand for our products could impact our profitability.

Our business will be dependent on maintaining in-stock products for distribution. Should we fail to accurately forecast demand for our products resulting in over or under stocking of products we could impact on our revenues due to product wastage, missed sales due to our inability to deliver product timely, and the limitation placed on our available working capital due to overstocking of products.

Disruption of supply, shortage, or increases in the cost of ingredients, packaging materials, and other raw materials as well as climate change could materially harm our business, financial condition, and operating results.

We and our third-party contract manufacturers depend on third-party suppliers to supply us with the various ingredients, packaging materials, and other raw materials that are used in our products and their distribution. Our business could be materially harmed if we experience operational difficulties with our third-party suppliers, such as increases in costs (which we may not be able to, or want to, pass on to consumers), reductions in the availability of materials or production capacity, errors in complying with specifications or applicable law, insufficient quality control, and failures to meet production or shipment deadlines. If we fail to develop or maintain our relationships with our third-party suppliers or if such suppliers cease doing business with us or go out of business, we could face difficulties in finding or transitioning to alternative suppliers that meet our standards.

Many of the ingredients, packaging materials, and other raw materials we use are subject to fluctuations in availability and price due to a number of factors beyond our control, including crop size, ingredient, water, and land scarcity, market demand for raw materials, commodity market speculation, energy costs, currency fluctuations, supplier and logistics service capacities, import and export requirements, tariffs, and other government policies, and drought, excessive rain, temperature extremes, and other severe weather events. If we experience supply shortages, price increases, or supplier or regulatory impediments with respect to any of the materials we use in our products or packaging, we may need to seek alternative supplies or suppliers and may experience difficulties in finding replacements that are comparable in quality and price.

Further, the risks related to our ability to adequately source the materials required to meet our needs may be exacerbated by the effects of climate change and the legal, regulatory, or market measures that may be implemented to address climate change. There is growing concern that carbon dioxide and other greenhouse gasses in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. If climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain raw materials that are necessary for our products. Severe weather conditions and natural disasters can reduce crop size and crop quality, which in turn could reduce our supplies of raw materials, lower recoveries of usable raw materials, increase the prices of our raw materials, increase our cost of storing and transporting our raw materials, or disrupt production schedules. The impacts of climate change may also cause unpredictable water availability or exacerbate water scarcity. In addition, the increasing concern over climate change and related sustainability matters may also result in more federal, state, local, and foreign legal and regulatory requirements relating to climate change, which may significantly increase our costs of operation and delivery.

If any of our third-party manufacturers fail to reliably supply products to us at the required levels of quality or fail to comply with applicable laws, our financial condition and operating results could be materially and adversely impacted.

We rely on third-party contract manufacturers to supply products to us. Any significant interruption of production at any of our third-party contract manufacturers, or other interruption in our supply chain, may materially harm our business, financial condition, and operating results. For example, natural disasters, including droughts, earthquakes, fires, hurricanes, or floods, technical issues, work stoppages, or other unforeseen or catastrophic events, that result in significant interruption of production at any of our facilities or third-party contract manufacturers or suppliers could impede our ability to conduct business. If we were to experience such an event resulting in the temporary, partial, or complete shutdown of one of these manufacturing facilities, we could be required to transfer manufacturing to a surviving facility and/or third-party contract manufacturers if permissible. Additionally, we cannot assure you that our third-party contract manufacturers will continue to reliably supply products to us at the levels of quality, or the quantities, we require, and in compliance with applicable laws. Except for force majeure events, such as natural disasters and other acts of God, and non-performance by our contract manufacturers generally cannot unilaterally terminate these contracts. These contracts can generally be extended by us at the end of the relevant time period. Our contract manufacturers are also located in countries such as the United States and Germany.  If any of our contract manufacturers were to become unable or unwilling to continue to provide us with products in required volumes, at suitable quality levels, or in a cost-effective manner, we would be required to identify and obtain replacement manufacturing sources. There is no assurance that we would be able to obtain acceptable alternative manufacturing sources on a cost-effective or timely basis, or at all. An extended interruption in the supply of our products would result in the loss of sales, which could have a material adverse effect on our business, financial condition, or operating results.

Product contamination or tampering or issues or concerns with respect to product quality, safety and integrity could adversely affect our business, reputation, financial condition or results of operations.

Our business depends in large part on our ability to maintain consumer confidence in the safety and quality of our products. We have rigorous product safety and quality standards, which we expect our contract manufacturers to meet. However, despite our commitment to product safety and quality, our contract manufacturers may not always meet these standards, particularly as we expand our manufacturing processes and product offerings. Further, our manufacturing operations are subject to numerous regulations, including food and drug, environmental, and labor regulations, which continue to expand and evolve and require substantial expenditures. If our contract manufacturers fail to comply with our product safety and quality standards or applicable law, or if our products are or become contaminated, damaged, adulterated, mislabeled, or misbranded, whether caused by us or someone in our supply chain or events outside of our or their control, we may be required to undertake costly remediation efforts, which may include product recalls, the destruction of inventory, temporarily facility closings, and supply chain interruption, and may become subject to negative publicity, regulatory fines, and product liability claims, which could materially harm our reputation, business, financial condition, and operating results. Further, any perceived degradation of product quality as a result of reliance on contract manufacturers may have an adverse effect on sales or result in increased product returns and buybacks.

Product contamination or tampering, or allegations of product contamination or tampering or product quality issues (whether or not valid) with respect to products in our portfolio may reduce demand for such products, and cause production and delivery disruptions or increase costs, which could adversely affect our business, reputation, financial condition or results of operations. Moreover, even if allegations of product contamination or tampering or suggestions that our products were not fit for consumption or use are meritless, the negative publicity surrounding assertions against us or products in our portfolio or processes could adversely affect our reputation or brands. Our business could also be adversely affected if consumers lose confidence in product quality, safety and integrity generally, even if such loss of confidence is unrelated to products in our portfolio.

Any of the foregoing could adversely affect our business, reputation, financial condition or results of operations. In addition, if we do not have adequate insurance, if we do not have enforceable indemnification from suppliers, manufacturers, distributors, joint venture partners or other third parties or if indemnification is not available, the liability relating to such product claims or disruption as a result of recall efforts could materially adversely affect our business, financial condition or results of operations.

Should we fail to ensure that our information on our products is compliant we may face a loss of business, regulatory sanctions or investigations and litigation.

Products, websites and marketing materials will require compliant wording around ingredients and claims. Failure to be compliant or misleading images and words may result in litigation, reputation impact, lost sales or regulatory investigation.

If we experience product recalls, we may incur significant and unexpected costs, and our business reputation could be adversely affected.

We may be exposed to product recalls and adverse public relations if our products are mislabeled or alleged to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating income.

As a distributor of products designed for human consumption, we are subject to product liability claims if the use of our products is alleged to have resulted in injury. Our products consist of plant-based vitamins, minerals, herbs, spices, antioxidants, superfood mixes and other ingredients that are classified as foods and dietary supplements, and, in most cases, are not necessarily subject to pre-market regulatory approval in the United States. Some of our products contain innovative ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur. As a marketer of products manufactured by third parties, we also may be liable for various product liability claims for products we do not manufacture. We have been in the past, and may be in the future, subject to various product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. A product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which, in turn, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Insurance coverage, even where available, may not be sufficient to cover losses we may incur.

Our business exposes us to the risk of liabilities arising from our operations. For example, we may be liable for claims brought by users of our products or by employees, customers or other third parties for personal injury or property damage occurring in the course of our operations. We seek to minimize these risks through various insurance contracts from third-party insurance carriers. However, our insurance coverage is subject to large individual claim deductibles, individual claim and aggregate policy limits, and other terms and conditions. We retain an insurance risk for the deductible portion of each claim and for any gaps in insurance coverage. We do not view insurance, by itself, as a material mitigant to these business risks.

We cannot assure you that our insurance will be sufficient to cover our losses. Any losses that the insurance does not substantially cover could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Natural disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, terrorist acts and global political events could cause permanent or temporary facility closures, impair our ability to purchase, receive or replenish raw materials or cause customer traffic to decline, all of which could result in lost sales and otherwise adversely affect our financial performance.

The occurrence of one or more natural disasters, such as hurricanes, fires, floods and earthquakes (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks (including the recent outbreak of COVID-19), terrorist acts or disruptive global political events, such as civil unrest in locations where our facilities, contract manufacturers or suppliers are located, or similar disruptions could adversely affect our operations and financial performance. To the extent these events result in the closure of one or more of our contract manufacturers or key suppliers, our operations and financial performance could be materially adversely affected through lost sales. In addition, these events could result in increases in fuel (or other energy) prices or a fuel shortage, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some local and overseas suppliers, the temporary disruption in the transport of goods from overseas, delay in the delivery of goods to our customers, the temporary reduction in the availability of our products, expiration of inventory, future long-lived asset impairment charges and disruption to our information systems. These events also could have indirect consequences, such as increases in the cost of insurance, if they were to result in significant loss of property or other insurable damage.

Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology and any interruption in these systems could have a material adverse effect on our business, financial condition, and results of operations.

Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology. Our information technology systems are designed and selected to facilitate order entry and customer billing, maintain customer records, accurately track purchases, manage accounting, finance and manufacturing operations, generate reports, and provide customer service and technical support. Any interruption in these systems or any interruption associated with the transition of these systems to a new information technology platform could have a material adverse effect on our business, financial condition, and results of operations.

System interruptions or security breaches may affect sales.

Customer access to, and ability to use, our websites and our apps affects our sales. If we are unable to maintain and continually enhance the efficiency of our systems, we could experience system interruptions or delays that could affect our operating results negatively. In addition, we could be liable for breaches of security on our websites or our apps, loss or misuse of our customers’ personal information or payment data. Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent credit card transactions and other security breaches, failure to prevent or mitigate such fraud or breaches may negatively affect our operating results.

We must successfully maintain and/or upgrade our information technology systems, and our failure to do so could have a material adverse effect on our business, financial condition or results of operations.

We rely on various information technology systems to manage our operations. We have implemented, and we continue to implement, modifications and upgrades to such systems and acquired new systems with new functionality. These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems. These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may cause disruptions in our business operations and have a material adverse effect on our business, financial condition or results of operations.

If we fail to comply with our obligations in the agreements under which we license the Chopra Group’s content or otherwise experience disruptions to our business relationships with the Chopra Group, we could lose license rights that are important to our business.

We are a party to a license agreement with the Chopra Group to use the Chopra name, image, trademarks, and content, teaching and coaching curriculum. The existing license agreement imposes various covenants, restrictions and other obligations on us. If we fail to comply with our obligations under this agreement or we are subject to a litigation for breach of permitted uses, we may be required to make certain payments to the Chopra Group, we may lose the exclusivity of our license, or the Chopra Group may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license. If the Chopra Group were to terminate our license agreement for whatever reason, it would materially and adversely affect our business, financial position and future prospects.

Use of social media, emails, push notifications, and text messages in ways that do not comply with applicable laws and regulations, lead to the loss or infringement of intellectual property, or result in unintended disclosure may harm our reputation or subject us to fines or other penalties.

We use social media, emails, push notifications and text messages as part of our omni-channel approach to marketing. As laws and regulations evolve to govern the use of these channels, the failure by us, our employees, or third parties acting at our direction to comply with applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines or other penalties. In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, users, educators or others. Information concerning us or our partners and users, whether accurate or not, may be posted on social media platforms at any time and may have an adverse impact on our brand, reputation, or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our reputation, business, operating results, financial condition, and prospects.

We may not be able to protect our intellectual property rights.

We regard our trademarks, service marks, copyrights, patents, trade secrets, proprietary technologies, domain names and similar intellectual property as important to our success. We rely on trademark, copyright and patent law, trade secret protection and confidentiality agreements with our employees, consultants, vendors, customers and others to protect our proprietary rights. Many of the trademarks that we use contain words or terms having a somewhat common usage and, as a result, we may have difficulty registering them in certain jurisdictions. We have not yet obtained registrations for some of our important marks. If other companies have registered or have been using in commerce similar trademarks for products similar to ours, we may have difficulty in registering, or enforcing an exclusive right to use, our marks.

There can be no assurance that our efforts to protect our proprietary rights will be sufficient or effective, that any pending or future patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior technologies, products, or that our patents, trademarks, and other intellectual property will not be challenged, invalidated, misappropriated or infringed by others. Additionally, the intellectual property laws and enforcement practices of other countries in which our product is or may in the future be offered may not protect our products and intellectual property rights to the same extent as the laws of the United States. If we are unable to protect our intellectual property from unauthorized use, our brand image may be harmed, and our business and results of operations may suffer.

Assertions by third parties of infringement, misappropriation or other violation by us of their intellectual property rights could result in significant costs and substantially harm our business and operating results.

In recent years, there has been significant litigation involving intellectual property rights in many technology-based industries. Any infringement, misappropriation or related claims, whether or not meritorious, is time-consuming, diverts technical and management personnel and is costly to resolve. As a result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing our product or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. Any of these events could result in increases in operating expenses, limit our product offerings or result in a loss of business.

We may be required to indemnify our vendors and/or customers, the payment of which could have a material adverse effect on our business, financial condition, and operating results.

We may provide certain rights of indemnification to our vendors and/or customers in certain circumstances. If any plaintiff is successful in certifying a class and thereafter prevailing on the merits of their complaint, such an adverse result could have a material adverse effect on us. In addition, due to the nature and scope of the indemnity and defense we will likely need to provide, the legal fees associated with such indemnification could be significant enough to have a material adverse effect on our cash flows until such matters are fully and finally resolved.

We may be a party to lawsuits that arise in the ordinary course of business.

We may be a party to lawsuits in the future (including product liability, false advertising, and intellectual property claims) that arise in the ordinary course of business. The possibility of such litigation, and its timing, is in large part outside our control. It is possible that future litigation could arise that could have material adverse effects on us.

Risks Relating to the Regulatory Environment

Compliance with new and existing laws and governmental regulations could increase our costs significantly and adversely affect our results of operations.

The processing, formulation, safety, manufacturing, packaging, labeling, advertising and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including the US Food and Drug Administration, or the FDA, the Federal Trade Commission, or the FTC, the Consumer Product Safety Commission, or the CPSC, the U.S. Department of Agriculture, or the USDA, and U.S. Environmental Protection Agency, or the EPA. These activities are also regulated by various state, local and international laws and agencies of the states and localities in which our products are sold. Government regulations may prevent or delay the introduction, or require the reformulation, of our products, which could result in lost revenues and increased costs to us. For instance, the FDA regulates, among other things, the composition, safety, manufacture, labeling and marketing of dietary ingredients and dietary supplements (including vitamins, minerals, herbs, and other dietary ingredients for human use). Dietary supplements and dietary ingredients that do not comply with FDA’s regulations and/or the Dietary Supplement Health and Education Act of 1994 will be deemed adulterated or misbranded. Manufacturers and distributors of dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded, and the FDA may take enforcement action against any adulterated or misbranded dietary supplement on the market. The FDA has broad enforcement powers. If we violate applicable regulatory requirements, the FDA may bring enforcement actions against us, which could have a material adverse effect on our business, prospects, financial condition, and results of operations. The FDA may not accept the evidence of safety for any new ingredient that we may wish to market, may determine that a particular supplement or ingredient presents an unacceptable health risk based on the required submission of serious adverse events or other information, and may determine that a particular claim or statement of nutritional value that we use to support the marketing of a supplement is an impermissible drug claim, is not substantiated, or is an unauthorized version of a “health claim.” Any of these actions could prevent us from marketing particular nutritional products or making certain claims or statements with respect to those products. The FDA could also require us to remove a particular product from the market. Any future recall or removal would result in additional costs to us, including lost revenues from any products that we are required to remove from the market, any of which could be material. Any product recalls or removals could also lead to an increased risk of litigation and liability, substantial costs, and reduced growth prospects.

Additional or more stringent laws and regulations of dietary supplements and other products have been considered from time to time. These developments could require reformulation of some products to meet new standards, recalls or discontinuance of some products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of some products, additional or different labeling, additional scientific substantiation, or other new requirements. Any of these developments could increase our costs significantly. In addition, regulators’ evolving interpretation of existing laws could have similar effects.

Our products are affected by extensive regulations and our failure to comply with any regulations could lead to significant penalties or claims which could materially harm our financial condition and operating results.

The majority of our products are classified as foods, dietary supplements, and cosmetics. In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, advertising, importation, exportation, licensing, sale, and storage of our products are subject to extensive government regulation. This regulation takes the form of laws, governmental regulations, administrative determinations, court decisions, and other similar constraints and exists at the federal, state, and local levels in the United States and at all levels of government in foreign jurisdictions. There can be no assurance that we are, or will remain, in compliance with all of these regulations. Our failure to comply with applicable regulations could disrupt the manufacturing and supplying of our products, our marketing activity, our sale of our products, or lead to increased costs, legal or regulatory proceedings, the imposition of significant penalties, or harm our reputation, any of which could adversely impact our business, financial condition, and operating results. In addition, regulatory authorities periodically review legislative and regulatory policies and initiatives, and may promulgate new or revised, or adopt changes in the interpretation and enforcement of existing, regulations at any time. The adoption of new regulations or changes in the interpretations of existing regulations, such as those relating to genetically modified foods, may result in significant compliance costs or discontinuation of impacted product sales and may negatively impact the marketing of our products or require us to change or cease aspects of our business, any of which could result in significant loss of sales and harm our business, financial condition, and operating results.

For example, we are subject to the rules of the FDA, including Current Good Manufacturing Practice or CGMP regulations. Any failure by us or our contract manufacturers or third-party suppliers and vendors to comply with the CGMPs could negatively impact our reputation and ability to sell our products even after the situation has been rectified and, in the case of our contract manufacturers, even though we are not directly liable under the CGMPs for their compliance. In complying with the dietary supplement CGMPs, we may experience increases in production costs due to increases in required testing of raw ingredients, work in process, and finished products. In addition, regulators and other governmental authorities limit the types of claims that we can make about our products, including nutrition content claims, health claims, and therapeutic claims and otherwise regulate the marketing of our products. For example, the FTC’s guides explain how the FTC interprets prohibitions on unfair or deceptive acts or practices. Consequently, the FTC could bring an enforcement action based on practices that are inconsistent with their guides. It is possible that our use of marketing materials, including testimonials about our products, may be significantly impacted by laws, rules, and regulations governing the marketing of our products and therefore might negatively impact our sales.

A portion of our business is conducted in foreign jurisdictions, exposing us to the risks associated with international operations.

Approximately 36% of our net sales for the year ended June 30, 2023 were generated outside the United States, exposing our business to risks associated with international operations. We plan to invest significant resources in our international operations and expect to continue to do so as we acquire new businesses and enter new markets. However, there are certain risks inherent in doing business in international markets, particularly in the direct-selling industry, which is regulated in many jurisdictions.

For example, a foreign government may impose trade restrictions or increased tariffs, require compliance with trade and economic sanctions laws, rules, or regulations, such as those administered by U.S. Customs and Border Protection and the U.S. Treasury Department’s Office of Foreign Assets Control, implement new or change existing trade policies, or otherwise limit or restrict our ability to import products in a cost-effective manner, or at all, any of which could negatively impact our operations.

Our operations in some jurisdictions also may be adversely affected by political, economic, legal, regulatory, and social conditions, or instability, as well as by economic and political tensions between governments. In addition, our compliance with our code of conduct and anti-bribery laws, rules, and regulations may conflict with local customs and practices in certain of the jurisdictions in which we operate.

Our ability to staff and manage our international operations could also be affected by laws and regulations related to immigration. For example, current and future tightening of U.S. immigration controls may adversely affect the residence status of non-U.S. employees in the U.S. or our ability to hire new non-U.S. employees in the U.S. and may adversely affect the ability of non-U.S. employees from entering the United States.

We are also exposed to risks associated with foreign currency fluctuations, foreign exchange controls, limitations on the repatriation of funds, and changes in currency policies or practices. Accordingly, any strengthening of the U.S. dollar versus a foreign currency could have a negative impact on us. Although we may engage in transactions to protect against risks associated with foreign currency fluctuations, we cannot be certain any hedging activity will effectively reduce our exchange rate exposure. In addition, due to the possibility of government restrictions on transfers of cash out of a country and control of exchange rates, we may not be able to immediately repatriate cash at the official exchange rate. If this should occur, or if the official exchange rate devalues, it may have a material adverse effect on our business, assets, financial condition, liquidity, operating results, or cash flows.

Our overall success depends, in part, on our ability to anticipate and effectively manage these risks, and to coordinate the various legal and regulatory requirements of multiple jurisdictions that are constantly evolving and subject to change, and there can be no assurance that we will be able to do so without incurring unexpected or increased costs or at all. In certain regions, the degree of these risks may be higher due to more volatile economic, political, or social conditions; less developed and predictable legal and regulatory regimes; and increased potential for various types of adverse governmental action. As we continue to focus on expanding our existing international operations, these and other risks associated with international operations will likely increase, which could materially harm our business, financial condition, and operating results.

We are subject to the anti-bribery laws, rules, and regulations of the United States and the other foreign jurisdictions in which we operate.

We are subject to a variety of anti-bribery laws, rules, and regulations, including the U.S. Foreign Corrupt Practices Act, or the FCPA, the U.K. Bribery Act of 2010, and similar anti-bribery laws, rules, and regulations in the other foreign jurisdictions in which we operate. These regimes generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business as well as require companies to maintain accurate books and records. There has been a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and criminal and civil enforcement proceedings brought against companies and individuals by regulators, including the Department of Justice, or DOJ, and the SEC. Our policies mandate compliance with these anti-bribery laws, rules, and regulations, including the requirements to maintain accurate information and internal controls. We operate in many parts of the world that have experienced governmental corruption to some degree and in certain circumstances, strict compliance with anti-bribery laws, rules, and regulations may conflict with local customs and practices. Additionally, we cannot predict the nature, scope, or effect of future anti-bribery requirements or the manner in which existing or new requirements might be administered or interpreted. Alleged or actual violations of any such existing or future laws, rules, or regulations, whether due to our own acts or inadvertence or to the acts or inadvertence of others, may result in criminal or civil sanctions, including fines, penalties, contract cancellations, or debarment, increased compliance costs, changes to our activities, and loss of reputation, any of which could have a material adverse effect on our business, financial condition, and operating results.

Our failure to comply with FTC regulations could result in substantial monetary penalties and could adversely affect our operating results.

The FTC exercises jurisdiction over the advertising of dietary supplements  and all food products and requires that all advertising to consumers be truthful and non-misleading. The FTC actively monitors the dietary supplement space and has instituted numerous enforcement actions against dietary supplement companies for failure to have adequate substantiation for claims made in advertising or for the use of false or misleading advertising claims. Failure to comply with applicable regulations could result in substantial monetary penalties, which could have a material adverse effect on our financial condition or results of operations.

Our operations are subject to environmental and health and safety laws and regulations that may increase our cost of operations or expose us to environmental liabilities.

We are subject, directly or indirectly, to numerous federal, state, local and foreign environmental and health and safety laws and regulations governing our operations, including the handling, transportation and disposal of our non-hazardous and hazardous substances and wastes, as well as emissions and discharges from our operations into the environment, including discharges to air, surface water and groundwater. Failure to comply with such laws and regulations could result in costs for remedial actions, penalties or the imposition of other liabilities. New laws, changes in existing laws or the interpretation thereof, or the development of new facts or changes in their processes could also cause us to incur additional capital and operating expenditures to maintain compliance with environmental laws and regulations and environmental permits. Any failure by us to comply with environmental, health and safety requirements could result in the limitation or suspension of our operations, including operations at our manufacturing facility. We also could incur monetary fines, civil or criminal sanctions, third-party claims or cleanup or other costs as a result of violations of or liabilities under such requirements.

We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment without regard to fault or knowledge about the condition or action causing the liability. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of previously owned or operated properties, or for properties to which substances or wastes that were sent in connection with current or former operations at our facilities. The presence of contamination from such substances or wastes could also adversely affect our ability to sell or lease our properties, or to use them as collateral for financing.

Failure to comply with federal, state and international privacy, data protection, marketing and consumer protection laws, regulations and industry standards, or the expansion of current or the enactment or adoption of new privacy, data protection, marketing and consumer protection laws, regulations or industry standards, could adversely affect our business.

We are subject to a variety of federal, state and foreign laws, regulations and industry standards regarding privacy, data protection, data security, marketing and consumer protection, which address the collection, storing, sharing, using, processing, disclosure and protection of data relating to individuals, as well as the tracking of consumer behavior and other consumer data. We are also subject to laws, regulations and industry standards relating to endorsements and influencer marketing. Many of these laws, regulations and industry standards are changing and may be subject to differing interpretations, are costly to comply with or inconsistent among jurisdictions. For example, the FTC expects companies like ours to comply with guidelines issued under the Federal Trade Commission Act that govern the collection, use, disclosure, and storage of consumer information, and establish principles relating to notice, consent, access and data integrity and security. The laws and regulations in many foreign countries relating to privacy, data protection, data security, marketing and consumer protection often are more restrictive than in the United States, and may in some cases be interpreted to have a greater scope. Additionally, the laws, regulations and industry standards, both foreign and domestic, relating to privacy, data protection, data security, marketing and consumer protection are dynamic and may be expanded or replaced by new laws, regulations or industry standards.

We strive to comply with applicable laws, policies, contractual and other legal obligations and certain applicable industry standards of conduct relating to privacy, data security, data protection, marketing and consumer protection. However, these obligations and standards of conduct often are complex, vague, and difficult to comply with fully, and it is possible that these obligations and standards of conduct may be interpreted and applied in new ways and/or in a manner that is inconsistent with each other or that new laws, regulations or other obligations may be enacted. It is possible that our practices may be argued or held to conflict with applicable laws, policies, contractual or other legal obligations, or applicable industry standards of conduct relating to privacy, data security, data protection, marketing or consumer protection. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, FTC, other regulatory requirements or orders or other federal, state or, as we continue to expand internationally, international privacy, data security, data protection, marketing or consumer protection-related laws, regulations, contractual obligations or self-regulatory principles or other industry standards could result in claims, proceedings or actions against us by governmental entities or others or other liabilities or could result in a loss of consumers. Any of these circumstances could adversely affect our business.

We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. For instance, with the increased focus on the use of data for advertising, the anticipation and expectation of future laws, regulations, standards and other obligations could impact us. In addition, as we expand our data analytics and other data related product offerings there may be increased scrutiny on our use of data and we may be subject to new and unexpected regulations. Future laws, regulations, standards and other obligations could, for example, impair our ability to collect or use information that we utilize to provide targeted digital promotions and media to consumers, thereby impairing our ability to maintain and grow our total customers and increase revenues. Future restrictions on the collection, use, sharing or disclosure of our users’ data or additional requirements for express or implied consent of users for the use and disclosure of such information could require us to modify our solutions, possibly in a material manner, and could limit our ability to develop or outright prohibit new solutions and features. Any such new laws, regulations, other legal obligations or industry standards, or any changed interpretation of existing laws, regulations or other standards may require us to incur additional costs and restrict our business operations. If our measures fail to comply with current or future laws, regulations, policies, legal obligations or industry standards relating to privacy, data protection, data security, marketing or consumer protection, we may be subject to litigation, regulatory investigations, fines or other liabilities, as well as negative publicity and a potential loss of business. Moreover, if future laws, regulations, other legal obligations or industry standards, or any changed interpretations of the foregoing limit our ability to store, process and share personally identifiable information or other data, demand for our products could decrease, our costs could increase, our revenue growth could slow, and our business, financial condition and operating results could be harmed.

We are exposed to potential liability for information on our customers’ websites and for products and services sold through their websites and we may incur significant costs and damage to our reputation as a result of defending against such potential liability.

We are exposed to potential liability for information on our customers’ websites. We could be exposed to liability with respect to such third-party information such as their products, links to third-party websites, advertisements and content provided by customers. Among other things, we may face assertions that, by directly or indirectly providing such third-party content or links to other websites, we should be liable for defamation, negligence, copyright or trademark infringement, or other actions by parties providing such content or operating those websites. We may also face assertions that content on our publishers and advertisers’ websites, including statistics or other data we compile internally, or information contained in websites linked to our websites contains false information, errors or omissions, and users and our customers could seek damages for losses incurred as a result of their reliance upon or otherwise relating to incorrect information. We may also be subject to fines and other sanctions by the government for such incorrect information. In addition, our services could be used as a platform for fraudulent transactions and third-party products and services sold through us may be defective. The measures we take to guard against liability for third-party content, information, products and services may not be adequate to exonerate us from relevant civil and other liabilities.

Any such claims, with or without merit, could be time-consuming to defend and result in litigation and significant diversion of management’s attention and resources. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against these claims and suffer damage to our reputation.

If the use of third-party cookies or other tracking technology is rejected by Internet users, restricted by third parties outside of our control, or otherwise subject to unfavorable regulation, our performance could decline and we could lose customers and revenue.

We use a number of technologies to collect information about our customers. For instance, we use small text files (referred to as “cookies”), placed through an Internet browser on an Internet user’s machine which corresponds to a data set that we keep on our servers, to gather important data. Our cookies collect anonymous information, such as when an Internet user views an advertisement, clicks on an advertisement, or visits one of our advertisers’ websites. In some countries, including countries in the European Economic Area, this information may be considered personal information under applicable data protection laws. On mobile devices, we may also obtain location-based information about the user’s device through our cookies or other tracking technologies. We use these technologies to achieve our campaign goals, to ensure that the same Internet user does not unintentionally see the same media too frequently, to report aggregate information regarding the performance of our digital promotions and marketing campaigns, and to detect and prevent fraudulent activity throughout our network.

Cookies may easily be deleted or blocked by Internet users. All of the most commonly used Internet browsers (including Chrome, Firefox, Internet Explorer, and Safari) allow Internet users to prevent cookies from being accepted by their browsers. Internet users can also delete cookies from their computers at any time. Some Internet users also download “ad blocking” software that prevents cookies from being stored on a user’s computer. If more Internet users adopt these settings or delete their cookies more frequently than they currently do, our business could be harmed. In addition, the Safari and Firefox browsers blocks third-party cookies by default, and other browsers may do so in the future. Unless such default settings in browsers were altered by Internet users to permit the placement of third-party cookies, we would be able to set fewer of our cookies in users’ browsers, which could adversely affect our business. In addition, companies such as Google have publicly disclosed their intention to move away from cookies to another form of persistent unique identifier, or ID, to identify individual Internet users or Internet-connected devices in the bidding process on advertising exchanges. If companies do not use shared IDs across the entire ecosystem, this could have a negative impact on our ability to find the same anonymous user across different web properties, and reduce the effectiveness of our marketing efforts.

In addition, in the European Union, or EU, Directive 2009/136/EC, commonly referred to as the “Cookie Directive,” directs EU member states to ensure that collecting information on an Internet user’s computer, such as through a cookie, is allowed only if the Internet user has appropriately given his or her prior freely given, specific, informed and unambiguous consent. Similarly, this Directive which also contains specific rules for the sending of marketing communications, limits the use of marketing texts messages and e-mails. Additionally, an e-Privacy Regulation, which will replace the Cookie Directive with requirements that could be stricter in certain respects, apply directly to activities within the EU without the need to be transposed in each member state’s law, and could impose stricter requirements regarding the use of cookies and marketing e-mails and text messages and additional penalties for noncompliance, has been proposed, although at this time it is unclear whether it will be approved as it is currently drafted or when its requirements will be effective. We may experience challenges in obtaining appropriate consent to our use of cookies from consumers or to send marketing communications to consumers within the EU, which may affect our ability to run promotions and our operating results and business in European markets, and we may not be able to develop or implement additional tools that compensate for the lack of data associated with cookies. Moreover, even if we are able to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than our current use of cookies.

We may face economic, political and other risks associated with international operations should we determine to expand into the international marketplace, which may adversely affect our revenues and international growth prospects.

International operations will be subject to a number of risks inherent to operating in foreign countries, and any expansion of our international operations will amplify the effects of these risks, which include, among others:

We may also be affected by domestic and international laws and regulations applicable to companies doing business abroad or importing and exporting goods and materials. These include tax laws, laws regulating competition, anti-bribery/anti-corruption and other business practices, and trade regulations, including duties and tariffs. Compliance with these laws is costly, and future changes to these laws may require significant management attention and disrupt our operations. Additionally, while it is difficult to assess what changes may occur and the relative effect on our international tax structure, significant changes in how U.S. and foreign jurisdictions tax cross-border transactions could materially and adversely affect our results of operations and financial position.

Our results of operations and financial position may also be impacted by changes in currency exchange rates. Unfavorable currency exchange rates between the US Dollar and foreign currencies, could adversely affect us in the future. Fluctuations in currency exchange rates may present challenges in comparing operating performance from period to period.

There are other risks that may be inherent to international operations, including the potential for changes in socio-economic conditions, laws and regulations, including, among others, competition, import, export, labor and environmental, health and safety laws and regulations, and monetary and fiscal policies, protectionist measures that may prohibit acquisitions or joint ventures, or impact trade volumes, unsettled political conditions; government-imposed plant or other operational shutdowns, backlash from foreign labor organizations related to our restructuring actions, corruption; natural and man-made disasters, hazards and losses, violence, civil and labor unrest, and possible terrorist attacks.

Additionally, if the opportunity arises, we may expand our operations into new and high-growth international markets. However, there is no assurance that we will expand our operations in such markets in our desired time frame. To expand our operations into new international markets, we may enter into business combination transactions, make acquisitions or enter into strategic partnerships, joint ventures or alliances, any of which may be material. We may enter into these transactions to acquire other businesses or products to expand our products or take advantage of new developments and potential changes in the industry. Our lack of experience operating in new international markets and our lack of familiarity with local economic, political and regulatory systems could prevent us from achieving the results that we expect on our anticipated time frame or at all. If we are unsuccessful in expanding into new or high-growth international markets, it could adversely affect our operating results and financial condition.

Future planned international operations may require us to comply with anti-corruption laws and regulations of the U.S. government and various international jurisdictions in which we do business.

Doing business on a worldwide basis will require us to comply with the laws and regulations of the U.S. government and various international jurisdictions, and our failure to successfully comply with these rules and regulations may expose us to liabilities. These laws and regulations apply to companies, individual directors, officers, employees, and agents, and may restrict our operations, trade practices, investment decisions and partnering activities. In particular, our international operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the Foreign Corrupt Practices Act, or the FCPA. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment, and requires us to maintain adequate record- keeping and internal accounting practices to accurately reflect our transactions. As part of our business, we may deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA. In addition, some of the international locations in which we may operate lack a developed legal system and have elevated levels of corruption. As a result of the above activities, we are exposed to the risk of violating anti-corruption laws. Violations of these legal requirements are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures. We expect to establish policies and procedures designed to assist us and our personnel in complying with applicable U.S. and international laws and regulations should this be required. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations. 

Privacy protection is increasingly demanding, and we may be exposed to risks and costs associated with security breaches, data loss, credit card fraud and identity theft that could cause us to incur unexpected expenses and loss of revenue, suffer reputational harm with our customers, as well as other risks.

The protection of customer, employee, vendor and other business data is critical to us. We receive confidential customer data, including payment card and personally identifiable information, in the normal course of customer transactions. In order for our sales channels to function, we and other parties involved in processing customer transactions must be able to transmit confidential information, including credit card information, securely over public networks. While we have taken significant steps to protect customer and confidential information, the intentional or negligent actions of employees, business associates or third parties may undermine our security measures and result in unauthorized parties obtaining access to our data systems and misappropriating confidential data. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent a compromise of our customer transaction processing capabilities and personal data. Because the techniques used to obtain unauthorized access to, disable, degrade, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any compromise of our data security could result in a violation of applicable privacy and other laws or standards, significant legal and financial exposure beyond the scope or limits of our insurance coverage, interruption of our operations, increased operating costs associated with remediation, equipment acquisitions or disposal, added personnel, and a loss of confidence in our security measures, which could harm our business or investor confidence. Any security breach involving the misappropriation, loss or other unauthorized disclosure of sensitive or confidential information could attract a substantial amount of media attention, damage our reputation, expose us to risk of litigation and material liability, disrupt our operations and harm our business.

Federal, state, provincial and international laws and regulations govern the collection, retention, sharing and security of data that we receive from and about our employees, customers and vendors. The regulatory environment surrounding information security and privacy has been increasingly demanding in recent years, including the recent implementation of the California Consumer Privacy Act. The costs of compliance with, and other burdens imposed by, these and other international data privacy and security laws may limit our business and services and could have a materially adverse impact on our business.

We believe that we are in material compliance with all laws, regulations and self-regulatory regimes that are applicable to us. However, the laws, regulations, and self-regulatory regimes may be modified, and new laws may be enacted in the future that may apply to us and affect our business. Further, data protection authorities may interpret existing laws in new ways. We may deploy new services from time to time, which may also require us to change our compliance practices. Any such developments (or developments stemming from enactment or modification of other laws) or the failure to anticipate accurately the application or interpretation of these laws could create liability for us, result in adverse publicity, increase our future compliance costs, make our products and services less attractive to our customers, or cause us to change or limit our business practices, and materially affect our business and operating results. Further, any failure or perceived failure by us or third-party service providers to comply with international data privacy and security laws may lead to regulatory enforcement actions, fines, private lawsuits or reputational damage.

Risks Relating to Our Common Stock

We have discretion in the use of proceeds from our securities issuances.

Generally, when we issue securities, our management will have broad discretion with respect to the application of net proceeds received by us from the sale of the securities and may spend such proceeds in ways that do not improve our results of operations or enhance the value of the securities issued and outstanding from time to time. Any failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business or cause the price of our securities issued and outstanding from time to time to decline.

There is a limited market for our common stock.

Our common stock is currently quoted on the OTC Markets QB tier under the trading symbol “HLCO.” There can be no assurance that an active and liquid market for our common stock will develop or be maintained, and an investor may find it difficult to resell any of our securities.

The market price of our common stock may be volatile.

The market price of our common stock may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control. This volatility may affect the ability of holders of our common stock to sell their securities at an advantageous price. Such volatility could be subject to significant fluctuations in response to numerous factors including:

The realization of any of these risks and other factors beyond our control could cause the market price of the common stock to decline significantly.

In addition, broad market, societal and industry factors may harm the market price of our common stock. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of our common stock regardless of our operating performance. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, our operations could be adversely impacted, and the trading price of our common stock may be materially adversely affected.

In the past, following a significant decline in the market price of a company’s securities, there have been instances of securities class action litigation having been instituted against that company. If we were to be involved in any similar litigation, we could incur substantial costs, management’s attention and resources could be diverted and our business, operating results and financial condition could be harmed.

We do not intend to pay dividends on our common stock and, consequently, the ability of investors to achieve a return on their investment will depend entirely on appreciation in the price of our common stock.

We do not anticipate paying cash dividends on the common stock in the foreseeable future. The Company currently intends to retain all future earnings to fund the development and growth of its business. Any payment of future dividends will be at the discretion of the directors and will depend on, among other things, the Company’s earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that the directors deem relevant. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment.

We have not paid any cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements which we may enter into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and any other factors that the board of directors decides is relevant. Therefore, any return on your investment in our capital stock must come from increases in the fair market value and trading price of the capital stock. 

We are a holding company and our earnings depend on the earnings and distributions of our subsidiaries.

We have limited assets and we will conduct substantially all of our business through our current operating subsidiaries which will generate all or substantially all our revenues. Our current ability and that of our acquired businesses to distribute funds to us will depend on operating results and tax considerations (both domestic and foreign), applicable laws and regulations which require that solvency and capital standards be maintained by these subsidiaries and contractual restrictions contained in the instruments governing their debt, existing or to be incurred. In the event of a bankruptcy, liquidation or reorganization of any of our subsidiaries, or any other future subsidiary, holders of indebtedness and trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us.

Future sales of common stock by shareholders, directors or officers could create volatility in our share price.

Subject to compliance with applicable securities laws and the terms of any applicable lock-up arrangements, our officers, directors, promoters and their affiliates may sell some or all of their common stock in the future. No prediction can be made as to the effect, if any, such future sales of common stock will have on the market price of our common stock prevailing from time to time. However, the future sale of a substantial number of shares of common stock by our officers and directors, promoters and their affiliates, or the perception that such sales could occur, could materially adversely affect prevailing market prices for our common stock.

Certain outstanding shares of our common stock are, subject to applicable securities laws, generally immediately available for resale in the public markets. Additional shares of our common stock issuable upon the exercise of stock options may also become available for sale in the public market, which may also cause the market price of the common stock to fall. Accordingly, if substantial amounts of common stock are sold in the public market, the market price of our common stock, which is thinly traded could fall substantially.

A small number of shareholders may exercise significant influence on matters submitted to Shareholders for approval.

We have a small number of shareholders who own, in the aggregate, approximately a 55%  equity interest in us. As a result, although these shareholders may not have an agreement to act in concert, they have the ability to exercise significant influence over matters submitted to the vote of shareholders for approval, whether subject to approval by a majority of the shareholders or special resolution.

We may issue additional shares and additional issuances could dilute a shareholder’s holdings.

We may issue additional shares of common stock in the future which may dilute a shareholder’s holdings in us. Our preferred stock, and shareholders have no pre-emptive rights in connection with any future issuances. Our directors have the discretion to determine the provisions attaching to the common stock and the price and the terms of issue of further common stock and preferred stock.

Additional equity financing, including pursuant to an at-the-market offering, may be dilutive to shareholders and could contain rights and preferences superior to those of the common stock. Debt financing may involve restrictions on our  financing and operating activities. Debt financing may be convertible into other of our securities which may result in immediate or resulting dilution. In either case, additional financing may not be available to us on acceptable terms or at all. If we are unable to raise additional funds as needed, the scope of our operations or growth may be reduced and, as a result, we may be unable to accomplish our long-term goals and objectives. In this case, investors may lose all or part of their investment. Any default under debt instruments could have a material adverse effect on us, our business, or the results of operations.

Purchasers of our common stock may experience immediate and substantial dilution of their investment.

The offering price of our common stock may significantly exceed the net tangible book value per share of the common stock. Accordingly, a purchaser of our common stock may incur immediate and substantial dilution of their investment. If outstanding options and warrants to purchase common stock are exercised or securities convertible into common stock are converted, additional dilution will occur. We may sell additional shares of common stock or other securities that are convertible or exchangeable into common stock in future offerings or we may issue additional shares of common stock or other securities to finance future acquisitions.

We cannot predict the size or nature of future sales or issuances of securities or the effect, if any, that such future sales and issuances will have on the market price of our common stock. Sales or issuances of substantial numbers of shares of common stock or other securities that are convertible or exchangeable into common stock, or the perception that such sales or issuances could occur, may adversely affect prevailing market prices of the common stock. With any additional sale or issuance of common stock or other securities that are convertible or exchangeable into common stock, investors will suffer dilution to their voting power and economic interest in us. Furthermore, to the extent holders of our stock options or other convertible securities convert or exercise their securities and sell the common stock they receive, the trading price of the common stock may decrease due to the additional number of shares of our common stock available in the market.

Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline and would result in the dilution of your holdings.

Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements, if any, that might restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common stock.

Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our Company does not own any real estate or other properties. Our business office is located at 130 W 50^th Street, 2^nd Floor, New York, New York, 10020.  The Company has not entered into any agreements for office space.  

ITEM 3. LEGAL PROCEEDINGS

The Company knows of no material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which its directors, officers or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to its interest.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is listed on the OTCQB tier of OTC Markets Group, Inc. under the symbol “HLCO”.

Our common stock is subject to rules adopted by the SEC regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the SEC. That disclosure document advises an investor that investment in “penny stocks” can be very risky and that the investor's salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for our common stock. Many brokers may be unwilling to engage in transactions in our common stock because of the added disclosure requirements, thereby making it more difficult for stockholders to dispose of their shares.

On October 19, 2023, the last reported sales price of our common stock as reported by OTC Markets was $1.72.

Our Common Stock

Our shares of common stock are issued in registered form. Pacific Stock Transfer Inc., Suite 300, 6725 Via Austi Parkway, Las Vegas, NV 89119, (800) 785-7782, is the registrar and transfer agent for the Company's common stock.

As of October 19, 2023, there were 57,474,920 shares of our common stock outstanding held by approximately 200 holders of record of our common stock. This number was derived from our stockholder records and does not include beneficial owners of our common stock whose shares are held in the name of various dealers, clearing agencies, banks, brokers and other fiduciaries.

Our Seed Preferred Stock

Pacific Stock Transfer Inc. is also the registrar and transfer agent for our seed preferred shares.

As of October 19, 2023, we had 11 shareholders of record for our seed preferred stock and a total of 645,000 shares of seed preferred stock issued and outstanding.

Our Seed Preferred Stock does not currently trade on any markets.

Dividend Policy

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.

Equity Compensation Plan Information

On June 10, 2022, our board of directors adopted the 2022 Omnibus Equity Incentive Plan, or the 2022 Omnibus Plan. Adoption of the 2022 Omnibus Plan was also approved on June 10, 2022, by the stockholders holding a majority of the outstanding voting capital stock of the Company.  Under the 2022 Omnibus Plan, non-employee members of our board of directors and employees and officers of the Company and its affiliates, including all executive officers, are eligible to receive options, stock appreciation rights, restricted stock, restricted stock units, stock grants, stock units, performance shares and performance units. The 2022 Omnibus Plan is currently administered by our board of directors. The total number of shares of our common stock reserved and available for grant under the 2022 Omnibus Plan is ten million (10,000,000).

The 2022 Omnibus Plan expires in 10 years from the date of adoption, or June 9, 2032.

The following summary briefly describes the principal features of the 2022 Omnibus Plan and is qualified in its entirety by reference to the full text of the 2022 Omnibus Plan.

Awards that may be granted include: (a) Incentive Stock Options, or ISOs, (b) Non-statutory Stock Options, (c) Stock Appreciation Rights, or SARs, (d) Restricted Stock, (e) Restricted Stock Units, or RSUs, and (g) Performance Awards. These awards offer us and our stockholders the possibility of future value, depending on the long-term price appreciation of our common stock and the award holder’s continuing service with us.

Stock options give the option holder the right to acquire from us a designated number of shares of common stock at a purchase price that is fixed at the time of the grant of the option. The exercise price must generally not be less than the fair market value of the common stock on the date of grant. Stock options granted may be either incentive stock options or non-statutory stock options.

SARs, which may be granted alone or in tandem with options, have an economic value similar to that of options. When an SAR for a particular number of shares is exercised, the holder receives a payment equal to the difference between the fair market value of the shares on the date of exercise and the exercise price of the shares under the SAR. The exercise price for SARs normally is the market price of the shares on the date the SAR is granted. Under the 2022 Omnibus Plan, holders of SARs may receive this payment – the appreciation value – either in cash or shares of common stock valued at the fair market value on the date of exercise. The form of payment will be determined by the Company.

Restricted stock awards represent issued and outstanding shares of common stock subject to vesting criteria. RSUs represent the right to receive shares of common stock subject to satisfaction of vesting criteria. Restricted stock and the rights under RSUs are forfeitable and non-transferable until they vest. The vesting date or dates and other conditions for vesting are established when the shares are awarded.

The 2022 Omnibus Plan also provides for performance awards, representing the right to receive a payment, which may be in the form of cash, shares of common stock, or a combination, based on the attainment of pre-established goals.

All of the permissible types of awards under the 2022 Omnibus Plan are described in more detail below.

Administration of the 2022 Omnibus Plan. The 2022 Omnibus Plan is currently administered by our board of directors. All questions of interpretation of the 2022 Omnibus Plan, of any award agreement or of any other form of agreement or other document employed by us in the administration of the 2022 Omnibus Plan or of any award shall be determined by the board of directors, and such determinations shall be final, binding and conclusive upon all persons having an interest in the 2022 Omnibus Plan or such award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the board of directors in the exercise of its discretion pursuant to the 2022 Omnibus Plan or award agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein.

Eligible Recipients. Persons eligible to receive awards under the 2022 Omnibus Plan are employees (including employees of affiliates and officers or directors who are also treated as employees); consultants, i.e., persons engaged to provide consulting or advisory services to the Company; and directors.

Shares Available Under the 2022 Omnibus Plan. The maximum aggregate number of shares of common stock that may be issued under the 2022 Omnibus Plan shall be 10,000,000 shares and shall consist of authorized but unissued or reacquired shares of common stock or any combination thereof, subject to adjustment for certain corporate changes affecting the shares, such as stock splits, merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, or stock dividend. Shares subject to an award under the 2022 Omnibus Plan which are canceled, forfeited or expires again become available for grants under the 2022 Omnibus Plan.

Stock Options and Stock Appreciation Rights

General. Stock options and SARs shall be evidenced by award agreements specifying the number of shares of common stock covered thereby, in such form as the board of directors shall from time to time establish. Each stock option grant will identify the option as an ISO or Non-statutory Stock Option. Subject to the provisions of the 2022 Omnibus Plan, the board of directors has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the board of directors may determine.

Exercise Price. The exercise price for each stock option or SAR shall be established in the discretion of the board of directors; provided, however, that the exercise price per share for the stock option or SAR shall be not less than the fair market value of a share of common stock on the effective date of grant of the stock option or SAR. Notwithstanding the foregoing, a stock option or SAR may be granted with an exercise price lower than the minimum exercise price set forth above if such stock option or SAR is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.

Exercise Terms. Stock options may be immediately exercisable but subject to repurchase or may be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the board of directors and set forth in the award agreement evidencing such stock option. No stock option or SAR shall be exercisable after the expiration of ten years after the effective date of grant of such stock option or SAR. Subject to the foregoing, unless otherwise specified by the board of directors in the grant of a stock option or SAR, any stock option or SAR granted under the 2022 Omnibus Plan shall terminate ten years after the effective date of grant of the stock option or SAR, unless earlier terminated in accordance with its provisions. The board of directors may set a reasonable minimum number of shares of common stock that may be exercised at any one time.

Expiration or Termination. Options, if not previously exercised, will expire on the expiration date established by the board of directors at the time of grant. In the case of incentive stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our total combined voting stock, such term cannot exceed five years. Options will terminate before their expiration date if the holder’s service with our company or a subsidiary terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations of employment, including terminations as a result of death, disability or retirement, with the precise period during which the option may be exercised to be established by the board of directors and reflected in the grant evidencing the award.

Incentive Stock Options. Stock options intending to qualify as ISOs may only be granted to employees, as determined by the board of directors. No ISO shall be granted to any person if immediately after the grant of such award, such person would own common stock, including common stock subject to outstanding awards held by him or her under the 2022 Omnibus Plan or any other plan established by the Company, amounting to more than 10% of the total combined voting power or value of all classes of stock of the Company. To the extent that the award agreement specifies that an option is intended to be treated as an ISO, the option is intended to qualify to the greatest extent possible as an “incentive stock option” within the meaning of Section 422 of the Code, and shall be so construed; provided, however, that any such designation shall not be interpreted as a representation, guarantee or other undertaking on the part of the Company that the option is or will be determined to qualify as an ISO. If and to the extent that any shares of stock are issued under a portion of any option that exceeds the $100,000 limitation of Section 422 of the Code, such shares of common stock shall not be treated as issued under an ISO notwithstanding any designation otherwise.  

Restricted Stock Awards. A restricted stock award is a grant of shares of common stock. These awards will be subject to such conditions, restrictions and contingencies as the board of directors shall determine at the date of grant, including the attainment of one or more performance criteria. Those may include requirements for continuous service and/or the achievement of specified performance goals. Restricted stock is forfeitable and generally non-transferable until it vests. The vesting date or dates and other conditions for vesting are established when the shares are awarded. Holders of restricted stock otherwise generally have the rights of stockholders of the Company, including voting and dividend rights, to the same extent as other stockholders of the Company.

Restricted Stock Units. An RSU is a right to receive stock on a future date.  The purchase price for shares of stock issuable under each RSU award shall be established by the board of directors in its discretion. Except as may be required by applicable law or established by the board of directors, no monetary payment (other than applicable tax withholding) shall be required as a condition of receiving a RSU award. Shares issued pursuant to any RSU award may (but need not) be made subject to vesting conditions based upon the satisfaction of such service requirements, conditions, restrictions or performance criteria, as shall be established by the board of directors and set forth in the award agreement evidencing such award.

Performance Awards. The board of directors shall designate the terms and conditions of each performance award, including the applicable performance criteria and performance period. Each performance award shall entitle the participant to a payment in cash or common stock upon the attainment of performance criteria and other terms and conditions specified by the board of directors. Notwithstanding the satisfaction of any performance criteria, the amount to be paid under a performance award may be adjusted by the board of directors on the basis of such further consideration as the board of directors in its sole discretion shall determine. The board of directors may, in its discretion, substitute actual common stock for the cash payment otherwise required to be made to a participant pursuant to a performance award.

Performance Criteria. Under the 2022 Omnibus Plan, performance criteria means business criteria including, but not limited to: revenue; revenue growth; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating income; pre-or after-tax income; net operating profit after taxes; economic value added (or an equivalent metric); ratio of operating earnings to capital spending; cash flow (before or after dividends); cash-flow per share (before or after dividends); net earnings; net sales; sales growth; share price performance; return on assets or net assets; return on equity; return on capital (including return on total capital or return on invested capital); cash flow return on investment; total stockholder return; improvement in or attainment of expense levels; and improvement in or attainment of working capital levels or performance criteria. Any performance criteria may be used to measure the Company’s performance as a whole or any of the Company’s business units and may be measured relative to a peer group or index.

Other Material Provisions. Awards will be evidenced by a written agreement, in such form as may be approved by the board of directors. In the event of various changes to the capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be made by the board of directors to the number of shares covered by outstanding awards or to the exercise price of such awards. The board of directors generally has the power to accelerate the exercise or vesting period of an award. The board of directors is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change of control of our company, including acceleration of vesting or payment of the value of the vested portion or, in its discretion, unvested portion of an award in cash, stock, or property. Except as otherwise determined by the board of directors at the date of grant, and subject to the terms of the 2022 Omnibus Plan, awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. The board of directors has the authority, at any time, to discontinue the granting of awards. The board of directors also has the authority to alter or amend the 2022 Omnibus Plan or any outstanding award or may terminate the 2022 Omnibus Plan as to further grants, provided that no amendment may be made without the approval of our stockholders to the extent that such approval is required by law or applicable rules of a securities exchange, and except as otherwise provided by the 2022 Omnibus Plan, no amendment that would adversely affect any outstanding award made under the 2022 Omnibus Plan may be made without the consent of the holder of such award.

The Company has issued the following stock options and stock awards under the 2022 Equity Incentive Plan as of June 30, 2023.

Recent Sales of Unregistered Securities

On April 6, 2023, stock options to acquire 200,000 shares of common stock were exercised at $0.001 per share for cash proceeds of $200 and a total of 200,000 shares of unregistered, restricted common stock were issued to the holder.

On April 7, 2023 we issued 125,000 unregistered, restricted shares of common stock to one corporate subscriber under the terms of a private placement at $2.00 per share for total proceeds of $250,000.

On April 27, 2023 we issued 750,000 unregistered, restricted shares of common stock to two corporate subscribers under the terms of a private placement at $2.00 per share for total proceeds of $1,500,000.

On June 1, 2023, 2,265,000 shares of seed preferred stock were converted into 2,265,000 shares of common stock.

The securities sales referenced above were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act as not involving a public offering, and Regulations D and S, thereunder. These sales were made without any form of general solicitation to sophisticated investors and with full access to any information requested by the investors regarding us and the securities they purchased.

There were no other sales of equity securities during the period covered by this Report that were not registered under the Securities Act or were not previously reported in a Current Report on Form 8-K filed by the Company.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Annual Report on Form 10-K contains predictions, estimates and other forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the risks set forth in the section entitled “Risk Factors” in this Annual Report on Form 10-K, that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.

Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Report. You should read this Report with the understanding that our actual future results may be materially different from what we expect.

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.

The management’s discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The following discussion of our financial condition and results of operations should be read in conjunction with the Company's audited consolidated financial statements and the related notes for the fiscal years ended June 30, 2023 and 2022, that appear elsewhere in this Annual Report. The Company's consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. 

General Overview

We are an emerging health and wellness company that has identified the need for a change to healthcare, where conventional medicine and alternative healing can both be drawn on to provide a world of integrated healing encompassing conventional medicine and alternative medicine. 

Our intent is to build a community of integrated healing brands by identifying and acquiring early stage, high potential brands within selected wellness categories.  Our plan is to build individual market impact through enhanced branding, a credible narrative, social conversation and improved accessibility by positioning all portfolio brands with a larger “healing community” of brands thus building exponential market impact.

On October 13, 2022, we concluded the acquisition of the assets and business of Los Angeles based Your Super, Inc. (“Your Super”) in order to capitalize on two high-growth wellness sectors: superfoods and plant-based nutrition. Your Super ranked #1 in the food and beverage category on Inc.’s 2021 5,000 fastest growing company list, placing 25th overall with a three-year revenue growth of 11,477 percent and $180 million in cumulative revenue. Your Super is a next-gen industry leader in plant-based living. Your Super’s plant-based superfood and protein mixes contain 5 to6 naturally dried superfoods. Superfoods are nutrient-rich foods considered to be high in micronutrients like vitamins, minerals, antioxidants, phytonutrients and enzymes, beneficial for health and well-being. Every ingredient is grown, harvested, 3rd party tested, and packaged 100% sustainably. The ingredients are certified organic, non-GMO certified, glyphosate-free, plant-based and gluten-free. Your Super products do not contain any sweeteners, stevia, artificial flavors, fillers, preservatives or additives.

On August 4, 2022, we entered into a credit agreement with certain lenders who agreed to extend a credit facility to us consisting of up to $150 million in accordance with the terms of the agreement in aggregate principal amount of term loan commitments, the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria established by an administrative agent party to the credit agreement. 

In connection with our acquisition of the assets of Your Super, Inc., on October 27, 2022, we received a $3 million loan under the credit facility referenced above. As an inducement for the loan and for a waiver of certain terms of the credit facility with respect to this loan, we issued to the administrative agent for the credit facility a warrant for 1,560,148 shares of our seed preferred stock. In addition, Your Super HLCO LLC, our indirectly wholly owned subsidiary that we established to house the acquired assets of Your Super, Inc. and to run our new Your Super business, entered into a supplemental agreement to the credit agreement with the administrative agent of the credit facility pursuant to which Your Super HLCO LLC pledged all of its assets (being the Your Super acquired assets) to the administrative agent as collateral for the $3 million loan.

During the quarter ended December 31, 2022, we commenced operations of our business encompassing the Your Super acquired assets.  We added five employees to its US-based operations and nine employees to its European-based operations as a result of this acquisition.

Recent Events

On March 3, 2023, we concluded the acquisition of certain assets of Chopra Global, LLC, a Delaware limited liability company including the Chopra App - a wellness and meditation app, certain products and services including guided meditation packages and detox kits and operation of select Chopra branded health and wellness retreats.  In connection with this acquisition, we drew a further $1.873 million from our credit facility.  We added 8 employees as a result of this acquisition.

On April 20, 2023, we amended our Amended and Restated Articles of Incorporation to restate in its entirety Article Fourth, Section B – Preferred Stock (i) to allow for the optional conversion of our outstanding Seed Preferred Shares and (ii) to conform and correct certain provisions in Article Fourth, Section B relating primarily to the calculation of, and adjustments to, the conversion price of the Seed Preferred Shares. 

Results of Operations

Fiscal Years ended June 30, 2023 and June 30, 2022

The following table summarizes key items of comparison and their related changes for the years ended June 30, 2023, and June 30, 2022.

Revenue

During the fiscal year ended June 30, 2023, we generated revenues of $8,895 as compared to $0 in the fiscal year ended June 30, 2022. Cost of revenue in the fiscal year ended June 30, 2023 was $6,905 as compared to $0 in the prior comparative period. We reported gross profit of $1,990 at June 30, 2023 compared to $0 in the fiscal year ended June 30, 2022. The increase in revenues period over period is related to our acquisition of the Your Super and Chopra wellness assets in October 2022 and March 2023.

Operating Loss

We reported operating expenses of $26,228 resulting in a loss from operations of $24,238 for the fiscal year ended June 30, 2023, as compared to operating expenses of $8,262 resulting in a loss from operations of $8,262 for the fiscal year ended June 30, 2022. The substantial increase to our current period loss is a direct result of an increase in operational expenses of $17,966, consisting of increases to general and administrative expenses of $3,554, predominantly related to stock based compensation in the current fiscal year as well as increased salaries and overhead with respect to our newly acquired operating assets, an increase to professional and consulting fees of $7,679 related to the completion of certain transactions whereby we acquired operating assets in the wellness sector, including financing fees and associated costs, goodwill impairment of $3,869, and an increase to management fees of $982 also as a result of the increase to our workforce as a result of the acquisition of new operations. In addition, during the fiscal year we incurred advertising and marketing expenses of $2,021, with no comparative expenses in the fiscal year ended June 30, 2022. These increased costs were a result of our expansion into the health and wellness sector.

Other Income / Expenses

For the fiscal year ended June 30, 2023, we recorded interest expenses of $669 compared to $2 for the fiscal year ended June 30, 2022, as well as a gain on foreign currency of $358 and other income of $3,240, with no comparative gain or income during the fiscal year ended June 30, 2022. Interest incurred relates predominantly to a credit facility we obtained in August 2022. Other income includes a gain of $1,318 from the settlement of certain outstanding debts acquired with the operating assets from Your Super for less than face value.

Net Loss

We recorded a net loss of $21,309 at June 30, 2023 as compared to a net loss of $8,264 at June 30, 2022.

Statements of Cash Flows

The following table summarizes our cash flows for the years ended June 30, 2023 and 2022:

Cash Used in Operating Activities

Reported in Thousands

Net Cash used in operating activities for the fiscal year ended June 30, 2023 was $7,944 as compared to $2,624 of cash used by operating activities in the fiscal year ended June 30, 2022.

Changes in operating activities in the fiscal year ended June 30, 2023, include various adjustments to reconcile the net loss to net cash used in the current fiscal year including $342 in depreciation and amortization, $6,930 as stock based compensation, $821 in forfeited stock awards, $4,181 in respect to warrants issued, including those issued as a financing cost relative to a line of credit we obtained in August 2022, $3,869 of impairment charges to goodwill, a gain from non-operating expenses of $1,060, predominantly related to the gain from settlement of certain debts acquired with the assets of Your Super for less than face value, a gain from foreign currency translation of $42 and a change in deferred income taxes of $79.  Cash used in operating activities of $2,624 in the fiscal year ended June 30, 2022, included non-cash adjustments of $138 in respect to impairment of certain intangible assets, $8 in respect to the write down of certain inventory and $5,328 for stock based compensation.

Changes in operating assets and liabilities in the fiscal year ended June 30, 2023 include a decrease in advances to vendors of $12, an increase to accounts receivable of $812 and an increase to inventories of $2,063, a decrease to contract liabilities of $987, all relating to the acquisition of certain operating assets from Your Super, Inc. and Chopra Global, LLC.  Accounts payable increased by $3,742 in the current year period as compared to an increase of $205 in the prior comparative year, prepaid expenses increased by $11 in the current year as compared to an increase of $19 in the prior comparative year, and sales tax payable increased by $178 compared to zero in the year ended June 30, 2022.  In the year ended June 30, 2023, we recorded a decrease to accounts payable, related party of $205, compared to an increase of $29 in the year ended June 30, 2022.

Cash Provided by Investing Activities

During the fiscal year ended June 30, 2023, investing activities as a result of the acquisition of the assets of Your Super, Inc. and Chopra Global, LLC used net cash of $4,275 which was comprised of cash acquired on acquisition of $595, a cash payment in respect of the acquisition of $4,500, purchases of property and equipment of $368, and security deposits of $2. 

During the fiscal year ended June 30, 2022, investing activities used net cash of $31 including cash paid to acquire our wholly owned subsidiary, NOEO of $20 and for certain intangible assets including trademark applications of $11. 

Cash Provided by Financing Activities

During the fiscal year ended June 30, 2023, financing activities provided net cash of $7,222, which was comprised of proceeds from the sale of common stock and seed preferred stock of $2,200, proceeds from a financing facility line of credit of $5,014, and proceeds from related party advance of $8.  

During the fiscal year ended June 30, 2022, financing activities provided net cash of $9,148, which was comprised of proceeds from private placement share subscriptions of $9,330, proceeds from related party loans of $20, proceeds from related party advances of $3 offset by repayments to related party advances of $204.  

Liquidity and Capital Resources

Reported in Thousands

The Company’s balance sheet as of June 30, 2023, reflects current assets of $7,617 consisting of $1,503 cash on hand, accounts receivable, net of $161, prepaid expenses of $1,309, inventory, net of $2,681, advances to vendors and other current assets of cumulative $1,963. We had a working capital deficit of $7,116 as of June 30, 2023 compared to $6,107 as of June 30, 2022, and have reported accumulated losses to date of $29,900. We have commenced revenue generating operations in the wellness sector; however, revenues are not yet sufficient to meet ongoing operational expenditures. During the fiscal year ended June 30, 2023, we entered into a credit agreement with certain lenders who agreed to extend us a credit facility of up to $75,000 (which amount may be increased up to $150,000 in accordance with the terms of the agreement) in aggregate principal amount of term loan commitments, the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria. During the year ended June 30, 2023, we drew down $4,873 under the credit facility to assist in financing the acquisition of additional operating assets. 

Going Concern

We had a working capital deficit of $7.1 million as of June 30, 2023. During the year ended June 30, 2022, we entered into private placement subscription agreements to raise a total of $10 million by the sale of seed preferred stock at $2 per share, of which we have collected $9.66 million. During the fiscal year ended June 30, 2023, we sold an additional 50,000 shares of seed preferred stock at $2 per share for proceeds of $0.1 million and 875,000 shares of common stock at $2 per share for proceeds of $1.75 million, all of which has been collected to date. We have commenced operations in the wellness sector initially through the acquisition of NOEO and more recently with the acquisition of the Your Super and Chopra Business assets. During the fiscal year ended June 30, 2023, we entered into a credit agreement with certain lenders who agreed to extend a credit facility to us consisting of up to $75 million (which amount may be increased up to $150 million in accordance with the terms of the agreement) in aggregate principal amount of term loan commitments), the proceeds of which may be used to acquire assets that are deemed eligible by meeting certain criteria. As of June 30, 2023, we have been funded $4.87 million under the terms of this agreement in order to facilitate the purchase of operating assets.  Our continuation as a going concern is dependent upon the ability to attain profitable operations from our future planned business operations and sufficient financing to carry out those plans. If we are unable to obtain adequate capital as needed, or conduct revenue generating operations, we may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

Credit Facility

As of September 20, 2023, we were out of compliance for the month ended August 31, 2023 with a financial covenant in our credit agreement requiring us to maintain at least $2,000,000 in unrestricted and unencumbered cash.  Additionally, as of September 30, 2023, our monthly EBITDA for Your Super was less than $75,000 which, under our credit agreement, resulted in a borrowing base deficiency with respect to the Your Super acquisition.  These two defaults entitled our lenders, upon notice to us, to take action to enforce their rights against us including, but not limited to, demanding immediate payment of their outstanding loans to us in the principal amount of $4,873,163, as of September 30, 2023, and enforcing their liens on our Your Super and Chopra operating assets. 

On October 12, 2023, we entered into a limited waiver to the credit agreement with our lenders, waiving  the two breaches referenced above provided that (i) we regain compliance with our cash covenant referenced above no later than, and remain compliant after, November 30, 2023, and (ii) we deposit $150,000 into a special reserve collection account on behalf of the secured lenders prior to the earlier to occur of (x) November 30, 2023 and (y) the closing of a sale of our equity in an amount of not less than $2,000,000. Our failure to comply with either of these two new covenants will constitute an event of default under the credit agreement entitling our secured lenders to pursue all rights and remedies against us under the credit agreement, including acceleration of our loans, foreclosure and collection actions.  

COVID-19 Pandemic and Other factors

While the World Health Organization has recently declared that the COVID-19 pandemic is no longer a public health emergency of international concern and the global economy is focused on recovery, the impact of COVID-19 could continue to have an adverse impact on us going forward. COVID-19 caused significant disruptions to the global financial markets, which may continue to impact our ability to raise additional capital and to pursue certain acquisitions. Additional factors which may impact our ongoing operations include, but are not limited to, inflation, potential supply chain issues as a result of the aforementioned recovery from the COVID-19 pandemic, the recent war in the Ukraine and climate change. These events may have serious adverse impact on domestic and foreign economies which may impact our operations as a result of a variety of factors including the potential for reduced consumer spending.  We are unable to predict the ongoing impact of these factors on our consolidated financial operations. There are no assurances that we will be able to meet its obligations, raise funds or conclude the acquisition of identified businesses.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change and continually maintain effective cost control in operations.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introduction.

Critical Accounting Policies

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. Our significant accounting policies are more fully discussed in the Notes to our Financial Statements. 

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP 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 revenue and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of its assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and we include any revisions to its estimates in its results for the period in which the actual amounts become known. Significant estimates in the period include the allowance for doubtful accounts on accounts and other receivables, inventory allowance and impairment, valuation and useful lives of fixed assets, valuation of common stock and stock warrants, stock option valuations, imputed interest on due to related parties, and deferred tax valuation allowance.

Inventories

Inventories consist primarily of raw materials, work-in-process (blended superfood powder) and finished goods. Finished goods and work-in-process include direct materials, finished product kits, finished products, third-party blender and other overhead costs involved in manufacturing for e-commerce sales. We value inventory using the standard costing method whereunder product costs are allocated based on standard rates for materials, labor, and overhead. We analyze actual costs at regular intervals and accounts for any variance in its costs of goods sold. Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in first-out method. Inventories have been reduced by an allowance for excess, obsolete and unsaleable inventories. The allowance is an estimate based on our management’s review of inventories on hand compared to estimated future usage and sales. We perform cycle counts of inventories at its warehouse and distribution center throughout the year. An allowance for inventory shrinkage is established for estimated inventory shrinkage since the last physical inventory date through the reporting date.

Goodwill and Intangibles

Goodwill represents the excess of the purchase price over the fair market value of the net assets (including intangibles) acquired on October 13, 2022 and March 3, 2023, respectively. We have implemented the Business Combinations Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, Intangibles- Goodwill and Other. Goodwill and tradename are deemed to have an indefinite life, customer/distributor relationships have a definite life of approximately 5 years and non-compete provisions with key employees have a definite life of approximately 4 years. Goodwill and indefinite life intangible assets are not amortized but are subject to, at a minimum, annual impairment tests. We expense costs to maintain or extend intangible assets as incurred.

We review intangible assets (with a definite life), excluding goodwill and tradenames, for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. We measure the recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows that the assets are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value of the asset exceeds its fair value.

We test goodwill, accreditation and trade names for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Amortization of customer relationships and non-compete agreements on a straight-line basis totaled $190 during the fiscal year ended June 30, 2023.  During the year ended June 30, 2023, management evaluated goodwill and recorded an impairment charge of $3,869.

Stock-Based Compensation

We account for stock option awards granted to employees, non-employees, and directors using the accounting guidance in ASC 718 “Stock Compensation” (“ASC 718”). In accordance with ASC 718, we estimate the fair value of service-based options and performance-based options on the date of grant, using the Black-Scholes pricing model. We recognize compensation expense for stock option awards over the requisite or implied service period of the grant. Compensation expense is recognized on a straight-line method over the requisite service period. Forfeitures are accounted for as they occur.

Revenue Recognition

The Company follows ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. During the fiscal year ended June 30, 2023, the Company generated revenues from selling its wellness products direct to customers using its owned and operated eCommerce website. The Company considers its performance obligations satisfied upon shipment and/or delivery of the purchased products to the customer. The Company evaluates returns from customers purchasing product using its eCommerce site on a case-by-case basis and generally will issue replacement product in the limited cases of product returns. The Company has no policy requiring cash refunds.

Recent Accounting Pronouncements

We have implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Subsequent Events

On August 24, 2023, we announced a restructuring plan to reduce overhead costs by approximately 30% and eliminate workforce redundancies that resulted from the acquisitions of Your Super and Chopra earlier in the year. This plan, which resulted in the elimination of eleven full time and four part time redundant positions, took effect on August 25, 2023.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated audited financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The consolidated audited financial statements are filed as part of this annual report starting on page F-1.

The Healing Company Inc.

Consolidated Financial Statements

For the Fiscal Years ended June 30, 2023 and 2022

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

The Healing Company Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The Healing Company Inc. and its subsidiaries (the Company) as of June 30, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two year period ended June 30, 2023, 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 as of June 30, 2023 and 2022, and the results of its operations and its cash flow for each of the years in the two year period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

The Company's Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred substantial operating losses and will require additional capital to continue as a going concern. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Basis for Opinion

These financial statement are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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.

New York, NY   Washington DC   Mumbai & Pune, India   Boca Raton, FL 

San Francisco, CA   Las Vegas, NV   Beijing, China   Athens, Greece

Member: ANTEA International with affiliated offices worldwide

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill and Other Intangibles arising from the acquisitions of Your Super, Inc. – Refer to Note 3 of consolidated financial statements

Critical Audit Matter Description

As disclosed in Note 3, on October 13, 2022, the Company completed the acquisition to acquire all the rights, title and interests in and substantially all of the assets owned by Your Super, Inc. (“YS”). The consideration included cash, warrants, stock and assumption of liabilities, net of assets purchased.  Given the significant judgments made by management to estimate the intangible assets acquired, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and an increased effort, including the need to involve fair value experts.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others:

New York, NY   Washington DC   Mumbai & Pune, India   Boca Raton, FL 

San Francisco, CA   Las Vegas, NV   Beijing, China   Athens, Greece

Member: ANTEA International with affiliated offices worldwide

The Healing Company Inc.

Consolidated Balance Sheets

(Stated in U.S. Dollars)

(in thousands, except share and per share amounts)

The accompanying notes are an integral part of these consolidated financial statements. 

The Healing Company Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Stated in U.S. Dollars)

(in thousands, except share and per share amounts)

The accompanying notes are an integral part of these consolidated financial statements.

The Healing Company Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

 (Stated in U.S. Dollars)

(in thousands, except share and per share amounts)