ITEM 1. DESCRIPTION OF BUSINESS.
Statements in this Form 10-K Annual Report may be "forward-looking statements." Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by our management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and probably will, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this Form 10-K Annual Report, including the risks described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other documents which we file with the Securities and Exchange Commission.
In addition, such statements could be affected by risks and uncertainties related to our financial condition, factors that affect our industry, market and customer acceptance, competition, government regulations and requirements and pricing, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-K Annual Report.
DESCRIPTION OF BUSINESS
Overview
Optec International, Inc. (Formerly Green Meadow Products, Inc.) "GMP", the "Company", "we", "us" or "our" “Optec”) was incorporated in the State of Wyoming on June 22 of 2012. The Company initially acquired a product for trucking fleets on December 20, 2012. Subsequently on April 18, 2013, we made the decision to take the business in a different direction and sold the product for the trucking fleets at a loss. The Company's new focus was, and is, on the manufacturing and sales of natural products for the pet industry. The Company acquired a formula for natural pain relief
for animals on February 27, 2013 for consideration of $10,500, which was satisfied through the payment of $500 in cash and the issuance of 700,000 shares of our common stock valued at $0.014 per share, with the intent to manufacture the product for wholesale and retail distribution. We have subsequently named the product, Green Meadow PR formula. The acquisition gave the Company all rights surrounding the formula with no additional royalties, or any other payment due.
In addition we have acquired Optec Fuel Maximizer devices which we have tested and which fit within our concept of environmentally friendly products.
In the last year ending June 30, 2017, we have done marketing testing of organic dog treats in the attempt to perfect a treat formula which is appealing to dogs using a variation of our pain relief formula in the treats. We anticipate expanding the development of our dog treat formula in the next year ultimately with the goal of expanding sales nationally and internationally.
As a result our plan is to initiate the manufacturing of the natural pain relief product based on the formulation of the Green Meadow PR formula which we acquired as well as to initiate the manufacturing of pet treats using the same formula as in our pain relief formula. Currently we are in search of a manufacturer that would meet the specifications we require. Primarily a manufacturer that currently manufactures natural pet products while at the same time being able to do so at a cost effective price point. We anticipate with the proper funding (which at this time is an unknown) that we will be in the process of manufacturing and sales of our pain relief products and pain relief treat in the year 2017-2018.
We have also developed the "PawPal" which is a foam pad with a removable cover for dogs. The pad was developed to be used for dogs when they jump out of a car or down from a high object such as a couch or bed, to relieve the stress on joints from the impact of landing. We have designed the pad with high density foam and a tough removable poly cover which can be washed.
Many people take their dogs out into the outdoors, the dog jumps out of the car and depending on the type of terrain, joints can be impacted from the result of the jump or paws can be damaged from debris. This is especially the case in older dogs and dogs with hip dysplasia. The pad is lightweight and takes up little room and can be easily cleaned.
We believe that the PawPal is a perfect companion with the Green Meadow PR formula. The PawPal can be used as an aid in preventing injury as well as the Green Meadow PR formula should injury occur or for dogs that are older and have arthritic type conditions.
The prototypes have been manufactured in Mexico. We anticipate manufacturing and sales of the PawPal to commence sometime in 2017. However development and sales will be dependent on the proper funding; at this time we have no commitments for any type of funding whether it be debt or equity financing.
In the year ended June 30, 2017, we made a decision to review additional potential products for marketing and distribution in what we consider to be the “Green Sector” or “environmentally friendly” which would fit within our guidelines as environmentally friendly products. As a result we acquired seven Optec Fuel
Ma
ximizer devices for vehicles in March of 2017 for testing; comprised of 2 HD Optec Fuel Maximizers, 2 Intermediate Optec Fuel Maximizers, 1 Optec Fuel Maximizer for gas passenger cars, 1 Optec Fuel Maximizer for diesel passenger cars. The Optec Fuel
M
aximizer is an on demand technology designed for computer controlled gasoline and diesel engines for improved fuel efficiency while simultaneously reducing harmful emissions. We believe that the technology can reduce greenhouse gas emissions which in turn could conceivably aid in making the air much healthier in our cities. Should the Company’s testing of the devices prove to meet the claims of the manufacturer, we may enter into future discussions with Optec for potential licensing rights for the devices. (
For further information on Optec Products acquired-www.optecmpg.com
)
Pet Pain Relief Product
Sales and Marketing
In the last year we have done marketing testing of organic dog treats in the attempt to perfect a treat formula which is appealing to dogs using a variation of our pain relief formula in the treats. We anticipate expanding the development of our dog treat formula in the next year ultimately with the goal of expanding sales nationally and internationally.
In the past our revenues have come from the sale of the sub-licensing rights to the Green Meadow PR formula, the sale of the non-exclusive design rights of the PawPal and the retail sale of the pain relief product, Petaprin, in our market testing. We also sold our discontinued operations initial product for trucking fleets at a loss as we determined that we would focus on
the sales of licensing rights to our Green Meadow PR formula and the manufacturing and sales of our Green Meadow PR formula as well as the manufacturing and sales of our PawPal product.
Selling the licensing rights for the Green Meadow PR formula was a direction taken by us to aid in the capitalization of the Company. We intend to market our products in the United States under our label. None of the licensing rights previously sold to other companies prevent us from selling the Green Meadow PR formula under our own Green Meadow Products brand within the United States, while at the same time preventing those companies that we did market the product to from competing against us in the United States with the exception of Eastwinds Holding Corporation (as detailed below) and Sandstone Enterprises. Sandstone Enterprises acquired the distribution rights for the product in the states of Virginia and North Carolina. (For further details please see "Competition.").
On January 21, 2014, we signed a contract with Wholesale 4 You, Inc. whereby Wholesale acquired the licensing rights to manufacture and sell the pain relief product in Central and South America for the sum of $15,000. There are no royalties attached to the rights. The rights are exclusive to Central and South America only. The rights have no duration or termination constraints.
On February 28, 2014, we entered into a contract for the rights to our Green Meadow PR formulation with Mountain High Products, Inc.
In February of 2014, we entered into a contract with a distributor to sell the product in Virginia and North Carolina for the sum of $6,000. There were no royalties attached to the rights and the rights are exclusive to Virginia and North Carolina. The rights have no duration or termination constraints.
On March 28, 2014, we entered into an exclusive licensing rights contract with Mountain High, Inc for the rights to manufacture and sell both the Paw Pal product and the Green Meadow PR formula internationally with the exception of Central and South America for the sum of $20,000. The rights have no duration or termination constraints.
On September 18, 2014, we entered into a contract with Eastwinds Holding Corporation ("EWH") for the non-exclusive sub-licensing rights to manufacture and sell our Green Meadow PR formula in the United States with the exception of Virginia and North Carolina, for the sum of $15,000. There are no future royalties attached to the sale of these rights. Under the terms of the contract we were required to deliver all details, digital information, specifications and samples of the Green Meadow PR formula upon acceptance of the contract and upon receipt of the $15,000 payment, which we have done. We have no further obligations under the contract. Accordingly, we have recognized in full the $15,000 received from the sale of these non-exclusive licensing rights as revenue during the period. The rights have no duration or termination constraints.
We sold the licensing rights to Eastwinds Holding Corporation (EWH) for the United States with the stipulation that EWH would private label the product and that we would have the right to purchase the product from EWH if we so chose
at
EWH's cost plus 10% (of the price EWH receives the product from the manufacturer, including packaging, but not labeling or shipping). Under the terms of the agreement, should we purchase the product from EWH, we would private label the product. Further, that if we should establish a manufacturer and both parties are in agreement, EWH shall have the right to purchase the product from us at a price of cost plus 15% (of the price GM receives the product from the manufacturer, including packaging, but not labeling or shipping).
Green Meadow Pain Relief formula
We plan on initiating the manufacturing of the natural Green Meadow PR formula based on the formulation which we acquired. We are in search of a manufacturer that would meet the specifications we require; a manufacturer
that currently manufactures natural pet products while at the same time being able to do so at a cost effective price point.
Product Description
The Green Meadow PR Formula is a formula specifically for canines and felines. ETArol (tm), the freeze-dried whole extract of the New Zealand Green Lipped Mussel, is the active ingredient in a supporting blend of nutritive herbs. The Green Lipped Mussel is a source of glucosamine, chondroitin and glycosaminoglycans.
These natural joint health ingredients combined with omega-3 essential fatty acids are found in Green Lipped Mussel. ETArol(tm) also contains many nutrients and trace elements important for the health of dogs or cats.
As there are no studies on the formula, there is no certainty that the formula can or cannot be helpful to dogs and/or cats by using the Green Meadow PR Formula.
Ingredients
The Green Meadow PR formula contains:
·
ETArol(tm) - Exclusive Green Lipped Mussel Extract used as a major source of glucosamine,
·
Chondroitin and glycosaminoglycans.
·
Ginger Powder -
·
Green Tea Extract - Green tea is rich in catechin polyphenols (GTC), particularly epigallocatechin
·
gallate (EGCG). EGCG is an anti-oxidant:
·
Holy Basil Extract – An antioxidant
·
White Willow Bark Extract -
·
Skullcap Extract
-
·
Turmeric Extract - Curcumin is the part of turmeric that gives curry food its golden color and provides turmeric with curcuminoids.
·
Feverfew Extract - An herb -
·
Rosemary Extract - Another antioxidant
.
Other Ingredients: Rice Flour, DiCalcium Phosphate, Natural Liver Flavor, Molasses, Stearic Acid, Magnesium Stearate. There are no artificial preservatives, no salt, no fat, no wheat, no chemicals, no caffeine, and no artificial colors or flavors in the formulation.
Upon completion of the manufacturing process we plan on marketing the product on a wholesale level to larger retail pet distributors as well as to veterinarians and pet stores.
We also plan on marketing the product on a retail level through our website. We plan on using social media in our marketing efforts such as:
Twitter
Facebook
Instagram
Pinterest
Linkedin
Statista (The Statistics Portal) indicates there were 1.41 billion social network users worldwide in 2012 and projects that number to increase to 2.33 billion users by 2017.
We believe that marketing the natural pain relief product in a desirable (by pets) chewable tablet form using the internet and social media will be a cost effective marketing plan.
Our pain relief product could be classified as a drug and subsequently regulated by the food and drug administration.
The FDA may classify our pain relief products as a drug specifically because in our efforts to market or sell our pain relief product, we state here and elsewhere that our pain relief product may be used as a pain relief product in the pet industry. If our product was considered a "drug" under section 201(g) of the Act, the FDA (Food and Drug Administration) could seek to take enforcement action against us if we were deemed to be marketing an unapproved new animal drug. In addition if our product was considered a "drug" under section 201(g) of the Act the FDA it could be deemed to be a "new animal drug," as defined under section 201(v) of the Act because it may not be generally recognized among experts qualified by scientific training and experience to evaluate the safety and effectiveness of animal drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling. If our product were deemed to be a "new animal drug," as defined under section 201(v) of the Act, to be legally marketed as a new animal drug we must have an approved new animal drug application, conditionally approved new animal drug application, or index listing under sections 512, 571, and 572 of the Act. We have not applied for any such approvals from the FDA. We have no intention to apply to the FDA for approval for our pain relief product.
If our product was found to be a "drug" under section 201(g) of the Act by the FDA (Food and Drug Administration), we would be forced to stop any production and sales of the product which could adversely affect our business, financial condition or results of operations. Further, we may face potential liability for selling our product as a "drug".
PawPal
Currently, we have developed prototypes of the PawPal by a manufacturer in Mexico. We believe that to manufacture a quality cost effective product, we must find a manufacturer that will complete the product per our specifications. At this time, we are not certain the manufacturer in Mexico will be the manufacturer we will continue to use. Once we have determined the optimum manufacturer for the PawPal product and have initiated the manufacturing of the product we will initiate sales aligned with the selling of the Natural Pain relief product.
Industry Overview
The pet market is dominated by a number of very large retailers such as Petco and Petsmart to name a few. Natural pet remedies are sold by most veterinarians, pet stores and larger pet retail outlets. As the following chart portrays the pet market in the U.S. alone is a large market.
The following U.S. pet industry statistics are gathered from the APPA (American Pet Products Association)
Total U.S. Pet Industry Expenditures
YEAR
|
|
(billion $)
|
|
2014
|
|
$
|
58.51 Estimated
|
|
2013
|
|
$
|
55.72
|
|
2012
|
|
$
|
53.33
|
|
2011
|
|
$
|
50.96
|
|
2010
|
|
|
48.35
|
|
2009
|
|
$
|
45.50
|
|
2008
|
|
$
|
43.20
|
|
2007
|
|
$
|
41.20
|
|
2006
|
|
$
|
38.5
|
|
2005
|
|
$
|
36.30
|
|
2004
|
|
$
|
34.40
|
|
2003
|
|
$
|
32.40
|
|
2002
|
|
$
|
29.50
|
|
2001
|
|
$
|
28.50
|
|
1998
|
|
$
|
23
|
|
1996
|
|
$
|
21
|
|
1994
|
|
$
|
17
|
|
|
|
|
|
|
Estimated 2014 Sales within the U.S. Market
For 2014, it is estimated that $58.51 billion would be spent on our pets in the U.S.
Estimated Breakdown
:
Breakdown
|
|
(billion $)
|
|
Food
|
|
$
|
22.62
|
|
Supplies/OTC Medicine
|
|
$
|
13.72
|
|
Vet Care
|
|
$
|
15.25
|
|
Live animal purchases
|
|
$
|
2.19
|
|
Pet Services: grooming & boarding
|
|
$
|
4.73
|
|
Actual Sales within the U.S. Market in 2013
In 2013, $55.72 billion was spent on our pets in the U.S.
Breakdown:
|
|
(billion $)
|
|
Food
|
|
$
|
21.57
|
|
Supplies/OTC Medicine
|
|
$
|
13.14
|
|
Vet Care
|
|
$
|
14.37
|
|
Live animal purchases
|
|
$
|
2.23
|
|
Pet Services: grooming & boarding
|
|
$
|
4.41
|
|
GMP is cognizant of the intense competition and the industry trends and management has attempted to devise its business strategy to exist and survive within the realities of this new marketplace. The charts are meant to portray the overall expenditures on pets. We are not aware of what percentage of the expenditures in the previous charts are directed towards the specific amounts spent on animal dietary supplements to treat pain or specific pet products to help prevent pain; nor are we aware of any statistics that specifically address those markets in which we compete.
Competition
The pet medications market is competitive and highly fragmented. Our competitors consist of veterinarians, and online and traditional retailers. We believe that the following are the principal competitive factors in our market:
|
●
|
Product selection and availability, including the availability of prescription and non-prescription medications;
|
|
●
|
Reliability and speed of delivery;
|
|
●
|
Personalized service and convenience;
|
|
●
|
Quality of website content.
|
We will compete with veterinarians, pet retailers such as Petsmart and Petco as well as many online retailers of pet products for the sale of our natural pain relief products who sell prescription and non-prescription pet medications and other health products.
We intend to market our products in the United States. None of the licensing rights previously sold to other companies prevent us from selling the Green Meadow PR formula under our own Green Meadow Products brand within the United States, while at the same time preventing those companies that we did market the product to from competing against us in the United States with the exception of Eastwinds Holding Corporation and Sandstone Enterprises, which acquired the licensing rights to distribute the product in North Carolina and Virginia (however we retain the right to sell the product under our label in those states).
We sold the licensing rights to Eastwinds Holding Corporation (EWH) for the United States with the stipulation that EWH would private label the product and that we would have the right to purchase the product from EWH if we so chose
at
EWH's cost plus 10% (of the price EWH receives the product from the manufacturer, including packaging, but not labeling or shipping). Under the terms of the agreement, should we purchase the product from EWH, we would private label the product. Further, if we should establish a manufacturer and both parties are in agreement, EWH shall have the right to purchase the product from us at a price of cost plus 15% (of the price GM receives the product from the manufacturer, including packaging, but not labeling or shipping).
Selling the rights to EWH could affect our ability to successfully market the product even though both EWH and GM would be selling the product under their own label. Regardless, EWH would be a direct competitor for the United States Market which could impact our ability to successfully market the product under our label.
There are similar products to ours which are available from numerous other sources, including other distributors and manufacturers. Consolidation in the animal health products industry could result in existing competitors increasing their market share, which could give them greater pricing power, decrease our revenues and profitability, and increase the competition for customers. We purchase our current pain relief product, Petaprin, which is private labeled for us, from Vitanique who is also a direct competitor as they sell the same product under their name.
Many pet owners may prefer the convenience of purchasing their pet medications or other health products at the time of a veterinarian visit. In order to effectively compete with veterinarians, we must continue to educate pet owners about the potential benefits of a natural pain relief product, convenience, and savings offered by our Company.
According to the American Pet Products Manufacturers Association, pet spending in the United States is estimated to have increased 4.7% to $58.51 billion in 2014. Pet supplies and medications represented $13.6 billion, or 25% of the total spending on pets in the United States. The pet medication market that we participate in is estimated to be approximately $4.4 billion, with veterinarians having the majority of the market share. The dog and cat population is approximately 165 million, with approximately 62% of all households having a pet.
We believe that the following are the main competitive strengths that will differentiate our products from the competition:
|
●
|
With our formula, a chewable tablet that pets will potentially eat as they would a treat;
|
|
●
|
unique "niche" products inclusive of our Green Meadow PR formula as well as out PawPal.
|
There are similar products to ours available from numerous other sources, including other distributors and manufacturers. We have not done a market study to determine all of the product lines which are similar to ours. We will compete with veterinarians, large pet retailers such as Petsmart and Petco as well as many online retailers of pet products for the sale of our natural pain relief products who sell prescription and non-prescription pet medications and other health products.
While our Green Meadow PR formula offers a formula comprised of the ingredients, elaborated under Product Description, in a specific formulation, there are many other companies that offer products with some or all of the same ingredients in different formulations. We do not know the exact formulation of our competitors. As such there may be competitors that offer the exact formulation or that offer a product with similar ingredients in a different formulation.
The Company does not intend to directly compete against the larger pet retailers and manufacturers, and it will not attempt to finance any projects beyond the limited scope of its business plans and on emerging distribution opportunities. Regardless, it will still have competition from a wide range of even smaller online distributors of pet products as well as the veterinarians and pet stores, all more established and, in most instances, better capitalized than the Company.
Regulation
Our businesses are regulated by governmental authorities in the jurisdictions in which we operate. Because of our international operations, we must comply with diverse and evolving regulations. Regulation relates to, among other things, management, licensing, foreign investment, use of confidential customer information and content. Our failure to comply with all applicable laws and regulations could result in, among other things, regulatory actions or legal proceedings against us, the imposition of fines, penalties or judgments against us or significant limitations on our activities. In addition, the regulatory environment in which we operate is subject to change. New or revised requirements imposed by governmental authorities could have adverse effects on us, including increased costs of compliance. Changes in the regulation of our operations or changes in interpretations of existing regulations by courts or regulators or our inability to comply with current or future regulations could adversely affect us by reducing our revenues, increasing our operating expenses and exposing us to significant liabilities. Our business involves risks of liability associated with the Health and Pet industries, which could adversely affect our business, financial condition or results of operations. As such, we may face potential liability for any of:
|
defamation;
|
|
invasion of privacy;
|
|
copyright infringement;
|
|
actions for royalties and accountings;
|
|
trademark misappropriation;
|
|
trade secret misappropriation;
|
|
breach of contract;
|
|
negligence; and/or
|
|
other claims based on the nature and content of the materials distributed.
|
These types of claims have been brought, sometimes successfully, against merchandisers, online services and other manufacturers, developers and distributors of health and pet related products. We could also be exposed to liability in connection with material available through our Internet sites. We currently do not have limited liability insurance and have no current plans to obtain such insurance which could have a material adverse effect on us.
Our products have not been approved by the FDA nor have we applied for approval. The FDA may classify our pain relief products as a drug specifically because in our efforts to market or sell our pain relief product we state here and elsewhere that our pain relief product may be used as a pain relief product in the pet industry. If in fact our product was considered a "drug" under section 201(g) of the Act, the FDA (Food and Drug Administration) could seek to take enforcement action against us if we were deemed to be marketing an unapproved new animal drug. In addition if our product was considered a "drug" under section 201(g) of the Act the FDA it could be deemed to be a "new animal drug," as defined under section 201(v) of the Act because it may not be generally recognized among experts qualified by scientific training and experience to evaluate the safety and effectiveness of animal drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling. If our product were deemed to be a "new animal drug," as defined under section 201(v) of the Act, to be legally marketed as a new animal drug we must have an approved new animal drug application, conditionally approved new animal drug application, or index listing under sections 512, 571, and 572 of the Act. We have not applied for an animal drug application with the FDA. We have no intention to apply to the FDA for approval for our pain relief product.
If our product was found to be a "drug" under section 201(g) of the Act the FDA (Food and Drug Administration) we would be forced to stop any production and sales of the product which could adversely affect our business, financial condition or results of operations. Further we may face potential liability for selling our product as a "drug". Further if we were found to be marketing an unapproved drug by the FDA we could potentially face FDA enforcement action. (See: Risk Factors on Page 10).
Intellectual Property & Proprietary Rights
We regard substantial elements of our businesses and website as proprietary and we shall attempt to protect them by relying on copyright, trademark, service mark and trade secret laws, restrictions on disclosure and transferring title and other methods. To date we have no copyrights or trademarks that have been applied for. We do not believe that our Green Meadow PR formula or the PawPal is patentable and therefore will not expend capital in attempting to patent the products. However we will attempt to trademark the name PawPal; but as yet have not done so and do not know whether once the trademark is applied for, that it would be granted. Without patent or trademark protection it is possible that our formula and PawPal products could be duplicated by a Company with greater resources that us; which in turn could take away from any current market share or
any
market share that we may create in the future.
Optec Devices
Sale and Marketing
We acquired seven Optec Fuel
M
aximizer devices
for vehicles
from OPTEC
Optimized Fuel Technologies, one of our suppliers,
in March of 2017 for testing; comprised of 2 HD Optec Fuel Maximizers, 2 Intermediate Optec Fuel Maximizers, 1 Optec Fuel Maximizer for gas passenger cars, 1 Optec Fuel Maximizer for diesel passenger cars. The Optec Fuel
M
aximizer is an on demand technology designed for computer controlled gasoline and diesel engines for improved fuel efficiency while simultaneously reducing harmful emissions. We believe that the technology can reduce greenhouse gas emissions which in turn could conceivably aid in making the air much healthier in our cities. Should the Company’s testing of the devices prove to meet the claims of the manufacturer we may enter into future discussions with Optec for potential licensing rights for the devices. (
For further information on Optec Products acquired-www.optecmpg.com
)
Currently, we have sold the devices acquired from OPTEC to Autovative Technologies, Inc. at a reduced price in order to obtain their testing results for the products so that we might better understand more precisely the benefits and effects of using the OPTEC devices. We anticipate making a determination of how we will proceed with the OPTEC devices in the first quarter of 2017.
Employees
We are a new, developing company and currently have only two part-time employee
s
, Peter Sallonne our president and CEO and Stanley Windhorn our Secretary.
We entered into an agreement on January 15, 2015 with, Stanley Windhorn, for a salary to be paid in the amount of $2,000 per month. For the three months ended March 31, 2015, $6,000 was paid to Mr. Windhorn per the agreement. Subsequently, we determined that the revenues generated by the Company were not sufficient to support operations and a salary. We entered into a new employment agreement on April 1, 2015 which supersedes any past agreements whereby Stanley Windhorn under the new agreement will be awarded compensation at the discretion of the Company’s board. The Company has not incurred any salary under this new agreement since April 1, 2015 to the date of the issuance of this Form 10K.