Overview
We are a platform for acquiring, developing, researching, patenting, marketing,
and distributing plant-based nutraceuticals. Our products have not been
evaluated by the U.S. Food and Drug Administration (FDA) or any similar
regulatory body for safety and efficacy. Our proprietary and patented products
target select high-growth categories within the multibillion-dollar
nutraceuticals market, such as heart, brain and immune health.
Guided by this mission, our first two acquisitions formed our current operating
subsidiaries, Bergamet, which offers nutraceutical heart and immune health
products, and UBN, which offers nutraceutical products for brain health.
Through published research, our Bergamet products have been shown to support
heart health, support immune response, and address metabolic syndrome.
On January 13, 2023, we entered into a definitive agreement to acquire
nutraceutical manufacturer, Hyperion, and its digital marketing affiliate OPM.
We intend to use a portion of the
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proceeds from this offering to fund this acquisition. Hyperion products have
been formulated to support brain, memory, vision, sinus and digestive health, as
well as healthy sleep and aging. OPM provides online advertising and marketing
for Hyperion as well as other companies in the health and wellness space. The
closing of these two acquisitions is expected to occur following the completion
of and using the proceeds from this Offering. We anticipate the acquisition of
Hyperion and OPM to be transformative to our business, significantly
strengthening our manufacturing, marketing and distribution capabilities,
expanding our nutraceutical product portfolio, adding positive cash flow, and
significantly increasing our annualized gross revenues. Revenues for Hyperion
and OPM were over $10 million for the year ended December 31, 2022.
We expect the combination of these synergistic and accretive acquisitions to
help accelerate our growth and expand our market reach. Our existing natural
heart and brain health formulations are perfect for cross selling with
Hyperion's Green Valley Natural Solutions branded product line. Likewise, we see
Green Valley sales benefiting from our established broad marketing channels,
which includes subscription-based direct-to-consumer sales, national grocery
stores, wholesale distribution, and a strong presence on Amazon. We also
anticipate that the greater financial and operational strength afforded by these
two acquisitions to better enable us to make future strategic complementary
acquisitions, including some of which we have identified and are currently
evaluating.
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, 2022 and 2021 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,
2022, we have incurred accumulated net losses of $15,926,742. In order to
continue as a going concern we must effectively balance many factors and
generate more revenue so that we can fund our operations from our sales and
revenues. If we are not able to do this, we may not be able to continue as an
operating company. At our current revenue and burn rate, we have an immediate
cash need, and thus we must raise capital by issuing debt or through the sale of
our stock. However, there is no assurance that our existing cash flow will be
adequate to satisfy our existing operating expenses and capital requirements.
Results of Operations for the Years Ended December 31, 2022 and 2021
Introduction
We had revenues of $2,251,469 for the year ended December 31, 2022, as compared
to $1,676,598 for the year ended December 31, 2021, an increase of $574,871, or
34%. Our cost of revenue was $879,951 for the year ended December 31, 2022, as
compared to $981,520 for the year ended December 31, 2021, a decrease of
$101,568, or 10%.
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Revenues and Net Operating Loss
Our revenues, operating expenses, and net operating loss for the years ended
December 31, 2022 and 2021 were as follows:
Year Ended Year Ended Increase/
December 31, 2022 December 31, 2021 (Decrease)
Revenue $ 2,251,469 $ 1,676,598 $ 574,871
Cost of Revenue 879,951 981,520 (101,568)
Operating expenses:
General and administrative 2,283,107 2,584,256 (301,148)
Total operating expenses 2,283,107 2,584,256 (301,148)
Net operating loss
Other income/(expense) (71,531) (97,945) (26,414)
Net gain/(loss) $ (983,121) $ (1,987,122) $ (1,004,000)
Revenues
We had revenues of $2,251,469 and $1,676,598 for the years ended December 31,
2022 and 2021, respectively, an increase of $574,871, or 34%. The increase in
revenues was mainly due to our increased focus on the Amazon marketplace. With
the additional focus on Amazon marketplace along with adding their fulfillment
program, we were able to increase sales through this channel by over $1 million
from 2021 to 2022.
Cost of Revenue
Cost of revenue was $879,951 and $981,520 for the years ended December 31, 2022
and 2021, respectively, a decrease of $101,568, or 10, and consisted of
wholesale product costs and packaging. Additionally, most of the variance was
due to the increase in the cost of product merchandise sold during the year. In
2022, most of our items sold had a higher cost due to manufacturing and shipping
increases, an increase of $226,169. But we also recognized a difference in
inventory adjustment for the two years. In 2022 our inventory adjustment was
$96,811 compared to $424,548, a decrease of $327,737. During 2021, we had some
raw product that expired, and we wrote off those goods, while in 2022 we did not
have any product expire.
General and Administrative
General and administrative expense was $2,283,107 and $2,584,256 for the years
ended December 31, 2022 and 2021, a decrease of $301,148, or 12%. The decrease
was related to the reduction in consulting and professional fees during 2022. In
the year ended December 31, 2022, general and administrative expenses consisted
mainly of consulting fees of $608,819, broker fees of $383,938, selling expenses
of $595,318, accounting and legal fees of $145,062, and salaries and wages of
$145,589. In the year ended December 31, 2021, general and administrative
expenses
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consisted mainly of consulting of $1,010,902, selling expenses of $560,883,
accounting and legal fees of $323,658, salary and wages of $147,938, and
transfer agent and filing fees of $46,778.
Net Operating Gain/Loss
As a result of the items discussed above, our net operating loss was $911,590
and $1,889,177 for the years ended December 31, 2022 and 2021, respectively, a
reduction of $977,587, or 52%.
Other Income and Expense
Other income (expense) was $(71,531) and $(97,945) for the years ended December
31, 2022 and 2021, respectively, a decrease of $26,414, or 27%.
Net Gain/(Loss)
Our net gain (loss) for the year ended December 31, 2022 was $(983,121), or
$0.00 per share, and our net gain (loss) for the ended December 31, 2021 was
$(1,987,122), or $(0.01) per share, a decrease of $1,004,000, or 51%.
Liquidity and Capital Resources
Introduction
During the years ended December 31, 2022 and 2021, we had negative operating
cash flows. Our cash on hand as of December 31, 2022 was $65,651. Our monthly
cash flow burn rate in 2022 (not including inventory purchases) was
approximately $28,000. Although we have strong short term cash needs, as our
operating expenses increase, we will face strong medium to long term cash needs.
We anticipate that these needs will be satisfied through the issuance of debt or
the sale of our securities until such time as our cash flows from operations
will satisfy our cash flow needs.
Our cash, current assets, total assets, current liabilities, and total
liabilities as of December 31, 2022 and 2021 were as follows:
December 31, 2022 December 31, 2021 Change
Cash $ 65,651 $ 222,098 $ (156,447)
Total Current Assets 1,990,572 2,313,404 (322,832)
Total Assets 2,781,118 3,029,579 (248,461)
Total Current Liabilities 902,788 558,841 343,947
Total Liabilities $ 902,788 $ $558,841 $ 343,947
Our cash decreased by $156,447 as of December 31, 2022 as compared to December
31, 2021. Our total current assets decreased by $322,832 because of our decrease
in cash, as well as accounts receivable and inventory. Our total assets
decreased by $74,371, despite our decrease in current assets, as a result of our
increase in prepaid acquisition costs, deposits, and fixed assets (net of
accumulated depreciation).
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Our current and total liabilities increased by $343,947, from $558,841 as of
December 31, 2021 to $902,788 as of December 31, 2022. Our total liabilities as
of the year ended December 31, 2022 consisted primarily of convertible det of
$317,284 and notes payable of $275,370.
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, 2022 was $65,651. Our monthly cash flow burn
rate in 2022 (not including inventory purchases) was approximately $28,000.
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, 2022
and 2021 $334,964 and $901,298, respectively, a decrease of $566,334, or 63%.
Our net cash used in operating activities for the year ended December 31, 2022
consisted of a net loss of $983,121 offset by an adjustment for warrants issued
for services of $402,100, an increase in inventory of $138,838, and an increase
in accounts payable of $54,048. Our net cash used in operating activities for
the year ended December 31, 2021 consisted primary of a net loss of $1,987,122,
plus a decrease in accounts receivable of $120,066, offset by an adjustment for
warrants issued for services of $608,836 and changes in inventory of $459,717.
Investments
Our cash flow provided by (used in) investing activities for the years ended
December 31, 2022 and 2021 was $7,987) and $(96,004), respectively, a decrease
of $88,017. All of our investing activities in 2021 was as a result of a
reduction in the value of our trademarks.
Financing
Our net cash provided by financing activities for the years ended December 31,
2022 and 2021 was $186,504 and $1,160,199, respectively, a decrease of $973,695,
or 84%. The decrease in 2022 was due to proceeds from the issuance of
convertible debt of $463,630 and from the issuance of notes payable of $275,370,
offset primarily by the repayment of convertible debt of $318,095 and repayment
of notes payable of $170,000.
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
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described in Note 2 to our consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2021. 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.
Inventory
Inventories consist of health supplements held for sale in the ordinary course
of business. The Company uses the weighted average cost method to value its
inventories at the lower of cost and net realizable value. The components of
inventory cost include raw materials, labor, and overhead. Net realizable value
is determined using various assumptions with regard to excess or slow-moving
inventories, expiration dates, current and future product demand, production
planning, and market conditions. A change in any of these variables could
result in an adjustment to inventory.
An allowance for inventory was established in 2018 and is evaluated each quarter
to determine if all items are still sellable due to expiration dates. As of
December 31, 2022 and 2021, the total of inventory which was written off as an
inventory allowance was $1,914,891 and $1,914,891.
DECEMBER 31, DECEMBER 31,
2022 2021
Inventory
Inventory Classes:
Raw Materials $ 1,483,764 $ 1,757,808
Finished Goods 310,600 194,490
Work in process 24,764 5,668
Total inventory 1,819,128 1,957,966
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Revenue Recognition
The Company applies Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) topic 606, Revenue from Contracts with Customers
(ASC 606). ASC 606 establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes
all of the existing revenue recognition guidance. This standard requires an
entity to recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. ASC 606
requires us to identify distinct performance obligations. A performance
obligation is a promise in a contract to transfer a distinct good or service to
the customer. When distinct performance obligations exist, the Company
allocates the contract transaction price to each distinct performance
obligation. The standalone selling price is used to allocate the transaction
price to the separate performance obligations. The Company recognizes revenue
when, or as, the performance obligation is satisfied.
Generally, revenues are recognized at the time of shipment to the customer with
the price being fixed and determinable and collectability assured, provided
title and risk of loss is transferred to the customer. Most of our shipping and
handling costs are built into the transaction price, but if the customer asks
for express shipping, the costs charged to customers are classified as sales,
and the shipping and handling costs incurred are included in cost of sales.
The Company's subsidiary, BergaMet N.A., LLC, recognizes revenue from our main
source - e-commerce revenue. Here is a list of all the sales channels which
include the Company's subsidiary website channel or any other selling channel
like Amazon, doctors' offices, and walk-in sales. All of our customer sales for
Healthy Extracts, Inc. and Ultimate Brain Nutrients, LLC are recognized as
revenue under the subsidiary of BergaMet N.A., LLC. All three divisions of the
Company sell plant-based nutraceuticals to our end using customers.
The Company evaluates the criteria outlined in ASC 606-10-55, Principal versus
Agent Considerations, currently we are the principal and have not engaged any
agents at this time. Currently, we have not recognized any revenues under the
agent considerations.
Revenue is recognized when, or as, control of a promised merchandise or service
is shipped to the customer, in an amount that reflects the consideration to
which the Company expects to be entitled in exchange for transferring title of
those products or services and are recorded net of and discounts or allowances.
Shipping costs paid by the customer are included in revenue. Merchandise sales
are fulfilled with inventory held in our warehouse in Henderson, NV. Therefore,
the Company's contracts have a single performance obligation (shipment of
product).
If the Company receives a request for refund on a customer obligation, the
Company will refund the full cost of the obligation due to our money back
guarantee.
Revenue recognition is evaluated through the following five-step process:
1.identification of the contract with a customer;
2.identification off the performance obligations in the contract;
3.determination of the transaction price;
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4.allocation of the transaction price to the performance obligations in the
contract; and
5.recognition of revenue when or as a performance obligation is satisfied.
These steps are met when an order is received, a price agreed and the product
shipped or delivered to that customer.
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