10-K/A
1
grck-20201231_10k.htm
10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No.1
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________
to _____________.
Commission file number 000-55572
Healthy Extracts Inc.
(Exact name of registrant as specified in its
charter)
Nevada
(State or other jurisdiction of
incorporation or organization)
47-2594704
(I.R.S. Employer
Identification No.)
6445 S. Tenaya Way, Suite B110
Las Vegas, NV
(Address of principal executive
offices)
89113
(Zip Code)
Registrant’s telephone number, including
area code (702) 463-1004
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
None
N/A
None
Securities registered pursuant to Section 12(g)
of the Act:
Common Stock, par value $0.001
(Title of class)
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
No ☒
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒
No ☐
Indicate by check mark
whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Yes ☒
No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicated by check mark
whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S. C. 7262(b)) by the registered public accounting
firm that prepared or issued its annual report. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
The aggregate market value
of the voting and non-voting common equity held by non-affiliates as February 16, 2021 was $7,090,074, based on the closing price
of $0.055 on June 30, 2020.
As of February 16, 2021,
there were 308,887,410 shares of common stock, par value $0.001, issued and outstanding.
Documents Incorporated by Reference
None.
Explanatory Note
This Amendment No. 1
to the Annual Report on Form 10-K/A amends the Annual Report on Form 10-K for the annual period ended December 31,
2020 of Healthy Extracts Inc. (“Healthy Extracts”), which was filed with the Securities and Exchange Commission on February
19, 2021. This Form 10-K/A is being filed to correct how we reflect the purchase of BergaMet and the UBN in our Consolidated Statement
of Cash Flows in the financial statements contained in Item 8 herein.
Except as described above,
this Amendment No. 1 on Form 10-K/A is not intended to update or modify any other information presented in Healthy Extracts’
Annual Report on Form 10-K for the annual period ended December 31, 2020, as originally filed. This Amendment does not reflect
events occurring after the Form 10-K’s original filing date of February 19, 2021. Accordingly, this Form 10-K/A should
be read in conjunction with our other filings made with the SEC subsequent to the filing of our Annual Report on Form 10-K for
the annual period ended December 31, 2020.
For the convenience of the reader,
we have included a complete version of the Amendment, which includes all unchanged portions of the original filing, within this report.
HEALTHY EXTRACTS INC.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
PART I
ITEM 1
BUSINESS
1
ITEM 1A
RISK FACTORS
7
ITEM 1B
UNRESOLVED STAFF COMMENTS
19
ITEM 2
PROPERTIES
19
ITEM 3
LEGAL PROCEEDINGS
19
ITEM 4
MINE SAFETY DISCLOSURES
19
PART II
ITEM 5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
20
ITEM 6
SELECTED FINANCIAL DATA
21
ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22
ITEM 7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
27
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
28
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
29
ITEM 9A
CONTROLS AND PROCEDURES
29
ITEM 9B
OTHER INFORMATION
31
PART III
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
32
ITEM 11
EXECUTIVE COMPENSATION
34
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
36
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
37
ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES
38
PART IV
ITEM 15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
39
PART I
Cautionary Statement Regarding Forward Looking
Statements
This Annual Report includes
forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements
are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking
statements include the information concerning possible or assumed future results of operations of the Company set forth under the
heading “Management’s Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements
also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,”
“believe,” “estimate,” “consider” or similar expressions are used.
Forward-looking statements
are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company’s future results
and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not
to put undue reliance on any forward-looking statements.
ITEM 1 – BUSINESS
Corporate History
We were incorporated on
December 19, 2014 in the State of Nevada. Historically, we provided cloud-based software to detect advertising fraud on the internet.
We abandoned this business in early 2018.
On October 17, 2017, we
acquired Eqova Life Sciences, a Nevada corporation (“Eqova”). Eqova was a wholly-owned subsidiary through which we
conduct our hemp oil product business. We closed this business in the second quarter of 2019.
In November 2017, we formed
Healthy Extracts, LLC, a wholly-owned subsidiary through which we conduct some of our CBD business.
On February 4, 2019, we
acquired BergaMet NA, LLC, a Delaware limited liability company (“BergaMet”). BergaMet is a wholly-owned subsidiary
through which we conduct our nutraceuticals business.
On April 3, 2020, we acquired
Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”). UBN is a wholly-owned subsidiary through
which we conduct our plant-based neuro-products business.
On October 23, 2020, we changed our name from
Grey Cloak Tech Inc. to Healthy Extracts Inc. to more accurately reflect our business. We
are currently waiting for The Financial Industry Regulatory Authority (FINRA) to issue our Company a new ticker symbol before we
file our 8-K for this change.
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Overview
Beginning with the acquisition
of Eqova in 2017, we began to transition away from our software services business and shifted our focus to new lines of business.
Eqova was focused on the production and sale of hemp oil products through the medical practitioner market. The addition of BergaMet,
an established company that was already generating revenues when we acquired it, added unique products that fit nicely with our
existing business. We plan on expanding our product line to other nutraceuticals.
BergaMet NA, LLC
On February 4, 2019, we
issued and exchanged shares of our common stock for all of the outstanding equity securities of BergaMet.
Through the exchange, we
were able to secure funds in BergaMet to pay off debt and provide capital for operations. We paid an aggregate of over $500,000
to retire convertible debt. Prior to the exchange, we also entered into agreements with other holders of convertible debt to convert
their notes for an aggregate of 806,015 shares of common stock. We also entered into conversion agreements with the holders of
our Series A Convertible Preferred Stock whereby all of the outstanding preferred stock was converted for an aggregate of 15,592,986
shares of common stock. The conversion and repayment of the preferred stock and convertible debt have greatly improved our capitalization
structure.
The acquisition of BergaMet
has been extremely beneficial to us. In addition to paying off our convertible debt, we are now able to better position ourselves
in the market. BergaMet is an established company that was already generating revenues when we acquired it. BergaMet also has unique
products that will fit nicely with our existing business. We now plan on expanding our product line to other nutraceuticals.
Ultimate Brain Nutrients, LLC
On April 3, 2020, we entered
into a Share Exchange Agreement with Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”), and
the members of UBN, whereby we issued and exchanged 90,000,960 shares of our common stock for all of the outstanding equity securities
of UBN. UBN is now our wholly-owned subsidiary. The shares of common stock issued in the Exchange were equal to approximately 42.5%
of our outstanding common stock immediately following the exchange.
UBN is a science-based
company that develops unique, plant-based superior health technology neuro-products that provide natural brain solutions. UBN has
numerous proprietary products, with four unique patent-pending formulations and one patent issued.
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The Market
Bergamot
BergaMet, LLC holds the
rights to distribute BergaMet products in the United States and Mexico.
Bergamot,
or citrus bergamia, is a rare citrus fruit native to the Calabrian region of Southern Italy. Due to sensitivity to the weather
and soil conditions, this region accounts for 80 percent of the worldwide production of bergamot. This superfruit has been used
for decades in the Calabrian regions for its beneficial effects in promoting overall health - particularly, in support of cholesterol,
cardiovascular, and metabolic health [1] .
Citrus bergamot contains five unique antioxidant polyphenols in unusually concentrated amounts, which help protect your body’s
trillions of cells from free radical damage. The juice and albedo of bergamot has a unique profile of flavanoid and glycosides,
such as neoeriocitrin, neohesperidin, naringin, rutin, neodesmin, rhoifolin, and poncirin. Naringin has been shown to be beneficial
in animal models of atherosclerosis, while neoeriocitrin and rutin have been found to exhibit a strong capacity to prevent LDL
from oxidation. Importantly, bergamot juice is rich in brutieridine and melitidine with an ability to inhibit HMG-CoA reductase,
which inhibits the liver’s ability to produce LDL, resulting in reduced cholesterol levels in liver cells.
BergaMet sells its
bergamot products in capsule form on its website and on distribution sites such as Amazon.
Bergamot Products
Our bergamot products are
sold in capsule form under the following product labels:
· BergaMet Pro+
· BergaMet Mega+O
· BergaMet HERHEART
· BergaMet Cholesterol Command
· BergaMet SPORTSHEART
Ultimate Brain Nutrients
Our UBN subsidiary is a
science-based company that develops unique, plant-based superior health technology neuro-products that improve brain health, including
memory, cognition, focus and neuro-energy.
UBN’s KETONOMICS®
proprietary formulations – targeting brain activity, focus, headache and cognitive behavior — provide multiple intellectual
property license opportunities for monetizing the company’s portfolio. Sales and licensing opportunities include multiple
beverage formats, individual products, proprietary mixtures and other food platforms.
[1] These statements have not been evaluated by the Food and
Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease.
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UBN has five unique formulation
patents – one issued and four pending – targeting brain activity, focus, headache and cognitive behavior.
UBN's (http://UBNutrients.com)
mission is to naturally ‘Create Better Lifestyles with Superior Health Technology through our science-based products.”
UBN’s all-natural, sugar-free and caffeine-free proprietary formulations are the result of 20 years of scientific research
and are positioned to provide consumer neuro-products that are natural brain solutions. UBN’s KETONOMICS® supplementation
has also been studied in sports physiology, with specific regard to its potential benefits for competitive performance and endurance
UBN Products
Over 50 million Americans
consume unhealthy energy shots and drinks each day, while the neuro/energy market generates over $16 billion per year in revenue [2] .
Within this growing market, UBN is advancing its position to meet rising consumer demand for healthy, science-based options with
clinical studies. The company’s KETONOMICS® proprietary formulations have been proven to naturally elevate brain energy
and function, including memory, cognition and focus.
UBN’s KETONOMICS®
supplementation has also been studied in sports physiology, with specific regard to its potential benefits for competitive performance
and endurance.
Patents and Intellectual Property Rights
Our subsidiary, UBN, has
four unique patent-pending formulations and two patents issued. We have not otherwise filed for any intellectual property protection.
However, we rely on intellectual property law that may include a combination of copyright, trade secret and confidentiality agreements
to protect our intellectual property. Our employees and independent contractors will be required to sign agreements acknowledging
that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our
property, and assigning to us any ownership that they may claim in those works. Despite our precautions, it may be possible for
third parties to obtain and use without consent intellectual property that we own. Unauthorized use of our intellectual property
by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.
Status
Serial No.
Date Filed
Title
Pending
15/743,448
January 10, 2018
PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES
Pending/In Appeal
16/501,502
April 22, 2019
PROHYLAXIS AND MITIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTER, AND OTHER KETONIC SOURCES
Pending
16/350,663
December 19, 2018
COMPOSITIONS OF MEDIUM CHAIN TRIGLYCERIDES AND PLANT-BASED NUTRIENTS FOR BRAIN HEALTH
Issuing
16/350,664
December 19, 2018
COMPOSITIONS WITH KETOGENIC AGENTS, CANNABINOIDS, PLANT-DERIVED SUBSTANCES AND MICRONUTRIENTS
Issued
16/501,249
(Patent No. 10,500,182)
December 17, 2018
COMPOSITIONS OF KETOGENIC SOURCES, MICRONUTRIENTS AND HYTOCHEMICALS FOR PROPHYLAXIS AND MITIGATION OF MIGRAINE HEADACHE
Pending
17/011,650
September 3, 2020
PROPHYLAXIS AND MIIGATION OF MIGRAINE HEADACHES USING MEDIUM CHAIN TRIGLYCERIDES, KETONE ESTERS, AND OTHER KETOGENIC SOURCES
[1] https://financial-news-now.com/nootropic-beverages-set-to-take-over-the-16-billion-dollar-energy-drink-market/
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From
time to time, we may encounter disputes over rights and obligations concerning intellectual property. While we believe that our
product and service offerings do not infringe the intellectual property rights of any third party, we cannot assure you that we
will prevail in any intellectual property dispute. If we do not prevail in such disputes, we may lose some or all of our intellectual
property protection, be enjoined from further sales of the applications determined to infringe the rights of others, and/or be
forced to pay substantial royalties to a third party.
Governmental Controls, Approval and Licensing Requirements
Federal laws related to the advertising,
distribution and sale of health supplements .
We expect that the formulation,
manufacturing, packaging, labeling, advertising, distribution and sale (hereafter, “sale” or “sold” may
be used to signify all of these activities) of our vitamin and nutritional supplement products will be subject to regulation by
one or more federal agencies, primarily the Food and Drug Administration (“FDA”) and the Federal Trade Commission (“FTC”),
and to a lesser extent the Consumer Product Safety Commission (“CPSC”), the United States Department of Agriculture,
and the Environmental Protection Agency. Our activities are also regulated by various governmental agencies for the states and
localities in which our products are sold, as well as by governmental agencies in certain countries outside the United States in
which our products are sold. Among other matters, regulation by the FDA and the FTC is concerned with product safety and claims
made with respect to a product’s ability to provide health-related benefits. Specifically, the FDA, under the Federal Food,
Drug, and Cosmetic Act (“FDCA”), regulates the formulation, manufacturing, packaging, labeling, distribution, and sale
of food, including dietary supplements and over-the-counter (“OTC”) drugs. The FTC regulates the advertising of these
products. The National Advertising Division (“NAD”) of the Council of Better Business Bureaus oversees an industry-sponsored,
self-regulatory system that permits competitors to resolve disputes over advertising claims. The NAD has no enforcement authority
of its own, but may refer matters that appear to violate the FTC Act or the FDCA to the FTC or the FDA for further action, as appropriate.
Most of the nutritional
supplement products that we plan to sell are classified as dietary supplements. The FDA’s revision of nutrition labeling
requirements also affects the nutrition labeling of certain dietary supplements. Our affected manufacturers may have to revise
labels on some of their dietary supplements in the next two years. Moreover, these manufacturers may need to reformulate their
products to maintain eligibility for certain marketing claims.
The Dietary Supplement
Health and Education Act (“DSHEA”) was enacted in 1994, amending the FDCA. Among other things, DSHEA prevents the FDA
from regulating dietary ingredients in dietary supplements as “food additives” and allows the use of statements of
nutritional support on product labels and in labeling. DSHEA establishes a statutory class of “dietary supplements,”
which includes vitamins, minerals, herbs, amino acids and other dietary ingredients for human use to supplement the diet. Dietary
ingredients marketed in the United States before October 15, 1994 may be marketed without the submission of a “new dietary
ingredient” (“NDI”) premarket notification to the FDA. Dietary ingredients not marketed in the United States
before October 15, 1994 may require the submission, at least 75 days before marketing, of an NDI notification containing
information establishing that the ingredient is reasonably expected to be safe for its intended use. The FDA has issued final regulations
under DSHEA.
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As required by Section 113(b)
of the Food Safety Modernization Act, the FDA published in July 2011 a draft guidance document clarifying when the FDA believes
a dietary ingredient is an NDI, when a manufacturer or distributor must submit an NDI premarket notification to the FDA, the evidence
necessary to document the safety of an NDI and the methods for establishing the identity of an NDI. Industry strongly objected
to several aspects of the draft guidance. In 2016, the FDA issued revised draft guidance on what constitutes an NDI and NDI notification
requirements. Regardless of whether the FDA finalizes this draft guidance, the FDA has recently acted more aggressively to remove
ingredients from the market that the FDA views as unlawful dietary ingredients. This trend, if it continues, may limit the dietary
supplement market. Several bills to amend DSHEA in ways that would make this law less favorable to consumers and industry have
been proposed in Congress.
The FDA issued a Final
Rule on GMPs for dietary supplements on June 22, 2007. The GMPs cover manufacturers and holders of finished dietary supplement
products, including dietary supplement products manufactured outside the United States that are imported for sale into the United
States. Among other things, the new GMPs: (a) require identity testing on all incoming dietary ingredients, (b) call
for a “scientifically valid system” for ensuring finished products meet all specifications, (c) include requirements
related to process controls, including statistical sampling of finished batches for testing and requirements for written procedures
and (d) require extensive recordkeeping. We have reviewed the GMPs and have taken steps to ensure compliance. While we believe
we are in compliance, there can be no assurance that our operations or those of our suppliers will be in compliance in all respects
at all times. Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance
with the GMPs.
On December 22, 2006, Congress
passed the Dietary Supplement and Nonprescription Drug Consumer Protection Act, which went into effect on December 22, 2007.
The law requires, among other things, that companies that manufacture or distribute nonprescription drugs or dietary supplements
report serious adverse events allegedly associated with their products to the FDA and institute recordkeeping requirements for
all adverse events (serious and non-serious). There is a risk that consumers, the press and government regulators could misinterpret
reported serious adverse events as evidence of causation by the ingredient or product complained of, which could lead to additional
regulations, banned ingredients or products, increased insurance costs and a potential increase in product liability litigation,
among other things.
All states regulate foods
and drugs under laws that generally parallel federal statutes. We are also subject to state consumer health and safety regulations,
such as the California Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”). Violation of Proposition
65 may result in substantial monetary penalties and compliance with Proposition 65 is a major focus. Contemplated changes in the
Proposition 65 labeling requirements could potentially lead to substantial costs. Current legislation in Massachusetts regarding
restrictions on weight loss and sports nutrition products could also impact the marketing of dietary supplements generally. Further,
state attorneys general have pressured industry to adopt DNA testing for herbal-based products to assure plant identity, and have
taken other actions relating to dietary ingredient status. It is uncertain whether these efforts will have a material impact on
the dietary supplement market.
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Competition
Nutritional Supplements
We
compete with other manufacturers, distributors and marketers of vitamins, minerals, herbs, and other nutritional supplements both
within and outside the U.S. The nutritional supplement industry is highly fragmented and competition for the sale of nutritional
supplements comes from many sources. These products are sold primarily through retailers (drug store chains, supermarkets, and
mass market discount retailers), health and natural food stores, and direct sales channels (network marketing and internet sales).
The
nutritional supplement industry is highly competitive and we expect the level of competition to remain high over the near term.
We do not believe it is possible to accurately estimate the total number or size of our competitors. The nutritional supplement
industry has undergone consolidation in the recent past and we expect that trend may continue in the near term.
Employees
As of the date hereof,
we do not have any employees other than our officers and directors. BergaMet has 2 employees, and UBN does not have any employees
but uses outside contract help on an as-needed basis. Our officers and directors will continue to work for us for the foreseeable
future. We anticipate hiring appropriate personnel on an as-needed basis, and utilizing the services of independent contractors
as needed.
ITEM 1A. – RISK FACTORS.
As a smaller reporting
company, we are not required to provide a statement of risk factors. Nonetheless, we are voluntarily providing risk factors herein.
Any investment in our common
stock involves a high degree of risk. You should consider carefully the following information, together with the other information
contained in this Annual Report, before you decide to buy our common stock. If one or more of the following events actually occurs,
our business will suffer, and as a result our financial condition or results of operations will be adversely affected. In this
case, the market price, if any, of our common stock could decline, and you could lose all or part of your investment in our common
stock.
We are providing services
to an industry that is heavily regulated and, in some respects, illegal under federal law and the laws of most states. We face
risks in developing our product candidates and services and eventually bringing them to market. We also face risks that our business
model may become obsolete. The following risks are material risks that we face. If any of these risks occur, our business, our
ability to achieve revenues, our operating results and our financial condition could be seriously harmed.
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Risk Factors Related to the Business of the
Company
Our
operations rely on professionals all over the United States, which is impacted by the global pandemic, causing our resources to
be affected. Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease
COVID-19.
An
outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and has been expanding
globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.
Restrictive
measures have been imposed in major cities in the USA, including Los Angeles, New York, and Las Vegas, and throughout the world
in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and
evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of
the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse
public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets
and our business.
Throughout
2020, the COVID-19 outbreak has caused disruptions in our operations, which have resulted in delays on existing projects. A prolonged
disruption or any further unforeseen delay in our operations could continue to result in increased costs and reduced revenue.
We
cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of
its impact. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition
may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and
national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot
foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment,
cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business,
financial condition and results of operations.
The outbreak of the coronavirus (“COVID-19”)
has negatively impacted and could continue to negatively impact the global economy. In addition, the COVID-19 pandemic could disrupt
or otherwise negatively impact global credit markets, our operations and our efforts to identify, review and explore alternatives
for the Company, including a merger, acquisition, or a business combination.
The significant outbreak
of COVID-19 has resulted in a widespread health crisis, which has negatively impacted and could continue to negatively impact the
global economy. In addition, the global and regional impact of the outbreak, including official or unofficial quarantines and governmental
restrictions on activities taken in response to such event, could have a negative impact on our operations and our ability to identify,
review and explore alternatives for the Company. More broadly, the outbreak could potentially lead to an economic downturn that
could limit the potential opportunities available to us via merger, acquisition or business combination.
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The COVID-19 outbreak could
disrupt or otherwise negatively impact credit and equity markets, which could adversely affect the availability and cost of capital.
Such impacts could limit our ability to obtain additional funding through various financing transactions or arrangements, including
joint venturing of projects, equity or debt financing or other means.
A pandemic typically results
in social distancing, travel bans and quarantines, and this may limit access to our management, support staff, professional advisors
and our independent auditors. These factors, in turn, may not only impact our operations, financial condition and our overall ability
to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with
the Securities and Exchange Commission.
The
extent and potential short- and long-term impact of the COVID-19 outbreak on our business will depend on future developments, including
the duration, severity and spread of the virus, actions that may be taken by governmental authorities and the impact on the financial
markets, all of which are highly uncertain and cannot be predicted. These and other potential impacts of an epidemic, pandemic
or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and
results of operations.
We have a limited operating history,
we are not profitable, and we do not expect to be profitable in the near future. There is no assurance our future operations will
result in revenues sufficient to obtain or sustain profitability. If we cannot generate sufficient revenues to operate profitably,
we may suspend or cease operations.
We were incorporated on
December 19, 2014 and we have not fully developed our proposed business operations and have not yet experienced significant revenue.
We have a limited operating history upon which an evaluation of our future success or failure can be made, and we recently shifted
focus to a new line of business with the acquisition of BergaMet and UBN. Our ability to continue as a going concern is dependent
upon our ability to obtain adequate financing and to reach profitable levels of operations. In that regard we have no proven history
of performance, earnings or success.
Our net loss from inception
to December 31, 2020, was ($12,956,498). Based on our cash position of $59,201 as of December 31, 2020, we will need to raise additional
capital from the sale of our stock or debt. Such funding may not be available, or may be available only on terms which are not
beneficial and/or acceptable to us.
Our ability to maintain
profitability and positive cash flow is dependent upon our ability to attract new customers who will buy our products and services,
and our ability to generate sufficient revenue through the sale of those products and services.
Based upon current plans,
we expect to incur operating losses in future periods because we will be incurring expenses that may exceed revenues. We cannot
guarantee that we will be successful in generating sufficient revenues in the future. In the event we cannot generate sufficient
revenues and/or secure additional financing, we may be forced to cease operations.
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Our competitors may develop products
that are less expensive, safer or otherwise more appealing, which may diminish or eliminate the commercial success of any potential
product that we may commercialize.
If our competitors market
products that are less expensive, safer or otherwise more appealing than our potential products, or that reach the market before
our potential products, we may not achieve commercial success. The market may choose to continue utilizing existing products for
any number of reasons, including familiarity with or pricing of these existing products. The failure of any of our products to
compete with products marketed by our competitors would impair our ability to generate revenue, which would have a material adverse
effect on our future business, financial condition, results of operations, and cash flows. Our competitors may:
· develop and market products that are less expensive, safer, or otherwise more appealing than our
products;
· commercialize competing products before we or our partners can launch our products; and
· initiate or withstand substantial price competition more successfully than we can.
Our auditors have substantial doubt about
our ability to continue as a going concern.
Our financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. Our auditor’s report reflects that our ability to continue as a going concern is dependent
upon our ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating
revenues. If we are unable to continue as a going concern, our stockholders will lose their investment. We will be required to
seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or,
if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to our stockholders.
Our controlling stockholders have significant influence over
the Company.
Our officers and directors
own stock representing less than 4% of shareholder votes; however, if you add in our controlling shareholder, Jay Decker, they
hold approximately 58% of shareholder votes. As a result they will possess a significant influence over our affairs and may have
the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination
or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company, which
in turn could materially and adversely affect the market price of our common stock. Our minority shareholders will be unable to
affect the outcome of stockholder voting as long as our officers and directors retain a controlling interest.
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Our current officers and directors may
set salaries and perquisites in the future which we are unable to support with our current assets.
Although our officers and
directors have written employment or services agreements, our officers and directors may decide to award themselves higher salaries
and other benefits but all changes to these agreements will need to be approved by the Board of Directors. We do not have significant
revenues, and there is no guarantee that we will have significant revenue in the near future. If we do not increase our revenues,
we will be unable to support any higher salaries or other benefits for management, which may cause us to cease operations.
We may engage in strategic transactions
that fail to enhance stockholder value.
From time to time, we may
consider possible strategic transactions, including the potential acquisitions or licensing of products or technologies or acquisition
of companies, and other alternatives with the goal of maximizing stockholder value. We may never complete a strategic transaction,
and in the event that we do complete a strategic transaction, implementation of such transactions may impair stockholder value
or otherwise adversely affect our business. Any such transaction may require us to incur non-recurring or other charges and may
pose significant integration challenges and/or management and business disruptions, any of which could harm our results of operation
and business prospects.
We may not be able to gain or sustain
market acceptance for our products and services.
Failure to establish a
brand and presence in the marketplace on a timely basis could adversely affect our financial condition and results of operations.
Moreover, there can be no assurance that we will successfully complete our development and introduction of new products and services
or that any such products and services will achieve acceptance in the marketplace. We may also fail to develop and deploy new products
and services on a timely basis.
We have incurred costs in completing
the transactions with BergaMet and UBN, and failure to successfully integrate those businesses into each other and with our own
will have an adverse impact on our financial position and prevent us from obtaining the benefits that the transaction would have
given us.
We have recently completed
our acquisitions of BergaMet and UBN. Our executives have spent considerable time and incurred legal and accounting costs in the
acquisitions. If we are unable to fully integrate those businesses into our business or maintain their existing customer base,
we will not be able to acquire the technologies, partnerships and potential customers that the transaction was intended given us.
The increase in acquisition and integration costs without the corresponding benefit will have an adverse impact on our financial
statements and foreclose potential revenue-producing opportunities in the near future.
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Economic uncertainties or downturns could
materially adversely affect our business.
Current or future economic
uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the general economy
including conditions resulting from changes in gross domestic product growth, the continued sovereign debt crisis, financial and
credit market fluctuations, political deadlock, natural catastrophes, warfare and terrorist attacks on the United States, Europe,
the Asia Pacific region or elsewhere, could cause a decrease in business investments.
General worldwide economic
conditions have experienced a significant downturn and continue to remain unstable. These conditions make it extremely difficult
for us to forecast and plan future business activities accurately, and they could cause our potential customers to reevaluate their
decisions to purchase our product, which could delay and lengthen our sales cycles or result in cancellations of planned purchases.
Furthermore, during challenging economic times our potential customers may tighten their advertising budgets which may impact their
spend on local inventory based digital marketing products. To the extent purchases of our products are perceived by potential customers
to be discretionary, sales of our products may never occur. Also, customers may choose to seek other methods to achieve the benefits
our products provide.
We cannot predict the timing,
strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry. If the economic
conditions of the general economy or industries in which we operate do not improve, or worsen from present levels, our business,
results of operations, financial condition and cash flows could be adversely affected.
We are dependent on the services of key
personnel and failure to attract qualified management could limit our growth and negatively impact our results of operations.
We are highly dependent
on the principal members of our management team, including our President, Kevin “Duke” Pitts, and our Chief Financial
Officer, William Bossung. At this time, we do not know of the availability of such experienced management personnel or how much
it may cost to attract and retain such personnel. The loss of the services of any member of senior management or the inability
to hire experienced technical or programing personnel could have a material adverse effect on our financial condition and results
of operations.
Other companies may claim that we have
infringed upon their intellectual property or proprietary rights.
We do not believe that
our products and services violate third-party intellectual property rights; however, we have not had an independent party conduct
a study of possible patent infringements. Nevertheless, we cannot guarantee that claims relating to violation of such rights will
not be asserted by third parties. If any of our products or services are found to violate third-party intellectual property rights,
we may be required to expend significant funds to re-engineer or cause to be re-engineered one or more of those products or services
to avoid infringement, or seek to obtain licenses from third parties to continue offering our products and services without substantial
re-engineering, and such efforts may not be successful.
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In addition, future patents
may be issued to third parties upon which our products and services may infringe. We may incur substantial costs in defending against
claims under any such patents. Furthermore, parties making such claims may be able to obtain injunctive or other equitable relief,
which effectively could block our ability to further develop or commercialize some or all of our products or services in the United
States or abroad, and could result in the award of substantial damages against us. In the event of a claim of infringement, we
may be required to obtain one or more licenses from third parties. There can be no assurance that we will be able to obtain such
licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any such license could be costly and have
a material adverse effect on our business.
Our success depends on our ability to
protect our proprietary technology.
Our success depends, to
a significant degree, upon the protection of our proprietary technology, and that of any licensors. Legal fees and other expenses
necessary to obtain and maintain appropriate patent protection could be material. Currently, no material aspect of our business
is protected by registered patents, copyrights or trademarks. Insufficient funding may inhibit our ability to obtain and maintain
such protection. Additionally, if we must resort to legal proceedings to enforce our intellectual property rights, the proceedings
could be burdensome and expensive, and could involve a high degree of risk to our proprietary rights if we are unsuccessful in,
or cannot afford to pursue, such proceedings.
We may also rely on trademarks,
trade secrets and contract law to protect certain of our proprietary technology. There can be no assurance that any trademarks
will be approved, that such contract will not be breached, or that if breached, we will have adequate remedies. Furthermore, there
can be no assurance that any of our trade secrets will not become known or independently discovered by third parties.
Our future growth may be inhibited by
the failure to implement new technologies.
Our future growth is partially
tied to our ability to improve our knowledge and implementation of mobile, AI, machine learning, and other advanced technologies
in a retail environment, which is a rapidly changing market. The inability to successfully implement commercially technologies
in response to market conditions in a manner that is responsive to our customers’ requirements could have a material adverse
effect on our business.
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Risks Related To Our Common Stock
The market price of our common stock
may be volatile and may be affected by market conditions beyond our control.
The market price of our
common stock is subject to significant fluctuations in response to, among other factors:
· variations in our operating results and market conditions specific to technology companies;
· changes in financial estimates or recommendations by securities analysts;
· announcements of innovations or new products or services by us or our competitors;
· the emergence of new competitors;
· operating and market price performance of other companies that investors deem comparable;
· changes in our board or management;
· sales or purchases of our common stock by insiders;
· commencement of, or involvement in, litigation;
· changes in governmental regulations; and
· general economic conditions and slow or negative growth of related markets.
In addition, if the market
for stocks in our industry or the stock market in general, experiences a loss of investor confidence, the market price of our common
stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing
occurs, it could cause the price of our common stock to fall and may expose us to lawsuits that, even if unsuccessful, could be
costly to defend and a distraction to the board of directors and management.
If we are unable to pay the costs associated
with being a public, reporting company, we may be forced to discontinue operations.
Our common stock is quoted
on the OTC Pink tier of the marketplace maintained by OTC Markets Group, Inc. We expect to have significant costs associated with
being a public, reporting company, which may raise substantial doubt about our ability to sell our equity securities and/or continue
as a going concern. Our ability to continue as a going concern will depend on positive cash flow, if any, from future operations
and on our ability to raise additional funds through equity or debt financing. If we are unable to achieve the necessary product
sales or raise or obtain needed funding to cover the costs of operating as a public, reporting company, we may be forced to discontinue
operations.
Our common stock is listed for quotation
on the OTCQB tier of the marketplace maintained by OTC Markets Group, Inc., which may make it more difficult for investors to resell
their shares due to suitability requirements.
Our common stock is currently
quoted on the OTCQB tier of the marketplace maintained by OTC Markets Group, Inc. Broker-dealers often decline to trade in over-the-counter
stocks given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater.
These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make
it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This
could cause our stock price to decline.
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Our principal stockholders have the ability
to exert significant control in matters requiring stockholder approval and could delay, deter, or prevent a change in control of
our company.
Jay Decker has beneficial
ownership of our common stock with over 56% of the shareholder votes. As a result, he has the ability to influence matters affecting
our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance
of our shares. Because he controls such shares, investors may find it difficult to replace our management if they disagree with
the way our business is being operated. Because the influence by these shareholders could result in management making decisions
that are in the best interest of those shareholders and not in the best interest of the investors, you may lose some or all of
the value of your investment in our common stock. Investors who purchase our common stock should be willing to entrust all aspects
of operational control to our current management team.
We do not intend to pay dividends in
the foreseeable future.
We do not intend to pay
any dividends in the foreseeable future. We do not plan on making any cash distributions in the manner of a dividend or otherwise.
Our Board presently intends to follow a policy of retaining earnings, if any.
Future sales and issuances of our capital
stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and
could cause our stock price to decline.
Future sales and issuances
of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders.
We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner
as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted.
New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common
stock.
In addition, changing laws,
regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies,
increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards
are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in
practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend
to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general
and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory
or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings
against us and our business may be adversely affected.
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We also expect that being
a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors
could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve
on our audit committee and compensation committee, and qualified executive officers.
As a result of disclosure
of information in this Annual Report and in filings required of a public company, our business and financial condition will become
more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties.
If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not
result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert
the resources of our management and adversely affect our business and results of operations.
The market for penny stocks has suffered in recent years from
patterns of fraud and abuse
Stockholders should be
aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include:
· control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
· manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
· boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced salespersons;
· excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and,
· the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with consequential investor losses.
Our management is aware of the abuses that
have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of
the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
Due to the lack of a developed trading
market for our securities, you may have difficulty selling your shares.
Our stock currently trades
on the OTCQB tier maintained by OTC Markets Group, Inc. There currently is a very limited public trading market for our common
stock. The lack of a developed public trading market for our shares may have a negative effect on your ability to sell your shares
in the future and it also may have a negative effect on the price, if any, for which you may be able to sell your shares. As a
result an investment in the shares may be illiquid in nature and investors could lose some or all of their investment.
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Our status as an “emerging growth
company” under the JOBS Act OF 2012 may make it more difficult to raise capital when we need to do it.
Because of the exemptions
from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended
transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and
it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business
with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in
our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations
may be materially and adversely affected.
Our internal controls may be inadequate,
which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f),
internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal
financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements. Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable
and lead to misinformation being disseminated to the public.
Our common stock is governed under The
Securities Enforcement and Penny Stock Reform Act of 1990.
The Securities Enforcement
and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades
in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity
security listed on NASDAQ and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000,
if such issuer has been in continuous operation for three years, (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three years, or (iii) average annual revenue of at least $6,000,000,
if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and
the risks associated therewith.
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The forward looking statements contained
in this Annual Report report may prove incorrect.
This Annual Report contains
certain forward-looking statements, including among others: (i) anticipated trends in our financial condition and results of operations;
(ii) our business strategy for expanding distribution; and (iii) our ability to distinguish ourselves from our current and future
competitors. These forward-looking statements are based largely on our current expectations and are subject to a number of risks
and uncertainties. Actual results could differ materially from these forward-looking statements. In addition to the other risks
described elsewhere in this “Risk Factors” discussion, important factors to consider in evaluating such forward-looking
statements include: (i) changes to external competitive market factors or in our internal budgeting process which might impact
trends in our results of operations; (ii) anticipated working capital or other cash requirements; (iii) changes in our business
strategy or an inability to execute our strategy due to unanticipated changes in the biotechnology industry; and (iv) various competitive
factors that may prevent us from competing successfully in the marketplace. In light of these risks and uncertainties, many of
which are described in greater detail elsewhere in this “Risk Factors” discussion, there can be no assurance that the
events predicted in forward-looking statements contained in this Annual Report will, in fact, transpire.
General Risk Factors
We will incur ongoing costs and expenses
for SEC reporting and compliance, without increased revenue we may not be able to remain in compliance, making it difficult for
investors to sell their shares, if at all.
Going forward, we will
have ongoing SEC compliance and reporting obligations. Such ongoing obligations will require us to expend additional amounts on
compliance, legal and auditing costs. In order for us to remain in compliance, we will require increased revenues to cover the
cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate
sufficient revenues to remain in compliance, it may be difficult for you to resell any shares you may purchase, if at all.
We have the right to issue additional
common stock without consent of stockholders. This would have the effect of diluting investors’ ownership and could decrease
the value of their investment.
We are authorized to issue
2,500,000,000 shares of common stock. Of these authorized shares, 308,887,410 shares are issued and outstanding as of February
16, 2021. Therefore, we are authorized to issue up to an additional 2,191,112,590 unissued shares of our common stock that may
be issued by us for any purpose without the further consent or vote of our stockholders that would dilute stockholders’ percentage
ownership of our company.
Our officers and directors can sell some
of their stock, which may have a negative effect on our stock price and ability to raise additional capital, and may make it difficult
for investors to sell their stock at any price.
Our officers and directors,
as a group, are the beneficial owners of 11,370,139 shares of our common stock, representing less than 4% of our total issued
shares; however, with the addition of our largest shareholder, they own a combined 201,547,112 shares. Each individual officer,
director, and control party may be able to sell up to 1% of our outstanding stock (currently approximately 3,000,000 shares) every
90 days in the open market pursuant to Rule 144, which may have a negative effect on our stock price and may prevent us from obtaining
additional capital. In addition, if our officers and directors are selling their stock into the open market, it may make it difficult
or impossible for investors to sell their stock at any price.
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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking
statements in this Annual Report, including the sections entitled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Business,” that are based on our management’s beliefs and assumptions
and on information currently available to our management. Forward-looking statements include the information concerning our possible
or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential
growth opportunities, the effects of future regulation, and the effects of competition. Forward-looking statements include all
statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,”
“expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions.
These statements are only predictions and involve known and unknown risks and uncertainties, including the risks outlined under
“Risk Factors” and elsewhere in this Annual Report.
Although we believe that
the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels
of activity, performance or achievement. We are not under any duty to update any of the forward-looking statements after the date
of this Annual Report to conform these statements to actual results, unless required by law.
ITEM 1B – UNRESOLVED STAFF COMMENTS
This Item is not applicable
to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however, we are voluntarily disclosing
that we have not received any written comments from the Commission staff more than 180 days before the end of our fiscal year to
which this Annual Report relates regarding our periodic or current reports under the Securities Exchange Act of 1934 and that remain
unresolved.
ITEM 2 – PROPERTIES
We do not currently maintain
office space.
ITEM 3 – LEGAL PROCEEDINGS
We are not a party to or
otherwise involved in any legal proceedings.
In the ordinary course
of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently
uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition
and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending
or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted
on the OTCQB tier of the marketplace maintained by OTC Markets Group, Inc. under the symbol “GRCK.” Our common stock
trades on a limited or sporadic basis and should not be deemed to constitute an established public trading market. There is no
assurance that there will be liquidity in the common stock.
The following table sets
forth the high and low closing price for each quarter within the fiscal years ended December 31, 2020 and 2019, as provided by
Nasdaq. The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not
represent actual transactions.
Fiscal Year
Ended
December 31,
Transaction Prices
Period
High
Low
2020
Fourth Quarter
$0.11
$0.04
Third Quarter
$0.08
$0.041
Second Quarter
$0.089
$0.021
First Quarter
$0.05
$0.02
2019
Fourth Quarter
$0.105
$0.0313
Third Quarter
$0.06
$0.0165
Second Quarter
$0.074
$0.03
First Quarter
$0.095
$0.0056
The Securities Enforcement
and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades
in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception
is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated therewith.
Holders
As of February 16, 2021,
there were 308,887,410 shares of our common stock issued and outstanding and held by 71 holders of record, not including shares
held in “street name” in brokerage accounts which is unknown.
Dividend Policy
We have not paid any dividends
on our common stock and do not expect to do so in the foreseeable future. We intend to apply our earnings, if any, in expanding
our operations and related activities. The payment of cash dividends in the future will be at the discretion of the Board of Directors
and will depend upon such factors as earnings levels, capital requirements, our financial condition and other factors deemed relevant
by the Board of Directors.
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Securities Authorized for Issuance under
Equity Compensation Plans
On June 10, 2020, our Board
of Directors approved the Grey Cloak Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside 25,000,000 shares of our
common stock for issuance thereunder. Pursuant to the plan, officers, directors, key employees and certain consultants may be granted
stock options (including incentive stock options and non-qualified stock options), restricted stock awards, unrestricted stock
awards, or performance stock awards. As of February 16, 2021, we have awarded an aggregate of twelve million (12,000,000) options
to nineteen (19) individuals at an exercise price of $0.05 per share.
Recent Issuance of Unregistered Securities
All unregistered
issuances of securities have been previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
ITEM 6 – SELECTED FINANCIAL DATA
As a smaller reporting
company we are not required to provide the information required by this Item.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary Overview
We were formed in December
2014. We had revenues of $1,276,559 in the year ended December 31, 2020 and $748,377 in the year ended December 31, 2019.
Eqova Life Sciences
On October 17, 2017, we
acquired Eqova Life Sciences, a Nevada corporation, through an exchange of shares of our Series A Convertible Preferred Stock
for all of the outstanding equity interest of Eqova. As part of the Exchange, we brought on Eqova’s President and Director,
Patrick Stiles, to serve as our President and Chief Executive Officer and as a Director on our Board of Directors. Mr. Stiles
resigned in September 2018.
Eqova is a medically-focused
CBD company that develops clinical grade full spectrum hemp oil products, sold exclusively via partnerships with licensed medical
practitioners to use with their patients. We believed that Eqova provided us with a prime growth opportunity with an established
business. Revenues of our hemp oil products from the acquisition of Eqova for the year ended December 31, 2018 were $64,384, but
were $0 in 2019. We closed this business in the second quarter of 2019.
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BergaMet NA, LLC
On February 4, 2019, we
issued and exchanged shares of our common stock for all of the outstanding equity securities of BergaMet. The shares of common
stock issued in the Exchange were equal to approximately 80.1% of our outstanding common stock immediately following the exchange.
Through the exchange,
we were able to secure funds in BergaMet to pay off some debt and provide capital for operations. We paid an aggregate of $353,908
and were obligated to pay another $164,578 approximately one (1) year later to retire convertible debt. In the third quarter of
2020, we facilitated the sale of the then-outstanding debt to a third-party who converted it into an aggregate of 3,400,000 shares
of our common stock. Prior to the exchange, we also entered into agreements with other holders of convertible debt to convert
their notes for an aggregate of 806,015 shares of common stock. We also entered into conversion agreements with the holders of
our Series A Convertible Preferred Stock whereby all of the outstanding preferred stock was converted for an aggregate of 15,592,986
shares of common stock. The conversion and repayment of the preferred stock and convertible debt have greatly improved our capitalization
structure, as we now have no outstanding variable-price convertible debt.
The acquisition of BergaMet
has been extremely beneficial to us. In addition to paying off our convertible debt, we are now able to better position ourselves
in the market. BergaMet is an established company that was already generating revenues when we acquired it. BergaMet also has
unique products that will fit nicely with our existing business. We now plan on expanding our product line to other nutraceuticals.
BergaMet generated all
of our revenue in 2020.
Ultimate Brain Nutrients, LLC
On April 3, 2020, we entered
into a Share Exchange Agreement with Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”),
and the members of UBN, whereby we issued and exchanged 90,000,960 shares of our common stock for all of the outstanding equity
securities of UBN. UBN is now our wholly-owned subsidiary. The shares of common stock issued in the Exchange were equal to approximately
42.5% of our outstanding common stock immediately following the exchange.
UBN is a science-based
company that develops unique, plant-based superior health technology neuro-products that provide natural brain solutions. UBN
has numerous proprietary products, with four unique patent-pending formulations and one patent issued.
Financial results for
UBN are included in this Management’s Discussion and Analysis.
Going Concern
As a result of our financial
condition, we have received a report from our independent registered public accounting firm for our financial statements for the
years ended December 31, 2020 and 2019 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, 2020, we have incurred accumulated
net losses of $12,956,498. 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.
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Table of Contents
Results of Operations for the Three Months Ended March 31, 2021
and 2020
Introduction
We had revenues of $170,433
for the three months ended March 31, 2021, compared to $455,839 for the three months ended March 31, 2020. Revenues for the three
months ended December 31, 2020 were $135,902. Our cost of revenue for the three months ended March 31, 2021 were $41,442, compared
to $196,057 for the three months ended March 31, 2020.
Our operating expenses
were $716,087 for the three months ended March 31, 2021, compared to $207,632 for the three months ended March 31, 2020, an increase
of $508,455, or 245%. Our operating expenses consisted entirely of general and administrative expenses.
Revenues and Net Operating Loss
Our revenue, operating
expenses, net operating loss, and net gain (loss) for the three months ended March 31, 2021 and 2020 were as follows:
Three Months
Ended March 31,
2021
2020
Revenue
$ 170,433
$ 455,839
Cost of Revenue
41,442
196,057
Gross Profit
128,991
259,782
Operating expenses:
General
and administrative
716,087
207,632
Total operating expenses
716,087
207,632
Other income (expense)
Interest expenses, net of interest
income
(15,759
(42,476 )
Change in fair value on derivative
(690,780 )
615,136
Loss on extinguishment of debt
—
—
SBA Loan Forgiveness
—
—
Impairment of Assets
—
—
Gain on
sale of asset
—
—
Total other income (expense)
(706,540 )
572,660
Net income (loss)
$ (1,293,636 )
$ 624,811
Revenues
We had revenues of $170,433
for the three months ended March 31, 2021, compared to $455,839 for the three months ended March 31, 2020, a reduction of $285,406,
or 63%. Revenues for the three months ended December 31, 2020 were $135,902. Our cost of revenue for the three months ended March
31, 2021 were $41,442, or 24% of revenue, compared to $196,057 for the three months ended March 31, 2020, or 43% of revenue.
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Cost of Revenue
Cost of revenue was $41,442
for the three months ended March 31, 2021, compared to $196,057 for the three months ended March 31, 2020, a decrease of $154,615,
or 79%. Gross profit was $128,991 for the three months ended March 31, 2021, compared to $259,782 for the three months ended March
31, 2020, a decrease of $130,792, or 50%.
Cost of revenue as a percentage
of revenues was 24% for the three months ended March 31, 2021, compared to 343% for the three months ended March 31, 2020.
General and Administrative
General and administrative
expenses were $716,087 for the three months ended March 31, 2021, compared to $207,632 for the three months ended March 31, 2020.
In the three months ended March 31, 2021, general and administrative expenses consisted mainly of consulting fees $172,500, professional
fees $368,960, salary and wages $30,446, advertising $82,729, and postage $7,625. In the three months ended March 31, 2020, general
and administrative expenses consisted mainly of professional fees $15,122, consulting fees $73,754, salary and wages $39,727,
postage $7,501, advertising $19,551, and transfer agent and filing fees of $1,470.
Other Income (Expense)
Other income (expense)
was $(706,540) for the three months ended March 31, 2021, compared to $572,660 for the three months ended March 31, 2020, a decrease
of $1,279,200, or 223%. In the three months ended March 31, 2021, other income (expense) consisted of interest expense, net of
interest income of $(15,759) and change in fair value on derivative of $(690,780). Change in fair value of derivative was related
to the conversion of convertible debts into common stock shares . In the three months ended
March 31, 2020, other income (expense) consisted of interest expense, net of interest income of $(42,476) and change in fair value
on derivative of $615,136.
Net Income (Loss)
Net income (loss) was
$(1,293,636) and $624,811, or $0.00 and $0.01 per share, for the three months ended March 31, 2021 and 2020.
Our net income (loss)
various from period to period primarily because of the change in fair value on derivative.
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Table of Contents
Liquidity and Capital Resources
Introduction
During the three months
ended March 31, 2021, we were unable to generate sufficient revenues and had negative operating cash flows. Our cash on hand as
of December 31, 2020 was $59,201, and as of March 31, 2021 was $232,932. The increase in cash on hand was primarily from our net
cash used in operating activities of $(635,261), offset by net cash provided by financing activities of $846,880. Our monthly
cash flow burn rate for 2020 (not including inventory purchases) was approximately $192,000, and for the three months ended March
31, 2021 it was approximately $212,000. We have strong short and medium term cash needs. We anticipate that these needs will be
satisfied through increased revenues and the issuance of debt or the sale of our securities until such time as our cash flows
from operations will satisfy our cash flow needs.
Our cash, current assets,
total assets, current liabilities, and total liabilities as of March 31, 2021 and December 31, 2020, respectively, are as follows:
March
31,
December
31,
Increase/
2021
2020
(Decrease)
Cash
$
232,932
$
59,201
$
173,731
Total
Current Assets
2,737,225
2,490,158
247,067
Total
Assets
3,399,109
3,115,430
283,680
Total
Current and Total Liabilities
1,332,039
261,604
1,070,436
Our total current assets
and total assets increased during the three months ended March 31, 2021 primarily as a result of our increase in cash of $173,731
and inventory of $61,961. Our total current and total liabilities increased by $1,070,436 during the three months ended March
31, 2021 primarily because of an increase in convertible debt of $340,000, derivative liabilities of $690,780, and accrued liabilities
of $50,298. Our accumulated deficit increased during the three months ended March 31, 2021 by $1,293,636 to $14,250,134.
In order to repay our
obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance,
however, that we will be successful in these efforts.
Cash Requirements
Our cash on hand as of
March 31, 2021 was $232,932. Based on our current level of revenues and monthly burn rate of approximately $212,000 per month,
we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.
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Sources and Uses of Cash
Operating Activities
We had net cash used in
operating activities of $(635,261) for the three months ended March 31, 2021, compared to $(175,395) for the three months ended
March 31, 2020. We use our cash for normal business operations. Our net cash used in operating activities for the three months
ended March 31, 2021 consisted of our net loss of $1,293,636, plus a decrease in inventory of $61,961, offset by a change in fair
value on derivative liability of $690,780 and accrued interest payable of $50,298.
Investing Activities
We had $(37,888) in cash
flows provided by investing activities for the three months ended March 31, 2021, compared to $zero for the three months ended
March 31, 2020.
Financing Activities
Our net cash provided
by financing activities for the three months ended March 31, 2021 was $846,880, compared to $109,607 for the three months ended
March 31, 2020. Our net cash provided by financing activities consisted of proceeds from the issuance of common stock of $506,880
and proceeds from the issuance of convertible debt of $340,000.
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Table of Contents
Results of Operations for the Years Ended December 31, 2020
and 2019
Introduction
We had revenues of $1,276,559
for the year ended December 31, 2020, as compared to $748,377 for the year ended December 31, 2019, an increase of $528,182, or
71%. Our cost of revenue was $1,855,001 for the year ended December 31, 2020, as compared to $524,494 for the year ended December
31, 2019, an increase of $1,330,506, or 254%. Our cost of revenue exceeded revenue for the year ended December 31, 2020 because
we built up our inventory of bergamot product.
Revenues and Net Operating Loss
Our revenues, operating
expenses, and net operating loss for the years ended December 31, 2020 and 2019 were as follows:
Year Ended December 31, 2020
Year Ended December 31, 2019
Increase/
(Decrease)
Revenue
$ 1,276,559
$ 748,377
$ 528,182
Cost of Revenue
1,855,001
524,494
1,330,506
Operating expenses:
General and administrative
1,474,891
1,163,745
311,146
Impairment of Assets
1,579,883
1,579,883
Total operating expenses
3,054,774
1,163,745
1,891,029
Net operating loss
Other income/(expense)
1,056,841
1,572,639
(515,798 )
Net gain/(loss)
$ (2,576,375 )
$ 632,776
$ (3,209,151 )
Revenues
We had revenues of $1,276,559
and $748,377 for the years ended December 31, 2020 and 2019, respectively, an increase of 71%. BergaMet generated all of our revenue
in 2020.
Cost of Revenue
Cost of revenue was $1,855,001
and $524,494 for the years ended December 31, 2020 and 2019, respectively, an increase of 254%, and consisted of wholesale product
costs and packaging. Our cost of revenue exceeded revenue for the year ended December 31, 2020 because we wrote off $1,389,991
in raw bergamot product.
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Table of Contents
General and Administrative
General and administrative
expense was $1,474,891 and $1,163,745 for the years ended December 31, 2020 and 2019, an increase of $311,146, or 27%. The increase
was related to our acquisition of UBN, and increased administrative costs associated with being a public company. In the year
ended December 31, 2020, general and administrative expenses consisted main of consulting of $607,197, selling expenses of $239,296,
accounting and legal fees of $192,198, salary and wages of $156,250, and transfer agent and filing fees of $41,431. In the year
ended December 31, 2019, general and administrative expense consisted mainly of consulting $435,357, selling expenses of $114,680,
salary and wages of $158,950, transfer agent and filing fees of $8,002, and accounting and legal fees of $216,546.
Impairment of Assets
For the year ended December
31, 2020, we recorded an impairment of the goodwill in the UBN acquisition of $1,579,883.
Net Operating Gain/Loss
As a result of the items
discussed above, our net operating loss was $3,633,216 and $939,863 for the years ended December 31, 2020 and 2019, respectively,
a gain of $2,693,353.
Other Income and Expense
Other income (expense)
was $1,056,841 and $1,572,639 for the years ended December 31, 2020 and 2019, respectively, a decrease of $515,798.
Net Gain/(Loss)
Our net gain (loss) for
the year ended December 31, 2020 was $(2,576,375), or $(0.01) per share, and our net gain (loss) for the year ended December 31,
2019 was $632,776, or $0.01 per share.
Liquidity and Capital Resources
Introduction
During the years ended
December 31, 2020 and 2019, we had negative operating cash flows. Our cash on hand as of December 31, 2020 was $59,201. Our monthly
cash flow burn rate in 2020 (not including inventory purchases) was approximately $192,000. Although we have strong short term
cash needs, as our operating expenses increase we will face strong medium to long term cash needs. We anticipate that these needs
will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations
will satisfy our cash flow needs. With the acquisitions of BergaMet and UBN, we expect to see an increase in revenues over the
next few years that will help us maintain the cash we need to operate our business. However, we have incurred additional expenses
in these acquisitions and the additional costs to be incurred through this expansion of our operations will increase our need
for additional cash flow.
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Our cash, current assets,
total assets, current liabilities, and total liabilities as of December 31, 2020 and 2019 are as follows:
December 31, 2020
December 31, 2019
Change
Cash
$ 59,201
$ 133,451
$ (74,250 )
Total Current Assets
2,490,158
3,241,083
(750,925 )
Total Assets
3,115,430
3,449,526
(334,096 )
Total Current Liabilities
261,604
4,315,136
(4,053,532 )
Total Liabilities
$ 261,604
$ 4,315,136
$ (4,053,532 )
Our cash decreased by
$74,250 as of December 31, 2020 as compared to December 31, 2019. Our total current assets decreased by $750,925, as a result
of our decrease in inventory. Our total assets decreased by $334,096 despite our increase in patents/trademarks of $425,877 from
the UBN acquisition.
Our current and total
liabilities decreased by $4,053,532, from $4,315,136 as of December 31, 2019 to $261,604 as of December 31, 2020. Our total liabilities
as of the year ended December 31, 2020 consisted primarily of notes payable – related party of $170,866 and accounts payable
of $64,836.
In order to repay our
obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance,
however, that we will be successful in these efforts.
Cash Requirements
Our cash on hand as of
December 31, 2020 was $59,201. Our monthly cash flow burn rate in 2020 (not including inventory purchases) was approximately $192,000.
Although we have strong short term cash needs, as our operating expenses increase we will face strong medium to long term cash
needs. We anticipate that these needs will be satisfied through the sale of our securities until such time as our cash flows from
operations will satisfy our cash flow needs.
Sources and Uses of Cash
Operations
Our net cash used in
operating activities for the years ended December 31, 2020 and 2019 was $1,902,758 and $1,730,788, respectively, an increase
of $171,970. Our net cash used in operating activities for the year ended December 31, 2020 consisted primarily of a net loss
of $2,576,375, plus a change in fair value on derivative liability of $1,053,186 and accrued interest to related party of
$490,703 offset in part by impairment of goodwill of $1,579,883. Our net cash used in operating activities for December 31, 2019
consisted primary of net income of $632,776, offset by inventory expense of $(3,080,658) and a change in fair value on
derivative liability of $(1,652,931).
Investments
Our cash flow provided
by (used in) investing activities for the years ended December 31, 2020 and 2019 was $(115,740) and $56,310, respectively, a decrease
of $172,050. The decrease in 2020 was primarily due to the addition of patents and trademarks.
Financing
Our net cash provided
by financing activities for the years ended December 31, 2020 and 2019 was $1,944,248 and $1,807,444, respectively, an
increase of $136,804. The increase in 2020 was primarily due to proceeds from the issuance of common stock of $4,405,791, offset by
proceeds from the issuance of convertible debt of $(1,501,876) and proceeds from issuance of notes payable - related party of
$(880,000).
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Table of Contents
Critical Accounting Policies and Estimates
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
in our consolidated financial statements and related notes. Our significant accounting policies are described in Note 2 to our
consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. Management
bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may
differ from these estimates and such differences may be material.
Management considers the
following policies critical because they are both important to the portrayal of our financial condition and operating results,
and they require management to make judgments and estimates about inherently uncertain matters.
Use of Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for
certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Recent Accounting Pronouncements
Our management has considered
all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these
recent pronouncements will not have a material effect on our financial statements.
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Table of Contents
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
F-1
Consolidated Balance Sheets as of December 31, 2020 and 2019
F-2
Consolidated Statement of Operations for the year ended December 31, 2020 and 2019
F-3
Consolidated Statement of Cash Flows for the year ended December 31, 2020 and 2019
F-4
Consolidated Statement of Stockholders' Deficit for the year ended December 31, 2020 and 2019
F-5
Notes to Consolidated Financial Statements
F-6 to F-18
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Table of Contents
Report of Independent Registered
Public Accounting Firm
To the shareholders and the board
of directors of Healthy Extracts Inc. (Formerly Grey Cloak Tech, Inc.)
Opinion on the Financial Statements
We have audited the accompanying
consolidated balance sheets of Healthy Extracts Inc. (the "Company") as of December 31, 2020 and 2019, the related statements
of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred
to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for
the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable
basis for our opinion.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements,
the Company’s minimal activities raise substantial doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since
2020
Lakewood, CO
February 19, 2021
F- 1
Table of Contents
HEALTHY EXTRACTS INC.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
DECEMBER 31,
DECEMBER 31,
2020
2019
ASSETS
CURRENT ASSETS
Cash
$ 59,201
$ 133,451
Accounts receivable
13,274
26,473
Inventory
2,417,683
3,081,158
Total current assets
2,490,158
3,241,083
Fixed assets, net of accumulated depreciation of $45,944 and $36,895, respectively
6,135
15,183
Patents/Trademarks
425,877
—
Goodwill
193,260
193,260
Total other assets
625,272
208,443
TOTAL ASSETS
$ 3,115,430
$ 3,449,526
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Accounts payable
$ 64,836
$ 21,125
Accrued liabilities
9,054
53,341
Notes payable
—
79,667
Notes payable - related party
170,866
1,050,866
Convertible debt, net of discount of $0.00 and $0.00, respectively
6,750
166,750
Convertible debt - related party, net of discount of $0.00 and $0.00,
respectively
—
1,341,876
Accrued interest payable
2,379
49,902
Accrued interest payable - related party
518
491,221
Derivative liabilities
7,202
1,060,388
Total current and total liabilities
261,604
4,315,136
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value, 75,000,000 shares authorized,
none and none shares issued and outstanding, respectively
—
—
Common stock, $0.001 par value, 2,500,000,000 shares authorized,
308,887,410 and 121,610,085 shares issued and outstanding, respectively
308,887
121,610
Additional paid-in capital
15,501,436
9,392,903
Accumulated deficit
(12,956,498 )
(10,380,123 )
Total stockholders' equity (deficit)
2,853,826
(865,610 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$ 3,115,430
$ 3,449,526
The accompanying notes
are an integral part of these unaudited consolidated financial statements.
F- 2
Table of Contents
HEALTHY EXTRACTS INC.
CONSOLIDATED STATEMENT
OF OPERATIONS
FOR THE YEAR ENDING DECEMBER 31, 2020
(Unaudited)
FOR THE MONTH ENDED
FOR THE YEAR ENDED
DECEMBER 31,
DECEMBER 31,
2020
2019
2020
2019
REVENUE
$ 135,902
$ 176,762
$ 1,276,559
$ 748,377
COST OF REVENUE
Cost of goods sold
29,459
5,672
465,010
99,536
Written off inventory
1,382,364
424,958
1,389,991
424,958
Total cost of revenue
1,411,823
430,630
1,855,001
524,494
GROSS PROFIT
(1,275,921 )
(253,868 )
(578,442 )
223,883
OPERATING EXPENSES
General and administrative
385,701
335,365
1,474,891
1,163,745
Impairment of Assets
—
—
1,579,883
—
Total operating expenses
385,701
335,365
3,054,774
1,163,745
OTHER INCOME (EXPENSE)
Interest expense, net of interest income
(655 )
(30,531 )
(72,882 )
(87,482 )
Change in fair value on derivative
3,077
581,888
1,053,186
1,607,083
Loss on extinguishment of debt
—
—
46,836
53,038
SBA Loan Forgiveness
29,700
—
29,700
—
Gain on sale of asset
—
—
—
—
Total other income (expense)
32,122
551,357
1,056,841
1,572,639
NET GAIN/(LOSS)
$ (1,629,500 )
$ (37,876 )
$ (2,576,375 )
$ 632,776
Loss per share - basic and diluted
$ (0.01 )
$ (0.00 )
$ (0.01 )
$ 0.01
Weighted average number of shares outstanding - basic and diluted
237,300,091
110,612,376
237,300,091
110,612,376
The accompanying notes
are an integral part of these unaudited consolidated financial statements.
F- 3
Table of Contents
HEALTHY EXTRACTS INC.
CONSOLIDATED STATEMENT
OF CASH FLOWS
(Unaudited)
FOR THE YEAR
ENDING
DECEMBER 31,
2020
2019
Cash Flows from Operating Activities:
Net Gain/(Loss)
$ (2,576,375 )
$ 632,776
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
9,048
8,527
Warrants issued for services
—
7,000
Non-cash compensation
—
110,636
Change in fair value on derivative liability
(1,053,186 )
(1,652,931 )
Loss on extinguishment of debt
—
53,038
Gain on sale of asset
—
—
Impairment of goodwill
1,579,883
—
Changes in operating assets and liabilities:
Accounts receivable
13,199
(26,473 )
Inventory
663,476
(1,325,724 )
Accrued interest receivable
—
4,762
Accounts payable
43,711
(36,215 )
Accounts payable - related party
—
(15,000 )
Accrued liabilities
(44,287 )
53,341
Accrued interest payable
(47,524 )
(33,997 )
Accrued interest payable - related party
(490,703 )
489,471
Net Cash used in Operating Activities
(1,902,758 )
(1,730,788 )
Cash Flows from Investing Activities:
Purchase of fixed assets
—
(22,985 )
Patent/Trademarks
(115,740 )
—
Payments of note receivable
—
79,295
Cash flows provided by (used in) Investing Activities:
(115,740 )
56,310
Cash Flows from Financing Activities:
Net cash paid for acquistion of BergaMet
—
—
Net cash paid for acquisition of UBN
—
—
Proceeds from issuance of common stock
4,405,791
—
Proceeds from issuance of convertible debt,
(1,501,876 )
1,104,241
Payments for repayment of convertible debt
—
(349,330 )
Proceeds from issuance of noted payable
(79,667 )
16,667
Proceeds from issuance of noted payable - related party
(880,000 )
1,050,866
Payments for repayment of notes payable - related party
—
(15,000 )
Net Cash provided by Financing Activities
1,944,248
1,807,444
Increase (decrease) in cash
(74,250 )
132,966
Cash at beginning of period
133,451
485
Cash at end of period
$ 59,201
$ 133,451
The accompanying notes
are an integral part of these unaudited consolidated financial statements.
F- 4
Table of Contents
HEALTHY EXTRACTS INC.
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDING DECEMBER 2020
AND 2019
(Unaudited)
Additional
Preferred Stock
Common Stock
Paid-In
Accumulated
Shares
Amount
Shares
Amount
Capital
Deficit
Total
Balance - December 31, 2018
1,333,334
1,333
6,455,354
6,455
7,440,895
$ (11,012,899 )
$ (3,564,216 )
Cashless exercise of warrants
—
—
996,052
996
1,921
—
2,917
Issuance of shares acquisition of BergaMet
—
—
97,409,678
97,410
1,850,784
1,948,194
Issuance of common stock for preferred stock conversion
(1,333,334 )
(1,333 )
15,592,986
15,593
(14,260 )
—
—
Issuance of common stock for debt conversion
—
—
806,015
806
106,912
—
107,718
Issuance of common stock for consulting fees
—
—
350,000
350
6,650
—
7,000
Debt Forgiveness
—
—
—
—
—
—
—
Net (loss) gain for the period
—
—
—
—
—
632,776
632,776
Balance - December 31, 2019
—
$ —
121,610,085
$ 121,610
9,392,903
$ (10,380,123 )
$ (865,610 )
Issuance of shares acquisition of UBN
—
—
90,000,960
90,001
1,800,019
—
1,890,020
Issuance of common stock for debt conversion
—
—
39,248,714
39,249
1,465,159
—
1,504,408
Issuance of common stock for debt conversion
—
—
13,200,000
13,200
646,800
—
660,000
Issuance of common stock for debt conversion
—
—
35,827,651
35,828
1,755,555
—
1,791,383
Issuance of common stock for cash
—
—
5,900,000
5,900
289,100
—
295,000
Issuance of common stock for cash
—
—
800,000
800
39,200
—
40,000
Issuance of common stock for cash
—
—
300,000
300
14,700
—
15,000
Issuance of common stock for cash
—
—
2,000,000
2,000
98,000
—
100,000
Net (loss) gain for the period
—
—
—
—
—
(2,576,375 )
(2,576,375 )
Balance - December 31, 2020
—
$ —
308,887,410
$ 308,887
15,501,436
$ (12,956,498 )
$ 2,853,826
The accompanying notes
are an integral part of these unaudited consolidated financial statements.
F- 5
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
Healthy Extracts Inc. (the “Company”)
was incorporated in the State of Nevada on December 19, 2014. The Company has additionally acquired BergaMet NA, LLC and Ultimate
Brian Nutrients, LLC which markets and sells heath supplemental products. On October 23, 2020, we changed our name from Grey Cloak
Tech Inc. to Healthy Extracts Inc. to more accurately reflect our business. We are currently waiting for The Financial Industry
Regulatory Authority (FINRA) to issue our Company a new ticker symbol before we file our 8-K for this change.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities
and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting
principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s
management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only
of normal recurring accruals) to present the financial position of the Company as of December 31, 2020 and the results of operations
and cash flows for the periods presented. The results of operations for the year ended December 31, 2020 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, 2019 filed with the SEC on August 10, 2020.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
F- 6
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Cash
Cash includes cash in banks, money market
funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible
to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
Accounts Receivables
Accounts receivables are recorded at
the invoice amount and do not bear interest.
Inventory
Inventories consist of health supplements
held for sale in the ordinary course of business. The Company uses the weighted average cost method to value its inventories at
the lower of cost or market. An allowance for inventory was established in 2018 and is evaluated each quarter to determine if
all items are still sellable due to expiration dates. As of December 31, 2020 and 2019, the total of inventory which was written
off as an inventory allowance was $1,892,008 and $748,972.
Property and Equipment
The Company’s property and equipment
are recorded at cost and depreciated using the straight-line method over the useful lives of the assets, generally from three
to seven years. Upon sale or disposal of property and equipment, the related asset cost and accumulated depreciation or amortization
are removed from the respective accounts and any gain or loss is reflected in current operations.
Indefinite-Lived Intangible Assets
Indefinite-lived intangible assets established in
connection with business combinations consist of patents, trademarks, and trade names. The impairment test for identifiable indefinite-lived
intangible assets consists of a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying
value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. With the combination of Ultimate Brain
Nutrients on April 3, 2020 the Company added a purchasing value of $315,604 in patents to its balance sheet.
As of December 31, 2020, the Company believes
that based upon qualitative factors, no impairment of indefinite-lived intangible assets is necessary.
Goodwill
In accordance with Goodwill and Other
Intangible Assets, goodwill is defined as the excess of the purchase price over the fair value assigned to individual assets acquired
and liabilities assumed and is tested for impairment at the reporting unit level on an annual basis in the Company's fourth fiscal
quarter or more frequently if indicators of impairment exist. The performance of the test involves a two-step process. The first
step of the impairment test involves comparing the fair value of the Company's reporting units with each respective reporting
unit's carrying amount, including goodwill. The fair value of reporting units is generally determined using the income approach.
If the carrying amount of a reporting unit exceeds the reporting unit's fair value, the second step of the goodwill impairment
test is performed to determine the amount of any impairment loss. The second step of the goodwill impairment test involves comparing
the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The Company sees the goodwill
to have a ten-year useful life. No goodwill impairment indicators were present, for the goodwill listed on the books as of December
31, 2020, after working through our analysis of goodwill during the year ending December 31, 2020.
F- 7
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
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 (2020 to 2024): we discounted our cash flows to the anticipated
cash projected to be received. We also projected the anticipated cash outflows required
to service these customers. If the asset group was to be valued as a whole, we would
expect an income approach based on the revenues being generated from the customers and
expenses required to service those customers, appropriately adjusted for the working
capital position. The sum of these values reasonably approximates this approach.
The Company’s revenue streams
align directly with the intangibles, which were recorded as a result of the BergaMet acquisition in fiscal 2019. For purposes
of the Step 2 recoverability test under ASC 360 subsection 2.3., the net revenues from BergaMet customers base were used. The
revenue stream fairly reflects anticipated future cash flows; accordingly, the intangibles associated with these revenue streams
have been tested with the expected cash flows.
Due to the purchase of Ultimate Brian
Nutrients, LLC being a related party transaction and the new division recording no revenue as of June 30, 2020, the Company found
the goodwill to be impaired. Due to the impairment the Company expensed the goodwill related to the purchase as of June 30, 2020.
Revenue Recognition
Beginning January 1, 2019, the Company
implemented ASC 606, Revenue from Contracts with Customers. Although the new revenue standard is expected to have an
immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition
and the control activities within them. These included the development of new policies based on the five-step model provided
in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures
The Company recognizes revenue and cost of
goods sold from product sales or services rendered when control of the promised goods are transferred to our clients in an amount that
reflects the consideration to which we expect to be entitled in exchange for those goods and services. Our recognizes revenue policy
includes all sales channels which include the Company website channel or any other selling channel like Amazon, doctors’ offices,
and walk-in sales. To achieve this core principle, we apply the following five steps: identify the contract with the client,
identify the performance obligations in the contract, determine the
F- 8
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
transaction price, allocate the transaction
price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.
The Company recognizes revenue and cost of
goods sold from each sale upon shipment of the promised goods to the customers.
Concentration
There
is no concentration of revenue for the year ended December 31, 2019 and the year ended December 31, 2020 because the revenue was
earned from multiple customers.
Income Taxes
The Company accounts for income taxes
using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability
method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount
that is believed more likely than not to be realized. For the period ending December 31, 2019 and December 31, 2020, the Company
did not have any amounts recorded pertaining to uncertain tax positions.
Fair Value Measurements
The Company adopted the provisions of
ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain
financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair
values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also
establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 —
quoted prices in active markets for identical assets or liabilities
Level 2 —
quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 —
inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The derivative liability in connection
with the conversion feature of the convertible debt, classified as a Level 3 liability, is the only financial liability measure
at fair value on a recurring basis.
The change in Level 3 financial instrument
is as follows:
Balance, January 1, 2020
$ 1,060,388
Issued during the year ended December 31, 2020
1,668,799
Change in fair value recognized in operations
(835,325 )
Converted during the year ended December 31, 2020
(1,886,660 )
Balance, December 31, 2020
$ 7,202
F- 9
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Recent Accounting Pronouncements
In May 2014, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 amends
the guidance for revenue recognition to replace numerous, industry specific requirements and converges areas under this topic
with those of the International Financial Reporting Standards. The ASU implements of five–step process for customer contract
revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires
enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers.
Other major provisions include the capitalization and amortization of certain contract cost, ensuring the time value of money
is considered in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies
are resolved in certain circumstances. The amendments in this ASU are effective for reporting period beginning after December
15, 2016, and early adoption is prohibited. Entities can transition to the standard either retrospectively or as a cumulative-effect
adjustment as of the date of adoption.
The Company’s revenues are recognized
when control of the promised goods or services is transferred to our clients (upon shipment of goods) in an amount that reflects
the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle,
we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract;
(3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize
revenues when or as the Company satisfies a performance obligation.
We adopted ASC 2014-09 on January 1,
2019. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did implement
changes to our processes related to revenue recognition and the control activities with them.
Convertible Instruments
The Company evaluates and account for
conversion options embedded in convertible instruments in accordance with ASC 815 “ Derivatives and Hedging Activities ”.
Applicable GAAP requires companies
to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments
according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b)
the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value
under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms
as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible
instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments)
as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded
in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of
the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized
over the term of the related debt to their stated date of redemption.
The Company accounts for the conversion
of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity
linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value,
with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the year ended
December 31, 2020, the Company did not have any conversions of convertible debt with a bifurcated conversion option.
F- 10
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Common Stock Purchase Warrants
The Company classifies as equity any
contracts that require physical settlement or net-share settlement or provide a choice of net-cash settlement or settlement in
the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own
stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). The Company classifies as assets or liabilities
any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and
if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical
settlement or net-share settlement). The Company assesses classification of common stock purchase warrants and other free-standing
derivatives at each reporting date to determine whether a change in classification is required.
Gain on Extinguishment of debt
Note Satisfaction Agreements
Prior to the Exchange, the Company entered
into a Note Satisfaction Agreement with each of Auctus Fund, Crown Bridge Partners, LLC, Power Up Lending Group Ltd., GS Capital
Partners LLC, Oakmore Opportunity Fund I LP, and Adar Bays, LLC. All of these entities were holders of the Company’s convertible
debt, and these Note Satisfaction Agreements terminate their convertible notes unless the Company fails to perform its payment
obligations. The Company agreed to pay these note holders an aggregate of $520,658 plus interest. The Company paid an aggregate
of $353,908 on or before February 15, 2019. The balance owed and outstanding of $160,000 plus interest was agreed to be purchased
by some third-party individuals. During the third quarter 2020, these third-party individuals decided to convert the outstanding
notes into 2,400,000 shares of the Company’s common stock.
Various other holders of Convertible
Promissory Notes agreed to convert their notes for an aggregate of 806,015 shares of common stock prior to the Exchange. As a
result of these transactions, no convertible promissory notes remain outstanding, except for those convertible notes subject to
revival if the Company fails to make payments pursuant to the Note Satisfaction Agreements.
NOTE 3 – GOING CONCERN
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has generated minimal revenues from operations. Since
its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring
startup costs and expenses. As a result, the Company incurred accumulated net losses from Inception (December 19, 2014) through
the period ended December 31, 2020 of $12,956,498. 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.
F- 11
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 4 – RELATED PARTY
For the year ended December 31, 2020
and 2019, the Company had expenses totaling $66,000 and $31,000 respectively, to an officer and director for salaries, which is
included in general and administrative expenses on the accompanying statement of operations As of December 31, 2020, there was
a total of convertible debt of $0.00 and accrued interest payable of $0.00 due to an officer and director, employees, and shareholders.
NOTE 5 – CONVERTIBLE DEBT –
RELATED PARTY
As of December 31, 2020, the Company
converted the outstanding convertible debt which was due to a related party.
NOTE 6 – NOTES PAYABLE
As of December 31, 2020, the Company
had the following:
Unsecured debt with shareholders of the Company, no due date, 0% interest,
866
Unsecured debt with shareholders of the Company, no due date, 8% interest,
170,000
TOTAL
$ 170,866
As of December 31, 2020, the Company has
an outstanding total of $517.78 in interest accrued for the above note.
NOTE 7 – CONVERTIBLE DEBT
As of December 31, 2020, the Company
had the following:
Unsecured convertible debt, due 01/19/17, 8% interest, default
interest at 18%, converts at a 54% discount to market price based on the lowest trading prices in the last 20 days trading
price
6,750
SUBTOTAL
6,750
Less: Discount
—
TOTAL
$ 6,750
F- 12
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 7 – CONVERTIBLE DEBT (continued)
Below represent the Black-Scholes Option
Pricing Model calculations for the above convertible note payables:
Payee
Number of options valued
Value of Convertible Option
Unsecured Convertible debt #1
271,684
$ 7,202
As of December 31, 2020, the Company has
an outstanding total of $2,379 in accrued interest for the above convertible notes.
The convertible promissory notes is
in default but management has not been able to make contact with this party, due to them living out of the country. We have calculated
the derivative liability as if it is in default (but the note’s default interest rate stays the same at 8%) and will still
accrue appropriate interest until the note is fully satisfied or converted into the Company’s common stock.
The Company has determined that the
conversion feature embedded in the notes referred to above that contain a potential variable conversion amount constitutes a derivative
which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the
associated debt.
NOTE 8 – STOCKHOLDERS’ EQUITY
Authorized
Stock
The Company has authorized 75,000,000
common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote on any matter on which
action of the stockholders of the corporation is sought. During February 2017, the Company increased the authorized number of
shares to 500,000,000. Also, the Company increased the authorized preferred stock to 75,000,000 shares and designated 25,000,000
shares of preferred stock to Series A Convertible Preferred Stock. During January 2018, the Company increased its authorized number
of common shares to 1,000,000,000. During April 2018, the Company increased its authorized number of common shares to 2,500,000,000.
The Board of Directors, in the future, has the authority to increase the authorized capital up to 4,000,000,000 shares based on
shareholder approval.
The shareholders of the Company approved
a reverse stock split at a ratio of between 1-for-100 and 1-for 250. The Company received approval from FINRA for a reverse stock
split of 1-for-250, which was effective as of July 23, 2018.
On October 16, 2017, the Company filed
an Amended and Restated Certificate of Designation of the Rights, Preferences, Privileges and Restrictions of the Series A Convertible
Preferred Stock (the “Amended Certificate”) with the Secretary of State of the State of Nevada. The Amended Certificate
reduces the number of preferred shares designated as Series A Preferred Stock from 25,000,000 shares to 1,333,334 shares. The
Amended Certificate also changes the conversion and voting rights of the Series A Preferred Stock. The Series A Preferred Stock
is now convertible into the number of shares of our common stock equal to 0.00006% of our outstanding common stock upon conversion.
The voting rights of the Series A Preferred Stock are now equal to the number of shares of common stock into which the Series
A Preferred Stock may convert.
F- 13
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 8 – STOCKHOLDERS’ EQUITY
(continued)
As of December 31, 2020, there are no
outstanding shares of preferred stock. All the preferred stock was converted in common stock on February 4, 2019. See recent developments
for details.
Common Share Issuances
During the year ended December 31, 2020,
the Company issued 41,727,651 shares of common stock. On several dates in September 2020, the Company raised $295,000 in direct
security purchase agreement which equal to 5,900,000 shares of the Company’s common stock. During the fourth quarter of
2020, the Company raised $155,000 in direct security purchase agreement which equal to 3,100,000 shares of the Company’s
common stock.
Warrant Issuances
In December 2020, the Company issued
7,500,000 warrants to three individuals at $0.05 per share. These warrants will need to be exercised between the date of issue
and three years thereafter. As of December 31, 2020, there were 7,512,000 warrants outstanding, of which 4,000 warrants are fully
vested.
Stock Issued for Services
On January 28, 2019, the Company entered
into a marketing and sales consulting agreement with an individual for a period of six months. The Company issued 350,000 shares
of common stock as the compensation for this agreement.
Share Conversion Agreements
All of the holders of the Company’s
Series A Convertible Preferred Stock (the “ Preferred Holders ”) entered into a Preferred Stock Conversion Agreement.
Pursuant to the Conversion Agreements, the Preferred Holders converted their shares of preferred stock into common stock, effective
as of the Exchange. As a result, no shares of the Company’s Series A Convertible Preferred Stock are outstanding. An aggregate
of 15,592,986 shares of common stock were issued to the Preferred Holders. The Preferred Holders agreed to convert each share
of Series A Convertible Preferred Stock into eighteen (18) shares of common stock and agreed to retire a total of 467,057 shares
of Series A Convertible Preferred Stock. The Company cancelled the retired shares.
Omnibus Stock Grant and Option
Plan
On May 30, 2020, the Company proposed
a stock options agreement in the amount of 10,550,000 shares with a strike price of $0.05 to sixteen individuals. This plan was
approved by the Company by the end of the third quarter 2020. Purchase price under the plan is defined as: unless otherwise permitted
by applicable law, the purchase price of Shares to be offered under the Plan shall not be less than eighty-five percent (85%)
of the Fair Market Value of a Share on the date of grant (100% for 10% shareholders).
F- 14
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 9 – ACQUISITIONS
Acquisition of Ultimate Brain Nutrients,
LLC
On April 3, 2020, the Company entered
into a Share Exchange Agreement by and among Grey Cloak Tech Inc., Ultimate Brain Nutrients, LLC, a Delaware limited liability
company (“ UBN ”), and the members of UBN, whereby we issued and exchanged 90,000,960 shares of our common stock
for all of the outstanding equity securities of UBN. UBN is now our wholly-owned subsidiary. The shares of common stock issued
in the Exchange are equal to approximately 42.5% of our outstanding common stock immediately following the exchange.
The assets acquired
and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition date,
April 3, 2020. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.
Cash
$ (5,466 )
Current assets
315,604
Current liabilities
0
Net assets acquired
$ 310,137
The purchase price method
was used when calculating the fair market value of the UBN purchase. On April 3, 2020 the closing stock price for GRCK was $0.021.
The total number of shares exchanged multiplied by the closing stock price equaled a purchase value of $1,890,020. The difference
between the net assets acquired and the purchase value was recorded as $1,579,883 of goodwill for the purchase. Due to the goodwill
impairment, the Company fully expensed the goodwill recorded in this transaction. The Company viewed UBN’s balance sheet
as being fairly valued as of April 3, 2020 so no adjustment was needed under the purchase price method of valuation.
Acquisition of BergaMet and
the Share Exchange Agreement
On February 4, 2019, the Company entered
into a Share Exchange Agreement with BergaMet NA, LLC, a Delaware limited liability company (“ BergaMet ”),
and the members of BergaMet, whereby the Company issued and exchanged 97,409,678 shares of its common stock for all of the
outstanding equity securities of BergaMet (the “ Exchange ”). Through the Exchange, BergaMet became
a wholly-owned subsidiary of the Company. The shares of common stock issued in the Exchange were equal to 80.1% of the Company’s
outstanding common stock (post-exchange).
F- 15
Table of Contents
HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 9 – ACQUISITIONS (continued)
The assets acquired
and liabilities assumed as part of our acquisition were recognized at their fair values as of the effective acquisition date,
February 4, 2019. The following table summarizes the fair values assigned to the assets acquired and liabilities assumed.
Cash
$ 437,826
Current assets
2,801,317
Current liabilities
(1,484,210 )
Net assets acquired
$ 1,754,934
The purchase price method
was used when calculating the fair market value of the BergaMet purchase. On February 4, 2019 the closing stock price for GRCK
was $0.02. The total number of shares exchanged multiplied by the closing stock price equaled a purchase value of $1,948,194.
The difference between the net assets acquired and the purchase value was recorded as $193,260 of goodwill for the purchase. The
Company viewed BergaMet’s balance sheet as being fairly valued as of February 4, 2019 so no adjustment was needed under
the purchase price method of valuation.
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HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 10 – DISCOUNTINUED OPERATIONS
Healthy Extracts
On January 1, 2019, the Company decided
to discontinue operating the Healthy Extracts division and did not operate in 2019. At the time of the closure, the Company incurred
a loss for the year of $714 which eliminated all carrying values of assets and liabilities for the division.
Eqova Life Science
On June 1, 2019, the Company decided
to discontinue operating the Eqova Life Science division which ceased all activities in May 2019. Due to the closure, the Company
incurred a loss for the year of $92,609 which eliminated all carrying values of assets and liabilities for the division.
NOTE 11 – BUSINESS SEGMENT INFORMATION
As
of December 31, 2020, the Company operated in two reportable segments (Corporate and Health Supplements) supported by a corporate
group which conducts activities that are non-segment specific. The following table presents selected financial information about
the Company’s reportable segments for the year ended December 31, 2020.
CONSOLIDATED
HEALTH SUPPLEMENTS
CORPORATE
BergaMet
UBN
Revenue
1,276,559
1,276,559
—
—
Cost of Revenue
1,855,001
1,855,001
—
—
Long-lived Assets
619,137
201,298
417,839
—
Gain (Loss) Before Income Tax
(2,576,375 )
(1,723,252 )
(151,551 )
(701,572 )
Identifiable Assets
2,417,683
2,417,683
—
—
Depreciation and Amortization
9,048
8,850
—
198
The
following table presents selected financial information about the Company’s reportable segments for the three months ended
December 3, 2020.
CONSOLIDATED
HEALTH SUPPLEMENTS
CORPORATE
BergaMet
UBN
Revenue
135,902
135,902
—
—
Cost of Revenue
1,411,823
1,411,823
—
—
Long-lived Assets
619,137
201,398
417,839
—
Gain (Loss) Before Income Tax
(1,629,500 )
(1,516,381 )
(39,614 )
(73,505 )
Identifiable Assets
2,417,683
2,417,683
—
—
Depreciation and Amortization
2,213
2,213
—
—
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HEALTHY EXTRACTS INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2020 and 2019
NOTE 12 – SUBSEQUENT EVENTS
Stock Purchase Agreements
During the beginning of January 2021,
the Company received a total of $225,000 in exchange for 4,500,000 of common stock restricted shares through subscription agreements
at $0.05 cents per share. Share for these stock purchase agreements were issued on January 27, 2021.
COVID-19
On March 11, 2020, the World Health Organization
declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide.
The Company is monitoring this closely, and although operations have not been materially affected by the coronavirus outbreak
to date, the ultimate severity of the outbreak is uncertain. Further the uncertain nature of its spread globally may impact our
business operations resulting from quarantines of employees, customers, and third-party service providers. At this time, the Company
is unable to estimate the impact of this event on its operations.
The Company evaluated its December 31, 2020
financial statements for subsequent events through February 19, 2021, the date the financial statements were available to be issued.
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Table of Contents
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There are no events required
to be disclosed under this Item.
ITEM 9A - CONTROLS AND PROCEDURES
(a) Disclosure Controls
and Procedures
We conducted an evaluation,
with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended, or the Exchange Act, as of December 31, 2020, to ensure that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by
us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including
our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that as of December 31, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level
due to the material weaknesses identified and described in Item 9A(b).
Our principal executive
officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure
controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive
officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how
well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further,
the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions.
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(b) Management Report
on Internal Control Over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting
is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under
the supervision of, our principal executive and principal financial officer and effected by our board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles in the United States and includes
those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is
a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020 . In making
this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based on this assessment, Management identified the following two material
weaknesses that have caused management to conclude that, as of December 31, 2018, our disclosure controls and procedures, and our
internal control over financial reporting, were not effective at the reasonable assurance level:
1. We
do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls
over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated the impact of our failure
to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures
and has concluded that the control deficiency that resulted represented a material weakness.
2. We
do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and
nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the
extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by
separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure
controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
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To address these material
weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein
fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial
condition, results of operations and cash flows for the periods presented.
This Annual Report
does not include an attestation report of our independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules
of the Securities and Exchange Commission that permit us to provide only our management’s report in this Annual Report.
(c) Remediation
of Material Weaknesses
To remediate the material
weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in
remedying this material weakness once resources become available.
We also intend to remedy
our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties
in a manner that establishes effective internal controls once resources become available.
(d) Changes
in Internal Control over Financial Reporting
No change in our system
of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year
ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
ITEM 9B – OTHER INFORMATION
None.
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PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors and Executive Officers
The following table sets
forth the names, ages, and biographical information of each of our current directors and executive officers, and the positions
with the Company held by each person, and the date such person became a director or executive officer of the Company. Our executive
officers are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected.
The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Family relationships
among any of the directors and officers are described below.
Name
Age
Position(s)
Kevin “Duke” Pitts
61
President, Director (2018)
William Bossung
62
Secretary, Chief Financial Officer, Director (2014)
Bill Croyle
69
Director (2019)
Kevin “Duke”
Pitts , age 61, was appointed to our Board of Directors on September 28, 2018, and as our President on September 24, 2019. Mr.
Pitts is a proven leader who has 30 years of senior management experience within a technology-driven industry. Mr. Pitts has been
the President and Owner of Envision Enterprises, a consumer electronic integration business, where he has worked since 2007. Earlier
in his career, Mr. Pitts served as the Director of Direct Marketing at Dish Network, the well-known satellite television provider.
His deep experience in senior management and marketing will be of great value to us.
William Bossung ,
age 62, has served as our Secretary, Chief Financial Officer, and member of the Board of Directors since our inception Mr. Bossung has
a diverse background in Corporate Finance, Insurance and accounting. From 2003 to August 2006 Mr. Bossung was co-founder of BCF
Technology, an insurance software company that was ultimately sold to Vertafore in August of 2006. During January 2012 Mr. Bossung
co-founded Splash Beverage Group, (SBEV) a beverage distribution company that distributes both alcohol and non-alcohol products.
The company’s products are sold in over 25,000 retail locations Mr. Bossung is the managing partner of Bishop Equity Partners
LLC, a small boutique private equity firm that invests in both private and public companies. From 1997 to 2002 Mr. Bossung was
the Director of Corporate Finance of Chadmoore Wireless Group, the company was engaged in the business of wireless communications
utilizing 800 MHZ frequencies. Chadmoore aggregated over 5500 Specialized Mobile Radio licenses from the Federal Communications
Commission, the licenses were acquired by Nextel, then merged into the Sprint PCS wireless network. Mr. Bossung currently holds
an Insurance License and earned a bachelor’s degree in accounting and finance from Bloomsburg State University.
Bill
Croyle , age 69, was appointed to our Board of Directors on September 24, 2019. Mr. Croyle is a private investor and an accomplished
Senior Executive with more than 40 years of success across the IT, energy, manufacturing, telecommunications, venture capital,
and finance industries. His broad areas of expertise include M&A, negotiations, service contracts and delivery,
executive development and mentoring, and managing complexities. Since 2009 Bill is has been a founder, owner or executive of EnTX
Group, Impact Legacy Partners, FB Oilfield Special Tools and Western Energy Advisors. He is Chairman of the Colorado Chapter of
the Marine Corps Scholarship Foundation, and he has served on the boards of Hill City Silica LLC, the University of Colorado Advocates
program, the Association for Corporate Growth/Denver, and the Denver Consulting Alliance. Bill served in the Marine Corps 1972-1974.
Mr. Croyle holds Certificates in Energy Finance and Management from the University of Denver and International Trade from World
Trade Center Denver. He graduated from the University of California, Santa Barbara, with a BA in History and minor in French.
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Table of Contents
Family Relationships
There are no family relationships
between any of our officers or directors.
Other Directorships; Director Independence
Other than as set forth
above, none of our officers and directors is a director of any company with a class of securities registered pursuant to section
12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company
under the Investment Company Act of 1940.
For purposes of determining
director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on which shares of common stock
are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means
a person other than an Executive Officer or employee of the company or any other individual having a relationship which, in the
opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. According to the NASDAQ definition, none of our directors are independent.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities
Exchange Act of 1934 requires our directors and executive officers and persons who own more than ten percent of a registered class
of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulations
to furnish us with copies of all Section 16(a) forms they file.
Except as set forth below,
to our knowledge, none of our officers, directors, or beneficial owners of more than ten percent of our common stock failed to
file on a timely basis reports required by section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal
years.
Board Committees
Our Board of Directors
does not maintain a separate audit, nominating or compensation committee. Functions customarily performed by such committees are
performed by its Board of Directors as a whole. We are not required to maintain such committees under the applicable rules of the
OTCQB. We do not currently have an “audit committee financial expert” since we currently do not have an audit committee
in place. We intend to create board committees, including an independent audit committee, in the near future.
We do not currently have
a process for security holders to send communications to the Board.
During the fiscal years
ended December 31, 2020 and 2019, the Board of Directors met as necessary.
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Involvement in Certain Legal Proceedings
None of our officers or
directors has, in the past ten years, filed bankruptcy, been convicted in a criminal proceeding or named in a pending criminal
proceeding, been the subject of any order, judgment, or decree of any court permanently or temporarily enjoining him or her from
any securities activities, or any other disclosable event required by Item 401(f) of Regulation S-K.
Code of Ethics
We have not adopted a written
code of ethics, primarily because we believe and understand that our officers and directors adhere to and follow ethical standards
without the necessity of a written policy.
ITEM 11 - EXECUTIVE COMPENSATION
Narrative Disclosure of Executive Compensation
Bossung Employment Agreement
On October 17, 2017, we
entered into an Employment Agreement with William Bossung, our Chief Financial Officer. Pursuant to Mr. Bossung’s Employment
Agreement, we have agreed to pay Mr. Bossung an annual base salary of $140,000, and he may receive employee stock options as determined
by the Board of Directors. Mr. Bossung’s employment is “at will” and either party may terminate the agreement
at any time.
If terminated without Cause
or as a result of Constructive Termination, Mr. Bossung will receive severance equal to three months’ pay at his most recent
Base Salary. If Mr. Bossung is terminated for Cause, Disability or death, or voluntarily resigns, he will not receive any severance,
only unpaid salary as of the date of termination and vested benefits. The Employment Agreement includes non-compete and non-solicitation
provisions that apply during the term of the Employment Agreement and for a period of one year after Mr. Bossung’s termination.
Capitalized terms in this section not defined herein have the meaning given to such term in the Employment Agreement.
Mr. Bossung’s Employment
Agreement also requires that certain proprietary information of ours be kept confidential. We will be the owner of certain intellectual
property conceived or made by Mr. Bossung prior to termination of the Employment Agreement. Mr. Bossung’s Employment Agreement
also contains other certain terms and conditions which are common in such agreements, and reference is made herein to the text
of the Employment Agreement which is filed herewith as Exhibit 10.1.
Pitts Employment Agreement
On September 28, 2018,
we entered into an Employment Agreement with Kevin “Duke” Pitts. Pursuant to Mr. Pitts’ Employment Agreement,
we have agreed to pay Mr. Pitts an annual base salary of $60,000, and he may receive employee stock options as determined by the
Board of Directors. Mr. Pitts’ employment is “at will” and either party may terminate the agreement at any time.
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If terminated without Cause
or as a result of Constructive Termination, Mr. Pitts will receive severance equal to three months’ pay at his most recent
Base Salary. If Mr. Pitts is terminated for Cause, Disability or death, or voluntarily resigns, he will not receive any severance,
only unpaid salary as of the date of termination and vested benefits. The Employment Agreement includes non-compete and non-solicitation
provisions that apply during the term of the Employment Agreement and for a period of one year after Mr. Pitts’ termination.
Capitalized terms in this section not defined herein have the meaning given to such terms in the Employment Agreement.
Mr. Pitts’ Employment
Agreement also requires that certain proprietary information of the Company be kept confidential. The Company will be the owner
of certain intellectual property conceived or made by Mr. Pitts prior to termination of the Employment Agreement. Mr. Pitts’
Employment Agreement also contains other certain terms and conditions which are common in such agreements, and reference is made
herein to the text of the Employment Agreement which is filed herewith as Exhibit 10.2.
Summary Compensation Table
The
following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, Chief Financial
Officer and Chief Technology Officer for the years ended December 31, 2020 and 2019.
Name and
Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option Awards
($)
Non-Equity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation ($)
All Other
($)
Total
($)
Kevin “Duke” Pitts
2020
110,000
-0-
-0-
-0-
-0-
-0-
-0-
110,000
President
2019
78,000
-0-
-0-
-0-
-0-
-0-
-0-
78,000
William Bossung
2020
66,000
-0-
-0-
-0-
-0-
-0-
-0-
66,000
Secretary and CFO
2019
54,000
-0-
-0-
-0-
-0-
-0-
-0-
54,000
Director Compensation
For the years ended December
31, 2020 and 2019, none of the members of our Board of Directors received compensation for his or her service as a director.
Outstanding Equity Awards at Fiscal Year-End
On June 10, 2020,
our Board of Directors approved the Grey Cloak Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside 25,000,000 shares
of our common stock for issuance thereunder. Pursuant to the plan, officers, directors, key employees and certain consultants
may be granted stock options (including incentive stock options and non-qualified stock options), restricted stock awards, unrestricted
stock awards, or performance stock awards. As of February 16, 2021, we have awarded an aggregate of twelve million (12,000,000)
options to nineteen (19) individuals at an exercise price of $0.05 per share.
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets
forth, as of February 16, 2021, certain information with respect to our equity securities owned of record or beneficially by (i)
each of our Officers and Directors; (ii) each person who owns beneficially more than 10% of each class of our outstanding equity
securities; and (iii) all Directors and Executive Officers as a group.
Name and Address (1)
Common Stock Beneficial Ownership
Percentage of Common Stock Beneficial Ownership (2)
Kevin “Duke” Pitts (3)(5)
4,230,112
1.36 %
William Bossung (3)(6)
6,276,357
2.02 %
Bill Croyle (3)(4)(7)
863,670
<1%
Jay Decker (8)
178,806,834
56.78 %
All Officers and Directors as a Group (3 Persons)
11,370,139
3.55 %
(1)
Unless otherwise indicated, the address of the shareholder is c/o Healthy Extracts Inc.
(2)
Unless otherwise indicated, based on 308,887,410 shares of common stock issued and outstanding. Shares of common stock subject to convertible preferred stock and options or warrants currently exercisable, or exercisable or convertible within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.
(3)
Indicates one of our officers or directors.
(4)
Includes 663,670 shares of common stock held by BMJ Estate Matters, LLC, of which Mr. Croyle is the controlling party.
(5)
Includes options to acquire 2,000,000 shares of common stock at $0.05 per share.
(6)
Includes options to acquire 2,000,000 shares of common stock at $0.05 per share.
(7)
Includes options to acquire 200,000 shares of common stock at $0.05 per share.
(8)
Includes warrants to acquire 6,000,000 shares of common stock at $0.05 per share.
The issuer is not aware
of any person who owns of record, or is known to own beneficially, five percent or more of the outstanding securities of any class
of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.
There are no current
arrangements which will result in a change in control.
On June 10,
2020, our Board of Directors approved the Grey Cloak Tech, Inc. 2020 Omnibus Stock Grant and Option Plan and set aside 25,000,000
shares of our common stock for issuance thereunder. Pursuant to the plan, officers, directors, key employees and certain consultants
may be granted stock options (including incentive stock options and non-qualified stock options), restricted stock awards, unrestricted
stock awards, or performance stock awards. As of February 16, 2021, we have awarded an aggregate of twelve million (12,000,000)
options to nineteen (19) individuals at an exercise price of $0.05 per share.
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Table of Contents
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
Bossung Employment Agreement
On October 17, 2017, we
entered into an Employment Agreement with William Bossung, our Chief Financial Officer. Pursuant to Mr. Bossung’s Employment
Agreement, we have agreed to pay Mr. Bossung an annual base salary of $140,000, and he may receive employee stock options as determined
by the Board of Directors. Mr. Bossung’s employment is “at will” and either party may terminate the agreement
at any time.
If terminated without Cause
or as a result of Constructive Termination, Mr. Bossung will receive severance equal to three months’ pay at his most recent
Base Salary. If Mr. Bossung is terminated for Cause, Disability or death, or voluntarily resigns, he will not receive any severance,
only unpaid salary as of the date of termination and vested benefits. The Employment Agreement includes non-compete and non-solicitation
provisions that apply during the term of the Employment Agreement and for a period of one year after Mr. Bossung’s termination.
Capitalized terms in this section not defined herein have the meaning given to such term in the Employment Agreement.
Mr. Bossung’s Employment
Agreement also requires that certain proprietary information of ours be kept confidential. We will be the owner of certain intellectual
property conceived or made by Mr. Bossung prior to termination of the Employment Agreement. Mr. Bossung’s Employment Agreement
also contains other certain terms and conditions which are common in such agreements, and reference is made herein to the text
of the Employment Agreement which is filed herewith as Exhibit 10.1.
Pitts Employment Agreement
On September 28, 2018,
we entered into an Employment Agreement with Kevin “Duke” Pitts. Pursuant to Mr. Pitts’ Employment Agreement,
we have agreed to pay Mr. Pitts an annual base salary of $60,000, and he may receive employee stock options as determined by the
Board of Directors. Mr. Pitts’ employment is “at will” and either party may terminate the agreement at any time.
If terminated without Cause
or as a result of Constructive Termination, Mr. Pitts will receive severance equal to three months’ pay at his most recent
Base Salary. If Mr. Pitts is terminated for Cause, Disability or death, or voluntarily resigns, he will not receive any severance,
only unpaid salary as of the date of termination and vested benefits. The Employment Agreement includes non-compete and non-solicitation
provisions that apply during the term of the Employment Agreement and for a period of one year after Mr. Pitts’ termination.
Capitalized terms in this section not defined herein have the meaning given to such terms in the Employment Agreement.
Mr. Pitts’ Employment
Agreement also requires that certain proprietary information of the Company be kept confidential. The Company will be the owner
of certain intellectual property conceived or made by Mr. Pitts prior to termination of the Employment Agreement. Mr. Pitts’
Employment Agreement also contains other certain terms and conditions which are common in such agreements, and reference is made
herein to the text of the Employment Agreement which is filed herewith as Exhibit 10.2.
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Director Independence
For purposes of determining
director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on which shares of common stock
are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means
a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the
opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. According to the NASDAQ definition, none of our directors are independent.
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
BF Borgers CPA PC was our
independent registered public accounting firm for the years ended December 31, 2020 and 2019.
Audit and Non-Audit Fees
The following table presents
fees for professional services rendered by our independent registered public accounting firm for the audit of our annual financial
statements for the years ended December 31, 2020 and 2019.
Years Ended December 31,
2020
2019
Audit Fees (1)
$ 40,600
$ 43,200
Audit Related Fees
—
—
Tax Fees
—
—
All Other Fees
—
—
Total
$ 40,600
$ 43,200
(1) Audit fees were principally
for audit and review services.
Of the fees described above
for the years ended December 31, 2020 and 2019, all were approved by the entire Board of Directors.
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PART IV
ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial
Statements
The following financial
statements are filed as part of this report:
Report of Independent Registered Public Accounting Firm
F-1
Consolidated Balance Sheets as of December 31, 2020 and 2019
F-2
Consolidated Statement of Operations for the year ended December 31, 2020 and 2019
F-3
Consolidated Statement of Stockholders’ Deficit for the year ended December 31, 2020 and 2019
F-4
Consolidated Statement of Cash Flows for the year ended December 31, 2020 and 2019
F-5
Notes to Consolidated Financial Statements
F-6 to F-15
(a)(2) Financial
Statement Schedules
We do not have any
financial statement schedules required to be supplied under this Item.
(a)(3) Exhibits
Refer to (b) below.
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Table of Contents
(b) Exhibits
Exhibit No.
Exhibit Description
3.1 (1)
Articles of Incorporation of Grey Cloak Tech Inc.
3.2
Certificate of Amendment of Articles of Incorporation
3.3 (1)
Bylaws of Grey Cloak Tech Inc.
10.1 (2)
Employment Agreement by and between the Company and William Bossung, dated October 17, 2017
10.2
Employment Agreement by and between the Company and Kevin “Duke” Pitts, dated September 28, 2018
10.3 (4)
Share Exchange Agreement dated February 4, 2019 by and among Grey Cloak Tech Inc., BergaMet NA, LLC, and the Members of BergaMet
10.4 (3)
Share Exchange Agreement with Ultimate Brain Nutrients, LLC and its members
10.5 (4)
Form of Note Satisfaction Agreement
10.6 (4)
Form of Preferred Stock Conversion Agreement
31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1
Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101. INS
XBRL Instance Document
101. SCH
XBRL Schema Document
101. CAL
XBRL Calculation Linkbase Document
101. DEF
XBRL Definition Linkbase Document
101. LAB
XBRL Labels Linkbase Document
101. PRE
XBRL Presentation Linkbase Document
(1)
Incorporated by reference from our Registration Statement on Form S-1 dated and filed with the Commission on March 6, 2015.
(2)
Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on June 8, 2018.
(3)
Incorporated by reference from our Current Report on Form 8-K filed with the Commission on April 8, 2020
(4)
Incorporated by reference from our Quarterly Report on Form 10-Q dated and filed with the Commission on May 28, 2020.
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Table of Contents
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Healthy Extracts Inc .
Dated: August 3, 2021
/s/ Kevin “Duke” Pitts
By:
Kevin “Duke” Pitts
Its:
President
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Dated: August 3, 2021
/s/ Kevin “Duke” Pitts
By:
Kevin “Duke” Pitts
Its:
President
Dated: August 3, 2021
/s/ William Bossung
By:
William Bossung
Its:
Secretary and Chief Financial Officer
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.