ITEM 1. DESCRIPTION OF BUSINESS
General
Healthient, Inc., and its wholly owned subsidiary, SnackHealthy, Inc., develops and markets delicious snacks and beverages that make healthy eating a fun experience for the entire family. The Company’s goal is to successfully position a “better for you” portfolio of products to American families as convenient, healthy solutions to support the lifestyles of health conscious consumers.
We sell our products through a network marketing distribution model. We believe that the SnackHealthy business opportunity empowers people from all walks of life to achieve their financial dreams. We provide tools, training, and support to help ensure the success of our brand partners. We commenced sales in the third quarter ended March 31, 2011.
Our principal executive offices are located at 15132 Park of Commerce Blvd., Jupiter, FL 33478 and our phone number is (561) 935-6449.
The Company is considered to be in the Development Stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises”. The Company has devoted substantially all of its efforts to the corporate formation. Activities during the Development Stage include developing the business plan and raising capital.
Organization
Our Company was organized under the laws of the state of California on November 5, 1996 as Renet Services, Inc. The name was changed to Time Lending, California, Inc. on August 4, 1998 and we reincorporated in the state of Nevada in December, 2000 by merging with Time Lending California, Inc., a Nevada corporation. Time Lending California, Inc. subsequently changed its name to "Time Associates, Inc." Effective as of October 5, 2010, Time Associates, Inc. entered into an Agreement and Plan of Reorganization dated as of September 23, 2010 (the "Reorganization Agreement") with Healthient, Inc. a Nevada corporation organized April 29, 2009 ("Healthient") and Healthient shareholders. In accordance with the terms and provisions of the Reorganization Agreement, the Company acquired Healthient in exchange for 43,618,356 newly issued "restricted" shares of common voting stock of the Company to the Healthient shareholders on a pro rata basis for the purpose of effecting a tax-free reorganization pursuant to sections 351, 354 and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. As a condition of the closing of the share exchange transaction, a majority shareholder of the Company cancelled all of his 188,572 shares. In addition, as a condition of the closing of the transaction, the Company spun off its operating subsidiary Time Marketing, Inc. Pursuant to the terms of the Reorganization Agreement, each one (1) share of common stock of Healthient has been exchanged for three (3) shares of the Company's common stock. Following the Closing Date, there were 43,778,433 shares of the Registrant's common stock outstanding. Immediately prior to the Closing, there were 160,077 shares issued and outstanding (assuming the cancellation of the shares held by the majority shareholder at the closing). The shareholders of Healthient owned 99.6% of the common stock outstanding of the Company after the issuance of the 43,618,356 shares. On November 15, 2010 Time Associates, Inc. changed its name to "Healthient, Inc."
The acquisition of Healthient by the Company on October 5, 2010 has been accounted for as a purchase and treated as a reverse acquisition and re-capitalization since the former owners of Healthient controlled 99.6% of the total shares of common stock of the Company outstanding immediately following the acquisition. In November 2010 Healthient, Inc. changed its name to "SnackHealthy, Inc." SnackHealthy, Inc., a Nevada corporation is a wholly-owned subsidiary of the Company.
On July 19, 2010 the Company effected a seventy (70) for one (1) reverse stock split of its common stock. There were 23,398,040 shares of common stock outstanding before the reverse stock split and 348,649 after the stock split.
As of August 7, 2010, the Company sold two of its fifty-percent owned subsidiaries, Time Management, Inc. and Tenth Street, Inc. to those companies’ shareholders for a price of $10.00 each.
On this basis, the historical financial statements prior to October 5, 2010 have been restated to be those of the accounting acquirer Healthient (now SnackHealthy, Inc.). The historical stockholders' equity prior to the reverse acquisition has been retroactively restated (a re-capitalization) for the equivalent number of shares received in the acquisition after giving effect to any difference in par value of the issuer's and acquirer's stock. The original 160,078 shares of common stock outstanding prior to the exchange reorganization have been reflected as an addition in the stockholders' equity account of the Company on October 5, 2010.
Business Overview
We are a network marketing company that sells healthy snacks and beverages. We pursue our mission of helping people achieve personal success by providing a financially rewarding business opportunity to our brand partners and great tasting products to customers seeking a healthy lifestyle.
The weight management product portfolio includes meal replacement shakes and a variety of healthy snacks. The energy category includes sugar free energy drink mixes to support a healthy active lifestyle.
We believe the direct-selling channel is ideally suited to marketing our products because sales of weight management and nutrition products are strengthened by ongoing personal contact between retail consumers and brand partners. This personal contact may enhance consumers’ nutritional and health education as well as motivate consumers to begin and maintain wellness and weight management programs. In addition, many of our brand partners use our products themselves, and can therefore provide first-hand testimonials of our products toconsumers, which often serve as a powerful sales tool.
We are focused on building and maintaining our brand partner network by offering financially rewarding and flexible career opportunities through sales of great tasting, “better for you” snacks to health conscious consumers. We believe the income opportunity provided by our network marketing program appeals to a broad cross-section of people throughout the world, particularly those seeking to supplement their family incomes, start a home business or pursue entrepreneurial, full and part-time, employment opportunities.
Our brand partners, who are independent contractors, can profit from selling our products and can also earn bonuses on sales made by the other brand partners whom they recruit to join their sales organizations. We enable our brand partners to maximize their potential by providing a broad array of motivational, educational and support services. We motivate our brand partners through our performance-based compensation plan, individual recognition, reward programs and promotions, and participation in local and national company- sponsored sales events. We are committed to providing professionally designed educational training materials that our brand partners can use to enhance recruitment and maximize their sales. We and our brand partner leadership conduct thousands of training sessions each year to educate and motivate our brand partners. These training events teach our brand partners not only how to develop invaluable business building and leadership skills, but also how to differentiate our products to consumers.
Our corporate sponsored training events provide a forum for brand partners, who otherwise operate independently, to share ideas with each other. In addition, we operate a web-based brand partner back-office, which delivers educational, motivational and inspirational content to our brand partners. We plan to further aid our brand partners by generating additional demand for our products through traditional marketing and public relations activities, such as radio and television ads, sporting event sponsorships and endorsements.
Competitive Strengths
We believe that our success stems from our ability to motivate our brand partner network through our marketing plan and provide brand partners with a unique go to market strategy that supports sustainable daily consumption of our great tasting snacks and beverages that appeal to consumer preferences for healthy lifestyles. Our goal is to achieve sustained and profitable growth by capitalizing on the following competitive strengths:
Brand Partner Base
Our brand partners can be segmented into three general categories based on their product order patterns: discount buyers, small retailers and potential sales leaders. We define discount buyers as customers who have signed up as brand partners to enjoy a discount on their purchases; small retailers as product users and sales people who generate modest sales to friends and family; and potential sales leaders who are proactively developing a business with the intention of building full-time careers. The marketing plan encourages active participation in the business including building down-line sales organizations of their own, which can serve to increase their income and increase our product sales. Sales leaders, our top brand partners, contribute significantly to our sales.
Product Portfolio
We are committed to building brand partner, customer and brand loyalty by providing a diverse portfolio of healthy snacks and beverages. The breadth of our product offerings enables our brand partners to sell a comprehensive package of products designed to simplify weight management and nutrition. We plan to continue to introduce new products annually and rigorously review, and if necessary, improve our product formulations, based upon developments in nutritional science. We believe that the variety in our product portfolio significantly enhances our brand partners’ ability to build their businesses.
Scalable Business Model
Our business model enables us to grow our business with only moderate investment in our infrastructure and other fixed costs. We require no Company-employed sales force to market and sell our products. We incur no direct incremental cost to add a new brand partner in our existing markets, and our brand partner compensation varies directly with sales. In addition, our brand partners bear the majority of our consumer marketing expenses, and sales leaders sponsor and coordinate a large share of brand partner recruiting and training initiatives.
Geographic Diversification
We have the ability to establish our network marketing organization in new markets. While sales within local markets may fluctuate due to economic, market and regulatory conditions, competitive pressures, political and social instability or for Company specific reasons, we believe that expanding our geographic diversity will mitigate our financial exposure to any particular market. We currently operate within the United States.
Our Business Strategy
We believe that our network-marketing business model is the most effective way to sell our products. Our objective is to increase the recruitment, retention, retailing and productivity of our brand partner base by pursuing the following strategic initiatives:
Product Strategy
We are committed to providing our brand partners with great tasting, healthy snacks and beverage mixes to help them increase sales and recruit new brand partners. Our product development is focused on two principal categories and that capitalize on the growing trends of obesity and anti-aging; weight management & energy and sports fitness. On an ongoing basis, we will augment our product portfolio with additional products and, as appropriate, will bundle products addressing similar health concerns into packages and programs.
To better support brand partners, we will expand our product packaging to provide both individual serving sizes for portion control and convenience and larger party and family sizes of our top selling products. Additionally, each year we plan to launch products and/or programs, coupled with our major events, to generate continued excitement among our brand partners.
These product launches will generally target specific market segments deemed strategic to us that support our focus on driving daily consumption.
Brand Partner Strategy
We will continue to increase our investment in events and promotions, both in absolute dollars and as a percent of net sales, as a catalyst to help our brand partners improve the effectiveness and productivity of their businesses. We work with our brand partner leaders to globalize best-practice business methods which enable our brand partners to improve their penetration in existing markets. These business methods will include: healthy snack clubs, weight loss challenges, internet and sampling.
Infrastructure Strategy
We are implementing an enterprise-wide technology solution, with a scalable and stable open architecture platform, to enhance our efficiency and productivity as well as that of our brand partners. In addition, we are upgrading our Internet-based marketing and brand partner services platform.
Product Overview
Our products are designed to help brand partners and customers achieve and maintain their healthy weight, improve their health and experience life-changing results. Our snacks and beverages appeal to the growing base of consumers seeking differentiated products and desiring a healthier lifestyle.
We market and sell products through our brand partners. Our products may often be sold as part of a program, and therefore our portfolio is comprised of a series of related products designed to simplify weight management and nutrition for our consumers and maximize our brand partners’ cross-selling opportunities. These programs target specific consumer market segments, such as women, men or children, as well as weight-management customers and individuals looking to enhance their overall well being.
The following information summarizes our products by product category.
Product Categories:
Weight Management & Energy, Sports &Fitness
Representative Products
Our portfolio of all natural goodness includes; Smart Shake Chocolate and Vanilla, our sugar free Whey protein shakes fortified with fiber; CrispyFruit a light and crispy fruit with no added sugar; LoliBars the wholesome whole wheat fruit filled cookie bar; RealFruit chewy, delicious dried fruit with no added sugars; Lite Natural Microwave Popcorn Mini Bags; Multigrain Pretzel Nuggets; LoliCrunch a delicious fruit and nut crunch; and Zing! our healthy Energy Drink Mix thoughtfully sweetened with Stevia.
Literature, Promotional and Other Products
We sell promotional materials designed to support our brand partners’ marketing efforts, as well as a Premium Marketing Program that includes retail websites forour brand partners to enhance the online experience and improve their productivity.
Product Development
We are committed to providing our brand partners with delicious healthy snacksand beverage mixes to helpthem increase recruitment, retention and retailing. We believe this can be best accomplished in part by introducing new products and by upgrading, reformulating and repackaging existing product lines.
Once a particular market opportunity has been identified, our marketing and salesteams work closely with brand partners to effect a successful development and launch of the product. Our research and development is performed by in-house staff and outside consultants. For all periods presented, research and development costs were expensed as incurred and were not material.
A new product development process was deployed to accelerate the introduction of new products and to improve the launch of products. The process consists of five stages: identification, feasibility assessment, development, and finally, launch and learn.
New product ideas are generated and narrowed down to high potential ideas that fill our business needs and conform to our overall strategy. We test the most promising ideas with brand partners and customers. This testing is followed by a feasibility assessment, which includes a review of product and package prototypes, product positioning and messaging, process design and analysis of manufacturing issues.
The next stage is the development phase in which we finalize the formula, process, manufacturing strategy, product positioning, pricing, labeling and other related matters. The fourth stage is the launch phase in which we prepare promotional and sales materials, complete the supply chain plan and complete other final preparations for launch.
After the product is launched, we closely track sales performance and the lessons learned so we can update and improve the product development process.
Network Marketing Program
General
Our products are distributed through a network marketing organization comprised independent brand partners in the United States. In addition to helping our brand partners achieve physical health and wellness through use of our products, we offer our brand partners, who are independent contractors, attractive income opportunities. Brand partners may earn income on their own sales and can also earn bonuses on sales made by the brand partners in their sales organizations.
We believe that our products are particularly well suited to the network marketing distribution channel because sales of weight management products are strengthened by ongoing personal contact and coaching between retail consumers and brand partners. We believe our continued commitment to developing great tasting, snacks and beverage mixes will enhance our ability to attract new brand partners as well as increase the productivity and retention of existing brand partners.
Structure of the Network Marketing Program
To become a brand partner, a person must be sponsored by an existing brand partner and must pay an annual brand partner fee.
Brand Partner Earnings
Brand partner earnings are derived from several sources. First, brand partners may earn profits by purchasing our products at wholesale prices, which are discounted 20% to 50% from suggested retail prices and selling our products to retail customers or to other brand partners. Second, brand partners who sponsor other brand partners and establish their own sales organizations may earn production bonuses.
Each brand partner’s success is dependent on two primary factors: 1) the time, effort and commitment a brand partner puts into his or her SnackHealthy business and 2) the product sales made by a brand partner and his or her salesorganization.
Many of our brand partners join SnackHealthy to obtain a discount on our products and become a discount consumer or have a part-time retail income goal in mind. This retail income is not tracked by the Company.
Brand Partner Motivation and Training
We believe that motivation and training are key elements in brand partner success and that our brand partner sales leaders will establish a consistent schedule of events to support these needs. Along with our brand partner leadership, we will conduct thousands of training sessions annually on local, regional and national levels to educate and motivate our brand partners. Every month, there are training seminars held throughout the nation. As we grow in each major region, we plan to host events that focus on product and business development.
Additionally, once a year, we will host a national event at which our brand partners can attend to learn about new products, expand their skills and celebrate their success. In addition to these training sessions, we host weekly webinars and conference calls that we use to provide brand partners continual training and the most current product and marketing information.
Manufacturing and Distribution
Our products are manufactured for us by third party manufacturing companies. We work closely with our vendors in an effort to achieve the highest quality standards and product availability. We continually strive to establish excellent relationships with our manufacturers and to obtain improvements in product quality and product delivery. Some of our key input materials such as whey proteins and packaging materials are subject to pricing fluctuations driven by commodities pricing. We are confident that we can offset potential cost increases of these materials with volume increases in our inventory purchases and, when necessary, by raising the prices of our products.
In order to coordinate and manage the manufacturing of our products, we will utilize a demand planning and forecasting process that is directly tied to our production planning and purchasing systems. Using a planning process allows us to balance our inventory levels to provide exceptional service to brand partners while minimizing working capital and inventory obsolescence.
Shipping and processing standards for orders placed are either same day or the following business day. Products are distributed in the United States market from our third party warehouse and distribution center in Salt Lake City.
Product Return and Buy-Back Policies
Our products include a customer satisfaction guarantee. Under this guarantee any customer who is not satisfied with a Snackhealthy product for any reason may return it unopened or any unopened unused portion of it within 30 days of purchase to the brand partner from whom it was purchased for a full refund from the brand partner or credit toward the purchase of another SnackHealthy product. If they return the products to us on a timely basis, the brand partner may obtain replacement product from us for such returned products. We believe this buy-back policy addresses a number of the regulatory compliance issues pertaining to network marketing.
Management Information, Internet and Telecommunication Systems
In order to facilitate our growth and support brand partner activities, we plan to continually upgrade our management information, Internet and telecommunication systems. These systems include: (1) Multiple centralized host computer systems managed by Exigo Office in Dallas, Texas and Opt3 Solutions, Inc in California. These systems are linked together via a secure wide area network that provides on-line, real-time access to information, transitioning and reporting; (2) 24 hour order fulfillment center located in Salt Lake City, Utah linked in real time to our transitioning systems; (3) Local area networks of personal computers within our markets, serving our regional administrative staffs; (4) A state of the art international e-mail system through which our employees communicate; (5) A standardized Cisco telecommunication system in all of our markets; (6) Internet websites to provide a variety of online services for brand partners such as status of qualifications, meeting announcements, product information, application forms, educational materials and, in select markets including the United States, sales ordering capabilities.
These systems are designed to provide, among other things, financial and operating data for management, timely and accurate product ordering, payment processing, inventory management and detailed brand partner records. We intend to continue to invest in these systems in order to strengthen our operating platform.
Regulation
General
We are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints exist at the federal, state or local levels in the United States including regulations pertaining to: (1) the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products; (2) product claims and advertising, including direct claims and advertising by us, as well as claims and advertising by brand partners, for which we may be held responsible; (3) our network marketing program; (4) transfer pricing and similar regulations that affect the level of U.S. and foreign taxable income and customs duties; and (5) taxation of our independent brand partners (which in some instances may impose an obligation on us to collect the taxes and maintain appropriate records).
Products
In the United States, the formulation, manufacturing, packaging, storing, labeling, promotion, advertising, distribution and sale of our products are subject to regulation by various governmental agencies, including (1) the Food and Drug Administration, or FDA, (2) the Federal Trade Commission, or FTC, (3) the Consumer Product Safety Commission, or CPSC, (4) the United States Department of Agriculture, or USDA, (5) the Environmental Protection Agency, or EPA, (6) the United States Postal Service, (7) United States Customs and Border Protection, and (8) the Drug Enforcement Administration.
Our activities also are regulated by various agencies of the states, localities and foreign countries in which our products are manufactured, distributed and/or sold. The FDA, in particular, regulates the formulation, manufacture and labeling of over-the-counter, or OTC, drugs, conventional foods, dietary supplements such as those distributed by us. FDA regulations require us and our suppliers to meet relevant current good manufacturing practice, or cGMP, regulations for the preparation, packing and storage of foods and OTC drugs. On June 25, 2007, the FDA published its final rule regulating cGMPs for dietary supplements. The final rule became effective August 24, 2007. The U.S. Dietary Supplement Health and Education Act of 1994, or DSHEA, revised the provisions of the Federal Food, Drug and Cosmetic Act, or FFDCA, concerning the composition and labeling of dietary supplements and, we believe, the revisions are generally favorable to the dietary supplement industry.
The legislation created a new statutory class of dietary supplements. This new class includes vitamins, minerals, herbs, amino acids and other dietary substances for human use to supplement the diet, and the legislation grandfathers, with some limitations, dietary ingredients that were on the market before October 15, 1994. A dietary supplement that contains a dietary ingredient that was not on the market before October 15, 1994 will require evidence of a history of use or other evidence of safety establishing that it is reasonably expected to be safe.
Manufacturers or marketers of dietary supplements in the United States and certain other jurisdictions that make product performance claims, including structure or function claims must have substantiation in their possession that the statements are truthful and not misleading.
The majority of the products marketed by us in the United States are classified as conventional foods or dietary supplements under the FFDCA. In January 2000, the FDA issued a regulation that defines the types of statements that can be made concerning the effect of a dietary supplement on the structure or function of the body pursuant to DSHEA. Under DSHEA, dietary supplement labeling may bear structure or function claims, which are claims that the products affect the structure or function of the body, without prior FDA approval, but with notification to the FDA. They may not bear a claim that they can prevent, treat, cure, mitigate or diagnose disease (a disease claim). The regulation describes how the FDA distinguishes disease claims from structure or function claims.
During 2004, the FDA issued guidance, paralleling an earlier guidance from the FTC, defining a manufacturer’s obligations to substantiate structure/ function claims. The FDA also issued a Structure/Function Claims Small Entity Compliance Guide. In addition, the agency permits companies to use FDA-approved full and qualified health claims for products containing specific ingredients that meet stated requirements.
As a marketer of nutritional supplements and other products, we are subject to the risk that one or more of the ingredients in our products may become the subject of regulatory action.
On December 22, 2007, a new law went into effect in the United States mandating the reporting of all serious adverse events occurring within the United States, which involve dietary supplements or OTC drugs. If, as a result of our receipt of adverse event reports, we may from time to time elect, or be required, to remove a product from a market, either temporarily or permanently.
On June 25, 2007, the FDA published its final rule regulating current good manufacturing practices, or cGMP, for dietary supplements. This final rule became effective on August 24, 2007. The final rule requires that companies establish written procedures governing: (1) personnel, (2) plant and equipmentcleanliness, (3) lab and testing, (4) packaging and labeling, and (5) distribution.
The FDA also required 100 percent identity testing of all incoming raw materials, although an interim final rule enables companies to petition for an exemption from the 100 percent testing requirement if they can demonstrate the existence of an appropriate statistical sampling program. The new cGMPs will help ensure that dietary supplements and dietary ingredients are not adulterated with contaminants or impurities, and are labeled to accurately reflect the active ingredients and other ingredients in the products. We have evaluated the finalcGMP rule with respect to its potential impact upon the various contract manufacturers that we use to manufacture our products, some of which might not meet the new standards. It is important to note that the final cGMP rule, in an effort to limit disruption, includes a three-year phase-in for small businesses. See Item 1A
Item 1A. Risk Factors
As a “smaller reporting company” we are not required to provide the information required by this Item.
Item 1B.
Item 1B. Unresolved Staff Comments
None.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTIES
Our facility in Jupiter, Florida is 4,500 feet of office workspace for computers, printers and office equipment with an adjacent area for packaging, shipping and storage. The current facility lease runs from July 1, 2011 through June 30, 2016 with an option for a five year extension. Our lease payments are $4,226 per month including operating expense and tax during the first year and subject to a three percent increase after each of the following four years. We maintain our executive and administrative offices in this facility. Our rental payments in fiscal 2012 were $75,917. Our rental payments in fiscal 2011 were $6,516. Future minimum payments under the office lease are approximately as follows: year ended June, 2013, $52,500; 2014, $54,000; 2015, $55,000; 2016, $56,000; for a total of $217,500.
We believe that our existing facilities are adequate to meet our current needs and that suitable additional or alternative space will be available after 2016. We have no assurance that future terms would be as favorable as our current terms.
The Company has not invested in any real property at this time nor does the Company intend to do so. The Company has no formal policy with respect to investments in real estate or investments with persons primarily engaged in real estate activities.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In 2011 Siesta Flow LLC filed a legal action against the Company in the Twelfth Circuit Court of Sarasota County, Florida, alleging breach of contract and seeking damages in the amount of approximately $95,000 plus costs. In April, 2012, the court has issued final summary judgment against the Company in the total amount of $95,000, which amount was subsequently settled in the amount of $75,000 and satisfied by the Company.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
PUBLIC MARKET
Our common stock trades on NASD's over-the-counter market, the Bulletin Board under the symbol "SNAX ". Our common stock has been trading sporadically since the reverse merger with Time Associates, Inc. on October 5, 2010. As of June 30, 2012 there were 183 holders of our common stock and the closing price of our common stock as of was $0.05 per share. As of August 11, 2010, we effected a reverse stock split of 1 to 70 of our common stock. All shares and per share amounts in the accompanying financial statements of the Company have been retroactively adjusted to give the effects of the reverse stock split.
DIVIDENDS
The Company does not expect to pay any dividends at this time. The payment of dividends, if any, will be contingent upon the Company's revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of the Company's Board of Directors and may be subject to restrictions under the terms of any debt or other financing arrangements that the Company may enter into in the future. The Company presently intends to retain all earnings, if any, for use in the Company's business operations and accordingly, the Board does not anticipate declaring any dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
Effective as of October 5, 2010, Time Associates, Inc., a Nevada corporation (the “Registrant”) entered into an agreement and plan of reorganization dated as of September 23, 2010 (the "Reorganization Agreement") with Healthient, Inc., a Nevada corporation ("Healthient") and Healthient shareholders. In accordance with the terms and provisions of the Reorganization Agreement, the Registrant acquired Healthient in exchange for 43,618,356 newly issued "restricted" shares of common voting stock of the Registrant to the Healthient shareholders on a pro rata basis for the purpose of effecting a tax-free reorganization pursuant to sections 351, 354 and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Pursuant to the terms of the Reorganization Agreement, each one (1) share of common stock of Healthient has been exchanged for three (3) shares of the Registrant's common stock. The shares of common stock issued to the Healthient shareholders in connection with the Reorganization (43,618,356) were not registered under the Securities Act, in reliance upon an exemption from registration provided by Section 4(2) and/or 4(6) under the Securities Act and Regulation D promulgated thereunder.
On October 10, 2010, the Company issued a total of 384,500 shares of common stock through its private placement of shares of common stock at a purchase price of $0.22 per share for a total amount of $86,128, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On October 13, 2010, the Company issued a total of 375,000 shares of common stock through its private placement of shares of common stock at a purchase price of $0.27 per share for a total amount of $100,000, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On November 2, 2010, the Company issued a total of 30,000 shares of common stock through its private placement of shares of common stock at a purchase price of $0.22 per share for a total amount of $6,720, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On November 29, 2010, the Company issued a total of 190,307 shares of common stock through its private placement of shares of common stock at a purchase price of $0.25 per share for a total amount of $47,130, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On December 7, 2010, the Company issued a total of 82,630 shares of common stock through its private placement of shares of common stock at a purchase price of $0.17 per share for a total amount of $13,768, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On December 14, 2010, the Company issued a total of 373,848 shares of common stock through its private placement of shares of common stock at a purchase price of $0.20 per share for a total amount of $73,539, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On January 20, 2011 the Company issued a total of 60,000 shares of common stock through its private placement of shares of common stock at a purchase price of $0.50 per share for a total amount of $30,000, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On April 11, 2011 the Company issued a total of 20,000 shares of common stock through its private placement of shares of common stock at a purchase price of $0.50 per share for a total amount of $10,000, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
On June 7, 2011 the Company issued a total of 100,000 shares of common stock through its private placement of shares of common stock at a purchase price of $0.20 per share for a total amount of $20,000, to an “accredited investor”, as that term is defined in Regulation D of the Securities Act of 1933.
In the quarter ended September 30, 2011, the Company issued 3,339,290 shares of common stock through its private placement of shares of common stock for a total amount of $347,679, to an "accredited investor", as that term is defined in Regulation D of the Securities Act of 1933. The proceeds of the sale were used for working capital. The Company also issued a total of 1,150,000 shares of common stock for services valued at $0.15 per share, for a total amount of $172,500; a total of 1,500,000 shares of common stock for services valued at $0.21 per share, for a total amount of $315,000; and a total of 1,000,000 shares of common stock for services valued at $0.09 per share. The shares of the Company's common stock were issued and sold in reliance upon the exemption provided by Section 4(2) and Regulation D of the Securities Act of 1933.
During the quarter ended December 31, 2011, the Company issued 507,800 shares of common stock through its private placement of shares of common stock for a total amount of $91,560, to an "accredited investor", as that term is defined in Regulation D of the Securities Act of 1933. The Company also issued a total of 12,000,000 shares of common stock for services valued at $0.08 per share for a total of $960,000; and a total of 115,000 shares of common stock valued at $0.08 per share for a total of $9,200. The proceeds of the sale were used for the working capital. The shares of the Company's common stock were issued and sold in reliance upon the exemption provided by Section 4(2) and Regulation D of the Securities Act of 1933.
During the quarter ended March 31, 2012, the Company issued 240,071 shares of common stock for services valued at $0.14 per share for a total of $33,610 and 485,000 shares of common stock for services valued at $0.13 per share for a total of $63,050. The shares of the Company's common stock were issued and sold in reliance upon the exemption provided by Section 4(2) and Regulation D of the Securities Act of 1933.
During the quarter ended June 30, 2012, the Company issued 4,000,000 shares of common stock for services valued at $0.12 per share for a total of $480,000; a total of 60,000 shares of common stock for services valued at $0.07 per share for a total of $4,200; and a total of 36,653,568 shares for a debt conversion valued at $0.05 per share for a total of $1,649,410. The shares of the Company's common stock were issued and sold in reliance upon the exemption provided by Section 4(2) and Regulation D of the Securities Act of 1933.
ITEM 6:
ITEM 6: SELECTED FINANCIAL DATA
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” and any other similar words. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward- looking statements include, among others, the following:
● product liability claims;
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our relationship with, and our ability to influence the actions of, our brand partners;
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adverse publicity associated with our products or network marketing organization;
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improper action by our employees or international brand partners in violation of applicable law;
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changing consumer preferences and demands;
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loss or departure of any member of our senior management team which could negatively impact our brand partner relations and operating results;
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the competitive nature of our business;
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regulatory matters governing our products, including potential governmental or regulatory actions concerning the safety or efficacy of our products, and network marketing program including the direct selling market in which we operate;
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third party legal challenges to our network marketing program;
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risks associated with operating internationally and the effect of economic factors, including foreign exchange, inflation, pricing and currency devaluation risks;
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our dependence on increased penetration of existing markets;
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contractual limitations on our ability to expand our business;
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our reliance on our information technology infrastructure and outside manufacturers;
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the sufficiency of trademarks and other intellectual property rights;
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the sufficiency of trademarks and other intellectual property rights;
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product concentration;
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our reliance on our management team;
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uncertainties relating to the application of transfer pricing, duties, value added taxes, and other tax regulations, and changes thereto;
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changes in tax laws, treaties or regulations, or their interpretation; • taxation relating to our brand partners;
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any collateral impact resulting from the ongoing worldwide financial “crisis,” including the availability of liquidity to us, our customers and our suppliers or the willingness of our customers to purchase products in a recessionary economic environment; and
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whether we will purchase any of our shares in the open markets or otherwise.
Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in this Annual Report on Form 10-K, including under the heading “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our Consolidated Financial Statements and the related Notes.
Forward-looking statements in this Annual Report on Form 10-K speak only as of the date hereof, and forward- looking statements in documents attached that are incorporated by reference speak only as of the date of those documents. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.
Overview
We are a development stage network marketing company. We have been primarily engaged in developing our infrastructure and a product portfolio of snacks and beverages designed to help people achieve and maintain their healthy weight. We commenced sales of two products from our product lines in the third quarter of fiscal year 2011 and had net revenue of $314,980 for the fiscal year ended June 30, 2012.
We believe the quality of our products and the effectiveness of our distribution network, coupled with geographic expansion will be the primary drivers to help us achieve our goal of being the largest network marketing company in North America.
Our products are grouped in two principal categories: weight management and energy, sports & fitness, along with premium marketing websites and promotional items. Our products are often sold in programs that are comprised of a variety of related products designed to simplify healthy snacking and weight management for consumers and to maximize cross-selling opportunities for our Brand Partners.
Industry wide factors that affect us and our competitors include the increasing prevalence of obesity in adults and children, which are driving the demand for healthier snacking alternatives, along with the increase in unemployment which can positively affect the recruitment and retention of Brand Partners.
We believe the value of the average monthly purchase of our products by our sales leaders will remain relatively constant over time. Consequently, increases in our sales are driven by our retention of sales leaders, our recruitment and retention of Brand Partners and by our Brand Partners’ adoption of daily consumption business methods.
We provide brand partners with products, support materials, training, special events and a competitive compensation program. If a Brand partner wants to pursue the Snackhealthy business opportunity, the brand partner is responsible for growing his or her business and personally pays for the sales activities related to attracting new customers and recruiting brand partners by hosting events such as business opportunity meetings, snack tasting parties, or success training seminars; by advertising Snackhealthy’s products; by purchasing and using promotional materials; by utilizing direct mail and print material such as brochures, flyers, business cards, and banners; by purchasing inventory for sale or use as samples; and by training, mentoring and following up (in person or via the phone or internet) with customers and recruits on how to enjoy Snackhealthy products and/or pursue the Snackhealthy business opportunity.
Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary SnackHealthy, Inc. All significant inter-company transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and due to related parties, as reported in the accompanying balance sheets, approximates fair value.
Long-Lived Assets
In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when products are shipped, which is when title and risk of loss pass to brand partners and preferred customers who are the Company’s customers. The Company requires credit card payment at the point of sale. The Company has determined that no allowance for doubtful accounts is necessary. Amounts received prior to shipment and title passage to brand partners are recorded as deferred revenue. The compensation plan for the Company’s brand partners generally does not provide rebates or selling discounts to brand partners who purchase its products and services. The Company classifies selling discounts and rebates, if any, as a reduction of revenue.
Inventory
Inventory comprises packaged healthy snacks ready for final sale, and is stated at the lower of cost or market value. Cost is determined by the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost and depreciated on the straight line method over the estimated life of the asset, which is 3-7 years.
Websites Development Cost
The Company has adopted the provisions of FASB Accounting Standards Codification No. 350 Intangible-Goodwill and Other. Costs incurred in the planning state of a websites are expensed, while costs incurred in the development stage are capitalized and amortized over the estimated three year life of the asset. Amortization expense has been recorded for the websites completed during the year ended June 30, 2011.
Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. The Company had a net loss of $3,448,933 while in development stage and used cash in operations from inception of approximately $1,489,000. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.
Management believes that the actions presently being taken and the success of future operations will be sufficient to enable the Company to continue as a going concern. However, there can be no assurance that the raising of equity will be successful. Failure to achieve the needed equity funding could have a material adverse effect on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
Basic and Diluted Net Loss per Common Share
Net Loss per Common Share is computed pursuant to FASB Accounting Standards Codification No. 260, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed in the same way as for Basic net loss. Warrants outstanding as of June 30, 2012 and 2011 were none and 3,557,972, respectively. These warrants were not included in diluted earnings per share as the effect was anti-dilutive.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements of changes in accounting pronouncements that impacted the year ended June 30, 2012 and 2011, or which are expected to impact future periods, that were not already adopted and disclosed in prior periods.
Presentation
“Net sales,” reflect distribution allowances and handling and shipping income, represent what we collect and recognize as net revenues in our financial statements.
Our “gross profit” consists of net sales less “cost of sales,” which represents the prices we pay to our raw material suppliers and manufacturers of our products as well as costs related to product shipments to our warehouse and distribution center, duties and tariffs, expenses relating to shipment of products to brand partners and importers and similar expenses.
“Selling fees” are our most significant expense and consist of:
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commissions, overrides and production bonuses which total approximately 20.03% of our net revenue.
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other discretionary incentive cash bonuses to qualifying brand partners.
Selling fees are earned based on retail and wholesale sales and provide potential earnings to brand partners of up to 20% of retail sales. Selling fees together with allowances of up to 45% represent the potential earnings to brand partners of up to approximately 65% of retail sales.
The compensation to brand partners is generally for the development, retention and improved productivity of our brand partner sales organizations and is paid to brand partners on each qualifying sale.
Our “operating margins” consist of net sales, less cost of sales and selling fees.
“General and administrative expenses” represent our operating expenses, components of which include labor and benefits, sales events, professional fees, travel and entertainment, brand partner marketing, occupancy costs, communication costs, bank fees, depreciation and amortization and other miscellaneous operating expenses.
Results of Operations
Our results of operations for the periods below are not necessarily indicative of results of operations for future periods, which depend upon numerous factors, including our ability to recruit new brand partners, retain existing brand partners, open new markets, further penetrate existing markets, introduce new products and programs that will help our brand partners increase their retail efforts and develop niche markets.
Net Sales
Net sales are directly associated with the recruiting and retention of our brand partner force, retailing of our products, the quality and completeness of our product offerings that the brand partner force has to sell and the number of countries in which we operate.
Management’s role is to provide brand partners with a competitive and relevant product line, encourage strong teamwork and leadership among brand partners and offer leading edge business tools to make doing business with SnackHealthy simple and fun.
Management uses the brand partner marketing program coupled with educational and motivational tools and promotions to incentivize brand partners to increase recruiting, retention and retailing, which in turn affects net sales.
Such tools include Company sponsored sales events where large groups of brand partners gather, thus allowing them to network with other brand partners, learn recruiting, retention and retailing techniques from our leading brand partners and become more familiar with how to market and sell our products and business opportunities.
Accordingly, management believes that development and motivation programs will increase the productivity of the sales leader network. The expenses for such programs are included in general and administrative expenses. Sales are driven by several factors, including the number and productivity of brand partners and who continually build, educate and motivate their respective distribution and sales organizations.
We will also use event and non-event product promotions to motivate brand partners to increase recruiting, retention and retailing activities.
These promotions will have prizes ranging from qualifying for events to product prizes and vacations. The costs of these promotions are included in general and administrative expenses. We believe the factors described above will help brand partners increase their business, which in turn helps drive volume points in our business, and thus, net sales.
We believe that the correct business foundation, coupled with ongoing training and promotional initiatives, is required to increase recruiting and retention of brand partners and retailing of our products. This correct business foundation includes strong management that works closely with the brand partner leadership, actively engaged and unified brand partner leadership, a broad product line that appeals to consumer needs, a favorable regulatory environment, a scalable and stable technology platform and an attractive brand partner marketing plan.
Initiatives, such as success training seminars, leadership development and promotional events are integral components of developing a highly motivated and educated brand partner sales organization that will work toward increasing the recruitment and retention of brand partners.
We anticipate that our strategy will continue to include creating and maintaining growth within existing markets, while expanding into new markets.
While in development stage, we commenced limited sales of two of our snack food products during the third quarter ending March 31, 2011. Our revenue during the full year ended June 30, 2012 was $314,980 compared to $172,902 revenue for the full year ended June 30, 2011.
We believe the net sales should increase substantially year over year primarily as a result of the Company leaving development stage and transitioning to our brand partner business focus and daily consumption model, although no assurances can be made of such increases.
Revenues
Revenue for the year ended June 30, 2012 was $314,980. While in development stage, we commenced limited sales of two of our snack food products during the third quarter ending March 31, 2011. Our revenue during the last half year ended June 30, 2011 was $172,902.
Gross Profit
Gross profit was $133,822 for the year ended June 30, 2012. As a percentage of net sales, gross profit for the year ended June 30, 2012 was 42%.
Selling Expense
Selling expenses were $76,732. As a percentage of net sales, selling expenses were 24% for the year ended June 30, 2012.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional advisor fees, audit fees and other expenses incurred in connection with general operations. Our general and administrative expenses for the year ended June 30, 2012 increased to $6,336,254 from $2,947,713 for the year ending June 30, 2011. The increase was due primarily to shares being issued for services and share based compensation in the amount of $5,448,408 as compared to $2,061,859 issued for services during the year ended June 30, 2011.
We expect general and administrative expenses in fiscal year 2013 to increase in absolute dollars over 2012 levels reflecting higher sales, employee costs, increased depreciation and various sales growth initiatives, including brand partner promotions. However, 2013 general and administrative expenses as a percentage of net sales are expected to be below 2012 levels.
Other Expense
The Company recorded an expense in the amount of $1,719,000 for 19,100,000 shares to be issued under a court approved share issuance agreement for the purposes of debt conversion.
Net Income
Net loss for the year ended June 30, 2012 was $7,998,164 as compared to $2,875,268 for the year ended June 30, 2011. Increase was due primarily to non-cash expenses of $5,448,408 as a result of stock issued for services and share based compensation and non-cash expenses of $1,719,000 for stock to be issued for debt conversion.
Liquidity and Capital Resources
Generally, our principal uses of cash includes operating expenses, particularly selling expenses, and working capital (principally inventory purchases), as well as capital expenditures and the development of operations in new markets. Most of our capital expenditures were completed by the June 30, 2011. Future expenditures will primarily relate to:
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development of new markets
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product inventory
During the first twelve months of development stage and prior to the acquisition by Time Associates, Inc., the Company through its subsidiary, then known as "Healthient, Inc." raised $1,219,785 from accredited investors to invest in the infrastructure needed during pre-launch phase. During the year ended June 30, 2010, the Company sold to investors 676,786 Units for cash of $672,500. 565,000 Units were sold at $1.00 per unit with warrants exercisable at $1.00 per share. 97,500 Units were sold at $1.00 per unit with warrants exercisable at $1.25 per share and 14,286 Units were sold at $.70 per unit with warrants exercisable at $1.25 per share. Subsequently, the shares underwent a 3 for 1 stock split. The warrant also increased to 3 for 1 and the exercise price became one-third the original price. During the fiscal year ended June 30, 2011, the Company sold to the investors a total of 1,556,285 shares of the Company's common stock for cash of $374,285 and had cash of $110,714 at the end of that period. During the year ended June 30, 2012 the Company sold to investors 7,565,458 shares of common stock for $622,507 and had a bank overdraft of $12,333.
Total current assets were $146,711 and total current liabilities were $2,191,472 creating a negative working capital of $2,338,183.
The Company anticipates it will need to raise additional funds during the next twelve months in order to sustain the growth of our business and has signed an investment banking agreement with a licensed broker dealer. Monies will be used primarily to build significant product inventory and cash reserves.
Off-Balance Sheet Arrangements
At June 30, 2012 and June 30, 2011, we had no material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
ITEM 7A:
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company, as defined by Rule 12b-2 of the Exchange Act and in Item 10 (f) (1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Healthient, Inc. (A Development Stage Company)
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Healthient, Inc.
Jupiter, Florida
I have audited the accompanying consolidated balance sheets of Healthient, Inc.(a development stage company) as of June 30, 2012 and 2011, and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended, and for the period from April 29, 2009 (inception) through June 30, 2011. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Healthient, Inc. as of June 30, 2012 and 2011, and the consolidated results of its operations and its cash flows for the years then ended, and for the period from April 29, 2009 (inception) through June 30, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements the Company has suffered recurring losses from operations and has a working capital deficit that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Aurora, Colorado
/s/ Ronald R. Chadwick, P.C.
October 15, 2012
RONALD R. CHADWICK, P.C.
HEALTHIENT, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
Healthient, Inc.
Consolidated Balance Sheets
The accompanying notes are an intergral part of these financial statements
Healthient, Inc.
Consolidated Statement of Operations
See accompanying notes to Financial Statements
Healthient, Inc.
Consolidated Statements of Cash Flows
The accompanying notes are an intergral part of these financial statements
Healthient, Inc.
Consolidated Statement of Stockholders' Equity (Deficit)
(Unaudited)
The accompanying notes are an intergral part of these financial statements
Healthient, Inc.
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30, 2012 and 2011
Note 1. Reorganization and Line of Business
On October 5, 2010 Time Associates, a Nevada corporation (" the Company") acquired all of the issued and outstanding common stock of Healthient, Inc., a Nevada corporation organized April 29, 2009 ("Healthient") in exchange for the issuance by the Company of a total of 43,618,356 newly issued restricted shares of common voting stock to the Healthient shareholders pursuant the Agreement and Plan of Reorganization dated as of September 23, 2010. Prior to the issuance of the shares, the Company had 160,078 shares of common stock issued and outstanding. Subsequent to the exchange there were 43,778,434 shares issued and outstanding. The shareholders of Healthient own 99.6% of the common stock outstanding of the Company after the issuance of the 43,618,356 shares. On November 15, 2010 Time Associates, Inc. name was changed to Healthient, Inc.
The acquisition of Healthient by the Company on October 5, 2010 has been accounted for as a purchase and treated as a reverse acquisition and re-capitalization since the former owners of Healthient controlled 99.6% of the total shares of Common Stock of the Company outstanding immediately following the acquisition. In November 2010 Healthient, Inc. changed its name to SnackHealthy, Inc.
On this basis, the historical financial statements prior to October 5, 2010 have been restated to be those of the accounting acquirer Healthient (now SnackHealthy, Inc.). The historical stockholders' equity prior to the reverse acquisition has been retroactively restated (a re-capitalization) for the equivalent number of shares received in the acquisition after giving effect to any difference in par value of the issuer's and acquirer's stock. The original 160,078 shares of common stock outstanding prior to the exchange reorganization have been reflected as an addition in the stockholders' equity account of the Company on October 5, 2010.
Healthient, Inc., and its wholly owned subsidiary, SnackHealthy, Inc., develop and market snacks and beverages with the objective of making healthy eating a fun experience for the entire family. The Company’s goal is to develop a portfolio of products and successfully position them as convenient, healthy solutions across several snacking occasions daily. The Company sells snacks through a network marketing distribution model.
The Company was in the Development Stage as defined in Accounting Standards Codified (ASC) No. 915, “Accounting and Reporting by Development Stage Enterprises” through June 30, 2011. The Company had devoted substantially all of its efforts to the corporate formation. Activities during the Development Stage include developing the business plan and raising capital. The Company is now in operations.
Note 2 Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary SnackHealthy, Inc. All significant inter-company transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Financial Instruments
The carrying value of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and due to related parties, as reported in the accompanying balance sheets, approximates fair value.
Long-Lived Assets
In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when products are shipped, which is when title and risk of loss pass to brand partners and preferred customers who are the Company’s customers. The Company requires credit card payment at the point of sale. The Company has determined that no allowance for doubtful accounts is necessary. Amounts received prior to shipment and title passage to brand partners are recorded as deferred revenue. The compensation plan for the Company’s brand partners generally does not provide rebates or selling discounts to brand partners who purchase its products and services. The Company classifies selling discounts and rebates, if any, as a reduction of revenue.
Inventory
Inventory comprises packaged healthy snacks ready for final sale, and is stated at the lower of cost or market value. Cost is determined by the first-in, first out method.
Property and Equipment
Property and equipment are stated at cost and depreciated on the straight line method over the estimated life of the asset, which is 3-7 years.
Websites Development Cost and License to Produce Drink
The Company has adopted the provisions of FASB Accounting Standards Codification No. 350 Intangible-Goodwill and Other. Costs incurred in the planning state of a websites are expensed, while costs incurred in the development stage are capitalized and amortized over the estimated three year life of the asset. The drink license is also being amortized over three years.
Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Going Concern
The financial statements have been prepared assuming that the Company will continue as a going concern. The Company had a net loss of $3,448,933 while in development and an additional loss of $6,279,164 during the year ended June 30, 2012. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.
Management believes that the actions presently being taken and the success of future operations will be sufficient to enable the Company to continue as a going concern.
However, there can be no assurance that the raising of equity will be successful. Failure to achieve the needed equity funding could have a material adverse effect on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
Basic and Diluted Net Loss per Common Share
Net Loss per Common Share is computed pursuant to FASB Accounting Standards Codification No. 260, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed in the same way as for Basic net loss.
Warrants outstanding as of June 30, 2012 and June 30, 2011 were none and 3,557,972. These warrants were not included in diluted earnings per share as the effect was anti-dilutive.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements of changes in accounting pronouncements that impacted the years ended June30, 2012 and June 30, 2011, or which are expected to impact future periods, that were not already adopted and disclosed in prior periods.
Note 3. Property and Equipment
The Company started the construction of several Websites, all of which have been completed and are being amortized over three years.
Property and equipment was as follows:
The Company leases its office space. The current facility lease runs from July 1, 2011 through June 30, 2016 with an option to extend the lease an additional term of five years. Our lease payments will be $4,226 per month including operating expense and tax for the first year and then a three percent increase after each of the following four years. We maintain our executive and administrative offices in this facility. Our rental payments in fiscal 2011 were $6,516. Our rental payments for the year ended June 30, 2012 were $75,917. Future minimum payments under the office lease are approximately as follows: year ended June, 2013 $52,500, 2014 $54,000, 2015 $55,000, 2016 $56,000, for a total of $217,500.
Note 4 . Stockholders’ Deficit
The Company has authorized 200,000,000 shares of common stock with a par value of $.001 and 25,000,000 shares of preferred stock with a par value of $.001. The Company effected a 3 for 1 share exchange as part of its reverse acquisition in October 2010. All share amounts in the financial statements and footnotes reflect this action.
The Company authorized the issuance of 40,822,998 shares of common stock to the founders at the fair value of $13,480. The fair value of the shares of $13,480 was recorded as an expense.
During the year ended June 30, 2010, the Company sold to investors 2,030,358 units for cash of $672,500 (on a 3 for 1 post split basis), with each unit containing one share of common stock and one common stock purchase warrant. 1,695,000 Units were sold at $.33 per unit with warrants exercisable at $.33 per share. 292,500 Units were sold at $.33 per unit with warrants exercisable at $.42 per share and 42,858 Units were sold at $.23 per unit with warrants exercisable at $42 per share.
During the year ended June 30, 2011 the Company sold investors 2,321,285 units for cash of $594,485. The Company issued 5,556,712 shares for services for $1,555,357 ($0.28 per share) and 1,534,250 under the 2010 Equity Compensation Plan for $506,302 ($0.33 per share).
During the year ended June 30, 2012 the Company issued 3,840,090 common shares for cash $409,239, 60,000 common shares in satisfaction of a stock subscription payable, 3,665,368 common shares for officer debt of $183,268, 61,250,414 common shares for services $5,448,408, 1,000,000 common shares for Directors’ fees payable $90,000 and 50,000 common shares for a drink license $7,500.
Non-Employee Stock Options and Warrants
The Company accounts for non-employee stock options and warrants under ASC 718, whereby option and warrant costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Unless otherwise provided for, the Company covers option and warrant exercises by issuing new shares.
During the years ended June 30, 2010 and 2011 the Company issued warrants to purchase common stock at exercisable at prices from $0.33-$0.42 per share. No warrants were ever exercised and at June 30, 2012 there are no warrants outstanding.
Note 5. Shareholder Loans
Shareholder loans of $210,254 and $192,179 at June 30, 2012 and 2011 respectively, are non interest bearing and due on demand.
Note 6. Income Taxes
The components of the deferred tax asset are as follows:
The Company had available approximately $9,682,000 at June 30, 2012 and $3,445,000 at June 30, 2011 of unused Federal and California net operating loss carry-forwards that may be applied against future taxable income. These net operating loss carry-forwards expire through 2030. There is no assurance that the Company will realize the benefit of the net operating loss carry-forwards.
SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized.
Reconciliation of the differences between the statutory tax rate and the effective income tax rate is as follows at June 30, 2012 and June 30, 2011 respectively:
Note 7. Other Matters
In 2011 Siesta Flow LLC filed a legal action against the Company in the Twelfth Circuit Court of Sarasota County, Florida, alleging breach of contract and seeking damages in the amount of 92,000 plus costs. In April, 2012, the court has issued final summary judgment against the Company in the total amount of $95,500. On April 27, 2012, the court issued an order to approve a settlement of the judgment issued against the Company. According to the terms of the approved settlement, a third party and a non-party to the legal action against the Company, agreed to purchase the claim of Siesta Flow LLC. in the amount of $75,000 and additional claims against the Company from other parties, for a total amount of $95,500 in exchange for the issuance of 19,100,000 shares of common stock by the Company, subject to certain limitations on the issuance of such shares set forth in settlement. The Company has recorded the settlement agreement at the market price of the stock on the date the settlement was approved by the court order on April 27, 2012 in the amount of $1,719,000.
Note 8. Related Party Transactions
During the year ended June 30, 2012 the Company issued 9,000,000 shares of common stock valued at $1,260,000, 32,988,211 shares of common stock valued at $1,649,410 and issued 500,000 shares of common stock to pay 2011 Directors fees of $45,000 to the Chairman of the Board plus $30,000 in fair value.
Directors of the Company had loan balances due of $210,254 and $192,179 at fiscal year June 30, 2012 and 2011 from the Company for working capital advances. The loan is non interest bearing and due upon demand. A Director of the Company converted loans made to the company totaling $183,268 to 3,665,357 shares of the Company’s common stock during the year.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Board of Directors of Healthient, Inc., previously known as Time Associates, Inc., a Nevada corporation (the "Registrant") determined that it was in the best interest of the Company to change its auditors, K. Brain Pybus, CPA, P.A. to Ron R. Chadwick, P.C. The Registrant dismissed K. Brian Pybus, CPA, P.A. as of January 10, 2011.
The Registrant completed a share exchange transaction with SnackHealthy, Inc., previously known as Healthient, Inc., a Nevada corporation as of October 5, 2010. Following the share exchange transaction, SnackHealthy, Inc. became a wholly-owned operating subsidiary of the Registrant. K. Brain Pybus, CPA, P.A. was the auditor for SnackHealthy, Inc. and Ron R. Chadwick, P.C. was the auditor for the Registrant prior to the share exchange transaction.
The audit reports provided by the auditors of SnackHealthy, Inc., K. Brain Pybus, CPA, P.A. for the fiscal years ended June 30, 2009 and 2010 did not contain any adverse opinion or disclaimer of opinion nor was any report modified as to uncertainty, audit scope or accounting principles. During the Registrant's two most recent fiscal years, and during the subsequent interim period preceding the date of dismissal of January 10, 2011, there have been no disagreements between the Registrant and K. Brian Pybus, CPA, P.A., on any matter of accounting principles or practices, financial statement disclosure or auditing, scope or procedure, which disagreement(s), if not resolved to the satisfaction of K. Brian Pybus, CPA, P.A., would have caused it to make reference to the subject matter of the disagreement(s) in connection with its report.
On January 10, 2011, the Board of Directors of the Registrant approved the appointment of Ron R. Chadwick, P.C. of Aurora, Colorado as its new auditors as of December 30, 2010 for its wholly-owned subsidiary SnackHealthy, Inc. During the Registrant's two most recent fiscal years, and the subsequent interim period prior to January 10, 2011, the Registrant did not consult Ron R. Chadwick, P.C. on any matter described in subsections (i) and (ii) of paragraph (a)(2) of Item 304 of Regulation S-K.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company has disclosure controls and procedures (as defined in Rules 13a-14and 15d-14 under the Securities Exchange Act of 1934, as amended) to ensure that material information contained in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely and accurate basis. Based on such evaluation, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective at ensuring that material information is recorded, processed, summarized and reported on a timely and accurate basis in the Company's filings with the Securities and Exchange Commission. Since such evaluation there have not been any significant changes in the Company's internal controls, or in other factors that could significantly affect these controls.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, which consists of our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting based on criteria established in the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), as supplemented by the COSO publication Internal Control over Financial Reporting - Guidance for Smaller Public Companies. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of June 30, 2012, based on these criteria.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2012, there were no changes in our internal controls that have materially affected or are reasonably likely to have materially affected our internal control over financial reporting.
Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system is met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
On October 1, 2012, the Company effected a 1-for-50 reverse stock split of its common stock, $0.001 par value per share.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The present directors and executive officers of the Company, their ages, positions held in the Company and duration of service are as follows:
Name
Age
Position
Since
Katherine West
Chief Executive Officer,
10/5/2010
President and Director
William Alverson
Director
10/5/2010
William Lindberg
Chief Financial Officer
10/5/2010
The term of office of each director and executive officer ends at, or immediately after, the next annual meeting of shareholders of the Company. Except as otherwise indicated, no organization by which any director of officer has been previously employed is an affiliate, parent, or subsidiary of the Company.
Business Experience
The following is a brief account of the business experience during at least the past five years of each director and executive officer, including the principal occupation and employment during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Katherine West - Director, President and Chief Executive Officer of Healthient, Inc. and SnackHealthy, Inc.
As Chief Executive Officer, Ms. West oversees the management team and entire day-to-day operations of Healthient, Inc. and its subsidiary, SnackHealthy, Inc. She has extensive knowledge in direct sales, executive management and public company experience having served for Travelstar on the Board of Directors and having held the titles of Executive Vice President and Chief Financial Officer.
From 1998 to 2002, Ms. West served as the COO of WMA & Associates. WMA provided early stage financing and led the public offerings of Baby Genius and FreeRealTime.com. She held various roles at Travelstar, Inc. including Executive Vice President, Chief Financial Officer and also served on the Board of Directors. The Company went public in 2004. As Executive Vice President, she managed the day-to-day operations including 36 employees and over 500 travel agents. The Company grew from a start-up to $80,000,000 in annual sales in just 4 years. In late 2008, the Company was forced to close its doors after losing its contract with its major supplier and could not recover in the world economic crisis and financial market meltdown of that period. In connection with her tenure as a director and executive officer, Ms. West was named in the involuntary bankruptcy proceeding filed in 2008. In September, 2011, the trustee filed for the dismissal of the case against Ms. West. Ms. West lives in Jupiter, Florida with her husband Bill and their four children. In addition to running the Company and taking care of her family, Kathy enjoys playing tennis and is the captain of her tennis team.
William M. Alverson - Director.
William Alverson serves as the Director of the Company (in his capacity as the Chairman of the Board of Directors) and senior executive of Healthient and SnackHealthy. He started his career in the financial industry in 1989 where he worked as a financial advisor at American Express. In 1993, Mr. Alverson founded Newport Beach, California based investment bank, WMA & Associates. Mr. Alverson served as Chairman and CEO providing first round financings and advisory services to both private and public companies. Major investments included Travelmax, Inc., Admore Memory, Freerealtime.com, Genius Products and Travelstar. In 1995, as the largest investor and shareholder of Travelmax, he assumed the role of CEO. Under Mr. Alverson’s watch, the company grew from seven employees to 220 employees in less than one year, supporting over 44,000 agents nationwide. In 1997, Mr. Alverson was involved in an off-road racing accident in Mexico that left him temporarily paralyzed with a broken back. As a result of the injury and one-year rehabilitation, Mr. Alverson stepped down as CEO moving away from the day-to-day management of the company and sold off the majority interest in his holdings. In 1998, he returned to work resuming his role as CEO of WMA & Associates . Over the next several years, Mr. Alverson, and his team of investment bankers began investing in start-ups. WMA provided early stage financing and led the public offerings of Baby Genius and FreeRealTime.com. In 2004, Mr. Alverson led Travelstar, Inc.’s growth from start up to $80,000,000 in annual sales in 4 years. In late 2008, the Company was forced to close its doors after losing its contract with its major supplier and could not recover in the world economic crisis and financial market meltdown of that period. In connection with his tenure as a director and executive officer, Mr. Alverson was named in the involuntary bankruptcy proceeding filed in 2008. In September, 2011, the trustee filed for the dismissal of the case against Mr. Alverson. Mr. Alverson lives in Jupiter, Florida. He is married and has four children with his wife of 15 years, Kathy. He currently serves on the boards of Jupiter Ventures, Healthient, Inc., SnackHealthy, Inc. and The Healthient Foundation.
William Lindberg - Chief Financial Officer
Mr. Lindberg is responsible for the Company's finance functions, including tax, financial planning, treasury, accounting, capital allocation, procurement, internal audit, and investor relations. His prior experience includes serving in executive financial positions at both public and private companies. Early in his career, Mr. Lindberg was a Certified Public Accountant at Arthur Anderson & Co. assigned to its offices in Montevideo, Buenos Aires, and Santiago.
LIMITATION ON DIRECTORS' LIABILITIES
Our certificate of incorporation limits, to the maximum extent permitted under Nevada law, the personal liability of directors and officers for monetary damages for breach of their fiduciary duties as directors and officers, except in circumstances involving wrongful acts, such as a breach of the director's duty of loyalty or acts of omission which involve intentional misconduct or a knowing violation of law.
Nevada Law permits us to indemnify officers, directors or employees against expenses, including attorney's fees, judgments, fines and amounts paid in settlement in connection with legal proceedings if the officer, director or employee acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interest, and, with respect to any criminal act or proceeding, he had no reasonable cause to believe his conduct was unlawful. Indemnification is not permitted as to any matter as to which the person is adjudged to be liable unless, and only to the extent that, the court in which such action or suit was brought upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Individuals who successfully defend this type of action are entitled to indemnification against expenses reasonably incurred in connection therewith.
Our by-laws require us to indemnify directors and officers against, to the fullest extent permitted by law, liabilities which they may incur under the circumstances described in the preceding paragraph.
The Company is not subject to the requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.
CODE OF BUSINESS CONDUCT AND ETHICS
Our code of business conduct and ethics, as approved by our board of directors, can be obtained from the Company by writing a request to our Healthient, Inc. corporate office.
We intend to satisfy the disclosure requirement under Item 10 of Form 8-K relating to amendments to or waivers from provisions of the code that relate to one or more of the items set forth in Item 406(b) of Regulation S-B, by describing on our Internet Website, within five business days following the date of a waiver or a substantive amendment, the date of the waiver or amendment, the nature of the amendment or waiver, and the name of the person to whom the waiver was granted.
Information on our Internet website is not, and shall not be deemed to be, a part of this report or incorporated into any other filings we make with the Securities and Exchange Commission.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-term compensation for services rendered during the last three fiscal years to our company in all capacities as an employee by our Chief Executive Officer and our other executive officers whose aggregate cash compensation exceeded $100,000 (collectively, the "named executive officers") at any time during such years.
Summary Compensation Table for 2012 and 2011 Fiscal Years
_________________________
(1)
Ms. West has been issued 1,071,250 shares of common stock of the Company at the price per share of $0.33 per share pursuant to the Company's Equity Compensation Plan of 2010 as amended.
(2)
Mr. Alverson has been issued 9,000,000 shares of common stock of the Company at the price per share of $0.08 per share pursuant to the Company's Equity Compensation Plan of 2010 as amended.
(3)
Mr. Alverson has been issued 32,988,211 shares of common stock of the Company for the conversion of a loan made to the Company. See "Related Party Transactions".
(4)
Mr. Lindberg has been issued 70,000 shares of common stock of the Company at the price per share of $0.10 per share pursuant to the Company’s Equity Compensation Plan of 2010, as amended.
Outstanding Equity Awards
The table below shows all outstanding equity awards held by our Named Executive Officers at the end of the fiscal year ended June 30, 2012.
Outstanding Equity Awards at 2012 Fiscal Year End
COMPENSATION OF DIRECTORS
The table below summarizes the compensation earned by directors for services during the fiscal year ended June 30, 2012:
Director Compensation
For Fiscal Year Ended June 30, 2012
_____________________
(1)
The company recorded a payable of $45,000 for shares of common stock to each Ms. West and Mr. Alverson for their respective services as directors valued at $45,000 pursuant to the Company's 2010 Equity Compensation Plan, as amended. Each director has been issued a total of 500,000 shares of common stock for their respective services. The shares were payable in fiscal 2012 for the services rendered in fiscal 2011.
The Company reimburses each Director for reasonable expenses (such as travel and out-of-pocket expenses) in attending meetings of the Board of Directors.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
There are no employment agreements with the Company's key employees at this time.
EQUITY COMPENSATION PLAN INFORMATION
In fiscal year 2011, the Company adopted its 2010 Equity Compensation Plan (the "Plan") which was registered on the registration statement on Form S-8. The Company registered 8,500,000 shares of its common stock. The Plan was amended in January 2012, and the Company registered an additional 12,000,000 shares of its common stock. Pursuant to the Plan, the Company issued a total of 6,762,143 shares of its common stock to employees, as that term is defined under the Plan. As of July 25, 2012, there were 4,245,714 shares of common stock remaining for issuance under the Plan.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information with respect to beneficial ownership of our common stock by: (i) each person known by us to be the beneficial owner of more than 5% of our common stock; (ii) each of our current directors; (iii) each of our executive officers set forth in the Summary Compensation Table; and (iv) all current directors and executive officers as a group. Except as otherwise indicated, the address for each person is 15132 Park of Commerce Blvd., Jupiter, FL 33478. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Except as otherwise indicated in the footnotes to the table, and subject to community property laws, where applicable, the persons and entities identified in the table below have sole voting and investment power with respect to all shares beneficially owned. The number of shares of common stock outstanding used in calculating the percentage for each listed person includes shares of common stock underlying options or warrants held by such person that are exercisable within 60 calendar days of August 31, 2012 but excludes shares of common stock underlying options or warrants held by any other person. Percentage of beneficial ownership is based on 118,493,410 shares of common stock issued and outstanding as of September 25, 2012.
Beneficial Ownership
Percentage
of Common Stock (1)
of Ownership
Katherine West
Director, CEO and President
7,938,168 (2)
6.70%
William Alverson
Director
51,433,568 (3)
43.40%
William Lindberg, Chief Financial Officer
0%
Mark Flanagan
331 Cedar Street
Newport Beach, CA 92663
6,437,657
5.43%
All current executive officers and directors as a group (3 persons)
59,371,736
50.10%
*
Less than 1%
(1) Beneficial ownership is determined in accordance with rules and regulations of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days after September 25, 2012 are deemed outstanding, but are not deemed outstanding for computing the percentage of any other person.
(2) Ms. West holds 332,501 of her shares of common stock in Northeast LLC., an entity she controls.
(3) Mr. Alverson holds 37,353,568 of his shares of common stock in Panacea, Inc., and 530,000 of his shares of common stock in MPB & Associates. Inc., the companies he owns and controls.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended June 30, 2012 the Company issued 9,000,000 shares of common stock valued at $1,260,000, 32,988,211 shares of common stock valued at $1,649,410, and 500,000 shares of common stock to each of two directors valued at $45,000 to pay directors and executive services fees of the Company. See "Executive Compensation Table".
Directors of the Company had loan balances due of $210,254 and $192,179 at fiscal year June 30, 2012 and 2011, respectively from the Company for working capital advances. The loan is non interest bearing and due upon demand. A Director of the Company and senior executive of the Company's wholly-owned subsidiary of the Company converted the loan made to the Company totaling $183,268 to a total of 36,653,568 shares of common stock, out of which 3,665,357 shares of the Company’s common stock were accounted as a conversion of the loan at a price of $0.05 per share and the remaining 32,988,211 shares of common stock valued at $1,649,410 were recorded as income to Mr. Alverson in connection with the conversion of the loan. See Note 8 to the Financial Statements.
Other than disclosed in the Financial Statements, there were no transactions for the fiscal year ended June 30, 2012, nor are there any current proposed transactions, or series of the same, to which the Company is a party, in which the amount exceeds $60,000 and in which, to the knowledge of the Company, any director, executive officers, nominee, five percent shareholders of any member of the immediate family of the foregoing person, have or will have a direct or indirect material interest.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional audit services rendered by:
Ronald R. Chadwick, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
for the year ended June 30, 2011.
(1) Audit Fees: Fees for professional services performed by Ronald R. Chadwick, P.C. for the audit of our annual financial statements and services that are normally provided in connection with statutory and regulatory filings or engagement, such as the filing of Form S-8 for the year ended June 30, 2012.
(2) Audit-Related Fees: Fees for the review of 10-Q’s for the first, second and third quarters for the year ended June 30, 2012.
(3) Tax Fees: Ronald R. Chadwick, P.C. did not provide any professional services with respect to tax compliance, such as preparation and filing of original and amended returns for us and our consolidated subsidiaries, refund claims, payment planning, tax audit assistance and tax work stemming from "Audit-Related" items.
(4) All Other Fees: Ronald R. Chadwick, P.C. did not provide other permissible work for us that does not meet the above category descriptions.
PRE-APPROVAL POLICY
Our Board of Directors is responsible for approving all Audit, Audit-Related, Tax and Other Non-Audit Services. The Board of Directors approves all auditing services and permitted non-audit services, including all fees and terms to be performed for us by our independent auditor at the beginning of the fiscal year.
Non-audit services are reviewed and pre-approved by project at the beginning of the fiscal year. Any additional non-audit services contemplated by the company after the beginning of the fiscal year are submitted to the Audit Committee chairman for pre-approval prior to engaging the independent auditor for such services. Such interim pre-approvals are reviewed with the full Audit Committee at its next meeting for ratification.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No.
Description of Document
2.1
Agreement and Plan of Merger of Time Lending, California, Inc.*
3.1
Articles of Incorporation of Time Lending, California, Inc.*
3.2
Articles of Incorporation of Tenth Street, Inc.*
3.3
Articles of Incorporation of Time Marketing Associates, Inc.*
3.4
Articles of Incorporation of Time Management, Inc.*
3.5
Articles and Certificate of Merger of Registrant*
3.6
Bylaws of Registrant*
3.7
Amendment to the Articles of Incorporation dated August 2, 2005*
3.8
Certificate of Designation.*
3.9
Amendment to the Articles of Incorporation dated August, 2011.*
3.10
Amendment to the Articles of Incorporation dated September, 2012.*
10.2
Lease Agreement*
10.3
Guaranty of Michael Pope*
10.4
Guaranty of Thomas Van Wagoner*
10.5
Demand Promissory Note (Michael Pope)*
10.6
Demand Promissory Note (Philip La Puma)*
10.7
Asset Sale and Purchase Agreement*
10.8
Share Exchange Agreement between Time Financial Services, Inc. and Interruption Television, Inc.*
10.9
Voting Agreement (Tenth Street, Inc.)*
10.10
Voting Agreement (Time Management, Inc.)*
10.11
Voting Agreement (Time Marketing Associates, Inc.)*
10.12
Broker Agreement*
10.13
Letter of Intent with Nationwide Security Mortgage*
Subsidiaries of Registrant
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Ss. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Ss. 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
________________________
* Previously filed with the Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ Katherine West
President and Director
October 15, 2012
Katherine West
(PRINCIPAL EXECUTIVE OFFICER)
/s/ William Lindberg
William Lindberg
Chief Financial Officer (PRINCIPAL FINANCIAL OFFICER)
October 15, 2012
/s/ William Alverson
Director
October 15, 2012
William Alverson