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Item 7. Management’s Discussion and Analysis

2025-04-01 compared with 2024-04-01 · 78 added, 107 removed, 25 unchanged (88% of the section changed)

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).

Forward-looking statements are, by their very nature, uncertain and risky.

These risks and uncertainties include international, national and local general economic and market conditions;

demographic changes;

our ability to sustain, manage, or forecast growth;

our ability to successfully make and integrate acquisitions;

raw material costs and availability;

new product development and introduction;

existing government regulations and changes in, or the failure to comply with, government regulations;

adverse publicity;

the loss of significant customers or suppliers;

fluctuations and difficulty in forecasting operating results;

changes in business strategy or development plans;

business disruptions;

the ability to attract and retain qualified personnel;

the ability to protect technology;

and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them.

Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements.

You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

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

Over the last year, we have focused on increasing revenue, maintaining our margins, and generating positive cash flow from our existing operations.

In part, we have been successful in meeting these objectives and our business has remained relatively unchanged.

We are a platform for acquiring, developing, patenting, marketing, and distributing plant-based nutraceuticals.

Our products have not been evaluated by the FDA or any similar regulatory body for safety and efficacy.

Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health.

Our products have not been evaluated by the FDA or any similar regulatory body for safety and efficacy.

Our mission is to acquire or create products with health and performance benefits that have mass consumer appeal.

Guided by this mission, our first two acquisitions formed our current operating subsidiaries, Bergamet, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health.

Based on published research from third-party sources, we believe our Bergamet products have been shown to support heart health, support immune response, and address metabolic syndrome.

Guided by this mission, our first two acquisitions formed our current operating subsidiaries, BergaMet NA, LLC, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health.

Based on published research from third-party sources, we believe our BergaMet NA, LLC products have been shown to support heart health, support immune response, and address metabolic syndrome.

Our Financial Condition and Going Concern Issues

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2023 and 2022 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern.

From inception (December 19, 2014) through the end of December 31, 2023, we have incurred accumulated net losses of $18,399,673.

In order to continue as a going concern, we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues.

If we are not able to do this, we may not be able to continue as an operating company.

At our current revenue and burn rate, we have an immediate cash need, and thus we must raise capital by issuing debt or through the sale of our stock.

However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.

Our net loss from inception to December 31, 2024 was $19,240,344, and we had limited cash resources at December 31, 2024 of $112,020.

Our financial statements have been prepared on a going

concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Our auditor’s report reflects that our ability to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock or other means and, ultimately, the achievement of significant operating revenues.

If we are unable to continue as a going concern, our business will fail and stockholders will lose their investment in our company.

No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms.

Moreover, financing will likely be dilutive to our stockholders.

Results of Operations for the Years Ended December 31, 2024 and 2023

We had revenues of $2,485,866 for the year ended December 31, 2023, as compared to $2,251,469 for the year ended December 31, 2022, an increase of $234,397, or 10%.

Our cost of revenue was $864,055 for the year ended December 31, 2023, as compared to $879,951 for the year ended December 31, 2022, a decrease of $15,896, or 2%.

We had revenues of $3,113,279 for the year ended December 31, 2024, compared to $2,485,866 for the year ended December 31, 2023.

Our cost of revenue for the year ended December 31, 2024 was $1,201,959, compared to $864,055 for the year ended December 31, 2023.

Our operating expenses were $2,094,469 for the year ended December 31, 2024, compared to $3,865,654 for the year ended December 31, 2023.

Our operating expenses consisted entirely of general and administrative expenses.

Our net income (loss) was $(840,671) for the year ended December 31, 2024, compared to $(2,472,931) for the year ended December 31, 2023.

Revenues and Net Operating Loss

Our revenues, operating expenses, and net operating loss for the years ended December 31, 2023 and 2022 were as follows:

December 31, 2023

December 31, 2022

Our revenue, cost of revenue, gross profit, operating expenses, other income (expense), and net loss for the years ended December 31, 2024 and 2023 were as follows:

Cost of Revenue

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Total operating expenses

Net operating loss

Other income (expense)

Net gain/(loss)

We had revenues of $2,485,866 for the year ended December 31, 2023, as compared to $2,251,469 for the year ended December 31, 2022, an increase of $234,397, or 10%.

The increase in revenues was mainly due to our increased focus on the Amazon marketplace.

Interest expenses, net of interest income

Change in fair value on derivative

Total other income (expense)

Net income (loss)

We had revenues of $3,113,279 for the year ended December 31, 2024, compared to $2,485,866 for the year ended December 31, 2023, an increase of $627,413, or 25%.

We expect revenue growth to increase as our direct consumer sales and marketing efforts continue to perform.

Cost of Revenue

Our cost of revenue was $864,055 for the year ended December 31, 2023, as compared to $879,951 for the year ended December 31, 2022, a decrease of $15,896, or 2%, and consisted of wholesale product costs and packaging.

Our cost of revenue for the year ended December 31, 2024 was $1,201,959, compared to $864,055 for the year ended December 31, 2023, an increase of $337,903, or 39%.

Gross profit for the year ended December 31, 2024 was $1,911,320, compared to $1,621,810 for the year ended December 31, 2023, an increase of $289,510, or 54%.

Cost of revenue as a percentage of revenues was 39% for the year ended December 31, 2024, compared to 35% for the year ended December 31, 2023.

General and Administrative

General and administrative expense was $3,865,654 and $2,283,107 for the years ended December 31, 2023 and 2022, an increase of $1,582,546, or 69%.

The increase was related to stock compensation expenses.

Our general and administrative expenses were $2,094,469 for the year ended December 31, 2024, compared to $3,865,654 for the year ended December 31, 2023, a decrease of $1,771,185, or 34%.

In the year ended December 31, 2024, general and administrative expenses consisted mainly of advertising of $697,533, consulting fees of $405,050, stock-based compensation $241,858, salaries and wages of $191,200 and accounting and legal fees of $261,076.

In the year ended December 31, 2023, general and administrative expenses consisted mainly of stock-based compensation of $1,494,191, consulting fees of $592,093, accounting and legal fees of $258,187 and salaries and wages of $198,554.

In the year ended December 31, 2022, general and administrative expenses consisted mainly of consulting fees of $608,819, broker fees of $383,938, selling expenses of $595,318, accounting and legal fees of $145,062, and salaries and wages of $145,589.

Net Operating Gain/Loss

As a result of the items discussed above, our net operating loss was $2,243,843 and $911,590 for the years ended December 31, 2023 and 2022, respectively, an increase of $1,332,253, or 146%.

Other Income and Expense

Other income (expense) was $(229,088) and $(71,531) for the years ended December 31, 2023 and 2022, respectively, an increase of $157,557, or 220%.

For the year ended December 31, 2023, our other income (expense) consisted of interest expenses, net of interest income of $(176,948) and change in fair value on derivative of $(52,140).

For the year ended December 31, 2022, our other income (expense) consisted of interest expenses, net of interest income of $(64,690) and change in fair value on derivative of $(9,484), offset by a gain on the sale of asset of $2,643.

Net Gain/(Loss)

Our net gain (loss) for the year ended December 31, 2023 was $(2,472,931), or $0.85 per share, and our net gain (loss) for the ended December 31, 2022 was $(983,121), or $(0.34) per share, an increase of $1,489,810, or 152%.

For the year ended December 31, 2024, the decrease was due in part to catch up in stock-based compensation expense recognition .

Other Income (Expense)

Other income (expense) was $(657,522) for the year ended December 31, 2024, compared to $(229,088) for the year ended December 31, 2023, an increase of $428,434, or 340%.

In the year ended December 31, 2024, other income (expense) consisted of interest expense, net of interest income of ($186,252) and change in fair value on derivative of $(471,270).

In the year ended December 31, 2023, other income (expense) consisted of interest expense, net of interest income of ($176,948) and change in fair value on derivative of $(52,140).

Change in fair value of derivative was related to the conversion of convertible debts into shares of common stock.

Net Income (Loss)

Net income (loss) was $(840,671), or $(0.28) per share, for the year ended December 31, 2024, compared to $(2,472,931), or $(0.85) per share, for the year ended December 31, 2023.

Our net income (loss) varies from period to period primarily because of the change in fair value on derivative and our increase in general and administrative expenses.

Liquidity and Capital Resources

During the years ended December 31, 2023 and 2022, we had negative operating cash flows.

During the year ended December 31, 2024, we had positive operating cash flows.

Our cash on hand as of December 31, 2024 was $112,020.

Our monthly cash flow burn rate in 2023 was approximately $35,000.

Although we have strong short term cash needs, as our operating expenses increase, we will face strong medium to long term cash needs.

We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2023 and 2022 were as follows:

While we had positive net cash from operations for the year ended December 31, 2024, our monthly cash flow burn rate for the year ended December 31, 2023 was $35,000.

We have both short- and medium-term cash needs.

We anticipate that these needs will be satisfied through increased revenues and the issuance of debt or the sale of our securities until such time as our cash flows from operations will consistently satisfy our cash flow needs.

Our cash, current assets, total assets, and current and total liabilities as of December 31, 2024 and 2023 were as follows:

Total Current Assets

Total Current Liabilities

Total Liabilities

Our cash decreased by $46,210 as of December 31, 2023 as compared to December 31, 2022.

Our total current assets decreased by $143,909 because of our decrease in cash, as well as accounts receivable and inventory.

Our total assets decreased by $146,104 for the same reasons.

Our current and total liabilities increased by $777,636, from $902,788 as of December 31, 2022 to $1,680,424 as of December 31, 2023.

Our total liabilities as of the year ended December 31, 2023 consisted primarily of convertible debt, net of discount of $608,601, notes payable of $361,093, and accrued liabilities of $215,069.

Total Current and Total Liabilities

Our total current assets and total assets decreased slightly during the year ended December 31, 2024 primarily as a result of our decrease in inventory of $265,067, offset in part by an increase in cash of $92,579.

Our accumulated deficit increased during the year ended December 31, 2024, by $840,671 to $19,240,344.

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources.

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Our cash on hand as of December 31, 2024 was $112,020.

Our monthly cash flow burn rate in 2023 was approximately $35,000.

Although we have strong short term cash needs, as our operating expenses increase, we will face strong medium to long term cash needs.

We anticipate that these needs will be satisfied through the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

Based on our current level of revenues and monthly burn rate for 2023 of approximately $35,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

Sources and Uses of Cash

Our net cash used in operating activities for the years ended December 31, 2023 and 2022 was $415,749 and $390,621, respectively, an increase of $25,128, or 6%.

Our net cash used in operating activities for the year ended December 31, 2023 consisted primary of a net loss of $2,472,931, offset primarily by an adjustment for warrants issued for services of $1,639,191 and changes in inventory of $192,845.

Our net cash used in operating activities for the year ended December 31, 2022 consisted of a net loss of $983,121 offset by an adjustment for warrants issued for services of $402,100, an increase in inventory of $138,838, and an increase in accounts payable of $54,048.

Our cash flow provided by (used in) investing activities for the years ended December 31, 2023 and 2022 was $zero and ($5,344), respectively.

Our net cash provided by financing activities for the years ended December 31, 2023 and 2022 was $369,539 and $239,518, respectively, an increase of $130,021, or 54%.

The increase in 2023 was due primarily to proceeds from the issuance of notes payable of $713,283 and proceeds from the issuance of convertible debt of $362,963, offset by the repayment of notes payable of $657,560 and repayment of convertible debt of $110,535.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related notes.

Our significant accounting policies are described in Note 2 to our consolidated financial statements.

Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results may differ from these estimates and such differences may be material.

Management considers the following policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.

The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period.

Actual results could differ from these good faith estimates and judgments.

Recent Accounting Pronouncements

Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements.

Our management believes that these recent pronouncements will not have a material effect on our financial statements.

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.

The components of inventory cost include raw materials, labor, and overhead.

Net realizable value is determined using various assumptions with regard to excess or slow-moving inventories, expiration dates, current and future product demand, production planning, and market conditions.

A change in any of these variables 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 expiration dates.

As of December 31, 2023 and 2022, the total of inventory which was written off as an inventory allowance was $ 1,611,257 and $1,914,891.

Inventory Classes:

Raw Materials

Finished Goods

Work in process

Total inventory

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.

standalone 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.

Generally, 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 outlined in ASC 606-10-55, Principal versus Agent Considerations, currently we are the principal and have not engaged any agents at this time.

Currently, 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.

Revenue recognition is evaluated through the following five-step process:

identification of the contract with a customer;

identification off the performance obligations in the contract;

determination of the transaction price;

allocation of the transaction price to the performance obligations in the contract;

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.

Operating Activities

We had net cash from operating activities of $281,968 for the year ended December 31, 2024, compared to net cash used in operating activities of $(415,749) for the year ended December 31, 2023.

We use our cash for normal business operations.

Our net cash from operating activities for the year ended December 31, 2024 consisted of our net loss of $840,671, offset in part by our change in fair value on derivative liability of $471,270, warrants issued for services of $301,858, and our decrease in inventory of $265,067.

Our net cash used in operating activities for the year ended December 31, 2023 consisted of our net loss of $2,472,931, offset in part by our warrants issued for services of $1,639,191 and decrease in inventory of $192,845.

Investing Activities

We had zero cash flows provided by investing activities for the years ended December 31, 2024 and 2023.

Financing Activities

Our net cash provided by financing activities for the year ended December 31, 2024 was $(189,389), compared to $369,539 for the year ended December 31, 2023.

Our net cash provided by financing activities consisted primarily of proceeds from the issuance of notes payable of $94,000 and proceeds from the issuance of notes payable related party of $314,800, offset by repayment of notes payable of $489,123 and repayment of convertible debt of $103,666.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis