UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

 

Commission file number: 333-206839

 

HEALTH-RIGHT DISCOVERIES, INC.

(Exact name of registrant as specified in its charter)

 

Florida	45-3588650
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

 

18851 NE 29th Avenue, Suite 700, Aventura, Florida 33180

(Address of Principal Executive Offices)

 

(305) 705-3247

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 

 

Large Accelerated Filer ¨	Accelerated Filer ¨
Non-accelerated filer ¨	Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

The number of shares outstanding of the registrant’s common stock, $0.001 par value, as of November 2, 2016 was 17,533,332 shares.

 

 

TABLE OF CONTENTS

 

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015	3
	Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (unaudited)	4
	Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)	5
	Notes to Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative Disclosures About Market Risk.	14
Item 4.	Controls and Procedures.	14
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	15
Item 1A.	Risk Factors.	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	15
Item 3.	Defaults Upon Senior Securities.	15
Item 4.	Mine Safety Disclosures.	15
Item 5.	Other information.	15
Item 6.	Exhibits.	15
SIGNATURES		15

 

 

HEALTH-RIGHT DISCOVERIES, INC.

BALANCE SHEETS

(Unaudited)

 

		September 30, 2016				December 31, 2015
ASSETS
CURRENT ASSETS:
Cash		$	544			$	1,957
Inventories			77				2,269
Total Current Assets			621				4,226
TOTAL ASSETS		$	621			$	4,226
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Credit card payable		$	7,718			$	7,222
Loans payable - related parties			155,335				126,845
Accrued interest - related parties			19,516				1,813
Salaries payable - related party			156,000				130,000
Accrued expenses			20,798				3,546
Total Current Liabilities			359,367				269,426
STOCKHOLDERS' DEFICIENCY
Preferred Stock, .001 par value, 5,000,000 shares authorized No shares issued and outstanding September 30, 2016 and December 31, 2015			-				-
Common Stock, .001 par value, 100,000,000 shares authorized 17,533,332 and 17,133,332  shares issued and outstanding September 30, 2016 and December 31, 2015, respectively			17,533				17,133
Additional Paid in Capital			589,717				550,117
Accumulated Deficit			(965,996	)			(832,450	)
TOTAL STOCKHOLDERS' DEFICIENCY			(358,746	)			(265,200	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY		$	621			$	4,226

 

The accompanying notes are an integral part of these financial statements

 

 

HEALTH-RIGHT DISCOVERIES, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

		Nine Months Ended September 30,								Three Months Ended September 30,
		2016				2015				2016				2015
Sales		$	8,959			$	18,101			$	1,279			$	4,520
Cost of Sales			3,054				3,776				524				1,112
Gross Profit			5,905				14,325				755				3,408
COSTS AND EXPENSES:
General and administrative			120,771				64,047				19,974				27,962
Interest expense - related parties			18,680				3,479				7,328				1,094
Total Cost and expenses			139,451				67,526				27,302				29,056
Loss before income tax provision			(133,546	)			(53,201	)			(26,547	)			(25,648	)
Income tax provision			-				-
NET LOSS		$	(133,546	)		$	(53,201	)		$	(26,547	)		$	(25,648	)
Loss per common share		$	(0.01	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Weighted average common shares outstanding			17,408,332				17,128,832				17,533,332				17,133,332

 

The accompanying notes are an integral part of these financial statements

 

 

HEALTH-RIGHT DISCOVERIES, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Nine Months Ended September 30,
		2016				2015
OPERATING ACTIVITIES:
Net loss		$	(133,546	)		$	(53,201	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation			40,000				1,000
Accrued salary to related party			26,000				39,000
Changes in operating assets and liabilities
Inventories			2,192				(2,343	)
Credit card payable			496				(550	)
Accrued interest			17,703				2,266
Accrued expenses			17,252				-
NET CASH USED IN OPERATING ACTIVITIES			(29,903	)			(13,828	)
FINANCING ACTIVITIES:
Proceeds of loan from related parties			29,500				51,742
Repayment of related party loan			(1,010	)			(12,972	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			28,490				38,770
INCREASE (DECREASE) IN CASH			(1,413	)			24,942
CASH - BEGINNING OF PERIOD			1,957				609
CASH - END OF PERIOD		$	544			$	25,551

 

The accompanying notes are an integral part of these financial statements

 

 

HEALTH-RIGHT DISCOVERIES, INC.

Notes to Financial Statements

September 30, 2016

(Unaudited)

 

NOTE 1 – Business and Basis of Presentation

 

Health-Right Discoveries, Inc. (the “Company”) was formed under the laws of the State of Florida on October 12, 2011 under the name Four Plex Partners, Inc. The company changed its name to Health-Right Discoveries, Inc. on March 22, 2012. The Company’s business is to develop and market an innovative portfolio of both prescription nutritional, OTC monograph and natural products that primarily focus on factors relating to stress-induced conditions and diseases.

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as September 30, 2016 and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Form 10-K for the year ended December 31, 2015 filed with the SEC on April 13, 2016.

 

NOTE 2 - Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

 

 

Cash

 

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

 

Revenue Recognition

 

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”. We record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided.

 

Inventories

 

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

 

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified.  Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company's statements of operations.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates are comparable to rates of returns for instruments of similar credit risk.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

 

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

 

Stock-based compensation

 

The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the fair value of the award is calculated on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for common shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, the fair value of the award on the date of grant is calculated in the same manner as employee awards. However, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

 

Advertising

 

Advertising and marketing expenses are charged to operations as incurred.

 

Income Taxes

 

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

  

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

NOTE 3 – Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues since inception. The Company has sustained losses since inception, and has a stockholders’ deficiency of $358,746 at September 30, 2016. These factors among others raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  

 

 

The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 4 – Stockholders’ Equity

 

The Company has authorized 100,000,000 shares of common stock $.001 par value and 5,000,000 shares of preferred stock $.001 par value.

 

During the nine months ended September 30, 2016 the Company issued 400,000 shares of common stock for services rendered which were valued at $40,000. The Company valued these shares based on the per share price in which unaffiliated investors purchased shares of common stock in a private placement.

 

During the period ended September 30, 2015, the Company issued 10,000 shares of common stock for services rendered which were valued at $1,000. The Company valued these shares based on the per share price in which unaffiliated investors purchased shares of common stock in a private placement.

 

NOTE 5 – Related Party

 

The Company has a secured promissory note with a founder and director (“director”) of the Company. During the nine months ended September 30, 2016 there were no advances on this note. These borrowing bear interest at 3% per annum with no maturity date. As of September 30, 2016 the principle balance due on this note was $45,000.

 

Effective July 30, 2015 the Company entered into a secured future advance promissory note with the director referred to above for a total amount of $75,000. During the nine months ended September, 2016 the Company borrowed $25,000 in regards to this note. The note bears interest at 7.5% per annum and matures on July 31, 2016. As of September 30, 2016 the principal balance due on this note was $106,845.

 

On April 13, 2016 a director of the Company provided a short term loan of $2,500 with an interest rate of 3% and is payable on demand.

 

On July 22, 2016 the President of the Company provided a short term loan of $2,000 with an interest rate of 3% and is payable on demand.

 

The Company’s President has made loans the Company through direct charges on his credit card to pay for working capital purposes. The balance of this loan at September 30, 2016 and December 31, 2015 was $0 and $1,009 respectively.

 

The Company’s board of directors approved a salary to the Company’s president in the amount of $52,000 per annum plus a car allowance of $600 per month. As of September 30, 2016 and December 31, 2015 the amount unpaid and accrued amount is $156,000 and $130,000 respectively. Effective in August 2013, the president waived his car allowance which amount has not been accrued since that date. The president resumed his car allowance in July of 2015. Effective January 1, 2016, the president has begun being paid a salary of $1,000 per week. Due to lack of funding for the period ended September 30, 2016 the president has continued to accrue salary. The Company has also accrued his car allowance for the period ended September 30, 2016.

 

 

NOTE 6 – Credit card payable

 

The Company utilizes a credit card for working capital purposes. The card has a credit limit of $9,000, with a balance of $7,718 and $7,222 outstanding at September 30, 2016 and December 31, 2015 respectively and bears interest at 21.49% per annum.

 

NOTE 7 – Income Taxes

 

As of September 30, 2016, the Company had approximately $965,000 of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2031.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.  

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

The Company files U.S. federal and state of Florida tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2012. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

 

NOTE 8 – Subsequent events

 

Management has evaluated subsequent events through, the date which the financial statements were available to be issued.

 

 

Item 2.                    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Unless the context otherwise requires, references in this report to “HRD,” “Health-Right,” “the Company,” “we,” “our” and “us” refers to Health-Right Discoveries, Inc.

 

Forward-Looking Statements

 

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements 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 such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

Background

 

Health-Right is a natural biotech company that combines science and nutrition to develop branded ingredients, formulations and products that seek to provide a better quality of life for consumers who primarily suffer from stress-induced viruses and diseases. These formulations and products are developed naturally, by utilizing and scientifically combining various ingredients to help positively influence the interrelationship between stress and the immune system.

 

The Company believes the formulation platform it has developed in order to help address the negative nutritional interrelationship between stress, a weakened immune system and certain conditions and diseases is now in place. At the end of 2014, Health-Right completed initial test-marketing of Advanced H-Plex Defense Formula 11, its first product (“H-Plex Defense”), an all-natural dietary supplement whose formulation seeks to address less than optimal nutrition and nutritional deficiencies to aid persons afflicted with Herpes Simplex Virus 1 (“HSV-1”). Based on customer feedback, HRD believes that it has developed an alternative approach to help counteract and improve the causes/triggers of HSV-1, a virus that affects over an estimated 100 million people in the U.S. alone with symptoms including tingling, itching, blisters, sores and rashes with an estimated $5 billion marketplace for treatments by 2017, according to Global Industry Analysts, Inc.

  

Notwithstanding the foregoing, the Company has not conducted formal clinical trials of H-Plex Defense. Subject to receipt of necessary funding, the Company intends to do so, utilizing the services of Miami Research Associates (“MRA”), one of the largest, multi-special clinical research centers in the United States. Management has had multiple meetings and discussion with MRA and has negotiated Protocol Development Agreement for clinical trials, the finalization and execution of which is subject to receipt of necessary funding.

 

We believe that Health-Right is uniquely positioned because its approach of not just responding to stress induced conditions and diseases, but proactively addressing stress-induced problems before they wreak havoc on multiple body systems. The Company’s research, formulation and nutritional theories offer wide ranging potential because we believe that our formulation platform has the potential to be successfully applied In the prescription nutritional/medical foods, OTC monograph drug and all-natural dietary supplement/nutraceutical arenas. HRD anticipates that it will be able to leverage the results of its planned clinical trials in order to market ingredients, branded ingredients, private label ingredients and finished products. We also believe that we will be positioned to license our formulations to strategic partners in order to expedite and achieve product commercialization and cross-promotion.

 

 

In addition to its initial product, the Company plans to focus its efforts on areas where it believes that HRD can commercialize and market products on an expedited basis. We believe that are other potential applications for our formulations that we have in the pipeline, including all-natural products designed to relieve symptoms associated with:

 

•

compromised immune systems and related muscle and joint pain;

•

the common cold and flu viruses; and

•

constipation resulting from prescription medications.

 

By adapting its formulation platform to applications such as these, the Company believes that it will be able to generate revenues in the short term in the following markets:

 

•

the Over-the-Counter (“OTC”) monograph drug industry;

•

the prescription nutritional marketplace; and

•

the natural products space.

 

The Company intends to use its contacts in the healthcare, medical foods and natural products industries to market and sell its proposed products either directly or through strategic partners and licensees.

 

In addition to the foregoing, the Company is exploring various opportunities for growth and revenue generation through the acquisition of complementary products, technologies or companies.

 

To date, the Company has generated limited revenues and has operated with limited capital. The Company will require significant capital to implement its business plan. There can be no assurance that the Company can raise the necessary funds, on favorable terms or otherwise. Failure to obtain sufficient capital will substantially harm the Company’s prospects.

 

Corporate Information

 

The Company was incorporated in the state of Florida on October 11, 2011 under the name “Four Plex Partners, Inc.” and changed its name to “Health-Right Discoveries, Inc.” on March 22, 2012.

 

Our executive offices are located at 18851 NE 29th Avenue, Suite 700, Aventura, Florida 33180 and our telephone number is (305) 705-3247. Our corporate website is www.health-right.com. Information appearing on our corporate website is not part of this report.

 

Results of Operations

 

Nine months ended September 30, 2016 compared to nine months ended September 30, 2015

 

We had revenues of $8,959 for the nine months ended September 30, 2016 as compared to $18,101 for the nine months ended September 30, 2015, reflecting the tapering off of trial-marketing of H-Plex Defense. Cost of sales were $3.054 in the 2016 period as compared to $3,776 in the 2015 period, which resulted in gross profit of $5,905 in the 2016 period, as compared to $14,325 in the 2015 period.

 

General and administrative costs were $120,771 for the nine months ended September 30, 2016 as compared to $64,047 in the comparable period in 2015, primarily reflecting increased expenses related to the implementation of the Company’s business plan and incurred as a public company with the Company having had its initial Registration Statement on Form S-1 having been declared effective with the Securities and Exchange Commission in the fourth quarter of 2015. Interest expense to related parties increased to $18,680 in the 2016 period from $3,479 in the 2015 period, reflecting the increased principal balance of shareholder loans.

 

Net losses for the nine months ended September 30, 2016 and September 30, 2015, were $133,546 and $53,201, respectively.

 

 

Three months ended September 30, 2016 compared to three months ended September 30, 2015

 

We had revenues of $1,279 for the three months ended September 30, 2016 as compared to $4,520 for the three months ended September 30, 2015, reflecting the tapering off of trial-marketing of H-Plex Defense. Cost of sales declined to $524 in the 2016 period from $1,124 in the 2015 period, which resulted in gross profit of $755 in the 2016 quarter, as compared to $3,408 in the 2015 quarter.

 

General and administrative costs were $19,974 for the three months ended September 30, 2016 as compared to $27,962 in the comparable period in 2015, reflecting limitations in 2016 on the Company’s capital resources related to the implementation of the its business plan. Interest expense to related parties increased to $7,328 in the 2016 period from $1,094 in the 2015 period, reflecting the increased principal balance of shareholder loans.

 

Net losses for the three months ended September 30, 2016 and September 30, 2015, were $26,547 and $25,648, respectively.

 

Liquidity and Capital Resources

 

As of September 30, 2016, total assets were $621, as compared to $4,226 on December 31, 2015. Total current liabilities as of September 30, 2016 were $359,367, as compared to $269,426 as of December 31, 2015, reflecting the increase in principal balance of shareholder loans.

 

For the nine months ended September 30, 2016, we raised $29,500 through shareholder loans, which was offset by repayments of $1,010 in shareholder loans.

 

Net cash used in operating activities was $29,903 for the nine months ended September 30, 2016, as compared to the $13,828 for the same period in 2015.

 

Net cash provided by financing activities in the 2016 period was $28,490, as compared to $38,770 in the 2015 period reflecting the increased balance of shareholder loans.

 

Our primary source of capital to develop and implement our business plan has been from private placements of our securities and shareholder loans.

 

The Company will require additional financing to complete development to commercially launch and market its planned products. Our independent auditors report for the year ended December 31, 2015 includes an explanatory paragraph strategy that our lack of revenues and working capital raise substantial doubt about our ability to continue a growing concern. While we are seeking to raise additional financing, either through government grants and loans or additional securities or offerings, there can be no assurance that additional financing will be available to the Company when needed, on favorable terms or otherwise. Moreover, any such additional financing may dilute the interests of existing shareholders. The absence of additional financing, when needed, could cause the Company to delay implementation of its business plan in whole or in part, curtail its business activities and seriously harm the Company and its prospects.

 

 

Item 3.

Quantitative Disclosures About Market Risks.

 

As a “smaller reporting company,” we are not required to provide the information required by this Item.

 

Item 4.

Controls and Procedures.

 

Management’s Report on Disclosure Controls and Procedures

 

Our President, as our sole executive officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, as of September 30, 2016, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the Securities and Exchange Commission (the “SEC”), including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our President, as our Principal Executive, Financial and Accounting Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our President has concluded that as of September 30, 2016, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(b) of our Annual Report on Form 10-K for the year ended December 31, 2015.

 

Our President does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in Internal Controls Over Financial Reporting

 

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

  

Item 1A.

Risk Factors.

 

See “Item 1.A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

Item 2..

Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 4..

Mine Safety Disclosures.

 

Not applicable.

 

Item 5..

Other Information.

 

None.

 

Item 6.

Exhibits.

 

Exhibit Number		Description of Exhibit
31.1		Section 302 Certification
32.1		Section 906 Certification

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	HEALTH-RIGHT DISCOVERIES, INC.
Dated:  November 2, 2016	By:	/s/ David Hopkins
		David Hopkins, President
		(Principal Executive, Financial and Accounting Officer)