Investing in our common stock involves a high degree of risk. Before you invest in our common stock, you should carefully consider the following risks, as well as general economic and business risks, and all of the other information contained in this Report. Any of the following risks could harm our business, operating results and financial condition and cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. When determining whether to invest, you should also refer to the other information contained in this Report including our financial statements and the related notes thereto.
(A) RISKS RELATED TO OUR BUSINESS
Risks Related to Our Business
If the Company needs additional money and if money is raised through the sale of our securities, the issuance of those securities could result in dilution to our existing security holders. If we raise money through debt financing or bank loans, we may be required to secure the financing with some or all of our business assets.
Side effects of the product.
-When taken by mouth in high doses, any sleeping aid is possibly unsafe. There is some concern that it could harm kidney, liver, or heart function. However, a connection between high doses and these negative effects has not been proven.
-Sleep Aid can also cause stomach pain, nausea, diarrhea, and muscle cramping if more than the recommended amount is taken.
-There is some concern that combining sleeping aids with caffeine and the herb ephedra (also called Ma Huang) might increase the chance of having serious side effects such as nausea, or stomach pain.
-There is concern that sleeping aids might cause irregular heartbeat in some people, but more information is needed to know if Sleep Aids can cause this problem.
It is not known how the aforementioned side effects could impact our business. We suspect some potential users of the product may decide to forego purchase of the product, but such persons would not be within the target market of the product.
There are many inherent risks and difficulties in introducing a new product to the market place.
The Company has begun to market its product nationally, to wholesalers and retailers, and develop our brand name. However, we face many of the risks and difficulties inherent in introducing a new product. These risks include, but are not limited to, the ability to:
As of March 31, 2022, we have working capital of $247,844. The Company believes it does not have enough capital to sustain business operations for 12 months without any additional capital needed. Mr. Sosa has indicated he would be able to fund another $100,000 if the company needs further assistance, but there is always the possibility that the company will need additional sources of financing in the future, as a result, an investment in our securities represents some risk and you may lose all or part of your entire investment.
Rest EZ, Inc. will rely on funding from Mr. Sosa until the company is self-sufficient. During the year ended March 31, 2022, the Company received payment for orders in the aggregate amount of $519,443; the proceeds from these orders is used for manufacturing purposes and running the company.
We do not expect any foreseeable losses in the future due to additional ingredient costs or other related costs that may or may not arise.
We may not be able to build our brand awareness.
Development and awareness of our brand Rest EZ, Inc. will depend largely upon our success in creating a customer base and potential referral sources. In order to attract and retain customers and to promote and maintain our brand in response to competitive pressures, management plans to drastically increase the Company’s marketing and advertising budgets. If we are unable to economically promote or maintain our brand, then our business, results of operations, and financial condition could be harmed.
The Company’s current business operations rely heavily upon our key wholesalers, retailers, and sole officer, director, and founder.
The Company is heavily dependent upon the key wholesalers, retailers and internet sales of Rest EZ, as well as the expertise and management of our Chief Executive Officer, President, and sole director. The Company’s future performance will depend upon the continued services of our CEO, the loss of which could seriously interrupt the Company’s business operations, and negatively impact our ability to fulfill our business plan and carry out existing operations. The Company currently does not maintain key man life insurance on this individual. There can be no assurance that a suitable replacement could be found upon his retirement, resignation, inability to act on our behalf, or death. The Company has no plans of entering into an employment agreement with the CEO.
Our CEO currently devotes approximately 28 hours per week to the affairs of the Company. He will devote 40 hours (or more) per week to the Company, and draw a salary of $2,000 per month, after the company is self-sufficient.
The company’s future growth may require recruitment of qualified employees.
In the event of our future growth in administration, marketing, and customer support functions, the Company may have to increase the depth and experience of the Company by adding new members. The Company’s future success will depend upon the active participation of its key officer.
Product sales were to one major customer.
Product sales and revenue were from purchases by one major customer. The Company’s dependence thus far, and if continued going forward, on a single major customer presents a risk to investors regarding the Company’s viability should that major customer stop making major purchases of the product and the Company is unable to find one or more suitable customers to make purchases to a similar extent.
We may incur significant costs to be a public company to ensure compliance with U.S. corporate governance and accounting requirements and we should be able to absorb such costs.
We may incur significant costs associated with our public Company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain directors and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
The lack of public company experience of the company’s sole officer and director could adversely impact our ability to comply with the reporting requirements of U.S. securities laws.
The Company’s sole officer and director has no public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. The Company’s sole officer and director has never had sole responsibility for managing a publicly traded Company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. The Company’s sole officer and director may experience regulatory compliance and reporting requirements, including establishing and maintaining internal controls over financial reporting, which are necessary to maintain its public Company status. Any such deficiencies, weaknesses or lack of compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), may impact our ability to continue as a U.S. public Company.
The Company’s operating results may fluctuate due to factors which are not within its control.
The Company’s operating results are expected to fluctuate in the future based on a number of factors, many of which are not in its control. The Company’s operating expenses primarily include marketing and general administrative expenses that are relatively fixed in the short-term. If our revenues are lower than we expect because demand for our product diminishes, or if we experience an increase in defaults among approved advertising applicants, or for any other reasons, we may not be able to quickly return to acceptable revenue levels.
Because of the unique nature of our business and the fact that there are no comparable past business models to rely on, future factors that may adversely affect our business are difficult to forecast. Any shortfall in the Company’s revenues would have a direct impact on our business. In addition, fluctuations in the Company’s quarterly results could adversely affect the market price of its common stock in a manner unrelated to its long-term operating performance.
(B) RISKS RELATED TO THE OWNERSHIP OF OUR SECURITIES.
We may never pay any dividends to shareholders.
The Company has never declared or paid any cash dividends or distributions on its capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion. Therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Our controlling security holder may take actions that conflict with your interests.
Mr. Sosa beneficially owns approximately 60% of the Company’s capital stock with voting rights. In this case, Mr. Sosa will be able to exercise control over all matters requiring stockholder approval, including the election of directors, amendment of the Company’s certificate of incorporation and approval of significant corporate transactions. He will also have significant control over the Company’s management and policies. The directors elected by our controlling security holder will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or in limiting the ability of our other security holders to approve transactions that they may deem to be in their best interest. For example, our controlling security holder will be able to control the sale or other disposition of our operating businesses and subsidiaries to another entity.
The offering price of the common stock was arbitrarily determined, and therefore should not be used as an indicator of the future market price of the securities. Therefore, the offering price bears no relationship to our actual value, and may make our shares difficult to sell.
Since our shares are not listed or quoted on any exchange or quotation system, the offering price of $0.010 per share for the shares of common stock was arbitrarily determined. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. The offering price bears no relationship to the book value, assets or earnings of our Company or any other recognized criteria of value. The offering price should not be regarded as an indicator of the future market price of the securities.
You may experience dilution of your ownership interest because of the future issuance of additional shares of our common stock.
In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 100,000,000 shares common stock, par value $0.001 per share.
We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes.
Our common stock is considered a penny stock, which may be subject to restrictions on marketability, so you may not be able to sell your shares.
Our shares of common stock are defined as a penny stock under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000, or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 ($300,000 jointly with spouse), or in transactions not recommended by the broker-dealer. Consequently, the penny stock rules may make it difficult for you to resell any shares.
There is no assurance of a public market or that our common stock will ever trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.
There is no established public trading market for our common stock. Our shares have not been listed or quoted on any exchange or quotation system. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, which operates the OTC Pink Sheet, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
The Company uses a corporate office located at: 1398 W. Mason Hollow Drive, Riverton, Utah 84065. This facility is being provided to the Company free of charge by the Company’s CEO. The facility is provided free of charge until the company needs additional space to store inventory over 100,000 bottles. The Company does not currently require storage space for inventory over 100,000 bottles. There are currently no proposed programs for renovations, improvements or developments of the facility currently in use.
Item 3. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.
We are not currently a party in any legal proceeding or governmental regulatory proceeding nor are we currently aware of any pending or potential legal proceeding or governmental regulatory proceeding proposed to be initiated against us that would have a material adverse effect on us or our business.
Item 4. Mine Safety Disclosures.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Holders
As of June 28, 2022, 20,000,000 shares of our common stock were issued and outstanding and held by 65 holders of record.
Dividends
We have never declared or paid any cash dividend. We do not anticipate that we will declare or pay any dividends in the foreseeable future. Our current policy is to retain earnings, if any, to fund operations, and the development and growth of our business. Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, operation results, capital requirements, applicable contractual restrictions, restrictions in our organizational documents, and any other factors that our Board deems relevant.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 6. Selected Financial Data.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
The following discussion should be read in conjunction with the consolidated financial statements and the related notes thereto, as well as all other related notes, and financial and operational references, appearing elsewhere in this document.
Certain information contained in this discussion and elsewhere in this report may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created by that act. The safe harbor created by the Private Securities Litigation Reform Act will not apply to certain “forward looking statements” because we issued “penny stock” (as defined in Section 3(a)(51) of the Securities Exchange Act of 1934 and Rule 3(a)(51-1) under the Exchange Act) during the three year period preceding the date(s) on which those forward looking statements were first made, except to the extent otherwise specifically provided by rule, regulation or order of the Securities and Exchange Commission. We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this Report or which are otherwise made by or on our behalf. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “will”, “expect”, “believe”, “explore”, “consider”, “anticipate”, “intend”, “could”, “estimate”, “plan”, “propose” or “continue” or the negative variations of those words or comparable terminology are intended to identify forward-looking statements. Factors that may affect our results include, but are not limited to, the risks and uncertainties associated with: