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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

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

 

For the quarterly period ended March 31, 2022

 

 

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

 

 Picture

 

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No  

 

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

 



Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

(Do not check if a smaller reporting company)

 

Emerging growth company

 ☒

 

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.

 

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

 

As of May 12, 2022, there were 338,091,821 shares of common stock, $0.001 par value, issued and outstanding.




PART I – FINANCIAL INFORMATION

 

This Quarterly 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 our possible or assumed future results of operations set forth under the heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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. Our 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          Financial Statements

 

 


1



 

HEALTHY EXTRACTS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

MARCH 31,

 

DECEMBER 31,

 

 

 

2022

 

2021

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

  Cash

 

 

 

$ 92,286 

 

$ 222,098 

  Accounts receivable

 

 

 

 109,171 

 

 133,340 

  Inventory

 

 

 

 2,008,524 

 

 1,957,966 

 

Total current assets

 

 

 

 2,209,981 

 

 2,313,404 

 

 

 

 

 

 

 

 

 

 

  Fixed assets, net of accumulated depreciation of $45,944 and $36,895, respectively

 

 7,147 

 

 1,035 

  Patents/Trademarks

 

 

 

 521,881 

 

 521,881 

  Deposit

 

 

 

 16,890 

 

 - 

  Goodwill

 

 

 

 193,260 

 

 193,260 

 

Total other assets

 

 

 

 739,177 

 

 716,175 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

$ 2,949,158 

 

$ 3,029,579 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Accounts payable

 

 

 

$ 105,420 

 

$ 37,267 

Accrued liabilities

 

 

 

 4,496 

 

 59,264 

Notes payable

 

 

 

 - 

 

 - 

Notes payable - related party

 

 

 

 150,866 

 

 170,866 

Convertible debt, net of discount of $0.00 and $0.00, respectively

 

 

 206,750 

 

 171,750 

Convertible debt - related party, net of discount of $0.00 and $0.00, respectively

 

 

 - 

 

 - 

Accrued interest payable

 

 

 

 5,228 

 

 13,050 

Accrued interest payable - related party

 

 

 17,518 

 

 14,118 

Derivative liabilities

 

 

 

 13,549 

 

 92,527 

 

Total current and total liabilities

 

 

 503,826 

 

 558,841 

 

 

 

 

 

 

 

 

 

 

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, 338,091,821 and 338,384,171 shares issued and outstanding, respectively

 

 

 338,092 

 

 338,384 

  Additional paid-in capital

 

 

 

 17,047,849 

 

 17,075,974 

  Accumulated deficit

 

 

 

 (14,940,609)

 

 (14,943,620)

 

Total stockholders' equity (deficit)

 

 

 2,445,332 

 

 2,470,738 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$ 2,949,158 

 

$ 3,029,579 

 

 

 

 

 

 

 

 

 

 

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

 


2



HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE MONTH ENDING MARCH 31, 2022

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR THE MONTHS ENDED

 

 

 

 

 

 

MARCH 31,

 

 

 

 

2022

 

2021

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

   Gross revenue

 

 

 

 

$ 551,654 

 

$ 181,034 

   Less selling fees

 

 

 

 

 (88,267)

 

 (10,601)

 

Net revenue

 

 

 

 

 463,386 

 

 170,433 

 

 

 

 

 

 

 

 

 

COST OF REVENUE

 

 

 

 

 

 

 

   Cost of goods sold

 

 

 

 

 138,681 

 

 41,442 

   Written off inventory

 

 

 

 

 - 

 

 - 

 

Total cost of revenue

 

 

 

 

 138,681 

 

 41,442 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

 

 

 324,705 

 

 128,991 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

   General and administrative

 

 

 

 

 370,357 

 

 716,087 

 

Total operating expenses

 

 

 

 

 370,357 

 

 716,087 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

   Interest expense, net of interest income

 

 

 

 (32,957)

 

 (15,759)

   Change in fair value on derivative

 

 

 

 

 78,978 

 

 (690,780)

   Loss on extinguishment of debt

 

 

 

 

 - 

 

 - 

   SBA loan forgiveness

 

 

 

 

 - 

 

 - 

   Gain on sale of asset

 

 

 

 

 2,643 

 

 - 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

 

 

 48,664 

 

 (706,540)

 

 

 

 

 

 

 

 

 

Net gain/(loss) before income tax provision

 

 

 

 3,011 

 

 (1,293,636)

 

 

 

 

 

 

 

 

 

NET GAIN/(LOSS)

 

 

 

 

$ 3,011 

 

$ (1,293,636)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - basic and diluted

 

 

 

 

$ 0.00 

 

$ (0.00)

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - basic and diluted

 

 

 313,764,817 

 

 313,442,910 

 

 

 

 

 

 

 

 

 

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

 


3



 

HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE MONTHS ENDING DECEMBER 2022 AND 2021

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

Common Stock

 

Paid-In

 

Accumulated

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

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

 

 -

 

  -

 

 3,500,000 

 

  3,500 

 

 171,500 

 

  - 

 

  175,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

 -

 

  -

 

 2,000,000 

 

  2,000 

 

 98,000 

 

  - 

 

  100,000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for debt

 

 -

 

  -

 

 12,203,983 

 

  12,204 

 

 597,995 

 

  - 

 

  610,199 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) gain for the period

 

 

 -

 

  -

 

 - 

 

  - 

 

 - 

 

  (1,987,122)

 

  (1,987,122)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2021

 

 

 -

 

 $ -

 

 338,384,171 

 

 $ 338,384 

 

 17,075,974 

 

 $ (14,943,620)

 

 $ 2,470,738 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelation of common stock for debt

 

 -

 

  -

 

 (200,267)

 

  (200)

 

 (9,813)

 

  - 

 

  (10,013)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for cash

 

 -

 

  -

 

 507,917 

 

  508 

 

 24,888 

 

  - 

 

  25,396 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelation of common stock for debt

 

 -

 

  -

 

 (600,000)

 

  (600)

 

 (43,200)

 

  - 

 

  (43,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) gain for the period

 

 

 -

 

  -

 

 - 

 

  - 

 

 - 

 

  3,011 

 

  3,011 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - December 31, 2022

 

 

 -

 

 $ -

 

 338,091,821 

 

 $ 338,092 

 

 17,047,849 

 

 $ (14,940,609)

 

 $ 2,445,332 

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

 


4



HEALTHY EXTRACTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

FOR THE MONTHS

 

 

ENDING

 

 

MARCH 31,

 

2022

 

2021

Cash Flows from Operating Activities:

 

 

 

 

Net Gain/(Loss)

 

 $ 3,011 

 

 $ (1,293,636)

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

  (768)

 

  1,275 

Warrants issued for services

 

  - 

 

  - 

Non-cash compensation

 

  - 

 

  - 

Change in fair value on derivative liability

 

  (78,978)

 

  690,780 

Loss on extinguishment of debt

 

  - 

 

  - 

Gain on sale of asset

 

  2,643 

 

  - 

Impairment of goodwill

 

  - 

 

  - 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

  24,169 

 

  (11,375)

Inventory

 

  (50,558)

 

  (61,961)

Accrued interest receivable

 

  - 

 

  - 

Deposits

 

  (16,890)

 

  - 

Accounts payable

 

  68,153 

 

  (15,406)

Accounts payable - related party

 

  - 

 

  - 

Accrued liabilities

 

  (54,767)

 

  50,298 

Accrued interest payable

 

  (7,822)

 

  1,363 

Accrued interest payable - related party

 

  3,400 

 

  3,400 

Net Cash used in Operating Activities

 

  (108,408)

 

  (635,261)

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

  (7,987)

 

  - 

Cash received from sale of asset

 

  - 

 

  - 

Purchase of note receivable

 

  - 

 

  - 

Trademarks

 

  - 

 

  (37,888)

Payments of note receivable

 

  - 

 

  - 

Cash flows provided by (used in) Investing Activities:

 

  (7,987)

 

  (37,888)

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

Purchase of BergaMet

 

  - 

 

  - 

Purchase of UBN

 

  - 

 

  - 

Proceeds from issuance of common stock

 

  (28,417)

 

  506,880 

Proceeds from issuance of convertible debt,

 

  202,000 

 

  340,000 

Payments for repayment of convertible debt

 

  (167,000)

 

  - 

Proceeds from issuance of noted payable

 

  - 

 

  - 

Proceeds from issuance of noted payable - related party

 

  - 

 

  - 

Payments for repayment of notes payable - related party

 

  (20,000)

 

  - 

Net Cash provided by Financing Activities

 

  (13,417)

 

  846,880 

 

 

 

 

 

Increase (decrease) in cash

 

  (129,812)

 

  173,731 

Cash at beginning of period

 

  222,098 

 

  59,201 

Cash  at end of period

 

 $ 92,286 

 

 $ 232,932 

 

 

 

 

 

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

 


5



HEALTHY EXTRACTS, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

March 31, 2022 and 2021

 

 

 

 

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 March 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the months ending March 31, 2022 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, 2021 filed with the SEC on April 1, 2022.

 

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.

 

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 March 31, 2022 and 2021, the total of inventory which was written off as an inventory allowance was $1,914,891 and $1,808,904.


6



 

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 March 31, 2022, 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 March 31, 2022, after working through our analysis of goodwill during the months ending March 31, 2022.

 

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. 

 

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.

 


7



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 March 31, 2021 and for the months ended March 31, 2022 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 March 31, 2021 and March 31, 2022, the Company did not have any amounts recorded pertaining to uncertain tax positions.

 

Fair Value Measurements

 

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

 

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

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

 

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

 

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

 


8



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

 

 $ 92,527 

Issued during the months ended March 31, 2022

 

  (84,500)

Change in fair value recognized in operations

 

  5,522 

Converted during the year ended March 31, 2022

 

  0 

Balance, March 31, 2022

 

 $ 13,549 

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas under this topic with those of the International Financial Reporting Standards. The ASU implements of five–step process for customer contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract cost, ensuring the time value of money is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The amendments in this ASU are effective for reporting period beginning after December 15, 2016, and early adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.

 

The Company’s revenues are recognized when control of the promised goods or services is transferred to our clients (upon shipment of goods) in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the Company satisfies a performance obligation.

 

We adopted ASC 2014-09 on January 1, 2019. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities with them.

 

Convertible Instruments

 

The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

 

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

 

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

 


9



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 months ended March 31, 2021, the Company issued $340,000 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.

 

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 March 31, 2022 of $14,940,609. 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 March 31, 2022 and 2021, the Company had expenses totaling $0 and $18,000 respectively, to an officer and director for salaries, which is included in general and administrative expenses on the accompanying statement of operations. As of March 31, 2022, 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 – NOTES PAYABLE

 

As of March 31, 2022, 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,

150,000

Unsecured debt with shareholders of the Company, no due date, 8% interest,

200,000

 

 

TOTAL

  $    350,866

 

As of March 31, 2022, the Company has an outstanding total of $19,684 in interest accrued for the above notes.

 


10



NOTE 6 – CONVERTIBLE DEBT

 

As of March 31, 2022, the Company had the following:

 

Unsecured convertible debt, due 01/19/17, 8% interest, default interest at 18%, converts at a 54% discount to market price based on the lowest trading prices in the last 20 days trading price

6,750

 

 

SUBTOTAL

6,750

Less: Discount

-

TOTAL

$    6,750

 

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

      530,903

      $    13,549

 

As of March 31, 2022, the Company has an outstanding total of $3,061 in accrued interest for the above convertible note.

 

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 7 – STOCKHOLDERS’ EQUITY

 

Authorized Stock 

 

The Company has authorized 75,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote on any matter on which action of the stockholders of the corporation is sought. During February 2017, the Company increased the authorized number of shares to 500,000,000. Also, the Company increased the authorized preferred stock to 75,000,000 shares and designated 25,000,000 shares of preferred stock to Series A Convertible Preferred Stock. During January 2018, the Company increased its authorized number of common shares to 1,000,000,000. During April 2018, the Company increased its authorized number of common shares to 2,500,000,000. The Board of Directors, in the future, has the authority to increase the authorized capital up to 4,000,000,000 shares based on shareholder approval.

 

The 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 March 31, 2022, 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.

 


11



 

Common Share Issuances

 

During the period ended March 31, 2022, the Company issued 507,917 shares of common stock while cancelling a total of 800,267 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.

 

Warrant Issuances

 

During the period ending December 31, 2021, the Company issued 14,000,000 warrants to 25 parties at a per share price between $0.05 and $0.075.  As of March 31, 2022, there were 14,012,000 warrants outstanding, of which 14,004,000 warrants are fully vested.

 

Stock Issued for Services

 

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.

 

No shares were issued for services during the period ending March 31, 2022.

 

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.

 

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.

 


12



NOTE 8 – BUSINESS SEGMENT INFORMATION

 

As of March 31, 2022, 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 months ended March 31, 2022.

 

 

CONSOLIDATED

HEALTH SUPPLEMENTS

CORPORATE

BergaMet

UBN

Revenue

551,654

551,654

-   

-   

Less Selling Fees

(88,267)

(88,267)

 

 

Cost of Revenue

138,681

138,681

-   

-   

Long-lived Assets

732,030

193,260

538,771

 -    

Gain (Loss) Before Income Tax

3,011

(19,171)

(663)

22,846

Identifiable Assets

2,124,842

2,124,842

-   

-   

Depreciation and Amortization

(768)

(768)

-   

-

 

NOTE 9 – 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.

 

The Company evaluated its March 31, 2022 financial statements for subsequent events through April 28, 2022, the date the financial statements were available to be issued.

 

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

 

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; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; 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 Quarterly Statement 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.

 

The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

 


13



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. We had revenues of $463,386 for the three months ended March 31, 2022.

 

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.

 

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 Three Months Ended March 31, 20221 and 2021

 

Introduction

 

We had revenues of $463,386 for the three months ended March 31, 2022, compared to $170,433 for the three months ended March 31, 2021. Revenues for the three months ended December 31, 2021 were $671,589. Our cost of revenue for the three months ended March 31, 2022 were $138,681, compared to $41,442 for the three months ended March 31, 2021.


14



Our operating expenses were $370,357 for the three months ended March 31, 2022, compared to $716,087 for the three months ended March 31, 2021, a decrease of $345,729, or 48%. Our operating expenses consisted entirely of general and administrative expenses.

 

Revenues and Net Operating Loss

 

Our revenue, operating expenses, net operating loss, and net gain (loss) for the three months ended March 31, 2022 and 2021 were as follows:

 

 

 

 

Three Months

Ended

 

 

Three Months

Ended

 

 

March 31,

 

March 31,

 

 

2022

 

2021

 

 

 

 

 

Revenue

$

 463,386 

$

 170,433 

 

 

 

 

 

Cost of Revenue

 

 138,681 

 

 41,442 

 

 

 

 

 

Gross Profit

 

 324,705 

 

 128,991 

 

 

 

 

 

Operating expenses:

 

 

 

 

General and administrative

 

 370,357 

 

 716,087 

Total operating expenses

 

 370,357 

 

 716,087 

 

 

 

 

 

Other income (expense)

 

 

 

 

Interest expenses, net of interest income

 

 (32,957)

 

 (15,759 

Change in fair value on derivative

 

 78,978 

 

 (690,780)

Loss on extinguishment of debt

 

 - 

 

 - 

SBA Loan Forgiveness

 

 - 

 

 - 

Impairment of Assets

 

 - 

 

 - 

Gain on sale of asset

 

 2,643 

 

 - 

Total other income (expense)

 

 48,664 

 

 (706,540)

 

 

 

 

 

Net income (loss)

$

 3,011 

$

 (1,293,636)

 

Revenues

 

We had revenues of $463,386 for the three months ended March 31, 2022, compared to $170,433 for the three months ended March 31, 2021, a, increase of $292,953, or 172%. Revenues for the three months ended December 31, 2021 were $671,589. Our cost of revenue for the three months ended March 31, 2022 were $138,681, or 30% of revenue, compared to $41,442 for the three months ended March 31, 2021, or 24% of revenue.

 

Cost of Revenue

 

Cost of revenue was $138,681 for the three months ended March 31, 2022, compared to $41,442 for the three months ended March 31, 2021, an increase of $97,239, or 235%. Gross profit was $324,705 for the three months ended March 31, 2022, compared to $128,991 for the three months ended March 31, 2021, an increase of $195,714, or 152%.

 

Cost of revenue as a percentage of revenues was 30% for the three months ended March 31, 2022, compared to 24% for the three months ended March 31, 2021.

 

General and Administrative

 

General and administrative expenses were $370,357 for the three months ended March 31, 2022, compared to $716,087 for the three months ended March 31, 2021. In the three months ended March 31, 2022, general and administrative expenses consisted mainly of advertising $162,329, consulting fees $97,750, professional fees 43,870, and salary and wages $35,489. In the three months ended March 31, 2021, general and administrative expenses


15



consisted mainly of consulting fees $172,500, professional fees $368,960, salary and wages $30,446, advertising $82,729, and postage $7,625.

 

Other Income (Expense)

 

Other income (expense) was $48,664 for the three months ended March 31, 2022, compared to $(706,540) for the three months ended March 31, 2021, an increase of $755,204, or 107%. In the three months ended March 31, 2022, other income (expense) consisted of interest expenses, net of interest income of $(32,957), change in fair value on derivative of $78,978, and gain on sale of asset of $2,643. In the three months ended March 31, 2021, other income (expense) consisted of interest expense, net of interest income of $(15,759) and change in fair value on derivative of $(690,780). Change in fair value of derivative was related to the conversion of convertible debts into common stock shares.

 

Net Income (Loss)

 

Net income (loss) was $3,011 and $(1,293,636), or $0.00 and $0.00 per share, for the three months ended March 31, 2022 and 2021.

 

Our net income (loss) various from period to period primarily because of the change in fair value on derivative.

 

Liquidity and Capital Resources

 

Introduction

 

During the three months ended March 31, 2022, we were unable to generate sufficient revenues and had negative operating cash flows. Our cash on hand as of December 31, 2021 was $222,098, and as of March 31, 2022 was $92,286. The decrease in cash on hand was primarily from our net cash used in operating activities of $(108,408), plus net cash used in investing activities of $(7,987) and net cash provided by financing activities of $(13,417). Our monthly cash flow burn rate for 2021 (not including inventory purchases) was approximately $37,000, and for the three months ended March 31, 2022 it was approximately $36,000. We have strong short and medium term cash needs. We anticipate that these needs will be satisfied through increased revenues and 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.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of March 31, 2022 and December 31, 2021, respectively, are as follows:

 

 

March 31,

 

December 31,

 

Increase/

 

2022

 

2021

 

(Decrease)

 

 

 

 

 

 

Cash

$

92,286

 

$

222,098

 

$

(129,812)

Total Current Assets

2,209,981

 

 

2,313,404

 

(103,423)

Total Assets

2,949,158

 

 

3,029,579

 

(80,421)

Total Current and Total Liabilities

503,826

 

 

558,841

 

(55,015)

 

Our total current assets and total assets decreased during the three months ended March 31, 2022 primarily as a result of our decrease in cash of $129,812 and accounts receivable of $24,169, offset by our increase in inventory of $50,558. Our total current and total liabilities decreased by $55,015 during the three months ended March 31, 2022 primarily because of a decrease in accrued liabilities of $54,767 and derivative liabilities of $78,978, offset by an increase in accounts payable of $68,153 and convertible debt of $35,000. Our accumulated deficit decreased during the three months ended March 31, 2022 by $3,011 to $14,940,609.

 

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.


16



Cash Requirements

 

Our cash on hand as of March 31, 2022 was $92,286. Based on our current level of revenues and monthly burn rate of approximately $36,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

Sources and Uses of Cash

 

Operating Activities

 

We had net cash used in operating activities of $(108,408) for the three months ended March 31, 2022, compared to $(635,261) for the three months ended March 31, 2021. We use our cash for normal business operations. Our net cash used in operating activities for the three months ended March 31, 2022 consisted of our net gain of $3,011 plus our increase in accounts payable of $68,153, offset by our change in fair value on derivative liability of $(78,978), decrease in accrue liabilities of $(54,767), and decrease in inventory of $(50,558). Our net cash used in operating activities for the three months ended March 31, 2021 consisted of our net loss of $1,293,636, plus a decrease in inventory of $61,961, offset by a change in fair value on derivative liability of $690,780 and accrued interest payable of $50,298.

 

Investing Activities

 

We had $(7,987) in cash flows provided by investing activities for the three months ended March 31, 2022, compared to $(37,888) for the three months ended March 31, 2021.

 

Financing Activities

 

Our net cash provided by financing activities for the three months ended March 31, 2022 was $(13,417), compared to $846,880 for the three months ended March 31, 2021. Our net cash provided by financing activities consisted of proceeds from the issuance of convertible debt of $202,000, offset primarily by payments for repayment of convertible debt of $(167,000).

 

ITEM 3Quantitative and Qualitative Disclosures About Market Risk 

 

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

 

ITEM 4Controls 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 March 31, 2022, 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 March 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K.

 

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all errors 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


17



relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

(b)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, the three month period ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1Legal Proceedings 

 

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

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

ITEM 1ARisk Factors 

 

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

 

ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds 

 

There have been no events which are required to be reported under this Item.

 

ITEM 3Defaults Upon Senior Securities 

 

There have been no events which are required to be reported under this Item.

 

ITEM 4Mine Safety Disclosures 

 

Not applicable.

 

ITEM 5Other Information 

 

None.

 


18



 

ITEM 6Exhibits 

 

(a)Exhibits 

 

Exhibit No.

 

Name and/or Identification of Exhibit

 

 

 

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.

 

 

 

100.INS

 

XBRL Instance Document

 

 

 

100.SCH

 

XBRL Schema Document

 

 

 

100.CAL

 

XBRL Calculation Linkbase Document

 

 

 

100.DEF

 

XBRL Definition Linkbase Document

 

 

 

100.LAB

 

XBRL Labels Linkbase Document

 

 

 

100.PRE

 

XBRL Presentation Linkbase Document


19



 

SIGNATURES

 

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

 

 

 

Healthy Extracts, Inc.

 

 

 

 

Dated:  May 13, 2022

/s/ Kevin Pitts

 

By:Kevin “Duke” Pitts 

 

Its:President 

 

 

 

 


20

 

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