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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

  x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2021

 

OR

 

  o 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

 

(IMAGE)

 

Healthy Extracts Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of

incorporation or organization)

47-2594704

(I.R.S. Employer

Identification No.)

   

1 Silvermound

Littleton, CO 80127

(Address of principal executive offices)

 

80127

(Zip Code)

 

Registrant’s telephone number, including area code (720) 463-1004

 

Securities registered pursuant to Section 12(b) of the Act:

 

  Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

     
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 o No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x

 

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

 

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 x No o

 

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):

 

Large accelerated filer o Accelerated filer o
Non-accelerated Filer o Smaller reporting company x
    Emerging growth company x

 

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. o

 

Indicate 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 audit report. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as March 22, 2022 was $12,649,188, based on the closing price of $0.08 on June 30, 2021.

 

As of March 22, 2022, there were 338,091,821 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
     
ITEM 1 BUSINESS 1
ITEM 1A RISK FACTORS 6
ITEM 1B UNRESOLVED STAFF COMMENTS 17
ITEM 2 PROPERTIES 17
ITEM 3 LEGAL PROCEEDINGS 17
ITEM 4 MINE SAFETY DISCLOSURES 18
     
PART II
     
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 19
ITEM 6 RESERVED 20
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 26
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 27
ITEM 9A CONTROLS AND PROCEDURES 27
ITEM 9B OTHER INFORMATION 29
     
PART III
     
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 30
ITEM 11 EXECUTIVE COMPENSATION 32
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 34
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 35
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES 38
     
PART IV
     
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 39

 

 

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.

 

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.

 

Overview

 

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. BergaMet is an established company that was already generating revenues when we acquired it.

 

Ultimate Brain Nutrients, LLC

 

On April 3, 2020, we issued and exchanged shares of our common stock for all of the outstanding equity securities of UBN. UBN is a science-based company that develops unique, plant-based health technology neuro-products that provide natural brain solutions. UBN has numerous proprietary products, with four unique patent-pending formulations and two patents issued.

-1 -

The Market

 

Bergamot

 

BergaMet, LLC holds the rights to distribute BergaMet products in the United States, Canada, Mexico, and South Korea pursuant to a Supply Agreement with H&AD S.r.L., an Italian limited company. The Supply Agreement was entered into on January 1, 2019, has a term of five (5) years, and is renewable for up to four (4) additional and successive three (3) year terms.

 

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 health1. 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:

 

BergaMet Pro+

 

BergaMet Mega+O

 

BergaMet HERHEART

 

BergaMet Cholesterol Command

 

BergaMet SPORTSHEART

 

Ultimate Brain Nutrients

 

Our UBN subsidiary is a science-based company that develops unique, plant-based 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.

-2 -

UBN has six unique formulation patents – two 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 revenue2. 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.

 

We are currently in the research and development phase on a UBN product called Ultimate Brain Nutrients with its proprietary Fuel for Thought (F4T) formulations. BergaMet has been covering the costs of the product creation and development with our product manufactures, due to UBN’s lack of positive cash flow. As we create and test new flavors of F4T, and once we have product production in place, UBN will begin to sell the product in April 2022. We have been accounting for these costs as inter-company loans.

 

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.

 

Status Serial No. Date Filed Title
Pending 15/743,448 January 10, 2018 PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES
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
Pending 16/350,663 December 19, 2018 COMPOSITIONS OF MEDIUM CHAIN TRIGLYCERIDES AND PLANT-BASED NUTRIENTS FOR BRAIN HEALTH
Issued 16/350,664 December 19, 2018 COMPOSITIONS WITH KETOGENIC AGENTS, CANNABINOIDS, PLANT-DERIVED SUBSTANCES AND MICRONUTRIENTS
Issued 16/501,249
(Patent No. 10,500,182)
December 17, 2018 COMPOSITIONS OF KETOGENIC SOURCES, MICRONUTRIENTS AND HYTOCHEMICALS FOR PROPHYLAXIS AND MITIGATION OF MIGRAINE HEADACHE
Pending 17/011,650 September 3, 2020 PROPHYLAXIS AND MIIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTERS, AND OTHER KETOGENIC SOURCES

 

 
2 https://financial-news-now.com/nootropic-beverages-set-to-take-over-the-16-billion-dollar-energy-drink-market/

-3 -

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.

-4 -

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.

-5 -

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.

-6 -

Risk Factors Related to the Business of the Company

 

Our operations rely on professionals all over the United States, which was 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.

 

Throughout 2020, 2021, and into 2022, 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 ongoing COVID-19 pandemic and responses thereto have adversely affected and we expect will continue to adversely affect our supply chain, workforce, approval process, and business operations.

 

The ongoing COVID-19 pandemic, and related government and social responses, have resulted in widespread impacts on our industry and the economy in general, including closures of businesses not deemed “essential,” limitations on the availability of elective medical procedures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, as well as record declines in stock prices, among other effects. We continue to monitor our operations and government mandates and may elect or be required to limit our access to customers and limit customer use of our products as they are required to prioritize resources to address the public healthcare needs arising from the COVID-19 pandemic. Such disruptions to our activities and operations will negatively impact our business and some of our operating results and may negatively impact our financial condition.

 

The duration of COVID-19’s impact on our business may be difficult to assess or predict. The widespread pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, reducing our ability to access capital, which would negatively affect our liquidity. Further, quarantines or government reaction or shutdowns could disrupt our supply chain. Travel and import restrictions may also disrupt our ability to manufacture or distribute our products. Any import or export or other cargo restrictions related to our products or the raw materials used to manufacture our products would restrict our ability to manufacture and ship products and harm our business, financial condition and results of operations. Our key personnel and other employees could also be affected by COVID-19, potentially reducing their availability, and an outbreak such as COVID-19 or the procedures we take to mitigate its effect on our workforce could reduce the efficiency of our operations or prove insufficient. We may delay or reduce certain spending related to certain projects until the travel and logistical impacts related to COVID-19 are lifted, which will delay the completion of such projects.

 

The global outbreak of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change, and its duration and extent depends on factors such as the evolution of variants of the virus, and the development and widespread distribution of vaccines. We do not yet know the full extent of potential delays or impacts on our business or the global economy as a whole. However, these effects have harmed our business, financial condition, and results of operations in the near term and could have a continuing material impact on our operations, sales, and ability to continue operations.

-7 -

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, but we have changed our business focus with the acquisition of BergaMet and UBN and we have not fully developed our current business operations and have not yet experienced significant revenue. 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, 2021, was ($14,943,620). Based on our cash position of $222,098 as of December 31, 2021, 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 nutritional supplement 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 nutritional supplement 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 nutritional supplement products that are less expensive, safer or otherwise more appealing than our current and potential products, or that reach the market before our current and 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:

 

develop and market products that are less expensive, safer, or otherwise more appealing than our products;

 

commercialize competing products before we or our partners can launch our products; and

 

initiate or withstand substantial price competition more successfully than we can.

-8 -

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 approximately 2% of shareholder votes; however, if you add in our controlling shareholder, Jay Decker, they hold approximately 53% 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.

-9 -

We have a significant amount of unsold inventory, which could affect our assets and our profitability.

 

As of December 31, 2021, we had over $1.9 million in inventory, after writing off over $400,000 in inventory for the year. The amount of our inventory exceeds our revenues for the year ended December 31, 2021. Our inventory could spoil or be damaged, or we could never sell it, affecting the assets on our balance sheet as well as our future profitability.

 

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.

 

We are subject to and affected by extensive governmental regulations.

 

We are subject to and affected by extensive governmental regulations, including, among other things, regulations pertaining to (i) the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of our products, and (ii) product claims and advertising (including direct claims and advertising by us, as well as claims and advertising by distributors for which we may be held responsible)

 

We could be found not to be in compliance with existing regulations as a result, among other things, of the ambiguous nature of certain of the regulations, the considerable interpretive and enforcement discretion given to regulators or misconduct by distributors, who are generally independent contractors over whom we have limited control. Enforcement actions that could be undertaken by state and federal regulators include product seizures, injunctions against further product distribution, requests for product recall, and possible criminal prosecution. Any assertion or determination that we or our distributors are not in compliance with existing regulations could have a material adverse effect on our revenues.

 

In addition, the adoption of new regulations, or changes in the interpretation of existing regulations, could have a material adverse effect on us. For example, in September 1997 the United States Food and Drug Administration (the “FDA”) issued regulations governing the labeling and marketing of dietary supplement products.

 

In addition, claims made with respect to weight management, dietary supplement, personal care or other products of ours may change the regulatory status of the products. For example, it is possible that the FDA could take the position that claims made in connection with certain of our products place those products within the scope of an FDA “over-the counter” (OTC) drug monograph. OTC monographs prescribe permissible ingredients and appropriate labeling language, and require the marketer or supplier of the products to register and file annual drug listing information with the FDA.

 

The U.S. Federal Trade Commission (“FTC”), which exercises jurisdiction over the advertising of all our products, has in the past instituted enforcement actions against dietary supplement companies for false and misleading advertising of certain products. These enforcement actions have resulted in consent decrees and monetary payments by the companies involved. In addition, the FTC has increased its scrutiny of the use of testimonials.

-10 -

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.

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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.

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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 OTCQB 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 51% 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.

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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.

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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.

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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 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, 338,091,821 shares are issued and outstanding as of March 22, 2022. Therefore, we are authorized to issue up to an additional 2,161,908,179 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.

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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 12,120,139 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 190,926,973 shares. Each individual officer, director, and control party may be able to sell up to 1% of our outstanding stock (currently approximately 3,300,000 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.

 

On January 20, 2022, we entered into a lease agreement for approximately 3,600 square fee of warehouse, distribution, and administrative office space in Henderson, Nevada. The lease is for a period of three (3) years, through January 31, 2025, at a monthly lease rate of $3,891 and increasing thereafter.

 

ITEM 3 – LEGAL PROCEEDINGS

 

We are not a party to or otherwise involved in any legal proceedings.

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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.

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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 “HYEX.” 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, 2021 and 2020, 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       Transaction Prices
December 31,   Period   High   Low
2021   Fourth Quarter   $0.108   $0.03
    Third Quarter   $0.139   $0.06
    Second Quarter   $0.08   $0.052
    First Quarter   $0.12   $0.04
             
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

 

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 March 22, 2022, there were 338,091,821 shares of our common stock issued and outstanding and held by 111 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.

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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 March 22, 2022, we have awarded an aggregate of nineteen million five hundred thousand (19,500,000) options to twenty five (25) 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 – RESERVED

 

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

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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 incorporated on December 19, 2014 in the State of Nevada. We had revenues of $1,465,782 in the year ended December 31, 2021 and $1,276,559 in the year ended December 31, 2020.

 

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.

 

Overview

 

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. BergaMet is an established company that was already generating revenues when we acquired it.

 

Ultimate Brain Nutrients, LLC

 

On April 3, 2020, we issued and exchanged shares of our common stock for all of the outstanding equity securities of UBN. UBN is a science-based company that develops unique, plant-based health technology neuro-products that provide natural brain solutions. UBN has numerous proprietary products, with four unique patent-pending formulations and two patents issued.

-21 -

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, 2021 and 2020 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, 2021, we have incurred accumulated net losses of $14,943,620. 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, 2021 and 2020

 

Introduction

 

We had revenues of $1,465,782 for the year ended December 31, 2021, as compared to $1,276,559 for the year ended December 31, 2020, an increase of $377,200, or 29%. Our cost of revenue was $770,704 for the year ended December 31, 2021, as compared to $1,855,001 for the year ended December 31, 2020, a decrease of $1,084,297, or 58%. 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, 2021 and 2020 were as follows:

 

    Year Ended
December 31, 2021
    Year Ended
December 31, 2020
    Increase/
(Decrease)
 
Revenue   $ 1,465,782     $ 1,276,559     $ 377,200  
Cost of Revenue     770,704       1,855,001       (1,084,297 )
                         
Operating expenses:                        
General and administrative     2,584,256       1,474,891       1,109,365  
Total operating expenses     2,584,256       3,054,774       (470,518 )
                         
Net operating loss                        
Other income/(expense)     (97,945 )     1,056,841       (1,154,786 )
                         
Net gain/(loss)   $ (1,987,122 )   $ (2,576,375 )   $ 589,253  

 

Revenues

 

We had revenues of $1,465,782 and $1,276,559 for the years ended December 31, 2021 and 2020, respectively, an increase of 29%. The increase in revenues was main due to our increased focus on the Amazon marketplace.

-22 -

Cost of Revenue

 

Cost of revenue was $770,704 and $1,855,001 for the years ended December 31, 2021 and 2020, respectively, a decrease of 58%, 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 $2,584,256 and $1,474,891 for the years ended December 31, 2021 and 2020, an increase of $1,109,365, or 75%. The increase was related to the additional costs of fund raising and the increased administrative costs associated with being a public company. In the year ended December 31, 2021, general and administrative expenses consisted mainly of consulting of $1,010,902, selling expenses of $560,883, accounting and legal fees of $323,658, salary and wages of $147,938, and transfer agent and filing fees of $46,778. In the year ended December 31, 2020, general and administrative expenses consisted mainly 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.

 

Net Operating Gain/Loss

 

As a result of the items discussed above, our net operating loss was $1,889,177 and $3,633,216 for the years ended December 31, 2021 and 2020, respectively, a reduction of $1,744,039.

 

Other Income and Expense

 

Other income (expense) was $(97,945) and $1,056,841 for the years ended December 31, 2021 and 2020, respectively, a decrease of $1,154,786, of which $1,138,512 was a change in fair value of derivative.

 

Net Gain/(Loss)

 

Our net gain (loss) for the year ended December 31, 2021 was $(1,987,122), or $0.01 per share, and our net gain (loss) for the ended December 31, 2020 was $(2,576,375), or $(0.01) per share.

 

Liquidity and Capital Resources

 

Introduction

 

During the years ended December 31, 2021 and 2020, we had negative operating cash flows. Our cash on hand as of December 31, 2021 was $222,098. Our monthly cash flow burn rate in 2021 (not including inventory purchases) was approximately $37,000. 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 expected to see an increase in revenues that would 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.

-23 -

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2021 and 2020 are as follows:

 

    December 31, 2021     December 31, 2020     Change  
Cash   $ 222,098     $ 59,201     $ 162,897  
Total Current Assets     2,313,404       2,490,158       (176,754 )
Total Assets     3,029,579       3,115,430       (85,850 )
Total Current Liabilities     558,841       261,604       297,237  
Total Liabilities   $ 558,841   $ 261,604     $ 297,237  

 

Our cash increased by $162,897 as of December 31, 2021 as compared to December 31, 2020. Our total current assets decreased by $176,754, despite our increase in cash and accounts receivable as a result of our decrease in inventory. Our total assets decreased by $85,850 despite our increase in cash, accounts receivable, and patents/trademarks from the UBN acquisition.

 

Our current and total liabilities increased by $297,237, from $261,604 as of December 31, 2020 to $558,841 as of December 31, 2021. Our total liabilities as of the year ended December 31, 2021 consisted primarily of notes payable – related party of $170,866 and convertible debt of $171,750.

 

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, 2021 was $222,098. Our monthly cash flow burn rate in 2021 (not including inventory purchases) was approximately $37,000. 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, 2021 and 2020 was $901,298 and $1,902,758, respectively, a decrease of $441,581. Our net cash used in operating activities for the year ended December 31, 2021 consisted primary of a net loss of $1,987,122, plus a decrease in accounts receivable of $120,066, offset by an adjustment for warrants issued for services of $608,836 and changes in inventory of $459,717. Our net cash used in operating activities for 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, offset by impairment of goodwill of $1,579,883 and changes in inventory of $663,476.

-24 -

Investments

 

Our cash flow provided by (used in) investing activities for the years ended December 31, 2021 and 2020 was $(96,004) and $(115,740), respectively, a decrease of $19,737. The decrease in 2021 was as a result of a reduction in the value of our trademarks.

 

Financing

 

Our net cash provided by financing activities for the years ended December 31, 2021 and 2020 was $1,160,199 and $1,944,248, respectively, a decrease of $784,049. The decrease in 2021 was due to proceeds from the issuance of common stock of $995,199 and proceeds from the issuance of convertible debt of $165,000.

 

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.

-25 -

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Report of Independent Registered Public Accounting Firm F-1
   
Consolidated Balance Sheets as of December 31, 2021 and 2020 F-2
   
Consolidated Statement of Operations for the year ended December 31, 2021 and 2020 F-3
   
Consolidated Statement of Stockholders’ Deficit for the year ended December 31, 2021 and 2020 F-4
   
Consolidated Statement of Cash Flows for the year ended December 31, 2021 and 2020 F-5
   
Notes to Consolidated Financial Statements F-6 to F-15

-26 -

Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of Healthy Extracts Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Healthy Extracts Inc. (the “Company”) as of December 31, 2021 and 2020, 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, 2021 and 2020, 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.

 

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.

 

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.

 

/s/ BF Borgers CPA PC
BF Borgers CPA PC

PCAOB ID 5041 

 

We have served as the Company’s auditor since 2020

 

Lakewood, CO
March 31, 2022

F-1

HEALTHY EXTRACTS, INC.
CONSOLIDATED BALANCE SHEETS
(Audited)

 

    DECEMBER 31,     DECEMBER 31,  
    2021     2020  
ASSETS                
                 
CURRENT ASSETS                
Cash   $ 222,098     $ 59,201  
Accounts receivable     133,340       13,274  
Inventory     1,957,966       2,417,683  
Total current assets     2,313,404       2,490,158  
                 
Fixed assets, net of accumulated depreciation of $45,944 and $36,895, respectively     1,035       6,135  
Patents/Trademarks     521,881       425,877  
Goodwill     193,260       193,260  
Total other assets     716,175       625,272  
                 
TOTAL ASSETS   $ 3,029,579     $ 3,115,430  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
LIABILITIES                
Accounts payable   $ 37,267     $ 64,836  
Accrued liabilities     59,264       9,054  
Notes payable            
Notes payable - related party     170,866       170,866  
Convertible debt, net of discount of $0.00 and $0.00, respectively     171,750       6,750  
Convertible debt - related party, net of discount of $0.00 and $0.00, respectively            
Accrued interest payable     13,050       2,379  
Accrued interest payable - related party     14,118       518  
Derivative liabilities     92,527       7,202  
Total current and total liabilities     558,841       261,604  
                 
                 
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,   338,384,171 and 308,887,410 shares issued and outstanding, respectively     338,384       308,887  
Additional paid-in capital     17,075,974       15,501,436  
Accumulated deficit     (14,943,620 )     (12,956,498 )
Total stockholders’ equity (deficit)     2,470,738       2,853,826  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   $ 3,029,579     $ 3,115,430  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2

HEALTHY EXTRACTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE 12 MONTHS ENDING DECEMBER 31, 2021 AND 2020
(Audited)

 

    FOR THE 12 MONTHS ENDED  
    DECEMBER 31,  
    2021     2020  
REVENUE                
Gross revenue   $ 1,676,598     $ 1,299,398  
Less selling fees     (210,816 )     (22,839 )
Net revenue     1,465,782       1,276,559  
                 
COST OF REVENUE                
Cost of goods sold     346,156       465,010  
Written off inventory     424,548       1,389,991  
Total cost of revenue     770,704       1,855,001  
                 
GROSS PROFIT     695,078       (578,442 )
                 
OPERATING EXPENSES                
General and administrative     2,584,256       1,474,891  
Impairment of assets           1,579,883  
Total operating expenses     2,584,256       3,054,774  
                 
OTHER INCOME (EXPENSE)                
Interest expense, net of interest income     (52,453 )     (72,882 )
Change in fair value on derivative     (85,325 )     1,053,186  
Loss on extinguishment of debt           46,836  
SBA loan forgiveness     39,833       29,700  
Gain on sale of asset            
                 
Total other income (expense)     (97,945 )     1,056,841  
                 
Net gain/(loss) before income tax provision     (1,987,122 )     (2,576,375 )
                 
NET GAIN/(LOSS)   $ (1,987,122 )   $ (2,576,375 )
                 
Loss per share - basic and diluted   $ (0.01 )   $ (0.01 )
                 
Weighted average number of shares outstanding - basic and diluted     319,209,932       237,300,091  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-3

HEALTHY EXTRACTS, INC.
 CONSOLIDATED STATEMENT OF CASH FLOWS
(Audited)

 

    FOR THE 12 MONTHS  
    ENDING  
    DECEMBER 31,  
    2021     2020  
Cash Flows from Operating Activities:                
Net Gain/(Loss)   $ (1,987,122 )   $ (2,576,375 )
                 
Adjustments to reconcile net loss to net cash  used in operating activities:                
Depreciation and amortization     5,100       9,048  
Warrants issued for services     608,836        
Non-cash compensation            
Change in fair value on derivative liability     85,325       (1,053,186 )
Loss on extinguishment of debt           (46,836 )
Gain on sale of asset            
Impairment of goodwill           1,579,883  
Changes in operating assets and liabilities:                
Accounts receivable     (120,066 )     13,199  
Inventory     459,717       663,476  
Accrued interest receivable            
Accounts payable     (27,569 )     43,711  
Accounts payable - related party            
Accrued liabilities     50,210       (44,287 )
Accrued interest payable     10,671       (47,524 )
Accrued interest payable - related party     13,600       (490,703 )
Net Cash used in Operating Activities     (901,298 )     (1,902,758 )
                 
Cash Flows from Investing Activities:                
                 
Purchase of fixed assets            
Cash received from sale of asset            
Purchase of note receivable            
Trademarks     (96,004 )     (115,740 )
Payments of note receivable            
Cash flows provided by (used in) Investing Activities:     (96,004 )     (115,740 )
                 
Cash Flows from Financing Activities:                
                 
Purchase of BergaMet            
Purchase of UBN            
Proceeds from issuance of common stock     995,199       4,405,791  
Proceeds from issuance of convertible debt,     165,000       (1,501,876 )
Payments for repayment of convertible debt            
Proceeds from issuance of noted payable           (79,667 )
Proceeds from issuance of noted payable - related party           (880,000 )
Payments for repayment of notes payable - related party            
Net Cash provided by Financing Activities     1,160,199       1,944,248  
                 
Increase (decrease) in cash     162,897       (74,250 )
Cash at beginning of period     59,201       133,451  
Cash at end of period   $ 222,098     $ 59,201  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4

HEALTHY EXTRACTS, INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE 12 MONTHS ENDING DECEMBER 2021 AND 2020
(Audited)

 

                                    Additional              
    Preferred Stock     Common Stock     Paid-In     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Deficit     Total  
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  
                                                         
Issuance of common stock for cash                 900,000       900       44,100             45,000  
                                                         
Issuance of common stock for cash                 300,000       300       14,700             15,000  
                                                         
Issuance of common stock for cash                 3,300,000       3,300       161,700             165,000  
                                                         
Issuance of common stock for cash                                          
                                                         
Issuance of common stock for debt                 1,200,000       1,200       85,200             86,400  
                                                         
Issuance of common stock for services                 715,000       715       50,765             51,480  
                                                         
Issuance of common stock for services                 2,000,000       2,000       142,000             144,000  
                                                         
Issuance of common stock for services                 1,000,000       1,000       59,000             60,000  
                                                         
Issuance of common stock for services                 1,177,778       1,178       90,778             91,956  
                                                         
Issuance of common stock for debt                 1,200,000       1,200       58,800             60,000  
                                                         
Issuance of common stock for services                 5,500,000       5,500       269,500             275,000  
                                                         
Issuance of common stock for debt                 12,203,983       12,204       597,995             610,198  
                                                         
Net (loss) gain for the period                                   (1,987,122 )     (1,987,122 )
                                                         
Balance - December 31, 2021         $       338,384,171     $ 338,384       17,075,974     $ (14,943,621 )   $ 2,470,738  

 

The accompanying notes are an integral part of these financial statements.

F-5

HEALTHY EXTRACTS, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2021 and 2020

 

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Healthy Extracts, Inc. (the “Company”) was incorporated in the State of Nevada on December 19, 2014 as Grey Cloak Tech Inc. On October 23, 2020, we changed our name from Grey Cloak Tech Inc. to Healthy Extracts Inc. to more accurately reflect our business. The Company has acquired BergaMet NA, LLC and ultimate Brain Nutrients, LLC which market and sell health supplemental products.

 

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, 2021 and the results of operations and cash flows for the periods presented. The results of operations for the year ending December 31, 2021 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, 2020 filed with the SEC on February 19, 2021.

 

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.

 

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.

F-6

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, 2021 and 2020, the total of inventory which was written off as an inventory allowance was $1,914,891 and $1,892,008.

 

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.

 

Indefinite-Lived Intangible Assets

 

Indefinite-lived intangible assets established in connection with business combinations consist of patents, trademarks, and trade names. The impairment test for identifiable indefinite-lived intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. With the acquisition of Ultimate Brain Nutrients on April 3, 2020 the Company added a purchasing value of $315,604 in patents to its balance sheet.

 

As of December 31, 2021, the Company believes that based upon qualitative factors, no impairment of indefinite-lived intangible assets is necessary.

 

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, 2021, after working through our analysis of goodwill during the year ending December 31, 2021.

 

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 (2021 to 2025): 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.

F-7

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. Our revenue policy includes all sales channels which include the Company website channel or any other selling channel like Amazon, doctors’ offices, and walk-in sales. 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 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 recognizes revenue and cost of goods sold from each sale upon shipment of the promised goods to the customers.

 

Concentration

 

There is no concentration of revenue for the months ended December 31, 2020 and for the months ended December 31, 2021 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, 2020 and December 31, 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.

F-8

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, 2021   $ 7,202  
Issued during the year ended December 31, 2021     1,446,469  
Change in fair value recognized in operations     (556,465 )
Converted during the year ended December 31, 2021     (804,679 )
Balance, December 31, 2021   $ 92,527  

 

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.

F-9

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, 2021, the Company issued $9550,000 of convertible debt with a bifurcated conversion option.

 

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

 

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.

F-10

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, 2021 of $14,943,620. Due to our negative cash flow, the Company has substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. In addition, the Company’s development activities since inception have been financially sustained through equity financing. Management plans to keep seeking funding through debt and equity financing which are intended to mitigate the conditions that have raise substantial doubt about the entity’s ability to continue as a going concern.

 

NOTE 4 – RELATED PARTY

 

For the months ended December 31, 2021 and 2020, the Company had expenses totaling $65,000 and $51,000 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, 2021, 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

 

In 2020, the Company converted the outstanding convertible debt which was due to a related party.

 

NOTE 6 – NOTES PAYABLE

 

As of December 31, 2021, 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, 2021, the Company has an outstanding total of $14,118 in interest accrued for the above note.

F-11

NOTE 7 – CONVERTIBLE DEBT

 

As of December 31, 2021, 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  
         
Unsecured convertible debt, due 03/17/22, 10% interest, default interest at 16%, converts at $0.05/share. Original note value $340,000     150,000  
         
1 unsecured convertible debt were issued during the third quarter 2021, due 03/31/23, 6% interest, converts at $0.05/share.     15,000  
         
SUBTOTAL     171,750  
Less: Discount      
TOTAL   $ 171,750  

 

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     421,432     $ 8,026  
Unsecured Convertible debt #2     5,010,000     $ 68,443  
Unsecured Convertible debt #3     507,917     $ 16,058  

 

As of December 31, 2021, the Company has an outstanding total of $92,527 in accrued interest for the above convertible notes.

 

The convertible promissory notes #1 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.

F-12

The Company effectuated a reverse stock split of 1-for-250 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.

 

As of December 31, 2021, 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, 2021, the Company issued 29,496,761 shares of common stock. During the fourth quarter 2021, the Company issued 3,500,000 shares of common stock for consulting fees. Additionally, the Company raised during the year over $900,000 in direct security purchase agreements which were converted into 15,403,983 shares of the Company’s common stock. During the third quarter 2021, the Company issued 1,177,778 shares of common stock for advertising and broker fees. On March 18, 2021, the Company raised $340,000 note payable agreement which 1,200,000 shares of the Company’s common stock were issued to the note holder. Additionally, 2,000,000 shares of common stock were issued to a company helping secure the note. Furthermore, 715,000 shares of common stock were issued for marketing services while 1,000,000 shares of common stock were issued for advertising services. During January 2021 the company converted 4,500,000 of securities purchase agreement into common stock shares.

 

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

 

During the third quarter 2021, the Company issued 6,500,000 warrants to 20 parties at $0.075 per share. 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, 2021, there were 14,012,000 warrants outstanding, of which 14,004,000 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. On March 18, 2021, the Company issued 715,000 shares of common stock as the compensation for this agreement. Additionally on March 18, 2021, the Company issued 2,000,000 shares of common stock to a company helping secure the note. During the second and third quarters of 2021, the Company entered into several broker agreements to help raise capital for the Company. 1,177,778 shares of common stock were issued in the third quarter as broker fees. And additional 1,000,000 shares of common stock were issued in the second quarter as advertising fees.

F-13

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 December 31, 2021, the Company approved stock option agreements in the amount of 7,500,000 shares with a strike price of $0.05 to twenty-one individuals.

 

On May 30, 2020, the Company approved stock option agreements in the amount of 12,000,000 shares with a strike price of $0.05 to nineteen individuals.

 

Offering Circular

 

During the first part of the 2021, the Company filed a Regulation A Offering Circular with the U.S. Securities and Exchange Commission. The Offering Circular was qualified during August 2021.

 

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.

F-14

NOTE 10 – BUSINESS SEGMENT INFORMATION

 

As of December 31, 2021, 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, 2021. 

 

  

    CONSOLIDATED     HEALTH SUPPLEMENTS     CORPORATE  
          BergaMet     UBN        
Revenue     1,676,598       1,676,598              
Less Selling Fees     (210,816 )     (210,816 )                
Cost of Revenue     770,704       770,704              
Long-lived Assets     715,140       212,413       502,727        
Gain (Loss) Before Income Tax     (1,975,971 )     (701,833 )     (136,308 )     (1,137,830 )
Identifiable Assets     2,092,341       2,092,341              
Depreciation and Amortization     5,100       5,100              

 

As of December 31, 2021, 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 Quarter ended December 31, 2021.

 

    CONSOLIDATED     HEALTH SUPPLEMENTS     CORPORATE  
          BergaMet     UBN        
Revenue     766,372       766,372              
Less Selling Fees     (94,783 )     (94,783 )                
Cost of Revenue     623,248       623,248              
Long-lived Assets     715,140       212,413       502,727        
Gain (Loss) Before Income Tax     (1,975,971 )     (701,833 )     (136,308 )     (1,137,830 )
Identifiable Assets     2,092,341       2,092,341              
Depreciation and Amortization     1,275       1,275              

 

NOTE 11 – SUBSEQUENT EVENTS

 

COVID-19

 

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The Company is monitoring this closely, and although operations have not been materially affected by the coronavirus outbreak to date, the ultimate severity of the outbreak is uncertain. Further the uncertain nature of its spread globally may impact our business operations resulting from quarantines of employees, customers, and third-party service providers. At this time, the Company is unable to estimate the impact of this event on its operations.

 

On February 22, 2022, the Company entered into a Common Stock Purchase Warrant and a Promissory Note. The warrants are to acquire two million (2,000,000) shares of our common stock, are exercisable for three (3) years at an exercise price of $0.05 per share, and contain a cashless exercise option for the holder. The note is in the principal amount of Two Hundred Thousand Dollars ($200,000), bears interest at a rate of ten percent (10%) per annum, and has a maturity date of February 15, 2023.

 

On March 1, 2022, the Company paid the remaining balance on the One Hundred Fifty Thousand Dollars ($150,000) promissory note that was due on March 17, 2022.

 

The Company evaluated its December 31, 2021 financial statements for subsequent events through March 4, 2022, the date the financial statements were available to be issued.

F-15

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, 2021, 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, 2021, 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.

-27 -

(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, 2021 . 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.

-28 -

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, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B – OTHER INFORMATION

 

None.

-29 -

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   62   President, Director (2018)
         
William Bossung   63   Secretary, Chief Financial Officer, Director (2014)
         
Bill Croyle   70   Director (2019)

 

Kevin “Duke” Pitts, age 62, 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 63, 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 70, 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.

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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, 2021 and 2020, the Board of Directors met as necessary.

-31 -

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 Independent Contractor Agreement

 

On October 1, 2019, we entered into an Independent Contractor Agreement with Kevin “Duke” Pitts. Pursuant to this agreement, Mr. Pitts has agreed to serve as our President and Chief Executive Officer in exchange for $120,000 per year.

-32 -

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, 2021 and 2020.

 

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 2021 110,000       -0-         -0-           -0-                     -0-                     -0-           -0- 110,000
President 2020   110,000       -0-         -0-           -0-                     -0-                     -0-           -0- 110,000
                   
William Bossung   65,000       -0-         -0-           -0-                     -0-                     -0-           -0- 65,000
Secretary and CFO 2020   66,000       -0-         -0-           -0-                     -0-                     -0-           -0-   66,000

 

Director Compensation

 

For the years ended December 31, 2021 and 2020, 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 March 22, 2022, we have awarded an aggregate of nineteen million five hundred thousand (19,500,000) options to twenty five (25) individuals at an exercise price of $0.05 per share.

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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of March 22, 2022, 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)   4,430,112   1.30%
         
William Bossung (3)(6)   6,526,357   1.92%
         
Bill Croyle (3)(4)(7)   1,163,670   <1%
         
Jay Decker (8)   178,806,834   51.96%
         
All Officers and Directors as a Group (3 Persons)   12,120,139   3.46%

 

  (1) Unless otherwise indicated, the address of the shareholder is c/o Healthy Extracts Inc.
     
  (2) Unless otherwise indicated, based on 338,091,821 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 2,200,000 shares of common stock at $0.05 per share.
     
  (6) Includes options to acquire 2,250,000 shares of common stock at $0.05 per share.
     
  (7) Includes options to acquire 500,000 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 March 22, 2022, we have awarded an aggregate of nineteen million five hundred thousand (19,500,000) options to twenty five (25) individuals at an exercise price of $0.05 per share.

-34 -

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 Independent Contractor Agreement

 

On October 1, 2019, we entered into an Independent Contractor Agreement with Kevin “Duke” Pitts. Pursuant to this agreement, Mr. Pitts has agreed to serve as our President and Chief Executive Officer in exchange for $120,000 per year.

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.

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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. Because six of the seven members of UBN, including our majority shareholder Jay Decker, were also member of BergaMet, this was an affiliated transaction.

 

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 two patents issued.

 

Jay Decker Transactions

 

We have entered into numerous transactions with Jay Decker, our majority shareholder (and his adult children, Logan Decker and Shelton Decker), as follows:

 

Convertible Notes

 

On July 31, 2019, we received the last of four (4) signed convertible notes issued to various related parties with an effective date of April 19, 2019. The table below shows the effective date of each note, the amount of the note, the interest rate, the maturity date and the purchaser of the note:

 

Date   Amount     Interest
Rate
    Maturity
Date
     Purchaser
4/19/2019   $ 150,000     8%     4/19/2020      Jay W. Decker
4/19/2019   $ 15,000     8%     4/19/2020      First Capital Properties LLC
4/19/2019   $ 7,500     8%     4/19/2020      Logan Bryce Decker
4/19/2019   $ 7,500     8%     4/19/2020      Shelton Sterling Decker
                       
Total   $ 180,000                

 

Each note bears interest at the rate indicated and is due on the maturity date given above. The notes are convertible into shares of our common stock from the date which is 12 months after the date of the note through the later of (i) the maturity date and (ii) the date of payment of the default amount due upon certain change of control transactions or a default of the note. Conversion of the notes is not allowed to the extent the conversion would result in beneficial ownership by the holder and its affiliates of more than 9.99% of our outstanding shares of common stock. The conversion price of the notes is $0.03 per share.

 

Convertible Notes

 

On October 3, 2019, we received the last of three (3) signed convertible notes issued to Jay W. Decker, a related party, each with a different effective date. The table below shows the effective date of each note, the amount of the note, the interest rate, the maturity date and the purchaser of the note:

 

Date   Amount     Interest Rate     Maturity Date      Purchaser
6/27/2019   $ 105,000     8%     6/27/2020      Jay W. Decker
8/27/2019   $ 225,000     8%     8/27/2020      Jay W. Decker
9/20/2019   $ 45,000     8%     9/20/2020      Jay W. Decker
                       
Total   $ 375,000                

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Each note bears interest at the rate indicated and is due on the maturity date given above. Conversion of the notes is not allowed to the extent the conversion would result in beneficial ownership by the holder and its affiliates of more than 9.99% of our outstanding shares of common stock. The conversion price of the notes is $0.03 per share.

 

Note Conversion Agreements and Advance Conversion Agreements

 

Effective April 13, 2020, we entered into a total of eighteen (18) agreements (16 Note Conversion Agreements and 2 Advance Conversion Agreements) whereby an aggregate of $1,508,407.84 in outstanding principal and accrued interest was converted into an aggregate of 39,248,714 shares of our common stock. The conversion price was either $0.03 per share or $0.05 per share, depending on the individual agreement. The conversions included notes and advances held by our officers and directors and our largest shareholder, as follows:

 

Name

  Aggregate Principal
and Interest
   

 

Aggregate Shares

 
Jay W. Decker   $ 1,282,231.11       33,418,004  
William Bossung   $ 65,677.84       2,189,262  
First Capital Properties LLC   $ 16,180.00       539,334  
Shelton S. Decker   $ 33,717.78       782,223  
Logan B. Decker   $ 33,717.78       782,223  
Kevin Pitts   $ 51,255.56       1,025,112  
Innovation Group Holdings, LLC   $ 25,627.78       512,556  

 

Securities Purchase Agreements

 

Effective October 15, 2020, we entered into four (4) Securities Purchase Agreements whereby we sold and issued 5,900,000 shares of our common stock at $0.05 per share for aggregate consideration of $295,000. The purchasers included our officers and directors and our largest shareholder, as follows:

 

 

Name

  Aggregate Principal
and Interest
   

 

Aggregate Shares

 
Jay W. Decker   $ 100,000       2,000,000  
Shelton S. Decker   $ 50,000       1,000,000  
Logan B. Decker   $ 50,000       1,000,000  
Dr. Gerald Haase   $ 95,000       1,900,000  
    Total   $ 295,000       5,900,000  

 

Securities Purchase Agreements

 

On February 10, 2021, and effective December 29, 2020, the Company entered into Securities Purchase Agreements with Shelton Decker and Logan Decker for the purchase and sale of an aggregate of 2,000,000 shares of Company common stock at $0.05 per share, as follows:

 

Name:   No. of Shares  
Logan Decker     1,000,000  
Jay Decker     1,000,000  
Total     2,000,000  

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Promissory Notes

 

On February 10, 2021, the Company issued promissory notes to Jay Decker dated December 14, 2020 and December 21, 2020 in the principal amount of $100,000 and $70,000 respectively.

 

On January 20, 2022, the Company issued a promissory note to Jay Decker in the principal amount of $185,000. In conjunction therewith and on the same date, the Company issued to Jay Decker warrants to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.05 per share.

 

Warrants

 

On February 10, 2021, but effective December 21, 2020, the Company issued warrants to purchase an aggregate of 7,500,000 shares of the Company’s common stock, at an exercise price of $0.05 per share, as follows (the “Warrants”), for consulting services rendered to the Company:

 

Name: No. of Warrants
Jay Decker 4,500,000
Logan Decker 1,500,000
Shelton Decker 1,500,000
Total 7,500,000

 

On January 20, 2022, the Company issued a promissory note to Jay Decker in the principal amount of $185,000. In conjunction therewith and on the same date, the Company issued to Jay Decker warrants to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.05 per share.

 

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, 2021 and 2020.

-38 -

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, 2021 and 2020.

 

    Years Ended December 31,  
    2021     2020  
Audit Fees (1)   $ 55,000     $ 40,600  
Audit Related Fees            
Tax Fees            
All Other Fees            
Total   $ 55,000     $ 40,600  

 

(1)        Audit fees were principally for audit and review services.

 

Of the fees described above for the years ended December 31, 2021 and 2020, 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, 2021 and 2020 F-2
   
Consolidated Statement of Operations for the year ended December 31, 2021 and 2020 F-3
   
Consolidated Statement of Stockholders’ Deficit for the year ended December 31, 2021 and 2020 F-4
   
Consolidated Statement of Cash Flows for the year ended December 31, 2021 and 2020 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.

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(b) Exhibits

 

Exhibit No.   Exhibit Description
3.1 (1)   Articles of Incorporation of Grey Cloak Tech Inc.
     
3.2 (5)   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 (6)   Independent Contractor Agreement by and between the Company and Kevin “Duke” Pitts, dated October 1, 2019
     
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 (6)   Supply Agreement with H&AD S.r.L.
     
10.6   Lease Agreement dated January 20, 2022
     
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   XBRL Calculation Linkbase Document
     
101.DEF   XBRL Definition Linkbase Document
     
101.LAB   XBRL Labels Linkbase Document
     
101.PRE   XBRL Presentation Linkbase Document

 

  (1) Incorporated by reference from our Registration Statement on Form S-1 dated and filed with the Commission on March 6, 2015.
     
  (2) Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on June 8, 2018.
     
  (3) Incorporated by reference from our Current Report on Form 8-K filed with the Commission on April 8, 2020
     
  (4) Incorporated by reference from our Quarterly Report on Form 10-Q dated and filed with the Commission on May 28, 2020.
     
  (5) Incorporated by reference from our Annual Report on Form 10-K dated and filed with the Commission on February 19, 2021.
     
  (6) Incorporated by reference from our Regulation A Offering Statement on Form 1-A dated and filed with the Commission on May 7, 2021.

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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.

 

  Healthy Extracts Inc.
     
     
Dated: March 31, 2022   /s/ Kevin “Duke” Pitts
  By: Kevin “Duke” Pitts
  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.

 

Dated: March 31, 2022   /s/ Kevin “Duke” Pitts
  By: Kevin “Duke” Pitts
  Its: President
     
     
Dated: March 31, 2022   /s/ William Bossung
  By: William Bossung
  Its: Secretary and Chief Financial Officer

-41 -

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