UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1−K
SPECIAL FINANCIAL REPORT
For the fiscal year ended December 31, 2020
Oracle Health, Inc.
(Exact name of issuer as specified in its charter)
| Delaware | 84-1730527 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
910 Woodbridge Court, Safety Harbor, FL 34695
(Full mailing address of principal executive offices)
727-470-3466
(Issuer’s telephone number, including area code)
Title of each class of securities issued pursuant to Regulation A:
4,000,000 Shares of Common Stock at $2.00 per Share
EXPLANATORY NOTE
We are filing this Special Financial Report on Form 1-K pursuant to Rule 257(b)(2) of Regulation A promulgated under the Securities Act of 1933, as amended because the offering statement on Form 1-A, which was qualified by the U.S. Securities and Exchange Commission on January 13, 2021, relating to our best efforts offering of up to 4,000,000 shares of our common stock, did not contain audited financial statements for our most recent fiscal year ended December 31, 2020, which is the fiscal year preceding the fiscal year in which the offering statement became qualified.
ITEM 7. FINANCIAL STATEMENTS
ORACLE HEALTH, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2020
TABLE OF CONTENTS
| Page | |
| FINANCIAL STATEMENTS: | |
| Independent Auditors’ Report | F-2 |
| Balance Sheets | F-3 |
| Statements of Operations | F-4 |
| Statements of Shareholders’ Deficit | F-5 |
| Statements of Cash Flows | F-6 |
| Notes to Financial Statements | F-7 to F-15 |
F-1
To the shareholder of
Oracle Health, Inc.
We have audited the accompanying financial statements of Oracle Health, Inc. (the Company), which comprise the balance sheet as of December 31, 2020, and the related statements of operations, stockholders’ deficit and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a incurred net losses from inception and has a net stockholders’ deficit all of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Other Matter
The financial statements of the Company for the year ended December 31, 2019, were audited by another auditor, who expressed an unmodified opinion on those statements on October 14, 2020.
/s/ Turner, Stone & Company, L.L.P.
Dallas, Texas
Certified Public Accountants
May 10, 2021
F-2
ORACLE HEALTH, INC.
BALANCE SHEETS
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 328,368 | $ | - | ||||
| Due from shareholder | - | 29,966 | ||||||
| Total current assets | 328,368 | 29,966 | ||||||
| Total Assets | $ | 328,368 | $ | 29,966 | ||||
| Liabilities and stockholders’ deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 142 | $ | - | ||||
| Accrued interest | 4,298 | - | ||||||
| Total current liabilities | 4,440 | - | ||||||
| Long-term Liabilities | ||||||||
| Convertible notes payable | 350,000 | - | ||||||
| SAFE Agreements | 412,106 | 120,000 | ||||||
| Total Liabilities | 766,546 | 120,000 | ||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $0.00001 par value, 50,000,000 shares authorized, no shares issued and outstanding | - | - | ||||||
| Common stock, $0.00001 par value, 200,000,000 shares authorized, 8,500,000 shares issued and outstanding | 85 | 85 | ||||||
| Additional paid in capital | 379,176 | - | ||||||
| Accumulated deficit | (817,439 | ) | (90,119 | ) | ||||
| Total Stockholders’ Deficit | (438,178 | ) | (90,034 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 328,368 | $ | 29,966 | ||||
The accompanying footnotes are an integral part of these financial statements
F-3
STATEMENTS OF OPERATIONS
| For the Year Ended December 31, 2020 | For the Period from May 9, 2019 (inception) to December 31, 2019 | |||||||
| Revenue | $ | - | $ | - | ||||
| Operating expenses: | ||||||||
| Stock based compensation | 379,176 | - | ||||||
| Salaries and wages | 120,000 | - | ||||||
| Professional fees | 114,265 | 62,709 | ||||||
| Sales and marketing | 12,948 | 3,659 | ||||||
| General and administrative | 30,925 | 21,260 | ||||||
| Research and development | 16,712 | 2,491 | ||||||
| Total operating expenses | 674,026 | 90,119 | ||||||
| Operating loss | (674,026 | ) | (90,119 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (4,298 | ) | - | |||||
| Unrealized loss on due from shareholder | (54,996 | ) | - | |||||
| Other income | 6,000 | - | ||||||
| Total other income (expense) | (53,294 | ) | - | |||||
| Net loss | $ | (727,320 | ) | $ | (90,119 | ) | ||
| Per share information: | ||||||||
| Basic weighted average shares outstanding | 8,500,000 | 8,500,000 | ||||||
| Diluted weighted average shares outstanding | 8,500,000 | 8,500,000 | ||||||
| Net loss per share - basic and diluted | $ | (0.09 | ) | $ | (0.01 | ) | ||
The accompanying footnotes are an integral part of these financial statements
F-4
STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Year Ended December 31, 2020 and the Period from May 9, 2019 (inception) to December 31, 2019
| Common Stock | Additional Paid | Accumulated | ||||||||||||||||||
| Shares | Amount | In Capital | Deficit | Total | ||||||||||||||||
| Balance, May 9, 2019 (inception) | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Issuance of common stock | 8,500,000 | 85 | - | - | 85 | |||||||||||||||
| Net loss | - | - | - | (90,119 | ) | (90,119 | ) | |||||||||||||
| Balance, December 31, 2019 | 8,500,000 | 85 | - | (90,119 | ) | (90,034 | ) | |||||||||||||
| Stock based compensation | - | - | 379,176 | - | 379,176 | |||||||||||||||
| Net loss | - | - | - | (727,320 | ) | (727,320 | ) | |||||||||||||
| Balance, December 31, 2020 | 8,500,000 | $ | 85 | $ | 379,176 | $ | (817,439 | ) | $ | (438,178 | ) | |||||||||
The accompanying footnotes are an integral part of these financial statements
F-5
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2020 and the Period from May 9, 2019 (inception) to December 31, 2019
| For the Year Ended December 31, 2020 | For the Period from May 9, 2019 (inception) to December 31, 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (727,320 | ) | $ | (90,119 | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | 379,176 | - | ||||||
| SAFE Agreements issued for services | - | 50,000 | ||||||
| Unrealized loss on due from shareholder | 54,996 | |||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts payable | 142 | - | ||||||
| Accrued interest | 4,298 | - | ||||||
| Net cash used in operating activities | (288,708 | ) | (40,119 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Due from shareholder, net | (25,030 | ) | (29,966 | ) | ||||
| Net cash used in investing activities | (25,030 | ) | (29,966 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of common stock | - | 85 | ||||||
| Proceeds from issuance of SAFE Agreements | 292,106 | 70,000 | ||||||
| Proceeds from issuance of convertible note payable | 350,000 | - | ||||||
| Net cash provided by financing activities | 642,106 | 70,085 | ||||||
| Net change in cash | 328,368 | - | ||||||
| Cash, beginning of period | - | - | ||||||
| Cash, end of year | $ | 328,368 | $ | - | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Issuance of SAFE Agreement for services | $ | - | $ | 50,000 | ||||
The accompanying footnotes are an integral part of these financial statements
F-6
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1 – NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Oracle Health, Inc. (the “Company”) was incorporated in Delaware on May 9, 2019. The Company is a healthcare technology company that is developing a digital cardiac monitor. The Company’s products will exploit certain proprietary research carried out by Jaeson Bang, its founder.
Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to Oracle Health, Inc.
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s fiscal year ends December 31.
Significant Risks and Uncertainties
The Company is subject to customary risks and uncertainties associated with development of new technology including, but not limited to, the need for protection of intellectual property, dependence on key personnel, costs of services provided by third parties, the need to obtain additional financing, and limited operating history.
The Company currently has no developed products for commercialization and there can be no assurance that the Company’s research and development will be successfully commercialized. Developing and commercializing a product requires significant capital, and based on the current operating plan, the Company expects to continue to incur operating losses as well as cash outflows from operations in the near term.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates made in connection with the accompanying financial statements include the estimate of valuation of stock-based compensation, and valuation allowances against net deferred tax assets.
Financial Instruments
Our financial instruments consist of cash, accounts payable and convertible notes. The carrying values of these instruments approximate fair value due to the short-term maturities of these instruments.
F-7
Fair Value Measurements
Financial Accounting Standards Board (“FASB”) ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, ASC 820 sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. ASC 820 defines the hierarchy as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.
Level 2 - Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
Level 3 - Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.
The Company’s financial instruments consist of cash, accounts payable and convertible notes. The estimated fair value of these financial instruments approximates their carrying amounts due to the short-term nature of these instruments.
Certain non-financial assets are measured at fair value on a nonrecurring basis. Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic impairment tests. These items primarily include long-lived assets and other intangible assets.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances, and highly liquid investments with maturities of three months or less when purchased.
Revenue
ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.
Property and Equipment
The Company capitalizes assets with an expected useful life of one year or more, and an original purchase price of $1,000 or more. Depreciation is calculated on a straight-line basis over management’s estimate of each asset’s useful life.
Rent
The Company is party to a non-cancellable lease agreement for office space. The lease commenced in January 2020 and has a term of eleven months. Future minimum payments due in 2020 amount to $5,500. The Company is currently on a month-to-month basis with this lease agreement.
Advertising
The Company records advertising expenses in the period incurred.
F-8
Research & Development
The Company records research & development expenses in the period incurred.
Equity Based Compensation
The Company accounts for stock options issued to employees under ASC 718 Stock Compensation. Under ASC 718, share-based compensation cost to employees is measured at the grant date, based on the estimated fair value of the award, and is recognized as an item of expense ratably over the employee’s requisite vesting period. The Company recognizes stock-based compensation for all share-based payment awards made to employees based on the estimated fair values, using the Black-Scholes option pricing model.
Non-employee stock-based compensation is accounted for based on the fair value of the related stock or options. The fair value of options to be granted are estimated on the date of each grant using the Black-Scholes option pricing model and amortized ratably over the option’s vesting periods, which approximates the service period.
The Company measures compensation expense for its non-employee stock-based compensation under ASC 505 (Equity). The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to expense and credited to additional paid-in capital.
Loss Per Share
We calculate net loss per share in accordance with ASC Topic 260, Earnings per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, and diluted earnings per share is computed by including common stock equivalents outstanding for the period in the denominator. For the year ended December 31, 2020, any equivalents would have been anti-dilutive as we had a loss for the period then ended. For the years ended December 31, 2020 and 2019, the following number of potentially dilutive shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| Stock options outstanding | 651,000 | - | ||||||
| Total | 651,000 | - | ||||||
Income Taxes
Income taxes are provided based upon the liability method of accounting pursuant to the ASC Topic 740 Income Taxes. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against the deferred tax asset if management does not believe the Company has met the “more likely than not” standard to allow recognition of such an asset.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.
F-9
NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As of December 31, 2020, the Company had an accumulated deficit of $817,439 and working capital of $323,928. During year ended December 31, 2020, the Company used cash in operating activities of $288,708. As of December 31, 2020, the Company had cash of $328,368. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company recognizes it will need to raise additional capital in order to fund operations and meet its payment obligations. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will generate revenues, become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds on favorable terms, it will have to develop and implement a plan to further extend payables and to raise capital through the issuance of debt or equity on less favorable terms until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.
Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily represent realizable or settlement values. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 3 – RELATED PARTY TRANSACTIONS
Due from Shareholder
Our founding shareholder, who is also our CEO, periodically receives advances and reimbursements from the Company for expenses incurred on behalf of the Company. The total net advances due from our founding shareholder as of December 31, 2020 and 2019 were $54,996 and $29,966, respectively.
The Company recorded a full valuation allowance against the due from shareholder as of December 31, 2020, recording an unrealized loss on due from shareholder of $54,996 and reducing the net balance of $54,996 to $0. Our founding shareholder does not anticipate taking additional advances in the future.
Employment Agreement
The Company entered into an informal employment agreement with its CEO on January 1, 2020, which includes an annual base salary of $120,000. A formal Employment Agreement was executed on February 1, 2021, which increased his base annual salary to $150,000 effective January 1, 2021.
NOTE 4 – NOTES PAYABLE
Convertible Notes Payable
On February 21, 2020, the Company issued a convertible promissory note in exchange for $100,000. The convertible note bears an interest rate of 5% per annum and will mature in thirty-six months at which the principle and all accrued interest will be due.
On November 12, 2020, the Company issued a convertible promissory note in exchange for $200,000. The convertible note bears an interest rate of 6% per annum and will mature in thirty-six months at which the principle and all accrued interest will be due.
On November 25, 2020, the Company issued a convertible promissory note in exchange for $50,000. The convertible note bears an interest rate of 6% per annum and will mature in thirty-six months at which the principle and all accrued interest will be due.
The above convertible notes payable will convert under certain pre-defined condition such as a Qualified Equity Financing or Change of Control. Upon conversion, the convertible notes payable will convert to common shares of the Company at the lesser of (i) eighty percent (80%) of the price per share paid by the other purchasers of Next Round Securities in the Qualified Equity Financing and (ii) the price obtained by dividing $5,000,000 by the number of outstanding shares of common stock of the Company immediately prior to the Qualified Equity Financing.
F-10
The Company accrued $4,298 in interest associated with these convertible notes payable as of December 31, 2020.
CARES Act and Grant
In 2020, the Company received an Economic Injury Disaster Loan Advance under the Paycheck Protection Program provision of the CARES Act. The advance does not have to be repaid and bears no interest. The Company received $4,000 from this program and has included this amount in other income on the statement of operations for the year ended December 31, 2020.
The Company also received a local city grant of $2,000, which is also included in other income for the year ended December 31, 2020.
SAFE Agreements
During 2020 and 2019, the Company issued Simple Agreements for Future Equity (“SAFE”). The SAFE agreements have no maturity date and bear no interest. The SAFE agreements provide a right to the holder to future equity in the Company in the form of SAFE Preferred Stock. SAFE Preferred Stock are shares of a series of Preferred Stock issued to the investor in an equity financing, having identical rights, privileges, preferences and restrictions as the shares of standard Preferred Stock offered to non-holders of SAFE agreements other than with respect to: (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the Safe price (price per share equal to the valuation capitalization divided by the total capitalization of the Company); and (ii) the basis for any dividend rights, which will be based on the conversion price. The number of shares issued to the holder is determined by either (1) the face value of the SAFE agreement divided by the price per share of the standard preferred stock issued, if the pre-money valuation is less than or equal to the valuation capitalization (ranging from $1,666,666 and $5,000,000); or (2) a number of shares of SAFE Preferred Stock equal to the face value of the SAFE agreement divided by the price per share equal to the valuation cap divided by the total capitalization of the company immediately prior to an equity financing event. Total capitalization of the company includes all shares of capital stock issued and outstanding and outstanding vested and unvested options as if converted.
If there is a liquidity event (as defined in the SAFE agreements), the investor will, at their option, either (i) receive a cash payment equal to the face value of the SAFE agreement (“Purchase Amount”) or (ii) automatically receive from the Company a number of shares of common stock equal to the Purchase Amount divided by the price per share equal to the valuation cap divided by the Liquidity Capitalization (“Liquidity Price”) (as defined in the SAFE agreements). If there are not enough funds to pay the holders of SAFE agreements in full, then all of the Company’s available funds will be distributed with equal priority and pro-rata among the SAFE agreement holders in proportion to their Purchase Amounts and they will automatically receive the number of shares of common stock equal to the remaining unpaid Purchase Amount divided by the Liquidity Price.
If there is a dissolution event (as defined in the SAFE agreements), the Company will pay an amount equal to the Purchase Amount, due and payable to the investor immediately prior to, or concurrent with, the consummation of the dissolution event. The Purchase Amount will be paid prior and in preference to any distribution of any of the assets of the Company to holders of outstanding capital stock. If immediately prior to the consummation of the dissolution event, the assets of the Company legally available for distribution to all SAFE holders, are insufficient to permit the payment to their respective Purchase Amounts, then all of the assets of the Company legally available for distribution will be distributed with equal priority and pro-rata among the SAFE holders as a single class.
The SAFE agreements will expire and terminate upon either (i) the issuance of shares to the investor pursuant to an equity financing event or (ii) the payment, or setting aside for payment, of amounts due to the investor pursuant to a liquidity or dissolution event.
F-11
As of December 31, 2020, no SAFE agreements had been converted into equity, nor had any terminated or expired based on the terms of the agreements.
The Company had $412,106 and $120,000 of SAFE obligations outstanding as of December 31, 2020 and 2019, with a valuation caps ranging from $1,666,666 and $5,000,000.
The Company accounts for the SAFE agreements under ASC 480 (Distinguishing Liabilities from Equity), which requires that they be recorded at fair value as of the balance sheet date. Any changes in fair value are to be recorded in the statements of operations. The Company has determined that the fair value at the date of issuance, and as of December 31, 2020 are both consistent with the proceeds received at issuance, and therefore there is no mark-to-market fair value adjustments required or reflected in income for the year ended December 31, 2020.
Non-Monetary Exchange
In 2019, the Company issued a $50,000 SAFE agreement to Midsouth Sustainable Energy Solutions, Inc. in exchange for business training, coaching, mentoring, and networking. The items received in this exchange were charged to the professional fees on the statement of operations.
NOTE 5 – STOCKHOLDERS’ DEFICIT
Preferred stock
As per our Amended and Restated Certificate of Articles of Incorporation dated October 22, 2020, we are authorized to issue up to 50,000,000 shares of preferred stock. Our certificate of incorporation authorize our board of directors to issue these shares in one or more series, to determine the designations and the powers, preferences and rights and the qualifications, limitations and restrictions thereof, including the dividend rights, conversion or exchange rights, voting rights (including the number of votes per share), redemption rights and terms, liquidation preferences, sinking fund provisions and the number of shares constituting the series. Our board of directors could, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of common stock and which could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding voting stock.
Common stock
Under our Amended and Restated Certificate of Articles of Incorporation, the Company is authorized to issue 200,000,000 shares of $0.00001 par value Common Stock. Common shareholders have the right to vote on certain items of Company business at the rate of one vote per share of stock.
On May 9, 2019, the Company issued 8,500,000 shares to its founder at an aggregate price of $85.
As of December 31, 2020 and 2019, the number of common shares issued and outstanding was 8,500,000.
NOTE 6 – STOCK OPTIONS
In 2020, the Board of Directors adopted the 2020 Equity Incentive Plan (“the Plan”). The Plan provides for the grant of equity awards to employees, and consultants, including stock options, stock purchase rights and restricted stock units to purchase shares of common stock. Up to 1,500,000 shares of common stock may be issued pursuant to awards granted under the Plan. The Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.
During 2020, the Company granted 700,000 stock options under the Plan to seven of our advisors. The granted options had an exercise price of $0.59 (the fair market value of our outstanding stock on the date of grant as determined by our sole director), expire in ten years, and ranged from 100% immediate vesting to vesting over a four-year period.
F-12
The total grant date fair value of options granted was $407,573 for the year ended December 31, 2020.
The following is a summary of outstanding stock options issued as of December 31, 2020:
| Number of Options | Exercise Price per Share | Average Remaining Term in Years | ||||||||||
| Outstanding, December 31, 2019 | - | - | - | |||||||||
| Granted | 700,000 | $ | 0.59 | 10.00 | ||||||||
| Exercised | - | - | - | |||||||||
| Outstanding, December 31, 2020 | 700,000 | $ | 0.59 | 9.15 | ||||||||
| Vested and expected to vest, December 31, 2020 | 651,000 | $ | 0.59 | 9.15 | ||||||||
| Exercisable, December 31, 2020 | 651,000 | $ | 0.59 | 9.15 | ||||||||
Stock option expense for the year ended December 31, 2020 and 2019 was $379,176 and $0, respectively. The Company will recognize the remaining $28,397 value of the options through 2021.
The stock options were valued using the Black-Scholes pricing model as indicated below:
| December 31, 2020 | ||||
| Expected life (years) | 5.19 | |||
| Risk-free interest rate | 1.37 | % | ||
| Expected volatility | 217 | % | ||
| Annual dividend yield | 0 | % | ||
The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s employee stock options.
The expected term of employee stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.
The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company’s common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history to use historical volatility.
The dividend yield assumption for options granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company is party to a non-cancellable operating lease agreement for office space. The lease commenced in January 2020 with a term of eleven months at $500 per month and is currently on a month-to-month basis at $515 per month beginning January 2021.
F-13
NOTE 8 – INCOME TAXES
The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
Reconciliations of the U.S. federal statutory rate to the actual tax rate are as follows:
| 2020 | 2019 | |||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | ||||
| Effects of: | ||||||||
| State taxes, net of federal benefit | 3.5 | % | 3.5 | % | ||||
| Stock based compensation | (12.8 | %) | - | |||||
| Other permanent differences | (1.9 | %) | - | |||||
| Valuation allowance | (9.8 | %) | (24.5 | %) | ||||
| Effective tax provision (benefit) rate | 0.0 | % | 0.0 | % | ||||
Significant components of the Company’s deferred tax assets as of December 31, 2020 and 2019 are summarized below.
| 2020 | 2019 | |||||||
| Deferred tax assets: | ||||||||
| Net operation loss carryforwards | $ | 96,000 | $ | 24,000 | ||||
| Total deferred tax asset | 96,000 | 24,000 | ||||||
| Valuation allowance | (96,000 | ) | (24,000 | ) | ||||
| $ | - | $ | - | |||||
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Company assessed the need for a valuation allowance against its net deferred tax assets and determined a full valuation allowance is required due to taxable loss for the year ended December 31, 2020. The Company has no history of generating taxable income. Therefore, a valuation allowance of $103,000 and $24,000 was recorded as of December 31, 2020 and 2019, respectively. Deferred tax assets were calculated using the Company’s combined effective tax rate, which it estimated to be 27%. The effective rate is reduced to 0% for 2020 and 2019 due to the full valuation allowance on its net deferred tax assets.
The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. Future utilization of the net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code. As of December 31, 2020, the Company had net operating loss carryforwards available to offset future taxable income in the amounts of approximately $380,000.
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The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.
The Company applies ASC 740 Income Taxes (“ASC 740”). Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any and the change during the period in deferred tax assets and liabilities. ASC 740 also provides criteria for the recognition, measurement, presentation, and disclosure of uncertain tax positions. A tax benefit from an uncertain position is recognized only if it is “more likely than not” that the position is sustainable upon examination by the relevant taxing authority based on its technical merit.
The Company is subject to franchise tax filing requirements in the State of Delaware.
NOTE 9 – SUBSEQUENT EVENTS
Management considered events subsequent to the end of the period but before the date that the financial statements were available to be issued, which was May 10, 2021. Based on this evaluation, other than the events below, no additional material events were identified which require adjustment or disclosure in the financial statements.
On January 8, 2021, the Company paid $100,000 pursuant to a development agreement with a consultant dated January 5, 2021. The agreement includes design work by the consultant over the following 18 months at a total cost of approximately $2 million to deliver an implantable device suitable for patients under FDA guidelines.
On January 30, 2021, the board of directors approved an Employment Agreement with our CEO which was executed on February 1, 2021 (see Note 3).
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SIGNATURES
Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Safety Harbor, County of Pinellas, State of Florida, on May 20, 2021.
| ORACLE HEALTH, INC. | ||
| By: | /s/ Jaeson Bang | |
| Name: | Jaeson Bang | |
| Title: | CEO and President | |
This offering statement has been signed by the following persons in the capacities and on the dates indicated.
| SIGNATURE | TITLE | DATE | ||
| /s/ Jaeson Bang | CEO, President, Secretary, Treasurer and Director (principal executive officer and principal financial and accounting officer) | May 20, 2021 | ||
| Jaeson Bang |
