The following information should be read in conjunction with the unaudited condensed and consolidated financial statements and notes thereto appearing elsewhere in this report. For additional context with which to understand our financial condition and results of operations, see the discussion and analysis included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on April 18, 2022, as well as the unaudited condensed and consolidated financial statements and related notes contained therein.





Forward Looking Statements

Certain statements in this report, including information incorporated by reference, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements reflect current views about future events and financial performance based on certain assumptions. They include opinions, forecasts, intentions, plans, goals, projections, guidance, expectations, beliefs or other statements that are not statements of historical fact. Words such as "may," "should," "could," "would," "expects," "plans," "believes," "anticipates," "intends," "estimates," "approximates," "predicts," or "projects," or the negative or other variation of such words, and similar expressions may identify a statement as a forward-looking statement. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism about future operating results and the development of our products, are forward-looking statements.

Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed elsewhere in this Quarterly Report on Form 10-Q. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We file reports with the SEC. You can read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.





Overview

Sunstock, Inc. ("Sunstock" or "the Company") was incorporated on July 23, 2012, as Sandgate Acquisition Corporation, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.

On July 18, 2013, the Company changed its' name from Sandgate Acquisition Corporation to Sunstock, Inc. On the same date, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.

On October 22, 2018, the Company acquired all assets and liabilities of the Retail Store of Sacramento, California. The Retail Store specializes in buying and selling gold, silver, and rare coins, and is one of the leading precious metals retailers in the greater Sacramento metropolitan area.





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Going Concern

The Company has not posted operating income and has not generated cash from operations since inception. It has an accumulated deficit of $62,161,252 as of March 31, 2022. The Company did not generate cash flow from operations for the three months ended March 31, 2022 and the year ended December 31, 2021. Therefore, there is substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and /or obtain additional financing from its stockholders and/or other third parties.

These unaudited condensed and consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, successfully locating and negotiate with a business entity for the combination of that target company with the Company.

There is no assurance that the Company will ever be profitable. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

In the first quarter of 2020, outstanding convertible notes payable balances as of December 31, 2019, were either converted to common stock or paid off. In relation to that, the Company had discussions with a third party in regards to raising funds through a private placement of equity. Those discussions with that third party have since been terminated. The Company intends to initiate discussions with an undetermined third party in regards to raising funds through a private placement of equity which, if it occurs, will provide the Company with funds to expand its operations and likely eliminate the going concern issue.





Critical Accounting Policies

There have been no material changes from the critical accounting policies as previously discussed in our Annual Report on Form 10-K for the year ended December 31, 2021.





Results of Operations

Discussion of the Three Months ended March 31, 2022 and 2021

The Company generated revenues during the three months ended March 31, 2022 of $3,248,983 as compared to $2,948,188 in revenues posted for the three months ended March 31, 2021. The increase in revenues is due to more aggressive pricing by Sunstock in order to increase revenues and more customers seeking a safe haven in uncertain times.

For the three months ended March 31, 2022 and 2021, cost of sales were $3,175,167 and $2,914,692, respectively, which increase was driven by the increase in revenues as disclosed above. Professional fees decreased to $32,495 from $71,695 for the three months ended March 31, 2022 and 2021, respectively, primarily due to lower consultant fees and audit fees. Compensation decreased to $374 from $399 for the three months ended March 31, 2022 and 2021, respectively. Other operating expenses decreased to $9,173 from $16,217 for the three months ended March 31, 2022 and 2021, respectively.





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Interest expense was $1,443 and $1,449 for the three months ended March 31, 2022 and 2021, respectively. Interest expense related party increased to $2,745 for the three months ended March 31, 2022 from $1,862 for the three months ended March 31, 2021.

Unrealized gain on investments in precious metals was $45,257 for the three months ended March 31, 2022 compared to an unrealized loss of $60,667 for the three months ended March 31, 2021 due to the increase in price of bullion.

$30,250 in other income in the three months ended March 31, 2022 was in regards to the forgiveness of PPP loans.

During the three months ended March 31, 2022, the Company posted a net income of $102,893 as compared to a net loss of $1,465,000 for the three months ended March 31, 2021. Such change is primarily related to greater gross profit, less operating expenses, unrealized gain on investment in precious metals, a loss on settlement of related party debt in 2021, and a gain on debt extinguishment.

Liquidity and Capital Resources

As of March 31, 2022, the Company had $37,417 in cash and $1,503,289 in inventory of precious metals and coins compared to $30,168 in cash and $1,392,665 in inventory of precious metals and coins at December 31, 2021.

Net cash used in operating activities totaled $50,051 during the three months ended March 31, 2022 as compared to net cash used in operating activities of $120,853 during the three months ended March 31, 2021. Consolidated net income was $102,893 for the three months ended March 31, 2022 as compared to consolidated net loss of $1,465,000 for the three months ended March 31, 2021. Explanation of the difference between these three months of 2022 and 2021 are explained above in the results of operations of the Company.

Changes in the adjustments to reconcile net income(net loss) for the three months ended March 31, 2022 and 2021, respectively, consist of unrealized gain or loss on investment in precious metals, depreciation, gain on extinguishment of debt, and loss on settlement of related party debt.

Unrealized gain on investment in precious metals was $45,257 for the three months ended March 31, 2022 and unrealized loss on investment in precious metals was $60,667 for the three months ended March 31, 2021. Deprecation was $355 and $762, respectively, for the three months ended March 31, 2022 and 2021. Gain on extinguishment of debt was $30,250 and $0, respectively, for the three months ended March 31, 2022 and 2021. Loss on settlement of related party debt was $0 and $1,345,407, respectively, for the three months ended March 31, 2022 and 2021.

Changes in assets and liabilities for inventories, prepaid expenses, and accounts payable and accrued expenses totaled a decrease of $77,792 for the three months ended March 31, 2022 and a decrease of $62,689 for the three months ended March 31, 2021.

No cash was used in investing activities for the three months ended March 31, 2022 and 2021, respectively.

Net cash provided by financing activities was $57,300 for the three months ended March 31, 2022 and net cash provided by financing activities was $134,125 for the three months ended March 31, 2021. $57,300 and $119,000, respectively were received from notes payable related party for the three months ended March 31, 2022 and 2021. Proceeds of $0 and $15,125, respectively, were received from a PPP loan for the three months ended March 31, 2022 and 2021

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be considered material to investors.

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