HEALTHY EXTRACTS INC. 10-Q

ITEM 1 Financial Statements HEALTHY EXTRACTS, INC. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022 (Unaudited) SEPTEMBER 30 DECEMBER 31, 2023 2022 ASSETS CURRENT ASSETS Cash $ 46,391 $ 65,651 Accounts receivable 109,224 105,794 Inventory, net 1,527,575 1,819,128 Offering costs 135,202 - Prepaid acquisition costs - 53,015 Right of use asset, net 86,279 - Total current assets 1,904,671 2,043,587 Fixed assets 3,855 5,501 Patents/Trademarks 521,881 521,881 Deposit 16,890 16,890 Goodwill 193,260 193,260 Total other assets 735,885 737,531 TOTAL ASSETS $ 2,640,556 $ 2,781,118 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Accounts payable $ 68,537 $ 91,316 Accrued liabilities 188,770 94,554 Lease liabilities - current 62,989 - Lease liabilities - long-term 26,187 - Notes payable 401,630 275,370 Notes payable - related party 83,366 866 Convertible debt, net of discount 595,638 317,284 Accrued interest payable 52,876 21,387 Accrued interest payable - related party 380 - Derivative liabilities 135,698 102,011 Total current and total liabilities 1,616,071 902,788 STOCKHOLDERS' EQUITY 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, 354,492,442 shares issued and outstanding as of September 30, 2023, and 345,172,442 shares issued and outstanding as of December 31, 2022, respectively 354,492 345,172 Additional paid-in capital 18,691,050 17,459,899 Accumulated deficit ( 18,021,058 ) ( 15,926,742 ) Total stockholders' equity 1,024,485 1,878,330 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,640,556 $ 2,781,118 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 HEALTHY EXTRACTS, INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDING SEPTEMBER 30, 2023 AND 2022 (Unaudited) FOR THE 3 MONTHS ENDING FOR THE 9 MONTHS ENDING SEPTEMBER 30 SEPTEMBER 30 2023 2022 2023 2022 REVENUE Revenue $ 613,541 $ 499,653 $ 1,816,968 $ 1,432,850 Net revenue 613,541 499,653 1,816,968 1,432,850 COST OF REVENUE Cost of goods sold 120,309 68,551 760,825 402,788 Total cost of revenue 120,309 68,551 760,825 402,788 GROSS PROFIT 493,233 431,102 1,056,143 1,030,062 OPERATING EXPENSES General and administrative 754,026 485,568 2,977,998 1,744,326 Total operating expenses 754,026 485,568 2,977,998 1,744,326 OTHER INCOME (EXPENSE) Interest expense, net of interest income ( 24,502 ) ( 11,336 ) ( 138,774 ) ( 68,657 ) Change in fair value on derivative 37,371 ( 104,421 ) ( 33,687 ) ( 246,260 ) Gain on sale of asset - - - 2,643 Total other income (expense) 12,869 ( 115,757 ) ( 172,461 ) ( 312,274 ) Net income/(loss) before income tax provision ( 247,924 ) ( 170,223 ) ( 2,094,316 ) ( 1,026,538 ) NET INCOME/(LOSS) $ ( 247,924 ) $ ( 170,223 ) $ ( 2,094,316 ) $ ( 1,026,538 ) Income/(Loss) per share - basic and diluted $ ( 0.00 ) $ ( 0.00 ) $ ( 0.01 ) $ ( 0.00 ) Weighted average number of shares outstanding - basic and diluted 348,284,383 341,619,198 349,849,154 342,514,810 The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 HEALTHY EXTRACTS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) FOR THE NINE MONTHS ENDING SEPTEMBER 30 2023 2022 Cash Flows from Operating Activities: Net Income/(Loss) $ ( 2,094,316 ) $ ( 1,026,538 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,646 329 Warrants issued for services 1,275,471 402,100 Change in fair value on derivative liability 33,687 246,260 Changes in operating assets and liabilities: Accounts receivable ( 3,430 ) 32,585 Inventory 291,553 91,523 Offering Costs ( 135,202 ) - Cost in acquisition of Hyperion/OP&M 53,015 - Right of use asset, net ( 86,279 ) - Deposits - ( 16,890 ) Accounts payable ( 22,778 ) 76,799 Accrued liabilities 94,216 ( 52,330 ) Accrued interest payable 31,489 16,621 Accrued interest payable - related party 380 ( 14,118 ) Lease liability - current 62,989 - Lease liability - long-term 26,187 - Net Cash used in Operating Activities ( 471,373 ) ( 243,658 ) Cash Flows from Investing Activities: Purchase of fixed assets - ( 7,987 ) Gain on sale of asset - 2,643 Cash flows provided by (used in) Investing Activities: - ( 5,344 ) Cash Flows from Financing Activities: Proceeds from issuance of common stock ( 35,000 ) ( 11,386 ) Proceeds from issuance of convertible debt, 350,000 445,826 Payments for repayment of convertible debt ( 110,535 ) ( 256,826 ) Proceeds from issuance of noted payable 627,000 93,174 Payments for repayment of notes payable ( 530,740 ) - Proceeds from issuance of noted payable - related party 82,500 - Payments for repayment of noted payable - related party - ( 170,000 ) Loan origination fees 68,888 - Net Cash provided by Financing Activities 452,113 100,788 Increase (decrease) in cash ( 19,260 ) ( 148,214 ) Cash at beginning of period 65,651 222,098 Cash at end of period $ 46,391 $ 73,884 The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 HEALTHY EXTRACTS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2023 AND 2022 (Unaudited) Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Total Balance - December 31, 2021 338,384,171 $ 338,384 17,075,974 $ ( 14,943,620 ) $ 2,470,738 Cancelation of common stock for debt ( 800,267 ) ( 800 ) ( 53,013 ) - ( 53,813 ) Issuance of common stock for cash 507,917 508 24,888 - 25,396 Issuance of common stock for services 6,740,000 6,740 395,360 - 402,100 Issuance of common stock - Note Conversion 340,621 341 16,690 - 17,031 Net (loss) for the period - - - ( 1,026,538 ) ( 1,026,538 ) Balance - September 30, 2022 345,172,442 $ 345,173 17,459,899 $ ( 15,970,158 ) $ 1,834,913 Issuance of common stock for services 320,000 320 15,680 - 16,000 Fair value of restricted stock units - - 76,047 - 76,047 Fair value of options and warrants issued - - 698,424 - 698,424 Issuance of common stock-restricted stock units issued 9,000,000 9,000 441,000 - 450,000 Net (loss) for the period - - - ( 2,094,316 ) ( 2,094,316 ) Balance - September 30, 2023 354,492,442 354,492 18,691,050 ( 18,021,058 ) 1,024,485 The accompanying notes are an integral part of these financial statements. 8 HEALTHY EXTRACTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2023 and 2022 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. On January 13, 2023 the Company entered into definitive agreement to acquire nutraceutical manufacturer, Hyperion, and its digital marketing affiliate, Online Publishing and Marketing. The total purchase price for the acquisitions will be $1,750,000 in cash, $1,300,000 in the form of secured promissory notes, which will be due in twelve months once the purchase has occurred, and $1,250,000 worth of our common stock. 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, 2023 and the results of operations and cash flows for the periods presented. The results of operations for the months ended September 30, 2023 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, 2022 filed with the SEC on March 31, 2023. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments. In regards to inventory write-offs and allowances, our Company determines the net realizable value by using the various factors as following: excess or slow-moving inventories (12 months or more of inventory on hand), expiration dates (within 12 months of the current reporting period), current and future product demand, production planning, and market conditions. If any of these factors are found in the reporting period, management will review each item and determine if any additional allowances or write-offs need to be made. A change in any of these variable’s factors could result in an adjustment to inventory. Management has provided for any risks in the current inventory allowance booked. 9 As for revenue adjustments for discounts, allowances and refunds, we treat each of these items differently. When it comes to revenue discounts, we will create the invoice for the product sold which will include any discounts given. These discounts usually happen for a short period of time for sales that we will offer around holidays. Due to the revenue being recognized once the order has shipped, less any applicable discount, we book this transaction at the net order transaction amount. In regards to allowances and refunds for revenue adjustments, due to our refund percentage is less than 1% we decided the need for an estimated adjustment for allowances and refunds was not material. If we do receive any returned orders, we will directly book those orders as refunds the day we receive the call from the customer requesting the refund. We will book the credit memo at the full value of the customer original order. 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 and net realizable value. In pursuant to ASC 330-10-50-6, the components of inventory cost include raw materials, labor, and overhead. Additionally, the weighted average cost per unit is used as a basis to determine the cost amounts removed from inventory as the aggregate number of units expected to be delivered under each order. Finally, the net realizable value is determined by using the various factors as following: excess or slow-moving inventories (12 months or more of inventory on hand), expiration dates (within 12 months of the current reporting period), current and future product demand, production planning, and market conditions. If any of these factors are found in the reporting period, management will review each item and determine if any additional allowances or write-offs need to be made. A change in any of these variable’s factors could result in an adjustment to inventory. An allowance for inventory was established in 2018 and is evaluated each quarter to determine if all items are still sellable due to the factors listed above. As of September 30, 2023 and December 31, 2022, the total of inventory allowance was $ 1,643,585 and $ 1,914,891 . The following are the classes held in inventory as of September 30, 2023 and December 31, 2022: SEPTEMBER 30, DECEMBER 31, 2023 2022 Inventory Inventory Classes: Raw Materials $ 3,135,059 $ 3,398,655 Finished Goods 5,788 310,600 Work in process 30,313 24,764 Total inventory 3,171,160 3,734,019 Inventory allowance ( 1,643,585 ) ( 1,914,891 ) Total inventory, net 1,527,575 1,819,128 10 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 it 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, 2023, 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. No goodwill impairment indicators were present, for the goodwill listed on the books as of September 30, 2023, after working through our analysis of goodwill during the months ended September 30, 2023. 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 (2022 to 2026): 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. 11 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. Debt with Warrants In accordance with ASC Topic 470-20-25, when the Company issues debt with warrants, the Company treats the fair value of the warrants as a debt discount, recorded as a contra-liability against the debt, and amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the consolidated statements of operations using the straight-line method. The offset to the contra-liability is recorded as either equity or liability in the Company’s consolidated balance sheets depending on the accounting treatment of the warrants. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the consolidated statements of operations. Convertible Debt – Derivative Treatment When the Company issues debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative, as follows: (a) one or more underlying’s, typically the price of our common stock; (b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; (c) no initial net investment, which typically excludes the amount borrowed; and (d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The scope exception applies if the contract is both (a) indexed to its own stock; and (b) classified in stockholders’ equity in its balance sheet. If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using a Black-Scholes Option-Pricing model upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt using the straight-line method. Revenue Recognition The Company applies Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) topic 606, Revenue from Contracts with Customers (ASC 606). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes all of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 requires us to identify distinct performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. When distinct performance obligations exist, the Company allocates the contract transaction price to each distinct performance obligation. The standalone 12 selling price is used to allocate the transaction price to the separate performance obligations. The Company recognizes revenue when, or as, the performance obligation is satisfied. Mostly, revenues are recognized at the time of shipment to the customer with the price being fixed and determinable and collectability assured, provided title and risk of loss is transferred to the customer. Most of our shipping and handling costs are built into the transaction price, but if the customer asks for express shipping, the costs charged to customers are classified as sales, and the shipping and handling costs incurred are included in cost of sales. The Company’s subsidiary, BergaMet N.A., LLC, recognizes revenue from our main source – e-commerce revenue. Here is a list of all the sales channels which include the Company’s subsidiary website channel or any other selling channel like Amazon, doctors’ offices, and walk-in sales. All of our customer sales for Healthy Extracts, Inc. and Ultimate Brain Nutrients, LLC are recognized as revenue under the subsidiary of BergaMet N.A., LLC. All three divisions of the Company sell plant-based nutraceuticals to our end using customers. The Company evaluates the criteria pursuant to ASC 606-10-55. Some of the different considerations that we use because of their significance are as follows: Collectability - payment has to be made prior to shipment unless the customer has agreed upon terms. Guaranties – we offer a money back to customers if they are unhappy with our products. Principal versus Agent Considerations - currently we are the principal and have not engaged an agent at this time and we have not recognized any revenues under the agent considerations. Revenue is recognized when, or as, control of a promised merchandise or service is shipped to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring title of those products or services and are recorded net of and discounts or allowances. Shipping costs paid by the customer are included in revenue. Merchandise sales are fulfilled with inventory held in our warehouse in Henderson, NV. Therefore, the Company’s contracts have a single performance obligation (shipment of product). If the Company receives a request for refund on a customer obligation, the Company will refund the full cost of the obligation due to our money back guarantee. Historically, we have done a valuation of our sales allowance account (customer returns). In 2022 our return percentage was 0.009% of sales and 2021 was 0.01% of sales. Due to the low refund percentage management decided there was not a need for an estimated adjustment for allowances and refunds due to materiality. Revenue recognition is evaluated through the following five-step process: 1. identification of the contract with a customer; 2. identification off the performance obligations in the contract; 3. determination of the transaction price; 4. allocation of the transaction price to the performance obligations in the contract; and 5. recognition of revenue when or as a performance obligation is satisfied. These steps are met when an order is received, a price agreed and the product shipped or delivered to that customer. Concentration There is no concentration of revenue for the months ended September 30, 2022 and for the months ended September 30, 2023 because the revenue was earned from multiple customers. 13 Income Taxes The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities. The deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences are expected to reverse. The Company's deferred income taxes include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. The Company has adopted ASC guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At September 30, 2023 and 2022, there were no uncertain tax positions that required accrual. 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. If the convertible debt is viewed as short-term, management chooses to expense the full debt discount in the period incurred is recorded as a gain or loss in the consolidated statement of operations. The Company measures and reports certain financial instruments as liabilities at fair value on a recurring basis. The fair value of these instruments as of September 30, 2023 and December 31, 2022 was as follows: 14 Fair Value Level 1 Level 2 Level 3 Fair Value at December 31, 2021 $ 92,527 - - $ 92,527 Derivative liability 102,011 - - 102,011 Fair Value at December 31, 2022 $ 102,011 - - $ 102,011 Derivative liability 135,698 - - 135,698 Fair Value at September 30, 2023 $ 135,698 - - $ 135,698 September 30, 2023 Level 1 Level 2 Level 3 Total Derivative liability - - 135,698 $ 135,698 December 31, 2022 Level 1 Level 2 Level 3 Total Derivative liability - - 102,011 $ 102,011 The details of derivative liability transactions for the period ended September 30, 2023 and December 31, 2022 are as follows: The change in Level 3 financial instrument fair value is as follows: Balance, December 31, 2021 $ 92,527 Issued during the months ended December 31, 2022 264,952 Derivative liabilities debt premium ( 43,269 ) Change in fair value recognized in operations ( 212,199 ) Converted during the months ended December 31, 2022 ( 0 ) Balance, December 31, 2022 $ 102,011 Issued during the months ended September 30, 2023 145,067 Derivative liabilities debt discount 29,167 Change in fair value recognized in operations ( 102,375 ) Converted during the months ended September 30, 2023 ( 38,172 ) Balance, September 30, 2023 $ 135,698 The Company did not transfer any assets or liabilities measured at fair value on a recurring basis between levels during the period ending September 30, 2023 and December 31, 2022. The Company determines the fair value of the derivative liability based on Level 3 inputs using the Black-Scholes option pricing model. The significant unobservable input assumptions that can significantly change the fair value includes common share price; amount of principal and accrued interest convertible into shares as of the conversion date, and the number of shares issuable upon conversion; expected exercise price; expected term; volatility; and risk-free interest rate. Convertible Instruments Convertible debt – derivative treatment The Company evaluates and accounts 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. 15 If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using the Black-Sholes option pricing model upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. If the convertible debt is viewed as short-term, management chooses to expense the full debt discount in the period incurred is recorded as a gain or loss in the consolidated statement of operations. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the consolidated statement of operations. Convertible debt – beneficial conversion feature 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, any discounts, if applicable, 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, if applicable, under these arrangements are amortized over the term of the related debt to their stated date of redemption. Debt modifications and extinguishments 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 under change in fair value on derivative, in the consolidated operation statements, as a gain or loss on extinguishment of the two separate liabilities. During the months ended September 30, 2023, the Company issued $388,888 of convertible debt. 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. 16 The Company leases its office and warehouse space under non-cancellable capital leases. The Company accounts for this lease in accordance with ASC 842. Right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Since our lease arrangements do not provide an implicit rate, we use our estimated incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease payments. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. Capital lease expense is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the lease payments to measure the lease liability and are expensed as incurred. Finance lease expense is comprised of both interest expense, which is recognized using the effective interest method, and amortization of the right-of-use assets. These expenses are presented consistently with the presentation of other interest expense and amortization or depreciation of similar assets. Common area maintenance fees (or CAMs) and other charges related to leases are expensed as incurred. See Note 5 — Right-of-Use Assets and Lease Liabilities for further discussion of the Company’s lease activities. 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 September 30, 2023 of $ 18,021,058 . 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, 2023 and December 31, 2022, the Company had expenses totaling $ 0 and $ 1,000 respectively, to an officer and director for salaries, which is included in general and administrative expenses on the accompanying consolidated statement of operations. 17 Note Issuance Date Maturity Date Interest Rate Original Principal Amount Balance at September 30, 2023 Balance at December 31, 2022 Unsecured debt A March 2019, March and June 2020 No due date 0 % $ 866 $ 866 $ 866 Unsecured debt H September 1, 2023 January 1, 2024 10 % $ 82,500 $ 82,500 $ 866 Total notes payable $ 83,366 $ 83,366 $ 866 Debt discount and deferred financing costs - - - Total notes payable, net $ 83,366 $ 83,366 $ 866 Unsecured debt A: On March 2, 2020, the Company received an unsecured loan of $200 from a shareholder. Additionally, during in March and June 2019, the Company received an additional loan of $666 from another shareholder. Both of these notes are unsecured and do not have a payment due date at an interest rate of 0.00%. Unsecured debt H: On September 1, 2023, the Company received an unsecured line of credit in the principal of up to $82,500 with a loan origination fee in the amount of $7,500, which was amortized over the life of the line of credit. The net proceeds from this line of credit were $75,000. The loan is unsecured and is due for repayment on January 1, 2024. Interest will accrue at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the holder of the note can declare all or any portion of the unpaid balance with all accrued interest immediately due and payable. As of September 30, 2023, the outstanding principal balance of unsecured debt G totaled $75,000. NOTE 5 – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES In February 2022, the Company entered into a lease agreement for our warehouse facilities located at 7375 Commercial Way Suite 125, Henderson, Nevada 89011 with a term of 35 month 25 days and will expire in 2025. Prior to February 4, 2022 the company was leasing a warehouse facility on a month-to-month lease. The average monthly base rent for the first 12 months is approximately $ 5,333 . For the next 24 months of the lease, the average monthly base rent will be approximately $ 5,694 . As part of the agreement the Company will be responsible to share any property operating expenses estimated as $1,017 per month. Pursuant to ASC 842, the estimated operating expenses was included with the base rent and was included in the calculations of the right of use assets. The Company recorded operating lease right-of-use of $175,765 and lease liabilities for operating lease of $175,765. 18 Supplemental statements of operations information related to leases are as follows: Months Ended September 30, 2023 Lease Cost Cash paid for amounts included in the measurement of lease liabilities for the first quarter 2022 $ - Weighted average remaining lease term – operating leases (in years) 1.33 Average discount rate – operating leases 9.8 % September 30, 2023 Operating leases Right-of-use assets, net of amortization of $75,142 $ 86,279 Short-term operating lease liabilities $ ( 62,989 ) Long-term operating lease liabilities ( 26,187 ) Total operating lease liabilities $ ( 89,176 ) The following table summarizes the future undiscounted cash payments reconciled to the lease liability: Year Ending Operating Leases 2022 (remaining eleven months) $ - 2023 16,779 2024 69,635 2025 5,822 2026 and thereafter - Total lease payments $ 92,182 Less: Imputed interest/present value discount $ ( 3,005 ) Present value of lease liabilities $ 89,176 NOTE 6 – NOTES PAYABLE As of September 30, 2023, the Company had the following: Note Issuance Date Maturity Date Interest Rate Original Principal Amount Balance at September 30, 2023 Balance at December 31, 2022 Unsecured debt B February 22, 2022 February 15, 2023 10 % $ 200,000 $ - $ 75,370 Secured debt C October 7, 2022 October 7, 2023 12.99 % 200,000 - 200,000 Unsecured debt D March 20, 2023 August 17, 2024 10 % 330,000 236,564 - Secured debt E May 19, 2023 May 18, 2024 12.99 % 131,000 - - Secured debt G July 26, 2023 May 18, 2024 12.99 % 196,000 165,066 - Total notes payable $ 1,057,000 $ 401,630 $ 275,370 Debt discount and deferred financing costs - - - Total notes payable, net $ 1,057,000 $ 401,630 $ 275,370 19 Unsecured debt B: On February 22, 2022, the Company received an unsecured loan in the principal of $200,000 with a loan origination fee in the amount of $20,000, which was fully expensed as interest expense in this period. The net proceeds from this loan were $180,000. The loan is unsecured and the initial payment of $17,804 was due on April 22, 2022. There will be ten monthly payments due on the 22 nd day of each following month, beginning on May 22, 2022 through Feb 15, 2023. During fourth quarter of 2022, the note holder agreed to forgo two months of payments and add them to the back end of the note, which extended the due date of the note to April 25, 2023. Interest will accrue at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the default interest will increase to 16% per annum. During 2022, the Company made a total in principal payments of $124,630 towards unsecured debt B. During 2023, the Company has made additional principal payments towards unsecured debt B totaling $75,370 which settled the entire principal balance in full. As of September 30, 2023, the principal balance of the note was paid off. Secured debt C: On October 7, 2022, the Company agreed to a secured loan by any consigned inventory held at fulfillment centers and any rights, title or interest in their account. The principal loan amount was $200,000 and will have a loan term of twelve months with an annual interest rate of 12.99%, with a default rate of 14.99%. The first three months of payment will be interest only payments of $2,165 and the remaining nine payments will be principal and interest payments of $23,442. Interest payments will begin November 8, 2022 and Installment payments, including principal and interest, will begin February 8, 2023. During 2023, the Company has made principal payments totaling $200,000 towards the secured debt C which settled the entire principal balance in full. As of September 30, 2023 the principal balance of secured debt C was paid off. Unsecured debt D: On March 20, 2023, the Company received an unsecured loan in the principal of $330,000 with a loan origination fee in the amount of $30,000, which was fully expensed as interest expense in this period. The net proceeds from this loan were $300,000. The loan is unsecured and the initial payment of $23,359 will be due on June 17, 2023. There will be fourteen monthly payments due on the 17 th day of each following month, beginning on July 17, 2023 through August 17, 2024. Interest will accrue at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the default interest will increase to 16% per annum. During 2023, the Company made a total in principal payments of $93,437 towards the unsecured debt D. As of September 30, 2023, the outstanding principal balance of unsecured debt D totaled $236,564. Secured debt E: On May 19, 2023, the Company agreed to a secured loan by any consigned inventory held at fulfillment centers and any rights, title or interest in their account. The principal loan amount was $131,000 and will have a loan term of twelve months with an annual interest rate of 12.99%, with a default rate of 14.99%. The first payment of principal and interest will be $11,700 and will be due June 19, 2023 with an additional eleven payments due each 19 th of the month. During 2023, the Company has made principal payments totaling $10,282 towards the secured debt E. As of September 30, 2023 the principal balance of secured debt E was paid off. Secured debt F: On July 26, 2023, the Company agreed to a secured loan by any consigned inventory held at fulfillment centers and any rights, title or interest in their account. The principal loan amount was $196,000 and will have a loan term of twelve months with an annual interest rate of 12.99%, with a default rate of 14.99%. The first payment of principal and interest will be $17,505 and will be due August 26, 2023 with an additional eleven payments due each 26 th of the month. During 2023, the Company has made principal payments totaling $30,934 towards the secured debt E. As of September 30, 2023 the principal balance of secured debt E was $165,066. Total interest expense for notes payable to was $ 12,830 and $ 5,000 for the three months ended September 30, 2023 and 2022, respectively. The Company paid $ 5,653 and $ 0 in interest for the three months ended September 30, 2023 and 2022, respectively. 20 Consolidated Statements of Operations – Interest expense, net of interest income September 30, September 30, 2023 2022 Interest Income $ ( 10,061 ) $ ( 8,660 ) Interest Expense 79,947 57,317 Origination Fees 68,888 20,000 Total of Interest Expense $ 138,774 $ 68,657 NOTE 7 – CONVERTIBLE DEBT As of September 30, 2023, the Company had the following convertible debt outstanding: Note Issuance Date Maturity Date Interest Rate Original Principal Amount Balance at September 30, 2023 Balance at December 31, 2022 Convertible promissory note #1 July 28, 2016 January 19, 2017 8 % $ 15,000 $ 6,750 $ 6,750 Convertible promissory note #2 May 25, 2022 August 5, 2023 10 % 154,000 - 110,535 Convertible promissory note #3 May 12, 2022 May 1, 2023 12 % 200,000 200,000 200,000 Convertible promissory note #4 January 24, 2023 October 24, 2023 0 % 388,888 388,888 - Total notes payable $ 757,888 $ 595,638 $ 317,285 Debt discount and deferred financing costs - - - Total notes payable, net $ 757,888 $ 595,638 $ 317,285 Convertible promissory note #1: On July 28, 2016, the Company executed the convertible promissory note #1 in the principal amount of $15,000, which is in default but management has not been able to make contact with this party, due to them living out of the country. The due date for this note was January 19, 2017 at an interest rate of 8%, with a default interest rate of 18%. 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 conversion option for this note coverts at a 54% discount to the market price based on the lowest trading prices in the last 20 days trading period. The outstanding balance on convertible promissory note #1 as of September 30, 2023 was $6,750. The fair value of the derivative as of September 30, 2023 was determined to be $10,574 using the Black-Scholes option pricing model based on the following assumptions: common share price of $0.05275 per share; expected exercise price of $0.0251 per share; volatility of 105%; expected dividend yield of zero; and annual risk-free interest rate of 5.40%. The derivatives are classified as liabilities as they represent an obligation to deliver a variable number of shares of common stock in the future and are therefore required to be initially and subsequently measured at fair value each reporting period. The Company originally recorded a derivative liability in the amount of $9,649. The fair value of the derivative liability is remeasured each reporting period using the Black-Scholes option pricing model, and the change in fair value is recorded as an adjustment to the derivative 21 liabilities account with the unrealized gains or losses reflect in other income – change in fair value on derivative. Convertible promissory note #2: On May 25, 2022, the Company executed the convertible promissory note #2 in the principal amount of $154,000 with a loan origination fee in the amount of $15,400, which was fully expensed as interest expense in this period. The net proceeds from this note were $138,600. The loan is unsecured and the initial repayment of $14,488 was due on October 5, 2022. There will be ten additional monthly payments due on the 5 th day of each following month, beginning on November 5, 2022 through August 5, 2023. Interest will accrual at an interest rate of 10% per annum on any unpaid principal amount. If the Company defaults on the loan, the default interest will increase to 16% per annum. During 2022, the Company has made principal payments totaling $43,465 towards the outstanding balance on convertible promissory note #2. During 2023, the Company has made additional principal payments towards convertible promissory note #2 totaling $110,535 which settled the entire principal balance in full. As of September 30, 2023, the principal balance of the note was paid off the principal balance of the note was paid off. The fair value of the derivative was determined to be $0, due to being paid off, using the Black-Scholes option pricing model based, prior to the note being paid off, on the following assumptions: common share price of $0.05275 per share; expected exercise price of $0.05 per share; volatility of 105%; expected dividend yield of zero; and annual risk-free interest rate of 5.40%. The derivatives are classified as liabilities as they represent an obligation to deliver a variable number of shares of common stock in the future and are therefore required to be initially and subsequently measured at fair value each reporting period. The Company originally recorded a derivative liability in the amount of $89,895. The fair value of the derivative liability is remeasured each reporting period using the Black-Scholes option pricing model, and the change in fair value is recorded as an adjustment to the derivative liabilities account with the unrealized gains or losses reflect in other income – change in fair value on derivative. Convertible promissory note #3: On May 12, 2022, the Company executed the convertible promissory note #3 in the principal amount of $200,000. The loan is unsecured and the principal and any unpaid accrued interest shall be due and payable on May 12, 2023. Interest shall accrue at the rate of 12% per annum. The outstanding balance on convertible promissory note #3 as of September 30, 2023 was $200,000. At any time on or after July 24, 2023, the holder shall have the right, at his option, to convert the principal amount of the note, or any portion of such principal amount, plus accrued but unpaid interest into shares of the Company’s common stock. The Company has been advised the holder of convertible promissory note #3 will be converting the full value of the outstanding principal and interest in the near future. The conversion price shall be $0.05 per share. The fair value of the derivative was determined to be $74,762 using the Black-Scholes option pricing model based on the following assumptions: common share price of $0.05275 per share; expected exercise price of $0.05 per share; volatility of 105%; expected dividend yield of zero; and annual risk-free interest rate of 5.40%. The derivatives are classified as liabilities as they represent an obligation to deliver a variable number of shares of common stock in the future and are therefore required to be initially and subsequently measured at fair value each reporting period. The Company originally recorded a derivative liability in the amount of $184,011. The fair value of the derivative liability is remeasured each reporting period using the Black-Scholes option pricing model, and the change in fair value is recorded as an adjustment to the derivative liabilities account with the unrealized gains or losses reflect in other income – change in fair value on derivative. 22 Convertible promissory note #4: On January 24, 2023, the Company executed the convertible promissory note #4 in the principal amount of $388,888 with a loan origination fee in the amount of $38,888, which was fully expensed as interest expense in this period, additionally there were $12,500 of legal costs and $31,500 of agent fees in which were also fully expenses in this period. The net proceeds from this loan were $306,000. The loan is unsecured and the principal and any unpaid accrued interest shall be due and payable on October 24, 2023 with an interest rate of 0%. Any unpaid balance at that time will start to accrue interest at a default rate of 20% per annum. The outstanding balance on convertible promissory note #4 as of September 30, 2023 was $388,888. The holder shall have the right, at his option, to convert the principal amount of the note, or any portion of such principal amount, plus accrued but unpaid interest into shares of the Company’s common stock. The conversion price means ninety percent (90%) of the lowest VWAP of our common stock for the five (5) consecutive Trading Days immediately preceding the date of the issuance of a Conversion Election. The fair value of the derivative was determined to be $50,362 using the Black-Scholes option pricing model based on the following assumptions: common share price of $0.05275 per share; expected exercise price of $0.0464 per share; volatility of 105%; expected dividend yield of zero; and annual risk-free interest rate of 5.40%. The derivatives are classified as liabilities as they represent an obligation to deliver a variable number of shares of common stock in the future and are therefore required to be initially and subsequently measured at fair value each reporting period. The Company originally recorded a derivative liability in the amount of $174,234. The fair value of the derivative liability is remeasured each reporting period using the Black-Scholes option pricing model, and the change in fair value is recorded as an adjustment to the derivative liabilities account with the unrealized gains or losses reflect in other income – change in fair value on derivative. Total interest expense for notes payable to was $ 6,138 and $ 9,988 for the three months ended September 30, 2023 and 2022, respectively. The Company paid $ 0 and $ 17,031 in interest for the three months ended September 30, 2023 and 2022, respectively. NOTE 8 – DERIVATIVE LIABILITY The Company evaluated the notes under the requirements of ASC 480 “Distinguishing Liabilities From Equity” (ASC 480) and concluded that the notes do not fall within the scope of ASC 480. The Company next evaluated the notes under the requirements of ASC 815 “Derivatives and Hedging Activities” and determined that the scope exception to ASC 815’s derivative accounting provisions does not apply. The Company then evaluated the embedded derivative criteria in ASC 815, and concluded that the conversion features meet all the embedded derivative criteria in ASC 815, and therefore, the conversion features meet the definition of an embedded derivative that should be separated from the notes and accounted for as a derivative liability. The derivative liabilities were valued using a Black-Scholes option pricing model with the following average assumptions: September 30, 2023 Upon Issuance 2023 December 31, 2022 Upon Issuance 2022 Stock Price $ 0.05275 $ 0.048 $ 0.04 $ 0.043 - 0.066 Exercise Price $ 0.025 - 0.05 $ 0.045 $ 0.0224 - 0.05 $ 0.0224 - 0.05 Expected Life 0 -0.07 0.75 0 -0.59 1.0 -1.2 Volatility 105 % 145 % 168 % 194.52 - 197.12 % Dividend Yield 0 % 0 % 0 % 0 % Risk-Free Interest Rate 5.40 % 4.57 % 4.02 % 0.53 - 0.61 % Convertible Notes 595,638 388,888 317,285 356,000 Total Fair Value $ 135,698 $ 174,234 $ 102,011 $ 273,906 The expected life of the note was based on the remaining contractual term of the instruments. The Company uses the historical volatility of its Common Stock to estimate the future volatility for its Common Stock. The expected dividend yield was based on the fact that the Company has not paid 23 dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank. Consolidated Statement of Operations – Change in fair value on derivative During the year ended December 31, 2022, , the following transactions were recorded in the account “change in fair value on derivative”: (i) as a result of the issuance of convertible notes, the Company recorded derivative liabilities of $(264,952); (ii) the Company viewed the convertible debt derivatives as short term and thus chose to record as other income the debt premium associated with the derivative liabilities incurred during this period in the amount of $43,269; and (iii) the change in the fair value of these derivative liabilities for the year ended December 31, 2022 resulted in a gain of $ 212,199 . During the period ended September 30, 2023, the following transactions were recorded in the account “change in fair value on derivative”: (i) as a result of the issuance of convertible notes, the Company recorded derivative liabilities of $(145,067); (ii) the Company viewed the convertible debt derivatives as short term and thus chose to expense the debt discounts associated with the derivative liabilities incurred during this period in the amount of $(29,167); (iii) the changes in the fair value of these derivative liabilities for the period ended September 30, 2023 resulted in a gain of $ 102,375 ; and (iv) the Company recorded a gain on debt extinguishment of $ 38,172 to account for the extinguishment of derivative liabilities associated with the settlement or the conversion of the convertible debt accounted for as a derivative liability. The details of derivative liability transactions for the period ended September 30, 2023 and December 31, 2022 are as follows: The change in Level 3 financial instrument fair value is as follows: Balance, December 31, 2021 $ 92,527 Issued during the months ended December 31, 2022 264,952 Derivative liabilities debt premium ( 43,269 ) Change in fair value recognized in operations ( 212,199 ) Converted during the months ended December 31, 2022 ( 0 ) Balance, December 31, 2022 $ 102,011 Issued during the months ended September 30, 2023 145,067 Derivative liabilities debt discount 29,167 Change in fair value recognized in operations ( 102,375 ) Converted during the months ended September 30, 2023 ( 38,172 ) Balance, September 30, 2023 $ 135,698 NOTE 9 – INCOME TAXES The effective income tax rate for the years ended September 30, 2023 and 2022 differs from the U.S. Federal statutory rate due to the following: September 2023 September 2022 Federal statutory income tax rate $ 562,157 $ ( 166,169 ) Change in valuation allowance ( 562,157 ) 166,169 $ - $ - 24 The components of the deferred tax assets and liabilities at September 30, 2023 and 2022 are as follows: September 2023 September 2022 Long-term deferred tax assets: Federal net operating loss carryforwards $ 562,157 $ 166,169 Valuation allowance ( 562,157 ) ( 166,169 ) Net long-term deferred tax assets $ - $ - NOTE 10 – 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 September 30, 2023, there are no outstanding shares of preferred stock. All the preferred stock was converted in common stock on February 4, 2019. Common Share Issuances During the months ended March 31, 2023, the Company issued 320,000 shares of common stock. During the months ended June 30, 2023, the Company did not issue any shares of common stock. During the months ended September 30, 2023, the Company issued 9,000,000 shares of common stock for the Restricted Stock Units which were executed. The holders paid the Company $0.01 for each share of common stock and the value of each share was $0.05. There were no shares issued during the fourth quarter 2022. During the third quarter 2022, the Company issued 340,000 shares of common stock for consulting fees along with issuing 340,621 shares of common stock to convert an outstanding note payable to a shareholder. On May 19, 2022, the Company issued 4,400,000 shares of common stock for broker and consulting fees. On April 22 and 25, 2022, the Company issued 2,000,000 shares of common stock for broker and funding fees. On February 4, 2022, the Company issued 507,917 shares of common stock in a direct security purchase agreement. On January 10, 2022, the Company cancelled 200,267 shares of common stock. Further, on March 4, 2022, the Company cancelled 600,000 shares of common stock. 25 Warrant Issuances During the month ending March 31, 2022, the Company issued 7,421,544 warrants to 2 unrelated parties at a per share price of $0.04716. On February 2, 2022, the Company issued 2,000,000 warrants to an individual at a per share price of $0.05. As of September 30, 2023, there were 23,421,544 warrants outstanding, of which 16,000,000 warrants are fully vested. Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Intrinsic Warrants Price Life (Years) Value Outstanding at December 31, 2022 16,000,000 $ 0.06 2.17 - Granted 7,421,544 0.05 4.31 - Forfeited - - - - Exercised - - - - Outstanding at September 30, 2023 23,421,544 $ 0.06 2.34 $ - Vested and expected to vest at September 30, 2023 23,421,544 $ 0.06 $ - Exercisable at September 30, 2023 23,421,544 $ 0.06 $ - At September 30, 2023, the intrinsic value of these stock warrants was $0 as the exercise price of these stock warrants were greater than the market price. Stock Issued for Services On March 6, 2023, the Company issued 320,000 shares of common stock for consulting fees at a per share price of $0.05. On September 13, 2022, the Company issued 340,000 shares of common stock for consulting fees at a per share price of $0.05. During the period ending June 30, 2022, the Company issued 6,400,000 shares of common stock for broker, consulting, and funding fees at a per share price of $0.05. 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. These options are immediately vest and will expire in five years. 26 The following summary of options activity for the three months ended September 30, 2023 is presented below: Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Price Life (Years) Value Outstanding at December 31, 2022 3,850,000 $ 0.05 2.84 10,588 Granted 750,000 0.05 3.67 2,063 Forfeited - - - - Exercised - - - - Outstanding at September 30, 2023 4,600,000 $ 0.05 2.59 $ 12,650 Vested and expected to vest at September 30, 2023 4,600,000 $ 0.05 $ 12,650 Exercisable at September 30, 2023 4,600,000 $ 0.05 $ 12,650 At September 30, 2023, the intrinsic value of these stock options was $12,650 as the exercise price of these stock options were less than the market price. On December 26, 2022, the Company canceled 12,150,000 stock options with a strike price of $0.05. The following summary of restricted stock units’ activity for the three months ended September 30, 2023 is presented below: Weighted- Weighted- Average Grant Date Shares Fair Value Non-vested at December 31, 2022 - - Granted 15,975,000 0.05 Vested ( 8,900,000 ) 0.05 Forfeited - - Non-vested at September 30, 2023 7,075,000 0.05 The total fair value of restricted stock units vested during the three months ended June 30, 2023 was $ 445,000 and is included in selling, general and administrative expenses in the accompanying consolidation statements of operations. As of September 30, 2023, the amount of unvested compensation related to issuances of restricted stock units’ fair value was $ 353,750 . This amount will be amortized and expensed over the life of the contract and will be included in selling, general and administrative expenses in the accompanying consolidation statements of operations. The fair value of share options, units, and warrants are estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions: Three Months Ended September 30, 2023 2022 Risk-free interest rate 5.18 % 2.75 % Average expected term (years) 4.7 years 4.75 years Expected volatility 106.5 % 194.8 % Expected dividend yield - - 27 NOTE 11 – BUSINESS SEGMENT INFORMATION As of September 30, 2023, the Company operated in two reportable segments (Corporate and Health Supplements) supported by a corporate group which conducts activities that are non-segment specific. The following table presents selected financial information about the Company’s reportable segments for the quarter September 30, 2023. CONSOLIDATED HEALTH SUPPLEMENTS CORPORATE BergaMet UBN Revenue 1,816,968 1,816,968 - - Cost of Revenue 760,825 760,825 - - Long-lived Assets 732,030 229,303 502,727 - Gain (Loss) Before Income Tax ( 2,094,316 ) ( 328,433 ) ( 6,113 ) ( 1,759,877 ) Identifiable Assets 1,636,798 1,636,798 - - Depreciation and Amortization 1,646 1,646 - - As of September 30, 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 quarter ended September 30, 2022. CONSOLIDATED HEALTH SUPPLEMENTS CORPORATE BergaMet UBN Revenue 1,668,105 1,668,105 - - Less Selling Fees ( 235,255 ) ( 235,255 ) Cost of Revenue 382,038 382,038 - - Long-lived Assets 732,030 193,260 538,771 - Gain (Loss) Before Income Tax ( 1,026,538 ) ( 83,534 ) ( 313 ) ( 942,691 ) Identifiable Assets 1,866,442 1,866,442 - - Depreciation and Amortization 329 329 - - Currently, all of our customers are located in the United States of American and Canada. Our revenues to our customers are not material to our overall total sales. Our largest customers, Natural Grocers and Emerson Ecologics, LLC, account for less than 1% of our total sales in the months ending 2023 and 2022. NOTE 12 – SUBSEQUENT EVENTS The key terms for the 15,975,000 RSU are as follows: the effective grant date for all RSU’s is April 28, 2023. Each of the RSU’s will have a purchase price of $0.01 (prior to the reverse split). 8,900,000 of the RSU’s had an expiration date of June 30, 2023 and are all immediately vested once granted. All of the 8,900,000 shares of common stock were issued on July 5, 2023. 7,075,000 of the RSU’s will have an expiration date of March 31, 2024 and will vest on January 1, 2024. Any of the RSU will be forfeited without any payment or consideration by the holder. The RSU’s comply with Section 409A. The Company evaluated its September 30, 2023 financial statements for subsequent events through November 5, 2023, the date the financial statements were available to be issued. 28