NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
September
30, 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 September 30, 2021 and the results
of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 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.
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 September 30, 2021 and 2020, the total of inventory which
was written off as an inventory allowance was $1,543,758 and $748,972.
Property
and Equipment
The
Company’s property and equipment are recorded at cost and depreciated using the straight-line method over the useful lives of the
assets, generally from three to seven years. Upon sale or disposal of property and equipment, the related asset cost and accumulated
depreciation or amortization are removed from the respective accounts and any gain or loss is reflected in current operations.
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 September 30, 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 September 30, 2021, after working through our analysis of goodwill during the year ending September 30, 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.
|
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 recognizes 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 September 30, 2020 and the nine months ended September 30, 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 September 30, 2020 and September 30, 2021, the Company did not
have any amounts recorded pertaining to uncertain tax positions.
Fair
Value Measurements
The
Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as
used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The
estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which
approximates their fair values because of the short-term nature of these instruments.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The
derivative liability in connection with the conversion feature of the convertible debt, classified as a Level 3 liability, is the only
financial liability measure at fair value on a recurring basis.
The
change in Level 3 financial instrument is as follows:
Schedule of Fair Value of Financial Liability on Recurring Basis
|
|
|
|
|
|
|
Balance,
January 1, 2021
|
|
$
|
7,202
|
|
|
Issued
during the year ended September 30, 2021
|
|
|
1,446,469
|
|
|
Change
in fair value recognized in operations
|
|
|
(158,498
|
)
|
|
Converted
during the year ended September 30, 2021
|
|
|
0
|
|
|
Balance,
September 30, 2021
|
|
$
|
1,295,173
|
|
Recent
Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic
606). ASU 2014-09 amends the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas
under this topic with those of the International Financial Reporting Standards. The ASU implements of five–step process for customer
contract revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires
enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. Other
major provisions include the capitalization and amortization of certain contract cost, ensuring the time value of money is considered
in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain
circumstances. The amendments in this ASU are effective for reporting period beginning after December 15, 2016, and early adoption is
prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.
The
Company’s revenues are recognized when control of the promised goods or services is transferred to our clients (upon shipment of
goods) in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve
this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations
in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract;
and (5) Recognize revenues when or as the Company satisfies a performance obligation.
We
adopted ASC 2014-09 on January 1, 2019. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing
net income, we did implement changes to our processes related to revenue recognition and the control activities with them.
Convertible
Instruments
The
Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives
and Hedging Activities”.
Applicable
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and
risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at
fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same
terms as the embedded derivative instrument would be considered a derivative instrument.
The
Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated
from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of
conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the
commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized over the term of the related debt to their stated date of redemption.
The
Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment
standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current
fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the months
ended September 30, 2021, the Company issued $200,000 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.
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 September 30, 2021 of $15,480,355. 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 September 30, 2021 and 2020, the Company had expenses totaling $18,000 and $0 respectively, to an officer and director
for salaries, which is included in general and administrative expenses on the accompanying statement of operations. As of September 30,
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 September 30, 2021, the Company had the following:
Schedule of Notes Payable
|
|
|
|
|
|
|
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 September 30, 2021, the Company has an outstanding total of $10,680 in interest accrued for the above note.
NOTE
7 – CONVERTIBLE DEBT
As
of September 30, 2021, the Company had the following:
Schedule of Convertible Debt
|
|
|
|
|
|
|
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
|
|
|
233,000
|
|
|
|
|
|
|
|
|
13
unsecured convertible debt were issued during the second quarter 2021, due 03/31/23, 6% interest, converts at $0.05/share.
|
|
|
425,000
|
|
|
|
|
|
|
|
|
7
unsecured convertible debt were issued during the third quarter 2021, due 03/31/23, 6% interest, converts at $0.05/share.
|
|
|
200,000
|
|
|
|
|
|
|
|
|
SUBTOTAL
|
|
|
864,750
|
|
|
Less:
Discount
|
|
|
—
|
|
|
TOTAL
|
|
$
|
864,750
|
|
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
|
|
|
243,318
|
|
|
$
|
8,472
|
|
|
Unsecured
Convertible debt #2
|
|
|
9,120,000
|
|
|
$
|
448,727
|
|
|
Unsecured
Convertible debt #3
|
|
|
509,917
|
|
|
$
|
33,426
|
|
|
Unsecured
Convertible debt #4
|
|
|
507,917
|
|
|
$
|
33,295
|
|
|
Unsecured
Convertible debt #5
|
|
|
1,010,000
|
|
|
$
|
67,459
|
|
|
Unsecured
Convertible debt #6
|
|
|
1,017,333
|
|
|
$
|
66,688
|
|
|
Unsecured
Convertible debt #7
|
|
|
508,833
|
|
|
$
|
33,355
|
|
|
Unsecured
Convertible debt #8
|
|
|
1,012,333
|
|
|
$
|
67,869
|
|
|
Unsecured
Convertible debt #9
|
|
|
200,267
|
|
|
$
|
13,162
|
|
|
Unsecured
Convertible debt #10
|
|
|
303,050
|
|
|
$
|
20,247
|
|
|
Unsecured
Convertible debt #11
|
|
|
1,022,167
|
|
|
$
|
67,003
|
|
|
Unsecured
Convertible debt #12
|
|
|
505,083
|
|
|
$
|
33,744
|
|
|
Unsecured
Convertible debt #13
|
|
|
508,250
|
|
|
$
|
33,317
|
|
|
Unsecured
Convertible debt #14
|
|
|
511,333
|
|
|
$
|
33,519
|
|
|
Unsecured
Convertible debt #15
|
|
|
511,333
|
|
|
$
|
33,519
|
|
|
Unsecured
Convertible debt #16
|
|
|
511,333
|
|
|
$
|
33,519
|
|
|
Unsecured
Convertible debt #17
|
|
|
1,016,500
|
|
|
$
|
66,633
|
|
|
Unsecured
Convertible debt #18
|
|
|
504,500
|
|
|
$
|
33,631
|
|
|
Unsecured
Convertible debt #19
|
|
|
510,417
|
|
|
$
|
33,459
|
|
|
Unsecured
Convertible debt #20
|
|
|
1,020,667
|
|
|
$
|
66,906
|
|
|
Unsecured
Convertible debt #21
|
|
|
505,667
|
|
|
$
|
33,847
|
|
|
Unsecured
Convertible debt #22
|
|
|
509,167
|
|
|
$
|
33,377
|
|
As
of September 30, 2021, the Company has an outstanding total of $29,829 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.
The
shareholders of the Company approved a reverse stock split at a ratio of between 1-for-100 and 1-for 250. The Company received approval
from FINRA for a reverse stock split of 1-for-250, which was effective as of July 23, 2018.
On
October 16, 2017, the Company filed an Amended and Restated Certificate of Designation of the Rights, Preferences, Privileges and Restrictions
of the Series A Convertible Preferred Stock (the “Amended Certificate”) with the Secretary of State of the State of Nevada.
The Amended Certificate reduces the number of preferred shares designated as Series A Preferred Stock from 25,000,000 shares to 1,333,334
shares. The Amended Certificate also changes the conversion and voting rights of the Series A Preferred Stock. The Series A Preferred
Stock is now convertible into the number of shares of our common stock equal to 0.00006% of our outstanding common stock upon conversion.
The voting rights of the Series A Preferred Stock are now equal to the number of shares of common stock into which the Series A Preferred
Stock may convert.
As
of June 30, 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 September 30, 2021, the Company issued 10,592,778 shares of 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
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 September 30, 2021, there were 7,512,000 warrants outstanding, of which 4,000
warrants are fully vested.
Stock
Issued for Services
On
January 28, 2019, the Company entered into a marketing and sales consulting agreement with an individual for a period of six months.
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.
Share
Conversion Agreements
All
of the holders of the Company’s Series A Convertible Preferred Stock (the “Preferred Holders”) entered into a Preferred
Stock Conversion Agreement. Pursuant to the Conversion Agreements, the Preferred Holders converted their shares of preferred stock into
common stock, effective as of the Exchange. As a result, no shares of the Company’s Series A Convertible Preferred Stock are outstanding.
An aggregate of 15,592,986 shares of common stock were issued to the Preferred Holders. The Preferred Holders agreed to convert each
share of Series A Convertible Preferred Stock into eighteen (18) shares of common stock and agreed to retire a total of 467,057 shares
of Series A Convertible Preferred Stock. The Company cancelled the retired shares.
Omnibus
Stock Grant and Option Plan
On
May 30, 2020, the Company proposed a stock options agreement in the amount of 10,550,000 shares with a strike price of $0.05 to sixteen
individuals. This plan was approved by the Company by the end of the third quarter 2020. Purchase price under the plan is defined as:
unless otherwise permitted by applicable law, the purchase price of Shares to be offered under the Plan shall not be less than eighty-five
percent (85%) of the Fair Market Value of a Share on the date of grant (100% for 10% shareholders).
NOTE
9 – ACQUISITIONS
Acquisition
of Ultimate Brain Nutrients, LLC
On
April 3, 2020, the Company entered into a Share Exchange Agreement by and among Grey Cloak Tech Inc., Ultimate Brain Nutrients, LLC,
a Delaware limited liability company (“UBN”), and the members of UBN, whereby we issued and exchanged 90,000,960 shares
of our common stock for all of the outstanding equity securities of UBN. UBN is now our wholly-owned subsidiary. The shares of common
stock issued in the Exchange are equal to approximately 42.5% of our outstanding common stock immediately following the exchange.
The
assets acquired and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition
date, April 3, 2020. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.
Schedule of fair value of Assets Acquired and Fair value Assumed
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Cash
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$
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(5,466
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)
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Current
assets
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315,604
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|
|
Current
liabilities
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|
|
0
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|
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Net
assets acquired
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$
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310,137
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|
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.
NOTE
10 – BUSINESS SEGMENT INFORMATION
As
of September 30, 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 YTD ended September 30, 2021.
Schedule of Reportable segments
The following table presents selected
financial information about the Company’s reportable segments for the Quarters ended September 30, 2021.
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CONSOLIDATED
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HEALTH SUPPLEMENTS
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CORPORATE
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BergaMet
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|
|
UBN
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Revenue
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|
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447,986
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|
|
|
447,986
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|
|
|
—
|
|
|
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—
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Less Selling Fees
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|
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(68,111
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)
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|
|
(68,111
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)
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|
|
|
|
|
|
|
|
|
Cost of Revenue
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|
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72,250
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|
|
|
72,250
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|
|
|
—
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|
|
|
—
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|
|
Long-lived Assets
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|
|
706,334
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|
|
|
203,607
|
|
|
|
502,727
|
|
|
|
—
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|
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Gain (Loss) Before Income Tax
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|
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(672,470
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)
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|
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(57,960
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)
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|
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(36,000
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)
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|
|
(578,510
|
)
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|
Identifiable Assets
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|
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2,533,170
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|
|
|
2,533,170
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|
|
|
—
|
|
|
|
—
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|
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Depreciation and Amortization
|
|
|
1,275
|
|
|
|
1,275
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|
|
|
—
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—
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NOTE
11 – SUBSEQUENT EVENTS
Notes
Conversion
During
the first part of the fourth quarter 2021, the Company converted 22 of the notes to common stock in total of $625,000. A total of 12,746,900
of common stock shares were issued in this conversion.
Offering
Circular
During the third quarter of the 2021, the Company qualified a Regulation
A offering with the U.S. Securities and Exchange Commission.
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 September 30, 2021 financial statements for subsequent events through November 15, 2021, the date the financial
statements were available to be issued.