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As filed with the Securities and Exchange Commission on November 2, 2023

 

Registration No. 333-268721

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

Amendment No. 6 to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

SCRIPPS SAFE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   SIC: 7372 NAICS: 511210   88-0611514

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

 

 

Scripps Safe, Inc.

9051 Tamiami Trail N, Suite 201

Naples, FL 34108

(844) 472-3379

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Jacqueline von Zwehl

Chief Executive Officer

Scripps Safe, Inc.

9051 Tamiami Trail N, Suite 201

Naples, FL 34108

(844) 472-3379

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:

Arthur Marcus, Esq.

Kayla Scoccola, Esq.

Sichenzia Ross Ference Carmel LLP.

1185 Avenue of the Americas

New York, New York 10036

(212) 930-9700

     

Richard Anslow, Esq.

Jonathan Deblinger, Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, New York 10105

(212) 370-1300

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

 

Large accelerated filer ☐   Accelerated filer ☐
Non-accelerated filer   Smaller reporting company
    Emerging growth company

 

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 7(a)(2)(B) of the Securities Act.

 

 

 

 

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant will file a further amendment which specifically states that this registration statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

EXPLANATORY NOTE

 

This Registration Statement contains two forms of prospectuses: one to be used in connection with the initial public offering of 2,115,000 shares of common stock through the underwriter named on the cover page of this prospectus (the “IPO Prospectus”) and one to be used in connection with the potential resale by selling stockholders of up to 1,915,000 shares of common stock, which includes 250,000 shares issuable upon the exercise of certain outstanding warrants (the “Resale Prospectus”). The IPO Prospectus and the Resale Prospectus will be identical in all respects except for the alternate pages for the Resale Prospectus included herein which are labeled “Alternate Pages for Resale Prospectus.

 

The Resale Prospectus is substantively identical to the IPO Prospectus, except for the following principal points:

 

they contain different outside and inside front covers;
   
they contain different Offering sections in the Prospectus Summary section;
   
they contain different Use of Proceeds sections;
   
the Capitalization section is deleted from the Resale Prospectus;
   
the Dilution section is deleted from the Resale Prospectus;
   
A Selling Stockholder section is included in the Resale Prospectus;
   
the Underwriting section from the IPO Prospectus is deleted from the Resale Prospectus and a Plan of Distribution is inserted in its place; and
   
the Legal Matters section in the Resale Prospectus deletes the reference to counsel for the underwriters.

 

We have included in this Registration Statement, after the financial statements, a set of alternate pages to reflect the foregoing differences of the Resale Prospectus as compared to the IPO Prospectus.

 

While the selling stockholders have expressed an intent not to sell the common stock registered pursuant to the Resale Prospectus prior to the closing of or concurrently with the initial public offering, the sales of our common stock registered in the IPO Prospectus and the Resale Prospectus may result in two offerings taking place sequentially or concurrently, which could affect the price and liquidity of, and demand for, our common stock. This risk and other risks are included in “Risk Factors” beginning on page 11 of the IPO Prospectus.

 

Restatement of previously issued financial statements. 

 

As stated in Note 10 “Restatement” in our consolidated condensed Financial Statements, we have restated our consolidated condensed Financial Statements as of June 30, 2023, and Management’s Discussion and Analysis has been revised to account for the effects of the restatement to record the expense not recognized in previously issued financial statement.

 

 
 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS   SUBJECT TO COMPLETION   November 2, 2023

 

2,115,000 Shares of Common Stock

 

 

This is the initial public offering of shares of common stock of Scripps Safe, Inc.

 

Prior to this offering, there was no public market for our common stock. We currently estimate that the initial public offering price per share will be between $4.00 and $6.00. The final public offering price will be determined by us and Spartan Capital Securities, LLC, as representative of the underwriters in connection with this offering, taking into consideration several factors at the time of pricing, including our historical performance and capital structure, prevailing market conditions, and overall assessment of our business. Therefore, the assumed public offering price used throughout this prospectus of $5.00 per share, the midpoint of the anticipated range, may not be indicative of the actual public offering price for our common stock.

 

We intend to apply to list our shares of common stock for trading on the Nasdaq Capital Market, or Nasdaq subject to official notice of issuance, under the symbol “SCRP”. Completion of this offering is contingent on the approval of our listing application for trading on the Nasdaq Capital Market.

 

The offering is being underwritten on a firm commitment basis. The underwriter may offer the shares of common stock from time to time to purchasers directly or through agents, through brokers in brokerage transactions on the Nasdaq Capital Market, to dealers in negotiated transactions or in a combination of such methods of sale, or otherwise, at fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices.

 

Upon completion of this offering, our Chief Executive Officer, and founder Jacqueline von Zwehl and her husband, our Chief Growth Officer Christopher von Zwehl, will collectively beneficially own approximately 64.94% of our common stock (or approximately 63.25% of our common stock if the underwriters’ over-allotment option is exercised in full) and we will be a “controlled company” within the meaning of the listing rules of The Nasdaq Stock Market LLC.

 

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

 

Investing in our securities is highly speculative and involves a high degree of risk. See “Risk Factors” beginning on page 11 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

   Per Share   Total 
Initial public offering price  $5.00   $10,575,000 
Underwriting discounts and commissions(1)   $0.45   $951,750 
Proceeds, before expenses, to us  $4.55   $9,623,250 

 

(1) Assumes no exercise of the over allotment shares. The underwriters will be reimbursed for certain expenses incurred in the offering. See “Underwriting” for additional disclosure regarding underwriting discounts, commissions and expenses.

 

We have granted to the underwriters an option to purchase up to 317,250 additional shares of common stock to cover overallotments, if any, exercisable at any time until 45 days after the date of this prospectus.

 

The underwriters expect to deliver the shares of common stock to purchasers in the offering on or about _______________, 2023.

 

Spartan Capital Securities, LLC

 

The date of this prospectus is ___, 2023.

 

 

 

 

TABLE OF CONTENTS

 

    Page
GENERAL MATTERS   ii
TRADEMARKS   ii
USE OF MARKET AND INDUSTRY DATA   ii
PROSPECTUS SUMMARY   1
RISK FACTORS   11
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS   28
USE OF PROCEEDS   28
DIVIDEND POLICY   29
CAPITALIZATION   29
DILUTION   30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   31
BUSINESS   34
MANAGEMENT   46
EXECUTIVE COMPENSATION   50
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS   52
PRINCIPAL STOCKHOLDERS   53
DESCRIPTION OF SECURITIES   54
SHARES ELIGIBLE FOR FUTURE SALE   56
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK   58
UNDERWRITING   61
LEGAL MATTERS   64
EXPERTS   65
WHERE YOU CAN FIND ADDITIONAL INFORMATION   65
INDEX TO FINANCIAL STATEMENTS   F-1

 

You should rely only on the information contained in this prospectus or in any free writing prospectuses or amendments thereto that we may provide to you in connection with this offering. Neither we nor any of the underwriters have authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or in any such free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to the reliability of any other information that others may give to you. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither we nor any of the underwriters are making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted.

 

i

 

 

GENERAL MATTERS

 

Unless otherwise indicated, all references to “dollars,” “US$,” or “$” in this prospectus are to United States dollars.

 

This prospectus contains various company names, product names, trade names, trademarks and service marks, all of which are the properties of their respective owners.

 

Unless otherwise indicated or the context otherwise requires, all information in this prospectus assumes no exercise of the over-allotment option granted to the underwriters.

 

Unless otherwise indicated, all references to “GAAP” in this prospectus are to United States generally accepted accounting principles.

 

Information contained on our websites, including www.4saferx.com and http://www.scrippssafe.com, shall not be deemed to be part of this prospectus or incorporated herein by reference and should not be relied upon by prospective investors for the purposes of determining whether to purchase the units offered hereunder.

 

Through and including ____________, 2023 all dealers effecting transactions in shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter with respect to an unsold allotment or subscription.

 

For investors outside the United States, neither we nor any of our agents have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourself about and to observe any restrictions relating to this offering and the distribution of this prospectus.

 

USE OF MARKET AND INDUSTRY DATA

 

This prospectus includes market and industry data that has been obtained from third party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to those industries based on that knowledge). Management’s knowledge of such industries has been developed through its experience and participation in those industries. Although our management believes such information to be reliable, neither we nor our management have independently verified any of the data from third party sources referred to in this prospectus or ascertained the underlying economic assumptions relied upon by such sources. In addition, the agents have not independently verified any of the industry data prepared by management or ascertained the underlying estimates and assumptions relied upon by management. Furthermore, references in this prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report survey or article is not incorporated by reference in this prospectus.

 

TRADEMARKS

 

Scripps Safe currently owns various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names. There are no known issues, disputes, litigation, or opposition proceedings regarding the Company’s use of any marks referenced herein.

 

ii

 

 

PROSPECTUS SUMMARY

 

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Scripps” “the Company,” “we,” “us” and “our” in this prospectus refer to Scripps Safe, Inc.

 

Company Overview

 

We are a pharmaceutical supply chain solutions company. We focus on the secure transport, storage, distribution and dispensing of pharmaceuticals within the lawful supply chain to healthcare providers while ensuring compliance with federal, state and industry oversight regulations. Our mission is to keep pharmaceuticals secure from the manufacturer/distributor to the patient by delivering integrated solutions across the United States and Canada.

 

WHO WE ARE

 

We are pharmaceutical security and inventory control pioneers. We bring innovation to compliance.®

 

WHAT WE DO

 

We innovate and develop integrated pharmaceutical security solutions, creating a safer healthcare environment.® 

 

HOW WE DO IT

 

Protecting the chain of custody.®

 

Scripps Safe, Inc. plans to primarily focus on three major verticals, mobile pharmaceutical delivery including Fire-EMS; Private Ambulance operations/ home healthcare delivery; and Addiction or Medication Treatment Facilities by launching solutions with a yearly subscription recurring revenue model. These verticals represent the pharmaceutical distribution supply chain from manufacturers through distributors down to care providers. The technology solution is the Scripps System™ which was debuted at EMS (“Emergency Medical Services”) World October 2021. Scripps Safe was honored to be chosen as a 2021 EMS World Innovations Award Winner for the Scripps System™, a Drug Enforcement Agency (“DEA”) and Drug Supply Chain Security Act (“DSCSA”) compliance inventory audit and tracking solution.

 

The Scripps System™ is a Platform as a service (PaaS) Solution to keep pharmaceuticals secure within the lawful supply chain. This solution will deliver new releases of expanded features and functions made available on a yearly subscription revenue model. The Scripps System™ currently includes the availability of secure storage (vaults and safes) and access control system management available now on a transaction-based revenue model. New solution features are scheduled to be released in 2023 and 2024 and will include advanced inventory management, supply chain tracking, audit/tracking capability, diversion control, advanced analytics, and application programming interfaces (“API”) to common healthcare applications which will be made available on the subscription revenue model.

 

Scripps Safe currently has over 600 healthcare clients who have purchased DEA compliant vaults and safes.

 

To date, Scripps Safe has financed operations primarily through the sales of vaults and safes, founders’ contributions and an EIDL (“Economic Injury Disaster Loan”) Small Business Administration (“SBA”) Loan. Scripps Safe did record negative cash flow from operations and stockholders’ deficit which caused our independent auditor to raise doubt about our ability to continue as a growing concern.

 

Pharmaceutical security is REQUIRED by law. There are 1.9 million and growing state licensed and federally registered facilities and professionals that can handle regulated controlled substances. The security guidelines are mandated in the Controlled Substance Act of 1970 which is enforced by the DEA, the DSCSA under the jurisdiction of the FDA and each state has pharmaceutical jurisdiction enforced by their respective Bureau of Narcotics and/or Board of Pharmacy Department of Health and other Licensing Boards. Additionally, the recent passage of the Coronavirus Aid, Relief and Economic Security (“Cares Act of 2020”) and the Coronavirus Response and Consolidated Appropriations Act (“Cares Act of 2021”) provides funding and subsidies support for qualified healthcare treatment facilities to pay for their pharmaceutical security solutions. Scripps Safe does not have a controlled substance license nor are we required to for our business model.

 

The DEA enforcement of the Controlled Substance Act of 1970 is the U.S. federal statute establishing drug policy under which the manufacture, importation, possession, use, and distribution of certain substances is regulated. The FDA enforcement of the Drug Supply Chain Security Act of 2013, outlines steps to build an electronic, interoperable system to identify and trace certain prescription drugs as they are distributed in the U.S. Compliance traceability will become mandatory by November of 2023. State Pharmacy Boards, Departments of Health and/or State Bureaus of Narcotics have the option to require stricter guidelines. Many states have now implemented legal requirements for constant pharmaceutical supervision and surveillance and an “unbroken chain of custody”.

 

1
 

 

The U.S. market for Scripps Safe is estimated to be congruent with pharmaceutical distribution. The U.S. pharmaceutical market is controlled by the top 3 biggest distributors, McKesson, AmerisourceBergen, and Cardinal Health, known as the “Big 3”. In 2021 the “Big 3” reported a total of $574B in revenue, showing a steady year-to-year average growth rate of 7% over the last 10 years.1 Additionally as previously mentioned, there are currently over 1.9M controlled substance state license and DEA registrant holders with 135,000+ new entrants in the market every year.2 Based on the total pharmaceutical distribution in the U.S. and the actual number of controlled substance license and registrant holders, Scripps Safe estimates the U.S. addressable market opportunity for the Scripps SystemTM solution to be $16.5 billion a year and growing at a steady rate of 7% year-to-year.

 

 

3

 

This estimated market is for the U.S. ONLY. Scripps Safe does plan future expansion into international markets. This addressable market also does not account for the additional security requirements which may be mandated by the opioid litigation settlements and/or any future updates to the federal 52-year-old Controlled Substance Act and ever-changing state laws. State license holders and federal registrants must follow the stricter of the two sets of laws. We believe these future developments will dramatically increase the overall market opportunity and growth rate.

 

In 2023, it’s critical we hire key personnel to continue supporting the target markets and solution launches. To attract top talent, we plan to offer key executives’ equity through participation in an equity incentive plan (or similar) to be adopted by us. Other focus areas will include software development, patent protection/design filings and at least two new solutions launched in addition to re-launching our existing solutions through subscription revenue models. We opened in May of 2022 a 5,000 square foot leased location in Jeffersonville, Indiana (sales, Eastern USA distribution, hardware innovation and customer support).

 

In 2023, we will continue hiring to support solutions development, marketing and sales. We’ll launch several solutions at key industry events within our targeted verticals. These events will be supported by months of pre-release public-relations campaigns, marketing tactics and launch deliverables. In 2023, we also plan strong sales and marketing expansion within these targeted verticals to grow revenue, market share and strategic positioning.

 

1 Compilation of Publicly reported revenues from each company

2 https://www.dealookup.com

3 Publicly reported annual revenues

 

2
 

 

Core Values

 

Every day we aim to change the world. To make an impactful difference. To save lives.

 

  1.

Creating A Safer Healthcare Environment®

  2.

We Bring Innovation to Compliance®

  3.

Protecting the Chain of Custody®

 

Drug diversion leads to drug abuse and death. We seek to keep drugs safe and save lives.

 

We Are…

 

  Mission Driven – Inspired by our core values; we lead, collaborate and serve.
     
  Game Changers – We provide the highest level of quality products and solutions that affordably address pharmaceutical security and compliance requirements.
     
  Innovators – We develop and patent integrated solutions to create a seamless workflow across the supply chain and across market verticals.
     
  Thought Leaders – We strive to be recognized as the industry thought leaders and experts in pharmaceutical security driving impactful and positive change.
     
  Collaborators – We enjoy working in an environment that fosters participative management, ethical business practices, effective communication, encourages teamwork, stimulates creativity and promotes success through mutual trust and respect.
     
  Influencers – We are driven to promulgate legislation at the state and federal levels to update pharmaceutical security standardization across the country providing for a safer, more secure and compliant environment.
     
  Customer Driven – Our customers’ needs are our needs. Their success is our success. Their challenges become our challenges. We are passionately committed to serving our customers and delivering solutions/services which far exceed expectations.
     
  Resilient – Markets, legislation and business dynamics change very fast. We strive to adapt quickly in the face of all disruptive challenges.
     
  Positive & Inspiring – We strive to attract and retain high performing leaders and teams who inspire one another, enjoy collaboration and celebrate mutual success.
     
  Patriotic – We are committed to sourcing and developing quality “Made in the USA” solutions and products. We love to hire veterans and those who’ve served our communities.
     
  Profit & Growth Driven – We are driven by sound business practices, operational excellence and growing revenue to exceed the costs of doing business. We understand the balance of managing profit margin, making sound investments and taking calculated risks. We are committed to our investors and creating sustainable long-term growth.
     
  Radical ThinkersWe believe we can and will reduce drug diversion. WE WILL SAVE LIVES.

 

“Passionate, hard-working and focused determination will Impact and Change the World.”

- Jacqueline von Zwehl, Founder/CEO Scripps Safe

 

3
 

 

Scripps Safe is proud to announce several recent highlights.

 

Scripps Safe was granted US Patent No. 11,257,314, issued 2/22/2022 – AUDITABLE SECURITY SYSTEM FOR SECURE ENCLOSURE.

 

The patent has claims directed to a security system comprising a safe, covert cameras, a video management system, alarm system, database, and computing system to process system data for preventing unlawful diversion of goods and/ or services.

 

Scripps Safe, Inc., was named a 2021 EMS World Innovation Awards Winner at the annual 2021 EMS World Expo in Atlanta. EMS World is the most influential and trusted voice among emergency medical services professionals. The Company publishes EMS World Magazine and runs North America’s largest EMS trade show/educational conference as part of HMP Global. Scripps Safe was recognized for its Scripps SystemTM, an end-to-end PaaS pharmaceutical inventory and access management system with smart analytics, a single integrated platform solution for narcotics/pharmaceutical transport, security, surveillance, access, inventory management, and analytics. A key component is the data which is held separate and aside from electronic health records, firewalled and encrypted. This monthly subscription cloud-based service connects to the inventory management system. The system will run on Verizon, T-Mobile, and/or AT&T LTE 4G/5G+ Wi-Fi networks for uninterrupted operability for first response reliability. The Scripps SystemTM will be available Fall of 2023.

 

Scripps Safe, Inc., was named a Top 10 Healthcare Security Solution Providers of 2022 by Healthcare Tech Outlook. Healthcare Tech Outlook is an industry leading publication with over 112,000 qualified healthcare technology subscribers focused on the current healthcare landscape, new solutions and enhanced care solutions for providers.

 

Owned IP - Trademarks Granted - 14

 

   

1. Scripps Safe Logo®

2. Rescue Series®

    3. TRXP Series ®  
    4. Guardian Series®  
    5. SafeDispense®  
    6. C1SAFE®  
    7. Total Rx Protection®  
    8. U.S. Strategic Drug Vault®  
    9. We Bring Innovation to Compliance®  
    10. Creating A Safer Healthcare Environment®  
    11. We’re Ending the Opioid Crisis®  
   

12. Protecting the Chain of Custody®

13. Cross & Shield Logo Art in Scripps Safe logo®

   

14. Central Dispense®

 

  

Risk Factor Summary

 

Our business is subject to numerous risks described in the section entitled “Risk Factors” and elsewhere in this prospectus. You should carefully consider these risks before making an investment. Some of these risks include:

 

4
 

 

Risks Related to Our Business Operations, and Industry

 

  We are an early development stage company with a limited operating history and have generated limited revenues to date.
  We have a new business model, which makes it difficult for us to forecast our financial results, creates uncertainty as to how investors will evaluate our prospects, and increases the risk that we will not be successful.
  We have a limited operating history and we expect a number of factors will cause our operating results to fluctuate on an annual basis, which may make it difficult to predict our future performance.
  We face competition from other companies and our operating results will suffer if we fail to compete effectively.
  Our business depends substantially on the continuing efforts of our executive officers and our business may be severely disrupted if we lose their services.
  We currently do not own a manufacturing facility, and rely on different manufacturers and suppliers for the production of our safes; while we have obtained favorable financing arrangements in the past from these manufacturer(s) and supplier(s), there is no assurance that future suppliers would provide similar favorable financing arrangements.
  Shortages of components and materials, as well as supply chain disruptions, may delay or reduce our sales and increase our costs, thereby harming our results of operations.
  If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges.
  We sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation.

 

5
 

 

Risks Related to the Our Legal and Regulatory Requirements

 

  Product defects could adversely affect the results of our operations
  We could be exposed to significant liability claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential product liability claims.

 

Risks Related to Our Financial Position and Need for Additional Capital

 

  We are an early-stage company with a history of limited revenues.
  We expect fluctuations in our financial results making it difficult to project future results.
  The costs of being a public company could result in us being unable to continue as a going concern.
  We may need to raise additional funds and these funds may not be available to us on attractive terms when we need them, or at all.
  We may be subject to risks associated with potential future acquisitions.
  If we are unable to establish and maintain confidence in our long-term business prospects among users, securities and industry analysts, and within our industries, or are subject to negative publicity, then our financial condition, operating results, business prospects, and access to capital may suffer materially.
  Pandemics and epidemics, including the ongoing COVID-19 pandemic, natural disasters, terrorist activities, political unrest, and other outbreaks could have a material adverse impact on our business, results of operations, financial condition and cash flows or liquidity.

 

Risks Related to Our Intellectual Property

 

  We may become subject to litigation brought by third parties claiming infringement, misappropriation or other violation by us of their intellectual property rights.
  Patent litigation is expensive and time-consuming and we may not prevail. In the event we did not prevail in any patent litigation, that could have a material adverse effect.
 

We have one issued utility patent and one pending design patent application, which we cannot guarantee will issue as a patent.

 

We also cannot provide any assurances that our issued patent or any other patents we may obtain will include claims with a scope sufficient to preclude others from competing with us. Others may develop systems that avoid infringing the claims of our issued patent or future patents.

 

We may also be subject to administrative proceedings challenging the validity of our issued patent or any future patents or opposing our registered trademarks or applications for registration of trademarks. Administrative proceedings challenging the validity of patents can also be expensive and time-consuming.

  Our business may be adversely affected if we are unable to adequately establish, maintain, protect, and enforce our intellectual property and proprietary rights or prevent third parties from making unauthorized use of our technology and other intellectual property rights.
  Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
  Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours. The patent prosecution process can be expensive, lengthy, and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. There are a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after issuance of any patent. Maintenance fees, renewal fees, annuity fees and/or various other government fees are required to be paid periodically. While an inadvertent lapse can, in some cases, be cured by payment of a late fee, or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market with similar or identical systems, which could have a material adverse effect on our business prospects and financial condition.
  Any trademarks we own obtain may be challenged, infringed, diluted, circumvented or declared generic or determined to be infringing on other marks. We intend to rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During the trademark registration process, we may receive Office Actions from the USPTO or from comparable agencies in foreign jurisdictions objecting to the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may be filed against any trademark applications we file or registrations we may obtain, and our trademark applications or registrations may not survive such proceedings. If we are unable to obtain a registered trademark or establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.
  We may not be able to protect our intellectual property rights throughout the world.
  In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes, and know-how. Although we require all our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, trade secrets and know-how can be difficult to protect and we have limited control over the protection of trade secrets used by our collaborators and suppliers. We cannot be certain that we have or will obtain these agreements in all circumstances and we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary information.

 

Risks Related to This Offering and Our Securities

 

  The offering price for our common stock may not be indicative of its fair market value.
  The market prices and trading volume of our shares of common stock may experience rapid and substantial price volatility, which could cause purchasers of our common stock to incur substantial losses.
  No public market for our common stock currently exists, and an active public trading market may not develop or be sustained following this offering.
  There is no established trading market for our shares; further, our shares will be subject to potential delisting if we do not maintain the listing requirements of the Nasdaq Capital Market.
  As a “controlled company” under the rules of the Nasdaq Capital Market, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.
  We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
  As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.
  Future sales of our common stock in the public market could cause the market price of our common stock to decline.
  Our stock price may be volatile, and the value of our common stock may decline.
  If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline.

 

6
 

 

  We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.
  Our executive officers and directors, have the ability and will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.
  You will experience immediate and substantial dilution in the net tangible book value of the shares of common stock you purchase in this offering.
  We anticipate that we will need to raise additional capital, and our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders.
  We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
  We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
  Anti-takeover provisions in our charter documents may discourage our acquisition by a third party, which could limit our stockholders’ opportunity to sell their shares, at a premium.
  There is currently no trading market for our common stock and we cannot ensure that one will ever develop or be sustained.
  We will not consummate this offering unless our common stock will be listed on the Nasdaq Capital Market.

 

Our certificate of incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that our stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

 

Corporate Information

 

Scripps Safe, Inc. was originally incorporated in the State of Florida on October 1, 2012 under the name Von Zwehl & Company, Inc. On March 3, 2016, we changed our name to Scripps Safe, Inc. On August 23, 2021, we formed a Delaware entity named Scripps Safe, Inc. and entered into a share exchange agreement on May 10, 2022, wherein the Florida entity merged with and into the Delaware corporation.

 

Our principal business address is 9051 Tamiami Trail N, Suite 201, Naples, FL 34108. We maintain our corporate website at https://4saferx.com and https://scrippssafe.com The reference to our website is an inactive textual reference only. The information that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in deciding whether to purchase our common stock.

 

Our executive officers, directors and principal stockholders in the aggregate, beneficially own approximately 80.39% and will continue to own approximately 66.08% of our outstanding common stock upon completion of this offering (assuming no exercise of the underwriters’ over-allotment option to purchase additional shares). Such persons acting together, will have the ability to control or significantly influence all matters submitted to our board of directors or stockholders for approval, as well as our management and business affairs.

 

Controlled Company

 

Upon completion of this offering, our Chief Executive Officer, and founder Jacqueline von Zwehl and her husband, our Chief Growth Officer Christopher von Zwehl, will collectively beneficially own approximately 64.94% of our common stock (or approximately 63.25% of our common stock if the underwriters’ over-allotment option is exercised in full) and we will be a “controlled company” within the meaning of the listing rules of The Nasdaq Stock Market LLC.

 

As long as our principal shareholder owns at least 50% of the voting power of our Company, we are a “controlled company” as defined under Nasdaq Listing Rules.

 

As a controlled company, we are permitted to rely on certain exemptions from Nasdaq’s corporate governance rules, including:

 

an exemption from the rule that a majority of our board of directors must be independent directors;
an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and
an exemption from the rule that our director nominees must be selected or recommended solely by independent directors.

 

As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

 

Implications of Being a Smaller Reporting Company

 

We are a “smaller reporting company” because the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during our most recently completed fiscal year. We may continue to be a smaller reporting company if either (a) the market value of our stock held by non-affiliates is less than $250 million or (b) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. We may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to public companies that are not smaller reporting companies.

 

Recent Developments

 

In February and March 2023, we offered to several accredited investors, and to one investor in June 2023, shares in a private placement. The Company issued an aggregate of 265,000 shares at the price of $2.00 per share, raising a total of $530,000. The offering was made pursuant to the exemption under Section 4(a)(2) of the Act, to a limited number of accredited investors who the Company had a personal pre-existing relationship with. There was no underwriter involved in the offering. The Company incurred $10,000 of expenses in connection with the offering.

 

On August 2, 2023, the Company signed an amendment to the loan with Greentree Financial. The amendment gives the Company the right to extend the maturity date of the note, that the Company, on August 4, 2023, utilized to extend the maturity date to November 15, 2023. On August 15, 2023, the Company issued 30,000 shares for all three extensions. The new maturity date can be extended at the request of the Company for an additional three-month extension, which would be up to February 15, 2024, if exercised. As of June 30, 2023, there is a balance of $170,000 on the note.

 

On October 4, 2023, the Company filed a Certificate of Amendment to increase the authorized shares to 50,000,000. All shares are shares of common stock and of one class.

 

7
 

 

THE OFFERING

 

Securities offered:   We are offering 2,115,000 shares of common stock (2,432,250 shares if the underwriters exercise their over-allotment option in full).
     
Initial Public offering price:   The assumed initial public offering price is $5.00 per share of common stock (the midpoint of the price range listed on the cover page of this prospectus).
     
Common Stock outstanding before this offering:  

9,765,000 shares of Common Stock.

     
Common Stock to be outstanding immediately after this offering:   11,880,000 shares of Common Stock.
     
Option to purchase additional shares:   We have granted the underwriters a 45-day option to purchase up to an additional 15% of the total number of shares of our common stock to be offered by the Company in this offering.
     
Use of proceeds:   Based on an assumed initial public offering price of $5.00 per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, we expect to receive gross proceeds of $10,575,000 and net proceeds of $9,087,500 (or gross proceeds of $12,161,250 and net proceeds of $10,515,125 if the over-allotment option is exercised in full). We intend to use the net proceeds from this offering for expanding our existing product offerings, expansion into new markets, purchasing inventory, expanding our workforce, repaying our note to Greentree Financial Group, Inc. and for working capital and other general corporate purposes.
     
    See “Use of Proceeds” on page 28 for a more complete description of the intended use of proceeds from this offering.
     
Underwriter Warrants:   The registration statement of which this prospectus is a part also registers the Underwriter Warrants that will be issued to the representative to purchase up to 8% of the total number of shares of our common stock to be offered by the Company in this offering, (including any shares of common stock sold pursuant to the over-allotment option to be issued to the underwriters), as a portion of the underwriting compensation payable in connection with this offering. The Underwriter Warrants will be exercisable immediately upon issuance, and from time to time, in whole or in part, and will expire five years from the commencement of sales at an exercise price of $6.25 (125% of the initial public offering price of the shares of common stock). Please see “Underwriting Underwriter Warrants” for a more complete description of these warrants.
     
Risk Factors:   Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page 11 of this prospectus before deciding whether or not to invest in our securities
     
Proposed Nasdaq Ticker Symbol:   We have applied to list our common stock on the Nasdaq Capital Market under the symbol “SCRP”. This offering will not be consummated until we have received Nasdaq Capital Market approval of our application. No assurance can be given that our application will be approved.
     
Lock-ups:   We and any successor entity, and each of our executive officers and directors, without the prior written consent of the Representative, have agreed not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our capital stock or convertible securities for a period of 180 days from the closing of this offering. See “Underwriting” on page 61.

 

8
 

 

The number of shares of our common stock to be outstanding after this offering is based on 9,485,000 shares of our common stock outstanding as of June 30, 2023, plus 30,000 shares of common stock were issued to Greentree on August 15, 2023, for all three note extensions. plus 250,000 shares issuable upon the exercise of warrants. Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:

 

  assumes the shares of common stock are offered at $5.00 per share (the midpoint of the price range listed on the cover page of this prospectus);
     
  assumes no exercise by the underwriters of their overallotment option;
     
 

assumes no exercise of 650,000 outstanding warrants and

     
  assumes no exercise of the warrants issued to the representative of the underwriters.

 

Emerging Growth Company under the JOBS Act

 

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we have elected to take advantage of reduced reporting requirements and are relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

 

  we may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;
     
  we are exempt from the requirement to obtain an attestation and report from our auditors on whether we maintained effective internal control over financial reporting under the Sarbanes-Oxley Act;
     
  we are permitted to provide less extensive disclosure about our executive compensation arrangements; and
     
  we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.

 

We may take advantage of these provisions until December 31, 2028 (the last day of the fiscal year following the fifth anniversary of our initial public offering) if we continue to be an emerging growth company. We would cease to be an emerging growth company if we have more than $1.235 billion in annual revenue, have more than $700 million in market value of our shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have elected to provide two years of audited financial statements. Additionally, we have elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act.

 

9
 

 

SUMMARY FINANCIAL AND OTHER DATA

 

The following tables present our summary financial data and should be read together with our audited financial statements and accompanying notes and information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. We derived the summary statements of operations data for the year ended December 31, 2022 and for the year ended December 31, 2021 and the balance sheet data as of June 30, 2023 and June 30, 2022 from the audited financial statements of Scripps Safe, Inc. included elsewhere in this prospectus. Our financial statements are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Our historical results are not necessarily indicative of our future results.

 

   Year Ended   Year Ended   Six Months Ended   Six Months Ended 
   December 31,   December 31,   June 30,   June 30, 
   2022   2021   2023   2022 
   (audited)   (audited)   (unaudited) (restated)   (unaudited) 
Summary Statements of Operations Data                    
Revenue  $708,256   $505,143   $241,829   $374,201 
Cost of revenue:   (413,612)   (354,768)   (188,285)   (256,467)
Total operating expenses   (628,968)   (438,675)   (4,840,636)   317,848 
Income (loss) from operations   (334,324)   (288,300)   (4,787,092)   (200,114)
Other (expense) income   1,947    26,416    799    1,852 
Charitable Donation   -    -    (80,000)   - 
Interest (expense) income   (26,755)   (6,720)   (42,175)   (8,281)
Amortization of debt discount   (11,306)   -    (5,694)   - 
Total other (expense) income   (36,114)   19,696    (127,070)   (6,429)
Net income (loss)  $(370,438)  $(268,604)  $(4,914,162)  $(206,543)
Net income (loss) per share  $(0.02)  $(0.02)  $(0.56)  $(0.01)
Weighted average number of shares   15,000,000    15,000,000    8,748,301    15,000,000 

 

As described in the notes to the Financial Statements, the Financial Statements for the three months and six months ended June 30, 2023 have been restated to correct misstatement. 

 

   Six Month Ended   Pro Forma(1) for   Pro Forma(2) for   Pro forma as
adjusted(3)
 
   June 30,   June 30,   June 30,   June 30, 
   2023   2023   2023   2023 
   (unaudited) (restated)   (unaudited)   (unaudited)   (unaudited) 
Summary Balance Sheet Data                    
Current assets:                    
Cash and cash equivalents  $16,134   $16,134   $516,134   $9,603,634 
Accounts receivable, net     110,876    110,876    110,876    110,876 
Other current assets     14,000    14,000    14,000    14,000 
Right-of-Use Lease Asset     97,435    97,435    97,435    97,435 
Other asset     28,000    28,000    28,000    28,000 
Property, plant and equipment, net     6,079    6,079    6,079    6,079 
Total assets  $272,524   $272,524   $772,524   $9,860,024 
Total current liabilities   320,869    302,384    302,384    302,384 
Total non-current liabilities   521,551    521,551    521,551    521,551 
Total liabilities  $842,420   $823,935   $823,935   $823,935 
Total stockholders’ deficit   (569,896)   8,536,089    (51,411)   9,036,089 
Total liabilities and stockholders’ deficit  $272,524   $272,524   $772,524   $9,860,024 

 

(1) The pro forma balance sheet data gives effect to the issue of 30,000 shares of common stock to the Investor for the extension of the Note as described elsewhere in this prospectus.

 

(2) The pro forma balance sheet data gives effect to the issue 250,000 shares of common stock upon the exercise of warrants that two selling stockholders have agreed to exercise upon the effective date of the registration statement.

 

(3) The as adjusted balance sheet data gives effect to the issuance and sale of shares in this offering at an assumed initial public offering price of $5.00 per share, as set forth on the cover of this prospectus, after deducting estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

 

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RISK FACTORS

 

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. Our business, financial condition, results of operations and prospects could be adversely affected by these risks. In that event, the market price of our common stock could decline, and you could lose part or all of your investment. Our business, financial condition, results of operations or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.

 

Risks Related to Our Business Operations, and Industry

 

We are an early development stage company with a limited operating history and have generated limited revenues to date

 

Although we were incorporated in Florida on October 2, 2012 and merged with and into a Delaware corporation on May 10, 2022, we began generating revenue in 2017. As a result, we are an early development stage company with a limited operating history and have generated limited revenues to date. If we cannot achieve our business objectives, investors in our shares will likely suffer a loss of their entire investment.

 

We have a new business model, which makes it difficult for us to forecast our financial results, creates uncertainty as to how investors will evaluate our prospects, and increases the risk that we will not be successful.

 

We have a new business model and are in the process of developing new offerings, seeking deeper market penetration and increasing our market shares. Accordingly, it will be difficult for us to forecast our future financial results, and it is uncertain how our new business model will affect investors’ perceptions and expectations with respect to our business and economic prospects. Additionally, our new business model may not be successful. Consequently, you should not rely upon any past financial results as indicators of our future financial performance.

 

We rely heavily on our suppliers and do not maintain written agreements with suppliers.

 

Our ability to compete and grow will be dependent on our access to software and equipment at reasonable costs and in timely manners. We sell licenses to third-party software and do not currently develop software. We do not maintain written agreements with our suppliers, and we are, therefore, dependent on the relationships we maintain with suppliers and third party software developers. Failure of suppliers and developers to deliver such software and equipment, at a reasonable cost and in a timely manner would be detrimental to our ability to maintain existing customers and obtain new customers. No assurance can be given that we will be successful in maintaining our required supply of such items.

 

We have a limited operating history and we expect a number of factors will cause our operating results to fluctuate on an annual basis, which may make it difficult to predict our future performance.

 

We are a company seeking to bring innovation to pharmaceutical compliance, transportation and storage and deal with controlled substances in a highly regulated industry and manner. Compliance with the myriad of laws and regulations concerning controlled substances and pharmaceuticals is complicated and burdensome. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history. We anticipate that our operating results will significantly fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. In particular, you should consider that we cannot provide assurance that we will be able to:

 

  successfully develop and introduce our Scripps System™;
     
  recruit and maintain our management team;
     
  raise sufficient funds in the capital markets to effectuate our business plan;
     
  attract, enter into or maintain contracts with, and retain customers; and/or
     
  compete effectively in the extremely competitive environment in which we operate.

 

These factors are our best estimates of possible factors that will affect our future operating results, however, they should not be considered a complete recitation of possible factors that could affect us. In addition, we do not know how the economic and societal impact of the ongoing COVID-19 global pandemic may negatively affect our current and future operations and development. Accordingly, the results of any historical quarterly or annual periods should not be relied upon as indications of future operating performance.

 

We face competition from other companies and our operating results will suffer if we fail to compete effectively.

 

There is intense competition amongst the healthcare industry. There are a number of established, well financed companies that provide pharmaceutical, security, transport, storage and tracking services that compete directly or indirectly with our services. Some competitors include Operative IQ for inventory tracking and Knox Box for security solutions in EMS. As most of our competitors have financial resources that are greater than us, they may spend more money and time on developing and testing products, systems, and undertake more extensive marketing campaigns, adopt more aggressive pricing policies or otherwise develop more commercially successful products or systems than us, which could impact our ability to win new marketing contracts. Furthermore, new competitors may enter our key market areas. If we are unable to obtain significant market presence or if we lose market share to our competitors, our results of operations and future prospects would be materially adversely affected. There are many companies with already established relationships with third parties, including hospitals, EMS/Fire/Ambulance and others that are able to introduce directly competitive products and have the potential and resources to quickly develop competitive technologies. Our success depends on our ability to develop new products and enhance existing products.

 

Our business depends substantially on the continuing efforts of our executive officers and our business may be severely disrupted if we lose their services.

 

Our future success depends substantially on the continued services of our executive officers, especially our Chief Executive Officer, and founder Jacqueline von Zwehl. If one or more of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. The loss of any of our executive officers could cause our business to be disrupted, and we may incur additional and unforeseen expenses to recruit and retain new officers.

 

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We currently do not own a manufacturing facility, and rely on different manufacturers and suppliers for the production of our safes and solutions; while we have obtained favorable financing arrangements in the past from these manufacturer(s) and supplier(s), there is no assurance that future suppliers would provide similar favorable financing arrangements.

 

We currently rely on seven different manufacturers and two different suppliers for access control systems for the overall production of our safes and vaults. We do not have control over the operations of the facilities of the third-party manufacturers that we use.

 

The manufacturers of our safes and solutions have extended favorable financing arrangements in the past, but there is no assurance that future suppliers would provide similar favorable financing arrangements. Therefore, the continued supply and manufacturing of our sales by our current manufacturers and suppliers are critical to our success. Any event that causes a disruption of the operation of our safes’ manufacturers for even a relatively short period of time would adversely affect our ability to ship and deliver our safes and other products and to provide service to our customers. We have previously experienced, including during the first months after the spread of COVID-19 pandemic, and may in the future experience, launch and production ramp up delays for our products as a result of disruption at our supplier’s manufacturing partners.

 

Shortages of components and materials, as well as supply chain disruptions, may delay or reduce our sales and increase our costs, thereby harming our results of operations.

 

The inability to obtain sufficient quantities of raw materials and components, including those necessary for the production of our products could result in reduced or delayed sales or lost orders. Any delay in or loss of sales or orders could adversely impact our operating results. Many of the materials used in the production of our products are available only from a limited number of suppliers. We do not have long-term supply contracts with any suppliers. As a result, we could be subject to increased costs, supply interruptions, and difficulties in obtaining raw materials and components.

 

Our reliance on third-party suppliers for various raw materials and components for our products exposes us to volatility in the availability, quality, and price of these raw materials and components. Our orders with certain of our suppliers may represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation of our orders. A disruption in deliveries from our third-party suppliers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. Quality issues experienced by third party suppliers can also adversely affect the quality and effectiveness of our products and result in liability and reputational harm.

 

Furthermore, the cost of safes/vaults, whether manufactured by our supplier or by us, depends in part upon the prices and availability of raw manufacturing materials such as steel, locks, fireboard, hinges, pins and other metals. The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products. Any reduced availability of these materials may impact our access to these parts and any increases in their prices may reduce our profitability if we cannot recoup the increased costs through increased safe prices. Moreover, any such attempts to increase product prices may harm our brand, prospects and operating results.

 

We have continued to maintain to relationships with multiple manufactures and suppliers within the industry to mitigate this risk.

 

We could be exposed to liability if we experience security breaches or other disruptions, which could harm our reputation and business.

 

We may be subject to cyber-attacks whereby computer hackers may attempt to access our computer systems or our third-party IT service providers’ systems and, if successful, misappropriate personal or confidential information. In addition, a contractor or other third party with whom we do business may attempt to circumvent our security measures or obtain such information, and may purposefully or inadvertently cause a breach involving sensitive information. We will continue to evaluate and implement additional protective measures to reduce the risk and detect cyber incidents, but cyber-attacks are becoming more sophisticated and frequent and the techniques used in such attacks change rapidly. Even though we take cyber-security measures that are continuously reviewed and updated, our information technology networks and infrastructure may still be vulnerable due to sophisticated attacks by hackers or breaches.

 

Even the most well protected IT networks, systems, and facilities remain potentially vulnerable because the techniques used in security breaches are continually evolving and generally are not recognized until launched against a target and, in fact, may not be detected. Any such compromise of our or our third party’s IT service providers’ data security and access, public disclosure, or loss of personal or confidential business information, could result in legal claims proceedings, liability under laws to protect, privacy of personal information, and regulatory penalties, disrupt our operations, require significant management attention and resources to remedy any damages that result, damage our reputation and customers willingness to transact business with us, any of which could adversely affect our business.

 

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If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service, or adequately address competitive challenges.

 

We expect to invest in our growth for the foreseeable future. Any growth in our business is expected to place a significant strain on not only our managerial, administrative, operational, and financial resources, but also our infrastructure. We plan to continue to expand our operations in the future. Our success will depend in part on our ability to manage this growth effectively and execute our business plan. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial, and management controls and our reporting systems and procedures.

 

We rely heavily on information technology (“IT”) systems to manage critical business functions. To manage our growth effectively, we must continue to improve and expand our infrastructure, including our IT, financial, and administrative systems and controls. In particular, we may need to significantly expand our IT infrastructure as the amount of data we store and transmit increases over time, which will require that we both utilize existing IT products and adopt new technology. If we are not able to scale our IT infrastructure in a cost-effective and secure manner, our ability to offer competitive solutions will be harmed and our business, financial condition, and operating results may suffer.

 

We must also continue to manage our employees, operations, finances, research and development, and capital investments efficiently. Our productivity and the quality of our solutions may be adversely affected if we do not integrate and train our new employees quickly and effectively or if we fail to appropriately coordinate across our executive, research and development, technology, service development, analytics, finance, human resources, marketing, sales, operations, and customer support teams. As we continue to grow, we will incur additional expenses, and our growth may continue to place a strain on our resources, infrastructure, and ability to maintain the quality of our solutions. If we do not adapt to meet these evolving challenges, or if the current and future members of our management team do not effectively manage our growth, the quality of our solutions may suffer and our corporate culture may be harmed. Failure to manage our future growth effectively could cause our business to suffer, which, in turn, could have an adverse impact on our business, financial condition, and operating results.

 

We sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation.

 

Our products are used to store, in part, items that involve risk of personal injury and death. Our products expose us to potential product liability, warranty liability, and personal injury claims and litigation relating to the use or misuse of our products, including allegations of defects in manufacturing, defects in design, defects in security measures, data loss, a failure to warn of dangers inherent in the product, or activities associated with the product, negligence, and strict liability. If successful, any such claims could have a material adverse effect on our business, operating results, and financial condition. Defects in our products may result in a loss of sales, recall expenses, delay in market acceptance, and damage to our reputation and increased warranty costs, which could have a material adverse effect on our business, operating results, and financial condition. Although we maintain product liability insurance in amounts that we believe are reasonable, we may not be able to maintain such insurance on acceptable terms, if at all, in the future and product liability claims may exceed the amount of insurance coverage. In addition, our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products.

 

Our profitability in part is dependent on material and other manufacturing costs. We are unable to offer any assurance that either we or a manufacturing partner will be able to reduce costs to a level that will allow production of a competitive product or that any product produced using lower cost materials and manufacturing processes will not suffer from a reduction in performance, reliability and longevity.

 

We are dependent on the services of Jacqueline von Zwehl, our Chief Executive Officer, Chairman of the Board of Directors and Director, and Mr. Christopher von Zwehl, our Chief Growth Officer, who are married to each other. The separation or divorce of the couple in the future could adversely affect our business.

 

We are dependent on the services of Jacqueline von Zwehl, our Chief Executive Officer, Chairman of the Board of Directors and Director, and Mr. Christopher von Zwehl, our Chief Growth Officer, who are married to each other. If Ms. Von Zwehl or Mr. Von Zwehl were to discontinue their service to us due to death, disability or any other reason, or if they were to become separated or divorced or could otherwise not amicably work with each other, we would be significantly disadvantaged. Alternatively, their work performance may not be satisfactory if they become preoccupied with issues relating to their personal situation. In these cases, our business could be materially harmed.

 

Our executive officers and directors collectively have the power to control our management and operations and have a significant majority in voting power on all matters submitted to the stockholders of the company.

 

Our directors and officers beneficially own approximately 80.39% of our outstanding common stock. Due to such significant ownership position held by our insiders, new investors may not be able to effect a change in our business or management, and therefore, shareholders would have no recourse as a result of decisions made by management. Jacqueline Von Zwehl, our Chief Executive Officer, Chairman of the Board and Director, and Christopher Von Zwehl, our Chief Growth Officer, who are married to each other, together own 79.01% of the outstanding common stock and after a fully subscribed offering will still own over 64.94% of the outstanding shares of our common stock. Accordingly, these individuals have a significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations and the sale of all or substantially all of our assets. They also have the power to prevent or cause a change in control. The interests of our directors may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.

 

Our shareholders are not entitled to cumulative voting rights. Consequently, the election of directors and all other matters requiring shareholder approval will be decided by majority vote. Management currently beneficially owns a majority of our outstanding common stock. Consequently, management has the ability to influence control of the operations of the Company and, acting together, will have the ability to influence or control substantially all matters submitted to stockholders for approval.

 

Risks Related to the Our Legal and Regulatory Requirements

 

Product defects could adversely affect the results of our operations.

 

The design, manufacture and marketing of our products involve certain inherent risks. Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of our products can lead to injury or other adverse events. The Company may not properly anticipate customer applications of our products and our products may fail to survive such unanticipated customer use. If the Company’s products fail to adequately perform to meet the customer’s expectations, the customer may demand refunds or replacements which will negatively affect the Company’s profitability.

 

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We could be exposed to significant liability claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential product liability claims.

 

Our products support the use and access to highly regulated controlled and non-controlled substances and if our products are ineffective, we could require protection against potential product liability claims. Our current insurance policies may not be adequate to protect us from certain losses, which could have a material adverse effect on our business, financial condition or results of operations. There are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure.

 

Risks Related to Our Financial Position and Need for Additional Capital

 

Although our financial statements have been prepared on a going concern basis, we must raise additional capital to fund our operations in order to continue as a going concern.

 

Our independent registered public accounting firm for the fiscal year ended December 31, 2022, has included an explanatory paragraph in their opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2022, indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern. If we are unable to improve our liquidity position we may not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment.

 

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

 

Since inception, we have had limited revenues. We have revenues of $241,829 and $374,201 for the six months ended June 30, 2023 and 2022 respectively. We have not recognized a material amount of revenue to date and have net (loss) of ($4,914,162) and ($206,543) for the six months ended June 30, 2023 and 2022 respectively. We have revenues of $708,256 and $505,143 for the year ended December 31, 2022, and for the year ended December 31, 2021 respectively. We have not recognized a material amount of revenue to date and have net (loss) of ($370,438) and ($268,604) for the year ended December 31, 2022, and for the year ended December 31, 2021 respectively. We cannot guarantee that we can increase sales and revenue at scale. Our potential profitability is dependent upon a number of factors, many of which are beyond our control. If we are unable to achieve and sustain profitability, the value of our business and common stock may significantly decrease.

 

Because we will incur the costs and expenses from becoming and being a publicly traded company, and otherwise growing our business, our revenues will be offset by these and other costs and expenses and will likely reduce profits and could result in losses. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in expected revenue, which would result in reduced profit or even losses.

 

We expect fluctuations in our financial results making it difficult to project future results.

 

Our results of operations may fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:

 

  changes in our revenue mix and related changes in revenue recognition;
     
  changes in actual and anticipated growth rates of our revenue, customers, and key operating metrics;
     
  fluctuations in demand for or pricing of our offering;
     
  our ability to attract new customers;
     
  our ability to retain our existing customers, particularly large customers;
     
  customers and potential customers opting for alternative products, including developing their own in-house solutions;
     
  investments in new offerings, features, and functionality;
     
  fluctuations or delays in development, release, or adoption of new features and functionality for our offering;
     
  delays in closing sales which may result in revenue being pushed into the next quarter;
     
  changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;
     
  our ability to control costs;
     
  the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses;
     
  timing of hiring personnel for our research and development and sales and marketing organizations;
     
  the amount and timing of costs associated with recruiting, educating, and integrating new employees and retaining and motivating existing employees;
     
  the effects of acquisitions and their integration;

 

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  general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;
     
  the impact of new accounting pronouncements;
     
  changes in revenue recognition policies that impact our technology license revenue;
     
  changes in regulatory or legal environments that may cause us to incur, among other things, expenses associated with compliance;
     
  the impact of changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period;
     
  health epidemics or pandemics, such as the COVID-19 pandemic;
     
  changes in the competitive dynamics of our market, including consolidation among competitors or customers; and
     
  significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our products.

 

Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.

 

We may need to raise additional funds and these funds may not be available to us on attractive terms when we need them, or at all.

 

The commercialization of pharmaceutical transportation and storage compliance is capital intensive. This includes the costs associated with filing and protecting patents and trademarks, developing software, marketing our solutions and general compliance with the myriad of laws and regulations governing controlled and non-controlled substances. To date, we have financed our operations primarily through the sales of vaults, safes, third party software, services, founders’ contributions and an EIDL Small Business Administration (“SBA”) Loan. We may need to raise additional capital to continue to fund our commercialization activities, sales and marketing efforts, enhancement of our technology and to improve our liquidity position. Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market volatility, investor acceptance of our business plan, regulatory requirements and the successful development of our autonomous technology. These factors may make the timing, amount, terms, and conditions of such financing unattractive or unavailable to us.

 

We may raise these additional funds through the issuance of equity, equity related, or debt securities. To the extent that we raise additional financing by issuing equity securities or convertible debt securities, our stockholders may experience substantial dilution, and to the extent we engage in debt financing, we may become subject to restrictive covenants that could limit our flexibility in conducting future business activities. Financial institutions may request credit enhancement such as third-party guarantee and pledge of equity interest in order to extend loans to us. We cannot be certain that additional funds will be available to us on attractive terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business, and prospects could be materially adversely affected.

 

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We may be subject to risks associated with potential future acquisitions.

 

Although we have no current acquisition plans, if appropriate opportunities arise, we may acquire additional assets, products, technology or businesses that are complementary to our existing business. Any future acquisitions and the subsequent integration of new assets and businesses would require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations, and consequently our results of operations and financial condition. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

 

If we are unable to establish and maintain confidence in our long-term business prospects among users, securities and industry analysts, and within our industries, or are subject to negative publicity, then our financial condition, operating results, business prospects, and access to capital may suffer materially.

 

Users may be less likely to purchase or use our technology and the industrial vehicles it is deployed on if they are not convinced that our business will succeed or that our service and support and other operations will continue in the long term. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed. Accordingly, in order to build and maintain our business, we must maintain confidence among users, suppliers, securities and industry analysts, and other parties in our long-term financial viability and business prospects. Maintaining such confidence may be particularly complicated by certain factors including those that are largely outside of our control, such as our limited operating history at scale, user unfamiliarity with our solutions, any delays in scaling manufacturing, delivery, and service operations to meet demand, competition, and our performance compared with market expectations.

 

Pandemics and epidemics, including the ongoing COVID-19 pandemic, natural disasters, terrorist activities, political unrest, and other outbreaks could have a material adverse impact on our business, results of operations, financial condition and cash flows or liquidity.

 

We are also vulnerable to natural disasters and other calamities. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services.

 

Risks Related to Our Intellectual Property

 

We may become subject to litigation brought by third parties claiming infringement, misappropriation or other violation by us of their intellectual property rights.

 

There is a significant amount of uncertainty in the industry regarding patent protection and infringement. In recent years, there has been significant litigation globally involving patents and other intellectual property rights. Third parties may in the future assert, that we have infringed, misappropriated or otherwise violated their intellectual property rights. As we face increasing competition and as a public company, the possibility of intellectual property rights claims against us grows. Such claims and litigation may involve one or more of our competitors focused on using their patents and other intellectual property to obtain competitive advantage, or patent holding companies or other adverse intellectual property rights holders who have no relevant product revenue, and therefore our own pending patents and other intellectual property rights may provide little or no deterrence to these rights holders in bringing intellectual property rights claims against us. There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies or business methods, and we cannot assure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights or that we will not be held to have done so or be accused of doing so in the future. In addition, because patent applications can take many years until the patents issue, there may be applications now pending of which we are unaware, which may later result in issued patents that our products may infringe. We expect that in the future we may receive notices that claim we or our suppliers or customers have misappropriated or misused other parties’ intellectual property rights, particularly as the number of competitors in our market grows.

 

To defend ourselves against any intellectual property claims brought by third parties, whether with or without merits, can be time-consuming and could result in substantial costs and a diversion of our resources. These claims and any resulting lawsuits, if resolved adversely to us, could subject us to significant liability for damages, impose temporary or permanent injunctions against our products, technologies or business operations, or invalidate or render unenforceable our intellectual property.

 

If our technology is determined to infringe a valid and enforceable patent, or if we wish to avoid potential intellectual property litigation on any alleged infringement, misappropriation or other violation of third party intellectual property rights, we may be required to do one or more of the following: (i) cease development, sales, or use of our systems that incorporate or use the asserted intellectual property right; (ii) obtain a license from the owner of the asserted intellectual property right, which may be unavailable on commercially reasonable terms, or at all, or which may be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us; (iii) pay substantial royalties or other damages; or (iv) redesign our technology to avoid any infringement or allegations thereof. The aforementioned options sometimes may not be commercially feasible. Additionally, in our ordinary course of business, we agree to indemnify our customers, partners, and other commercial counterparties for any infringement arising out of their use of our intellectual property, along with providing standard indemnification provisions, so we may face liability to our users, business partners or third parties for indemnification or other remedies in the event that they are sued for infringement.

 

We may also in the future license third party technology or other intellectual property, and we may face claims that our use of such in-licensed technology or other intellectual property infringes, misappropriates or otherwise violates the intellectual property rights of others. In such cases, we will seek indemnification from our licensors. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses.

 

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We also may not be successful in any attempt to redesign our technology to avoid any alleged infringement. A successful claim of infringement against us, or our failure or inability to develop and implement non-infringing technology, or license the infringed technology on acceptable terms and on a timely basis, could materially adversely affect our business and results of operations. Furthermore, such lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and would divert management’s time and attention from our business, which could seriously harm our business. Also, such lawsuits, regardless of their success, could seriously harm our reputation with users and in the industry at large.

 

Our business may be adversely affected if we are unable to adequately establish, maintain, protect, and enforce our intellectual property and proprietary rights or prevent third parties from making unauthorized use of our technology and other intellectual property rights.

 

Our intellectual property is an essential asset of our business. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of our competitive advantage, and a decrease in our revenue which would adversely affect our business prospects, financial condition, and operating results. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. We rely on a combination of intellectual property rights, such as patents, trademarks, copyrights, and trade secrets (including know-how), in addition to employee and third-party nondisclosure agreements, intellectual property licenses, and other contractual rights, to establish, maintain, protect, and enforce our rights in our technology, proprietary information, and processes. Intellectual property laws and our procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. Others may also invent around and avoid infringing any patents If we fail to protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete. While we take measures to protect our intellectual property, such efforts may be insufficient or ineffective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Other parties may also independently develop technologies that are substantially similar or superior to ours. We also may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. However, the measures we take to protect our intellectual property from unauthorized use by others may not be effective and there can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar or superior to ours and that compete with our business.

 

Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property. Any litigation initiated by us concerning the violation by third parties of our intellectual property rights is likely to be expensive and time-consuming and could lead to the invalidation of, or render unenforceable, our intellectual property, or could otherwise have negative consequences for us. Furthermore, it could result in a court or governmental agency invalidating or rendering unenforceable our patents or other intellectual property rights upon which the suit is based or finding that there is no infringement. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay the introduction and implementation of new technologies, result in our substituting inferior or more costly technologies into our products or injure our reputation. Moreover, policing unauthorized use of our technologies, trade secrets, and intellectual property may be difficult, expensive, and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. If we fail to meaningfully establish, maintain, protect, and enforce our intellectual property and proprietary rights, our business, operating results, and financial condition could be adversely affected.

 

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

 

There are a number of recent changes to the patent laws that may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act (the “AIA”) enacted in September 2011, resulted in significant changes in patent legislation. An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned from a “first-to-invent” to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. A third party that files a patent application in the United States Patent and Trademark Office (“USPTO”) after that date but before us could therefore be awarded a patent covering an invention of ours even if we made the invention before it was made by the third party. Circumstances could prevent us from promptly filing patent applications on our inventions.

 

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The AIA also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. The AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

 

Further, the standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable for business methods. As such, we do not know the degree of future protection that we will have on our technologies, products, and services. While we will endeavor to try to protect our technologies, products, and services with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive, and sometimes unpredictable.

 

Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

 

Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting systems similar to ours.

 

We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application to the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will be broad enough to protect our proprietary rights or otherwise afford protection against competitors with similar technology. In addition, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability. Our competitors may challenge or seek to invalidate our issued patents, or design around our issued patents, which may adversely affect our business, prospects, financial condition or operating results. Also, the costs associated with enforcing patents, confidentiality and invention agreements, or other intellectual property rights may make aggressive enforcement impracticable.

 

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

 

Filing, prosecuting, maintaining, defending, and enforcing patents and other intellectual property rights in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. We have no foreign intellectual property rights. Competitors may use our technologies in jurisdictions where we have not obtained patent protection or other intellectual property rights to develop their own systems. These systems may compete with our systems candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

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In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes, and know-how.

 

We rely on proprietary information (such as trade secrets, know-how, and confidential information) to protect intellectual property that may not be patentable, or that we believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by entering into confidentiality agreements, or consulting, services, or employment agreements that contain non-disclosure and non-use provisions with our employees, consultants, contractors, scientific advisors, and third parties. However, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our trade secrets or proprietary information and, even if entered into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. In addition, our proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, contractors, and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that trade secret to compete with us. If any of our trade secrets were to be disclosed (whether lawfully or otherwise) to or independently developed by a competitor or other third party, it could have a material adverse effect on our business, operating results, and financial condition.

 

We also rely on physical and electronic security measures to protect our proprietary information but we cannot guarantee that these security measures provide adequate protection for such proprietary information or will never be breached. There is a risk that third parties may obtain unauthorized access to and improperly utilize or disclose our proprietary information, which would harm our competitive advantages. We may not be able to detect or prevent the unauthorized access to or use of our information by third parties, and we may not be able to take appropriate and timely steps to mitigate the damages (or the damages may not be capable of being mitigated or remedied).

 

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Risks Related to This Offering and Our Securities

 

The offering price for our common stock may not be indicative of its fair market value.

 

The offering price for our common stock was determined in the context of negotiations between us and the underwriters. Accordingly, the offering price may not be indicative of the true fair market value of the Company or the fair market value of our common stock. We are making no representations that the offering price of our common stock under this prospectus bears any relationship to our assets, book value, net worth or any other recognized criteria of our value.

 

The market prices and trading volume of our shares of common stock may experience rapid and substantial price volatility, which could cause purchasers of our common stock to incur substantial losses.

 

Recently, the market prices and trading volume of shares of the common stock of other small publicly traded companies with a limited number of shares available to purchasers, have experienced rapid and substantial price volatility unrelated to the financial performance of those companies. Similarly, subsequent to this offering, shares of our common stock may experience similar rapid and substantial price volatility unrelated to our financial performance, which could cause purchasers of our common stock in this offering to incur substantial losses, which may be unpredictable and not bear any relationship to our business and financial performance. Extreme fluctuations in the market price of our common stock may occur in response to strong and atypical retail investor interest, including on social media and online forums, the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our common stock and our other securities, access to margin debt, trading in options and other derivatives on our shares of common stock and any related hedging and other trading factors:

 

If there is extreme market volatility and trading patterns in our common stock, it may create several risks for investors in this offering, including the following:

 

  the market price of our common stock may experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals;

 

  if our future market capitalization reflects trading dynamics unrelated to our financial performance or prospects, purchasers of our common stock could incur substantial losses as prices decline once the level of market volatility has abated;

 

  if the future market price of our common stock declines, purchasers of shares of common stock in this offering may be unable to resell such shares at or above the price at which they acquired them. We cannot assure such purchasers that the market of our common stock will not fluctuate or decline significantly in the future, in which case investors in this offering could incur substantial losses.

 

Further, we may incur rapid and substantial increases or decreases in our common stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or affecting us. Accordingly, the market price of our common stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in our business. Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock, including:

 

  actual or anticipated variations in our annual or quarterly results of operations, including our earnings estimates and whether we meet market expectations with regard to our earnings;

 

  our current inability to pay dividends or other distributions;

 

  changes in market valuations of similar companies;

 

  market reaction to any additional equity, debt or other securities that we may issue in the future, and which may or may not dilute the holdings of our existing stockholders;

 

  additions or departures of key personnel;

 

  actions by institutional or significant stockholders;

 

  short interest in our common stock or our other securities and the market response to such short interest;

 

  the dramatic increase in the number of individual holders of our common stock and their participation in social media platforms targeted at speculative investing;

 

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  speculation in the press or investment community about our company or industries in which we operate;

 

  strategic actions by us or our competitors, such as acquisitions or other investments;

 

  legislative, administrative, regulatory or other actions affecting our business, and our industry;

 

  investigations, proceedings, or litigation that involve or affect us;

 

  the occurrence of any of the other risk factors included in this registration statement of which this prospectus forms a part; and

 

  general market and economic conditions.

 

No public market for our common stock currently exists, and an active public trading market may not develop or be sustained following this offering.

 

Prior to this offering, there has been no public market for our common stock. Although we have applied to list our common stock on the Nasdaq Capital Market, an active public trading market for our common stock may not develop following the completion of this offering or, if developed, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

 

There is no established trading market for our shares; further, our shares will be subject to potential delisting if we do not maintain the listing requirements of the Nasdaq Capital Market.

 

This offering constitutes our initial public offering of our shares. No public market for these shares currently exists. We have applied to list the shares of our common stock on the Nasdaq Capital Market, or Nasdaq. An approval of our listing application by Nasdaq will be subject to, among other things, our fulfilling all of the listing requirements of Nasdaq. Even if these shares are listed on Nasdaq, there can be no assurance that an active trading market for these securities will develop or be sustained after this offering is completed.

 

In addition, Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or de-listing from Nasdaq, would make it more difficult for shareholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.

 

Future sales of shares by existing stockholders could cause our stock price to decline.

 

If our existing stockholders sell, or indicate an intent to sell, substantial amounts of our common stock in the public market after the restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline significantly and could decline below the initial public offering price. Based on shares outstanding as of the date of this prospectus, upon the completion of this offering, we will have 11,880,000 outstanding shares of common stock. Of these shares, assuming no shares are purchased in this offering by our existing stockholders 2,115,000 shares of common stock, plus any shares sold pursuant to the underwriters’ option to purchase additional shares, will be immediately freely tradable, without restriction, in the public market.

 

In addition, upon issuance, the 1,200,000 shares reserved for future issuance under our 2022 Equity Incentive Plan may become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. If our existing stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, this could have an adverse impact on the market price of our common stock, even if there is no relationship between such sales and the performance of our business.

 

We will be a “controlled company” within the meaning of the Nasdaq Stock Market Rules and Nasdaq Capital Market rules after this offering because our insiders will beneficially own more than 50% of our outstanding shares of common stock.

 

Upon completion of this offering, our Chief Executive Officer, and founder Jacqueline von Zwehl and her husband, our Chief Growth Officer Christopher von Zwehl, will collectively beneficially own approximately 64.94% of our common stock (or approximately 63.25% of our common stock if the over-allotment option is exercised in full). Accordingly, the Company will be a “controlled company” under applicable Nasdaq listing standards after this offering. We may rely on certain exemptions from corporate governance rules, on including an exemption from the rule that a majority of our board of directors must be independent directors. Although we currently do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. In the event that we elected to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors, and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Our status as a controlled company could cause our shares of common stock to be less attractive to certain investors or otherwise harm our trading price. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

 

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.

 

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Capital Market, and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.

 

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As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

 

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting as of the end of the fiscal year that coincides with the filing of our second annual report on Form 10-K. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” We have not yet commenced the costly and time-consuming process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, and we may not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated. Our compliance with Section 404 will require that we incur substantial expenses and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

 

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes. Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of internal control over financial reporting. Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise. During the assessment of the effectiveness of our internal controls over financial reporting, the following were identified as material weaknesses (i). due to the nature and number of year-end adjustments by our external auditors, we have a deficiency related to our closing process; (ii). Lack of documentation surrounding components of the Company’s entity level and process level control environment.

 

The SEC defines ‘material weakness” as’ a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls. While we have adopted remediation procedures related to these identified material weaknesses, there can be no assurance that such remedies will be effective. In addition, if we identify one or more additional material weaknesses in our internal control over financial reporting in the future, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

 

The growth and expansion of our business places a continuous, significant strain on our operational and financial resources. Further growth of our operations to support our customer base, our information technology systems and our internal controls and procedures may not be adequate to support our operations. For example, we are still in the process of implementing information technology and accounting systems to help manage critical functions such as billing and revenue recognition and financial forecasts. As we continue to grow, we may not be able to successfully implement requisite improvements to these systems, controls and processes, such as system access and change management controls, in a timely or efficient manner. Our failure to improve our systems and processes, or their failure to operate in the intended manner, whether as a result of the growth of our business or otherwise, may result in our inability to accurately forecast our revenue and expenses, or to prevent certain losses. Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely and reliable reports on our financial and operating results and could impact the effectiveness of our internal control over financial reporting. In addition, our systems and processes may not prevent or detect all errors, omissions or fraud.

 

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Future sales of our common stock in the public market could cause the market price of our common stock to decline.

 

Sales of a substantial number of shares of our common stock in the public market following the completion of this offering, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Many of our existing equity holders have substantial unrecognized gains on the value of the equity they hold based upon the price of this offering, and therefore, they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares. We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our common stock.

 

Our stock price may be volatile, and the value of our common stock may decline.

 

We cannot predict the prices at which our common stock will trade. The initial public offering price of our common stock will be determined by negotiations between us and the underwriters and may not bear any relationship to the market price at which our common stock will trade after this offering or to any other established criteria of the value of our business and prospects, and the market price of our common stock following this offering may fluctuate substantially and may be lower than the initial public offering price. In addition, the trading price of our common stock following this offering is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our common stock as you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the trading price of our common stock include the following:

 

  actual or anticipated fluctuations in our financial condition or results of operations;
     
  variance in our financial performance from expectations of securities analysts;
     
  changes in the pricing of the solutions on our platforms;
     
  changes in our projected operating and financial results;
     
  changes in laws or regulations applicable to our technology;
     
  announcements by us or our competitors of significant business developments, acquisitions or new offerings;
     
  sales of shares of our common stock by us or our shareholders;
     
  significant data breaches, disruptions to or other incidents involving our technology;
     
  our involvement in litigation;
     
  future sales of our common stock by us or our stockholders, as well as the anticipation of lock-up releases;
     
  changes in senior management or key personnel;
     
  the trading volume of our common stock;
     
  changes in the anticipated future size and growth rate of our market;
     
  general economic and market conditions; and
     
  other events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events.

 

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Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may also negatively impact the market price of our common stock. In addition, technology stocks have historically experienced high levels of volatility. In the past, companies who have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention.

 

If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of our common stock could decline.

 

The market price and trading volume of our common stock following the completion of this offering will be heavily influenced by the way analysts interpret our financial information and other disclosures. We do not have control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our common stock.

 

We may be required to pay back the Greentree loan in full with proceeds from an offering of more than $8 million.

 

We currently have a loan with Greentree Financial, which if in default, carries an 18% penalty payment. We may be required by the request of Greentree to pay back the loan in full with proceeds from an offering of more than $8 million. The original maturity date was February 15, 2023. The Company had a right to extend the maturity date by three months, up to two times. The Company exercised its right and requested an extension prior to the maturity dates of February 15, 2023 and May 15, 2023, resulting in a new maturity date of August 15, 2023.

 

On August 2, 2023, the Company signed an amendment to the loan with Greentree Financial. The amendment gives the Company the right to extend the maturity date of the note, that the Company, on August 4, 2023, utilized to extend the maturity date to November 15, 2023. On August 15, 2023 the Company issued 30,000 shares to Greentree Financial for all three extensions. The new maturity date can be extended at the request of the Company for an additional three-month extension, which would be up to February 15, 2024, if exercised. As of June 30, 2023, there is a balance of $170,000 on the note.

 

We will have broad discretion in the use of the net proceeds to us from this offering and may not use them effectively.

 

We will have broad discretion in the application of the net proceeds to us from this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, our ultimate use may vary substantially from our currently intended use. Investors will need to rely upon the judgment of our management with respect to the use of proceeds. Pending use, we may invest the net proceeds from this offering in investment-grade, interest-bearing securities, such as money market accounts, certificates of deposit, commercial paper and guaranteed obligations of the U.S. government that may not generate a high yield for our stockholders. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, results of operations and prospects could be harmed, and the market price of our common stock could decline.

 

Our executive officers, directors and principal stockholders, if they choose to act together, have the ability and will continue to have the ability to control or significantly influence all matters submitted to stockholders for approval.

 

Our executive officers, directors and principal stockholders in the aggregate, beneficially own approximately 80.39% of our common stock and will continue to own approximately 66.08% of our outstanding common stock upon completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares), Such persons acting together, will have the ability to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.

 

You will experience immediate and substantial dilution in the net tangible book value of the shares of common stock you purchase in this offering.

 

The initial public offering price of our common stock is substantially higher than the adjusted net tangible book value per share of our common stock immediately after this offering. If you purchase shares of our common stock in this offering, your shares will experience immediate dilution of $4.28 per share, or $4.18 per share if the underwriters exercise their over-allotment option in full, representing the difference between our as adjusted net tangible book value per share after giving effect to the sale of common stock in this offering and an assumed initial public offering price of $5.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus. See the section titled “Dilution.”

 

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The issuance of our common stock in connection with the Company’s outstanding warrants and promissory note could cause substantial dilution, which could materially affect the trading price of our common stock.

 

The GT Warrants and the warrants pursuant to the Greentree service agreement are exercisable for up to a total of 600,000 shares of the Company’s common stock and the Note is convertible at a price equal to 70% of the lowest closing price for the last five (5) trading days immediately prior to but not including the date of conversion. 200,000 warrants were issued pursuant to the loan agreement with Greentree; Greentree has received 400,000 warrants pursuant to the Company’s service agreement with the Company. The Company granted an additional 300,000 warrants to Chartered Services LLC exercisable at $2.00 per share. The additional shares of common stock issued pursuant to these instruments will result in dilution to the then existing holders of common stock of the Company and increase the number of shares eligible for resale in the public market. In addition, the Company was granted three extensions on its loan with Greentree in exchange for an aggregate of 30,000 shares of the Company’s common stock. A further extension would result in the issuance of an additional 10,000 shares being issued to Greentree. Sales of a substantial number of such shares in the public market could adversely affect the market price of our common stock.

 

The sale of our common stock in this offering could result in the reset of the exercise price of certain outstanding warrants.

 

We have outstanding warrants to purchase 650,000 shares of our common stock with an exercise price of $2.00 per share that may be subject to further adjustment. The terms of these warrants provide that if we sell common stock, options to purchase common stock, securities convertible into common stock or rights relating to our common stock at a price per share less than the then-current exercise price, then we are required to reduce the exercise price of the warrants to match the price per share of such sale of our common stock. In such event, the exercise price of such warrants will be reduced, which would result in an additional dilution for investors in this offering and the Company would receive less proceeds from the exercise of such warrants.

 

Spartan Capital Securities, LLC, the lead underwriter for the Offering, is subject to certain FINRA proceedings.

Spartan Capital Securities, LLC, the lead underwriter for the offering, and two of its principals are involved in a recent FINRA disciplinary proceeding (Disciplinary Proceeding No. 2019061528001). On March 28, 2023, the FINRA Hearing Panel ordered Spartan Capital Securities, LLC to pay a fine of $600,000 and two of its principals to pay fines of $30,000 and $40,000, respectively, and certain non-economic sanctions were imposed against Spartan Capital Securities, LLC and two of its principals, including a suspension of such principals for up to two years. On April 19, 2023, Spartan filed a notice of appeal which stays the imposition of the sanctions. As of the date of this prospectus, the matter is still under appeal. There can be no assurances that such matters will not have a material adverse effect on Spartan Capital Securities, LLC’s ability to continue to act as lead underwriter for the offering.

 

We anticipate that we will need to raise additional capital, and our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other stockholders.

 

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or investment. We may not be able to obtain additional capital if and when needed on terms acceptable to us, or at all. Further, if we do raise additional capital, it may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

 

25
 

 

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

 

We have never declared or paid any cash dividends on our capital stock, and, subject to the discretionary dividend policy described in the section entitled “Dividend Policy” of this prospectus, we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.

 

We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging-growth company,” as defined in the JOBS Act, and we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements will not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

 

We will remain an emerging-growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.

 

We cannot predict if investors will find our common stock less attractive as a result of choosing to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations will not be as comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

 

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Anti-takeover provisions in our charter documents may discourage our acquisition by a third party, which could limit our stockholders’ opportunity to sell their shares, at a premium.

 

Our certificate of incorporation effective immediately prior to the completion of this offering include provisions that could limit the ability of others to acquire control of our company. These provisions could have the effect of depriving our stockholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control in a tender offer or similar transaction. Among other things, the charter documents will provide:

 

  certain amendments to our bylaws that will require the approval of two-thirds of the combined vote of our then-outstanding shares of our common stock;
     
  directors will be able to be removed only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of our common stock;
     
  our board of directors will be classified into three classes of directors with staggered three-year terms; and
     
  our board of directors has the authority, without further action by our stockholders, to issue preferred stock in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional, or special rights, and the qualifications, limitations, or restrictions, including dividend rights, conversion rights, voting rights, terms.

 

Our certificate of incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that our stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

 

Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be exclusive forums for any:

 

  derivative action or proceeding brought on our behalf;
     
  action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;
     
  action asserting a claim against us, our directors or officers or employees arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or amended and restated bylaws; or
     
  other action asserting a claim against us, our directors or officers or employees that is governed by the internal affairs doctrine.

 

This choice of forum provision does not apply to actions brought to enforce a duty or liability created under the Exchange Act. Our amended and restated certificate of incorporation to be in effect after this offering also provides that the federal district courts of the United States are the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. We intend for this provision to apply to any complaints asserting a cause of action under the Securities Act despite the fact that Section 22 of the Securities Act creates concurrent jurisdiction for the federal and state courts over all actions brought to enforce any duty or liability created by the Securities Act or the rules and regulations promulgated thereunder. There is uncertainty as to whether a court would enforce such a provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above.

 

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains, in addition to historical information, forward-looking statements. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally under the headings “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds” and “Business.” Forward-looking statements include statements concerning:

 

  our possible or assumed future results of operations;
     
  our business strategies;
     
  our ability to attract and retain customers;
     
  our ability to sell additional products and services to customers;
     
  our cash needs and financing plans;
     
  our competitive position;
     
  our industry environment;
     
  our potential growth opportunities;
     
  expected technological advances by us or by third parties and our ability to integrate and commercialize them;
     
  the effects of future regulation; and
     
  the effects of competition

.

All statements in this prospectus that are not historical facts are forward-looking statements. We may, in some cases, use terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions that convey uncertainty of future events or outcomes to identify forward-looking statements.

 

The outcome of the events described in these forward-looking statements are subject to 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. These important factors include our financial performance and the other important factors we discuss in greater detail in “Risk Factors.” You should read these factors and the other cautionary statements made in this prospectus as applying to all related forward-looking statements wherever they appear in this prospectus. Given these factors, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date on which the statements are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we currently expect.

 

USE OF PROCEEDS

 

We estimate that we will receive net proceeds from this offering of approximately $9,087,500 (or approximately $10,515,125 if the underwriters’ option to purchase additional shares is exercised in full) based on an assumed initial public offering price of $5.00 per share of common stock, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $5.00 per share of common stock would increase (decrease) the net proceeds to us from this offering by approximately $1,903,500 assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $4,500,000 assuming the assumed initial public offering price of $5.00 per share of common stock remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

We intend to use net proceeds from this offering for expanding our existing product offerings, expansion into new markets, purchasing inventory, expanding our workforce, repaying our note with Greentree Financial Group, Inc. in full, working capital and other general corporate purposes, as follows:

 

   Without over allotment   With over allotment 
         
Expanding Product Offerings  $1,989,778   $2,330,983 
Marketing   1,989,778    2,330,983 
Expanding Workforce   4,180,206    4,860,247 
D&O insurance   200,000    200,000 
Working Capital and Other General Operation   477,738    542,912 
GT Group Loan Repayment   250,000    250,000 
Total  $9,087,500   $10,515,125 

 

We believe that the net proceeds from this offering and our existing cash will be sufficient to fund our operations through at least the next 24 months. This expected use of the net proceeds from the offering represents our intentions based upon our current plans and business conditions. We cannot specify with certainty all of the particular uses of the net proceeds that we will receive from this offering, or the amounts that we will actually spend on the uses set forth above. We may find it necessary or advisable to use the net proceeds for other purposes, and we will have broad discretion in using these proceeds. Investors will be relying on our judgment regarding the use of the net proceeds from this offering. Pending the use of proceeds as described above, we plan to invest the net proceeds that we receive in short-term and intermediate-term interest-bearing obligations, investment-grade investments, certificates of deposit or direct or guaranteed obligations of the U.S. government. We cannot predict whether the invested proceeds will yield a favorable return.

 

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We may also use a portion of our net proceeds to acquire or invest in complementary products, technologies, or businesses. However, we currently have no agreements or commitments to complete any such transactions.

 

On August 4, 2022, we entered into a loan agreement (the “Loan Agreement”) with Greentree Financial Group, Inc. (the “Investor”) for a loan of up to $250,000 to help us pay certain offering expenses. As funds are advanced, the Company will issue a promissory note (the “Note”) for the amount advanced plus a 10% original issue discount. The Note matured on February 15, 2023, subject to the Company’s right to extend the note two times for three months each by issuing the investor 10,000 shares of the Company’s common stock on each extension. The Investor has the right to convert the unpaid principal amount and interest on the Note into shares of common stock at a price equal to 70% of the lowest closing price for the last five (5) trading days immediately prior to but not including the date of conversion. In connection with the Loan Agreement, the Investor received warrants to purchase up to 200,000 shares of common stock (based on a $200,000 investment) at $2.00 per share for a period of five years (the “GT Warrant”). The Investor was granted registration rights for a registration statement in connection with a subsequent offering, subject to certain exceptions. If after sixty (60) days of this offering (i) a registration statement for the common stock underlying the GT Warrants has gone effective, and is still effective, (ii) the 20-day volume-weighted daily average price of the Company’s common stock exceeds $6 per share, (iii) the average daily trading volume is at least 500,000 shares during such 20-day period, and (iv) an event of default under the Note has not occurred, then the Company will have the option for thirty (30) days to elect to call the Investor’s unexercised GT Warrants at a price per GT Warrant equal to $0.10 per GT Warrant; provided that, the Company provides the Investor with written notice of its intent to redeem, and the Investor has thirty (30) days after receipt of notice to elect to exercise the GT Warrants. The GT Warrants also contain an anti-dilution provision which proportionately adjusts the exercise price of the GT Warrants if the Company issues common stock or securities convertible into common stock at a price per share less than the exercise price.

 

On November 16, 2022, the Company and the Investor entered into an amendment to the Note (“Amendment No.1”), pursuant to which the balance under the note may be converted into the Company’s common stock immediately upon the completion of the Company’s initial public offering or some other event that results in the Company’s common stock becoming publicly traded as opposed to the balance under the note being convertible into common stock immediately upon issuance.

 

On November 16, 2022, the Company and the Investor entered into an amendment to the GT Warrant, pursuant to which the GT Warrants will not be exercisable until the Company’s initial public offering or some other event that results in the Company’s common stock becoming publicly traded as opposed to the GT Warrant being exercisable into common stock immediately upon issuance. The warrant was valued at approximately $229,000 using the Black Scholes pricing model relying on the following assumptions: volatility 66.15%; annual rate of dividends 0%; discount rate 2.76%.

 

On August 4, 2023, the Note was amended to extend the maturity date (“Amendment No.2” and together with Amendment No. 1, the “Amendments”). The new maturity date can be extended at the request of the Company for an additional three-month extension, which would be up to February 15, 2024, if exercised. If the Company extends the maturity date to February 15, 2024 an additional 10,000 shares would be issued to the Investor. The Amendments include the issuance of 10,000 shares of common stock for each extension, if the Company chooses to exercise its right of extension, the total shares issued under the Amendments would be 40,000 shares of common stock. No other terms of the agreement were amended in Amendment No.2. Up until now, the first loan extension is for the three-month period starting from February 15, 2023, the second loan extension is for the three-month period starting from May 15, 2023, and the third loan extension is for the three-month period starting from August 15, 2023. Thus, with three loan extensions exercised under the Amendments, all 30,000 shares for the extensions were issued to the Investor on August 15, 2023 and the Note is currently due November 15, 2023.

 

DIVIDEND POLICY

 

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.

 

Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant. In addition, our ability to pay dividends may be restricted by any agreements we may enter into in the future.

 

CAPITALIZATION

 

The following table sets forth our cash and cash equivalents as of June 30, 2023:

 

  on an actual basis;
     
 

a pro forma basis to give effect to the issuance of 30,000 shares of common stock to Greentree for note extensions.

     
  a pro forma basis to give effect to the issuance of 250,000 shares of common stocks upon the exercise of warrants.
     
  a pro forma basis to give effect to the sale of 2,115,000 shares in this offering at the assumed initial public offering price of $5.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us.

 

The foregoing pro forma information as adjusted is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the following table in conjunction with the “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus and our financial statements and related notes appearing elsewhere in this prospectus.

 

   As of June 30, 2023 (Unaudited) 
  

Actual

(restated)

   Pro forma(1)   Pro forma (2)   Pro forma as adjusted(3) 
Cash and cash equivalents  $16,134   $16,134   $516,134   $9,603,634 
Debt:                
Accounts payable and accrued liabilities  $88,475   $69,990   $69,990   $69,990 
Short-term payables  $232,394   $232,394   $232,394   $232,394 
Long-term payables  $521,551   $521,551   $521,551   $521,551 
Total Debt  $842,420   $823,935   $823,935   $823,935 
Stockholders’ equity (deficit):                    
Common stock  $94,850   $95,150   $97,650   $118,800 
Subscription receivables  $(25,000)  $(25,000)  $(25,000)  $(25,000)
Additional paid-in capital  $4,979,172   $5,038,872   $5,536,372   $14,602,722 
Accumulated deficit  $(5,618,918)  $(5,660,433)  $(5,660,433)  $(5,660,433)
Total stockholders’ (deficit) equity  $(569,896)  $(551,411)  $(51,411)  $9,036,089 
Total capitalization  $272,524   $272,524   $772,524   $9,860,024 

 

(1) The pro forma balance sheet data gives effect to the issue of 30,000 shares of common stock to the Investor for the extensions of the Note as described elsewhere in this prospectus.

 

(2) The pro forma balance sheet data gives effect to the issue 250,000 shares of common stock upon the exercise of warrants that two selling stockholders have agreed to exercise upon the effective date of the registration statement.

 

(3) The as adjusted balance sheet data gives effect to the issuance and sale of shares in this offering at an assumed initial public offering price of $5.00 per share, as set forth on the cover of this prospectus, after deducting estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

 

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The number of shares of our common stock to be outstanding after this offering is based on 9,485,000 shares of our common stock outstanding as of June 30, 2023, plus 30,000 shares of common stock were issued to Greentree on August 15, 2023 for the three note extensions, plus 250,000 shares issuable upon the exercise of warrants. Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:

 

  assumes the shares of common stock are offered at $5.00 per share (the midpoint of the price range listed on the cover page of this prospectus);
     
  assumes no exercise by the underwriters of their overallotment option;
     
  assumes no exercise of 650,000 outstanding warrants; and
     
  assumes no exercise of the warrants issued to the representative of the underwriters.

 

DILUTION

 

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma as adjusted net tangible deficit per share of our common stock immediately after this offering.

 

As of June 30, 2023, we had a historical net tangible deficit of approximately $(569,896) or $(0.06) per share. Our historical net tangible deficit per share represents total tangible assets of $272,524 less total liabilities of $842,420.

 

The number of shares of our common stock to be outstanding after this offering is based on 9,485,000 shares of our common stock outstanding as of June 30, 2023, plus 30,000 shares of common stocks issued to Greentree on August 15, 2023, for note extensions, plus 250,000 shares issuable upon the exercise of warrants. Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:

 

  assumes the shares of common stock are offered at $5.00 per share (the midpoint of the price range listed on the cover page of this prospectus);
     
  assumes no exercise by the underwriters of their overallotment option;
     
  assumes no exercise of 650,000 outstanding warrants; and
     
  assumes no exercise of the warrants issued to the representative of the underwriters.

 

We determine dilution per share to investors participating in this offering by subtracting pro forma as adjusted net tangible deficit per share after this offering from the assumed initial public offering price per share paid by investors participating in this offering. The following table illustrates this dilution on a per share basis to new investors:

 

Assumed initial public offering price per share  $5.00 
Pro forma net tangible deficit per share as of June 30, 2023  $(0.06)
Increase per share to existing stockholders attributable to investors in this offering  $0.77 
Pro forma as adjusted net tangible book value per share, to give effect to this offering  $0.72 
Dilution in pro forma net tangible book value per share to new investors in this offering  $4.28 

 

The pro forma information discussed above is illustrative only and will change based on the actual initial public offering price, number of shares and other terms of this offering determined at pricing.

 

Each $1.00 increase or decrease in the assumed initial public offering price of $5.00 per share (which is the midpoint of the price range set forth on the cover page of this prospectus), would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share after this offering by $0.16, respectively, and dilution per share to new investors purchasing shares of common stock in this offering by $0.84, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by $0.29 and decrease the dilution per share to new investors purchasing shares of common stock in this offering by $0.29, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A decrease of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease our pro forma as adjusted net tangible book value per share after this offering by $0.35 and increase the dilution per share to new investors purchasing shares of common stock in this offering by $0.35, assuming no change in the assumed initial public offering price and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

If the underwriters exercises their over-allotment option in full, our pro forma adjusted net tangible book value would be $9,963,714, or approximately $0.82 per share, representing an immediate increase in the adjusted net tangible book value to existing stockholders of approximately $0.87 per share and immediate dilution of approximately $4.18 per share to new investors purchasing shares of our common stock in this offering, assuming an initial public offering price of 5.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

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The table below summarizes as of June 30, 2023 with additional shares issued, adjusted pro forma basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by existing stockholders and (ii) to be paid by new investors purchasing shares in this offering at an assumed initial public offering price of $5.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses.

 

   Shares Purchased   Total Consideration   Average Price Per 
   Number (1)   Percent   Amount   Percent   Share 
Existing stockholders   9,765,000    82.20%  $480,000    4.34%  $0.05 
New investors   2,115,000    17.80%  $10,575,000    95.66%  $5.00 
Total   11,880,000    100%  $11,055,000    100%     

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of financial condition and results of operations in conjunction with our financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, the following discussion and analysis includes forward looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated in these forward looking statements as a result of a variety of factors, including those discussed in “Risk Factors” and elsewhere in this prospectus. See the discussion under “Special Note Regarding Forward Looking Statements” beginning on page 28 of this prospectus. Our fiscal year ends on December 31.

 

Overview

 

Scripps Safe is a pharmaceutical supply chain solutions company. Our company focuses on developing solutions for the transport, security, storage, distribution and dispensing of pharmaceuticals within the lawful supply chain and compliant with federal and state regulations. Our mission is to keep pharmaceuticals secure from the manufacturer/distributor to the patient by delivering integrated security solutions across the United States and Canada. Our solutions prevent drug diversion, reduce attempts to minimize drug abuse and ensure required compliance with the myriad of healthcare and pharmaceutical laws and regulations.

 

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Critical Accounting Policies and Estimates and Recent Accounting Pronouncements

 

Basis of Presentation

 

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). While our significant accounting policies are more fully described in our financial statements, we believe the following accounting policies are the most critical to aid in fully understanding and evaluating this management discussion and analysis.

 

Use of Accounting Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates and judgments include but are not limited to share-based compensation. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

 

Revenue Recognition

 

The Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) and recognizes revenue upon the transfer of goods or services in an amount that reflects the expected consideration received in exchange for those goods or services. The Company recognized $241,829 and $374,201 of revenue for the six months ended June 30, 2023 and 2022, respectively. The Company recognized $708,256 and $505,143 of revenue for the year ended December 31, 2022 and 2021, respectively. All of the Company’s revenue for the six months ended June 30, 2023 and 2022, and for the years ended December 31, 2022 and December 31, 2021 were derived from the sale of hardware.

 

Accounts Receivable

 

Accounts receivables are carried at their estimated collectible amounts and are periodically evaluated for collectability based on past credit history with clients and other factors.  The Company establishes provisions for losses on accounts receivable on the basis of loss experience, known and inherent risk in the account balance, and current economic conditions. Past due balances over 60 days and other higher risk amounts are reviewed individually on a customer-by-customer basis for collectability, and appropriate adjustments, if necessary, are made to the allowance. Based on management’s assessment of the aforementioned conditions, the Company has kept its allowance unchanged for the June 30, 2023 and December 31, 2022 period ends.  Approximately $99,000 of the Company’s accounts receivable of $110,876 at June 30, 2023 pertain to sales on products which were shipped, and accordingly invoiced in the final month of the quarter ended June 30, 2023. The amounts of allowance for doubtful accounts on June 30, 2023, and December 31, 2022, were approximately $8,000 and $8,000, respectively.

 

Recently Issued Pronouncements

 

For information on recently issued accounting pronouncements, refer to Note 2 to our financial statements included elsewhere in this prospectus.

 

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Results of Operations for the Six Months Ended June 30, 2023, and 2022

 

Revenue

 

Revenue decreased $132,372, or 35.37% from $374,201 for the six months ended June 30, 2022, to $241,829 for the six months ended June 30, 2023. The decrease was due to the Company purposefully pivoting away from smaller projects to building its sales pipeline for larger projects.

 

Cost of Revenue

 

Cost of revenue decreased $68,182 or 26.59% from $256,467 for the six months ended June 30, 2022, to $188,285 for the six months ended June 30, 2023. The decrease was due to the decrease in costs of services.

 

Selling, General and Administrative

 

Selling, General and administrative costs increased $4,523,380 or 1430.75% from $316,155 for the six months ended June 30, 2022, to $4,839,535 for the six months ended June 30, 2023. The increase was primarily due to the increase in stock-based compensation which was for issuances of common stock for services to related parties and third-party consultants. These issuances were non-cash, non-recurring expenses which were primarily related to our initial public offering expenses and key individuals to incentivize them for their service to the Company.

 

Results of Operations for the Years Ended December 31, 2022, and 2021.

 

Revenue

 

Revenue increased $203,113, or 40.21% from $505,143 for the year ended December 31, 2021, to $708,256 for the year ended December 31, 2022. The increase was due to the expansion of marketing.

 

Cost of Revenue

 

Cost of revenue increased $58,844, or 16.59% from $354,768 for the year ended December 31, 2021, to $413,612 for the year ended December 31, 2021. The increase was due to the increase in costs of services.

 

Selling, General and Administrative

 

Selling, General and administrative costs increased $188,924, or 43.2% from $437,261 for the year ended December 31, 2021, to $626,185 for the year ended December 31, 2022. The increase was primarily due to the increase in advertising and marketing expense and professional service expenses.

 

Off-Balance Sheet Arrangements

 

We did not have, during the periods presented, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

 

Liquidity and Capital Resources

 

We have financed our operations primarily through the founder’s equity, revenue from sales and an EIDL SBA loan which has historically been sufficient to meet our working capital and capital expenditure requirements. As of June 30, 2023 and December 31, 2022, our principal sources of liquidity were $16,134 and $10,329, respectively of cash and cash equivalents. Cash and cash equivalents consist primarily of cash on deposit.

 

On August 4, 2022, we entered into a loan agreement (the “Loan Agreement”) with Greentree Financial Group, Inc. (the “Investor”) for a loan of up to $250,000 to help us pay certain offering expenses. As funds are advanced, the Company will issue a promissory note (the “Note”) for the amount advanced plus a 10% original issue discount. The Note matures on February 15, 2023, subject to the Company’s right to extend the note two times for three months each by issuing the investor 10,000 shares of the Company’s common stock on each extension. The Company notified the Investor it was exercising its right to extend the note prior to the maturity date of February 15, 2023 and May 15, 2023, extending the maturity date until August 15, 2023. The Investor has the right to convert the unpaid principal amount and interest on the Note into shares of common stock at a price equal to 70% of the lowest closing price for the last five (5) trading days immediately prior to but not including the date of conversion. In connection with the Loan Agreement, the Investor will receive warrants to purchase up to 200,000 shares of common stock (based on a $200,000 investment) at $2.00 per share for a period of five years (the “GT Warrant”). The Investor was granted registration rights for a registration statement in connection with a subsequent offering, subject to certain exceptions. If after sixty (60) days of this offering (i) a registration statement for the common stock underlying the GT Warrants has gone effective, and is still effective, (ii) the 20-day volume-weighted daily average price of the Company’s common stock exceeds $6 per share, (iii) the average daily trading volume is at least 500,000 shares during such 20-day period, and (iv) an event of default under the Note has not occurred, then the Company will have the option for thirty (30) days to elect to call the Investor’s unexercised GT Warrants at a price per GT Warrant equal to $0.10 per GT Warrant; provided that, the Company provides the Investor with written notice of its intent to redeem, and the Investor has thirty (30) days after receipt of notice to elect to exercise the GT Warrants. The GT Warrants also contain an anti-dilution provision which proportionately adjusts the exercise price of the GT Warrants if the Company issues common stock or securities convertible into common stock at a price per share less than the exercise price.

 

On November 16, 2022, the Company and the Investor entered into amendment to the Note, pursuant to which the balance under the note may be converted into the Company’s common stock immediately upon the completion of the Company’s initial public offering or some other event that results in the Company’s common stock becoming publicly traded as opposed to the balance under the note being convertible into common stock immediately upon issuance.

 

On November 16, 2022, the Company and the Investor entered into amendment to the GT Warrant, pursuant to which the GT Warrants will not be exercisable until the Company’s initial public offering or some other event that results in the Company’s common stock becoming publicly traded as opposed to the GT Warrant being exercisable into common stock immediately upon issuance. The investor has agreed to exercise 150,000 of the 200,000 warrants to purchase shares of common stock they were provided upon the effectiveness of the registration statement. Upon exercise of the warrants, the Company will recognize an expense of $229,000, with the warrants valued using the Black-Scholes pricing model with the following assumptions: volatility 66.15%; annual rate of dividends 0%.

 

On August 2, 2023, the Company signed an amendment to the loan with Greentree Financial. The amendment gives the Company the right to extend the maturity date of the Note, that the Company, on August 4, 2023, utilized to extend the maturity date to November 15, 2023. On August 15, 2023, the Company issued 30,000 shares to Greentree Financial for all three extensions. The new maturity date can be extended at the request of the Company for an additional three-month extension, which would be up to February 15, 2024, if exercised. As of June 30, 2023, there is a balance of $170,000 on the note.

 

To various investors in February and March 2023, and to one investor for $25,000 in June 2023, the Company offered shares in a private placement. The Company issued an aggregate of 265,000 shares at the price of $2.00 per share, raising a total of $530,000. The Company had $10,000 of expenses in connection with such offering.

 

In June 2023, the Company entered into a consulting agreement with Chartered Services LLC (the “Consultant”). As compensation for signing this agreement, the Company issued to the Consultant warrants to purchase up to 300,000 shares of common stock at an exercise price of $2 per share, with such warrants expiring on July 23, 2028. The Consultant has agreed to exercise 100,000 of the 300,000 warrants to purchase shares of common stock they were provided upon the effectiveness of the registration statement. The Company had recognized the expense relating to the warrants at June 30,2023.

 

Based on our current operating plan, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents and anticipated cash generated from sales of our services, will be sufficient to meet our anticipated cash needs for at least the next 24 months following the date of this prospectus.

 

Our future capital requirements will depend on many factors, including, but not limited to, the rate of our growth, our ability to attract and retain customers, and the timing and extent of spending to support our efforts to develop our software platform. Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies. As such, we may be required to seek additional equity and/or debt financing. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations may be materially and adversely affected.

 

Cash Flows

 

Operating activities

 

Net cash used in operating activities was $464,501 and $189,448 for the six months ended June 30, 2023 and 2022, respectively. The negative cash flows from operating activities for the six months ended June 30, 2023 was primarily due to the net loss of 4,914,162, plus increase in account receivable of $77,392, mainly offset by stock-based compensation of $4,120,000, issuance of warrants of $361,724 and stock-based donation of $80,000. Comparatively, the negative cash flows from operating activities for the six months ended June 30, 2022 was primarily due to the net income of $206,543, plus increase in right-of-use asset of $119,979 and offset mainly by the decrease in right-of-use liabilities of $120,404.

 

Net cash used in operating activities was $418,064 and $138,387 for the years ended December 31, 2022 and 2021, respectively. The negative cash flows from operating activities for the year ended December 31, 2022 was primarily due to the net loss of 370,338, plus mainly the right of use asset of $108,863, offsetting mainly by increase in right of use liabilities of $110,138. Comparatively, the negative cash flows from operating activities for the year ended December 31, 2021 was primarily due to the net loss of $268,604.

 

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Investing activities

 

Net cash used in investing activities was $1,900 for the six months ended June 30, 2022 and 2023. The negative cash flow from investing activities for the six months ended June 30, 2023 was due to the purchase of fixed assets.

 

Net cash used in investing activities was nil for the years ended December 31, 2022 and 2021.

 

Financing activities

 

Net cash provided by financing activities was $472,206 and $3,419 for the six months ended June 30, 2023 and 2022. The positive cash flows from financing activities for the six months ended June 30, 2023 was primarily due to the $480,000 of the net proceeds from issuing the stock in a private placement. Comparatively, the positive cash flows from financing activities for the six months ended June 30, 2022 was primarily due to the $2,589 proceeds from borrowing in debt.

 

Net cash provided by financing activities was $200,461 and $307,378 for the years ended December 31, 2022 and 2021. The positive cash flows from financing activities for the year ended December 31, 2022 was primarily due the $153,000 of the net proceeds from issuing the promissory note and proceeds from line of credit of $46,845. Comparatively, the positive cash flows from financing activities for the year ended December 31, 2021 was primarily due to the $314,700 proceeds from SBA EIDL loan.

 

Emerging Growth Company Status

 

We are an “emerging-growth company”, as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company we can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company.

 

We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of this offering; (ii) the first fiscal year after our annual gross revenue are $1.235 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common stock less attractive, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

 

BUSINESS

 

Overview

 

The U.S. pharmaceuticals market is the world’s largest national market and represents over 45% of the world’s global pharmaceuticals with sales exceeding $584B in 2021.4 U.S. pharmaceuticals are divided into two categories: controlled and non-controlled substances. The Controlled Substances Act (CSA) of 1970 is the statute establishing federal U.S. drug policy under which the manufacture, importation, possession, use, transport, security, storage, distribution and dispensing of controlled substances is regulated. The Drug Enforcement Administration (“DEA”) enforces these policies at the federal level and State Pharmacy Boards, Bureau of Narcotics and Departments of Health have enforcement authority at the state level. The stricter of the two regulations must always be followed.

 

Our mission focuses on developing integrated solutions for the professionals who are required to manage the transport, security, storage and distribution of pharmaceuticals within the lawful supply chain and be compliant with federal and state regulations. Our mission is to keep pharmaceuticals secure from the manufacturer/distributor to the patient by delivering integrated security solutions across the United States and Canada.

 

The Scripps System™ is a Platform as a service (PaaS) Solution to keep pharmaceuticals secure within the lawful supply chain. Currently, we sell DEA compliant safes and vaults with integrated access control system management. We anticipate adding new solution features in the near term that will include advanced inventory management, supply chain tracking, audit tracking capability and diversion control. Within two years we anticipate adding advanced analytics, and application programming interfaces (“API”) to common healthcare applications.

 

Scripps Safe currently has over 600 healthcare clients who have purchased our currently available DEA compliant vaults and safes with integrated access control/management systems. To date, our revenue has not been concentrated to any one particular vertical or among a small number of customers.

 

4 https://www.statista.com/topics/1719/pharmaceutical-industry/

 

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Market Need and Opportunity

 

Pharmaceutical Drug Diversion

 

In 2021 over 18,278 opioid related overdose deaths were reported, directly attributable to diverted pharmaceuticals.5 In 2021 a total of 107,521 people died in the USA to a drug overdose with 75% related to an opioid according to the CDC.

 

Pharmaceutical Drug Diversion is defined as the transfer of a drug from a lawful to an unlawful channel of distribution or abuse. The impact of drug diversion in the U.S. is:

 

  $72.65 billion a year – Economic Cost6
  $120 billion a year – Lost Labor and Productivity2
  $45 - $150 billion – Litigation & Settlement Costs7
  Pharmacy / Healthcare Facility Risks:

 

  Risk of violent crime
  Risk to patient health and security
  Workplace risk to employees
  Negative publicity
  Remediation costs
  Regulatory and civil liability
  Loss of federal funding (Medicaid)
  Loss of license

 

Destroying lives, families and communities

 

Drug diversion is not uncommon and can result in substantial risk not only to the individual who is diverting the drugs but also to patients, co-workers, and employers. Drug diversion can occur at any point along the supply chain. The true devastation of drug diversion and economic impact is immeasurable.

 

Market Opportunity and Growth

 

This market is primarily driven by the growth and distribution of pharmaceuticals. Pharmaceutical security solutions ARE REQUIRED BY LAW.

 

Three companies—McKesson, AmerisourceBergen, and Cardinal Health—account for approximately 90% of drug distribution revenue in the United States. Each of the Big 3 distributors appear in the top 15 companies ranked in the 2021 Fortune 500 list, and each recorded revenue of over $162 billion for 2021, following years of steady growth.8

 

5 https://nida.nih.gov/drug-topics/trends-statistics/overdose-death-rates

6 Source: National Drug Control Budget: FY 2018 Funding Highlights

7 https://www.bloomberg.com/news/articles

8 Publicly reported revenues

 

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Figure 1

 

 

From 2011 – 2021 the pharmaceutical market has grown approximately 95.2% and continues to show a steady upward trajectory.

 

Based on the overall size of the pharmaceutical market, the current U.S. federal and state security requirements and the number of controlled substance license holders, Scripps Safe estimates the addressable pharmaceutical security market for the Scripps SystemTM to be $16.5B in the United States. Based on the current laws, market dynamics and growth, pharmaceutical security is estimated to be a €6.14B/year9 opportunity within the European Union (EU).

 

Target Verticals

 

Pharmaceuticals are divided into two categories: controlled and non-controlled substances. There are many high value non-controlled substances that need to be protected in the supply chain. These include but are not limited to OTC medications, vaccines, Viagra, birth control pills, steroids and pet medications. However, the target verticals will generally be focused on securing and protecting controlled substances.

 

In order to manufacture, carry, dispense, handle or prescribe controlled substances an individual must register with the DEA, their State Pharmacy Board, Bureau of Narcotics and/or Department of Health. Upon approval registrants are awarded their license as a practitioner, mid-level practitioner or non-practitioner. The laws regarding the security and handling of controlled substances varies by each of these groups. Scripps Safe is not a medical practitioner, mid-level practitioner or non-practitioner and is not required to have a state or federal controlled substance license.

 

Controlled substances are categorized by the DEA into five (5) distinct categories or schedules depending upon the drug’s acceptable medical use and the drug’s abuse or dependency potential. The abuse rate is a determinate factor in the scheduling of the drug; for example, Schedule I drugs have a high potential for abuse and the potential to create severe psychological and/or physical dependence. As the drug schedule changes— Schedule II, Schedule III, etc., so does the abuse potential— Schedule V drugs represents the least potential for abuse. Drugs may include the parent chemical and do not necessarily describe the salts, isomers and salts of isomers, esters, ethers and derivatives which may also be classified as controlled substances.10

 

There are currently 1.9 million DEA controlled substance licenses, broken out as follows:11

 

9 EFPIA (European Federation of Pharmaceutical Industries and Associations), 2020

10 https://www.dea.gov/drug-scheduling

11 https://www.dealookup.com/

 

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  Physicians 1,352,890
  Nurses/Pas 446,573
  Pharmacy 70,905
  Hospital/Clinic 18,722
  Researcher 11,919

 

Net new licenses are currently growing about 7% per year. Several market dynamics can and will dramatically increase this number. One, is the opioid settlements and litigation. The massive infusion of opioid settlement funds is expected to funnel billions of dollars in grants to open new opioid treatment facilities within the next few years. Two, is the massive approval of medical marijuana across many states, creating a virtually new industry and expanded add-on business for many existing providers. Narcotic treatment providers and medical marijuana (schedule I) would be held to the highest government standards for security and handling. Scripps Safe breaks out our current target vertical markets and priority as follows:

 

 

 

Scripps Safe’s top three target strategic verticals are mobile pharmacy including EMS/Fire/ RescuePharmacy/ Home Health Delivery, Addiction/ Medication Treatment Facilities and Distributed Supply Chain plus those needing the Highest Security Requirements Required by Law

 

  Government, Law Enforcement, Military, Prisons
  Hospitals, Research, Universities, Independent Testing Labs, Medical and Veterinary Practices
  Manufacturers, Distributors, Reverse Distributors, Importers, Exporters, Compounders
  Narcotic/ Medication Treatment Facilities, Bio & Life Sciences, Assisted/ Acute Care

 

Maximum Crime and Anti-Diversion Risk

 

  Chain & Independent Pharmacies
  Mobile Pharmacy: First Responders/ EMS/Fire/Delivered Home Health Care –
  Animal Handlers/ Veterinary Care
  Hospice & Assisted/ Acute Care Facilities

 

Solution Launch Priority by Vertical in 2023

 

  Scripps System™ Mobile Pharmacy – 1H2023
  SafeDispense® for Hospitals – 1H2023
  Guardian Series® for Addiction/ Medication Treatment Facilities – 1H2023
  TRXP Series® for Assisted Care Facilities and Chain Pharmacies 2H2023
  SMART Series™ Vaults for Manufactures & Distributors 2H2023 C1SAFE®Analytical & Research Labs 2H2023

 

Future Verticals/Opportunities – 2024 - 2025

 

 

Vaccine Transportation & Storage Solutions (2024)

  Cold Chain Storage Solutions (2024)
  Scripps Pharma Tracking Command Center (2025)
  U.S. Strategic Drug Vault® (2025)

 

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These priorities were chosen based on highest market/legislative need, competitive advantage, lowest barriers to entry, solution availability and strongest market opportunity.

 

Competition

 

The competitive environment for pharmaceutical security is disparate, fragmented, non-integrated commodity products and/or general non-compliance.

 

 

By target vertical the competitive solutions currently serving the market are as follows:

 

  Hospitals – 1) Very expensive medication management and dispensing solutions which are not DEA compliant for storage. No integration to secure enclosures.
     
  Pharmacy – 1) No solution at all 2) Commodity products 3) Not integrated
     
  Mobile Pharmacy: EMS/Fire Rescue/ Home Health Care – 1) Very fragmented solution options 2) Non-UL/Non-compliant disparate systems 3) Commodity products. The biggest competitor in this space has stopped servicing their product opening a tremendous opportunity for Scripps Safe.
     
  Bio & Life Sciences1) Great market opportunity, currently no leaders in this space.
     
  Narcotic/ Medication Assisted Treatment Clinics, Animal Handlers
     
    1) Commodity products with no software or technology integration
     
  Assisted/ Long-Term/ Acute Care Facilities – No competitors in this space. Currently only using commodity products.

 

The greatest competitive “challenges” are complacent non-compliance, no solution at all, and addressing customer purchasing behavior. Our top 2 target verticals are EMS/Fire/Ambulance and Addiction Treatment Facilities. The competitive opportunity in Mobile Pharmacy: EMS/Fire/Ambulance is our biggest competitor has stopped servicing their product. The competitive opportunity for Addiction Treatment facilities is two-fold. One, there are no market leaders addressing this vertical and two, the cost of pharmaceutical security solutions for treatment providers (up to $8,000 for facilities and $250,000 for mobile treatment operations) are covered by SAMSHA (Substance Abuse and Mental Services Health Administration) grants.

 

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Solutions and Products

 

  I. The Scripps SystemPaaS Solution

 

The patent approved Scripps System™ is designed to eliminate drug diversion throughout the supply chain. This is an integrated system of transport, storage, dispensing and inventory management with direct supervision surveillance and access control system management connected to track and trace serialization requirements. This system will integrate to advanced diversion analytics, customer’s pharmacy management and inventory systems, customized reporting, advanced artificial intelligence and machine learning to empower real time knowledge leading to smarter decisions.

 

The Scripps System™ keeps drugs safe from manufacturer to the patient with end-to-end chain of custody solutions. This system currently includes the following brand segments and product lines: Rescue Series®, TRXP Series®, Guardian Series®, C1SAFE® and SafeDispense®.

 

On-going R&D is planned for each of these product lines to development competitive, game changing and patented solutions to continue bringing innovation to compliance.

 

 

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Turnkey System

 

The Chief Pharmacist will have the ability to manage permissions and access across the entire pharmacy narcotics workflow. Permissions can be centrally managed, audited, revoked and issued across each of the narcotics vaults. The central administrator will have 24/7 administrative supervision and audit control backed by video technology.

 

Pre-Integrated & Tested

 

The Scripps System integrates all these components to work together to significantly reduce the risk of internal diversion, tampering, narcotics substitutions or theft.

 

Growth is Easy

 

When your needs grow so does your system. Seamless turnkey future growth and expansion make growth easy at minimal cost. Whether you need to add one vault to the new surgery unit or inpatient facility, your plug-in security system easily expands.

 

Compliant Monitoring Technology

 

The Chief Pharmacist now can monitor all flow and usage no matter the day or time. In compliance with State and Federal law, the Chief Pharmacist will have constant supervisory view over the entire pharmacy narcotics workflow with the patented Scripps System covert digital video camera solution.

 

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Customer Benefits

 

Pharmaceutical security solutions lower drug diversion while reducing healthcare costs and keeping everyone safe. Scripps Safe solutions go beyond security to bring smart innovation to compliance. The Scripps System™ patented solution uniquely integrates the DEA’s Controlled Substance Act to the FDA’s Drug Supply Chain Security Act for a seamless workflow environment.

 

Healthcare facilities will have integrated systems, chain of custody management, streamlined operations, reduced costs and reduced risks of drug diversion. This creates a safer healthcare environment for patients, staff and communities.

 

Creating a Safer Healthcare Environment®

 

Integrated Pharmaceutical Security Benefits

 

 

Competitive Advantage

 

We believe Scripps Safe presents the only vertically integrated system that integrates across healthcare systems meeting all federal and state security requirements including constant supervision surveillance.

 

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In 2021, NASCSA (National Association of State Controlled Substance Authorities) chose Scripps Safe Executive to be honored with the Annual President’s Award, a significant industry recognition.

 

We Bring Innovation to Compliance®

 

 

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We believe our competitive advantage is a fully integrated and autonomous system that has patent protection.

 

 

Pricing - Subscription Recurring Revenue Model

 

Scripps Safe currently has a flat rate transactional pricing model. With the support of the capital raise, we plan to re-launch/launch our new solutions with a recurring subscription revenue monthly pricing model.

 

Monthly - Per Unit/User Pricing for Access Control System Automated Dispatch System

 

This is a standard PaaS pricing model, where users pay different amounts based on the number of individuals using the hardware, software and requiring dispatch codes. Accounts would have 3 to 10-year service contracts.

 

Monthly Subscription License - Feature Based Pricing for Solution Bundles

 

PaaS pricing model customized to a customer’s feature requirements, offering different tiers of support on services and upgrades available. Accounts would have 3 to 10-year service contracts.

 

Scripps Safe will make money through the following:

 

  Sale and/ or Leasing of Hardware
  Long-Term/ Ongoing Service and Support Contracts
  Extended Warranty Packages
  Consulting Services
  Data & Analytics Revenue Stream

 

Intellectual Property

 

Utility Patent Granted – 1

 

Scripps Safe was issued United States Patent No. US11,257,314 - – AUDITABLE SECURITY SYSTEM FOR SECURE ENCLOSURE.

 

In summary, this approved patent is directed to an auditable security system for preventing unlawful diversion of goods and/ or services.

 

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  We believe this patent’s claims cover having the ONLY fully networked secure enclosure with camera surveillance in the US.
     
  We believe this patent potentially allows Scripps Safe to be the ONLY vendor who can offer this fully integrated solution meeting the Controlled Substance Act of 1970, the FDA’s Drug Supply Chain Security Act of 2013 and State Pharmacy Board security requirements for constant supervision.
     
  Currently NY & Illinois DO require constant supervision technology, which we believe only Scripps Safe would be able to provide through a single integrated solution.

 

Trademarks Granted – 14

 

 

1. Scripps Safe Logo®

2. Rescue Series®

  3. TRXP Series ®  
  4. Guardian Series®  
  5. SafeDispense ®  
  6. C1SAFE®  
  7. Total Rx Protection®  
  8. U.S. Strategic Drug Vault®  
  9. We Bring Innovation to Compliance®  
  10. Creating A Safer Healthcare Environment®  
  11. We’re Ending The Opioid Crisis®  
 

12. Protecting the Chain of Custody®

13. Cross & Shield Logo Art in Scripps Safe logo®

    14. Central Dispense®  

 

Trademarks Filed & Pending - 2

 

 

Scripps SystemTM

    Smart SeriesTM

 

Patents Design Pending – 1

 

  Design patent application number: 29761955 – Product design in support of The Scripps System™

 

Marketing

 

Solutions Managers, Market Managers, Marketing Operations & Analytics leaders empowered to drive a fully integrated marketing ecosystem by decision maker, influencer and industry executives.

 

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Direct & Partner Sales

 

Ambulance Manufacturers, Medical Supply Distributors, Northwell GPO (already a Member), MHA GPO, LabRepCo GPO, Hospital GPO’s, Federal & State GSA, Healthcare Engineering & Design Firms, Healthcare Consulting Firms

 

Vertical Channel Strategy

 

Channel Campaigns, Buying Alliances, Manufacturers, Service Providers, Healthcare Compliance Officers, Consultants, GC’s, Mobile Briefing Centers, CE Education, Business Partners – Co-Marketing/ Joint Campaigns

 

Go to Market Channels

 

SEO, PPC, Mobile, Affiliate, Display, Social Media, Blogs, Apps, Video, Web Design, Events Calendar

 

Content Marketing

 

Unique Content, Customer References, Testimonials, Case Studies, Articles, Newsletters, Blog, Webinars, Deliverables, Language Translations

 

Influencers

 

DEA, NADDI, NASCA, State Pharmacy Boards, Vertical Industry Associations, Educational Institutions, Dept of Health

 

 

Advocacy

 

Promulgate legislation through Coalition for 21st Controlled Substances Act (CSA 21)

 

Promotion

 

PR Partner Team – Press Releases, Run Print Ads, Broadcast Media, Detail PR Plans to support solution launch events.

 

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Associations

 

Scripps Safe currently has marketing agreements with the following associations:

 

  AAP – American Associated Pharmacists
     
  AphA – American Pharmacy Association
     
  APPA – American Pharmacy Purchasing Alliance
     
  CARE – Pharmacy Cooperative
     
  IPA – Independent Pharmacy Alliance
     
  Keystone – Pharmacy Purchasing Alliance
     
  PFOA – Pharmacy Practitioners & Owners Association
     
  Pharmacist Mutual Insurance (PHMIC)
     
  RxPlus Pharmacies
     
  Southern Drug Store Solutions
     
  SPC Southern Pharmacy
     
  WSPC – Western States Pharmacy Coalition

 

Facilities

 

Our corporate headquarters is located in 9051 Tamiami Trail N, Suite 201, Naples, FL 34108. We have entered into a lease agreement, for our corporate headquarters which lease provides for monthly base rent of $2,200 and expired in April 2022. The lease is currently $2,300 per month on a month-to-month basis. We have entered into a three-year lease agreement for distribution, customer support and order processing for 5,000 sq feet of office space at 100 Technology Way, Jeffersonville, IN 47130 for a monthly base rent of $2,291.67 beginning 5/1/2022, with an option to renew.

 

Legal Proceedings

 

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates are involved in a proceeding adverse to our business or have a material interest adverse to our business.

 

MANAGEMENT

 

The following table provides information regarding our executive officers and directors as of the date of this prospectus:

 

Name   Age   Position(s)
Executive Officers:        
Jacqueline von Zwehl   48   Chief Executive Officer, Chairman of the Board of Directors and Director
Craig Steinhoff   45   Chief Financial Officer
Christopher von Zwehl  

60

  Chief Growth Officer
James Egan   74   Lead Director, Audit Chair, Independent Board
Tim Theriault   63  

Director, Human Capital and Compensation Chair, Independent Board

Steven Ruhl   65  

Director, Independent Board

Doug Balog   62   Director, Nominating & Governance Chair, Independent Board

 

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Executive Officers and Directors

 

Jacqueline von Zwehl, Chief Executive Officer & Chairman of the Board

 

Ms. Von Zwehl founded Scripps Safe, Inc. in 2016. She is passionate about pharmaceutical security and creating a safer healthcare environment. In her current role, she consults hospitals, pharmacies, federal healthcare, EMS, private ambulance, law enforcement, opioid treatment clinics, manufactures and others on the compliance and safe handling, transportation, storage and dispensing of pharmaceuticals. She is an expert on DEA, SAMHSA regulations and State Board/Bureau of Narcotic guidelines. Ms. Von Zwehl is an advisor to State and Federal lawmakers on controlled substance trends, legislation and drug diversion risks.

 

Career Highlights

 

  22+ Years Global Healthcare Technology & SW Solutions Leader
  11+ Years Executive & Management Career at IBM focused on Healthcare Solutions
  Managed 220+ Employees, managed Global P&L and influenced Billions in Revenue
  Led software development teams in CA, Austin, Canada, Israel and India
  Consulted clients in healthcare software solutions in over 25 countries
  BA, Film & English Literature, New York University
  MBA, Marketing & Finance, Penn State University

 

Ms. Von Zwehl lives in Naples, FL. She is proud to support her family’s charitable foundation and philanthropic work around the world. The Family Foundation has funded and built 44 medical clinics around the world, St Joseph’s Hospital in Jerusalem, four primary schools in Vietnam and three orphanages in Russia.

 

Craig Steinhoff, Chief Financial Officer

 

Craig Steinhoff has been a Principal at HBK CPA’s & Consultants for over 14 years. Craig is acting as Scripps Safe’s interim CFO on a full-time basis as we conduct an executive search for a permanent Chief Financial and Operating Officer (CFOO). Craig does not have any conflicts of interest in performing the duties of this role. He manages a wide range of tax, accounting, audit, business advisory, financial planning, and other business operational and support with expertise across multiple industries. His experience is backed by a B.S. in Accounting from Capital University.

 

Christopher von Zwehl, Chief Growth Officer

 

Mr. Von Zwehl joined Scripps Safe, Inc. in 2016 and acts as the Company’s Chief Growth Officer and Rx Security Solutions Expert. Mr. Von Zwehl received a Bachelor of Business Administration in International Marketing from Hofstra University and Master of Arts in International Media Studies from The New School University. He also obtained leadership & officer’s training at the U.S. Coast Guard Academy. Mr. Von Zwehl is an Advisory Board Member of the American Pharmacy Purchasing Alliance (APPA). He serves on the Education & Membership Committees for the National Association of State Controlled Substance Authorities (NASCSA) for which he was just awarded the 2021 President’s Award. He is a member of the National Association of Drug Diversion Investigators (NADDI), FBI InfraGard Cyber Health Working Group, International Association for Healthcare Security & Safety (IAHSS) and American Society of Pharmacovigilance.

 

Prior to joining the Company, Mr. Von Zwehl was Vice President of Business Development at E-Renewables, LLC and Vice President at VARN International, a leader in graphic arts pressroom products distributing solutions to over 85 countries.

 

Part time, Mr. Von Zwehl volunteers his service to the United States as the Training Division Chief (DVC-AT) for the Public Affairs National Directorate in the U.S. Coast Guard Auxiliary. He has 20 years of service as a highly decorated national staff officer. He has an Active National Security “SECRET” Clearance. Mr. Von Zwehl is also a Terrorism Liaison Officer and Instructor. He is a two-time commissioned appointee of past EPA Administrator and New Jersey Governor Christine Todd-Whitman. Mr. Von Zwehl is proud of his work jointly overseeing the successful return of the United States’ most decorated warship to her namesake state from 1995 to 1999 as past Commissioner of the U.S.S. New Jersey Battleship Commission (BB-62), and as President of the Battleship New Jersey Foundation raising over $18 million.

 

James Egan, Lead Director, Audit Chair, Independent Board

 

Jim Egan has served as the Non-Executive Chairman of PHH Corporation (NYSE: PHH), a mortgage origination and servicing business, from 2009 to 2020. He was a Chairman of the Audit Committee and a member of the Compensation and Governance committees.

 

Jim recently served as Board Advisor and Executive Coach to a privately-owned master plan community, real estate developer. He currently serves as the Chairman of the Audit Committee of a privately owned and operated hospital system. He served as a Managing Director of Investcorp International, Inc, an alternative asset management firm specializing in private equity, hedge fund and real estate investments, from 1998 through 2008. Jim was the partner-in-charge, M&A Practice, U.S. Northeast Region for KPMG LLP from 1997 to 1998.

 

He also served as the Senior Vice President and Chief Financial Officer of Riverwood International, Inc. (currently Graphic Packaging Holding Co.); a global paper, packaging and machinery company from 1996 to 1997. Jim began his career with PricewaterhouseCoopers (formerly Coopers & Lybrand) in 1971 and served as a partner from 1982 to 1996 and a member of the Board of Partners from 1995 to 1996.

 

Jim possesses over forty years of business experience involving companies of varying sizes from start-ups to Fortune 500 public companies operating across numerous industries, including, among others, retail, consumer, distribution, industrial and financial services.

 

As a director, Jim brings to the board of directors a wide range of skills and experience in strategy development; operations, financial expertise; governance; risk management, and regulatory compliance. As the lead director, Mr. Egan is the liaison between management and the independent directors.

 

Tim Theriault, Director, Human Capital and Compensation Chair, Independent Board

 

Tim Theriault is an executive with more than 30 years of experience in various leadership roles for publicly traded and private companies. Tim currently serves on the Boards of Directors for Alliance Data Systems (NYSE:ADS) and previously the Vitamin Shoppe (NYSE:VSI). Alliance Data Systems, where Tim serves on the Audit and Nominating and Governance Committees, provides a portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services, and private label and co-brand retail credit card programs. Vitamin Shoppe, where Tim served on the Audit, Compensation, and IT Committees, operates as an omni-channel specialty retailer of nutritional products in the United States and internationally. Tim left the Board when the Vitamin Shoppe was sold in December, 2019.

 

Tim most recently served as Executive Vice President and Global Chief Information Officer for Walgreens Boots Alliance, Inc. a Fortune 20 company. During his career he has held leadership positions within information technology, business leadership with P/L responsibility, global operations, innovation, and continuous improvement at companies with annual revenues ranging from $4B to over $100b. His experience includes a wide variety of industries, including healthcare, financial services, retail, and manufacturing. He consistently served as a key advisor to CEOs and boards, as well as strategic partner to the business, helping to provide proactive advice designed to further business objectives while managing risk.

 

He has applied his skill set to a variety of challenges facing executive teams and boards over the course of his career. Tim has gained significant recognition for his leadership in technology, financial services, retail, and healthcare. At the same time, Tim provided key leadership around cyber security, Cloud, Analytics, Mobile, and other progressive technology solutions. Tim is an avid reader of emerging technologies and how they drive business value. Tim has also led significant mergers and acquisitions in retail, healthcare, and financial services. Having participated in hundreds of board and board committee meetings as an executive or as a board member, Tim has a wealth of practical knowledge and experiences and a common sense approach to board service.

 

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Steven Ruhl, Director, Independent Board

 

Steven Ruhl joined Scripps Safe Board in March 2022. He currently serves as the Chief Scientific Officer for Forte Biosciences. In this role, he is responsible for Forte’s technology and scientific needs and issues. He works with management to determine the short- and long-term technical requirements and investments to help the company reach its goals. He has over 35 years of experience in biopharmaceutical development and commercial manufacturing including technical roles with commercializing first in class products and commercial technology transfers associated with large capital projects. He has managed manufacturing of scheduled drug products in the US and EU. Before joining Forte, Mr. Ruhl supported a direct phase 3 transfer of a COVID warp speed monoclonal antibody downstream process at ThermoFisher, contributing to an accelerated PPQ campaign readiness with an external partnership and third-party sending site. Prior to that, Mr. Ruhl held positions of increasing responsibility and leadership at various biopharmaceutical companies, including IDEC Pharmaceuticals as Technical and Commercial Manufacturing Supply Director and Amgen as Commercial Drug Product Development Executive Director and Amgen Ireland Site Process Development Head. Mr. Ruhl received his B.Sc. in Microbiology and Chemistry from Brigham Young University.

 

Doug Balog, Director, Nominating & Governance Chair, Independent Board

 

Doug Balog is a seasoned executive in the IT industry. He currently is an investor, board member, advisor and/or consultant to numerous technology companies involved in areas such as Hybrid Cloud, Data Protection, Cybersecurity and Artificial Intelligence/Machine Learning.

 

Previously, Doug spent 37 years at IBM and was a senior executive for IBM’s Systems Business responsible for the portfolio innovation, sales growth and business unit performance of their Storage, Server, and Mainframe hardware businesses. In these roles, Doug traveled the world to work with some of IBM’s largest customers, business partners, ecosystem members, and cloud providers to architect next generation IT solutions.

 

Doug graduated from Pennsylvania State University with a B.S. in Computer Science and has maintained a close relationship with the university as an Alumni Club member as well as a member of the Penn State College of Information Sciences and Technology’s Board of Advisors. He and his wife have established the Balog Educational Grant at Penn State to help women and diverse students fulfill their dreams of a STEM degree.

 

Board Composition

 

Our board currently consists of 5 directors, Jacqueline Anz von Zwehl, Steven Ruhl, Tim Theriault, James Egan, and Doug Balog. Messrs. Ruhl, Theriault, Egan and Balog are “independent directors” within the meaning of the Listing Rules (the “Nasdaq Listing Rules”) of the Nasdaq Stock Market (“Nasdaq”).

 

Family Relationships

 

The Company’s Chief Executive Officer and Chief Growth Officer are married. Otherwise, no family relationships exist between any of our officers or directors.

 

Role of Board of Directors in Risk Oversight Process

 

The board of directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by the Audit Committee. The purpose of the Risk and Audit Committee is to assist the board of directors in fulfilling its fiduciary oversight responsibilities relating to (1) the integrity of the Company’s financial statements, (2) the effectiveness of the Company’s internal control over financial reporting, (3) the Company’s compliance with legal and regulatory requirements, and (4) the independent auditor’s qualifications and independence. Through its regular meetings with management, including finance and legal, the Risk and Audit Committee reviews and discusses all significant areas of our business and summarizes for the board of directors all areas of risk and the appropriate mitigating factors. In addition, our board of directors receives periodic detailed operating performance reviews from management.

 

Director Independence

 

The Board evaluates the independence of each nominee for election as a director of our Company in accordance with the Nasdaq Listing Rules. Pursuant to these rules, a majority of our Board must be “independent directors” within the meaning of the Nasdaq Listing Rules, and all directors who sit on our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee must also be independent directors.

 

Committees of the Board of Directors

 

Our board of directors has established an Audit Committee, a Human Capital and Compensation committee, and a Nominating and Governance committee. The composition and responsibilities of each of the committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

 

Audit Committee

 

The members of our Audit Committee are James Egan, Doug Balog, Steven Ruhl and Tim Theriault, with James Egan serving as the Chairperson. Each of Mr. Balog, Mr. Ruhl, Mr. Theriault, and Mr. Egan are independent under the rules and regulations of the SEC and the listing standards of the Nasdaq Stock Market applicable to audit committee members. Our board of directors has determined that each of Jim Egan, Doug Balog, Steven Ruhl, and Tim Theriault qualify as an audit committee financial expert within the meaning of SEC regulations and meet the financial sophistication requirements of the Nasdaq Stock Market.

 

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Our Audit Committee has the responsibility for, among other things, (i) selecting, retaining and overseeing our independent registered public accounting firm, (ii) obtaining and reviewing a report by independent auditors that describe the accounting firm’s internal quality control, and any materials issues or relationships that may impact the auditors, (iii) reviewing and discussing with the independent auditors standards and responsibilities, strategy, scope and timing of audits, any significant risks, and results, (iv) ensuring the integrity of the Company’s financial statements, (v) reviewing and discussing with the Company’s independent auditors any other matters required to be discussed by PCAOB Auditing Standard No. 1301, (v1) reviewing, approving and overseeing any transaction between the Company and any related person and any other potential conflict of interest situations, (vii) overseeing the Company’s internal audit department, (v) reviewing, approving and overseeing related party transactions, and (viii) establishing and overseeing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters.

 

Human Capital and Compensation Committee

 

The members of our Human Capital and Compensation Committee are Tim Theriault, Steven Ruhl and James Egan, with Tim Theriault serving as the Chairperson. Our Compensation Committee has the responsibility for, among other things, (i) reviewing and approving the chief executive officer’s compensation based on an evaluation in light of corporate goals and objectives, (ii) reviewing and recommending to the Board the compensation of all other executive officers, (iii) reviewing and recommending to the Board incentive compensation plans and equity plans, (iv) reviewing and discussing with management the Company’s Compensation Discussion and Analysis and related information to be included in the annual report on Form 10-K and proxy statements.

 

Nominating and Corporate Governance Committee

 

The members of our Nominating and Corporate Governance Committee are Doug Balog and Steven Ruhl with Doug Balog serving as the Chairperson. Our Nominating and Corporate Governance Committee has the responsibility relating to assisting the Board in, among other things, (i) identifying and screening individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors, (ii) recommending to the Board the approval of nominees for director, (ii) developing and recommending to our board of directors a set of corporate governance guidelines, and (iv) overseeing the evaluation of our board of director.

 

Code of Business Conduct and Ethics

 

Our board of directors has adopted a Code of Business Conduct and Ethics (the “Code”). The Code applies to all of our directors, officers and employees. Upon the completion of this offering, the full text of our code of conduct will be posted on our website under the Investor Relations section. We intend to disclose future amendments to, or waivers of, our Code, as and to the extent required by SEC regulations, at the same location on our website identified above or in public filings. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase our shares of common stock.

 

Board Diversity

 

Each year, our nominating and corporate governance committee will review, with the board of directors, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates, our nominating and corporate governance committee will consider factors including, without limitation, an individual’s character, integrity, judgment, potential conflicts of interest, other commitments and diversity. While we have no formal policy regarding board diversity for our board of directors as a whole nor for each individual member, the nominating and corporate governance committee does consider such factors as gender, race, ethnicity, experience and area of expertise, as well as other individual attributes that contribute to the total diversity of viewpoints and experience represented on the board of directors.

 

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Effective upon completion of this offering, our board of directors will include at least one female director.

 

Involvement in Certain Legal Proceedings

 

Our directors and executive officers have not been involved in any of the following events during the past ten years:

 

  1. any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
     
  2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
     
  3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
     
  4. being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
     
  5. being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
     
  6. being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The amounts a represent the compensation awarded to or earned by or paid to our named executive officers for the years ended December 31, 2022, 2021, and 2020:

 

Name and Principal Position  Fiscal
Year
   Salary
($)
   Bonus
($)
   Stock
Awards
($)
   Option
Award
($)(1)
   Non-Equity
Incentive Plan
Compensation
   Non-Qualified
Deferred
Compensation
Earnings
($)
   All Other
Compensation
($)
   Total
($)
 
Jacqueline von Zwehl   2022   $114,205   $0   $0   $0   $          0   $        0   $          0   $114,205 
CEO   2021   $108,625   $0   $0   $0   $0   $0   $0   $108,625 
    2020   $50,443   $0   $0   $0   $0   $0   $0   $50,443 
Craig Steinhoff (2)   2022   $25,504   $-   $-   $-   $-   $-   $-   $25,504 
CFO   2021   $-   $-   $-   $-   $-   $-   $-   $- 
    2020   $-   $-   $-   $-   $-   $-   $-   $- 
Christopher von Zwehl   

2022

  

$

81,641

  

$

0

   $

0

   $0   $0   $0   $0   $

81,641

 
CGO   2021   $76,595   $0   $0   $0   $0   $0   $0   $76,595 
    2020   $37,146   $0   $0   $0   $0   $0   $0   $37,146 

 

(1) Represents the aggregate grant date fair value of equity compensation awards granted to the named executive officer, computed in accordance with FASB ASC Topic 718. See Note 9 to our financial statements included elsewhere in this prospectus for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards.
(2) Mr. Steinhoff was not a Chief Financial Officer of the Company in 2020 or 2021.

 

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Executive Employment Agreements

 

Jacqueline von Zwehl

 

On April 1, 2022 Jacqueline von Zwehl executed an Employment Agreement (the “Zwehl Employment Agreement”) for her service as our Chief Executive Officer. She will be paid a base salary of $325,000 per year upon completion of the Company’s initial public offering and will be eligible to earn an annual bonus based on the achievement of certain goals and performance criteria established by our Board of Directors. For the fiscal years 2022-2025, the annual bonus will be 20% of the current base salary with a maximum payout of 150% based on target achievement. The employment is “at-will” and the Zwehl Employment Agreement can be terminated any anytime, however, if the she is terminated without cause or if she resigns for Good Reason (defined therein) she shall receive an amount equal to twelve months (12) of Executive’s then-current base salary (the “Severance Payout”). The Severance Payout is payable in equal installments over the subsequent 12 month period.

 

Christopher von Zwehl

 

On April 1, 2022 Christopher von Zwehl executed an Employment Agreement (the “von Zwehl Employment Agreement”) for his service as our Chief Growth Officer. He will be paid a base salary of $240,000 per year upon completion of the Company’s initial public offering and will be eligible to earn an annual bonus based on the achievement of certain goals and performance criteria established by our Board of Directors. For the fiscal years 2022-2025, the annual bonus will be 15% of the current base salary with a maximum payout of 50% based on target achievement. The employment is “at-will” and the von Zwehl Employment Agreement can be terminated any anytime, however, if the he is terminated without cause or if he resigns for Good Reason (defined therein) he shall receive an amount equal to twelve months (12) of Executive’s then-current base salary (the “Severance Payout”). The Severance Payout is payable in equal installments over the subsequent 12 month period.

 

Consulting Agreements

 

In August 2021, the Company entered into a service agreement with Greentree Financial Group, Inc. (“Greentree”) to provide certain services to the Company, including assisting the Company in responding to comments from Nasdaq, preparing a code of conduct, preparing employment agreements, and advising the Company with financial statements. In exchange for the services, Greentree has received an amount of shares of the Company’s common stock equal to 3.0% of the total outstanding shares prior to this offering. In addition, Greentree has received warrants (the “Warrants”) to purchase 400,000 shares of common stock at $2.00 per share. The Warrants also contain an anti-dilution provision which proportionately adjusts the exercise price of the Warrants if the Company issues common stock or securities convertible into common stock at a price per share less than the exercise price. Greentree was granted registration rights for a registration statement in connection with a subsequent offering, subject to certain exceptions.

 

In August 2021, the Company entered into a Business Service Development Agreement (the “Business Service Development Agreement”) with Gerald R. Newman & Associates whereby Mr. Newman will provide certain services to the Company, including general business consulting, strategic relationships and the recruiting of certain key personnel. Pursuant to the agreement, Newman has received shares of common stock equal to 8% of the total shares outstanding prior to this offering. Commencing upon the closing of the offering, Newman shall be entitled to a fee of $5,000 per month for twelve months, less the $10,000 fee that was prepaid. On July 13, 2022, the Business Service Development Agreement was amended to include a lock up period commencing as of the date the shares are issued and ending six (6) months from the date the Company is listed as a public company.

 

In June 2023, the Company entered into a consulting agreement with Chartered Services LLC to provide the Company with corporate consulting services. As consideration for the services, the Company issued Chartered 270,000 shares of common stock and warrants to purchase 300,000 shares of common stock at $2.00 per share.

 

Compensation of Directors

 

With the exception of Mrs. von Zwehl, our directors do not currently receive any compensation other than reimbursement for expenses incurred during the performance of their duties or their separate duties as officers of the Company. We intend to approve a compensation plan for directors that will take effect upon completion of this offering.

 

Equity Incentive Plans

 

2022 Equity Incentive Plan

 

On April 15, 2022 our Board and stockholders adopted the 2022 Equity Incentive Plan (the “2022 Plan”). The purpose of the 2022 Plan is to advance the interests of our stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to us and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the interests of such persons with those of our stockholders.

 

Each stock option granted shall be exercisable at such times and terms and conditions as the Board may specify in the applicable option agreement, provided that no option will be granted with a term in excess of 10 years. Upon the adoption of the 2022 Plan, we reserved for issuance 1,200,000 shares of common stock. There are 1,200,000 shares of common stock authorized for non-statutory and incentive stock options, restricted stock units, and stock grants under the 2022 Plan, which are subject to adjustment in the event of stock splits, stock dividends, and other situations. As of June 30, 2023, we had not made any grants under the 2022 Plan.

 

The 2022 Plan is administered by our Board. The persons eligible to participate in the 2022 Plan are as follows: all of our employees, officers and directors, as well as consultants and advisors to the Company (as such terms consultants and advisors are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended, or any successor form) are eligible to be granted Awards under the 2022 Plan. Each person who is granted an Award under the 2022 Plan is deemed a “Participant.”

 

The 2022 Plan will continue in effect until all of the stock available for grant or issuance has been acquired through exercise of options or grants of shares, or until April 15, 2027, whichever is earlier. The 2022 Plan may also be terminated in the event of certain corporate transactions such as a merger or consolidation or the sale, transfer or other disposition of all or substantially all of our assets.

 

As of the date hereof, no grants have been made or awarded under the 2022 Plan.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

Other than as set forth below and compensation arrangements, including employment, and indemnification arrangements, discussed, there have been no transactions since January 1, 2019, in which the amount involved in the transaction exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets as at the year-end for the last two completed fiscal years, and to which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.

 

Three of our independent directors (Messrs. Egan, Theriault and Balog), each purchased 25,000 shares of our common stock at $2.00 per share in our private placement which was the same price paid by other investors.

 

In June 2023, we issued Christopher von Zwehl 595,000 shares for his services to the Company. Mr. von Zwehl is the Company’s Chief Growth Officer and is the husband of our Chief Executive Officer, Jacqueline von Zwehl.

 

Indemnification Agreements

 

Our amended and restated certificate of incorporation, which will be effective upon the completion of this offering, will contain provisions limiting the liability of directors, and provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation will also provide our board of directors with discretion to indemnify our officers and employees when determined appropriate by our board of directors.

 

We intend to enter into indemnification agreements with each of our directors and executive officers. The indemnification agreements will provide that we will indemnify each of our directors, executive officers, and such other key employees against any and all expenses incurred by that director or executive officer because of his or her status as one of our directors or executive officers, to the fullest extent permitted by Delaware law and our amended and restated certificate of incorporation. In addition, the indemnification agreements will provide that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

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Limitation of Liability and Indemnification of Officers and Directors

 

Our certificate of incorporation, limits the liability of directors to the maximum extent permitted by Delaware General Corporation Law (the “DGCL”). The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors.

 

Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by law, and may indemnify employees and other agents. Our bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding.

 

Our bylaws, subject to the provisions of the DGCL contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he or she reasonably believed was in the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act of 1933 as amended, or the Securities Act, may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

The limitation of liability and indemnification provisions in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

 

At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

 

Policies and Procedures for Related Party Transactions

 

In connection with this offering, we expect to adopt a written related party transactions policy that will provide that transactions with directors, officers and holders of five percent or more of our voting securities and their affiliates, each a related party must be approved by our audit committee. This policy will become effective on the date on which the registration statement of which this prospectus is part is declared effective by the SEC. Pursuant to this policy, the audit committee will have the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed the lesser of (i) $120,000 or (ii) one percent of the average of our total assets for the last two completed fiscal years, and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members.

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth certain information with respect to the beneficial ownership of our voting securities as of October 6, 2023 by (i) any person or group beneficially owning more than 5% of any class of voting securities; (ii) our directors, and; (iii) each of our named executive officers; and (iv) all executive officers and directors as a group as of the date of this prospectus. The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. Unless otherwise indicated, the address of all listed stockholders is c/o 9051 Tamiami Trail N, Suite 201, Naples, FL 34108.

 

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Name of Beneficial Owner  Common Stock Beneficially Owned   Percentage of Common Stock Before Offering   Percentage of Common Stock After Offering 
Directors and Officers:               
Jacqueline von Zwehl, Chief Executive Officer, Chairman of the Board of Directors and Director   7,120,000    72.91%   59.93%
Craig Steinhoff, Chief Financial Officer   -    -    - 
Doug Balog, Director, Nominating & Governance Chair   40,000    0.41%   0.34%
James Egan, Director, Audit Chair   40,000    0.41%   0.34%
Tim Theriault, Director, Compensation Chair   40,000    0.41%   0.34%
Steven Ruhl, Director, Risk & Compliance Chair   15,000    0.15%   0.13%
Christopher von Zwehl, Chief Growth Officer   595,000    6.09%   5.01%
All Executive Officers and Directors as a Group (6 persons)   7,850,000    80.39%   66.08%
                
Beneficial owners of more than 5%:               
Jacqueline von Zwehl   7,120,000    72.91%   59.93%
Gerald Newman   725,000    7.42%   6.10%
Christopher von Zwehl   595,000    6.09%   5.01%
Greentree Financial Group Inc   555,000    5.68%   4.67%

 

DESCRIPTION OF SECURITIES

 

A description of our capital stock and the material terms and provisions of our certificate of incorporation and our amended and restated bylaws that will be in effect upon the completion of this offering and affecting the rights of holders of our capital stock is set forth below. The forms of certificate of incorporation and our amended and restated bylaws to be adopted in connection with this offering are filed as exhibits to the registration statement relating to this prospectus.

 

On October 5, 2023 we increased our authorized capital stock to 50,000,000 shares of stock, all with a par value of $0.01. There is only one class of stock authorized and no preferred stock.

 

Common Stock

 

Currently, we have 50,000,000 authorized shares, par value $0.01. Immediately following the completion of this offering, the Company will have 11,880,000 shares of common stock issued and outstanding (assuming no exercise by the underwriters of their over-allotment option to purchase additional shares).

 

Dividend Rights

 

The holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.

 

Voting Rights

 

Each holder of our common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Our certificate of incorporation, as amended and restated, provides that there is no cumulative voting for directors.

 

No Preemptive or Similar Rights

 

Our common stock is not entitled to preemptive rights to acquire additional securities issued by the Company.

 

Right to Receive Liquidation Distributions

 

Upon our liquidation, dissolution, or winding-up, after the payment of all claims of the Company’s creditors and preferential amounts to the holders of shares of preferred stock, the remaining assets of the Company legally available for distribution to its stockholders shall be distributed among the holders of shares of common stock, pro rata based on the number of shares outstanding held by each such holder.

 

Preferred Stock

 

We have not issued any preferred stock.

 

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Underwriter Warrants The following summary of certain terms and provisions of the Underwriter Warrants that are being issued to the representative hereby is not complete and is subject to, and qualified in its entirety by, the provisions of the Underwriter Warrants, the form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of Underwriter Warrant for a complete description of the terms and conditions of the Underwriter Warrant.

 

Duration and Exercise Price

 

Each Underwriter Warrant offered hereby will have an initial exercise price equal to $6.25 per share of common stock (125% of the initial public offering price per share of common stock). The Underwriter Warrants will be immediately exercisable and will expire five years from the commencement of sales in this offering. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price.

 

Exercisability

 

The Underwriter Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of the Underwriter to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of beneficial ownership of outstanding stock after exercising the holder’s Underwriter Warrant up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Underwriter Warrants and in accordance with the rules and regulations of the SEC.

 

Cashless Exercise

 

In lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Underwriter Warrants.

 

Fractional Shares

 

No fractional shares of common stock will be issued upon the exercise of the Underwriter Warrants. Rather, the number of shares of common stock to be issued will be rounded up to the nearest whole number.

 

Transferability

 

Subject to applicable laws and certain exceptions, the Underwriter Warrants may not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of commencement of sales of this offering.

 

Trading Market

 

There is no trading market available for the Underwriter Warrants on any securities exchange or nationally recognized trading system, and we do not expect a trading market to develop. We do not intend to list the Underwriter Warrants on any securities exchange or other trading market. Without a trading market, the liquidity of the Underwriter Warrants will be extremely limited. The common stock issuable upon exercise of the Underwriter Warrants will be listed on the Nasdaq Capital Market in connection with this offering.

 

Right as a Stockholder

 

Except as otherwise provided in the Underwriter Warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the Underwriter Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their Underwriter Warrants.

 

Fundamental Transaction

 

In the event of a fundamental transaction, as described in the Underwriter Warrants and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the Underwriter Warrants will be entitled to receive upon exercise of the Underwriter Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Underwriter Warrants immediately prior to such fundamental transaction. In addition, in the event of a fundamental transaction which is approved by our Board, the holders of the Underwriter Warrants have the right to require us or a successor entity to redeem the Underwriter Warrant for cash in the amount of the Black-Scholes value of the unexercised portion of the Underwriter Warrant on the date of the consummation of the fundamental transaction. In the event of a fundamental transaction which is not approved by our Board, the holders of the Underwriter Warrants have the right to require us or a successor entity to redeem the Underwriter Warrants for the consideration paid in the fundamental transaction in the amount of the Black Scholes value of the unexercised portion of the Underwriter Warrant on the date of the consummation of the fundamental transaction.

 

Delaware Law

 

We will be governed by the provisions of Section 203 of the DGCL. In general, Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

 

  the business combination or transaction which resulted in the stockholder becoming an interested stockholder was approved by the board of directors prior to the time that the stockholder became an interested stockholder;
     
  upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by directors who are also officers of the corporation and shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
     
  at or subsequent to the time the stockholder became an interested stockholder, the business combination was approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

 

In general, Section 203 defines a “business combination” to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder and an “interested stockholder” as a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock. These provisions may have the effect of delaying, deferring or preventing changes in control of our company.

 

Choice of Forum

 

Our certificate of incorporation provides that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty by any of our directors, officers or other employees to us or our stockholders; any action asserting a claim against the Company, our directors or officer or employees directors arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or amended and restated bylaws or any other action asserting a claim against us our directors or officers or employees that is governed by the internal affairs doctrine. This choice of forum provision does not apply to actions brought to enforce a duty or liability created by the Exchange Act or any other claim for which federal courts have exclusive jurisdiction.

 

Furthermore, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. We intend for this provision to apply to any complaints asserting a cause of action under the Securities Act despite the fact that Section 22 of the Securities Act creates concurrent jurisdiction for the federal and state courts over all actions brought to enforce any duty or liability created by the Securities Act or the rules and regulations promulgated thereunder. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions in our certificate of incorporation to be inapplicable or unenforceable.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our common stock is VStock Transfer, LLC.

 

Limitations of Liability and Indemnification

 

Our certificate of incorporation, as amended and restated, limits the liability of directors to the maximum extent permitted by the DGCL. The DGCL provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors.

 

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