As filed with the Securities and Exchange Commission on May 11, 2023
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
STEMTECH CORPORATION
(Exact name of registrant as specified in its charter)
| Nevada | 7370 | 87-2151440 | ||
| (State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
10370 USA Today Way
Miramar, FL 33025
(954) 715-6000
(Address, including zip code and telephone number, including area code, of registrant’s principal executive offices)
Charles S. Arnold
Chief Executive Officer
10370 USA Today Way
Miramar, FL 33025
Telephone: (954) 715-6000
(Name, address, including zip code and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
Joseph M. Lucosky, Esq.
Soyoung Lee, Esq.
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Iselin, NJ 08830
(732) 395-4400
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 11, 2023
PRELIMINARY PROSPECTUS
189,121,101 Shares of Common Stock
This prospectus relates to the resale, from time to time, of up to 189,121,101 shares (the “Shares”) of our common stock, par value $0.001 per share (“Common Stock”), by the selling stockholders (each, a “Selling Stockholder” and collectively, the “Selling Stockholders”) identified in this prospectus under “Selling Stockholders” (the “Offering”), comprised of:
| (i) | up to 76,446,281 Shares issuable upon conversion of that certain Senior Secured Promissory Note dated March 27, 2023 (the “2023 Note”) issued by the Company to one (1) Selling Stockholder pursuant to the Securities Purchase Agreement between the Company and such Selling Stockholder dated March 27, 2023 (the “2023 Purchase Agreement”); |
| (ii) | up to 38,223,141 Shares issuable upon exercise of those certain Series 1 Warrants issued pursuant to the 2023 Purchase Agreement, exercisable immediately, for a term of 60 months, at an initial exercise price of $0.10 per share, subject to customary adjustment provisions (the “Series 1 Warrants”); and |
| (iii) | up to 38,223,140 Shares issuable upon exercise of those certain Series 2 Warrants issued pursuant to the 2023 Purchase Agreement, exercisable immediately, for a term of 60 months, at an initial exercise price of $0.15 per share, subject to customary adjustment provisions (the “Series 2 Warrants” and together with the Series 1 Warrants, the “2023 Warrants”); | |
| (iv) | up to 10,715,781 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 30, 2021 (the “MCUS Note”) issued by the Company to MCUS, LLC (“MCUS”) pursuant to the Securities Purchase Agreement between the Company and MCUS dated August 30, 2021 (the “MCUS SPA”); | |
| (v) | up to 93,115 Shares issuable upon exercise of that certain Common Share Purchase Warrant (the “MCUS Warrant”) issued to MCUS pursuant to the MCUS SPA, exercisable until August 30, 2024 at an exercise price of $3.00 per share; | |
| (vi) | up to 13,217,318 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 31, 202 (the “August Leonite Note) issued by the Company to Leonite Fund I, LP (“Leonite”); | |
| (vii) | up to 10,500,000 Shares issued to Leonite (the “Leonite Settlement Shares”) issued to Leonite pursuant to that certain Global Settlement & Exchange of Senior Secured Convertible Promissory Note dated February 28, 2023 between the Company and Leonite (the “Leonite Exchange Agreement”); | |
| (viii) | up to 110,000 Shares (the “Leonite Warrant Exchange Shares”) issued in exchange for warrants held by Leonite pursuant to the Leonite Exchange Agreement; | |
| (ix) | up to 38,152 Shares issued to Leonite (the “Outstanding Equity Interest Shares”) pursuant to the Leonite Exchange Agreement; | |
| (x) | up to 1,400,000 Shares issuable upon exercise of that certain Common Stock Warrant (the “Sharing Services Warrant” and together with the Series 1 Warrants, the Series 2 Warrants, the MCUS Warrant, collectively, the “Warrants”) issued to Sharing Services pursuant to the Sharing Services SPA, exercisable at any time until September 13, 2024 at an exercise price of $0.05 per share; and | |
| (xi) | up to 154,173 Shares issued to Sharing Services as an origination fee (the “Origination Fee Shares”) pursuant to the Sharing Services SPA. |
We are not selling any shares of our Common Stock under this prospectus and will not receive any proceeds from the sale of the Shares. We will, however, receive proceeds from any Warrants that are exercised through the payment of the exercise price in cash. The Selling Stockholders will bear all commissions and discounts, if any, attributable to the sale of the Shares. We will bear all costs, expenses and fees in connection with the registration of the Shares.
Our common stock is quoted on the OTCQB Marketplace operated by OTC Markets Group Inc. (“OTCQB”) under the symbol “STEK.” On May 9, 2023, the last reported sale price of our common stock on OTCQB was $0.0627 per share.
Investing in our securities involves risks. See “Risk Factors” beginning on page 7 of this prospectus. We and our board of directors are not making any recommendation regarding the exercise of your rights.
No securities may be sold without delivery of this prospectus and the applicable prospectus supplement describing the method and terms of the offering of such securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is May 11, 2023.
TABLE OF CONTENTS
Unless the context requires otherwise, references in this prospectus to “Stemtech,” “our company,” “we,” “our” “us” and similar terms refer to Stemtech Corporation, a Nevada corporation, and its subsidiaries, unless the context otherwise requires.
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PROSPECTUS SUMMARY
The following summary highlights selected information contained in this prospectus. Because the following is only a summary, it does not contain all of the information you should consider before investing in our securities. Before making an investment decision, you should carefully read all of the information contained in this prospectus, including the risks described under “Risk Factors” and our consolidated financial statements and the related notes from our 2022 Annual Report on Form 10-K before making an investment decision.
Overview
Stemtech Corporation and its subsidiaries (collectively, the “Company”, or “Stemtech”) was incorporated in the State of Nevada, USA on September 4, 2009 under the name Globe Net Wireless Corp., with ticker symbol “GNTW”. We have changed our corporate name to Stemtech Corporation in the state of Nevada, and listed on the OTCQB with the ticker symbol “STEK”. Stemtech is a global network marketing company that develops science-based products that it believes supports wellness by helping the body maintain healthy stem cell physiology, also known as stem cell enhancers. Known as the Stem Cell Nutrition Company®, the Company is a pioneer in nutritional stem cell science and believes it can demonstrate that adult stem cells function as the natural renewal system of the body. The Company believes our products enhance and support the work of the body’s stem cells by releasing more stem cells, helping to circulate them in the blood and migrate them into tissues, where they can perform their daily function of renewal for optimal health. Our Mission is to enhance wellness and prosperity around the world. These products are marketed internationally by the Companies subsidiaries and through Independent Business Partners (IBPs). The Company markets its products under the following brands: RCM System, stemrelease3™, Stemflo® MigraStem™, OraStem® (Oral Health Care), and D-Fuze™ (Electromagnetic Frequency (EMF) blocker). Stemtech also introduced a new skincare product in December 2022: Cellect One™ Rapid Renew Stem Cell Peptide Night Cream. Stemtech has also trade-marked the term “stemceuticals™” as a brand, which is the combination of stem cells and nutraceuticals.
On August 19, 2021, Stemtech Corporation (“Stemtech”), a (Delaware corporation), entered into a Merger Agreement (the “Merger Agreement”) with Globe Net Wireless Corp. (“Globe Net” or “GNTW”) (the “Merger”). The Merger was accounted for as a reverse acquisition and recapitalization in accordance with the Accounting Standards Codification topic 805, Business Combinations (“ASC 805”). Management evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the Merger and concluded, based on a consideration of the pertinent facts and circumstances, that Stemtech acquired Globe Net for financial accounting purposes. On November 9, 2021, the Company changed its fiscal year end date from August to December.
Implications of Being an Emerging Growth Company
Emerging Growth Company - We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities Act. We will continue to be an emerging growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30.
As an emerging growth company, we are exempt from:
| · | Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation; | |
| · | The requirement to provide, in any registration statement, periodic report or other report to be filed with the SEC certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement; | |
| · | Compliance with new or revised accounting standards until those standards are applicable to private companies; | |
| · | The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to provide auditor attestation of our internal controls and procedures; and | |
| · | Any Public Company Accounting Oversight Board, or “PCAOB”, rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public. |
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We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Startups Act.
We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.
Business Strategy
Stemtech offers and sells our products through Independent Business Partners (“IBPs”), similar to Herbalife or Amway distribution systems. Currently Stemtech has offices in the United States, Canada, Mexico, Ecuador, and Taiwan. IBPs sell Stemtech products and provide details and information to customers about our all-natural health products. The majority of our products are shipped directly to the consumer direct from the company where no individual IBP has to carry or store inventory. All of the fulfillment is done by the Company, saving time and providing more efficiency for our distributors and the Company.
Product Development, Production and Distribution
In every country we sell our products, we register our products adhering to local laws and registration requirements prior to sales in the particular country. Our IBPs are commission based with a down line plan that offers IBPs income possibilities based upon how many customers they introduce to our products. Our IBPs generate income on up to 6 downlines of distribution. The Company pays the IBPs direct weekly and monthly commissions, as well as bonuses. The system is maintained for efficiency through Exigo, LLC, a company that specializes in payment processing with a focus on our specific industry. The Company currently has six (6) patents on the formulations for our products. These products are manufactured to Stemtech`s specifications in various CGMP manufacturing facilities that meet federal requirements. To date, there has never been a recall associated with our Stemtech products.
In the first quarter of 2023, Stemtech acquired Life Factor Research (“LFR”). LFR developed the IP and produced our most recent new product “Cellect One”. With Stemtech`s acquisition of LFR, Stemtech plans to develop and offer new health related products for our direct sales division for distributors as well as to be able to develop non Stemtech products for other companies as clients seeking innovative products.
As a wholly owned subsidiary of Stemtech, LFR is responsible for the development of new products has access to research and development scientists who are developing products within the stem cell niche. In addition, LFR is working on updating current product formulations with current science and more state-of-the-art ingredients to enable Stemtech with the goal to provide more disruptive, leading-edge health products. Stemtech formulates products to be compliant with the health regulation agencies for each country in which we do business.
Most of the nutritional supplements are contract manufactured at our business manufacturing partner located in Miami, FL. Our partner carries United Stated Food and Drug Administration (“FDA”) licenses and manufactures in accordance with Current Good Manufacturing Practices (cGMP) standards. Raw materials are received into quarantine, lab tested to match Stemtech’s specification and put into storage until required for production. Tests are again taken after the manufacturing process and issued with a Certificate of Analysis. For some countries, we ship in a bulk blend (meaning a complete product but not yet encapsulated or bottled) where the receiving subsidiary’s contract manufacturing partners, which are also cGMP certified, complete the process.
The finished goods products are then sent to the distribution facilities and stored until orders are placed by our IBPs or customers. No orders are shipped until payment is received. Stemtech has no accounts receivable from our customers. Stemtech products are primarily sold through our network marketing model, but not exclusively. In some cases, we have entered into licensing agreements with a business wanting to distribute our products. In such situations, the licensee is prohibited from selling the products, customized for that country and compliant with local regulations and is not sold through the network marketing or commissionable model.
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Competitors
Stemtech is a pioneer in stem cell nutrition, with the original products developed in 2005. Our products are all natural, plant based and have been sold since their original introduction with over $600 million in total sales. According to a “Research and Marketing” publication of February 2023 “Stem Cell Therapy Global Market Report 2023 Region: Global, 175 pages”, “the stem cell therapy market will grow from $5.14 billion in 2022 to $6.4 billion in 2023 at a compound annual growth rate (CAGR) of 25.5%. The stem cell therapy market is expected to grow to $11.88 billion in 2027 at a CAGR of 16.5%.” We believe the emergence of new products being developed in stem cell therapy will raise the attention of all stem cell work and validate our products and method of distribution in the stem cell nutrition field.
Competitive Advantage
Stemtech products have been sold for over 18 years and we believe has created a strong name for our products within our consumer base even though our products are not currently a household name or widely distributed. This believe is based on the numerous remarkable stories consumers have provided based on their personal experience with our products. Although our products are not currently widely distributed or known by many consumers, We believe our experienced leadership and network of research and development partners provides us with a competitive advantage in our space.
Recent Developments
2023 Purchase Agreement
On March 27, 2023, the Company and one Selling Stockholder (the “Holder”) executed an investment agreement for up to $7,000,000 pursuant to a Securities Purchase Agreement (the “2023 Purchase Agreement”), a Senior Secured Convertible Promissory Note (the “2023 Note”), Series 1 Warrants (the “Series 1 Warrants”), Series 2 Warrants (the “Series 2 Warrants” and together with the Series 1 Warrants, the “2023 Warrants”) and Registration Rights Agreement (the “Registration Rights Agreement”).
The 2023 Note has a principal amount of up to $7,000,000 with an original issue discount of 12% and is to be disbursed in four (4) disbursements as set forth on Schedule A of the 2023 Note and as follows: (i) the first disbursement in the amount of $1,000,000 occurred on March 27, 2023; (ii) the second disbursement in the amount of $200,000 is due within three (3) days after the filing of this registration statement; (iii) the third disbursement in the amount of $500,000 is due forty-five (45) days after effectiveness of this registration statement; and (iv) $120,000 is due forty-five (45) days after the third disbursement. The 2023 Note carries an interest rate equal to seven percent (7%) per annum and is redeemable by the Company at any time at an amount equal to one hundred twenty-five percent (125%) of the then outstanding principal and interest accrued on the Note. All additional disbursements will be made at the Holder’s discretion, at any time, and if the Holder’s broker refuses to custody the securities issued in connection therewith, the Holder will have no obligation to make a disbursement under the disbursement schedule, but will have the option to make such disbursement.
The Series 1 Warrant is exercisable immediately for a number of shares equal to fifty percent (50%) of the shares issuable upon conversion of the Note, for a term of 60 months, at an initial exercise price of $0.10 per share, subject to customary adjustments. The Series 2 Warrants is exercisable immediately for a number of shares equal to fifty percent (50%) of the shares issuable upon conversion of the Note, for a term of 60 months, at an initial exercise price of $0.15 per share.
The Holder agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time while the 2023 Note remains outstanding or while the Selling Stockholder holds any 2023 Warrants.
Leonite Exchange Agreement
On February 28, 2023, the Company and Leonite Fund I, LP entered into that certain Global Settlement & Exchange of Senior Secured Convertible Promissory Note (the “Exchange Agreement”) with Leonite Fund I, LP (“Leonite”), a Selling Stockholder. Pursuant to the terms of the Exchange Agreement, Leonite agreed to exchange the total balance due under its Senior Secured Convertible Promissory Note dated September 1, 2021, as amended, for 10,500,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). Additionally, under the Exchange Agreement, the Company agreed to (i) issue 110,000 shares of Common Stock in exchange for warrants previously issued to Leonite and (ii) issue 38,152 shares of Common Stock (the “Outstanding Equity Interest Shares”).
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MCUS Amendment Agreement
On April 11, 2023, the Company entered into an Amendment of Promissory Note with MCUS, whereby MCUS agreed to amend its conversion price to $0.05. All other terms in the note remain as is and unchanged.
Sharing Services Amendment Agreement
On May 1, 2023, the Company entered into an Amendment of Promissory Note with Sharing Services whereby Sharing Services relinquished its right to conversion of the note into common stock, in exchange for immediate payment of outstanding accrued interest and monthly payments beginning June 1, 2023, until maturity on September 1, 2024.
Our Corporate History
Stemtech Corporation and its subsidiaries (collectively, the “Company”, or “Stemtech”) was incorporated in the State of Nevada, USA on September 4, 2009 under the name Globe Net Wireless Corp., with ticker symbol “GNTW”. We have changed our corporate name to Stemtech Corporation in the state of Nevada, and our common stock is listed on the OTCQB with the ticker symbol “STEK”. Stemtech is a global network marketing company that develops science-based products that it believes support wellness by helping the body maintain healthy stem cell physiology, also known as stem cell enhancers. Known as the Stem Cell Nutrition Company®, the Company is a pioneer in nutritional stem cell science and believes it can demonstrate that adult stem cells function as the natural renewal system of the body. The Company believes our products enhance and support the work of the body’s stem cells by releasing more stem cells, helping to circulate them in the blood and migrate them into tissues, where they can perform their daily function of renewal for optimal health. Our mission is to enhance wellness and prosperity around the world. These products are marketed internationally by the Companies subsidiaries and through Independent Business Partners (IBPs). The Company markets its products under the following brands: RCM System, stemrelease3™, Stemflo® MigraStem™, OraStem® (Oral Health Care), and D-Fuze™ (Electromagnetic Frequency (EMF) blocker). Stemtech also introduced a new skincare product in December 2022: Cellect One™ Rapid Renew Stem Cell Peptide Night Cream. Stemtech has also trade-marked the term “stemceuticals™” as a brand, which is the combination of stem cells and nutraceuticals.
On August 19, 2021, Stemtech Corporation (“Stemtech”), a (Delaware corporation), entered into a Merger Agreement (the “Merger Agreement”) with Globe Net Wireless Corp. (“Globe Net” or “GNTW”) (the “Merger”). The Merger is accounted for as a reverse acquisition and recapitalization in accordance with the Accounting Standards Codification topic 805, Business Combinations (“ASC 805”). Management evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the Merger and concluded, based on a consideration of the pertinent facts and circumstances, that Stemtech acquired Globe Net for financial accounting purposes. On November 9, 2021, the Company changed its fiscal year end date from August to December.
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SUMMARY OF THE OFFERING
This prospectus relates to the resale, from time to time, of up to 189,121,101 shares (the “Shares”) of our common stock, par value $0.001 per share (“Common Stock”), by the selling stockholders identified in this prospectus under “Selling Stockholders” (the “Offering”), comprised of:
| (i) | up to 76,446,281 Shares issuable upon conversion of that certain Senior Secured Promissory Note dated March 27, 2023 (the “2023 Note”) issued by the Company to one (1) Selling Stockholder pursuant to the Securities Purchase Agreement between the Company and such Selling Stockholder dated March 27, 2023 (the “2023 Purchase Agreement”); | |
| (ii) | up to 38,223,141 Shares issuable upon exercise of those certain Series 1 Warrants issued pursuant to the 2023 Purchase Agreement, exercisable immediately, for a term of 60 months, at an initial exercise price of $0.10 per share, subject to customary adjustment provisions (the “Series 1 Warrants”); and | |
| (iii) | up to 38,223,140 Shares issuable upon exercise of those certain Series 2 Warrants issued pursuant to the 2023 Purchase Agreement, exercisable immediately, for a term of 60 months, at an initial exercise price of $0.15 per share, subject to customary adjustment provisions (the “Series 2 Warrants” and together with the Series 1 Warrants, the “2023 Warrants”); | |
| (iv) | up to 10,715,781 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 30, 2021 (the “MCUS Note”) issued by the Company to MCUS, LLC (“MCUS”) pursuant to the Securities Purchase Agreement between the Company and MCUS dated August 30, 2021 (the “MCUS SPA”); | |
| (v) | up to 93,115 Shares issuable upon exercise of that certain Common Share Purchase Warrant (the “MCUS Warrant”) issued to MCUS pursuant to the MCUS SPA, exercisable until August 30, 2024 at an exercise price of $3.00 per share; | |
| (vi) | up to 13,217,318 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 31, 202 (the “August Leonite Note) issued by the Company to Leonite Fund I, LP (“Leonite”); | |
| (vii) | up to 10,500,000 Shares issued to Leonite (the “Leonite Settlement Shares”) issued to Leonite pursuant to that certain Global Settlement & Exchange of Senior Secured Convertible Promissory Note dated February 28, 2023 between the Company and Leonite (the “Leonite Exchange Agreement”); | |
| (viii) | up to 110,000 Shares (the “Leonite Warrant Exchange Shares”) issued in exchange for warrants held by Leonite pursuant to the Leonite Exchange Agreement; | |
| (ix) | up to 38,152 Shares issued to Leonite (the “Outstanding Equity Interest Shares”) pursuant to the Leonite Exchange Agreement; | |
| (x) | up to 1,400,000 Shares issuable upon exercise of that certain Common Stock Warrant (the “Sharing Services Warrant” and together with the Series 1 Warrants, the Series 2 Warrants, the MCUS Warrant, collectively, the “Warrants”) issued to Sharing Services pursuant to the Sharing Services SPA, exercisable at any time until September 13, 2024 at an exercise price of $0.05 per share; and | |
| (xi) | up to 154,173 Shares issued to Sharing Services as an origination fee (the “Origination Fee Shares”) pursuant to the Sharing Services SPA.
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| (iv) | up to 10,715,781 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 30, 2021 (the “MCUS Note”) issued by the Company to MCUS, LLC (“MCUS”) pursuant to the Securities Purchase Agreement between the Company and MCUS dated August 30, 2021 (the “MCUS SPA”); |
We are not selling any shares of our Common Stock under this prospectus and will not receive any proceeds from the sale of the Shares. We will, however, receive proceeds from any Warrants that are exercised through the payment of the exercise price in cash. The Selling Stockholders will bear all commissions and discounts, if any, attributable to the sale of the Shares. We will bear all costs, expenses, and fees in connection with the registration of the Shares.
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| Issuer | Stemtech Corporation | |
| Shares of Common Stock offered by us | None | |
| Shares of Common Stock offered by the Selling Stockholders | 189,121,101 shares (1) | |
| Shares of Common Stock outstanding before the Offering | 64,739,899 shares (2) | |
| Shares of Common Stock outstanding after completion of this offering, assuming the sale of all shares offered hereby | 253,861,000 shares (2) | |
| Use of proceeds | We will not receive any proceeds from the resale of the common stock by the Selling Stockholders. | |
| Market for Common Stock | Our common stock is quoted on OTCQB under the symbol “STEK.” | |
| Risk Factors | Investing in our securities involves a high degree of risk. See the “Risk Factors” section of this prospectus on page 7 and in the documents we incorporate by reference in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our securities. |
| (1) | This amount consists of up to (i) 76,446,281 Shares issuable upon conversion of the 2023 Note, (ii) 38,223,141 Shares issuable upon exercise of the Series 1 Warrants, (iii) 38,223,140 Shares issuable upon exercise of the Series 2 Warrants, (iv) up to 10,715,781 Shares issuable upon conversion of the MCUS Note, (v) up to 93,115 Shares issuable upon exercise of the MCUS Warrant, (vi) 13,217,318 Shares issuable upon conversion of the August Leonite Note, (vii) 10,500,000 Leonite Settlement Shares, (viii) 110,000 Leonite Warrant Exchange Shares, (ix) up to 38,152 Outstanding Equity Interest Shares, (x) 1,400,000 Shares issuable upon exercise of the Sharing Services Warrant, and (xi) 154,173 Origination Fee Shares. |
| (2) | The number of shares of Common Stock outstanding before and after the Offering is based on 64,739,899 shares outstanding as of May 9, 2023. |
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RISK FACTORS
Investing in our securities involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information contained in this prospectus, before making an investment decision with respect to our securities. The occurrence of any of the following risks or those incorporated by reference, or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations or cash flows. In any such case, the trading price of common stock and the trading price of Series A warrants, if any, could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below and those incorporated by reference.
Risks Related to our Business
The Company is a development stage business and subject to the many risks associated with new businesses.
Our business has a limited operating history and is subject to all of the risks inherent with a development stage enterprise. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with development and expansion of a development stage enterprise. We have incurred losses and may continue to operate at a net loss for at least the next several years as we execute our business plan. The Company has experienced recurring net losses and negative cash flows from operations since inception and has an accumulated deficit of approximately $21.6 million and a working capital deficiency of approximately $6.8 million at December 31, 2022.
Our financial situation creates doubt whether we will continue as a going concern.
There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain funding or additional financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital and no assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment.
Based on the report from our independent auditors dated April 17, 2023, management stated that our financial statements for the year ended December 31, 2022, were prepared assuming substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
We are not profitable and may never be profitable.
Since inception through the present, we have been dependent on raising capital to support our working capital needs. During this same period, we have recorded net accumulated losses and are yet to achieve profitability. Our ability to achieve profitability depends upon many factors, including our ability to sell current products and develop and commercialize new products. There can be no assurance that we will ever achieve any significant revenues or profitable operations.
Our operating expenses exceed our revenues and will likely continue to do so for the foreseeable future.
We are in an early stage of our development, and we have not generated sufficient revenues to offset our operating expenses. Our operating expenses will likely continue to exceed our operating income for the foreseeable future, until such time as we are able to monetize our products and generate substantial revenues, particularly as we undertake payment of the increased costs of operating as a public company.
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We have assumed a significant amount of debt and our operations may not be able to generate sufficient cash flows to meet our debt obligations, which could reduce our financial flexibility and adversely impact our operations.
The Company currently has considerable obligations under notes, related party notes and lines of credit outstanding with various lenders. Our ability to make payments on such indebtedness will depend on our ability to generate cash flow. The Company may not generate sufficient cash flow from operations to enable us to repay this indebtedness and to fund other liquidity needs, including capital expenditure requirements. Such indebtedness could affect our operations in several ways, including the following:
| ● | a significant portion of our cash flows could be required to be used to service such indebtedness; | |
| ● | a high level of debt could increase our vulnerability to general adverse economic and industry conditions; | |
| ● | any covenants contained in the agreements governing such outstanding indebtedness could limit our ability to borrow additional funds, dispose of assets, pay dividends and make certain investments; | |
| ● | a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, our competitors may be able to take advantage of opportunities that our indebtedness may prevent us from pursuing; and | |
| ● | debt covenants to which we may agree may affect our flexibility in planning for, and reacting to, changes in the economy and in our industry. |
A high level of indebtedness increases the risk that we may default on our debt obligations. We may not be able to generate sufficient cash flows to pay the principal or interest on our debt. If we cannot service or refinance our indebtedness, we may have to take actions such as selling significant assets, seeking additional equity financing (which will result in additional dilution to stockholders) or reducing or delaying capital expenditures, any of which could have a material adverse effect on our operations and financial condition. If we do not have sufficient funds and are otherwise unable to arrange financing, our assets may be foreclosed upon which could have a material adverse effect on our business, financial condition and results of operations.
We will need additional capital, which may be difficult to raise as a result of our limited operating history as a public company or any number of other reasons.
We expect that we will need to raise additional capital within the next 12 months. However, in the event that we exceed our expected growth, we would need to raise additional capital. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms, or even at all. Our limited operating history makes investor evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be offered on terms or conditions that are not acceptable. In the event that we are not able to secure financing, we may have to scale back our growth plans or cease operations.
We face intense and increasing competition. If we do not provide products that are helpful and desirable by consumers, we may not remain competitive, and our potential revenues and operating results could be adversely affected.
Our business is rapidly evolving and intensely competitive, and is subject to changing consumer trends, economic and regulatory conditions, shifting consumer needs and frequent introductions of new products and offerings from competitors. Our ability to compete successfully depends heavily on providing digital content that is useful and enjoyable for our users and delivering our content through innovative technologies in the marketplace. It is necessary for us to continue creating new focused products with the intention to be disruptive and innovative in the marketplace.
We face competition from others in the wellness and nutrition industries. Our current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual property claims (whether or not meritorious) and competing aggressively for consumers. Emerging start-ups may be able to innovate and provide products and services faster than we can.
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Additionally, our operating results would suffer if our products are not timed with market opportunities, or if our new products are not effectively brought to market. As the nutrition and wellness industry continues to evolve with consumer trends and scientific discoveries, our competitors may be able to offer products that are, or that are seen to be, substantially similar to or better than, ours. This may force us to compete in different ways and expend significant resources in order to remain competitive. If our competitors are more successful than we are in developing compelling products or attracting and retaining customers, our revenues and operating results could be adversely affected.
If we fail to retain existing customers, or if our users decrease their level of engagement with our products, our revenue, financial results, and business may be significantly harmed.
The size of our customer base and the attraction of new customers are critical to our success. Our financial performance will be significantly determined by our success in adding, retaining, and engaging customers. If consumers do not perceive our products to be useful, reliable, and trustworthy, we may not be able to attract or retain customers or otherwise maintain or increase the frequency in which they use our products. Any number of factors could potentially negatively affect customer retention, growth, and engagement, including if:
| ● | We fail to introduce new products or services that consumers find beneficial or if we introduce new products or services, or make changes to existing products and services, that are not favorably received; |
| ● | Consumer behavior and desires change; |
| ● | Consumers adopt new products or offerings where our products may be displaced in favor of other products or offerings; |
| ● | There may be changes being considered by legislation, regulatory authorities, that could adversely affect our industry of dietary supplements and all-natural plant-based products; |
| ● | Distribution or other problems could prevent us from delivering our products in a rapid and reliable manner or otherwise negatively impact our relationship with customers; such as backorders or possible issues related for force majeure, civil unrest, war, electrical grid power interruptions, energy supply such as gasoline and diesel for transportation.
Supply chain challenges may occur if geo-political uncertainty and unrest rise to new levels of contention, given that several of our raw materials are imported from countries within those regions for manufacturing. |
Labor Strikes
| ● | We make changes in how we promote different products and services across our business; |
| ● | Initiatives designed to attract and retain customers are unsuccessful or discontinued, whether as a result of actions by us, third parties, or otherwise; or |
| ● | We fail to provide adequate customer service, training and support, recognition, events, cruises and other rewards. |
If we are unable to maintain or increase our customer base, our revenue and financial results may be adversely affected. Any decrease in customer retention, growth, or engagement could render our products less attractive, which is likely to have a material and adverse impact on our revenue, business, financial condition, and results of operations.
We face competition from additional new products entering the markets.
Other companies like Cerule International LLC and Stemsation International, Inc., which were each formed by prior Stemtech employees, operate with a similar plan as Stemtech. Other new competitors can emerge as the stem cell market continues to grow. Our success will be highly dependent on our ability to raise capital and develop and market new products.
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Acquisitions and new product offerings may disrupt growth.
We may pursue strategic acquisitions and new product offerings in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment, difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations for the acquired businesses. Fully integrating an acquired company or business into our operations may take a significant amount of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitions and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Additionally, the integration of new product offerings carries many of the same risks associated with acquisitions. We may incur difficulties in the integration of new products into our current business and providing new products may take a significant amount of time and financial resources. We cannot assure that the offering of new products will be successful and that such risks may prevent us from realizing the expected benefits from the development and offering of new products and services.
We depend on our key management personnel and the loss of their services could adversely affect our business.
We place substantial reliance upon the efforts and abilities of our executive officers and directors. Though no individual is indispensable, the loss of the services of these executive officers could have a material adverse effect on our business, operations, revenues or prospects. We do not currently maintain key man life insurance on the lives of these individuals.
If we are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality, assignment, and license agreements with our employees, consultants, and third parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect our proprietary rights. In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold a number of registered trademarks and issued patents in multiple jurisdictions and have acquired patents and patent applications from third parties. Third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or intend to operate our business. In any or all of these cases, we may be required to expend significant time and expense in order to prevent infringement or to enforce our rights. Although we have generally taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business. In addition, we regularly contribute software source code under open-source licenses and have made other technology we developed available under other open licenses, and we include open-source software in our products. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to more effectively mimic our products, services, and methods of operations. Any of these events could have an adverse effect on our business and financial results.
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We need to manage growth in operations to maximize our potential growth and achieve our expected revenues and our failure to manage growth will cause a disruption of our operations, resulting in the failure to generate revenue.
In order to maximize potential growth in our current and potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
In order to achieve the general strategies of our company we need to maintain and search for hard-working employees who have innovative initiatives, while at the same time, keep a close eye on any and all expanding opportunities in our marketplace.
The laws and regulations concerning dietary supplements are continually evolving; our actual or perceived failure to comply with these laws and regulations could harm our business.
Our products are classified as foods and dietary supplements. In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, advertising, importation, exportation, licensing, sale, and storage of our products are subject to extensive government regulation. This regulation takes the form of laws, governmental regulations, administrative determinations, court decisions, and other similar constraints and exists at the federal, state, and local levels in the United States and at all levels of government in foreign jurisdictions. There can be no assurance that we or our partners are, or will remain, in compliance with all of these regulations. Our failure or our partners’ failure to comply with applicable regulations could disrupt the manufacturing of our products, our marketing activity, our partners’ sale of our products, or lead to increased costs, legal or regulatory proceedings, the imposition of significant penalties, or harm our reputation, any of which could adversely impact our business, financial condition, and operating results. In addition, regulatory authorities periodically review legislative and regulatory policies and initiatives, and may promulgate new or revised, or adopt changes in the interpretation and enforcement of existing, regulations at any time. The adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of impacted product sales and may negatively impact the marketing of our products or require us to change or cease aspects of our business, any of which could result in significant loss of sales and harm our business, financial condition, and operating results.
For example, we are subject to the rules of the FDA, including for CGMPs. Any failure by us or our contract manufacturers to comply with the CGMPs could negatively impact our reputation and ability to sell our products even after the situation has been rectified and, in the case of our contract manufacturers, even though we are not directly liable under the CGMPs for their compliance. In complying with the dietary supplement CGMPs, we have experienced increases in production costs due to increases in required testing of raw ingredients, work in process, and finished products. In addition, regulators and other governmental authorities limit the types of claims that we and our partners can make about our products, including nutrition content claims, health claims, and therapeutic claims and otherwise regulate the marketing of our products. For example, the FTC’s Guides explain how the FTC interprets prohibitions on unfair or deceptive acts or practices. Consequently, the FTC could bring an enforcement action based on practices that are inconsistent with the FTC’s Guides. It is possible that our use, and that of our partners, of marketing materials, including testimonials about our products, may be significantly impacted by laws, rules, and regulations governing the marketing of our products and therefore might negatively impact our sales.
From time to time, we receive inquiries from regulators and third parties requesting information concerning our products. We fully cooperate with these inquiries including, when requested, by the submission of detailed technical documents addressing product composition, manufacturing, process control, quality assurance, and contaminant testing. We are confident in the safety of our products when used as directed. However, there can be no assurance that regulators, including in countries where we plan to commence or expand operations, will not take actions that may adversely affect our business and our sales, including preventing or delaying entry into markets or the introduction of new products or requiring the reformulation or the temporary or permanent withdrawal of certain of our existing products from their markets. Any such regulatory action, regardless of whether it results in a final determination adverse to us, could create negative publicity, with detrimental effects on the motivation and recruitment of Members and, consequently, on sales.
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We are subject to material product liability risks, which could increase our costs and materially harm our business, financial condition, and operating results.
Our products include vitamins, minerals, botanicals, and other ingredients and are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the United States. Our products could contain contaminated substances, and some of our products contain ingredients that do not have long histories of human consumption or use. Although we rely upon published and unpublished safety information, including clinical studies on ingredients used in our products, unknown adverse reactions resulting from human consumption or use of these ingredients could occur.
Changes to federal, state or international laws or regulations applicable to our company could adversely affect our business.
Our business is subject to a variety of federal, state and international laws and regulations. These laws and regulations, and the interpretation or application of these laws and regulations, could change. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business.
Intellectual property litigation could expose us to significant costs and liabilities and thus negatively affect our business, financial condition and results of operations.
We may be subject to claims of infringement of third-party patents and trademarks and other violations of third-party intellectual property rights. Intellectual property disputes are generally time-consuming and expensive to litigate or settle and the outcome of such disputes is uncertain and difficult to predict. The existence of such disputes may require us to set-aside substantial reserves and has the potential to significantly affect our overall financial standing. To the extent that claims against us are successful, they may subject us to substantial liability, and we may have to pay substantial monetary damages, change aspects of our business model, and/or discontinue any of our services or practices that are found to be in violation of another party’s rights. Such outcomes may severely restrict or hinder ongoing business operations and impact the value of our business. Successful claims against us could also result in us having to seek a license to continue our practices. Under such conditions, a license may or may not be offered or otherwise made available to us. If a license is made available to us, the cost of the license may significantly increase our operating burden and expenses, potentially resulting in a negative effect on our business, financial condition and results of operations.
Unfavorable global economic, business, or political conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, including the impact of health and safety concerns, such as those relating to the current COVID-19 coronavirus (“COVID-19”) pandemic.
The continuing global COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. The extent to which the COVID-19 pandemic continues to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions, including vaccination requirements, that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; and any future variants that may arise and its effects on the overall response to the pandemic. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates.
Our business faced supply-chain issues as a direct result of the COVID-19 pandemic, resulting in delayed growth within our product offerings. Additionally, the global financial crisis in connection with the COVID-19 pandemic has caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our products and our ability to raise additional capital when needed on acceptable terms, if at all. Any of the foregoing could harm our business and we cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business.
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Risks Related to Our Common Stock
Risks Relating to our Common Stock and the Offering
Future sales or potential sales of our common stock in the public market could cause our share price to decline.
If the existing holders of our common stock, particularly our directors and officers, sell a large number of shares, they could adversely affect the market price for our common stock. Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline.
Because we will not pay dividends on our common stock in the foreseeable future, stockholders will only benefit from owning common stock if it appreciates.
We have never paid cash dividends on our common stock, and we do not intend to do so in the foreseeable future. We intend to retain any future earnings to finance our growth. Accordingly, any potential investor who anticipates the need for current dividends from his investment should not purchase our common stock.
Our share price has been, and will likely continue to be, volatile, and you may be unable to resell your shares at or above the price at which you acquired them.
The trading price of our common stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
The market price for our securities may be influenced by many factors that are beyond our control, including, but not limited to:
| ● | variations in our revenue and operating expenses; |
| ● | market conditions in our industry and the economy as a whole; |
| ● | actual or expected changes in our growth rates or our competitors’ growth rates; |
| ● | developments or disputes concerning patent applications, issued patents or other proprietary rights; |
| ● | developments in the financial markets and worldwide or regional economies; |
| ● | variations in our financial results or those of companies that are perceived to be similar to us; |
| ● | announcements by the government relating to regulations that govern our industry; |
| ● | sales of our common stock or other securities by us or in the open market; |
| ● | changes in the market valuations of other comparable companies; |
| ● | general economic, industry and market conditions; and |
| ● | the other factors described in this “Risk Factors” section. |
The trading price of our shares might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of your investment in our securities. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.
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Because our shares of common stock are subject to the penny stock rules, it is more difficult to trade our shares.
The United States Security and Exchange Commission (the “SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
The price of our common stock may be subject to wide fluctuations.
Even though we have our shares quoted with the OTCQB, the market price of our Common Stock may be highly volatile and subject to wide fluctuations in response to a variety of factors and risks, many of which are beyond our control. In addition to the risks noted elsewhere in this registration statement, some of the other factors affecting our stock price may include:
| ● | Variations in our operating results; |
| ● | The level and quality of securities analysts’ coverage of our Common Stock; |
| ● | Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
| ● | Announcements by third parties of significant claims or proceedings against us; and |
| ● | Future sales of our Common Stock. |
For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention.
You may lose all of your investment.
Investing in our common stock involves a high degree of risk. As an investor, you might never recoup all, or even part of, your investment and you may never realize any return on your investment. You must be prepared to lose all your investment.
We may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and potentially dilute our share value.
Our Articles of Incorporation authorize the issuance of up to 200,000,000 shares of common stock, par value $0.001 per share and no shares of preferred stock. As of May 1, 2023, there are outstanding (i) warrants to purchase 3,010,875 shares of our common stock, and (ii) 13,469,531 shares underlying the conversion of convertible notes.
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Assuming all of the Company’s currently outstanding warrants and options are exercised and all convertible notes are converted, the Company would have to issue an additional 168,003,333 shares of common stock representing 260% of our current issued and outstanding common stock. The future issuance of this common stock would result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.
Liability of directors for breach of duty is limited under Nevada law.
Nevada law provides that directors must discharge their duties as a director in good faith and with a view to the interests of the corporation. Under Nevada law, directors owe a fiduciary duty to the corporation, which is generally comprised of the duty of care and duty of loyalty to the corporation. Except under limited circumstances set forth in NRS 78.138(7), or unless our Articles of Incorporation or an amendment thereto provide for greater individual liability (which ours does not provide), a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer, and the breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Our stockholders’ ability to recover damages for fiduciary breaches may be reduced by this statute.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as such, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, any future loan arrangements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Sales of a substantial number of shares of our common stock in the public market by certain of our stockholders could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or the Securities Act, Section 21E of the Securities Exchange Act of 1934 or the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that reflect our current views with respect to future events and financial performance, and all statements other than statements of historical fact are statements that are, or could be, deemed forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “believe,” “expect,” “seek,” “anticipate,” “intend,” “estimate,” “plan,” “target,” “project,” “forecast,” “envision” or the negative of these terms, and other similar phrases. All statements contained in this prospectus and any prospectus supplement regarding future financial position, sales, costs, earnings, losses, cash flows, other measures of results of operations, capital expenditures or debt levels and plans, objectives, outlook, targets, guidance or goals are forward-looking statements.
You should not place undue reliance on our forward-looking statements because they are not guarantees of future performance or expectations, and involve risks and uncertainties. Our forward-looking statements are based on the information currently available to us and speak only as of the date on the cover of this prospectus, the date of any prospectus supplement, or, in the case of forward-looking statements incorporated by reference, the date of the filing that includes the statement. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.
The forward-looking statements contained in this prospectus are set forth principally in “Risk Factors” above, and in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and other sections in our 2022 Annual Report on Form 10-K and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors.” In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Please consider our forward-looking statements in light of these risks as you read this prospectus.
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USE OF PROCEEDS
All proceeds from the resale of the Shares of our Common Stock offered by this prospectus will belong to the Selling Stockholders. We will not receive any proceeds from the resale of the shares of our Common Stock by the Selling Stockholders.
We will receive proceeds from any cash exercise of the Warrants. If all Warrants are exercised on a cash basis, the Company would receive gross cash proceeds of 9,635,941 subject to adjustment upon certain events. We expect to use the proceeds from the exercise of such Warrants, if any, for general corporate purposes. General corporate purposes may include providing working capital, funding capital expenditures, or paying for acquisitions. We currently do not have any arrangements or agreements for any acquisitions. We cannot precisely estimate the allocation of the net proceeds from any exercise of the Warrants for cash. Accordingly, in the event the Warrants are exercised for cash, our management will have broad discretion in the application of the net proceeds of such exercises. There is no assurance that the Warrants will ever be exercised for cash.
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CAPITALIZATION
The table below sets forth our cash and cash equivalents and capitalization as of December 31, 2022 on an actual basis and on a pro forma basis to reflect our issuance of the shares of our Common Stock offered by this prospectus and our receipt and application of the proceeds in the amount of approximately $9,852,941 from the exercise of Warrants, after deducting our estimated offering expenses. This table should be read in conjunction with “Use of Proceeds” above and our consolidated audited and unaudited financial statements and the notes thereto set forth in this prospectus.
| December 31, 2022 | ||||||||||||
| Actual | Proforma (1) | Pro Forma as Adjusted (2) | ||||||||||
| Cash | $ | 132,487 | $ | 1,132,487 | $ | 1,957,143 | ||||||
| Marketable Securities | – | |||||||||||
| Notes Payable | 446,246 | 446,246 | $ | 446,246 | ||||||||
| Convertible Notes Payable | 482,885 | 1,219,547 | $ | 1,765,494 | ||||||||
| Common stock - par value $0.001; 200,000,000 shares authorized; 53,442,147 issued and outstanding as of December 31, 2022 | 53,442 | 55,860 | $ | 69,423 | ||||||||
| Additional paid-in capital | 19,391,400 | $ | 20,088,974 | $ | 20,354,120 | |||||||
| Accumulated deficit | (21,631,241 | ) | (21,631,241 | ) | (21,631,241 | ) | ||||||
| Accumulated other comprehensive income (loss) | (247,760 | ) | (247,760 | ) | (247,760 | ) | ||||||
| Stockholders’ equity | (2,434,159 | ) | (2,471,926 | ) | (2,673,100 | ) | ||||||
| Total capitalization | ||||||||||||
1) The pro forma balance sheet data gives effect to the issuance of 5,027,898 shares of our common stock as a result of transactions described in the subsequent events in the Company’s Form 10-K filed on April 17, 2023.
2) The pro forma as adjusted column gives effect to the pro forma adjustments set forth in footnote (1) above and (i) tranches 2 – 4 of the 2023 Note; (ii) the conversion of the Leonite and MCUS notes into 13,469,531 shares, and (iii) the exercise of 93,115 warrants held by MCUS at $0.05 per share.
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MARKET FOR COMMON STOCK AND DIVIDEND POLICY
Our common stock is quoted on the OTCQB under the symbol “STEK.” As of May 9, 2023, the last reported sale price of the common stock as reported on OTCQB was $0.0627 per share. As of May 9, 2023, there were approximately 71 holders of record of our Common Stock. The actual number of shareholders is greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held in street name by brokers and other nominees (including any mobile investment platform).
To date, we have not paid cash dividends on our common stock and do not plan to pay such dividends in the foreseeable future. Our board of directors will determine our future dividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions. Dividends, under the Nevada Revised Statutes, may only be paid from our net profits or surplus.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth in “Risk Factors.”
This prospectus and other reports filed by Stemtech Corporation (the “Company”), from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this prospectus.
We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion should be read in conjunction with our financial statements and accompanying notes for the year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on April 17, 2022 and the Company’s Quarterly Report on Form 10-Q that was filed with the SEC on November 16, 2022.
Overview
Stemtech Corporation was incorporated under the laws of the State of Nevada, U.S. on September 4, 2009. Our registration statement on Form S-1 was filed with the SEC was declared effective on May 15, 2013. On August 19, 2021, the Company entered into a Merger Agreement with Stemtech Corporation by which the Company acquired one hundred percent of the shares of STEMTECH CORPORATION in exchange for the issuance of 37,060,000 shares of the Company, approximately 85% of the issued and outstanding shares of the Company.
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Stemtech has pioneered and patented a whole new category of dietary supplements beginning in 2005. Stemtech’s advanced Stem Cell Nutrition formulations are one-of-a-kind natural products designed to help support the three most important aspects of stem cell physiology: 1) Releasing more stem cells; 2) their circulation in the blood; and 3) Migration into tissues, where they can perform their daily function of renewal and rejuvenation for optimal health. We actually harness the incredible power of adult stem cells. How does this work? Adult stem cells are released from your bone marrow into the bloodstream, they then Circulate in the bloodstream and flow to the tissues most in need. As they arrive, the adult stem cells migrate into the tissues, reproduce and become new, healthy cells of those tissues. This process takes place every single day, even without tissue damage, as part of the natural renewal system of the body. It is important to understand that Stemtech’s products do not contain stem cells. They are composed of natural botanicals and other ingredients that have been clinically documented to support the performance of your own adult stem cells. Stemtech also offers our all-natural OraStem toothpaste, which is a tooth whitener, breath freshener, anti-microbial, stem cell attracting and promotes good gum health. In December 2022, our new Cellect One™ Rapid Renew Stem Cell Peptide Night Cream was introduced at our Cancun Leadership Even, the first since 2018 due to the pandemic. Cellect One is a Stemtech proprietary formula containing an FDA patented ingredient, Red Oak Bark, which enables deep penetration to promote good skin health.
While sales of products obviously create the cash flow, our real business model is not just “sales”, but lateral penetration. We do this through our IBPs - “Independent Business Partner” Sales Forces, and we invest much energy in growing our IBPs. Post funding, Stemtech is projecting the addition of 30,000 new independent business partner reps over the next 12 to 24 months, adding to the existing IBPs. With additional capital, an enhanced compensation plan will be provided, IBPs will be even more incentivized to build their network, attracting additional industry leaders. IBPs are a testimonial to our product and business model, lowering our customer acquisition costs.
We are now reinstituting contests, travel incentives, cruises, other trips, Business Academies for Training, regional conferences, our Annual Convention with new product launches. Our IBPs offer highly flexible yet steady income which is most adapted to todays “Laptop & Cellphone Lifestyle”, with structured and organized weekly Corporate training calls, a personalized website, back office tracking, oversight and management Tools, Reports, Training Materials and Social Sharing. Stemtech also launched the Stemtech AdvanceOffice Mobile App, based on the Verb Technology platform in September 2022, improving communication, sharing of information, training videos and other content for recruiting, on-boarding, customer retention and measuring key performance indicators for the IBP business. The artificial intelligence (AI) component of the AdvanceOffice enables IBPs to see when a prosect has opened, viewed a video or presentation which they shared. This enables the IBP to focus on those who are demonstrating the most interest and encouraging the engage as a business builder or customer.
Stemtech launched a new marketing program in January 2022, with sales continuing to come in from returning consumers who believe in the quality products. Until September 2021, the Company had operated on an extremely tight budget, with inadequate working capital and difficulties fulfilling orders. Since the cash infusions noted in “Financing” infra, the company now has the resources to contact and re-engage the over 200,000 former distributors. With this new cash infusion, the Company has engaged experienced marketing and social media professionals to initiate new marketing strategies which are expected to bring increased activity. Management conservatively believes that given the cash on hand and working expenditures as describe above, we can reinvigorate sales to be more consistent with the previous company’s revenue historically, as they were recognized 4 times in the Inc 5000 Magazine’s list of fastest growing companies.
Below this IBP level, we have our “DTC” (Direct to Consumer) network marketing Distribution model. This integrative model allows us an immediate global presence and ability to operate in multiple countries on any continent. We are uniquely positioned in this post pandemic economy beset by supply chain issues, as this method requires no up-front or required buy-in of inventory, with monthly shipments available for known recurring sales. This platform has us now operating at the intersection of the ecommerce economy, social economy and gig economy.
Implications of Being an Emerging Growth Company
Emerging Growth Company - We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, or the Securities Act. We will continue to be an emerging growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30.
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As an emerging growth company, we are exempt from:
| · | Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation; | |
| · | The requirement to provide, in any registration statement, periodic report or other report to be filed with the SEC certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement; | |
| · | Compliance with new or revised accounting standards until those standards are applicable to private companies; | |
| · | The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to provide auditor attestation of our internal controls and procedures; and | |
| · | Any Public Company Accounting Oversight Board, or “PCAOB”, rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public. |
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Startups Act.
We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Such consolidated financial statements and accompanying notes are the representations of the Company’s management, which is responsible for their integrity and objectivity. All intercompany accounts and transactions have been eliminated in consolidation.
Results of Operations
Our consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021.
During the years ended December 31, 2022 and 2021, net sales were $4,559,399 and $4,321,245, respectively. The increase of $238,154 is primarily due to slight increases in the overall sales of the subsidiaries due to the increase in IBPs in 2022.
During the years ended December 31, 2022 and 2021, our total operating expenses were $8,418,761 and $6,508,356, respectively. The increase of $1,910,405 is primarily attributable to an increase in stock compensation granted to vendors and officers in 2022.
During the years ended December 31, 2022 and 2021, total non-operating expenses were $3,513,830 and $3,900,838, respectively, resulting in an increase of $387,008. The difference is primarily due to the gain on extinguishment of debt of $3,799,356 in 2022, the decrease in interest expense of $4,232,358, partially offset by the changes in fair value of derivative liabilities from a gain of $4,553,372 at December 31, 2021 to a loss of $3,223,271 at December 31, 2022 in connection with the note payable issued in September 2021.
Our net loss for the years ended December 31, 2022 and 2021, was $8,632,828 and $7,111,109, respectively. The increase in net loss was caused by the factors described above.
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Liquidity and Capital Resources
In spite of increasing revenues, we are not yet profitable, and we cannot provide any assurance of when we will be profitable. We incurred a net loss of $8,632,828 and $7,111,109 for the years ended December 31, 2022 and 2021, respectively. During the year ended December 31, 2022, we met our short-term liquidity requirements from our existing cash reserves and proceeds from the issuance of notes payable of $611,266, net proceeds from financing arrangements of $214,249 and stock issued for cash of $100,002.
As of December 31, 2022, our current assets were $612,370 compared to $1,600,039 in current assets at December 31, 2021. As of December 31, 2022, our current liabilities were $7,415,791 compared to $9,387,038 at December 31, 2021. Current liabilities at December 31, 2022 were comprised of $3,396,543 of accounts payable and accrued expenses, $2,717,633 of derivative liabilities, $482,885 in convertible notes, $446,246 of nonconvertible notes payable, $214,249 of factoring liability, $119,065 in current operating lease liabilities and $39,170 in deferred revenues.
Stockholders’ deficit decreased from $4,005,446 as of December 31, 2021 to $3,171,918 at December 31, 2022. This change was primarily caused by the issuance of common stock for the conversion of debt of $828,000 during the year ended December 31, 2022.
Cash Flows from Operating Activities
We have not generated positive cash flows from operating activities. For the year ended December 31, 2022, net cash flows used in operating activities were $1,216,948 which is primarily due the change in working capital accounts. The net loss of $8,632,828 and $3,799,356 gain on extinguishment of debt was offset by $3,223,271 loss from the change in fair value of derivative liabilities, $3,996,187 stock-based compensation, and $2,428,539 amortization of debt discount. Adjustments for changes in operating assets and liabilities were due to a decrease in inventories of $278,352, an increase in deferred revenues of $39,170, a decrease in prepaid expenses and other current assets of $37,645 and an increase in long term deposits of $15,627 offset by an decrease in accounts payable and accrued expenses of $683,058 and an increase in accounts receivable of $24,047. For the year ended December 31, 2021, net cash flows used in operating activities were $1,914,093.
Cash Flows from Financing Activities
We have financed our operations primarily from either the issuance of our shares of common stock or notes payable. For the year ended December 31, 2022, we generated $338,734 cash from financing activities which consists of $611,266 from the issuance of convertible promissory notes, $214,249 proceeds from factoring arrangement and $100,002 proceeds from issuance of stocks for cash, partially offset by payments on notes payable of $586,783. For the year ended December 31, 2021, net cash flows provided by financing activities were $2,628,739.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of equity securities and debt instruments.
Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next three months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; (iii) marketing expenses and (iv) updating our IT efforts, with focus on the website technology platform. We intend to finance these expenses with further issuances of securities and director loans. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements in place for any future equity financing.
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Off-Balance Sheet Arrangements
As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Stockholders’ Deficit
Authorized Shares
The Company is authorized to issue up to 200,000,000 shares of Common Stock, par value $0.001 per share and no shares of preferred stock. Each outstanding share of Common Stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of Common Stock are non-assessable and non-cumulative, with no pre-emptive rights.
Commitments and Contingencies
None.
Financing
On September 3, 2021, the Company executed a Convertible Promissory Note, Securities Purchase Agreement and ancillary agreements with Leonite. Per the terms of the Agreements with Leonite, the Company was tendered $410,000, which is open with right of redemption for one year. Prior to the maturity date of the note, the Company at its option, has the right to redeem in cash in part or in whole, the amounts outstanding. Should Leonite wish to convert this debt into equity, the conversion price shall be sixty-five percent of the lowest intraday price during the previous 21 days. Pursuant to the Agreements, the Company has earmarked the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures. Leonite. has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our common stock during any time.
On September 3, 2021, the Company finalized a Promissory Convertible Note, Securities Purchase Agreement and ancillary agreements with MCUS. Per the terms of the Agreements with MCUS., the Company was tendered $500,000, which the Company utilizes for normative working capital purposes and capital expenditures. The note is open with right of redemption for nine months. MCUS has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our common stock during any time during the term of the Agreements. Pursuant to the Agreements, the Company is required to register all shares which Leonite may acquire. The foregoing is a summary description of certain terms of the Agreements. For a full description of all terms, please refer to the original Agreements which were filed as an 8K with the SEC on September 10, 2021.
On September 17, 2021, the Company finalized a $1,400,000 investment into our Company with Sharing Services Global Corporation, a publicly traded company (“SHRG”) via a Convertible Promissory Note, a Share Purchase Agreement and Warrant Agreement. Per the terms of the Agreements, the Company was tendered the full $1,400,0000, which is open with right of redemption at 10% interest per annum until September 9, 2024.
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BUSINESS
Overview
The Company was incorporated in the State of Nevada, USA on September 4, 2009 under the name Globe Net Wireless Corp., with ticker symbol “GNTW”. While we have changed our corporate name to Stemtech Corporation in the state of Nevada, the Company was approved by FINRA in 2022 to change the symbol to STEK, listed on the OTCQB Market. Stemtech is a global network marketing company that develops science-based products that it believes supports wellness by helping the body maintain healthy stem cell physiology, also known as stem cell enhancers. Known as the Stem Cell Nutrition Company®, the Company is a pioneer in stem cell science, and believes it can demonstrate that adult stem cells function as the natural renewal system of the body. The Company believes our products enhance and support the work of the body’s stem cells by releasing more stem cells, helping to circulate them in the blood and migrate them into tissues, where they can perform their daily function of renewal for optimal health. Our Mission is to enhance wellness and prosperity around the world. These products are marketed internationally by the Companies subsidiaries and through independent distributors. The Company markets its products under the following brands: RCM System, stemrelease3™, Stemflo® MigraStem™, OraStem® (Oral Health Care), and D-Fuze™ (Electromagnetic Frequency blocker). Stemtech also introduced a new skincare product in December 2022: Cellect One™ Rapid Renew Stem Cell Peptide Night Cream, which contains an FDA approved and patented ingredient, Red Oak Bark.
On August 19, 2021, Stemtech Corporation (“Stemtech”), a (Delaware corporation), entered into a Merger Agreement (the “Merger Agreement”) with Globe Net Wireless Corp. (“Globe Net” or “GNTW”) (the “Merger”). The Merger is accounted for as a reverse acquisition and recapitalization in accordance with the Accounting Standards Codification topic 805, Business Combinations (“ASC 805”). Management evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the Merger and concluded, based on a consideration of the pertinent facts and circumstances, that Stemtech acquired Globe Net for financial accounting purposes. On November 9, 2021, the Company changed its fiscal year end date from August to December.
Business Strategy
Stemtech offers and sells our products through Independent Business Partners (“IBPs”), similar to Herbalife or Amway distribution systems. Currently Stemtech has offices in the United States, Canada, Mexico, Ecuador, and Taiwan. IBPs sell Stemtech products and provide details and information to customers about our all-natural health products. The majority of our products are shipped directly to the consumer direct from the company where no individual IBP has to carry or store inventory. All of the fulfillment is done by the Company, saving time and providing more efficiency for our distributors and the Company.
Product Development, Production and Distribution
In every country we sell our products, we register our products adhering to local laws and registration requirements prior to sales in the particular country. Our IBPs are commission based with a down line plan that offers IBPs income possibilities based upon how many customers they introduce to our products. Our IBPs generate income on up to 6 downlines of distribution. The Company pays the IBPs direct weekly and monthly commissions, as well as bonuses. The system is maintained for efficiency through Exigo, LLC, a company that specializes in payment processing with a focus on our specific industry. The Company currently has six (6) patents on the formulations for our products. These products are manufactured to Stemtech`s specifications in various CGMP manufacturing facilities that meet federal requirements. To date, there has never been a recall associated with our Stemtech products.
In the first quarter of 2023, Stemtech acquired Life Factor Research (“LFR”). LFR developed the IP and produced our most recent new product “Cellect One”. With Stemtech`s acquisition of LFR, Stemtech plans to develop and offer new health related products for our direct sales division for distributors as well as to be able to develop non Stemtech products for other companies as clients seeking innovative products.
As a wholly owned subsidiary of Stemtech, LFR is responsible for the development of new products has access to research and development scientists who are developing products within the stem cell niche. In addition, LFR is working on updating current product formulations with current science and more state-of-the-art ingredients to enable Stemtech with the goal to provide more disruptive, leading-edge health products. Stemtech formulates products to be compliant with the health regulation agencies for each country in which we do business.
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Most of the nutritional supplements are contract manufactured at our business manufacturing partner located in Miami, FL. Our partner carries United Stated Food and Drug Administration (“FDA”) licenses and manufactures in accordance with Current Good Manufacturing Practices (cGMP) standards. Raw materials are received into quarantine, lab tested to match Stemtech’s specification and put into storage until required for production. Tests are again taken after the manufacturing process and issued with a Certificate of Analysis. For some countries, we ship in a bulk blend (meaning a complete product but not yet encapsulated or bottled) where the receiving subsidiary’s contract manufacturing partners, which are also cGMP certified, complete the process.
The finished goods products are then sent to the distribution facilities and stored until orders are placed by our IBPs or customers. No orders are shipped until payment is received. Stemtech has no accounts receivable from our customers. Stemtech products are primarily sold through our network marketing model, but not exclusively. In some cases, we have entered into licensing agreements with a business wanting to distribute our products. In such situations, the licensee is prohibited from selling the products, customized for that country and compliant with local regulations and is not sold through the network marketing or commissionable model.
Competitors
Stemtech is a pioneer in stem cell nutrition, with the original products developed in 2005. Our products are all natural, plant based and have been sold since their original introduction with over $500 million in total sales. According to recent articles published by “Research and Marketing”, the stem cell market is growing at a CAGR rate of over 17% annually. Currently, the entire stem cell market is approximately $4.5 billion and is anticipated to grow to $30 billion by 2030, with new products involving stem cell nutrition are starting to enter the market by other providers. We believe the emergence of competitors and new products being developed validate our products and method of distribution
Competitive Advantage
Stemtech products have been sold for over 18 years and we believe has created a strong name for our products within our consumer base even though our products are not currently a household name or widely distributed. This believe is based on the numerous remarkable story’s consumers have provided based on their personal experience with our products. Although our products are not yet widely distributed or known by many consumers. We also believe our experienced leadership and network of research and development partners provides us with a competitive advantage in our space.
Recent Developments
2023 Purchase Agreement
On March 27, 2023, the Company and one Selling Stockholder (the “Holder”) executed an investment agreement for up to $7,000,000 pursuant to a Securities Purchase Agreement (the “2023 Purchase Agreement”), a Senior Secured Convertible Promissory Note (the “2023 Note”), Series 1 Warrants (the “Series 1 Warrants”), Series 2 Warrants (the “Series 2 Warrants” and together with the Series 1 Warrants, the “2023 Warrants”) and Registration Rights Agreement (the “Registration Rights Agreement”).
The 2023 Note has a principal amount of up to $7,000,000 with an original issue discount of 12% and is to be disbursed in four (4) disbursements as set forth on Schedule A of the 2023 Note and as follows: (i) the first disbursement in the amount of $1,000,000 occurred on March 27, 2023; (ii) the second disbursement in the amount of $200,000 is due within three (3) days after the filing of this registration statement; (iii) the third disbursement in the amount of $500,000 is due forty-five (45) days after effectiveness of this registration statement; and (iv) $120,000 is due forty-five (45) days after the third disbursement. The 2023 Note carries an interest rate equal to seven percent (7%) per annum and is redeemable by the Company at any time at an amount equal to one hundred twenty-five percent (125%) of the then outstanding principal and interest accrued on the Note. All additional disbursements will be made at the Holder’s discretion, at any time, and if the Holder’s broker refuses to custody the securities issued in connection therewith, the Holder will have no obligation to make a disbursement under the disbursement schedule, but will have the option to make such disbursement.
The Series 1 Warrant is exercisable immediately for a number of shares equal to fifty percent (50%) of the shares issuable upon conversion of the Note, for a term of 60 months, at an initial exercise price of $0.10 per share, subject to customary adjustments. The Series 2 Warrants is exercisable immediately for a number of shares equal to fifty percent (50%) of the shares issuable upon conversion of the Note, for a term of 60 months, at an initial exercise price of $0.15 per share.
The Holder agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time while the 2023 Note remains outstanding or while the Selling Stockholder holds any 2023 Warrants.
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Employees
As of May 1, 2023, we had 31 full-time employees, 2 part-time employees and 8 independent contractors. None of our employees are subject to a collective bargaining agreement, and we believe our relationship with our employees to be good.
We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified personnel. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Facilities
Our corporate headquarters is located at 10370 USA Today Way, Miramar, Florida 33025. The current lease term is effective October 1, 2021 through September 30, 2024, with current monthly rent of $8,925, and an increase in rent of 3.85% for every year thereafter. The Company also has facilities in Mexico, Taiwan and Canada.
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
In December 2018, PSIQ Inc. filed a lawsuit against the Company alleging non-payment of a combined loan in the amount of $150,000. The Company vigorously objected to the legality of the interest charged, and filed a dispositive Motion for Dismissal, which was granted on March 15, 2023. The case against Stemtech was dismissed on March 16, 2023.
On August 6, 2019, Ray Carter, the former CEO prior to the Company’s bankruptcy, filed a lawsuit against the Company’s subsidiary, Stemtech HealthSciences, alleging unpaid salary and vacation time dating to a period predating the Company’s current management team taking control in 2018. Mr. Carter’s claim is in the amount of $267,000. The Company has counter-sued Ray Carter personally and deems this matter non-meritorious. At the same time, the Company has accrued $267,000 which is included in accounts payable and accrued expenses in the accompanying consolidated financial statements as of December 31, 2022 and 2021. Mr. Carter’s request for Summary Judgment was dismissed by the Court on March 3, 2023.
On March 4, 2020, Canon Financial Services, Inc., filed a lawsuit against the Company in a dispute over office machine leases. The Company settled this matter with Canon Financial Services out of Court for $32,000 in May 2021 and has made the final payment of $1,333 on April 24, 2023.
In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Company’s consolidated financial position or consolidated results of operations.
Corporate Information
The Company’s address is 10370 USA Today Way, Miramar, Florida 33025. The Company’s telephone number is (954) 715-6000. Our website is https://stemtech.com. The information on, or that can be accessed through, this website is not part of this prospectus, and you should not rely on any such information in making the decision whether to purchase the securities.
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MANAGEMENT
The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers as of the date of this prospectus:
| Name | Age | Positions | |||
| John W. Meyer | 69 | Director, President & Chief Operating Officer | |||
| Charles S. Arnold | 72 | Director, Chief Executive Officer | |||
| John Thatch | 59 | Director | |||
| Benjamin Kaplan | 56 | Director | |||
| Darryl V. Green | 58 | Director | |||
| James S. Cardwell | 63 | Chief Financial Officer | |||
| Tufan Obuz | 53 | Chief Administrative Officer | |||
John W. Meyer – Director, President and Chief Operating Officer
With over 40 years’ business experience in logistics and management of projects, supply chain and staff, Mr. Meyer oversees operations for Stemtech’s global company. In fifteen years with Stemtech, he has supported openings of 51 national markets, serving as VP of Global Operations prior to his position as COO in 2016 and as President and COO since October 2021. Mr. Meyer is responsible for global management of the Company. He also is the executive sponsor and leader of the Life Sciences Advisory Board, the Field Advisory Board and the Business Advisory Board. Mr. Meyer graduated from the University of San Francisco with B.A. and M.A. degrees. He previously worked at Shaklee, Arbonne, and third-party logistics provider Menlo Worldwide – now a part of XPO Logistics.
Charles S. Arnold – Director, Chief Executive Officer
Mr. Arnold’s ability to integrate marketing concepts and financial strategies play a pivotal role in the development of his clients’ businesses. In addition to developing start-up companies, he is responsible for placing more than $1 Billion into public and private companies with as much as $400 Million in a single transaction. Significant mergers and acquisitions have been accomplished through his network of financial specialists and professionals throughout the world. In 1993, Mr. Arnold was one of the original investors in pre-paid legal “PPD” (now Legal Shield). In 2001 he was engaged by National Health “LEXXUS”, and the company grew from under $1.00 to over $40 and traded on the American stock exchange. Mr. Arnold feels that the direct sales marketing industry is an underserved market that deserves investors’ attention. Mr. Arnold believes that Stemtech has exceptional growth potential and sees this company’s bright future distributing and developing innovative stem cell nutrition products and providing the business opportunity where anyone can start and operate their own business.
Tufan Obuz – Chief Administrative Officer
Tufan is a graduate of Manchester University with a BA degree in accounting. Tufan is a CPA and an experienced CFO. He started his career in public accounting as an auditor with a focus in real estate, construction, and manufacturing industries. After 10 years of auditing in various industries, he moved to corporate finance. In addition to accounting and financial management, Tufan also managed large equity and debt financing transactions with multiple financial institutions and investors. Tufan has led teams raising capital for various large construction projects in Europe, and worked with financial institutions from Singapore, Dubai, and Kuwait. Tufan is in charge operational efficiency, performance management, management reporting, budgeting, and the administrative functions at Stemtech.
John Thatch – Director
John “JT” Thatch, serves as Chief Executive Officer and Vice Chairman of Sharing Services Global Corporation a publicly traded company with over $100M in annual revenues. Mr. Thatch is an accomplished executive who has successfully started and operated businesses in various industries that include service companies, retail, wholesale, on-line learning, finance, real estate management and technology. From 2009 to 2016, Mr. Thatch served as Chief Executive Officer of Universal Education Group, in 2016 Mr. Thatch created Superior Wine and Spirits, LLC, a Florida-based wholesale distributor of wine and spirits. Prior to 2005, Mr. Thatch served as CEO of Orbital Energy Group, Inc. (“OEG”), a NASDAQ-listed company formerly known as OnScreen Technologies, Inc. Mr. Thatch currently serves on the board of directors of several other companies and is the lead independent director of Document Security Systems, Inc. (“DSS”), a NYSE listed company and is a current member of NACD.
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Benjamin Kaplan – Director
Benjamin Kaplan has been a successful entrepreneur and investor for over 20 years, with a particular focus on health, wellness and pharmaceutical companies. He currently serves as the CEO of Ehave, Inc., a leader in digital therapeutics delivering evidence-based therapeutic interventions to patients.
Darryl V. Green – Director
Darryl V. Green is Founder and President of DVG Ventures & DVG Nutrition since 2014. He specializes in health and nutrition businesses and is a franchise strategist. For over 30 years, from 1983 – 2014, Mr. Green was with GNC Nutrition which included 20 years of corporate and franchise executive positions and over 10 years of various field positions encompassing all facets of retail operations across the United States.
James S. Cardwell – Chief Financial Officer
James Cardwell, our Chief Financial Officer, has over 16 years of experience as a Chief Financial Officer and Chief Operating Officer, with a concentration in both SEC financial reporting and tax compliance. Since July 2015, he has served as the Chief Operating Officer of the CFO Squad LLC, an accounting firm specializing in financial reporting for public companies. In connection with his role at the CFO Squad, he also served as interim Chief Financial Officer at several entities, including NanoVibronix, Inc. (NASDAQ: NAOV), a medical device company, from June 2019 to October 2020; Esports Entertainment Group (NASDAQ: GMBL), an esports and online gambling company, from February 2020 to June 2020; Stemtech Corporation (OTC:GNTW) , a nutrition supplement company, since May 2020; Ehave, Inc. (EHVVF), a health data platform company since October 2020; Artemis Acquisition Corporation, a SPAC in the Healthcare Industry June 2021 to December 2021; NewGioco Group Inc., a gaming technology company, from August 2018 to December 2018; and VerifyMe Inc., a company that provides comprehensive brand protection and customer engagement solutions, from January 2018 to May 2018. Mr. Cardwell served as the Chief Financial Officer of S2BN Entertainment Corporation, a New York-based entertainment producer and promoter, from 2011 to 2015. He served as the Chief Financial Officer and Chief Operating Officer of Sibling Entertainment, Inc. (OTCQB: SIBE), an innovative education company, from 2002 to 2010. Mr. Cardwell started his public accounting career at Arthur Andersen & Co. (St. Louis) and worked as a Tax Accountant from 1981 to 1985, with clients including General Dynamics, Anheuser-Bush, May Department Stores and others. Mr. Cardwell has extensive experience in corporate structure, financial reporting and modelling, mergers and acquisition, quality of earnings and business analysis, SEC reporting, tax and compliance. He currently serves as the Trustee of John Street United Methodist Church and John Street Trust Fund Society. He is also the Treasurer and Director of Southold Historical Museum..
Director Terms; Qualifications
Members of our board of directors serve until the next annual meeting of stockholders, or until their successors have been duly elected.
When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the board of directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the board of directors focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director.
Director or Officer Involvement in Certain Legal Proceedings
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.
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Nomination Procedure for Directors
Stemtech does not have a standing nominating committee; recommendations for candidates to stand for election as directors are made by the board of directors. Stemtech has not adopted a policy that permits shareholders to recommend candidates for election as directors or a process for shareholders to send communications to the board of directors.
Board Committees
The Company does not currently have an established committees of its board of directors.
Audit Committee
Stemtech does not have a separately designated standing audit committee. Rather, Stemtech’s entire board of directors perform the required functions of an audit committee. Currently, John W. Meyer our President and COO and Charles S. Arnold, our CEO are the only members of Stemtech’s audit committee, but they do not meet Stemtech’s independent requirements for an audit committee member. See “Item 13. (c) Director independence” below for more information on independence.
Compensation Committee
The Company does not currently maintain a separately designated compensation committee.
Nominating and Corporate Governance Committee
The Company does not currently maintain a separately designated nominating and corporate governance committee.
Director independence
Stemtech’s board of directors currently consists of John W. Meyer our President and COO, Charles S. Arnold, our CEO, John Thatch, Benjamin Kaplan and Darryl V. Green. Pursuant to Item 407(a)(1)(ii) of Regulation S-K of the Securities Act, Stemtech’s board of directors has adopted the definition of “independent director” as set forth in Rule 4200(a)(15) of the NASDAQ Manual. In summary, an “independent director” means a person other than an executive officer or employee of Stemtech or any other individual having a relationship which, in the opinion of Stemtech’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director, and includes any director who accepted any compensation from Stemtech in excess of $200,000 during any period of 12 consecutive months with the three past fiscal years. Also, the ownership of Stemtech’s stock will not preclude a director from being independent.
In applying this definition, Stemtech’s board of directors has determined that neither Messrs. Meyer nor Arnold qualifies as an “independent director” pursuant to the same rule.
As of the date of the report, Stemtech did not maintain a separately designated compensation or nominating committee.
Stemtech has also adopted this definition for the independence of the members of its audit committee. John W. Meyer our President and COO and Charles S. Arnold, our CEO are the sole members of Stemtech’s audit committee as a result of being the sole director. Stemtech’s board of directors has determined that neither Messrs. Meyer nor Arnold qualifies “independent” for purposes of Rule 4200(a)(15) of the NASDAQ Manual, applicable to audit, compensation and nominating committee members, and is “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act.
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Code of Business Conduct and Ethics
The company has adopted a financial code of ethics that applies to all its executive officers and employees, including its CEO and CFO. Stemtech undertakes to provide any person with a copy of its financial code of ethics free of charge. Please contact Stemtech at (954) 715-6000 to request a copy of Stemtech’s financial code of ethics. Management believes Stemtech’s financial code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Delinquent Section 16(A) Reports
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and are required to furnish copies to the Company. Based solely on the review of the Changes of Beneficial Ownership disclosures on Forms 3, 4 and 5 filed with the Securities and Exchange Commission, the following persons filed the following number of transactions on Section 16 beneficial ownership disclosure filings late for transactions: Charles S. Arnold, John Thatch and Darryl V Green.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our officers for the years ended December 31, 2022 and 2021. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid to named executive officers.
| Stock | All Other | |||||||||||||||||||||||
| Name and Principal Position | Year | Salary | Bonus | Awards | Compensation | Total | ||||||||||||||||||
| Charles S. Arnold, Director, CEO | 2021 | $ | – | $ | – | 268,904 | $ | – | $ | 268,904 | ||||||||||||||
| 2022 | $ | – | $ | – | 268,904 | $ | – | $ | 268,904 | |||||||||||||||
| John W. Meyer, President & COO | 2021 | $ | 120,000 | $ | – | 109,526 | $ | – | $ | 229,526 | ||||||||||||||
| 2022 | $ | 120,000 | $ | – | 109,526 | $ | – | $ | 229,526 | |||||||||||||||
| James S. Cardwell, CFO | 2021 | $ | 7,500 | $ | – | – | $ | – | $ | 7,500 | ||||||||||||||
| 2022 | $ | 7,500 | $ | – | – | $ | – | $ | 7,500 | |||||||||||||||
There are no stock option plans, retirement, pension, or profit-sharing plans for the benefit of Stemtech’s officers and directors, other than their shares for being board members.
Employment Agreements
On August 19, 2021, the Company and Charles S. Arnold entered into an employment agreement (the “Arnold Employment Agreement”). Pursuant to the Arnold Employment Agreement, Mr. Arnold receives [describe compensation a set forth in employment agreement].
On August 19, 2021, the Company and John W. Meyer entered into an employment agreement (the “Meyer Employment Agreement” and, together with the Arnold Employment Agreement, the “Executive Employment Agreements”). Pursuant to the Meyer Employment Agreement, Mr. Meyer receives [describe compensation as set forth in employment agreement].
The Executive Employment Agreements contain customary terms, conditions and rights.
Outstanding Equity Awards at Fiscal Year-End 2022
At December 31, 2022, we had no outstanding equity awards.
Director Compensation
The following table presents the total compensation for each person who served as a non-employee member of our board of directors and received compensation for such service during the fiscal year ended December 31, 2022. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2022.
| Director | Equity Awards | Fees Earned or Paid in Cash | Total | |||||||||
| John Thatch | $ | 30,000 | $ | – | $ | 30,000 | ||||||
| Benjamin Kaplan | $ | 30,000 | $ | – | $ | 30,000 | ||||||
| Darryl V. Green | $ | 30,000 | $ | – | $ | 30,000 | ||||||
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pre-Merger Stock Compensation
During the year ended December 31, 2020 and for the period January 1, 2021 through August 19, 2021, Charles Arnold, an officer and director converted $250,000 and $187,500, respectively into 500,000 and 375,000, respectively, shares of common stock of Stemtech Corporation, a Delaware Corporation prior to the closing of the Merger with Stemtech Corporation (formerly Globe Net Wireless Corp), a Nevada Corporation (the “Company”) which was exchanged into 1,280,417 shares of common stock of the Company upon closing of the Merger.
During the year ended December 31, 2020 and for the period January 1, 2021 through August 19, 2021, Joshua Rosenbaum as a beneficial owner through Mindshare Holdings, Inc. and related party, converted $165,000 and $195,000, respectively into 330,000 and 390,000, respectively, shares of common stock shares of Stemtech Corporation, a Delaware Corporation prior to the closing of the Merger with the Company which was exchanged into 1,280,417 shares of common stock of the Company upon closing of the Merger.
During the year ended December 31, 2021, John W. Meyer, an officer and director received 45,000 shares of common stock of Stemtech Corporation, a Delaware Corporation with a fair value of $22,500 of prior to the closing of the Merger with the Company which was exchanged into 153,650 shares of common stock of the Company upon closing of the Merger.
Conversion of Shares upon Closing of Merger
The following officers, directors and/or related parties held common stock in Stemtech Corporation, a Delaware Corporation prior the Merger (“Pre-Merger Shares”) and upon the Merger on August 19, 2021 received common stock in the Company (“Shares Issued upon Merger”).
| Related Parties | Beneficial Owner | Pre-Merger Shares | Shares Issued upon Merger | |||||||
| Crest Ventures LLC | Charles Arnold* | 516,948 | 1,765,090 | |||||||
| Charles S. Arnold* | 1,639,508 | 5,598,008 | ||||||||
| Long Side Ventures LLC | Benjamin Kaplan* | 644,001 | 2,198,905 | |||||||
| Benjamin Kaplan* | 243,672 | 832,004 | ||||||||
| R&T Sports Marketing Inc | Daniel Kaplan** | 675,070 | 2,304,988 | |||||||
| Daniel Kaplan*** | (former director) ** | 243,672 | 832,004 | |||||||
| Empereur Limited Partnership | Javad Abbasi** | 650,026 | 2,219,477 | |||||||
| Veken, LLC | Javad Abbasi** | 1,265,000 | 4,319,271 | |||||||
| Taconic Group LLC | Robert Grinberg*** | 680,769 | 2,324,447 | |||||||
| Robert Grinberg*** | (former director) ** | 243,672 | 832,004 | |||||||
| Mindshare Holdings, Inc. | Joshua Rosenbaum*** | 720,000 | 2,458,399 | |||||||
| John W. Meyer* | 90,000 | 307,300 | ||||||||
| Total | 7,612,338 | 25,991,897 | ||||||||
* Officer and Director of the Company
** Former Director of the Stemtech Corporation, a Delaware Corporation
*** Related party, or beneficial owner of over 5% of the common stock of the Company
Post-Merger Promissory Notes
On September 10, 2021, John Thatch, a director of the Company and beneficial owner through an affiliated company Sharing Services Global Corp. of which Mr. Thatch is the CEO entered into a Convertible Promissory Notes in the amount of $1,400,000 and received no payments through the period ended August 19, 2021, and also received 154,173 shares of common stock of the Company reported as debt issuance costs.
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Post-Merger Stock Compensation
On September 1, 2021, Charles Arnold, an officer and director received 1,000,000 shares of restricted stock of the Company’s common stock as additional compensation vesting 62,500 shares quarterly beginning October 1, 2024 with a fair value of $3,000,000 at the time of issuance.
On December 3, 2021, John W. Meyer, an officer and director received 37,002 shares of restricted stock of the Company’s common stock as additional compensation vesting on December 3, 2022 with a fair value of 109,489 at the time of issuance.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of May 9, 2023 with respect to the beneficial ownership of the outstanding Common Stock by (i) any holder of more than five (5%) percent, (ii) each of the Company’s executive officers and directors, and (iii) the Company’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. The address for each person is 10370 USA Today Way, Miramar, Florida 33025.
| Name of Beneficial Owner and address (1) | Amount and Nature of Beneficial Ownership | Percent of Ownership | ||||||
| Named Executives and Directors | ||||||||
| Charles S. Arnold (2) | 8,906,683 | 14.6% | ||||||
| John W. Meyer | 644,302 | * | ||||||
| James S. Cardwell | – | – | ||||||
| John Thatch (3) | 1,854,173 | 3% | ||||||
| Darryl V. Green | 3,941,937 | 6.5% | ||||||
| Benjamin Kaplan (4) | 3,678,680 | 6.1% | ||||||
| All directors and Named Executive Officers as a group (6 persons) | 19,025,776 | 30.5% | ||||||
| Over 5% Shareholders | ||||||||
| Daniel Kaplan (5) | 3,880,578 | 6.4% | ||||||
| Javad Abbasi (6) | 6,538,748 | 10.7% | ||||||
| Joshua Rosenbaum (7) | 5,872,842 | 9.1% | ||||||
| Robert Grinberg (8) | 3,400,037 | 5.6% | ||||||
| Leonite Capital, LLC (9) | 5,872,842 | 9.5% | ||||||
| MCUS LLC (10) | 3,156,451 | 7.9% | ||||||
| Over 5% Shareholders | 18,705,034 | 29.6% | ||||||
* Less than 1%.
(1) Addresses for all officers and directors are 10370 USA Today Way, Miramar, FL 33025.
(2) Includes 1,765,090 indirect shares owned through a related party held by Crest Ventures LLC.
(3) Includes shares underlying vested warrants of 1,400,00 issued by the Company and 154,173 indirect shares owned through a related party held by Sharing Services Global Corp.
(4) Includes shares 2,198,905 indirect shares owned through a related party held by Long Side Ventures LLC.
(5) Includes shares 2,304,998 indirect shares owned through a related party held by R&T Sports Marketing, Inc.
(6) Includes shares 2,219,477 indirect shares owned through a related party held by Empereur Limited Partnership and 4,319,271 shares held by Veken, LLC.
(7) Includes shares underlying vested warrants of 3,414,443 issued by the Company and 2,458,399 indirect shares owned through a related party held by Mindshare Holdings, Inc.
(8) Includes shares 2,324,447 indirect shares owned through a related party held by Taconic Group LLC.
(9) Includes shares underlying vested warrants of 81,760 issued by the Company.
(10) Includes shares underlying vested warrants of 93,115 issued by the Company.
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SELLING STOCKHOLDERS FOR WHOSE ACCOUNTS WE ARE REGISTERING SHARES
The Selling Stockholders identified in this prospectus may offer and sell up to an aggregate amount of 189,121,101 Shares, comprised of:
| (i) | up to 76,446,281 Shares issuable upon conversion of that certain Senior Secured Promissory Note dated March 27, 2023 (the “2023 Note”) issued by the Company to one (1) Selling Stockholder pursuant to the Securities Purchase Agreement between the Company and such Selling Stockholder dated March 27, 2023 (the “2023 Purchase Agreement”); | |
| (ii) | up to 38,223,141 Shares issuable upon exercise of those certain Series 1 Warrants issued pursuant to the 2023 Purchase Agreement, exercisable immediately, for a term of 60 months, at an initial exercise price of $0.10 per share, subject to customary adjustment provisions (the “Series 1 Warrants”); and | |
| (iii) | up to 38,223,140 Shares issuable upon exercise of those certain Series 2 Warrants issued pursuant to the 2023 Purchase Agreement, exercisable immediately, for a term of 60 months, at an initial exercise price of $0.15 per share, subject to customary adjustment provisions (the “Series 2 Warrants” and together with the Series 1 Warrants, the “2023 Warrants”); | |
| (iv) | up to 10,715,781 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 30, 2021 (the “MCUS Note”) issued by the Company to MCUS, LLC (“MCUS”) pursuant to the Securities Purchase Agreement between the Company and MCUS dated August 30, 2021 (the “MCUS SPA”); | |
| (v) | up to 93,115 Shares issuable upon exercise of that certain Common Share Purchase Warrant (the “MCUS Warrant”) issued to MCUS pursuant to the MCUS SPA, exercisable until August 30, 2024 at an exercise price of $3.00 per share; | |
| (vi) | up to 13,217,318 Shares issuable upon conversion of that certain Promissory Convertible Note dated August 31, 202 (the “August Leonite Note) issued by the Company to Leonite Fund I, LP (“Leonite”); | |
| (vii) | up to 10,500,000 Shares issued to Leonite (the “Leonite Settlement Shares”) issued to Leonite pursuant to that certain Global Settlement & Exchange of Senior Secured Convertible Promissory Note dated February 28, 2023 between the Company and Leonite (the “Leonite Exchange Agreement”); | |
| (viii) | up to 110,000 Shares (the “Leonite Warrant Exchange Shares”) issued in exchange for warrants held by Leonite pursuant to the Leonite Exchange Agreement; | |
| (ix) | up to 38,152 Shares issued to Leonite (the “Outstanding Equity Interest Shares”) pursuant to the Leonite Exchange Agreement; | |
| (x) | up to 1,400,000 Shares issuable upon exercise of that certain Common Stock Warrant (the “Sharing Services Warrant” and together with the Series 1 Warrants, the Series 2 Warrants, the MCUS Warrant, collectively, the “Warrants”) issued to Sharing Services pursuant to the Sharing Services SPA, exercisable at any time until September 13, 2024 at an exercise price of $0.05 per share; and | |
| (xi) | up to 154,173 Shares issued to Sharing Services as an origination fee (the “Origination Fee Shares”) pursuant to the Sharing Services SPA. |
The shares of our Common Stock being offered by the Selling Stockholders include Shares issuable upon (i) conversion of the Notes, (ii) exercise of the Warrants, (iii) issuance of the Leonite Settlement Shares, (iv) issuance of the Leonite Warrant Exchange Shares, (v) issuance of the Outstanding Equity Interest Shares, and (vi) issuance of the Origination Fee Shares. For additional information regarding the issuance the 2023 Notes and 2023 Warrants, see above description of the 2023 Purchase Agreement. For additional information about the issuance of the Leonite Settlement Shares, Leonite Warrant Exchange Shares and Outstanding Equity Interest Shares, see above description of the Leonite Exchange Agreement. For additional information regarding the issuance of the MCUS Note, the August Leonite Note, the Sharing Services Note, the Sharing Services Warrant and the Origination Fee, see below description of the 2021 Selling Stockholder Agreements.
We are registering the shares of our Common Stock in order to permit the Selling Stockholders to offer the Shares for resale from time to time. Except as otherwise described in the footnotes to the table below and for the ownership of the registered Shares, neither the Selling Stockholders nor any of the persons that control them has had any material relationships with us or our affiliates within the past three (3) years.
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The table below lists the Selling Stockholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (and the rules and regulations thereunder) of the shares of our Common Stock by the Selling Stockholder.
The second column lists the number of shares of our Common Stock beneficially owned by the Selling Stockholders before this Offering (including shares which the Selling Stockholders has the right to acquire within 60 days, including upon conversion of any convertible securities)
The third column lists the shares of our Common Stock being offered by this prospectus by the Selling Stockholders.
The fourth and fifth columns list the number of shares of Common Stock beneficially owned by the Selling Stockholders and their percentage ownership after the Offering (including shares which the Selling Stockholders has the right to acquire within 60 days, including upon conversion of any convertible securities), assuming the sale of all of the shares offered by the Selling Stockholder pursuant to this prospectus.
Under the terms of the Notes and the Warrants, the Selling Stockholders may not convert any such securities to the extent such conversion or exercise would cause such Selling Stockholder, together with any other person with which the Selling Stockholder is considered to be part of a group under Section 13 of the Exchange Act or with which the Selling Stockholder otherwise files reports under Section 13 and/or 16 of the Exchange Act, to beneficially own a number of shares of Common Stock which exceeds 4.99% or 9.99%, as applicable, of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable upon such Note and Warrant, as applicable.
The amounts and information set forth below are based upon information provided to us by the Selling Stockholders as of May 9, 2023, except as otherwise noted below. Each Selling Stockholder may sell all or some of the shares of Common Stock it is offering, and may sell, unless indicated otherwise in the footnotes below, shares of our Common Stock otherwise than pursuant to this prospectus. The table below assumes each Selling Stockholder sells all of the Shares offered by it in offerings pursuant to this prospectus, and does not acquire any additional shares. We are unable to determine the exact number of shares that will actually be sold or when or if these sales will occur.
| Selling Stockholder | Number of Shares Owned Before Offering (1) | Shares Offered Hereby | Number of Shares Owned After Offering | Percentage of Shares Beneficially Owned After Offering (1) | ||||||||||||
| Leviston Resources, LLC(2) | – | 152,892,562 | 152,892,562 | 62.07% | ||||||||||||
| MCUS, LLC(3) | 4,705,659 | 3,602,646 | 7,768,305 | 3.15% | ||||||||||||
| Leonite Fund I, LP (4) | 8,406,841 | 10,648,125 | 19,384,636 | 7.87% | ||||||||||||
| Sharing Services Note (5) | 154,173 | 1,400,000 | 1,554,173 | 0.63% | ||||||||||||
| (1) | Percentages are calculated based on an aggregate of 64,739,899 shares of Common Stock outstanding as of May 1, 2023. As applicable, such percentages have been further adjusted to account for outstanding convertible securities of the Selling Stockholders. |
| (2) | Represents 76,446,281 shares of Common Stock issuable upon the conversion of the 2023 Note, 38,223,141 shares of Common Stock issuable upon exercise of the Series 1 Warrants, and 38,223,140 shares of Common Stock issuable upon exercise of the Series 2 Warrants. The controlling party for Leviston Resources LLC is Roman Rogel, 78 SW 7th St, Miami, Fla 33130. |
| (3) | Represents • shares of Common Stock issuable upon the conversion of the August and September MCUS Notes and exercise of 110,000 warrants. The controlling party for MCUS LLC is Vlad Lipken, 5869 Avenida Isla Verde, #1502, Carolina, Puerto Rico 00979. |
| (4) | Represents 10,648,125 shares of Common Stock issuable upon the conversion of the August and September Leonite Notes and exercise of 110,000 warrants. The controlling party for Leonite I LP is Avi Geller, 1 Hillcrest Center Dr #232, Spring Valley, NY 10977 |
| (5) | Represents the 1,400,000 shares of Common Stock issuable upon exercise of the Sharing Services Warrant, and 154,173 Origination Fee Shares. The controlling party for Sharing Services is J.T. Thatch, 1700 Cold Rd, #100, Plano, Texas 75075. |
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2021 Selling Stockholder Agreements
Leonite and MCUS Agreements
On September 3rd, 2021, the Company finalized two separate Convertible Promissory Notes, Securities Purchase Agreements, and ancillary agreements (collectively, the “Agreements”) with the Leonite Fund I, LP (“Leonite”) and MCUS LLC (“MCUS”).
Per the terms of the Agreements with Leonite, the Company was tendered $410,000, open with right of redemption for nine months. Pursuant to the Agreements, the Company used the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures. There are no other restrictions on future financing transactions contemplated in the Agreements. The Agreement does not contain any right of first refusal or penalties. Leonite agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time during the term of the Agreements. Pursuant to the Agreements, the Company is required to register all shares which the Leonite Fund I LP may acquire.
Also on September 3rd, 2021, the Company finalized a Promissory Convertible Note, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”) with MCUS. Per the terms of the Agreements with MCUS LLC., the Company was tendered $500,000, which the Company used the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures. The Note had a right of redemption for nine months. MCUS has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time during the term of the Agreements. Pursuant to the Agreements, the Company is required to register all shares which the Leonite Fund I LP may acquire.
Sharing Services Agreement
On September 17th, 2021, the Company finalized a $1,400,000 investment into our Company with Sharing Services Global Corporation, a publicly traded company (“SHRG”) via a Convertible Promissory Note, a Share Purchase Agreement and Warrant Agreement (collectively, the “Agreements”).
Per the terms of the Agreements, the Company was tendered the full $1,400,0000, which is open with right of redemption at 10% interest per annum until September 9th, 2024. Should the holder prefer to have its debt converted, the conversion rate shall be based on the 30-day VWAP from 8/20/21 to 9/20/21, which is $3.2431.
Additionally, per the Agreements, Sharing Services Global Corporation (i) was tendered 1,400,000 Warrants with a three year life span and can convert at the market price of the previous 10 day VWAP of the date of Conversion and (ii) issued 154,173 shares of our Common Stock as an origination fee pursuant to the Share Purchase Agreement.
Pursuant to the Agreements, we used the net proceeds for immediate cash infusion for normative working capital purposes and capital expenditures. There are no other restrictions on future financing transactions. The Agreement does not contain any right of first refusal or penalties. Sharing Services Global Corporation has agreed that neither it nor any of its affiliates shall engage in any short-selling or hedging of our Common Stock during any time during the term of the Agreements. Pursuant to the Agreements, the Company is required to register all shares which Sharing Services Global Corporation may acquire.
| 38 |
DESCRIPTION OF SECURITIES
The following description of the Company’s capital stock and provisions of its Articles of Incorporation and Amended and Restated Bylaws are summaries and are qualified by reference to the Company’s Articles of Incorporation and Amended and Restated Bylaws.
Description of Stock
The Company is authorized to issue 200,000,000 shares of capital stock, par value $0.001 per share, of which 200,000,000 are shares of common stock and no shares are preferred stock. As of May 9, 2023, there were 61,136,808 shares of common stock and no shares of preferred stock issued and outstanding.
The holders of the Common Stock are entitled to one vote per share. In addition, the holders of the Common Stock will be entitled to receive dividends ratably, if any, declared by the Company’s board of directors out of legally available funds; however, the current policy of the board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of the Common Stock are entitled to share ratably in all assets that are legally available for distribution. The holders of the Common Stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of the Common Stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of the board of directors and issued in the future.
The Common Stock is quoted on the OTCQB under the trading symbol “STEK.”
The Company’s transfer agent is Empire Stock Transfer, Henderson, NV 89014.
Applicable Anti-Takeover Law
Set forth below is a summary of provisions in our Articles of Incorporation and the Bylaws that could have the effect of delaying or preventing a change in control of the Company. The following description is only a summary and it is qualified by refence our Articles of Incorporation, Bylaws and relevant provisions of the Nevada Revised Statutes.
No Cumulative Voting
Our Articles of Incorporation and the Bylaws do not provide holders of our common stock cumulative voting rights in the election of directors. The absence of cumulative voting could have the effect of preventing stockholders holding a minority of our shares of common stock from obtaining representation on our board of directors. The absence of cumulative voting might also, under certain circumstances, render more difficult or discourage a merger, tender offer or proxy contest favored by a majority of our stockholders, the assumption of control by a holder of a large block of our stock or the removal of incumbent management.
| 39 |
PLAN OF DISTRIBUTION
Each Selling Stockholder and any of its pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on the OTCQB or any other stock exchange, market or trading facility on which the shares of Common Stock are traded or in private transactions. These sales may be at fixed or negotiated prices. The Company will not receive proceeds from any such sales. The Selling Stockholders may use any one or more of the following methods when selling shares :
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part; |
| ● | broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | a combination of any such methods of sale; or |
| ● | any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell securities under Rule 144 under the Securities Act, as amended, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the Common Stock or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended. The Selling Stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the common stock .
| 40 |
We are required to pay certain fees and expenses incurred by us incident to the registration of the Shares. We have agreed to indemnify the Selling Stockholder against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933, as amended.
Because a Selling Stockholder may be deemed to be an “underwriter” within the meaning of the Securities Act of 1933, as amended, it will be subject to the prospectus delivery requirements of the Securities Act of 1933, as amended, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the Shares may be resold by the Selling Stockholders without registration and without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144 or (ii) all of the Shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale Shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the resale Shares may not simultaneously engage in market making activities with respect to the Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the Selling Stockholder or any other person. We will make copies of this prospectus available to the Selling Stockholder and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act of 1933, as amended).
| 41 |
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by Lucosky Brookman LLP.
EXPERTS
The consolidated financial statements as of the fiscal year ended December 31, 2022 and 2021 have been audited by Turner, Stone & Company, L.L.P., an independent registered public accounting firm, as stated in their reports. Such consolidated financial statements have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Available Information
We file reports, proxy statements and other information with the SEC. Information filed with the SEC by us can be inspected and copied at the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of this information by mail from the Public Reference Room of the SEC at prescribed rates. Further information on the operation of the SEC’s Public Reference Room in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site that contains reports, proxy and information statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov.
Our website address is https://stemtech.com. The information on our website, however, is not, and should not be deemed to be, a part of this prospectus.
This prospectus and any prospectus supplement are part of a registration statement that we filed with the SEC and do not contain all of the information in the registration statement. The full registration statement may be obtained from the SEC or us, as provided below. Forms of the documents establishing the terms of the offered securities are or may be filed as exhibits to the registration statement. Statements in this prospectus or any prospectus supplement about these documents are summaries and each statement is qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for a more complete description of the relevant matters. You may inspect a copy of the registration statement at the SEC’s Public Reference Room in Washington, D.C. or through the SEC’s website, as provided above.
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PART I – FINANCIAL INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Stemtech Corporation
Consolidated Financial Statements
December 31, 2022
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Stemtech Corporation and Subsidiaries
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Stemtech Corporation and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 of the notes to consolidated financial statements, the Company has suffered recurring losses from operations since inception and has a significant working capital deficit and a significant accumulated deficit. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the board of directors and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| F-1 |
Critical Audit Matter Description:
As discussed in Note 7 of the notes to consolidated financial statements, the Company had various debt instruments which included conversion features requiring bifurcation and separate accounting. Management evaluated the required accounting, significant estimates, and judgments around the valuation for these embedded derivatives. These embedded derivatives were initially measured at fair value and have subsequently been remeasured to fair value at each reporting period and at settlement.
There is no current observable market for these types of features and, as such, the Company determined the fair value of the embedded derivatives using a Monte Carlo model to measure the fair value of the bifurcated derivative. As a result, a high degree of auditor judgment and effort was required in performing audit procedures to evaluate the conclusions of management, as well as the inputs to the Company’s Monte Carlo mode.
How the Critical Audit Matter was Addressed in the Audit:
Our principal audit procedures performed to address the critical audit matter included the following:
| · | We obtained an understanding of the controls and processes surrounding the evaluation, initial measurement, and revaluation of the bifurcated derivatives. | |
| · | We verified the note amount, interest rate, and maturity date to the supporting documentation and debt agreement, and examined terms and conditions of the note and confirmed the ending balance to the note holder. | |
| · | We evaluated management’s assessment and the conclusions reached to ensure these instruments were recorded in accordance with the relevant accounting guidance. | |
| · | We evaluated the fair value of the bifurcated derivatives that included testing the valuation models and assumptions utilized by management. We reviewed and tested the fair value model used, significant assumptions, and underlying data used in the model. | |
| · | We considered the adequacy of the disclosures in the consolidated financial statements in relation to convertible debt. |
/s/ Turner, Stone & Company, LLP
We have served as the Company’s auditor since 2020.
Dallas, Texas
April 17, 2023
| F-2 |
Stemtech Corporation
Consolidated Balance Sheets
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 132,487 | $ | 828,206 | ||||
| Accounts receivable, net | 34,767 | 10,720 | ||||||
| Inventory, net | 158,053 | 436,405 | ||||||
| Prepaid expenses and other current assets | 287,063 | 324,708 | ||||||
| TOTAL CURRENT ASSETS | 612,370 | 1,600,039 | ||||||
| Property and equipment, net | 27,296 | 33,168 | ||||||
| Intangible assets, net | 2,994,000 | 3,406,714 | ||||||
| Long term deposits | 23,065 | 38,692 | ||||||
| Operating lease right-of-use assets, net | 142,801 | 174,100 | ||||||
| Goodwill | 467,409 | 467,409 | ||||||
| TOTAL ASSETS | $ | 4,266,941 | $ | 5,720,122 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 3,396,543 | $ | 4,050,798 | ||||
| Operating lease liabilities, current | 119,065 | 55,745 | ||||||
| Notes payable | 446,246 | 453,123 | ||||||
| Convertible debentures, net of discount | 482,885 | 602,787 | ||||||
| Deferred revenues | 39,170 | – | ||||||
| Factoring liability | 214,249 | – | ||||||
| Derivative liabilities | 2,717,633 | 4,224,585 | ||||||
| TOTAL CURRENT LIABILITIES | 7,415,791 | 9,387,038 | ||||||
| Notes payable, long term | – | 219,465 | ||||||
| Operating lease liabilities, long term | 23,068 | 119,065 | ||||||
| TOTAL LIABILITIES | 7,438,859 | 9,725,568 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 12) | – | – | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common stock - $ par value; shares authorized; and shares issued and outstanding as of December 31, 2022 and 2021, respectively | 53,442 | 44,685 | ||||||
| Additional paid in capital | 19,391,400 | 10,116,296 | ||||||
| Accumulated other comprehensive loss | (247,760 | ) | (430,255 | ) | ||||
| Accumulated deficit | (21,631,241 | ) | (13,086,318 | ) | ||||
| Stemtech Corporation stockholders’ deficit | (2,434,159 | ) | (3,355,592 | ) | ||||
| Non-controlling interest in subsidiaries | (737,759 | ) | (649,854 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (3,171,918 | ) | (4,005,446 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 4,266,941 | $ | 5,720,122 | ||||
See accompanying Notes to Consolidated Financial Statements
| F-3 |
Stemtech Corporation
Consolidated Statements of Operations and Comprehensive Loss
| For The Years Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| NET SALES | $ | 4,559,399 | $ | 4,321,245 | ||||
| COST OF GOODS SOLD: | ||||||||
| Cost of goods sold | 1,100,903 | 1,011,270 | ||||||
| Freight-in | 63,115 | 11,890 | ||||||
| TOTAL COST OF GOODS SOLD | 1,164,018 | 1,023,160 | ||||||
| GROSS PROFIT | 3,395,381 | 3,298,085 | ||||||
| OPERATING EXPENSES: | ||||||||
| Commissions | 1,047,400 | 1,014,721 | ||||||
| Selling and marketing | 533,397 | 739,855 | ||||||
| General and administrative | 6,837,964 | 4,753,780 | ||||||
| TOTAL OPERATING EXPENSES | 8,418,761 | 6,508,356 | ||||||
| OPERATING LOSS | (5,023,380 | ) | (3,210,271 | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Change in fair value of derivative liability | (3,223,271 | ) | 4,553,372 | |||||
| Interest expense | (4,097,843 | ) | (8,330,201 | ) | ||||
| Other income and expenses, net | 7,928 | (124,009 | ) | |||||
| Gain on extinguishment of debt | 3,799,356 | – | ||||||
| TOTAL OTHER EXPENSE, NET | (3,513,830 | ) | (3,900,838 | ) | ||||
| LOSS BEFORE INCOME TAXES | (8,537,210 | ) | (7,111,109 | ) | ||||
| PROVISION FOR INCOME TAXES | (95,618 | ) | – | |||||
| NET LOSS | (8,632,828 | ) | (7,111,109 | ) | ||||
| NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (87,905 | ) | (33,646 | ) | ||||
| NET LOSS AVAILABLE TO COMMON STOCKHOLDERS | $ | (8,544,923 | ) | $ | (7,077,463 | ) | ||
| Net loss per common share | ||||||||
| Basic | $ | (0.19 | ) | $ | (0.20 | ) | ||
| Diluted | $ | (0.19 | ) | $ | (0.20 | ) | ||
| Shares used to compute loss per share | ||||||||
| Basic | $ | 46,014,138 | $ | 35,311,381 | ||||
| Diluted | $ | 46,014,138 | $ | 35,311,381 | ||||
| Comprehensive loss | ||||||||
| Net loss available to common stockholders | $ | (8,544,923 | ) | $ | (7,077,463 | ) | ||
| Change in foreign currency translation adjustments | 182,495 | (19,505 | ) | |||||
| Comprehensive loss available to common stockholders | $ | (8,362,428 | ) | $ | (7,096,968 | ) | ||
See accompanying Notes to Consolidated Financial Statements
| F-4 |
Stemtech Corporation
Consolidated Statements of Changes in Stockholders’ Deficit
| Common Stock | Additional | Accumulated Other Compre- hensive | Non- | Total | ||||||||||||||||||||||||||||
| No. of Shares | Amount | Paid-in Capital | Accumulated Deficit | Income (Loss) | Sub total | controlling Interest | Stockholders’ Deficit | |||||||||||||||||||||||||
| Balance at December 31, 2020 | 34,246,498 | $ | 34,246 | $ | 8,269,563 | $ | (6,008,855 | ) | $ | (410,750 | ) | $ | 1,884,204 | $ | (616,208 | ) | $ | 1,267,996 | ||||||||||||||
| Effect of reverse merger transaction with Stemtech Corporation | 540,000 | 539 | (539 | ) | – | – | – | – | – | |||||||||||||||||||||||
| Stock based compensation | 2,030,744 | 2,031 | 787,143 | – | – | 789,173 | – | 789,173 | ||||||||||||||||||||||||
| Stock issued for services | 1,652,591 | 1,653 | 240,347 | – | – | 242,000 | – | 242,000 | ||||||||||||||||||||||||
| Stock issued as debt discount | 154,173 | 154 | 462,365 | – | – | 462,519 | – | 462,519 | ||||||||||||||||||||||||
| Stock issued upon acquisition of Globe Net | 6,061,667 | 6,062 | 357,417 | – | – | 363,479 | – | 363,479 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | (19,505 | ) | (19,505 | ) | – | (19,505 | ) | |||||||||||||||||||||
| Non-controlling interest | – | – | – | – | – | – | (33,646 | ) | (33,646 | ) | ||||||||||||||||||||||
| Net loss | – | – | – | (7,077,463 | ) | – | (7,077,463 | ) | – | (7,077,463 | ) | |||||||||||||||||||||
| Balance at December 30, 2021 | 44,685,673 | $ | 44,685 | $ | 10,116,296 | $ | (13,086,318 | ) | $ | (430,255 | ) | $ | (3,355,592 | ) | $ | (649,854 | ) | $ | (4,005,446 | ) | ||||||||||||
| Balance at December 30, 2021 | 44,685,673 | $ | 44,685 | $ | 10,116,296 | $ | (13,086,318 | ) | $ | (430,255 | ) | $ | (3,355,592 | ) | $ | (649,854 | ) | $ | (4,005,446 | ) | ||||||||||||
| Stock based compensation | – | – | 439,053 | – | – | 439,053 | – | 439,053 | ||||||||||||||||||||||||
| Stock issued for services | 3,584,344 | 3,586 | 3,553,546 | – | – | 3,557,132 | – | 3,557,132 | ||||||||||||||||||||||||
| Stock issued for cash | 37,314 | 37 | 99,965 | – | – | 100,002 | – | 100,002 | ||||||||||||||||||||||||
| Conversion of convertible notes and accrued interest to common stock | 4,114,816 | 4,114 | 823,886 | – | – | 828,000 | – | 828,000 | ||||||||||||||||||||||||
| Stock issued for loan extension | 945,512 | 946 | 4,158,728 | – | – | 4,159,674 | – | 4,159,674 | ||||||||||||||||||||||||
| Shares issued as debt issuance cost | 74,488 | 74 | 199,926 | – | – | 200,000 | – | 200,000 | ||||||||||||||||||||||||
| Foreign currency translation adjustment | – | – | – | – | 182,495 | 182,495 | – | 182,495 | ||||||||||||||||||||||||
| Non-controlling interest | – | – | – | – | – | – | (87,905 | ) | (87,905 | ) | ||||||||||||||||||||||
| Net loss | – | – | – | (8,544,923 | ) | – | (8,544,923 | ) | – | (8,544,923 | ) | |||||||||||||||||||||
| Balance at December 31, 2022 | 53,442,147 | $ | 53,442 | $ | 19,391,400 | $ | (21,631,241 | ) | $ | (247,760 | ) | $ | (2,434,159 | ) | $ | (737,759 | ) | $ | (3,171,918 | ) | ||||||||||||
See accompanying Notes to Consolidated Financial Statements
| F-5 |
Stemtech Corporation
Consolidated Statements of Cash Flows
| For the Years Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (8,632,828 | ) | $ | (7,111,109 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 447,386 | 428,586 | ||||||
| Operating leases | (1,378 | ) | (102,325 | ) | ||||
| Stock compensation expense | 3,996,187 | 1,031,173 | ||||||
| Amortization of debt discount | 2,428,539 | 602,787 | ||||||
| Amortization Due to Conversion/Redemptions | 1,457,542 | – | ||||||
| Change in fair value of derivative liabilities | 3,223,271 | (4,553,372 | ) | |||||
| Gain on extinguishment of debt | (3,799,356 | ) | – | |||||
| Non-cash interest expense from issuance on debt (derivative) | – | 6,816,739 | ||||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||
| Accounts receivable | (24,047 | ) | 15,102 | |||||
| Inventory | 278,352 | (237,778 | ) | |||||
| Prepaid expenses and other current assets | 37,645 | (109,122 | ) | |||||
| Other assets | – | 8,053 | ||||||
| Accounts payable and accrued expenses | (683,058 | ) | 1,217,832 | |||||
| Long term deposits | 15,627 | (19,818 | ) | |||||
| Deferred revenues | 39,170 | – | ||||||
| Net cash used in operating activities | (1,216,948 | ) | (1,914,093 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from notes payable | 611,266 | 3,321,969 | ||||||
| Repayment of note payable | (586,783 | ) | (658,230 | ) | ||||
| Net proceeds from factoring arrangement | 214,249 | – | ||||||
| Stock issued for cash | 100,002 | – | ||||||
| Proceeds from note payable - related parties | – | (35,000 | ) | |||||
| Net cash provided by financing activities | 338,734 | 2,628,739 | ||||||
| Effects of currency translation on cash | 182,495 | (19,505 | ) | |||||
| Net increase (decrease) in cash | (695,719 | ) | 695,141 | |||||
| Cash, beginning of year | 828,206 | 133,065 | ||||||
| Cash, end of year | $ | 132,487 | $ | 828,206 | ||||
| Supplemental disclosure cash flow information: | ||||||||
| Cash paid for interest | $ | 36,205 | $ | 11,389 | ||||
| Cash paid for income taxes | $ | – | $ | – | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Operating leases | $ | – | $ | 187,734 | ||||
| Issuance of common stock for conversion of debt | $ | 828,000 | $ | – | ||||
| Shares issued as debt discount | $ | 200,000 | $ | 462,519 | ||||
See accompanying Notes to Consolidated Financial Statements
| F-6 |
STEMTECH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022
Note 1 – Organization and Basis of Presentation
Stemtech Corporation and its Subsidiaries (collectively, the “Company”) was incorporated in the State of Nevada, USA on September 4, 2009 under the previous name Globe Net Wireless Corp. On November 19, 2021, the Company adopted an Amendment to its Articles changing the name of the Corporation to Stemtech Corporation in the state of Nevada, and on April 14, 2022, FINRA gave final approval for said name change, as evidenced by the 8-K filed that date. Stemtech is a global network marketing company that develops science-based products that it believes supports wellness by helping the body maintain healthy stem cell physiology, also known as stem cell enhancers. Known as the Stem Cell Nutrition Company®, the Company is a pioneer in stem cell science, and believes it can demonstrate that adult stem cells function as the natural renewal system of the body. The Company believes our products enhance and support the work of the body’s stem cells by releasing more stem cells, helping to circulate them in the blood and migrate them into tissues, where they can perform their daily function of renewal for optimal health. Our mission is to enhance wellness and prosperity around the world. These products are marketed internationally by the Company’s subsidiaries and through independent distributors. The Company markets its products under the following brands: RCM System, stemrelease3™, Stemflo® MigraStem™, OraStem® (Oral Health Care), and D-Fuze™ (Electromagnetic Frequency Blocker). Cellect One™ Rapid Renew Stem Cell Peptide Night Cream.
On August 19, 2021, Stemtech Corporation (“Stemtech”), a Delaware corporation, entered into a Merger Agreement (the “Merger Agreement”) with Globe Net Wireless Corp. (“Globe Net” or “GNTW”). The merger was accounted for as a reverse acquisition and recapitalization in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. Management evaluated the guidance contained in ASC 805 with respect to the identification of the acquirer in the merger and concluded, based on a consideration of the pertinent facts and circumstances, that Stemtech acquired Globe Net for financial accounting purposes. On November 9, 2021, the Company changed its fiscal year end from a fiscal year end of August 31 to a calendar year end of December 31.
The consolidated financial statements include the accounts of Stemtech (Parent) and its nine (9) subsidiaries:
1) Stemtech HealthSciences Corp (U.S.A.) (“Stemtech HealthSciences”)
2) Stemtech Canada, Inc. (“Canada”)
3) Stemtech Health Sciences S. de R.L. de C.V. (“Mexico”)
4) Stemtech Services SARL de C.V. (Mexico) (“Stemtech Mexico”)
5) Stemtech Malaysia Holdings Sdn. Bhd. (“Malaysia Holdings”)
6) Stemtech Malaysia Sdn. Bhd. (“Malaysia”)
7) Stemtech Taiwan Holding, Inc. (“Taiwan”)
8) Tecrecel S.A. (“Ecuador”)
9) Food & Health Tech Foodhealth SA (“Ecuador FHTFH”)
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and considering the requirements of the United States Securities and Exchange Commission (“SEC”). All intercompany accounts and transactions have been eliminated in consolidation.
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Going Concern
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and classification of liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.
The Company has experienced recurring net losses and negative cash flows from operations since inception and has an accumulated deficit of approximately $21.6 million and a working capital deficiency of approximately $6.8 million at December 31, 2022. The Company has funded its activities to date almost exclusively from debt and equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company will continue to require substantial funds to implement its new investment acquisition plans. Management’s plans in order to meet its operating cash flow requirements include financing activities such as private placements of its common stock, preferred stock offerings, and issuances of debt and convertible debt instruments.
The Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements depends on its ability to execute its business plan, increase revenue, and reduce expenditures. Such conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company considers all highly liquid temporary investments purchased with original maturities of three months or less at the date of purchase to be cash equivalents. The Company has no cash equivalents as of December 31, 2022 and 2021. The Company maintains certain cash balances at several institutions located outside the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.
Inventory
Inventory is comprised of finished goods and raw materials and is valued at the lower of cost or market, using the “first-in, first-out” method in determining cost. Management evaluates the allowance for inventory obsolescence on a regular basis and has determined that no allowance for slow moving or obsolete inventory is necessary as at December 31, 2022 and 2021.
Impairment of Long-Lived Assets
The Company assesses, on an annual basis, the recoverability of the carrying amount of intangible assets and long-lived assets used in continuing operations. A loss is recognized when expected future cash flows (undiscounted and without interest) are less than the carrying amount of the asset. The impairment loss is determined as the difference by which the carrying amount of the asset exceeds its fair value. The Company evaluated its long-lived assets for any indications of impairment. The Company concluded that there was no impairment, however there can be no assurance that market conditions will not change or demand for the Company’s products will continue which could result in impairment of long-lived assets in the future.
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Revenue Recognition
It is the Company’s policy that revenues from product sales is recognized in accordance with ASC 606 “Revenues from Contracts with Customers.” Five basic steps must be followed before revenue can be recognized; (1) Identifying the contract(s) with a customer that creates enforceable rights and obligations; (2) Identifying the performance obligations in the contract, such as promising to transfer goods or services to a customer; (3) Determining the transaction price, meaning the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer; (4) Allocating the transaction price to the performance obligations in the contract, which requires the Company to allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or services promised in the contract; and (5) Recognizing revenue when (or as) the entity satisfies a performance obligation by transferring a promised good or service to a customer. The amount of revenue recognized is the amount allocated to the satisfied performance obligation.
Revenues from direct retail sales to consumers and revenues from independent distributors occur when title and risk of loss had passed, which generally occurs at the time the products are shipped. Revenues are recorded net of estimated sales returns and allowances.
Allowances for product returns are provided at the time the sale is recorded. This liability is based upon historic return rates and the relevant return pattern, which reflects anticipated returns to be received over a period of up to one year following the original sale. As of both December 31, 2022 and 2021, the Company had a reserve for sales returns of approximately $7,000, which is included in accrued liabilities in the accompanying consolidated balance sheets.
Comprehensive Loss
Other comprehensive loss in the accompanying consolidated financial statements relates to unrealized foreign currency translation adjustments.
Foreign Currency Translation
A portion of the Company’s business operations occur outside the United States. The local currency of each of the Company’s subsidiaries is generally its functional currency. All assets and liabilities are translated into U.S. Dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at weighted-average exchange rates and stockholders’ equity is recorded at historical exchange rates. The resulting foreign currency translation adjustments are recorded as a separate component of stockholders’ equity in the consolidated balance sheets and as a component of comprehensive loss. Transaction gains and losses are included in other expense, net in the consolidated statements of operations and comprehensive loss.
Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each reporting period. For the years ended December 31, 2022 and 2021, the dilutive effect of and , respectively, of common stock warrants have not been included in the average shares outstanding for the calculation of net loss per share as the effect would be anti-dilutive as a result of our net losses in these periods.
Fair Value Measurements
As defined in ASC 820 “Fair Value Measurements,” fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.
The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued interest, notes payable and, convertible debentures. The carrying amounts of these financial instruments are of approximate fair value due to either length of maturity or interest rates that approximate prevailing rates unless otherwise disclosed in these financial statements. The Company’s derivative liabilities are valued using option pricing models with Level 3 inputs.
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Note 3 – Inventory
Inventory consists of the following components:
| Schedule of inventory | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Finished goods | $ | 103,297 | $ | 249,659 | ||||
| Raw materials | 54,756 | 186,746 | ||||||
| Total Inventory | $ | 158,053 | $ | 436,405 | ||||
Note 4 – Intangible Assets
On May 7, 2018, Stemtech Corporation purchased the assets of Stemtech International, Inc. (the “Former Parent Company”), out of a Chapter 7 Bankruptcy for $400,000 and assumed a $4,000,000 note from RBCD Holdings Inc (formerly RBCD Holdings LLC) (“RBCD Holdings”), a related party owned by the Company’s Directors, purchased an outstanding note at its face value of $4,000,000 from the Opus Bank (the “Opus Note”) and subsequently converted in 2019 into shares of the Company’s common stock of which 250,000 shares of the Company’s stock was allocated to Charles Arnold, an officer and director.
Pursuant to a bankruptcy decree, the Company paid $400,000 in cash and assumed a note payable in the amount of $4,000,000 representing 100% percent of the issued and outstanding capital stock of Stemtech Canada, Inc. (Canada), Stemtech Health Sciences S. de R.L. de C.V. (Mexico), Stemtech Services SARL de C.V. (Mexico) (“Stemtech Mexico”), Ste, Stemtech New Zealand, Ltd. (“Stemtech New Zealand”), Stemtech Taiwan Holding, Inc. (U.S.A.), PT Stemtech Indonesia (Indonesia Pty Ltd.), Stemtech Korea (Korea) and Tecrecel S.A. (Ecuador); and Stemtech Malaysia Holdings S/B (Malaysian Parent) that owns two-thirds of its subsidiary Stemtech Malaysia Holding Sdn. Bhd. (Malaysia).
Fair Value of the Acquired Assets
The Company accounted for the acquisitions as business combinations using the acquisition method of accounting as prescribed in ASC Topic 805 Business Combinations (“ASC 805”) and ASC Topic 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company assigned fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed.
The excess purchase price has been recorded as goodwill in the amount of $467,409 at December 31, 2022 and 2021. The estimated useful life of the identifiable intangible assets is six to fourteen years. The goodwill is amortizable for tax purposes.
The components of the acquired intangible assets were as follows:
| Schedule of Acquired Intangible Assets | ||||||||
| Fair | Average | |||||||
| Value | Estimated Life | |||||||
| Patent products | $ | 2,344,900 | 14 | |||||
| Trade names & trademarks | 1,106,000 | Indefinite | ||||||
| Customer/distribution list | 1,461,300 | 6 | ||||||
| Accumulated amortization | (1,918,200 | ) | ||||||
| Total | $ | 2,994,000 | ||||||
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Note 5 – Operating Lease Commitments
On August 16, 2021, the Company extended its office space lease with Sunbeam Properties Inc. to rent approximately 5,000 square feet of space in Miramar, Florida. The Company pays $8,900.65 per month in rent until the end of the extended lease September 30, 2024. The Company incurred lease expense for its operating leases of $85,629 and $105,673 for the years ended December 31, 2022 and 2021, respectively. The Company classified this lease as an operating lease and accordingly, recognized a lease liability and right of use asset of $187,734 at inception.
In June 2022, the Company entered into a lease for office space in Mexico which terminates on May 31, 2024.
The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases as of December 31, 2022:
| Schedule of Operating Lease Liabilities | ||||
| Maturity of operating lease liabilities for the following fiscal years: | ||||
| 2023 | $ | 90,450 | ||
| 2024 | 63,851 | |||
| Total undiscounted operating lease payments | 154,301 | |||
| Less: imputed interest | 12,168 | |||
| Present value of operating lease liabilities | $ | 142,133 | ||
The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate, which is determined using the average of borrowing rates explicitly stated in the Company’s convertible debt.
The Company’s weighted-average remaining lease term relating to its operating leases is 1.75 years, with a weighted-average discount rate of 10%.
The Company incurred lease expense for its operating leases of $85,629 and $105,673 for the years ended December 31, 2022 and 2021, respectively.
Note 6 – Notes Payable
Schedule of notes payable as of:
| Schedule of Notes Payable | ||||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Secured Royalty Participation Agreements (1) | $ | 150,000 | $ | 150,000 | ||||
| Vehicle and equipment loans (2) | 11,246 | 18,123 | ||||||
| Notes payable (3) (6) | 285,000 | 285,000 | ||||||
| Convertible notes payable, net of discount (4) | 482,885 | 602,787 | ||||||
| SBA loans (5) | – | 219,465 | ||||||
| Total notes payable, net of discount | $ | 929,131 | $ | 1,275,375 | ||||
| (1) | During June 2018, the Company entered into two (2) Secured Royalty Participation Agreements with Profile Solutions, Inc. (“PSI”) in exchange for working capital loans totaling $150,000. The loan amounts were due in June of 2019, plus an IRR of 18%. In consideration of these loan obligations, The Company agreed to pay a monthly royalty for one year being the greater of: x) 10% of the loan amount or y) 1.5% of the monthly gross revenues. PSI claims that these loans are in default, but the Company contends the loans reflected the terms of these agreements were usurious and contends that the loans are not legally enforceable obligations. This case was dismissed by the Court. See Legal Part I, 3.1. |
| (2) | In 2019, Malaysia borrowed $27,295 to purchase a car. The note accrues interest at 4.42% and matures in 5 years with a balance due of $11,246 and $18,123 as of December 31, 2022 and 2021, respectively. |
| (3) | In 2019, the Company entered into various promissory notes with lenders in the aggregate principal balance of $375,000. The effective interest rates of the notes are 10% and mature within one year. In addition, the Company issued shares of common stock in the aggregate for the commitment of resulting in a charge of $22,500 to debt discount. In 2020, the Company entered into various promissory notes with lenders in the aggregate principal balance of $225,000 with effective interest rates between 8% and 10% per annum. Each of these notes was extended until May 31, 2023. The outstanding balance of these notes and the notes issued in 2019 was $275,000 at both December 31, 2022 and 2021 plus $50,819 in accrued interest. |
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| (4) | During the year ended December 31, 2021, the Company issued an aggregate of $2,423,738 of convertible promissory notes to investors. The notes had maturity dates between nine months and three years and have interest rates between 8% and 12% per annum. The notes were later extended and not in default. The Company also issued shares of common stock and granted warrants to purchase shares of common stock with exercise prices ranging between $2.685 and $3.00 per share. The value of the common stock and warrants were recorded as a discount of the note at fair value.
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During the second quarter of 2022, one of the nine-month notes was extended for an additional 60 days, until August 1, 2022. As consideration for the 60-day extension, the Company agreed to pay shares of common stock to the note holder, reduce the conversion price of the note, and reprice the associated warrants from $3.00 per share to $1.00 per share. The new conversion price shall be equal to the lower of (i) 50% of the lowest volume weighted average prices for common stock as reported at the close of trading on the market reporting trade prices for the common stock during the 30 trading days ending on, and including, the date of the notice of conversion and (ii) Closing Price on the Closing Date, not to exceed $2.25. On July 13, 2022, one of the notes was extended to September 1, 2022 in exchange for warrants to purchase common stock at $3.00 per share, shares of common stock and the principal amount of the note was increased by $70,833. On September 8, 2022, the note was further extended to May 26, 2023 and the interest rate increased from 10% to 18% per annum. The Company recognized $252,429 loss on extinguishment from the amendment of the note. On August 18, 2022, another note was further extended to September 30, 2022, in exchange for shares of common stock. During the fourth quarter, the note was extended until May 31, 2023.
During the third and fourth quarters of 2022, the Company issued an aggregate of $400,000 of convertible notes payable net of discount, in various tranches. The notes accrue interest ranging between 10% and prime plus 8% per annum and mature nine months from the date of each issuance. In addition, the lenders received warrants with an exercise price of the lowest of $2.685 or 65% of lowest traded price in preceding 30 days and warrants with an exercise price of lowest of $2.685 or 50% of VWAP for the preceding 30 days, with all warrants having an expiry of 5 years from the date of issuance.
During the year ended December 31, 2022, $798,526 of principal and $25,473 of accrued interest was converted into common shares leaving a balance, net of discount, of $482,885 and accrued interest of $381,259. as of December 31, 2022. The balance of the for convertible notes payable, net of discount, as of December 31, 2022 and 2021 was $482,885 and $602,787, respectively. |
| (5) | During the year ended December 31, 2021, the Company was granted loans (the “PPP Loans”) from the Small Business Administration in the aggregate amount of $250,535, pursuant to the and Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid, Relief, and Economic Securities (“CARES”) Act, which was enacted March 27, 2020. The PPP Loans, which was in the form of a note that was granted in May 2020 and April 2021, matures in two years and accrues interest at a rate of 1.00% per annum, payable in monthly payments commencing six months after loan disbursement. The note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the PPP, certain amounts of the PPP Loans may be forgiven if they are used for qualifying expenses as described in the CARES Act. On May 11, 2022, the SBA granted forgiveness of one of the outstanding PPP loans for $124,300. On July 15, 2022, the SBA forgave the other PPP loan for $124,372. As of December 31, 2022 and 2021, the balance of the PPP Loans was $0 and $219,465, respectively. |
| (6) | On October 20, 2021, The Company issued two promissory notes to investors for a total of $10,000. One of these notes was paid in full on January 18, 2023. The other has been extended until May 20, 2023. |
Note 7 – Derivative Liabilities
The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock, which gives rise to a derivative liability which is a non-cash liability. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Pursuant to ASC Sub Topic 815-15 Embedded Derivatives (“ASC 815-15”), the fair values of the variable conversion options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.
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Schedule of Derivative Liabilities
| Schedule of Derivative Liabilities | ||||||||||||
| Derivative Liability - Convertible Notes | Derivative Liability - Warrants | Total | ||||||||||
| Balance as of December 31, 2020 | $ | – | $ | – | $ | – | ||||||
| Change due to issuances | 4,114,227 | 4,663,730 | 8,777,957 | |||||||||
| Change in fair value | (2,861,830 | ) | (1,691,542 | ) | (4,553,372 | ) | ||||||
| Balance as of December 31, 2021 | 1,252,397 | 2,972,188 | 4,224,585 | |||||||||
| Change due to issuances | 3,401,528 | 1,964,761 | 5,366,289 | |||||||||
| Change due to redemptions | (2,850,311 | ) | (7,246,201 | ) | (10,096,512 | ) | ||||||
| Change in fair value | 840,180 | 2,383,091 | 3,223,271 | |||||||||
| Balance as of December 31, 2022 | $ | 2,643,794 | $ | 73,839 | $ | 2,717,633 | ||||||
The Company used a Monte Carlo model to estimate the fair value of its derivatives. A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the fair value of derivative liabilities during the years ended December 31, 2022 and 2021 is as follows:
| Schedule of assumptions | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Stock price | ||||||||
| Contractual term (in years) | 0.00 - 5.00 | 0.58 - 3.00 | ||||||
| Volatility (annual) | 47.4% - 236% | 48.8% - 61.3% | ||||||
| Risk-free rate | 0.19% - 4.38% | 0.19% - 0.47% | ||||||
Note 8 – Financing Arrangement
During the year ended December 31, 2022, the Company entered into five non-recourse agreements for the sale of future receipts receiving gross proceeds of $528,984 which provides the Company with the ability to convert our account receivables into cash. Under the terms of the agreements, the Company must pay a specified amount each day until the financed receivables are fully paid. The agreements have an effective interest rate within the range of approximately 36% and 40%, which includes a discount of $143,446. The outstanding balance is secured by an interest in virtually all assets of the Company, with a first security interest in accounts receivable.
The Company accounts for these agreements as a financing arrangement, with the purchase price recorded as a liability and daily repayments made are a reduction of the liability. As of December 31, 2022, there was an outstanding balance of $292,636 which is presented net of a discount of $78,387. There was no outstanding balance as of December 31, 2021.
Note 9 – Stockholders’ (Deficit) Equity
Stock issued upon acquisition of Globe Net
Pursuant to the Merger Agreement between Stemtech and Globe Net, the Company agreed to issue common stock to settle all outstanding notes payable of Globe Net. In October 2021 and November 2021, the Company issued an aggregate of 6,061,667 shares of common stock which settled $363,479 of notes payable.
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Shares issued as debt issuance costs
During the year ended December 31, 2021, the Company issued shares of common stock to a lender to cover the financing costs. The shares were valued on the day of issuance at $ per share for a total value of $462,519. This amount was treated as financing costs and recorded as a discount to notes payable.
During the year ended December 31, 2022, the Company issued shares of common stock to a lender to cover the financing costs. The shares were valued on the day of issuance at $ per share for a total value of $200,000. This amount was treated as financing costs and recorded as a discount to notes payable.
Stock issuance for services and stock based compensation
During the years ended December 31, 2022 and 2021, the Company issued and shares of common stock respectively, to officers, employees and vendors for services valued at $3,216,111 and 242,000, respectively. The Company also recognized $ of expense relating to the vesting of common stock issued to Chairman and CEO during the year ended December 31, 2022.
Stock issued for loan extension
On June 8, 2022, the Company issued shares of common stock valued at $300,000 to one of its note holders per the loan extension agreement (see Note 3). The Company recognized $878,806 loss on extinguishment of the note.
On July 13, 2022, the Company entered into an amendment of its original promissory convertible note of September 1, 2021 with the note holder. The terms of the original note was amended to increase the principal balance of the note by $70,833; as well as granting warrants and common shares as consideration for a 90-day extension of the note. The common shares were issued to the lender as well as the original common shares that were to be issued upon entering into the original loan agreement dated September 1, 2021. The Company recognized $955,658 loss on extinguishment of the note.
On August 18, 2022, the Company entered into an additional amendment of a previous amendment dated May 31, 2022, of its original promissory convertible note executed on September 3, 2021. Under the terms of the new amendment dated, August 18, 2022, the note is extended until September 30, 2022 and in exchange, the Company agreed to provide the note holder with shares of common stock. In addition, the note holder also agreed to cancel warrants previously issued to the note holder in exchange for an additional shares of Company’s common stock. The Company recognized $423,176 loss on extinguishment of the note and a $1,183,544 gain on extinguishment upon cancellation of the warrants and derivative liabilities associated with the warrants.
On August 26, 2022, the Company cancelled warrants previously issued to a note holder in exchange for the common shares valued at $1,213,710. The Company recognized a $4,106,707 gain on extinguishment upon cancellation of the warrants and derivative liabilities associated with the warrants that was partially offset by a loss on extinguishment of $77,960.
Conversion of convertible notes and accrued interest to common stock
On September 19, 2022, the Company, under the terms of the note, issued common shares upon the conversion of $148,870 in notes payable plus $1,250 in transaction fees. Upon conversion and settlement of the derivative liability, the Company recognized a $214,655 gain on extinguishment.
On September 20, 2022, the Company, under the terms of the note, issued common shares upon the conversion of $100,000 in notes payable. Upon conversion and settlement of the derivative liability, the Company recognized a $100,808 gain on extinguishment.
On September 29, 2022, the Company, under the terms of the note, issued common shares upon the conversion of $388,000 in notes payable. Upon conversion and settlement of the derivative liability, the Company recognized a $341,156 gain on extinguishment.
On December 9, 2022, the Company, under the terms of the note, issued common shares upon the conversion of $39,744 in notes payable. Upon conversion and settlement of the derivative liability, the Company recognized a $41,435 gain on extinguishment.
On December 9, 2022, the Company, under the terms of the note, issued common shares upon the conversion of $148,077 in notes payable. Upon conversion and settlement of the derivative liability, the Company recognized a $148,254 gain on extinguishment.
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Note 10 – Related Parties
Notes Payable and Accrued Interest – Related Parties
On May 15, 2020, the Company received a $10,000 loan from John W. Meyer, a related party. A promissory note was issued in the amount of $10,000 with a maturity date of August 15, 2020 (the “Meyer Note”). Interest on the Meyer Note accrued on the principal amount at the rate of eight and one-half percent (8.5%) per annum, payable in full including any accrued interest and late fees on August 15, 2020 and shall continue to accrue until paid in full. As of December 31, 2020, the Company owed $10,000 principal amount of the Meyer Note, plus $543 in interest. On June 29, 2021, John Meyer extended the Meyer Note until December 31, 2021. This note was paid in full in September 2021.
In addition, on December 10, 2020, the Company received a $25,000 loan from Charles Arnold, a related party. A promissory note was issued in the amount of $25,000 with a maturity date of December 10, 2021 (the “Arnold Note”). Interest on the Arnold Note accrued on the principal amount at the rate of eight percent (8%) per annum, payable in full including any accrued interest and late fees on December 10, 2021 and shall continue to accrue until paid in full. As of December 31, 2020, the Company owed $25,000 principal amount of the Arnold Note, plus $117 in interest. On June 29, 2021, Charles Arnold extended the Arnold Note until December 31, 2021. This note was paid in full in September 2021.
During the year ended December 31, 2022, the Company entered into the following related party transactions:
| · | It recognized $250,000 in accrued salary for its Chairman and CEO in addition to the Company amortized $ ($ in 2021) of previous stock compensation granted to its Chairman and CEO that is being amortized over 10 years; | |
| · | On September 7, 2022, the Company granted common shares of the Company to past and current directors for past services with a fair value of $2,806,111. | |
| · | On December 29, 2022, the Company granted common shares of the Company to current directors for current services with a fair value of $150,000. | |
| · | A current director previous advanced $100,000 with an interest rate of 5% for which the Company accrued $7,604 ($7,538 in 2021) as interest expense and included in Accounts payable and accrued liabilities.. | |
| · | On December 29, 2022, the Company granted its Corporate Secretary common shares of the Company for past services with a fair value of $60,000 in addition to $8,000 in cash that was paid during the year. | |
| · | A company with a common director advanced the Company $1,400,000 at 10% on September 1, 2021 for which the Company accrued $140,000 ($35,000 in 2021) in interest for the year and included in accounts payable and accrued liabilities. This note is also described in Note 6. | |
| · | The Company paid its CFO $7,500 in fees during the year. |
In addition, as at December 31, 2022, the Company owes Officers $179,509 that is included in Accounts payable and accrued liabilities.
| F-15 |
Note 11 – Segment and Geographic Information
Operating segments are identified as components of an enterprise about which separate discreet financial information is available for evaluation by the chief operating officer, or chief executive officer, in making decisions on how to allocate resources and assess performance.
The Company is operated and managed geographically, and management evaluates performance and allocates the Company’s resources on a geographic basis. Operating segments’ measure of profitability is based on loss from operations. The accounting policies for the reportable operating segments are the same as for the Company taken as a whole. The Company has three reportable operating segments: North America (including its subsidiaries in United States and Canada), Latin America (including subsidiaries in Mexico and Ecuador) and Asia (including its subsidiaries in Malaysia, Taiwan and Indonesia).
Information about operating segments is as follows:
| Information about operating segments | Year Ended December 31, | |||||||
| 2022 | 2021 | |||||||
| Geographic Net Sales: | ||||||||
| Americas | $ | 1,547,056 | $ | 1,866,154 | ||||
| Latin America | 2,501,416 | 1,668,252 | ||||||
| Asia | 510,927 | 786,839 | ||||||
| Total Net Sales | $ | 4,559,399 | $ | 4,321,245 | ||||
| Cost of Goods Sold: | ||||||||
| Americas | $ | 279,246 | $ | 304,615 | ||||
| Latin America | 723,544 | 443,191 | ||||||
| Asia | 161,228 | 275,354 | ||||||
| Total Cost of Goods Sold: | $ | 1,164,018 | $ | 1,023,160 | ||||
| Operating Expenses: | ||||||||
| Americas | $ | 6,057,305 | $ | 3,748,307 | ||||
| Latin America | 1,823,365 | 2,059,381 | ||||||
| Asia | 538,091 | 700,668 | ||||||
| Total Operating Expenses | $ | 8,418,761 | $ | 6,508,356 | ||||
| Loss from operations: | ||||||||
| Americas | $ | (4,789,494 | ) | $ | (2,186,768 | ) | ||
| Latin America | (45,493 | ) | (834,320 | ) | ||||
| Asia | (188,393 | ) | (189,183 | ) | ||||
| Total Loss from Operations | $ | (5,023,380 | ) | $ | (3,210,271 | ) | ||
| Total Assets by Geographic Location | ||||||||
| Americas | $ | 3,986,976 | $ | 5,211,878 | ||||
| Latin America | 198,609 | 284,788 | ||||||
| Asia | 81,356 | 223,456 | ||||||
| Total Assets | $ | 4,266,941 | $ | 5,720,122 | ||||
| F-16 |
Note 12 – Commitments and Contingencies
Legal proceedings
In December 2018, PSIQ Inc. filed a lawsuit against the Company alleging non-payment of a combined loan in the amount of $150,000. The Company vigorously objected to the legality of the interest charged, and filed a dispositive Motion for Dismissal, which was granted on March 15, 2023. The case against Stemtech was dismissed on March 16, 2023.
On August 6, 2019, Ray Carter, the former CEO prior to the Company’s Bankruptcy, filed a lawsuit against the Company’s subsidiary Stemtech HealthSciences, alleging unpaid salary and vacation time dating to a period predating the Company’s current management team taking control in 2018. Mr. Carter’s claim is in the amount of $267,000. The Company has counter-sued Ray Carter personally and deems this matter non-meritorious. At the same time, the Company has accrued $267,000 which is included in accounts payable and accrued expenses in the accompanying consolidated financial statements as of December 31, 2022 and 2021. Mr. Carter’s request for Summary Judgment was dismissed by the Court on March 3, 2023.
On March 4, 2020, Canon Financial Services, Inc., filed a lawsuit against the Company in a dispute over office machine leases. The Company settled this matter with Canon Financial Services out of Court for $32,000 in May 2021, and is making installment payments for the remaining $6,665 until paid off in May 2023.
In the opinion of management, the resolution of these matters, if any, will not have a material adverse impact on the Company’s consolidated financial position or consolidated results of operations.
Note 13 – Income Taxes
Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.
The FASB has issued ASC 740 “Income Taxes”. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.
If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by ASC 740 and concluded that the tax position of the Company has not met the more-likely-than-not threshold as of December 31, 2022.
| F-17 |
The domestic and foreign components of loss before provision for income taxes were as follows:
| Domestic and foreign components of income | Year Ended | Year Ended | ||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Domestic | $ | (8,551,252 | ) | $ | (6,083,667 | ) | ||
| Foreign | 14,042 | (1,027,442 | ) | |||||
| Loss before provision for income taxes | $ | (8,537,210 | ) | $ | (7,111,109 | ) | ||
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2022 and 2021 is as follows:
| Reconciliation of income tax expense | Year Ended | Year Ended | ||||||
| December 31, 2022 | December 31, 2021 | |||||||
| Loss before income taxes | $ | (8,537,210 | ) | $ | (7,111,109 | ) | ||
| Taxes benefits under statutory US tax rates | (1,792,814 | ) | (1,493,333 | ) | ||||
| Increase (decrease) in taxes resulting from: | ||||||||
| Increase in valuation allowance | 2,697,747 | 2,984,299 | ||||||
| Foreign tax rate differential | 110,120 | (73,413 | ) | |||||
| Permanent differences | (495,637 | ) | (955,027 | ) | ||||
| State taxes | (423,798 | ) | (462,526 | ) | ||||
| Provision for income taxes | $ | 95,618 | $ | – | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities consist of the following:
| Schedule of deferred taxes | December 31, 2022 | December 31, 2021 | ||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforwards | $ | 6,132,841 | $ | 4,369,537 | ||||
| Stock based compensation | 1,664,597 | 732,868 | ||||||
| Intangibles | (83,111 | ) | (88,159 | ) | ||||
| Depreciation | (1,986 | ) | – | |||||
| Other | (209 | ) | 140 | |||||
| Total deferred tax assets | 7,712,132 | 5,014,385 | ||||||
| Valuation allowance | (7,712,132 | ) | (5,014,385 | ) | ||||
| Net deferred tax assets (liabilities) | $ | – | $ | – | ||||
At December 31, 2022, the Company had net operating loss (“NOL”) carryforwards of approximately $24.4 million that may be offset against future taxable income. Of the $24.4 million of net operating losses, U.S. Federal and state net operating losses accounted for $20.6 million and are subject to limitation under IRC Section 382. The U.S. net operating losses are limited to utilization of 80% of taxable income but do not have an expiration. At December 31, 2022, the Company had $ 3.8 million of non-US NOL carryforwards.
The Company applied the “more-likely-than-not” recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2022 and 2021, respectively.
Prior to 2018, when the Company was acquired by the current management, the Mexican Tax Authorities completed an audit of Stemtech Mexico for the 2013 fiscal year and issued a preliminarily assessment of $2.5 million tax liability including interest and penalties. The Company had argued to date that this assessment was unfounded and on June 3, 2022, the Mexican Tax Court dismissed the claim asserted by the Mexican Tax Authorities. The Company, related to this assessment, owes no taxes whatsoever to the Mexican government.
| F-18 |
Note 14 – Subsequent Events
Management of the Company has performed a review of all events and transactions occurring after the consolidated balance sheet date to determine if there were any such events or transaction requiring adjustment to or disclosure in the accompanying consolidated financial statements, noting that no such events or transactions occurred other than the following items:
On January 13, 2023, the Company, under the terms of one of its note agreements, issued 2,600,000 shares of common stock of the Company at $0.05 per share for the conversion of $130,000 of notes payable.
On January 23, 2023, the Company, under the terms of one of its note agreements, issued 2,666,763 shares of common stock of the Company at $0.05 per share for the conversion of $133,338 of notes payable.
One February 9, 2023, the Company issued 27,898 shares of common stock of the Company valued at $40,694 to consultants for services.
On March 7, 2023, the Company acquired 100% of the issued and outstanding stock of Life Factor Research (“LFR”), a Wyoming corporation, in exchange for 2,4000,000 shares of common stock of the Company valued at $272,400.
On March 27, 2023, the Company and an institutional investor executed an investment agreement for up to $7,000,000 through a convertible promissory note, share purchase agreement and warrant agreement. Per the terms of the agreement, the Company was tendered an initial $1,000,000, with further disbursements to follow. The agreement has a 12% original issue discount and carries interest at 7% per annum. The Company has an open right of redemption at 125% of face value.
| F-19 |
Up to 189,121,101 Shares of Common Stock
PROSPECTUS
May [__], 2023
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses payable by us in connection with the offering of securities described in this registration statement. All amounts shown are estimates, except for the SEC registration fee. We will bear all expenses shown below.
| SEC registration fee | $ | – | ||
| Legal fees and expenses | $ | – | ||
| Accounting fees and expenses | $ | – | ||
| Miscellaneous fees and expenses | $ | – | ||
| Total | $ | – |
Item 14. Indemnification of Directors and Officers.
Each of our Articles of Incorporation and Bylaws provide for indemnification of our directors and officers. Our Bylaws provide that we will indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent will not, without more, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. The Company may by action of its Board of Directors, grant rights to indemnification and advancement of expenses to employees and agents of the Company with the same scope and effects as the indemnification provisions for officers and directors.
Insofar as indemnification for liabilities under the Securities Act may be permitted to officers, directors or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that is it is the opinion of the United States Securities and Exchange Commission that such indemnification is against public policy as expressed in such Securities Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities.
On September 3, 2021, the Company executed a Convertible Promissory Note, Securities Purchase Agreement and ancillary agreements (collectively, the “Agreements”) with Leonite Capital, LLC (“Leonite”). Per the terms of the Agreements with Leonite, the Company was tendered $410,000.
On September 3, 2021, the Company finalized a Promissory Convertible Note, Securities Purchase Agreement and ancillary agreements (collectively, the “MCUS Agreements”) with MCUS LLC (“MCUS”). Per the terms of the MCUS Agreements with MCUS, the Company was tendered $500,000.
On September 17, 2021, the Company finalized a $1,400,000 investment into our Company with Sharing Services Global Corporation, a publicly traded company (“SHRG”) via a Convertible Promissory Note, a Share Purchase Agreement and Warrant Agreement. Per the terms of the Agreements, the Company was tendered the full $1,400,0000, which is open with right of redemption at 10% interest per annum until September 9, 2024.
On September 19, 2022, the Company, under the terms of the note, issued 329,670 common shares upon the conversion of $148,870 in notes payable plus $1,250 in transaction fees.
| II-1 |
On September 20, 2022, the Company, under the terms of the note, issued 250,438 common shares upon the conversion of $100,000 in notes payable.
On September 29, 2022, the Company, under the terms of the note, issued 1,355,222 common shares upon the conversion of $388,000 in notes payable.
On December 9, 2022, the Company, under the terms of the note, issued 256,410 common shares upon the conversion of $39,744 in notes payable.
On December 9, 2022, the Company, under the terms of the note, issued 1,923,077 common shares upon the conversion of $148,077 in notes payable.
During the year ended December 31, 2022, the Company issued 74,488 shares of common stock to a lender to cover the financing costs. The shares were valued on the day of issuance at $2.68 per share for a total value of $200,000.
Item 16. Exhibits and Consolidated Financial Statement Schedules.
| Exhibit | Description | |
| 3.1 | Articles of Incorporation and Certificate of Amendment, filed as an exhibit to Globe Net’s registration statement on Form S-1 filed on February 11, 2011, and incorporated herein by reference. | |
| 3.2 | By-Laws, filed as an exhibit to Globe Net’s registration statement on Form S-1 filed on February 11, 2011, and incorporated herein by reference. | |
| 4.1 | Form of Series 1 Warrant (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on March 30, 2023). | |
| 4.2 | Form of Series 2 Warrant (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on March 30, 2023). | |
| 4.3 | Form of Common Share Purchase Warrant issued to MCUS, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on March 31, 2023) | |
| 4.4 | Warrant Agreement of September 10, 2021, with Sharing Services Global Corporation (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2021) | |
| 5.1** | Opinion of Lucosky Brookman LLP | |
| 10.1 | Securities Purchase Agreement dated March 27, 2023 between the Company and the Selling Stockholder (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on March 30, 2023). | |
| 10.2 | Senior Secured Convertible Promissory Note issued in favor of the Selling Stockholder dated March 27, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 30, 2023). | |
| 10.3 | Security Agreement dated March 27, 2023 between the Company and the Selling Stockholder (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on March 30, 2023). | |
| 10.4 | Registration Rights Agreement dated March 27, 2023 between the Company and the Selling Stockholder (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on March 30, 2023). | |
| 10.5 | Securities Purchase Agreement of September 10, 2021, with Sharing Services Global Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2021) | |
| 10.6 | Convertible Promissory Note of September 10, 2021, with Sharing Services Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2021) | |
| 10.7 | Convertible Promissory Note of September 1, 2021, with Leonite Fund I LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021) | |
| 10.8 | Securities Purchase Agreement of September 1, 2021, with Leonite Fund (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021). | |
| 10.9 | Warrant Agreement of September 1, 2021, with Leonite Fund I LP (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021). | |
| 10.1 | Convertible Promissory Note of September 1, 2021, with MCUS, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021) | |
| 10.11 | Securities Purchase Agreement of September 1, 2021, with MCUS, LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021). | |
| 10.12 | Warrant Agreement of September 1, 2021, with MCUS, LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021). | |
| 10.13 | Registration Rights Agreement of September 1, 2021, with MCUS, LLC (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Commission on September 9, 2021). | |
| 10.14* | Global Settlement & Exchange of Senior Secured Convertible Promissory Note dated February 28, 2023 with Leonite Fund I, LP. |
| II-2 |
| 21.1 | List of Subsidiaries (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K filed with the Commission on April 17, 2023). | |
| 23.1 | Consent of Turner, Stone & Company, L.L.P. | |
| 23.2** | Consent of Lucosky Brookman LLP (included in Exhibit 5.1) | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |
| 107 | Filing Fee Table |
| + | Indicates management contract or compensatory plan. |
| * | Filed herewith. |
| ** | To be filed by amendment. |
| (b) | Consolidated Financial Statement Schedules |
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
| II-3 |
Item 17. Undertakings.
| (a) | The undersigned registrant hereby undertakes: |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) above do not apply if the registration statement is on Form S-1 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement. |
| (2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act to any purchaser: |
| (i) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and | |
| (ii) | Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
| II-4 |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (ii) | any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
| (iv) | any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (b) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) | Insofar as indemnification for liabilities arising under the Securities Act, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act (“Act”) in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. |
| (d) | The undersigned registrant hereby undertakes that: |
| (i) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(I) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and |
| (ii) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| II-5 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Miramar, State of Florida, on May 11, 2023.
| Stemtech Corporation | |||
| By: | /s/ Charles S. Arnold | ||
| Name: | Charles S. Arnold | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
POWER OF ATTORNEY: KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles Arnold and James Cardwell, or any one of them, as his or her, true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution for him/her and in his/her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Charles S. Arnold | Chief Executive Officer, Director | May 11, 2023 | ||
| Charles Arnold | (Principal Executive Officer) | |||
| /s/ James S. Cardwell | Chief Financial Officer | May 11, 2023 | ||
| James S. Cardwell | (Principal Financial and Accounting Officer) | |||
| /s/ John W. Meyer | President, Chief Operating Officer, Director | May 11, 2023 | ||
| John W. Meyer | ||||
| /s/ John Thatch | Director | May 11, 2023 | ||
| John Thatch | ||||
| /s/ Benjamin Kaplan | Director | May 11, 2023 | ||
| Benjamin Kaplan | ||||
| /s/ Darryl V. Green | Director | May 11, 2023 | ||
| Darryl V. Green |
| II-6 |
