UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2020
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from_____________ to _____________.
Commission file number 000-55572
Healthy Extracts Inc.
(Exact name of registrant as specified in its charter)
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Nevada
(State or other jurisdiction of
incorporation or organization)
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47-2594704
(I.R.S. Employer
Identification No.)
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6445 S. Tenaya Way, Suite B110
Las Vegas, NV
(Address of principal executive offices)
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89113
(Zip Code)
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Registrant’s telephone number, including area code (702)
463-1004
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading
Symbol(s)
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Name of each exchange on which registered
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None |
N/A |
None |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes
☐ No
☒
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act. Yes
☐ No
☒
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes ☒
No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer |
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Accelerated filer |
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| Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicated by check mark whether the registrant has filed a report
on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S. C. 7262(b))
by the registered public accounting firm that prepared or issued
its annual report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
The aggregate market value of the voting and non-voting common
equity held by non-affiliates as February 16, 2021 was $7,090,074,
based on the closing price of $0.055 on June 30, 2020.
As of February 16, 2021, there were 308,887,410 shares of common
stock, par value $0.001, issued and outstanding.
Documents Incorporated by Reference
None.
HEALTHY EXTRACTS INC.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
PART I
Cautionary Statement Regarding Forward Looking
Statements
This Annual Report includes forward-looking statements within the
meaning of the Securities Exchange Act of 1934 (the “Exchange
Act”). These statements are based on management’s beliefs and
assumptions, and on information currently available to management.
Forward-looking statements include the information concerning
possible or assumed future results of operations of the Company set
forth under the heading “Management’s Discussion and Analysis of
Financial Condition or Plan of Operation.” Forward-looking
statements also include statements in which words such as “expect,”
“anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider”
or similar expressions are used.
Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions. The
Company’s future results and shareholder values may differ
materially from those expressed in these forward-looking
statements. Readers are cautioned not to put undue reliance on any
forward-looking statements.
ITEM 1 – BUSINESS
Corporate History
We were incorporated on December 19, 2014 in the State of Nevada.
Historically, we provided cloud-based software to detect
advertising fraud on the internet. We abandoned this business in
early 2018.
On October 17, 2017, we acquired Eqova Life Sciences, a Nevada
corporation (“Eqova”). Eqova was a wholly-owned subsidiary through
which we conduct our hemp oil product business. We closed this
business in the second quarter of 2019.
In November 2017, we formed Healthy Extracts, LLC, a wholly-owned
subsidiary through which we conduct some of our CBD business.
On February 4, 2019, we acquired BergaMet NA, LLC, a Delaware
limited liability company (“BergaMet”). BergaMet is a wholly-owned
subsidiary through which we conduct our nutraceuticals
business.
On April 3, 2020, we acquired Ultimate Brain Nutrients, LLC, a
Delaware limited liability company (“UBN”). UBN is a wholly-owned
subsidiary through which we conduct our plant-based neuro-products
business.
On October 23, 2020, we changed our name from Grey Cloak Tech Inc.
to Healthy Extracts Inc. to more accurately reflect our business.
We are currently waiting for The Financial Industry Regulatory
Authority (FINRA) to issue our Company a new ticker symbol before
we file our 8-K for this change.
Overview
Beginning with the acquisition of Eqova in 2017, we began to
transition away from our software services business and shifted our
focus to new lines of business. Eqova was focused on the production
and sale of hemp oil products through the medical practitioner
market. The addition of BergaMet, an established company that was
already generating revenues when we acquired it, added unique
products that fit nicely with our existing business. We plan on
expanding our product line to other nutraceuticals.
BergaMet NA, LLC
On February 4, 2019, we issued and exchanged shares of our common
stock for all of the outstanding equity securities of BergaMet.
Through the exchange, we were able to secure funds in BergaMet to
pay off debt and provide capital for operations. We paid an
aggregate of over $500,000 to retire convertible debt. Prior to the
exchange, we also entered into agreements with other holders of
convertible debt to convert their notes for an aggregate of 806,015
shares of common stock. We also entered into conversion agreements
with the holders of our Series A Convertible Preferred Stock
whereby all of the outstanding preferred stock was converted for an
aggregate of 15,592,986 shares of common stock. The conversion and
repayment of the preferred stock and convertible debt have greatly
improved our capitalization structure.
The acquisition of BergaMet has been extremely beneficial to us. In
addition to paying off our convertible debt, we are now able to
better position ourselves in the market. BergaMet is an established
company that was already generating revenues when we acquired it.
BergaMet also has unique products that will fit nicely with our
existing business. We now plan on expanding our product line to
other nutraceuticals.
Ultimate Brain Nutrients, LLC
On April 3, 2020, we entered into a Share Exchange Agreement with
Ultimate Brain Nutrients, LLC, a Delaware limited liability company
(“UBN”), and the members of UBN, whereby we issued and exchanged
90,000,960 shares of our common stock for all of the outstanding
equity securities of UBN. UBN is now our wholly-owned subsidiary.
The shares of common stock issued in the Exchange were equal to
approximately 42.5% of our outstanding common stock immediately
following the exchange.
UBN is a science-based company that develops unique, plant-based
superior health technology neuro-products that provide natural
brain solutions. UBN has numerous proprietary products, with four
unique patent-pending formulations and one patent issued.
The Market
Bergamot
BergaMet, LLC holds the rights to distribute BergaMet products in
the United States and Mexico.
Bergamot, or citrus bergamia, is a rare citrus fruit native to the
Calabrian region of Southern Italy. Due to sensitivity to the
weather and soil conditions, this region accounts for 80 percent of
the worldwide production of bergamot. This superfruit has been used
for decades in the Calabrian regions for its beneficial effects in
promoting overall health - particularly, in support of cholesterol,
cardiovascular, and metabolic health[1].
Citrus bergamot contains five unique antioxidant polyphenols in
unusually concentrated amounts, which help protect your body’s
trillions of cells from free radical damage. The juice and
albedo of bergamot has a unique profile of flavanoid and
glycosides, such as neoeriocitrin, neohesperidin, naringin, rutin,
neodesmin, rhoifolin, and poncirin. Naringin has been shown to be
beneficial in animal models of atherosclerosis, while neoeriocitrin
and rutin have been found to exhibit a strong capacity to prevent
LDL from oxidation. Importantly, bergamot juice is rich in
brutieridine and melitidine with an ability to inhibit HMG-CoA
reductase, which inhibits the liver’s ability to produce LDL,
resulting in reduced cholesterol levels in liver cells.
BergaMet sells its bergamot products in capsule form on its website
and on distribution sites such as Amazon.
Bergamot Products
Our bergamot products are sold in capsule form under the following
product labels:
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BergaMet Cholesterol Command |
Ultimate Brain Nutrients
Our UBN subsidiary is a science-based company that develops unique,
plant-based superior health technology neuro-products that improve
brain health, including memory, cognition, focus and
neuro-energy.
UBN’s KETONOMICS® proprietary formulations – targeting brain
activity, focus, headache and cognitive behavior — provide multiple
intellectual property license opportunities for monetizing the
company’s portfolio. Sales and licensing opportunities include
multiple beverage formats, individual products, proprietary
mixtures and other food platforms.
[1] These statements have not been evaluated by the Food and Drug
Administration. These products are not intended to diagnose, treat,
cure, or prevent any disease.
UBN has five unique formulation patents – one issued and four
pending – targeting brain activity, focus, headache and cognitive
behavior.
UBN's (http://UBNutrients.com) mission is to naturally ‘Create
Better Lifestyles with Superior Health Technology through our
science-based products.” UBN’s all-natural, sugar-free and
caffeine-free proprietary formulations are the result of 20 years
of scientific research and are positioned to provide consumer
neuro-products that are natural brain solutions. UBN’s KETONOMICS®
supplementation has also been studied in sports physiology, with
specific regard to its potential benefits for competitive
performance and endurance
UBN Products
Over 50 million Americans consume unhealthy energy shots and drinks
each day, while the neuro/energy market generates over $16 billion
per year in revenue[2].
Within this growing market, UBN is advancing its position to meet
rising consumer demand for healthy, science-based options with
clinical studies. The company’s KETONOMICS® proprietary
formulations have been proven to naturally elevate brain energy and
function, including memory, cognition and focus.
UBN’s KETONOMICS® supplementation has also been studied in sports
physiology, with specific regard to its potential benefits for
competitive performance and endurance.
Patents and Intellectual Property Rights
Our subsidiary, UBN, has four unique patent-pending formulations
and two patents issued. We have not otherwise filed for any
intellectual property protection. However, we rely on intellectual
property law that may include a combination of copyright, trade
secret and confidentiality agreements to protect our intellectual
property. Our employees and independent contractors will be
required to sign agreements acknowledging that all inventions,
trade secrets, works of authorship, developments and other
processes generated by them on our behalf are our property, and
assigning to us any ownership that they may claim in those works.
Despite our precautions, it may be possible for third parties to
obtain and use without consent intellectual property that we own.
Unauthorized use of our intellectual property by third parties, and
the expenses incurred in protecting our intellectual property
rights, may adversely affect our business.
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Status |
Serial No. |
Date Filed |
Title |
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Pending |
15/743,448 |
January 10, 2018 |
PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN
TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES |
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Pending/In Appeal |
16/501,502 |
April 22, 2019 |
PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN
TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES |
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Pending |
16/350,663 |
December 19, 2018 |
COMPOSITIONS OF MEDIUM CHAIN
TRIGLYCERIDES AND PLANT-BASED NUTRIENTS FOR BRAIN
HEALTH |
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Issuing |
16/350,664 |
December 19, 2018 |
COMPOSITIONS WITH KETOGENIC AGENTS,
CANNABINOIDS, PLANT-DERIVED SUBSTANCES AND
MICRONUTRIENTS |
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Issued |
16/501,249
(Patent No. 10,500,182)
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December 17, 2018 |
COMPOSITIONS OF
KETOGENIC SOURCES, MICRONUTRIENTS AND HYTOCHEMICALS FOR PROPHYLAXIS
AND MITIGATION OF MIGRAINE HEADACHE |
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Pending |
17/011,650 |
September 3, 2020 |
PROPHYLAXIS AND MIIGATION OF MIGRAINE
HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTERS, AND
OTHER KETOGENIC SOURCES |
[1] https://financial-news-now.com/nootropic-beverages-set-to-take-over-the-16-billion-dollar-energy-drink-market/
From time to time, we may encounter disputes over rights and
obligations concerning intellectual property. While we believe that
our product and service offerings do not infringe the intellectual
property rights of any third party, we cannot assure you that we
will prevail in any intellectual property dispute. If we do not
prevail in such disputes, we may lose some or all of our
intellectual property protection, be enjoined from further sales of
the applications determined to infringe the rights of others,
and/or be forced to pay substantial royalties to a third party.
Governmental Controls, Approval and Licensing
Requirements
Federal laws related to the advertising, distribution and sale
of health supplements.
We expect that the formulation, manufacturing, packaging, labeling,
advertising, distribution and sale (hereafter, “sale” or “sold” may
be used to signify all of these activities) of our vitamin and
nutritional supplement products will be subject to regulation by
one or more federal agencies, primarily the Food and Drug
Administration (“FDA”) and the Federal Trade Commission (“FTC”),
and to a lesser extent the Consumer Product Safety Commission
(“CPSC”), the United States Department of Agriculture, and the
Environmental Protection Agency. Our activities are also regulated
by various governmental agencies for the states and localities in
which our products are sold, as well as by governmental agencies in
certain countries outside the United States in which our products
are sold. Among other matters, regulation by the FDA and the FTC is
concerned with product safety and claims made with respect to a
product’s ability to provide health-related benefits. Specifically,
the FDA, under the Federal Food, Drug, and Cosmetic Act (“FDCA”),
regulates the formulation, manufacturing, packaging, labeling,
distribution, and sale of food, including dietary supplements and
over-the-counter (“OTC”) drugs. The FTC regulates the advertising
of these products. The National Advertising Division (“NAD”) of the
Council of Better Business Bureaus oversees an industry-sponsored,
self-regulatory system that permits competitors to resolve disputes
over advertising claims. The NAD has no enforcement authority of
its own, but may refer matters that appear to violate the FTC Act
or the FDCA to the FTC or the FDA for further action, as
appropriate.
Most of the nutritional supplement products that we plan to sell
are classified as dietary supplements. The FDA’s revision of
nutrition labeling requirements also affects the nutrition labeling
of certain dietary supplements. Our affected manufacturers
may have to revise labels on some of their dietary supplements in
the next two years. Moreover, these manufacturers may need to
reformulate their products to maintain eligibility for certain
marketing claims.
The Dietary Supplement Health and Education Act (“DSHEA”) was
enacted in 1994, amending the FDCA. Among other things, DSHEA
prevents the FDA from regulating dietary ingredients in dietary
supplements as “food additives” and allows the use of statements of
nutritional support on product labels and in labeling. DSHEA
establishes a statutory class of “dietary supplements,” which
includes vitamins, minerals, herbs, amino acids and other dietary
ingredients for human use to supplement the diet. Dietary
ingredients marketed in the United States before October 15,
1994 may be marketed without the submission of a “new dietary
ingredient” (“NDI”) premarket notification to the FDA. Dietary
ingredients not marketed in the United States before
October 15, 1994 may require the submission, at least
75 days before marketing, of an NDI notification containing
information establishing that the ingredient is reasonably expected
to be safe for its intended use. The FDA has issued final
regulations under DSHEA.
As required by Section 113(b) of the Food Safety Modernization
Act, the FDA published in July 2011 a draft guidance document
clarifying when the FDA believes a dietary ingredient is an NDI,
when a manufacturer or distributor must submit an NDI premarket
notification to the FDA, the evidence necessary to document the
safety of an NDI and the methods for establishing the identity of
an NDI. Industry strongly objected to several aspects of the draft
guidance. In 2016, the FDA issued revised draft guidance on what
constitutes an NDI and NDI notification requirements. Regardless of
whether the FDA finalizes this draft guidance, the FDA has recently
acted more aggressively to remove ingredients from the market that
the FDA views as unlawful dietary ingredients. This trend, if it
continues, may limit the dietary supplement market. Several bills
to amend DSHEA in ways that would make this law less favorable to
consumers and industry have been proposed in Congress.
The FDA issued a Final Rule on GMPs for dietary supplements on
June 22, 2007. The GMPs cover manufacturers and holders of
finished dietary supplement products, including dietary supplement
products manufactured outside the United States that are imported
for sale into the United States. Among other things, the new GMPs:
(a) require identity testing on all incoming dietary
ingredients, (b) call for a “scientifically valid system” for
ensuring finished products meet all specifications,
(c) include requirements related to process controls,
including statistical sampling of finished batches for testing and
requirements for written procedures and (d) require extensive
recordkeeping. We have reviewed the GMPs and have taken steps to
ensure compliance. While we believe we are in compliance, there can
be no assurance that our operations or those of our suppliers will
be in compliance in all respects at all times. Additionally, there
is a potential risk of increased audits as the FDA and other
regulators seek to ensure compliance with the GMPs.
On December 22, 2006, Congress passed the Dietary Supplement and
Nonprescription Drug Consumer Protection Act, which went into
effect on December 22, 2007. The law requires, among other
things, that companies that manufacture or distribute
nonprescription drugs or dietary supplements report serious adverse
events allegedly associated with their products to the FDA and
institute recordkeeping requirements for all adverse events
(serious and non-serious). There is a risk that consumers, the
press and government regulators could misinterpret reported serious
adverse events as evidence of causation by the ingredient or
product complained of, which could lead to additional regulations,
banned ingredients or products, increased insurance costs and a
potential increase in product liability litigation, among other
things.
All states regulate foods and drugs under laws that generally
parallel federal statutes. We are also subject to state consumer
health and safety regulations, such as the California Safe Drinking
Water and Toxic Enforcement Act of 1986 (“Proposition 65”).
Violation of Proposition 65 may result in substantial monetary
penalties and compliance with Proposition 65 is a major focus.
Contemplated changes in the Proposition 65 labeling requirements
could potentially lead to substantial costs. Current legislation in
Massachusetts regarding restrictions on weight loss and sports
nutrition products could also impact the marketing of dietary
supplements generally. Further, state attorneys general have
pressured industry to adopt DNA testing for herbal-based products
to assure plant identity, and have taken other actions relating to
dietary ingredient status. It is uncertain whether these efforts
will have a material impact on the dietary supplement market.
Competition
Nutritional Supplements
We compete with other manufacturers, distributors and marketers of
vitamins, minerals, herbs, and other nutritional supplements both
within and outside the U.S. The nutritional supplement industry is
highly fragmented and competition for the sale of nutritional
supplements comes from many sources. These products are sold
primarily through retailers (drug store chains, supermarkets, and
mass market discount retailers), health and natural food stores,
and direct sales channels (network marketing and internet
sales).
The nutritional supplement industry is highly competitive and we
expect the level of competition to remain high over the near term.
We do not believe it is possible to accurately estimate the total
number or size of our competitors. The nutritional supplement
industry has undergone consolidation in the recent past and we
expect that trend may continue in the near term.
Employees
As of the date hereof, we do not have any employees other than our
officers and directors. BergaMet has 2 employees, and UBN does not
have any employees but uses outside contract help on an as-needed
basis. Our officers and directors will continue to work for us for
the foreseeable future. We anticipate hiring appropriate personnel
on an as-needed basis, and utilizing the services of independent
contractors as needed.
ITEM 1A. – RISK FACTORS.
As a smaller reporting company, we are not required to provide a
statement of risk factors. Nonetheless, we are voluntarily
providing risk factors herein.
Any investment in our common stock involves a high degree of risk.
You should consider carefully the following information, together
with the other information contained in this Annual Report, before
you decide to buy our common stock. If one or more of the following
events actually occurs, our business will suffer, and as a result
our financial condition or results of operations will be adversely
affected. In this case, the market price, if any, of our common
stock could decline, and you could lose all or part of your
investment in our common stock.
We are providing services to an industry that is heavily regulated
and, in some respects, illegal under federal law and the laws of
most states. We face risks in developing our product candidates and
services and eventually bringing them to market. We also face risks
that our business model may become obsolete. The following risks
are material risks that we face. If any of these risks occur, our
business, our ability to achieve revenues, our operating results
and our financial condition could be seriously harmed.
Risk Factors Related to the Business of the Company
Our operations rely on professionals all over the United
States, which is impacted by the global pandemic, causing our
resources to be affected. Our business operations have been and may
continue to be materially and adversely affected by the coronavirus
disease COVID-19.
An outbreak of respiratory illness caused by COVID-19 emerged in
Wuhan city, Hubei province, PRC, in late 2019 and has been
expanding globally. COVID-19 is considered to be highly contagious
and poses a serious public health threat.
Restrictive measures have been imposed in major cities in the USA,
including Los Angeles, New York, and Las Vegas, and throughout the
world in an effort to contain the COVID-19 outbreak. The World
Health Organization (the “WHO”) is closely monitoring and
evaluating the situation. On March 11, 2020, the WHO declared the
outbreak of COVID-19 a pandemic, expanding its assessment of the
threat beyond the global health emergency it had announced in
January. Any outbreak of such epidemic illness or other adverse
public health developments in the USA or elsewhere in the world may
materially and adversely affect the global economy, our markets and
our business.
Throughout 2020, the COVID-19 outbreak has caused disruptions in
our operations, which have resulted in delays on existing projects.
A prolonged disruption or any further unforeseen delay in our
operations could continue to result in increased costs and reduced
revenue.
We cannot foresee whether the outbreak of COVID-19 will be
effectively contained, nor can we predict the severity and duration
of its impact. If the outbreak of COVID-19 is not effectively and
timely controlled, our business operations and financial condition
may be materially and adversely affected as a result of the
deteriorating market outlook for sales, the slowdown in regional
and national economic growth, weakened liquidity and financial
condition of our customers and vendors or other factors that we
cannot foresee. Any of these factors and other factors beyond our
control could have an adverse effect on the overall business
environment, cause uncertainties, cause our business to suffer in
ways that we cannot predict and materially and adversely impact our
business, financial condition and results of operations.
The outbreak of the coronavirus (“COVID-19”) has negatively
impacted and could continue to negatively impact the global
economy. In addition, the COVID-19 pandemic could disrupt or
otherwise negatively impact global credit markets, our operations
and our efforts to identify, review and explore alternatives for
the Company, including a merger, acquisition, or a business
combination.
The significant outbreak of COVID-19 has resulted in a widespread
health crisis, which has negatively impacted and could continue to
negatively impact the global economy. In addition, the global and
regional impact of the outbreak, including official or unofficial
quarantines and governmental restrictions on activities taken in
response to such event, could have a negative impact on our
operations and our ability to identify, review and explore
alternatives for the Company. More broadly, the outbreak could
potentially lead to an economic downturn that could limit the
potential opportunities available to us via merger, acquisition or
business combination.
The COVID-19 outbreak could disrupt or otherwise negatively impact
credit and equity markets, which could adversely affect the
availability and cost of capital. Such impacts could limit our
ability to obtain additional funding through various financing
transactions or arrangements, including joint venturing of
projects, equity or debt financing or other means.
A pandemic typically results in social distancing, travel bans and
quarantines, and this may limit access to our management, support
staff, professional advisors and our independent auditors. These
factors, in turn, may not only impact our operations, financial
condition and our overall ability to react timely to mitigate the
impact of this event. Also, it may hamper our efforts to comply
with our filing obligations with the Securities and Exchange
Commission.
The extent and potential short- and long-term impact of the
COVID-19 outbreak on our business will depend on future
developments, including the duration, severity and spread of the
virus, actions that may be taken by governmental authorities and
the impact on the financial markets, all of which are highly
uncertain and cannot be predicted. These and other potential
impacts of an epidemic, pandemic or other health crisis, such as
COVID-19, could therefore materially and adversely affect our
business, financial condition and results of operations.
We have a limited operating history, we are not profitable,
and we do not expect to be profitable in the near future. There is
no assurance our future operations will result in revenues
sufficient to obtain or sustain profitability. If we cannot
generate sufficient revenues to operate profitably, we may suspend
or cease operations.
We were incorporated on December 19, 2014 and we have not fully
developed our proposed business operations and have not yet
experienced significant revenue. We have a limited operating
history upon which an evaluation of our future success or failure
can be made, and we recently shifted focus to a new line of
business with the acquisition of BergaMet and UBN. Our ability to
continue as a going concern is dependent upon our ability to obtain
adequate financing and to reach profitable levels of operations. In
that regard we have no proven history of performance, earnings or
success.
Our net loss from inception to December 31, 2020, was
($12,956,498). Based on our cash position of $59,201 as of December
31, 2020, we will need to raise additional capital from the sale of
our stock or debt. Such funding may not be available, or may be
available only on terms which are not beneficial and/or acceptable
to us.
Our ability to maintain profitability and positive cash flow is
dependent upon our ability to attract new customers who will buy
our products and services, and our ability to generate sufficient
revenue through the sale of those products and services.
Based upon current plans, we expect to incur operating losses in
future periods because we will be incurring expenses that may
exceed revenues. We cannot guarantee that we will be successful in
generating sufficient revenues in the future. In the event we
cannot generate sufficient revenues and/or secure additional
financing, we may be forced to cease operations.
Our competitors may develop products that are less expensive,
safer or otherwise more appealing, which may diminish or eliminate
the commercial success of any potential product that we may
commercialize.
If our competitors market products that are less expensive, safer
or otherwise more appealing than our potential products, or that
reach the market before our potential products, we may not achieve
commercial success. The market may choose to continue utilizing
existing products for any number of reasons, including familiarity
with or pricing of these existing products. The failure of any of
our products to compete with products marketed by our competitors
would impair our ability to generate revenue, which would have a
material adverse effect on our future business, financial
condition, results of operations, and cash flows. Our competitors
may:
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· |
develop and market products that
are less expensive, safer, or otherwise more appealing than our
products; |
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· |
commercialize competing products
before we or our partners can launch our products; and |
|
· |
initiate or withstand substantial
price competition more successfully than we can. |
Our auditors have substantial doubt about our ability to
continue as a going concern.
Our 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. Our
auditor’s report reflects that our ability to continue as a going
concern is dependent upon our ability to raise additional capital
from the sale of common stock and, ultimately, the achievement of
significant operating revenues. If we are unable to continue as a
going concern, our stockholders will lose their investment. We will
be required to seek additional capital to fund future growth and
expansion. No assurance can be given that such financing will be
available or, if available, that it will be on commercially
favorable terms. Moreover, favorable financing may be dilutive to
our stockholders.
Our controlling stockholders have significant influence over
the Company.
Our officers and directors own stock representing less than 4% of
shareholder votes; however, if you add in our controlling
shareholder, Jay Decker, they hold approximately 58% of shareholder
votes. As a result they will possess a significant influence over
our affairs and may have the effect of delaying or preventing a
future change in control, impeding a merger, consolidation,
takeover or other business combination or discouraging a potential
acquirer from making a tender offer or otherwise attempting to
obtain control of the company, which in turn could materially and
adversely affect the market price of our common stock. Our minority
shareholders will be unable to affect the outcome of stockholder
voting as long as our officers and directors retain a controlling
interest.
Our current officers and directors may set salaries and
perquisites in the future which we are unable to support with our
current assets.
Although our officers and directors have written employment or
services agreements, our officers and directors may decide to award
themselves higher salaries and other benefits but all changes to
these agreements will need to be approved by the Board of
Directors. We do not have significant revenues, and there is no
guarantee that we will have significant revenue in the near future.
If we do not increase our revenues, we will be unable to support
any higher salaries or other benefits for management, which may
cause us to cease operations.
We may engage in strategic transactions that fail to enhance
stockholder value.
From time to time, we may consider possible strategic transactions,
including the potential acquisitions or licensing of products or
technologies or acquisition of companies, and other alternatives
with the goal of maximizing stockholder value. We may never
complete a strategic transaction, and in the event that we do
complete a strategic transaction, implementation of such
transactions may impair stockholder value or otherwise adversely
affect our business. Any such transaction may require us to incur
non-recurring or other charges and may pose significant integration
challenges and/or management and business disruptions, any of which
could harm our results of operation and business prospects.
We may not be able to gain or sustain market acceptance for
our products and services.
Failure to establish a brand and presence in the marketplace on a
timely basis could adversely affect our financial condition and
results of operations. Moreover, there can be no assurance that we
will successfully complete our development and introduction of new
products and services or that any such products and services will
achieve acceptance in the marketplace. We may also fail to develop
and deploy new products and services on a timely basis.
We have incurred costs in completing the transactions with
BergaMet and UBN, and failure to successfully integrate those
businesses into each other and with our own will have an adverse
impact on our financial position and prevent us from obtaining the
benefits that the transaction would have given us.
We have recently completed our acquisitions of BergaMet and UBN.
Our executives have spent considerable time and incurred legal and
accounting costs in the acquisitions. If we are unable to fully
integrate those businesses into our business or maintain their
existing customer base, we will not be able to acquire the
technologies, partnerships and potential customers that the
transaction was intended given us. The increase in acquisition and
integration costs without the corresponding benefit will have an
adverse impact on our financial statements and foreclose potential
revenue-producing opportunities in the near future.
Economic uncertainties or downturns could materially
adversely affect our business.
Current or future economic uncertainties or downturns could
adversely affect our business and results of operations. Negative
conditions in the general economy including conditions resulting
from changes in gross domestic product growth, the continued
sovereign debt crisis, financial and credit market fluctuations,
political deadlock, natural catastrophes, warfare and terrorist
attacks on the United States, Europe, the Asia Pacific region or
elsewhere, could cause a decrease in business investments.
General worldwide economic conditions have experienced a
significant downturn and continue to remain unstable. These
conditions make it extremely difficult for us to forecast and plan
future business activities accurately, and they could cause our
potential customers to reevaluate their decisions to purchase our
product, which could delay and lengthen our sales cycles or result
in cancellations of planned purchases. Furthermore, during
challenging economic times our potential customers may tighten
their advertising budgets which may impact their spend on local
inventory based digital marketing products. To the extent purchases
of our products are perceived by potential customers to be
discretionary, sales of our products may never occur. Also,
customers may choose to seek other methods to achieve the benefits
our products provide.
We cannot predict the timing, strength or duration of any economic
slowdown, instability or recovery, generally or within any
particular industry. If the economic conditions of the general
economy or industries in which we operate do not improve, or worsen
from present levels, our business, results of operations, financial
condition and cash flows could be adversely affected.
We are dependent on the services of key personnel and failure
to attract qualified management could limit our growth and
negatively impact our results of operations.
We are highly dependent on the principal members of our management
team, including our President, Kevin “Duke” Pitts, and our Chief
Financial Officer, William Bossung. At this time, we do not know of
the availability of such experienced management personnel or how
much it may cost to attract and retain such personnel. The loss of
the services of any member of senior management or the inability to
hire experienced technical or programing personnel could have a
material adverse effect on our financial condition and results of
operations.
Other companies may claim that we have infringed upon their
intellectual property or proprietary rights.
We do not believe that our products and services violate
third-party intellectual property rights; however, we have not had
an independent party conduct a study of possible patent
infringements. Nevertheless, we cannot guarantee that claims
relating to violation of such rights will not be asserted by third
parties. If any of our products or services are found to violate
third-party intellectual property rights, we may be required to
expend significant funds to re-engineer or cause to be
re-engineered one or more of those products or services to avoid
infringement, or seek to obtain licenses from third parties to
continue offering our products and services without substantial
re-engineering, and such efforts may not be successful.
In addition, future patents may be issued to third parties upon
which our products and services may infringe. We may incur
substantial costs in defending against claims under any such
patents. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief, which effectively
could block our ability to further develop or commercialize some or
all of our products or services in the United States or abroad, and
could result in the award of substantial damages against us. In the
event of a claim of infringement, we may be required to obtain one
or more licenses from third parties. There can be no assurance that
we will be able to obtain such licenses at a reasonable cost, if at
all. Defense of any lawsuit or failure to obtain any such license
could be costly and have a material adverse effect on our
business.
Our success depends on our ability to protect our proprietary
technology.
Our success depends, to a significant degree, upon the protection
of our proprietary technology, and that of any licensors. Legal
fees and other expenses necessary to obtain and maintain
appropriate patent protection could be material. Currently, no
material aspect of our business is protected by registered patents,
copyrights or trademarks. Insufficient funding may inhibit our
ability to obtain and maintain such protection. Additionally, if we
must resort to legal proceedings to enforce our intellectual
property rights, the proceedings could be burdensome and expensive,
and could involve a high degree of risk to our proprietary rights
if we are unsuccessful in, or cannot afford to pursue, such
proceedings.
We may also rely on trademarks, trade secrets and contract law to
protect certain of our proprietary technology. There can be no
assurance that any trademarks will be approved, that such contract
will not be breached, or that if breached, we will have adequate
remedies. Furthermore, there can be no assurance that any of our
trade secrets will not become known or independently discovered by
third parties.
Our future growth may be inhibited by the failure to
implement new technologies.
Our future growth is partially tied to our ability to improve our
knowledge and implementation of mobile, AI, machine learning, and
other advanced technologies in a retail environment, which is a
rapidly changing market. The inability to successfully implement
commercially technologies in response to market conditions in a
manner that is responsive to our customers’ requirements could have
a material adverse effect on our business.
Risks Related To Our Common Stock
The market price of our common stock may be volatile and may
be affected by market conditions beyond our control.
The market price of our common stock is subject to significant
fluctuations in response to, among other factors:
|
· |
variations in our operating results
and market conditions specific to technology companies; |
|
· |
changes in financial estimates or
recommendations by securities analysts; |
|
· |
announcements of innovations or new
products or services by us or our competitors; |
|
· |
the emergence of new
competitors; |
|
· |
operating and market price
performance of other companies that investors deem comparable; |
|
· |
changes in our board or
management; |
|
· |
sales or purchases of our common
stock by insiders; |
|
· |
commencement of, or involvement in,
litigation; |
|
· |
changes in governmental
regulations; and |
|
· |
general economic conditions and
slow or negative growth of related markets. |
In addition, if the market for stocks in our industry or the stock
market in general, experiences a loss of investor confidence, the
market price of our common stock could decline for reasons
unrelated to our business, financial condition or results of
operations. If any of the foregoing occurs, it could cause the
price of our common stock to fall and may expose us to lawsuits
that, even if unsuccessful, could be costly to defend and a
distraction to the board of directors and management.
If we are unable to pay the costs associated with being a
public, reporting company, we may be forced to discontinue
operations.
Our common stock is quoted on the OTC Pink tier of the marketplace
maintained by OTC Markets Group, Inc. We expect to have significant
costs associated with being a public, reporting company, which may
raise substantial doubt about our ability to sell our equity
securities and/or continue as a going concern. Our ability to
continue as a going concern will depend on positive cash flow, if
any, from future operations and on our ability to raise additional
funds through equity or debt financing. If we are unable to achieve
the necessary product sales or raise or obtain needed funding to
cover the costs of operating as a public, reporting company, we may
be forced to discontinue operations.
Our common stock is listed for quotation on the OTCQB tier of
the marketplace maintained by OTC Markets Group, Inc., which may
make it more difficult for investors to resell their shares due to
suitability requirements.
Our common stock is currently quoted on the OTCQB tier of the
marketplace maintained by OTC Markets Group, Inc. Broker-dealers
often decline to trade in over-the-counter stocks given the market
for such securities are often limited, the stocks are more
volatile, and the risk to investors is greater. These factors may
reduce the potential market for our common stock by reducing the
number of potential investors. This may make it more difficult for
investors in our common stock to sell shares to third parties or to
otherwise dispose of their shares. This could cause our stock price
to decline.
Our principal stockholders have the ability to exert
significant control in matters requiring stockholder approval and
could delay, deter, or prevent a change in control of our
company.
Jay Decker has beneficial ownership of our common stock with over
56% of the shareholder votes. As a result, he has the ability to
influence matters affecting our shareholders, including the
election of our directors, the acquisition or disposition of our
assets, and the future issuance of our shares. Because he controls
such shares, investors may find it difficult to replace our
management if they disagree with the way our business is being
operated. Because the influence by these shareholders could result
in management making decisions that are in the best interest of
those shareholders and not in the best interest of the investors,
you may lose some or all of the value of your investment in our
common stock. Investors who purchase our common stock should be
willing to entrust all aspects of operational control to our
current management team.
We do not intend to pay dividends in the foreseeable
future.
We do not intend to pay any dividends in the foreseeable future. We
do not plan on making any cash distributions in the manner of a
dividend or otherwise. Our Board presently intends to follow a
policy of retaining earnings, if any.
Future sales and issuances of our capital stock or rights to
purchase capital stock could result in additional dilution of the
percentage ownership of our stockholders and could cause our stock
price to decline.
Future sales and issuances of our capital stock or rights to
purchase our capital stock could result in substantial dilution to
our existing stockholders. We may sell common stock, convertible
securities and other equity securities in one or more transactions
at prices and in a manner as we may determine from time to time. If
we sell any such securities in subsequent transactions, investors
may be materially diluted. New investors in such subsequent
transactions could gain rights, preferences and privileges senior
to those of holders of our common stock.
In addition, changing laws, regulations and standards relating to
corporate governance and public disclosure are creating uncertainty
for public companies, increasing legal and financial compliance
costs and making some activities more time consuming. These laws,
regulations and standards are subject to varying interpretations,
in many cases due to their lack of specificity, and, as a result,
their application in practice may evolve over time as new guidance
is provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and higher
costs necessitated by ongoing revisions to disclosure and
governance practices. We intend to invest resources to comply with
evolving laws, regulations and standards, and this investment may
result in increased general and administrative expenses and a
diversion of management’s time and attention from
revenue-generating activities to compliance activities. If our
efforts to comply with new laws, regulations and standards differ
from the activities intended by regulatory or governing bodies due
to ambiguities related to their application and practice,
regulatory authorities may initiate legal proceedings against us
and our business may be adversely affected.
We also expect that being a public company and these new rules and
regulations will make it more expensive for us to obtain director
and officer liability insurance, and we may be required to accept
reduced coverage or incur substantially higher costs to obtain
coverage. These factors could also make it more difficult for us to
attract and retain qualified members of our board of directors,
particularly to serve on our audit committee and compensation
committee, and qualified executive officers.
As a result of disclosure of information in this Annual Report and
in filings required of a public company, our business and financial
condition will become more visible, which we believe may result in
threatened or actual litigation, including by competitors and other
third parties. If such claims are successful, our business and
results of operations could be adversely affected, and even if the
claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them,
could divert the resources of our management and adversely affect
our business and results of operations.
The market for penny stocks has suffered in recent years from
patterns of fraud and abuse
Stockholders should be aware that, according to SEC Release No.
34-29093, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include:
|
· |
control of the market for the security by one or a few
broker-dealers that are often related to the promoter or
issuer; |
|
· |
manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; |
|
· |
boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced salespersons; |
|
· |
excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and, |
|
· |
the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices
and with consequential investor losses. |
Our management is aware of the abuses that have occurred
historically in the penny stock market. Although we do not expect
to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the
described patterns from being established with respect to our
securities. The occurrence of these patterns or practices could
increase the volatility of our share price.
Due to the lack of a developed trading market for our
securities, you may have difficulty selling your
shares.
Our stock currently trades on the OTCQB tier maintained by OTC
Markets Group, Inc. There currently is a very limited public
trading market for our common stock. The lack of a developed public
trading market for our shares may have a negative effect on your
ability to sell your shares in the future and it also may have a
negative effect on the price, if any, for which you may be able to
sell your shares. As a result an investment in the shares may be
illiquid in nature and investors could lose some or all of their
investment.
Our status as an “emerging growth company” under the JOBS Act
OF 2012 may make it more difficult to raise capital when we need to
do it.
Because of the exemptions from various reporting requirements
provided to us as an “emerging growth company” and because we will
have an extended transition period for complying with new or
revised financial accounting standards, we may be less attractive
to investors and it may be difficult for us to raise additional
capital as and when we need it. Investors may be unable to compare
our business with other companies in our industry if they believe
that our financial accounting is not as transparent as other
companies in our industry. If we are unable to raise additional
capital as and when we need it, our financial condition and results
of operations may be materially and adversely affected.
Our internal controls may be inadequate, which could cause
our financial reporting to be unreliable and lead to misinformation
being disseminated to the public.
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. As defined in
Exchange Act Rule 13a-15(f), internal control over financial
reporting is a process designed by, or under the supervision of,
the principal executive and principal financial officer and
effected by the board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that: (i)
pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial
statements. Our internal controls may be inadequate or ineffective,
which could cause our financial reporting to be unreliable and lead
to misinformation being disseminated to the public.
Our common stock is governed under The Securities Enforcement
and Penny Stock Reform Act of 1990.
The Securities Enforcement and Penny Stock Reform Act of 1990
requires additional disclosure relating to the market for penny
stocks in connection with trades in any stock defined as a penny
stock. The Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. Such
exceptions include any equity security listed on NASDAQ and any
equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in
continuous operation for three years, (ii) net tangible assets
of at least $5,000,000, if such issuer has been in continuous
operation for less than three years, or (iii) average annual
revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years. Unless an exception
is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated
therewith.
The forward looking statements contained in this Annual
Report report may prove incorrect.
This Annual Report contains certain forward-looking statements,
including among others: (i) anticipated trends in our financial
condition and results of operations; (ii) our business strategy for
expanding distribution; and (iii) our ability to distinguish
ourselves from our current and future competitors. These
forward-looking statements are based largely on our current
expectations and are subject to a number of risks and
uncertainties. Actual results could differ materially from these
forward-looking statements. In addition to the other risks
described elsewhere in this “Risk Factors” discussion, important
factors to consider in evaluating such forward-looking statements
include: (i) changes to external competitive market factors or in
our internal budgeting process which might impact trends in our
results of operations; (ii) anticipated working capital or other
cash requirements; (iii) changes in our business strategy or an
inability to execute our strategy due to unanticipated changes in
the biotechnology industry; and (iv) various competitive factors
that may prevent us from competing successfully in the marketplace.
In light of these risks and uncertainties, many of which are
described in greater detail elsewhere in this “Risk Factors”
discussion, there can be no assurance that the events predicted in
forward-looking statements contained in this Annual Report will, in
fact, transpire.
General Risk Factors
We will incur ongoing costs and expenses for SEC reporting
and compliance, without increased revenue we may not be able to
remain in compliance, making it difficult for investors to sell
their shares, if at all.
Going forward, we will have ongoing SEC compliance and reporting
obligations. Such ongoing obligations will require us to expend
additional amounts on compliance, legal and auditing costs. In
order for us to remain in compliance, we will require increased
revenues to cover the cost of these filings, which could comprise a
substantial portion of our available cash resources. If we are
unable to generate sufficient revenues to remain in compliance, it
may be difficult for you to resell any shares you may purchase, if
at all.
We have the right to issue additional common stock without
consent of stockholders. This would have the effect of diluting
investors’ ownership and could decrease the value of their
investment.
We are authorized to issue 2,500,000,000 shares of common stock. Of
these authorized shares, 308,887,410 shares are issued and
outstanding as of February 16, 2021. Therefore, we are authorized
to issue up to an additional 2,191,112,590 unissued shares of our
common stock that may be issued by us for any purpose without the
further consent or vote of our stockholders that would dilute
stockholders’ percentage ownership of our company.
Our officers and directors can sell some of their stock,
which may have a negative effect on our stock price and ability to
raise additional capital, and may make it difficult for investors
to sell their stock at any price.
Our officers and directors, as a group, are the beneficial owners
of 11,370,139 shares of our common stock, representing less than 4%
of our total issued shares; however, with the addition of our
largest shareholder, they own a combined 201,547,112 shares. Each
individual officer, director, and control party may be able to sell
up to 1% of our outstanding stock (currently approximately
3,000,000 shares) every 90 days in the open market pursuant to Rule
144, which may have a negative effect on our stock price and may
prevent us from obtaining additional capital. In addition, if our
officers and directors are selling their stock into the open
market, it may make it difficult or impossible for investors to
sell their stock at any price.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this Annual Report,
including the sections entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
“Business,” that are based on our management’s beliefs and
assumptions and on information currently available to our
management. Forward-looking statements include the information
concerning our possible or assumed future results of operations,
business strategies, financing plans, competitive position,
industry environment, potential growth opportunities, the effects
of future regulation, and the effects of competition.
Forward-looking statements include all statements that are not
historical facts and can be identified by the use of
forward-looking terminology such as the words “believe,” “expect,”
“anticipate,” “intend,” “plan,” “estimate” or similar expressions.
These statements are only predictions and involve known and unknown
risks and uncertainties, including the risks outlined under “Risk
Factors” and elsewhere in this Annual Report.
Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee
future results, events, levels of activity, performance or
achievement. We are not under any duty to update any of the
forward-looking statements after the date of this Annual Report to
conform these statements to actual results, unless required by
law.
ITEM 1B – UNRESOLVED STAFF
COMMENTS
This Item is not applicable to us as we are not an accelerated
filer, a large accelerated filer, or a well-seasoned issuer;
however, we are voluntarily disclosing that we have not received
any written comments from the Commission staff more than 180 days
before the end of our fiscal year to which this Annual Report
relates regarding our periodic or current reports under the
Securities Exchange Act of 1934 and that remain unresolved.
ITEM 2 – PROPERTIES
We do not currently maintain office space.
ITEM 3 – LEGAL PROCEEDINGS
We are not a party to or otherwise involved in any legal
proceedings.
In the ordinary course of business, we are from time to time
involved in various pending or threatened legal actions. The
litigation process is inherently uncertain and it is possible that
the resolution of such matters might have a material adverse effect
upon our financial condition and/or results of operations. However,
in the opinion of our management, other than as set forth herein,
matters currently pending or threatened against us are not expected
to have a material adverse effect on our financial position or
results of operations.
ITEM 4 – MINE SAFETY
DISCLOSURES
Not applicable.
PART II
ITEM 5 - MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock is quoted on the OTCQB tier of the marketplace
maintained by OTC Markets Group, Inc. under the symbol “GRCK.” Our
common stock trades on a limited or sporadic basis and should not
be deemed to constitute an established public trading market. There
is no assurance that there will be liquidity in the common
stock.
The following table sets forth the high and low closing price for
each quarter within the fiscal years ended December 31, 2020 and
2019, as provided by Nasdaq. The information reflects prices
between dealers, and does not include retail markup, markdown, or
commission, and may not represent actual transactions.
|
Fiscal Year
Ended
December 31,
|
|
|
|
|
|
|
|
|
Transaction Prices |
|
|
Period |
|
High |
|
Low |
|
2020 |
|
Fourth Quarter |
|
$0.11 |
|
$0.04 |
|
|
|
Third
Quarter |
|
$0.08 |
|
$0.041 |
|
|
|
Second
Quarter |
|
$0.089 |
|
$0.021 |
|
|
|
First
Quarter |
|
$0.05 |
|
$0.02 |
|
|
|
|
|
|
|
|
|
2019 |
|
Fourth
Quarter |
|
$0.105 |
|
$0.0313 |
|
|
|
Third
Quarter |
|
$0.06 |
|
$0.0165 |
|
|
|
Second
Quarter |
|
$0.074 |
|
$0.03 |
|
|
|
First
Quarter |
|
$0.095 |
|
$0.0056 |
The Securities Enforcement and Penny Stock Reform Act of 1990
requires additional disclosure relating to the market for penny
stocks in connection with trades in any stock defined as a penny
stock. The Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of
less than $5.00 per share, subject to a few exceptions which we do
not meet. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, of
a disclosure schedule explaining the penny stock market and the
risks associated therewith.
Holders
As of February 16, 2021, there were 308,887,410 shares of our
common stock issued and outstanding and held by 71 holders of
record, not including shares held in “street name” in brokerage
accounts which is unknown.
Dividend Policy
We have not paid any dividends on our common stock and do not
expect to do so in the foreseeable future. We intend to apply our
earnings, if any, in expanding our operations and related
activities. The payment of cash dividends in the future will be at
the discretion of the Board of Directors and will depend upon such
factors as earnings levels, capital requirements, our financial
condition and other factors deemed relevant by the Board of
Directors.
Securities Authorized for Issuance under Equity Compensation
Plans
On June 10, 2020, our Board of Directors approved the Grey Cloak
Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside
25,000,000 shares of our common stock for issuance thereunder.
Pursuant to the plan, officers, directors, key employees and
certain consultants may be granted stock options (including
incentive stock options and non-qualified stock options),
restricted stock awards, unrestricted stock awards, or performance
stock awards. As of February 16, 2021, we have awarded an aggregate
of twelve million (12,000,000) options to nineteen (19) individuals
at an exercise price of $0.05 per share.
Recent Issuance of Unregistered Securities
All unregistered issuances of securities have been previously
reported in a Quarterly Report on Form 10-Q or a Current Report on
Form 8-K.
ITEM 6 – SELECTED FINANCIAL
DATA
As a smaller reporting company we are not required to provide the
information required by this Item.
ITEM 7 – MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Our Management’s Discussion and Analysis contains not only
statements that are historical facts, but also statements that are
forward-looking (within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). Forward-looking statements are, by their very nature,
uncertain and risky. These risks and uncertainties include
international, national and local general economic and market
conditions; demographic changes; our ability to sustain, manage, or
forecast growth; our ability to successfully make and integrate
acquisitions; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse
publicity; competition; fluctuations and difficulty in forecasting
operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; and other
risks that might be detailed from time to time in our filings with
the Securities and Exchange Commission.
Although the forward-looking statements in this Annual Report
reflect the good faith judgment of our management, such statements
can only be based on facts and factors currently known by them.
Consequently, and because forward-looking statements are inherently
subject to risks and uncertainties, the actual results and outcomes
may differ materially from the results and outcomes discussed in
the forward-looking statements. You are urged to carefully review
and consider the various disclosures made by us in this report and
in our other reports as we attempt to advise interested parties of
the risks and factors that may affect our business, financial
condition, and results of operations and prospects.
Summary Overview
We were formed in December 2014. We had revenues of $1,276,559 in
the year ended December 31, 2020 and $748,377 in the year ended
December 31, 2019.
Eqova Life Sciences
On October 17, 2017, we acquired Eqova Life Sciences, a Nevada
corporation, through an exchange of shares of our Series A
Convertible Preferred Stock for all of the outstanding equity
interest of Eqova. As part of the Exchange, we brought on Eqova’s
President and Director, Patrick Stiles, to serve as our President
and Chief Executive Officer and as a Director on our Board of
Directors. Mr. Stiles resigned in September 2018.
Eqova is a medically-focused CBD company that develops clinical
grade full spectrum hemp oil products, sold exclusively via
partnerships with licensed medical practitioners to use with their
patients. We believed that Eqova provided us with a prime growth
opportunity with an established business. Revenues of our hemp oil
products from the acquisition of Eqova for the year ended December
31, 2018 were $64,384, but were $0 in 2019. We closed this business
in the second quarter of 2019.
BergaMet NA, LLC
On February 4, 2019, we issued and exchanged shares of our common
stock for all of the outstanding equity securities of BergaMet. The
shares of common stock issued in the Exchange were equal to
approximately 80.1% of our outstanding common stock immediately
following the exchange.
Through the exchange, we were able to secure funds in BergaMet to
pay off some debt and provide capital for operations. We paid an
aggregate of $353,908 and were obligated to pay another $164,578
approximately one (1) year later to retire convertible debt. In the
third quarter of 2020, we facilitated the sale of the
then-outstanding debt to a third-party who converted it into an
aggregate of 3,400,000 shares of our common stock. Prior to the
exchange, we also entered into agreements with other holders of
convertible debt to convert their notes for an aggregate of 806,015
shares of common stock. We also entered into conversion agreements
with the holders of our Series A Convertible Preferred Stock
whereby all of the outstanding preferred stock was converted for an
aggregate of 15,592,986 shares of common stock. The conversion and
repayment of the preferred stock and convertible debt have greatly
improved our capitalization structure, as we now have no
outstanding variable-price convertible debt.
The acquisition of BergaMet has been extremely beneficial to us. In
addition to paying off our convertible debt, we are now able to
better position ourselves in the market. BergaMet is an established
company that was already generating revenues when we acquired it.
BergaMet also has unique products that will fit nicely with our
existing business. We now plan on expanding our product line to
other nutraceuticals.
Ultimate Brain Nutrients, LLC
On April 3, 2020, we entered into a Share Exchange Agreement with
Ultimate Brain Nutrients, LLC, a Delaware limited liability company
(“UBN”), and the members of UBN, whereby we issued and exchanged
90,000,960 shares of our common stock for all of the outstanding
equity securities of UBN. UBN is now our wholly-owned subsidiary.
The shares of common stock issued in the Exchange were equal to
approximately 42.5% of our outstanding common stock immediately
following the exchange.
UBN is a science-based company that develops unique, plant-based
superior health technology neuro-products that provide natural
brain solutions. UBN has numerous proprietary products, with four
unique patent-pending formulations and one patent issued.
Financial results for UBN are included in this Management’s
Discussion and Analysis.
Going Concern
As a result of our financial condition, we have received a report
from our independent registered public accounting firm for our
financial statements for the years ended December 31, 2020 and 2019
that includes an explanatory paragraph describing the uncertainty
as to our ability to continue as a going concern. From inception
(December 19, 2014) through the end of December 31, 2020, we have
incurred accumulated net losses of $12,956,498. In order to
continue as a going concern we must effectively balance many
factors and generate more revenue so that we can fund our
operations from our sales and revenues. If we are not able to do
this we may not be able to continue as an operating company. At our
current revenue and burn rate, we have an immediate cash need, and
thus we must raise capital by issuing debt or through the sale of
our stock. However, there is no assurance that our existing cash
flow will be adequate to satisfy our existing operating expenses
and capital requirements.
Results of Operations for the Years Ended December 31, 2020 and
2019
Introduction
We had revenues of $1,276,559 for the year ended December 31, 2020,
as compared to $748,377 for the year ended December 31, 2019, an
increase of $528,182, or 71%. Our cost of revenue was $1,855,001
for the year ended December 31, 2020, as compared to $524,494 for
the year ended December 31, 2019, an increase of $1,330,506, or
254%. Our cost of revenue exceeded revenue for the year ended
December 31, 2020 because we built up our inventory of bergamot
product.
Revenues and Net Operating Loss
Our revenues, operating expenses, and net operating loss for the
years ended December 31, 2020 and 2019 were as follows:
| |
|
Year Ended
December 31, 2020 |
|
Year Ended
December 31, 2019 |
|
Increase/
(Decrease) |
| |
|
|
|
|
|
|
| Revenue |
|
$ |
1,276,559 |
|
|
$ |
748,377 |
|
|
$ |
528,182 |
|
| Cost of Revenue |
|
|
1,855,001 |
|
|
|
524,494 |
|
|
|
1,330,506 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| General
and administrative |
|
|
1,474,891 |
|
|
|
1,163,745 |
|
|
|
311,146 |
|
| Total operating
expenses |
|
|
1,474,891 |
|
|
|
1,163,745 |
|
|
|
311,146 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net operating
loss |
|
|
|
|
|
|
|
|
|
|
|
|
| Other
income/(expense) |
|
|
(523,042 |
) |
|
|
1,572,639 |
|
|
|
(2,095,681 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net
gain/(loss) |
|
$ |
(2,576,375 |
) |
|
$ |
632,776 |
|
|
$ |
(3,209,151 |
) |
Revenues
We had revenues of $1,276,559 and $748,377 for the years ended
December 31, 2020 and 2019, respectively, an increase of 71%.
Cost of Revenue
Cost of revenue was $1,855,001 and $524,494 and $28,590 for the
years ended December 31, 2020 and 2019, respectively, an increase
of 254%, and consisted of wholesale product costs and packaging.
Our cost of revenue exceeded revenue for the year ended December
31, 2020 because we built up our inventory of bergamot product.
General and Administrative
General and administrative expense was $1,474,891 and $1,163,745
for the years ended December 31, 2020 and 2019, an increase of
$311,146, or 27%. The increase was related to our acquisition of
UBN, and increased administrative costs associated with being a
public company. In the year ended December 31, 2020, general and
administrative expenses consisted main of consulting of $607,197,
selling expenses of $239,296, accounting and legal fees of
$192,198, salary and wages of $156,250, and transfer agent and
filing fees of $41,431. In the year ended December 31, 2019,
general and administrative expense consisted mainly of consulting
$435,357, selling expenses of $114,680, salary and wages of
$158,950, transfer agent and filing fees of $8,002, and accounting
and legal fees of $216,546.
Net Operating Gain/Loss
As a result of the items discussed above, our net operating loss
was $2,053,333 and $939,863 for the years ended December 31, 2020
and 2019, respectively, a gain of $1,113,470.
Other Income and Expense
Other income (expense) was $(523,042) and $1,572,639 for the years
ended December 31, 2020 and 2019, respectively, a decrease of
$2,095,681, of which $1,579,883 was an impairment of the goodwill
in the UBN acquisition.
Net Gain/(Loss)
Our net gain (loss) for the year ended December 31, 2020 was
$(2,576,375), or $(0.01) per share, and our net gain (loss) for the
year ended December 31, 2019 was $632,776, or $0.01 per share.
Liquidity and Capital Resources
Introduction
During the years ended December 31, 2020 and 2019, we had negative
operating cash flows. Our cash on hand as of December 31, 2020 was
$59,201. Our monthly cash flow burn rate in 2020 (not including
inventory purchases) was approximately $192,000. Although we have
strong short term cash needs, as our operating expenses increase we
will face strong medium to long term cash needs. We anticipate that
these needs will be satisfied through the issuance of debt or the
sale of our securities until such time as our cash flows from
operations will satisfy our cash flow needs. With the acquisitions
of BergaMet and UBN, we expect to see an increase in revenues over
the next few years that will help us maintain the cash we need to
operate our business. However, we have incurred additional expenses
in these acquisitions and the additional costs to be incurred
through this expansion of our operations will increase our need for
additional cash flow.
Our cash, current assets, total assets, current liabilities, and
total liabilities as of December 31, 2020 and 2019 are as
follows:
| |
|
December 31, 2020 |
|
December 31, 2019 |
|
Change |
| |
|
|
|
|
|
|
|
Cash |
|
$ |
59,201 |
|
|
$ |
133,451 |
|
|
$ |
(74,250 |
) |
| Total Current
Assets |
|
|
2,490,158 |
|
|
|
3,241,083 |
|
|
|
(750,925 |
) |
| Total
Assets |
|
|
3,115,430 |
|
|
|
3,449,526 |
|
|
|
(334,096 |
) |
| Total Current
Liabilities |
|
|
261,604 |
|
|
|
4,315,136 |
|
|
|
(4,053,532 |
) |
| Total
Liabilities |
|
$ |
261,604 |
|
|
$ |
4,315,136 |
|
|
$ |
(4,053,532 |
) |
Our cash decreased by $74,250 as of December 31, 2020 as compared
to December 31, 2019. Our total current assets decreased by
$750,925, as a result of our decrease in inventory. Our total
assets decreased by $334,096 despite our increase in
patents/trademarks of $425,877 from the UBN acquisition.
Our current and total liabilities decreased by $4,053,532, from
$4,315,136 as of December 31, 2019 to $261,604 as of December 31,
2020. Our total liabilities as of the year ended December 31, 2020
consisted primarily of notes payable – related party of $170,866
and accounts payable of $64,836.
In order to repay our obligations in full or in part when due, we
will be required to raise significant capital from other sources.
There is no assurance, however, that we will be successful in these
efforts.
Cash Requirements
Our cash on hand as of December 31, 2020 was $59,201. Our monthly
cash flow burn rate in 2020 (not including inventory purchases) was
approximately $192,000. Although we have strong short term cash
needs, as our operating expenses increase we will face strong
medium to long term cash needs. We anticipate that these needs will
be satisfied through the sale of our securities until such time as
our cash flows from operations will satisfy our cash flow
needs.
Sources and Uses of Cash
Operations
Our net cash used in operating activities for the years ended
December 31, 2020 and 2019 was $3,482,641 and $3,488,099,
respectively, a decrease of $5,458. Our net cash used in operating
activities for the year ended December 31, 2020 consisted primarily
of a net loss of $2,576,375, plus a change in fair value on
derivative liability of $1,053,186 and accrued interest to related
party of $490,703. Our net cash used in operating activities for
December 31, 2019 consisted primary of net income of $632,776,
offset by inventory expense of $(3,080,658) and a change in fair
value on derivative liability of $(1,652,931).
Investments
Our cash flow provided by (used in) investing activities for the
years ended December 31, 2020 and 2019 was $(425,877) and
$1,813,621, respectively, a decrease of $2,239,498. The decrease in
2020 was primarily from the purchase of UBN.
Financing
Our net cash provided by financing activities for the years ended
December 31, 2020 and 2019 was $3,834,268 and $1,807,444,
respectively, an increase of $2,026,824. The increase in 2020 was
primarily due to proceeds from the issuance of common stock of
$6,295,811, offset by proceeds from the issuance of convertible
debt of $(1,501,876) and proceeds from issuance of notes payable –
related party of $(880,000).
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amounts in our consolidated financial
statements and related notes. Our significant accounting policies
are described in Note 2 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended
December 31, 2018. Management bases its estimates on historical
experience and on various other assumptions it believes to be
reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and
liabilities. Actual results may differ from these estimates and
such differences may be material.
Management considers the following policies critical because they
are both important to the portrayal of our financial condition and
operating results, and they require management to make judgments
and estimates about inherently uncertain matters.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America 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 date of the
financial statements. The estimates and judgments will also affect
the reported amounts for certain revenues and expenses during the
reporting period. Actual results could differ from these good faith
estimates and judgments.
Recent Accounting Pronouncements
Our management has considered all recent accounting pronouncements
issued since the last audit of our financial statements. Our
management believes that these recent pronouncements will not have
a material effect on our financial statements.
ITEM 7A – QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide the
information required by this Item.
ITEM 8 - FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Report of Independent
Registered Public Accounting Firm
To the shareholders and the board of directors of Healthy Extracts
Inc. (Formerly Grey Cloak Tech, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Healthy Extracts Inc. (the "Company") as of December 31, 2020 and
2019, the related statements of operations, stockholders' equity
(deficit), and cash flows for the years then ended, and the related
notes (collectively referred to as the "financial statements"). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and
its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audit. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a
Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company’s minimal
activities raise substantial doubt about its ability to continue as
a going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
February 19, 2021
HEALTHY EXTRACTS INC.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
| |
|
DECEMBER 31, |
|
DECEMBER 31, |
| |
|
2020 |
|
2019 |
| ASSETS |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| CURRENT ASSETS |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
59,201 |
|
|
$ |
133,451 |
|
| Accounts
receivable |
|
|
13,274 |
|
|
|
26,473 |
|
| Inventory |
|
|
2,417,683 |
|
|
|
3,081,158 |
|
|
Total current assets |
|
|
2,490,158 |
|
|
|
3,241,083 |
|
| |
|
|
|
|
|
|
|
|
| Fixed assets, net of
accumulated depreciation of $45,944 and $36,895, respectively |
|
|
6,135 |
|
|
|
15,183 |
|
| Patents/Trademarks |
|
|
425,877 |
|
|
|
— |
|
| Goodwill |
|
|
193,260 |
|
|
|
193,260 |
|
|
Total other assets |
|
|
625,272 |
|
|
|
208,443 |
|
| |
|
|
|
|
|
|
|
|
| TOTAL
ASSETS |
|
$ |
3,115,430 |
|
|
$ |
3,449,526 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
| Accounts
payable |
|
$ |
64,836 |
|
|
$ |
21,125 |
|
| Accrued
liabilities |
|
|
9,054 |
|
|
|
53,341 |
|
| Notes
payable |
|
|
— |
|
|
|
79,667 |
|
| Notes
payable - related party |
|
|
170,866 |
|
|
|
1,050,866 |
|
| Convertible
debt, net of discount of $0.00 and $0.00, respectively |
|
|
6,750 |
|
|
|
166,750 |
|
| Convertible
debt - related party, net of discount of $0.00 and $0.00,
respectively |
|
|
— |
|
|
|
1,341,876 |
|
| Accrued
interest payable |
|
|
2,379 |
|
|
|
49,902 |
|
| Accrued
interest payable - related party |
|
|
518 |
|
|
|
491,221 |
|
|
Derivative liabilities |
|
|
7,202 |
|
|
|
1,060,388 |
|
|
Total current and total liabilities |
|
|
261,604 |
|
|
|
4,315,136 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
| Preferred stock, $0.001 par value, 75,000,000
shares authorized, |
|
|
|
|
|
|
|
|
| none and
none shares issued and outstanding, respectively |
|
|
— |
|
|
|
— |
|
| Common stock, $0.001 par value, 2,500,000,000
shares authorized, |
|
|
|
|
|
|
|
|
|
308,887,410 and 121,610,085 shares
issued and outstanding, respectively |
|
|
308,887 |
|
|
|
121,610 |
|
| Additional paid-in
capital |
|
|
15,501,436 |
|
|
|
9,392,903 |
|
|
Accumulated deficit |
|
|
(12,956,498 |
) |
|
|
(10,380,123 |
) |
|
Total stockholders' equity (deficit) |
|
|
2,853,826 |
|
|
|
(865,610 |
) |
| |
|
|
|
|
|
|
|
|
| TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
$ |
3,115,430 |
|
|
$ |
3,449,526 |
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HEALTHY EXTRACTS INC.
CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE YEAR ENDING DECEMBER 31, 2020
(Unaudited)
| |
|
FOR
THE YEAR ENDED |
| |
|
DECEMBER 31, |
| |
|
2020 |
|
2019 |
| |
|
|
|
|
|
REVENUE |
|
$ |
1,276,559 |
|
|
$ |
748,377 |
|
| |
|
|
|
|
|
|
|
|
| COST OF
REVENUE |
|
|
1,855,001 |
|
|
|
524,494 |
|
| |
|
|
|
|
|
|
|
|
| GROSS
PROFIT |
|
|
(578,442 |
) |
|
|
223,882 |
|
| |
|
|
|
|
|
|
|
|
| OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
1,474,891 |
|
|
|
1,163,745 |
|
| Total
operating expenses |
|
|
1,474,891 |
|
|
|
1,163,745 |
|
| |
|
|
|
|
|
|
|
|
| OTHER INCOME
(EXPENSE) |
|
|
|
|
|
|
|
|
| Interest
expense, net of interest income |
|
|
(72,882 |
) |
|
|
(87,482 |
) |
| Change in fair
value on derivative |
|
|
1,053,186 |
|
|
|
1,607,083 |
|
| Loss on
extinguishment of debt |
|
|
46,836 |
|
|
|
53,038 |
|
| SBA Loan
Forgiveness |
|
|
29,700 |
|
|
|
— |
|
| Impairment of Assets |
|
|
(1,579,883 |
) |
|
|
— |
|
|
Gain on sale of asset |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
(523,042 |
) |
|
|
1,572,639 |
|
| |
|
|
|
|
|
|
|
|
| NET
GAIN/(LOSS) |
|
$ |
(2,576,375 |
) |
|
$ |
632,776 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Loss per
share - basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
| Weighted average
number of shares outstanding - basic and diluted |
|
|
237,300,091 |
|
|
|
110,612,376 |
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HEALTHY EXTRACTS INC.
CONSOLIDATED STATEMENT OF CASH
FLOWS
(Unaudited)
| |
|
FOR
THE YEAR ENDING |
| |
|
DECEMBER 31, |
| |
|
2020 |
|
2019 |
| Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
|
| Net Gain/(Loss) |
|
$ |
(2,576,375 |
) |
|
$ |
632,776 |
|
| |
|
|
|
|
|
|
|
|
| Adjustments to reconcile net loss to
net cash |
|
|
|
|
|
|
|
|
| used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and
amortization |
|
|
9,048 |
|
|
|
8,527 |
|
| Warrants issued
for services |
|
|
— |
|
|
|
7,000 |
|
| Non-cash
compensation |
|
|
— |
|
|
|
108,260 |
|
| Change in fair
value on derivative liability |
|
|
(1,053,186 |
) |
|
|
(1,652,931 |
) |
| Loss on
extinguishment of debt |
|
|
— |
|
|
|
53,038 |
|
| Changes in operating assets and
liabilities: |
|
|
|
|
|
|
|
|
| Accounts
receivable |
|
|
13,199 |
|
|
|
(26,473 |
) |
| Inventory |
|
|
663,476 |
|
|
|
(3,080,658 |
) |
| Accrued interest
receivable |
|
|
— |
|
|
|
4,762 |
|
| Accounts
payable |
|
|
43,711 |
|
|
|
(36,215 |
) |
| Accounts payable -
related party |
|
|
— |
|
|
|
(15,000 |
) |
| Accrued
liabilities |
|
|
(44,287 |
) |
|
|
53,341 |
|
| Accrued interest
payable |
|
|
(47,524 |
) |
|
|
(33,997 |
) |
|
Accrued interest payable - related party |
|
|
(490,703 |
) |
|
|
489,471 |
|
| Net
Cash used in Operating Activities |
|
|
(3,482,641 |
) |
|
|
(3,488,099 |
) |
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Purchase of fixed assets |
|
|
— |
|
|
|
(22,985 |
) |
| Purchase of BergaMet |
|
|
— |
|
|
|
1,757,310 |
|
| Purchase of UBN |
|
|
(417,839 |
) |
|
|
— |
|
| Trademarks |
|
|
(8,038 |
) |
|
|
|
|
| Payments of
note receivable |
|
|
— |
|
|
|
79,295 |
|
| Cash
flows provided by (used in) Investing Activities: |
|
|
(425,877 |
) |
|
|
1,813,621 |
|
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Proceeds from issuance of common
stock |
|
|
6,295,811 |
|
|
|
— |
|
| Proceeds from issuance of convertible
debt, |
|
|
(1,501,876 |
) |
|
|
1,104,241 |
|
| Payments for repayment of convertible
debt |
|
|
— |
|
|
|
(349,330 |
) |
| Proceeds from issuance of noted
payable |
|
|
(79,667 |
) |
|
|
16,667 |
|
| Proceeds from issuance of noted
payable - related party |
|
|
(880,000 |
) |
|
|
1,050,866 |
|
| Payments for
repayment of notes payable - related party |
|
|
— |
|
|
|
(15,000 |
) |
| Net
Cash provided by Financing Activities |
|
|
3,834,268 |
|
|
|
1,807,444 |
|
| |
|
|
|
|
|
|
|
|
| Increase (decrease)
in cash |
|
|
(74,250 |
) |
|
|
132,966 |
|
| Cash at
beginning of period |
|
|
133,451 |
|
|
|
485 |
|
|
Cash at end of period |
|
$ |
59,201 |
|
|
$ |
133,451 |
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HEALTHY EXTRACTS INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDING DECEMBER 2020 AND 2019
(Unaudited)
|
|
|
|
|
|
|
Additional |
|
|
|
|
| |
|
Preferred Stock |
|
Common Stock |
|
Paid-In |
|
Accumulated |
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Deficit |
|
Total |
| Balance - December 31,
2018 |
|
|
1,333,334 |
|
|
|
1,333 |
|
|
|
6,455,354 |
|
|
|
6,455 |
|
|
|
7,440,895 |
|
|
$ |
(11,012,899 |
) |
|
$ |
(3,564,216 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cashless exercise of warrants |
|
|
— |
|
|
|
— |
|
|
|
996,052 |
|
|
|
996 |
|
|
|
1,921 |
|
|
|
— |
|
|
|
2,917 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of shares acquisition of BergaMet |
|
|
— |
|
|
|
— |
|
|
|
97,409,678 |
|
|
|
97,410 |
|
|
|
1,850,784 |
|
|
|
|
|
|
|
1,948,194 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for preferred
stock conversion |
|
|
(1,333,334 |
) |
|
|
(1,333 |
) |
|
|
15,592,986 |
|
|
|
15,593 |
|
|
|
(14,260 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for debt
conversion |
|
|
— |
|
|
|
— |
|
|
|
806,015 |
|
|
|
806 |
|
|
|
106,912 |
|
|
|
— |
|
|
|
107,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for
consulting fees |
|
|
— |
|
|
|
— |
|
|
|
350,000 |
|
|
|
350 |
|
|
|
6,650 |
|
|
|
— |
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Debt Forgiveness |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) gain
for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
632,776 |
|
|
|
632,776 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance - December 31, 2019 |
|
|
— |
|
|
$ |
— |
|
|
|
121,610,085 |
|
|
$ |
121,610 |
|
|
|
9,392,903 |
|
|
$ |
(10,380,123 |
) |
|
$ |
(865,610 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of shares acquisition of UBN |
|
|
— |
|
|
|
— |
|
|
|
90,000,960 |
|
|
|
90,001 |
|
|
|
1,800,019 |
|
|
|
— |
|
|
|
1,890,020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for debt
conversion |
|
|
— |
|
|
|
— |
|
|
|
39,248,714 |
|
|
|
39,249 |
|
|
|
1,465,159 |
|
|
|
— |
|
|
|
1,504,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for debt
conversion |
|
|
— |
|
|
|
— |
|
|
|
13,200,000 |
|
|
|
13,200 |
|
|
|
646,800 |
|
|
|
— |
|
|
|
660,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for debt
conversion |
|
|
— |
|
|
|
— |
|
|
|
35,827,651 |
|
|
|
35,828 |
|
|
|
1,755,555 |
|
|
|
— |
|
|
|
1,791,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for cash |
|
|
— |
|
|
|
— |
|
|
|
5,900,000 |
|
|
|
5,900 |
|
|
|
289,100 |
|
|
|
— |
|
|
|
295,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for cash |
|
|
— |
|
|
|
— |
|
|
|
800,000 |
|
|
|
800 |
|
|
|
39,200 |
|
|
|
— |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for cash |
|
|
— |
|
|
|
— |
|
|
|
300,000 |
|
|
|
300 |
|
|
|
14,700 |
|
|
|
— |
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of common stock for cash |
|
|
— |
|
|
|
— |
|
|
|
2,000,000 |
|
|
|
2,000 |
|
|
|
98,000 |
|
|
|
— |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) gain
for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,576,375 |
) |
|
|
(2,576,375 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance - December 31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
308,887,410 |
|
|
$ |
308,887 |
|
|
|
15,501,436 |
|
|
$ |
(12,956,498 |
) |
|
$ |
2,853,826 |
|
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Healthy Extracts Inc. (the “Company”) was incorporated in the State
of Nevada on December 19, 2014. The Company has additionally
acquired BergaMet NA, LLC and Ultimate Brian Nutrients, LLC which
markets and sells heath supplemental products. On October 23, 2020,
we changed our name from Grey Cloak Tech Inc. to Healthy Extracts
Inc. to more accurately reflect our business. We are currently
waiting for The Financial Industry Regulatory Authority (FINRA) to
issue our Company a new ticker symbol before we file our 8-K for
this change.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated 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 8 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 consolidated financial statements
contain all the adjustments necessary (consisting only of normal
recurring accruals) to present the financial position of the
Company as of December 31, 2020 and the results of operations and
cash flows for the periods presented. The results of operations for
the year ended December 31, 2020 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 Company’s form 10-K for the year ended
December 31, 2019 filed with the SEC on August 10, 2020.
Use of Estimates
The preparation of financial statements in conformity with 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 date of the financial
statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Cash
Cash includes cash in banks, money market funds, and certificates
of term deposits with maturities of less than three months from
inception, which are readily convertible to known amounts of cash
and which, in the opinion of management, are subject to an
insignificant risk of loss in value.
Accounts Receivables
Accounts receivables are recorded at the invoice amount and do not
bear interest.
Inventory
Inventories consist of health supplements held for sale in the
ordinary course of business. The Company uses the weighted average
cost method to value its inventories at the lower of cost or
market. An allowance for inventory was established in 2018 and is
evaluated each quarter to determine if all items are still sellable
due to expiration dates. As of December 31, 2020 and 2019, the
total of inventory which was written off as an inventory allowance
was $1,892,008 and $748,972.
Property and Equipment
The Company’s property and equipment are recorded at cost and
depreciated using the straight-line method over the useful lives of
the assets, generally from three to seven years. Upon sale or
disposal of property and equipment, the related asset cost and
accumulated depreciation or amortization are removed from the
respective accounts and any gain or loss is reflected in current
operations.
Goodwill
In accordance with Goodwill and Other Intangible Assets, goodwill
is defined as the excess of the purchase price over the fair value
assigned to individual assets acquired and liabilities assumed and
is tested for impairment at the reporting unit level on an annual
basis in the Company's fourth fiscal quarter or more frequently if
indicators of impairment exist. The performance of the test
involves a two-step process. The first step of the impairment test
involves comparing the fair value of the Company's reporting units
with each respective reporting unit's carrying amount, including
goodwill. The fair value of reporting units is generally determined
using the income approach. If the carrying amount of a reporting
unit exceeds the reporting unit's fair value, the second step of
the goodwill impairment test is performed to determine the amount
of any impairment loss. The second step of the goodwill impairment
test involves comparing the implied fair value of the reporting
unit's goodwill with the carrying amount of that goodwill. The
Company sees the goodwill to have a ten-year useful life. No
goodwill impairment indicators were present, for the goodwill
listed on the books as of December 31, 2020, after working through
our analysis of goodwill during the year ending December 31,
2020.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
The Company has determined that the method applied represents the
fair value of the asset group principally because the valuation of
the intangibles with the asset group is based on the anticipated
cash flows related to the revenue stream from its customers. The
asset group excludes goodwill, long term non-operational assets and
liabilities and cash. As such, the principal value from the asset
group relates to the cash inflows from its customers and the cash
outflows required to service these customers. The fair value for
the asset group consists of the following:
|
· |
Fair
value of net revenues: computed using the income approach. The key
input to these computations is the anticipated cash inflows from
customers. These valuations include 100% of the cash inflows
related to the customer base, and taking cash outflows into
consideration. |
|
· |
Fair
value of working capital (including accounts receivable, inventory,
accrued expenses, and accounts payables). Due to the short-term
nature of the working capital, book value has been determined to be
fair value. These accounts represent either avoided future outflows
(inventory, prepaids) or future cash flows (accrued expense, AP and
AR) related to customer sales. |
|
· |
Fair
value of five years of revenue (2020 to 2024): we discounted our
cash flows to the anticipated cash projected to be received. We
also projected the anticipated cash outflows required to service
these customers. If the asset group was to be valued as a whole, we
would expect an income approach based on the revenues being
generated from the customers and expenses required to service those
customers, appropriately adjusted for the working capital position.
The sum of these values reasonably approximates this
approach. |
The Company’s revenue streams align directly with the intangibles,
which were recorded as a result of the BergaMet acquisition in
fiscal 2019. For purposes of the Step 2 recoverability test under
ASC 360 subsection 2.3., the net revenues from BergaMet customers
base were used. The revenue stream fairly reflects anticipated
future cash flows; accordingly, the intangibles associated with
these revenue streams have been tested with the expected cash
flows.
Due to the purchase of Ultimate Brian Nutrients, LLC being a
related party transaction and the new division recording no revenue
as of June 30, 2020, the Company found the goodwill to be impaired.
Due to the impairment the Company expensed the goodwill related to
the purchase as of June 30, 2020.
Revenue Recognition
Beginning January 1, 2019, the Company implemented ASC
606, Revenue from Contracts with Customers. Although the
new revenue standard is expected to have an immaterial impact, if
any, on our ongoing net income, we did implement changes to our
processes related to revenue recognition and the control activities
within them. These included the development of new policies
based on the five-step model provided in the new revenue standard,
ongoing contract review requirements, and gathering of information
provided for disclosures
The Company recognizes revenue and cost of goods sold from product
sales or services rendered when control of the promised goods are
transferred to our clients in an amount that reflects the
consideration to which we expect to be entitled in exchange for
those goods and services. To achieve this core principle, we
apply the following five steps: identify the contract with
the client, identify the performance obligations in the contract,
determine the
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
transaction price, allocate the transaction price to performance
obligations in the contract and recognize revenues when or as the
Company satisfies a performance obligation.
The Company records revenue upon shipment of the products to the
customers.
Concentration
There is no concentration of
revenue for the year ended December 31, 2019 and the year ended
December 31, 2020 because the revenue was earned from multiple
customers.
Income Taxes
The Company accounts for income taxes using the asset and liability
method in accordance with ASC 740, “Accounting for Income Taxes”.
The asset and liability method provides that deferred tax assets
and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities and for operating
loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the currently enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. The Company records a valuation allowance to reduce
deferred tax assets to the amount that is believed more likely than
not to be realized. For the period ending December 31, 2019 and
December 31, 2020, the Company did not have any amounts recorded
pertaining to uncertain tax positions.
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 are carried at historical cost
basis, which approximates their fair values because of the
short-term nature of these instruments.
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 derivative liability in connection with the conversion feature
of the convertible debt, classified as a Level 3 liability, is the
only financial liability measure at fair value on a recurring
basis.
The change in Level 3 financial instrument is as follows:
| Balance, January 1,
2020 |
|
$ |
1,060,388 |
|
| Issued during the year ended
December 31, 2020 |
|
|
1,668,799 |
|
| Change in fair value recognized in
operations |
|
|
(835,325 |
) |
| Converted
during the year ended December 31, 2020 |
|
|
(1,886,660 |
) |
| Balance,
December 31, 2020 |
|
$ |
7,202 |
|
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”)
issued ASU No. 2014-09, Revenue from Contracts with Customers
(Topic 606). ASU 2014-09 amends the guidance for revenue
recognition to replace numerous, industry specific requirements and
converges areas under this topic with those of the International
Financial Reporting Standards. The ASU implements of five–step
process for customer contract revenue recognition that focuses on
transfer of control, as opposed to transfer of risk and rewards.
The amendment also requires enhanced disclosures regarding the
nature, amount, timing and uncertainty of revenues and cash flows
from contracts with customers. Other major provisions include the
capitalization and amortization of certain contract cost, ensuring
the time value of money is considered in the transaction price, and
allowing estimates of variable consideration to be recognized
before contingencies are resolved in certain circumstances. The
amendments in this ASU are effective for reporting period beginning
after December 15, 2016, and early adoption is prohibited. Entities
can transition to the standard either retrospectively or as a
cumulative-effect adjustment as of the date of adoption.
The Company’s revenues are recognized when control of the promised
goods or services is transferred to our clients (upon shipment of
goods) in an amount that reflects the consideration to which we
expect to be entitled in exchange for those goods and services. To
achieve this core principle, we apply the following five steps: (1)
Identify the contract with a client; (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 revenues when or as the Company
satisfies a performance obligation.
We adopted ASC 2014-09 on January 1, 2019. Although the new revenue
standard is expected to have an immaterial impact, if any, on our
ongoing net income, we did implement changes to our processes
related to revenue recognition and the control activities with
them.
Convertible Instruments
The Company evaluates and account for conversion options embedded
in convertible instruments in accordance with ASC 815
“Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options
from their host instruments and account for them as free-standing
derivative financial instruments according to certain criteria. The
criteria include circumstances in which (a) the economic
characteristics and risks of the embedded derivative instrument are
not clearly and closely related to the economic characteristics and
risks of the host contract, (b) the hybrid instrument that embodies
both the embedded derivative instrument and the host contract is
not re-measured at fair value under other GAAP with changes in fair
value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been
determined that the embedded conversion options should not be
bifurcated from their host instruments) as follows: The Company
records when necessary, discounts to convertible notes for the
intrinsic value of conversion options embedded in debt instruments
based upon the differences between the fair value of the underlying
common stock at the commitment date of the note transaction and the
effective conversion price embedded in the note. Debt discounts
under these arrangements are amortized over the term of the related
debt to their stated date of redemption.
The Company accounts for the conversion of convertible debt when a
conversion option has been bifurcated using the general
extinguishment standards. The debt and equity linked derivatives
are removed at their carrying amounts and the shares issued are
measured at their then-current fair value, with any difference
recorded as a gain or loss on extinguishment of the two separate
accounting liabilities. During the year ended December 31, 2020,
the Company did not have any conversions of convertible debt with a
bifurcated conversion option.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Common Stock Purchase Warrants
The Company classifies as equity any contracts that require
physical settlement or net-share settlement or provide a choice of
net-cash settlement or settlement in the Company’s own shares
(physical settlement or net-share settlement) provided that such
contracts are indexed to our own stock as defined in ASC 815-40
("Contracts in Entity's Own Equity"). The Company classifies as
assets or liabilities any contracts that require net-cash
settlement (including a requirement to net cash settle the contract
if an event occurs and if that event is outside our control) or
give the counterparty a choice of net-cash settlement or settlement
in shares (physical settlement or net-share settlement). The
Company assesses classification of common stock purchase warrants
and other free-standing derivatives at each reporting date to
determine whether a change in classification is required.
Gain on Extinguishment of debt
Note Satisfaction Agreements
Prior to the Exchange, the Company entered into a Note Satisfaction
Agreement with each of Auctus Fund, Crown Bridge Partners, LLC,
Power Up Lending Group Ltd., GS Capital Partners LLC, Oakmore
Opportunity Fund I LP, and Adar Bays, LLC. All of these entities
were holders of the Company’s convertible debt, and these Note
Satisfaction Agreements terminate their convertible notes unless
the Company fails to perform its payment obligations. The Company
agreed to pay these note holders an aggregate of $520,658 plus
interest. The Company paid an aggregate of $353,908 on or before
February 15, 2019. The balance owed and outstanding of $160,000
plus interest was agreed to be purchased by some third-party
individuals. During the third quarter 2020, these third-party
individuals decided to convert the outstanding notes into 2,400,000
shares of the Company’s common stock.
Various other holders of Convertible Promissory Notes agreed to
convert their notes for an aggregate of 806,015 shares of common
stock prior to the Exchange. As a result of these transactions, no
convertible promissory notes remain outstanding, except for those
convertible notes subject to revival if the Company fails to make
payments pursuant to the Note Satisfaction Agreements.
NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has
generated minimal revenues from operations. Since its inception,
the Company has been engaged substantially in financing activities
and developing its business plan and incurring startup costs and
expenses. As a result, the Company incurred accumulated net losses
from Inception (December 19, 2014) through the period ended
December 31, 2020 of $12,956,498. In addition, the Company’s
development activities since inception have been financially
sustained through equity financing. Management plans to seek
funding through debt and equity financing and has recently acquired
two new companies as a wholly owned subsidiary.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 4 – RELATED PARTY
For the year ended December 31, 2020 and 2019, the Company had
expenses totaling $66,000 and $31,000 respectively, to an officer
and director for salaries, which is included in general and
administrative expenses on the accompanying statement of operations
As of December 31, 2020, there was a total of convertible debt of
$0.00 and accrued interest payable of $0.00 due to an officer and
director, employees, and shareholders.
NOTE 5 – CONVERTIBLE DEBT – RELATED PARTY
As of December 31, 2020, the Company converted the outstanding
convertible debt which was due to a related party.
NOTE 6 – NOTES PAYABLE
As of December 31, 2020, the Company had the following:
| Unsecured debt with
shareholders of the Company, no due date, 0% interest, |
|
|
866 |
|
| Unsecured debt
with shareholders of the Company, no due date, 8% interest, |
|
|
170,000 |
|
| TOTAL |
|
$ |
170,866 |
|
As of December 31, 2020, the Company has an outstanding total of
$517.78 in interest accrued for the above note.
NOTE 7 – CONVERTIBLE DEBT
As of December 31, 2020, the Company had the following:
|
Unsecured convertible debt, due 01/19/17, 8% interest, default
interest at 18%, converts at a 54% discount to market price based
on the lowest trading prices in the last 20 days trading price |
|
|
6,750 |
|
| |
|
|
|
|
| SUBTOTAL |
|
|
6,750 |
|
| Less:
Discount |
|
|
— |
|
| TOTAL |
|
$ |
6,750 |
|
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 7 – CONVERTIBLE DEBT (continued)
Below represent the Black-Scholes Option Pricing Model calculations
for the above convertible note payables:
| Payee |
|
Number of options valued |
|
Value of Convertible Option |
| Unsecured Convertible debt
#1 |
|
|
271,684 |
|
|
$ |
7,202 |
|
As of December 31, 2020, the Company has an outstanding total of
$2,379 in accrued interest for the above convertible notes.
The convertible promissory notes is in default but management has
not been able to make contact with this party, due to them living
out of the country. We have calculated the derivative liability as
if it is in default (but the note’s default interest rate stays the
same at 8%) and will still accrue appropriate interest until the
note is fully satisfied or converted into the Company’s common
stock.
The Company has determined that the conversion feature embedded in
the notes referred to above that contain a potential variable
conversion amount constitutes a derivative which has been
bifurcated from the note and recorded as a derivative liability,
with a corresponding discount recorded to the associated debt.
NOTE 8 – STOCKHOLDERS’ EQUITY
Authorized
Stock
The Company has authorized 75,000,000 common shares with a par
value of $0.001 per share. Each common share entitles the
holder to one vote on any matter on which action of the
stockholders of the corporation is sought. During February 2017,
the Company increased the authorized number of shares to
500,000,000. Also, the Company increased the authorized preferred
stock to 75,000,000 shares and designated 25,000,000 shares of
preferred stock to Series A Convertible Preferred Stock. During
January 2018, the Company increased its authorized number of common
shares to 1,000,000,000. During April 2018, the Company increased
its authorized number of common shares to 2,500,000,000. The Board
of Directors, in the future, has the authority to increase the
authorized capital up to 4,000,000,000 shares based on shareholder
approval.
The shareholders of the Company approved a reverse stock split at a
ratio of between 1-for-100 and 1-for 250. The Company received
approval from FINRA for a reverse stock split of 1-for-250, which
was effective as of July 23, 2018.
On October 16, 2017, the Company filed an Amended and Restated
Certificate of Designation of the Rights, Preferences, Privileges
and Restrictions of the Series A Convertible Preferred Stock (the
“Amended Certificate”) with the Secretary of State of the State of
Nevada. The Amended Certificate reduces the number of preferred
shares designated as Series A Preferred Stock from 25,000,000
shares to 1,333,334 shares. The Amended Certificate also changes
the conversion and voting rights of the Series A Preferred Stock.
The Series A Preferred Stock is now convertible into the number of
shares of our common stock equal to 0.00006% of our outstanding
common stock upon conversion. The voting rights of the Series A
Preferred Stock are now equal to the number of shares of common
stock into which the Series A Preferred Stock may convert.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 8 – STOCKHOLDERS’ EQUITY (continued)
As of December 31, 2020, there are no outstanding shares of
preferred stock. All the preferred stock was converted in common
stock on February 4, 2019. See recent developments for details.
Common Share Issuances
During the year ended December 31, 2020, the Company issued
41,727,651 shares of common stock. On several dates in September
2020, the Company raised $295,000 in direct security purchase
agreement which equal to 5,900,000 shares of the Company’s common
stock. During the fourth quarter of 2020, the Company raised
$155,000 in direct security purchase agreement which equal to
3,100,000 shares of the Company’s common stock.
Warrant Issuances
In December 2020, the Company issued 7,500,000 warrants to three
individuals at $0.05 per share. These warrants will need to be
exercised between the date of issue and three years thereafter. As
of December 31, 2020, there were 7,512,000 warrants outstanding, of
which 4,000 warrants are fully vested.
Stock Issued for Services
On January 28, 2019, the Company entered into a marketing and sales
consulting agreement with an individual for a period of six months.
The Company issued 350,000 shares of common stock as the
compensation for this agreement.
Share Conversion Agreements
All of the holders of the Company’s Series A Convertible Preferred
Stock (the “Preferred Holders”) entered into a Preferred
Stock Conversion Agreement. Pursuant to the Conversion Agreements,
the Preferred Holders converted their shares of preferred stock
into common stock, effective as of the Exchange. As a result, no
shares of the Company’s Series A Convertible Preferred Stock are
outstanding. An aggregate of 15,592,986 shares of common stock were
issued to the Preferred Holders. The Preferred Holders agreed to
convert each share of Series A Convertible Preferred Stock into
eighteen (18) shares of common stock and agreed to retire a total
of 467,057 shares of Series A Convertible Preferred Stock. The
Company cancelled the retired shares.
Omnibus Stock Grant and Option Plan
On May 30, 2020, the Company proposed a stock options agreement in
the amount of 10,550,000 shares with a strike price of $0.05 to
sixteen individuals. This plan was approved by the Company by the
end of the third quarter 2020. Purchase price under the plan is
defined as: unless otherwise permitted by applicable law, the
purchase price of Shares to be offered under the Plan shall not be
less than eighty-five percent (85%) of the Fair Market Value of a
Share on the date of grant (100% for 10% shareholders).
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 9 – ACQUISITIONS
Acquisition of Ultimate Brain Nutrients, LLC
On April 3, 2020, the Company entered into a Share Exchange
Agreement by and among Grey Cloak Tech Inc., Ultimate Brain
Nutrients, LLC, a Delaware limited liability company
(“UBN”), and the members of UBN, whereby we issued and
exchanged 90,000,960 shares of our common stock for all of the
outstanding equity securities of UBN. UBN is now our wholly-owned
subsidiary. The shares of common stock issued in the Exchange are
equal to approximately 42.5% of our outstanding common stock
immediately following the exchange.
The assets acquired and liabilities assumed as part of our
acquisition were recognized at their fair values as of the
effective acquisition date, April 3, 2020. The following table
summarizes the fair values assigned to the assets acquired and
liabilities assumed.
| Cash |
|
$ |
(5,466 |
) |
| Current assets |
|
|
315,604 |
|
| Current
liabilities |
|
|
0 |
|
|
Net assets acquired |
|
$ |
310,137 |
|
The purchase price method was used when calculating the fair market
value of the UBN purchase. On April 3, 2020 the closing stock price
for GRCK was $0.021. The total number of shares exchanged
multiplied by the closing stock price equaled a purchase value of
$1,890,020. The difference between the net assets acquired and the
purchase value was recorded as $1,579,883 of goodwill for the
purchase. Due to the goodwill impairment, the Company fully
expensed the goodwill recorded in this transaction. The Company
viewed UBN’s balance sheet as being fairly valued as of April 3,
2020 so no adjustment was needed under the purchase price method of
valuation.
Acquisition of BergaMet and the Share Exchange
Agreement
On February 4, 2019, the Company entered into a Share Exchange
Agreement with BergaMet NA, LLC, a Delaware limited
liability company (“BergaMet”), and the members
of BergaMet, whereby the Company issued and exchanged
97,409,678 shares of its common stock for all of the outstanding
equity securities of BergaMet (the “Exchange”).
Through the Exchange, BergaMet became a wholly-owned
subsidiary of the Company. The shares of common stock issued in the
Exchange were equal to 80.1% of the Company’s outstanding common
stock (post-exchange).
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 9 – ACQUISITIONS (continued)
The assets acquired and liabilities assumed as part of our
acquisition were recognized at their fair values as of the
effective acquisition date, February 4, 2019. The following table
summarizes the fair values assigned to the assets acquired and
liabilities assumed.
| Cash |
|
$ |
437,826 |
|
| Current assets |
|
|
2,801,317 |
|
| Current
liabilities |
|
|
(1,484,210 |
) |
|
Net assets acquired |
|
$ |
1,754,934 |
|
The purchase price method was used when calculating the fair market
value of the BergaMet purchase. On February 4, 2019 the closing
stock price for GRCK was $0.02. The total number of shares
exchanged multiplied by the closing stock price equaled a purchase
value of $1,948,194. The difference between the net assets acquired
and the purchase value was recorded as $193,260 of goodwill for the
purchase. The Company viewed BergaMet’s balance sheet as being
fairly valued as of February 4, 2019 so no adjustment was needed
under the purchase price method of valuation.
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 10 – DISCOUNTINUED OPERATIONS
Healthy Extracts
On January 1, 2019, the Company decided to discontinue operating
the Healthy Extracts division and did not operate in 2019. At the
time of the closure, the Company incurred a loss for the year of
$714 which eliminated all carrying values of assets and liabilities
for the division.
Eqova Life Science
On June 1, 2019, the Company decided to discontinue operating the
Eqova Life Science division which ceased all activities in May
2019. Due to the closure, the Company incurred a loss for the year
of $92,609 which eliminated all carrying values of assets and
liabilities for the division.
NOTE 11 – BUSINESS SEGMENT INFORMATION
As of December 31, 2020, the
Company operated in two reportable segments (Corporate and Health
Supplements) supported by a corporate group which conducts
activities that are non-segment specific. The following table
presents selected financial information about the Company’s
reportable segments for the year ended December 31,
2020.
| |
|
CONSOLIDATED |
|
HEALTH SUPPLEMENTS |
|
CORPORATE |
| |
|
|
|
BergaMet |
|
UBN |
|
|
| Revenue |
|
|
1,276,559 |
|
|
|
1,276,559 |
|
|
|
— |
|
|
|
— |
|
| Cost of Revenue |
|
|
1,855,001 |
|
|
|
1,855,001 |
|
|
|
— |
|
|
|
— |
|
| Long-lived Assets |
|
|
619,137 |
|
|
|
8,038 |
|
|
|
417,839 |
|
|
|
193,260 |
|
| Gain (Loss) Before Income Tax |
|
|
(2,576,375 |
) |
|
|
(1,723,252 |
) |
|
|
(151,551 |
) |
|
|
(701,572 |
) |
| Identifiable Assets |
|
|
2,417,683 |
|
|
|
2,417,683 |
|
|
|
— |
|
|
|
— |
|
| Depreciation and Amortization |
|
|
9,048 |
|
|
|
8,850 |
|
|
|
— |
|
|
|
198 |
|
The following table presents
selected financial information about the Company’s reportable
segments for the three months ended December 3, 2020.
| |
|
CONSOLIDATED |
|
HEALTH SUPPLEMENTS |
|
CORPORATE |
| |
|
|
|
BergaMet |
|
UBN |
|
|
| Revenue |
|
|
135,902 |
|
|
|
135,902 |
|
|
|
— |
|
|
|
— |
|
| Cost of Revenue |
|
|
1,411,823 |
|
|
|
1,411,823 |
|
|
|
— |
|
|
|
— |
|
| Long-lived Assets |
|
|
619,137 |
|
|
|
8,038 |
|
|
|
417,839 |
|
|
|
193,260 |
|
| Gain (Loss) Before Income Tax |
|
|
(1,629,500 |
) |
|
|
(1,516,381 |
) |
|
|
(39,614 |
) |
|
|
(73,505 |
) |
| Identifiable Assets |
|
|
2,417,683 |
|
|
|
2,417,683 |
|
|
|
— |
|
|
|
— |
|
| Depreciation and Amortization |
|
|
2,213 |
|
|
|
2,213 |
|
|
|
— |
|
|
|
— |
|
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 12 – SUBSEQUENT EVENTS
Stock Purchase Agreements
During the beginning of January 2021, the Company received a total
of $225,000 in exchange for 4,500,000 of common stock restricted
shares through subscription agreements at $0.05 cents per
share.
COVID-19
The COVID-19 outbreak in early 2020 has adversely affected, and may
continue to adversely affect economic activity globally, nationally
and locally. These economic and market conditions and other effects
of the COVID-19 outbreak may adversely affect the Company. At this
point, the extent to which COVID-19 may impact the Company's
business is uncertain.
ITEM 9 - CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There are no events required to be disclosed under this Item.
ITEM 9A - CONTROLS AND
PROCEDURES
(a) Disclosure Controls
and Procedures
We conducted an evaluation, with the participation of our Chief
Executive Officer and Chief Financial Officer, 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, as amended, or the Exchange Act,
as of December 31, 2020, 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 Securities Exchange
Commission’s rules and forms, 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 principal executive and principal
financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure. Based on that evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that as of December 31,
2020, 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).
Our principal executive officers do 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 officers have 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.
(b) Management Report
on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal
control over financial reporting is defined in Rules 13a-15(f)
and 15d-15(f) promulgated under the Exchange Act, as amended, as a
process designed by, or under the supervision of, our principal
executive and principal financial officer and effected by our board
of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the
United States and includes those policies and procedures that:
| |
· |
Pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect our
transactions and any disposition of our assets; |
| |
· |
Provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are
being made only in accordance with authorizations of our management
and directors; and |
| |
· |
Provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a
material effect on the financial statements. |
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect all misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. Our management assessed the
effectiveness of our internal control over financial reporting as
of December 31, 2020 . In making this assessment, our management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Based on this assessment, Management
identified the following two material weaknesses that have caused
management to conclude that, as of December 31, 2018, our
disclosure controls and procedures, and our internal control over
financial reporting, were not effective at the reasonable assurance
level:
1. We do not have written
documentation of our internal control policies and procedures.
Written documentation of key internal controls over financial
reporting is a requirement of Section 404 of the Sarbanes-Oxley
Act. Management evaluated the impact of our failure to have written
documentation of our internal controls and procedures on our
assessment of our disclosure controls and procedures and has
concluded that the control deficiency that resulted represented a
material weakness.
2. We do not have
sufficient segregation of duties within accounting functions, which
is a basic internal control. Due to our size and nature,
segregation of all conflicting duties may not always be possible
and may not be economically feasible. However, to the extent
possible, the initiation of transactions, the custody of assets and
the recording of transactions should be performed by separate
individuals. Management evaluated the impact of our failure to have
segregation of duties on our assessment of our disclosure controls
and procedures and has concluded that the control deficiency that
resulted represented a material weakness.
To address these material weaknesses, management performed
additional analyses and other procedures to ensure that the
financial statements included herein fairly present, in all
material respects, our financial position, results of operations
and cash flows for the periods presented. Accordingly, we believe
that the financial statements included in this report fairly
present, in all material respects, our financial condition, results
of operations and cash flows for the periods presented.
This Annual Report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by our registered public accounting firm
pursuant to the rules of the Securities and Exchange Commission
that permit us to provide only our management’s report in this
Annual Report.
(c) Remediation of
Material Weaknesses
To remediate the material weakness in our documentation, evaluation
and testing of internal controls we plan to engage a third-party
firm to assist us in remedying this material weakness once
resources become available.
We also intend to remedy our material weakness with regard to
insufficient segregation of duties by hiring additional employees
in order to segregate duties in a manner that establishes effective
internal controls once resources become available.
(d) Changes in Internal
Control over Financial Reporting
No change in our system of internal control over financial
reporting occurred during the period covered by this report, fourth
quarter of the fiscal year ended December 31, 2020, that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 9B – OTHER INFORMATION
None.
PART III
ITEM 10 – DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the names, ages, and biographical
information of each of our current directors and executive
officers, and the positions with the Company held by each person,
and the date such person became a director or executive officer of
the Company. Our executive officers are elected annually by the
Board of Directors. The directors serve one-year terms until their
successors are elected. The executive officers serve terms of one
year or until their death, resignation or removal by the Board of
Directors. Family relationships among any of the directors and
officers are described below.
| Name |
|
Age |
|
Position(s) |
| |
|
|
|
|
| Kevin “Duke” Pitts |
|
|
61 |
|
|
President, Director
(2018) |
| |
|
|
|
|
|
|
| William Bossung |
|
|
62 |
|
|
Secretary, Chief Financial Officer,
Director (2014) |
| |
|
|
|
|
|
|
| Bill Croyle |
|
|
69 |
|
|
Director (2019) |
Kevin “Duke” Pitts, age 61, was appointed to our Board of
Directors on September 28, 2018, and as our President on September
24, 2019. Mr. Pitts is a proven leader who has 30 years of senior
management experience within a technology-driven industry. Mr.
Pitts has been the President and Owner of Envision Enterprises, a
consumer electronic integration business, where he has worked since
2007. Earlier in his career, Mr. Pitts served as the Director of
Direct Marketing at Dish Network, the well-known satellite
television provider. His deep experience in senior management and
marketing will be of great value to us.
William Bossung, age 62, has served as our Secretary, Chief
Financial Officer, and member of the Board of Directors since our
inception Mr. Bossung has a diverse background in
Corporate Finance, Insurance and accounting. From 2003 to August
2006 Mr. Bossung was co-founder of BCF Technology, an insurance
software company that was ultimately sold to Vertafore in August of
2006. During January 2012 Mr. Bossung co-founded Splash Beverage
Group, (SBEV) a beverage distribution company that distributes both
alcohol and non-alcohol products. The company’s products are sold
in over 25,000 retail locations Mr. Bossung is the managing partner
of Bishop Equity Partners LLC, a small boutique private equity firm
that invests in both private and public companies. From 1997 to
2002 Mr. Bossung was the Director of Corporate Finance of Chadmoore
Wireless Group, the company was engaged in the business of wireless
communications utilizing 800 MHZ frequencies. Chadmoore aggregated
over 5500 Specialized Mobile Radio licenses from the Federal
Communications Commission, the licenses were acquired by Nextel,
then merged into the Sprint PCS wireless network. Mr. Bossung
currently holds an Insurance License and earned a bachelor’s degree
in accounting and finance from Bloomsburg State University.
Bill Croyle, age 69, was appointed to our Board of Directors
on September 24, 2019. Mr. Croyle is a private investor and an
accomplished Senior Executive with more than 40 years of success
across the IT, energy, manufacturing, telecommunications, venture
capital, and finance industries. His broad areas of expertise
include M&A, negotiations, service
contracts and delivery, executive development and
mentoring, and managing complexities. Since 2009 Bill is has been a
founder, owner or executive of EnTX Group, Impact Legacy Partners,
FB Oilfield Special Tools and Western Energy Advisors. He is
Chairman of the Colorado Chapter of the Marine Corps Scholarship
Foundation, and he has served on the boards of Hill City Silica
LLC, the University of Colorado Advocates program, the Association
for Corporate Growth/Denver, and the Denver Consulting Alliance.
Bill served in the Marine Corps 1972-1974. Mr. Croyle holds
Certificates in Energy Finance and Management from the University
of Denver and International Trade from World Trade Center Denver.
He graduated from the University of California, Santa Barbara, with
a BA in History and minor in French.
Family Relationships
There are no family relationships between any of our officers or
directors.
Other Directorships; Director Independence
Other than as set forth above, none of our officers and directors
is a director of any company with a class of securities registered
pursuant to section 12 of the Exchange Act or subject to the
requirements of section 15(d) of such Act or any company registered
as an investment company under the Investment Company Act of
1940.
For purposes of determining director independence, we have applied
the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on
which shares of common stock are quoted does not have any director
independence requirements. The NASDAQ definition of “Independent
Officer” means a person other than an Executive Officer or employee
of the company or any other individual having a relationship which,
in the opinion of the company’s Board of Directors, would interfere
with the exercise of independent judgment in carrying out the
responsibilities of a director. According to the NASDAQ definition,
none of our directors are independent.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than ten
percent of a registered class of our equity securities to file with
the SEC initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the
Company. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file.
Except as set forth below, to our knowledge, none of our officers,
directors, or beneficial owners of more than ten percent of our
common stock failed to file on a timely basis reports required by
section 16(a) of the Exchange Act during the most recent fiscal
year or prior fiscal years.
Board Committees
Our Board of Directors does not maintain a separate audit,
nominating or compensation committee. Functions customarily
performed by such committees are performed by its Board of
Directors as a whole. We are not required to maintain such
committees under the applicable rules of the OTCQB. We do not
currently have an “audit committee financial expert” since we
currently do not have an audit committee in place. We intend to
create board committees, including an independent audit committee,
in the near future.
We do not currently have a process for security holders to send
communications to the Board.
During the fiscal years ended December 31, 2020 and 2019, the Board
of Directors met as necessary.
Involvement in Certain Legal Proceedings
None of our officers or directors has, in the past ten years, filed
bankruptcy, been convicted in a criminal proceeding or named in a
pending criminal proceeding, been the subject of any order,
judgment, or decree of any court permanently or temporarily
enjoining him or her from any securities activities, or any other
disclosable event required by Item 401(f) of Regulation S-K.
Code of Ethics
We have not adopted a written code of ethics, primarily because we
believe and understand that our officers and directors adhere to
and follow ethical standards without the necessity of a written
policy.
ITEM 11 - EXECUTIVE
COMPENSATION
Narrative Disclosure of Executive Compensation
Bossung Employment Agreement
On October 17, 2017, we entered into an Employment Agreement with
William Bossung, our Chief Financial Officer. Pursuant to Mr.
Bossung’s Employment Agreement, we have agreed to pay Mr. Bossung
an annual base salary of $140,000, and he may receive employee
stock options as determined by the Board of Directors. Mr.
Bossung’s employment is “at will” and either party may terminate
the agreement at any time.
If terminated without Cause or as a result of Constructive
Termination, Mr. Bossung will receive severance equal to three
months’ pay at his most recent Base Salary. If Mr. Bossung is
terminated for Cause, Disability or death, or voluntarily resigns,
he will not receive any severance, only unpaid salary as of the
date of termination and vested benefits. The Employment Agreement
includes non-compete and non-solicitation provisions that apply
during the term of the Employment Agreement and for a period of one
year after Mr. Bossung’s termination. Capitalized terms in this
section not defined herein have the meaning given to such term in
the Employment Agreement.
Mr. Bossung’s Employment Agreement also requires that certain
proprietary information of ours be kept confidential. We will be
the owner of certain intellectual property conceived or made by Mr.
Bossung prior to termination of the Employment Agreement. Mr.
Bossung’s Employment Agreement also contains other certain terms
and conditions which are common in such agreements, and reference
is made herein to the text of the Employment Agreement which is
filed herewith as Exhibit 10.1.
Pitts Employment Agreement
On September 28, 2018, we entered into an Employment Agreement with
Kevin “Duke” Pitts. Pursuant to Mr. Pitts’ Employment Agreement, we
have agreed to pay Mr. Pitts an annual base salary of $60,000, and
he may receive employee stock options as determined by the Board of
Directors. Mr. Pitts’ employment is “at will” and either party may
terminate the agreement at any time.
If terminated without Cause or as a result of Constructive
Termination, Mr. Pitts will receive severance equal to three
months’ pay at his most recent Base Salary. If Mr. Pitts is
terminated for Cause, Disability or death, or voluntarily resigns,
he will not receive any severance, only unpaid salary as of the
date of termination and vested benefits. The Employment Agreement
includes non-compete and non-solicitation provisions that apply
during the term of the Employment Agreement and for a period of one
year after Mr. Pitts’ termination. Capitalized terms in this
section not defined herein have the meaning given to such terms in
the Employment Agreement.
Mr. Pitts’ Employment Agreement also requires that certain
proprietary information of the Company be kept confidential. The
Company will be the owner of certain intellectual property
conceived or made by Mr. Pitts prior to termination of the
Employment Agreement. Mr. Pitts’ Employment Agreement also contains
other certain terms and conditions which are common in such
agreements, and reference is made herein to the text of the
Employment Agreement which is filed herewith as Exhibit 10.2.
Summary Compensation Table
The following table sets forth information with respect to
compensation earned by our Chief Executive Officer, President,
Chief Financial Officer and Chief Technology Officer for the years
ended December 31, 2020 and 2019.
|
Name and
Principal Position
|
|
Year |
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option Awards
($)
|
|
Non-Equity Incentive Plan Compensation ($) |
|
Nonqualified Deferred Compensation ($) |
|
All Other
($)
|
|
Total
($)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Kevin
“Duke” Pitts |
|
|
2020 |
|
|
|
110,000 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
110,000 |
|
| President |
|
|
2019 |
|
|
|
78,000 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
78,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| William
Bossung |
|
|
2020 |
|
|
|
66,000 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
66,000 |
|
| Secretary and
CFO |
|
|
2019 |
|
|
|
54,000 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
54,000 |
|
Director Compensation
For the years ended December 31, 2020 and 2019, none of the members
of our Board of Directors received compensation for his or her
service as a director.
Outstanding Equity Awards at Fiscal Year-End
On June 10, 2020, our Board of Directors approved the Grey Cloak
Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside
25,000,000 shares of our common stock for issuance thereunder.
Pursuant to the plan, officers, directors, key employees and
certain consultants may be granted stock options (including
incentive stock options and non-qualified stock options),
restricted stock awards, unrestricted stock awards, or performance
stock awards. As of February 16, 2021, we have awarded an aggregate
of twelve million (12,000,000) options to nineteen (19) individuals
at an exercise price of $0.05 per share.
ITEM 12 - SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The following table sets forth, as of February 16, 2021, certain
information with respect to our equity securities owned of record
or beneficially by (i) each of our Officers and Directors; (ii)
each person who owns beneficially more than 10% of each class of
our outstanding equity securities; and (iii) all Directors and
Executive Officers as a group.
|
Name and Address (1)
|
|
Common Stock Beneficial Ownership
|
|
Percentage of Common Stock Beneficial Ownership (2) |
| |
|
|
|
|
|
Kevin “Duke” Pitts (3)(5) |
|
|
4,230,112 |
|
|
|
1.36 |
% |
| |
|
|
|
|
|
|
|
|
| William
Bossung (3)(6) |
|
|
6,276,357 |
|
|
|
2.02 |
% |
| |
|
|
|
|
|
|
|
|
| Bill Croyle
(3)(4)(7) |
|
|
863,670 |
|
|
|
<1% |
|
| |
|
|
|
|
|
|
|
|
| Jay Decker
(8) |
|
|
178,806,834 |
|
|
|
56.78 |
% |
| |
|
|
|
|
|
|
|
|
| All Officers and
Directors as a Group (3 Persons) |
|
|
11,370,139 |
|
|
|
3.55 |
% |
| |
(1) |
Unless otherwise indicated, the
address of the shareholder is c/o Healthy Extracts Inc. |
| |
|
|
| |
(2) |
Unless otherwise indicated, based
on 308,887,410 shares of common stock issued and outstanding.
Shares of common stock subject to convertible preferred stock and
options or warrants currently exercisable, or exercisable or
convertible within 60 days, are deemed outstanding for purposes of
computing the percentage of the person holding such options or
warrants, but are not deemed outstanding for purposes of computing
the percentage of any other person. |
| |
|
|
| |
(3) |
Indicates one of our officers or
directors. |
| |
|
|
| |
(4) |
Includes 663,670 shares of common
stock held by BMJ Estate Matters, LLC, of which Mr. Croyle is the
controlling party. |
| |
|
|
| |
(5) |
Includes options to acquire
2,000,000 shares of common stock at $0.05 per share. |
| |
|
|
| |
(6) |
Includes options to acquire
2,000,000 shares of common stock at $0.05 per share. |
| |
|
|
| |
(7) |
Includes options to acquire 200,000
shares of common stock at $0.05 per share. |
| |
|
|
| |
(8) |
Includes warrants to acquire
6,000,000 shares of common stock at $0.05 per share. |
The issuer is not aware of any person who owns of record, or is
known to own beneficially, five percent or more of the outstanding
securities of any class of the issuer, other than as set forth
above. There are no classes of stock other than common stock issued
or outstanding.
There are no current arrangements
which will result in a change in control.
On June 10, 2020, our Board of Directors approved the Grey Cloak
Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside
25,000,000 shares of our common stock for issuance thereunder.
Pursuant to the plan, officers, directors, key employees and
certain consultants may be granted stock options (including
incentive stock options and non-qualified stock options),
restricted stock awards, unrestricted stock awards, or performance
stock awards. As of February 16, 2021, we have awarded an aggregate
of twelve million (12,000,000) options to nineteen (19) individuals
at an exercise price of $0.05 per share.
ITEM 13 - CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Bossung Employment Agreement
On October 17, 2017, we entered into an Employment Agreement with
William Bossung, our Chief Financial Officer. Pursuant to Mr.
Bossung’s Employment Agreement, we have agreed to pay Mr. Bossung
an annual base salary of $140,000, and he may receive employee
stock options as determined by the Board of Directors. Mr.
Bossung’s employment is “at will” and either party may terminate
the agreement at any time.
If terminated without Cause or as a result of Constructive
Termination, Mr. Bossung will receive severance equal to three
months’ pay at his most recent Base Salary. If Mr. Bossung is
terminated for Cause, Disability or death, or voluntarily resigns,
he will not receive any severance, only unpaid salary as of the
date of termination and vested benefits. The Employment Agreement
includes non-compete and non-solicitation provisions that apply
during the term of the Employment Agreement and for a period of one
year after Mr. Bossung’s termination. Capitalized terms in this
section not defined herein have the meaning given to such term in
the Employment Agreement.
Mr. Bossung’s Employment Agreement also requires that certain
proprietary information of ours be kept confidential. We will be
the owner of certain intellectual property conceived or made by Mr.
Bossung prior to termination of the Employment Agreement. Mr.
Bossung’s Employment Agreement also contains other certain terms
and conditions which are common in such agreements, and reference
is made herein to the text of the Employment Agreement which is
filed herewith as Exhibit 10.1.
Pitts Employment Agreement
On September 28, 2018, we entered into an Employment Agreement with
Kevin “Duke” Pitts. Pursuant to Mr. Pitts’ Employment Agreement, we
have agreed to pay Mr. Pitts an annual base salary of $60,000, and
he may receive employee stock options as determined by the Board of
Directors. Mr. Pitts’ employment is “at will” and either party may
terminate the agreement at any time.
If terminated without Cause or as a result of Constructive
Termination, Mr. Pitts will receive severance equal to three
months’ pay at his most recent Base Salary. If Mr. Pitts is
terminated for Cause, Disability or death, or voluntarily resigns,
he will not receive any severance, only unpaid salary as of the
date of termination and vested benefits. The Employment Agreement
includes non-compete and non-solicitation provisions that apply
during the term of the Employment Agreement and for a period of one
year after Mr. Pitts’ termination. Capitalized terms in this
section not defined herein have the meaning given to such terms in
the Employment Agreement.
Mr. Pitts’ Employment Agreement also requires that certain
proprietary information of the Company be kept confidential. The
Company will be the owner of certain intellectual property
conceived or made by Mr. Pitts prior to termination of the
Employment Agreement. Mr. Pitts’ Employment Agreement also contains
other certain terms and conditions which are common in such
agreements, and reference is made herein to the text of the
Employment Agreement which is filed herewith as Exhibit 10.2.
Director Independence
For purposes of determining director independence, we have applied
the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on
which shares of common stock are quoted does not have any director
independence requirements. The NASDAQ definition of “Independent
Officer” means a person other than an Executive Officer or employee
of the Company or any other individual having a relationship which,
in the opinion of the Company’s Board of Directors, would interfere
with the exercise of independent judgment in carrying out the
responsibilities of a director. According to the NASDAQ definition,
none of our directors are independent.
ITEM 14 – PRINCIPAL ACCOUNTING
FEES AND SERVICES
BF Borgers CPA PC was our independent registered public accounting
firm for the years ended December 31, 2020 and 2019.
Audit and Non-Audit Fees
The following table presents fees for professional services
rendered by our independent registered public accounting firm for
the audit of our annual financial statements for the years ended
December 31, 2020 and 2019.
| |
|
Years Ended December
31, |
| |
|
2020 |
|
2019 |
| Audit
Fees (1) |
|
$ |
40,600 |
|
|
$ |
43,200 |
|
| Audit Related
Fees |
|
|
— |
|
|
|
— |
|
| Tax Fees |
|
|
— |
|
|
|
— |
|
| All
Other Fees |
|
|
— |
|
|
|
— |
|
| Total |
|
$ |
40,600 |
|
|
$ |
43,200 |
|
(1) Audit fees were principally for audit and
review services.
Of the fees described above for the years ended December 31, 2020
and 2019, all were approved by the entire Board of Directors.
PART IV
ITEM 15 - EXHIBITS, FINANCIAL
STATEMENT SCHEDULES
(a)(1) Financial
Statements
The following financial statements are filed as part of this
report:
|
Report of Independent Registered
Public Accounting Firm |
|
|
F-1 |
|
| |
|
|
|
|
| Consolidated Balance Sheets as of
December 31, 2020 and 2019 |
|
|
F-2 |
|
| |
|
|
|
|
| Consolidated
Statement of Operations for the year ended December 31, 2020 and
2019 |
|
|
F-3 |
|
| |
|
|
|
|
| Consolidated
Statement of Stockholders’ Deficit for the year ended December 31,
2020 and 2019 |
|
|
F-4 |
|
| |
|
|
|
|
| Consolidated
Statement of Cash Flows for the year ended December 31, 2020 and
2019 |
|
|
F-5 |
|
| |
|
|
|
|
| Notes to
Consolidated Financial Statements |
|
|
F-6 to F-15 |
|
(a)(2) Financial
Statement Schedules
We do not have any financial statement schedules required to be
supplied under this Item.
(a)(3) Exhibits
Refer to (b) below.
(b) Exhibits
|
Exhibit No. |
|
Exhibit Description |
| |
3.1 (1) |
|
|
Articles of Incorporation of Grey
Cloak Tech Inc. |
| |
|
|
|
|
|
|
3.2 |
|
|
Certificate of Amendment of Articles
of Incorporation |
| |
|
|
|
|
| |
3.3 (1) |
|
|
Bylaws of Grey Cloak Tech
Inc. |
| |
|
|
|
|
| |
10.1 (2) |
|
|
Employment Agreement by and between
the Company and William Bossung, dated October 17, 2017 |
| |
|
|
|
|
| |
10.2 |
|
|
Employment Agreement by and between
the Company and Kevin “Duke” Pitts, dated September 28,
2018 |
| |
|
|
|
|
| |
10.3 (4) |
|
|
Share Exchange Agreement dated
February 4, 2019 by and among Grey Cloak Tech Inc., BergaMet NA,
LLC, and the Members of BergaMet |
| |
|
|
|
|
| |
10.4 (3) |
|
|
Share Exchange Agreement with
Ultimate Brain Nutrients, LLC and its members |
| |
|
|
|
|
| |
10.5 (4) |
|
|
Form of Note Satisfaction
Agreement |
| |
|
|
|
|
| |
10.6 (4) |
|
|
Form of Preferred Stock Conversion
Agreement |
| |
|
|
|
|
| |
31.1 |
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer |
| |
|
|
|
|
| |
31.2 |
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer |
| |
|
|
|
|
| |
32.1 |
|
|
Chief Executive Officer
Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
|
| |
32.2 |
|
|
Chief Financial Officer
Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
|
| |
101. |
INS |
|
XBRL Instance
Document |
| |
|
|
|
|
| |
101. |
SCH |
|
XBRL Schema
Document |
| |
|
|
|
|
| |
101. |
CAL |
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XBRL
Calculation Linkbase Document |
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101. |
DEF |
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XBRL
Definition Linkbase Document |
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101. |
LAB |
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XBRL Labels
Linkbase Document |
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101. |
PRE |
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XBRL
Presentation Linkbase Document |
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(1) |
Incorporated by
reference from our Registration Statement on Form S-1 dated and
filed with the Commission on March 6, 2015. |
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(2) |
Incorporated by reference from our
Annual Report on Form 10-K filed with the Commission on June 8,
2018. |
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(3) |
Incorporated by reference from our
Current Report on Form 8-K filed with the Commission on April 8,
2020 |
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(4) |
Incorporated by reference from our
Quarterly Report on Form 10-Q dated and filed with the Commission
on May 28, 2020. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
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Healthy Extracts Inc. |
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Dated: February 19, 2021 |
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/s/ Kevin “Duke” Pitts |
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By: |
Kevin “Duke”
Pitts |
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Its: |
President |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
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Dated: February 19, 2021 |
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/s/ Kevin “Duke” Pitts |
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By: |
Kevin “Duke”
Pitts |
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Its: |
President |
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Dated: February 19, 2021 |
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/s/ William Bossung |
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By: |
William
Bossung |
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Its: |
Secretary and
Chief Financial Officer |
