Overview

You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related Notes thereto included in Part II, Item 8 of this Report before deciding to purchase, hold or sell our common stock.

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. In July 2013, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company's name from Sandgate Acquisition Corporation to Sunstock, Inc. On July 18, 2013, Jason Chang and Dr. Ramnik S Clair were named as directors of the Company.

On October 22, 2018, Sunstock, Inc. acquired all assets and liabilities of Mom's Silver Shop, Inc. (the "Retail Store") located in Sacramento, California.





Critical Accounting Policies

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.





Revenue Recognition

The Company's principal activities from which it generates revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement with a customer. These contracts define each party's rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid at time of sale via credit card, check, or cash when products are sold direct to consumers.

A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of a product to customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of product and related shipping and handling are accounted for as the single performance obligation.

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. We do not issue refunds.

The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product is shipped based on fulfillment by the Company or when a point-of-sale transaction is completed. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. The Company does not accept returns.





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Stock-Based Compensation:

All share-based payments are recognized in the consolidated financial statements based upon their fair values.

The Company recognizes stock-based compensation expense in accordance with the provisions of ASC 718, Compensation - Stock Compensation ("ASC 718"). ASC 718 requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors and non-employees based on the grant date fair value of the awards. The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is primarily recognized over the term of the consulting agreement. In accordance with FASB guidance, an asset acquired in exchange for the issuance of fully vested, non-forfeitable equity instruments should not be presented or classified as an offset to equity on the grantor's balance sheet once the equity instrument is granted for accounting purposes.

2022 Year-End Analysis Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

For the year ended December 31, 2022, revenues were $13,013,682, a decrease of $1,002,797 from $14,016,479 for 2021. The price of gold and silver decreased throughout the year and the Company believes that customers are less likely to purchase gold and silver coins in a down market and are more likely to purchase them in an up market.

For the year ended December 31, 2022, cost of goods sold were $12,735,272, a decrease of $996,397 from $13,731,669 for 2021, due to the decrease in revenues.

For the year ended December 31, 2022, gross profit was $278,410 (2.1%), a decrease of $6,400 from a gross profit of $284,810 (2.0%) for 2021.

For the year ended December 31, 2022, operating expenses were $150,043, a decrease of $443,841 from $593,884 for 2021. Professional fees were $113,328, a $137,518 decrease from $250,846 for 2021. For professional fees, auditor fees decreased $49,065, consultant fees decreased $31,783, legal fees decreased $43,160, and stock related fees decreased $13,342. Compensation was $820 for 2022, a $31,140 decrease from $31,960 for 2021. Lawsuit judgment was $0 for 2022 compared to $260,308 for 2021. The lawsuit judgment was the result of trial regarding Boustead Securities. The Company has filed an appeal. Other operating expenses were composed of various small items $35,895 for 2022 compared to $50,770 for 2021.

For the year ended December 31, 2022, gain on sale of precious metals was $56,709, a decrease of $27,005 from $83,714 for 2021. For the year ended December 31, 2022, unrealized gain on investments in precious metals was $21,445, a $64,804 increase from an unrealized loss of $43,359 in 2021. For the year ended December 31, 2022, interest expense related party was $14,105, a $10,016 increase from $4,089 in 2021. For the year ended December 31, 2022, gain on debt extinguishment was $30,250, a $30,250 increase from $0 in 2021. For the year ended December 31, 2022, loss on settlement of related party debt was $3,867,927, a $2,092,259 increase from $1,775,668 in 2021.

For the year ended December 31, 2022, the net loss was $3,651,833, a decrease of $1,595,179 from a net income of $2,056,654 for 2021. The accumulated deficit at December 31, 2022 was $65,915,978.

Liquidity and Capital Resources

As of December 31, 2022, the Company had $16,691 in cash, $1,751,659 in inventories and $5,155 in prepaid expenses. During the year ended December 31, 2022, the Company used net cash of $273,164 in operations. During the year ended December 31, 2022, $259,657 in net cash was provided by financing activities from notes payable from related parties.

The Company has not posted net income from inception. It has an accumulated deficit of $65,915,978 of December 31, 2022. 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 stockholders and/or third parties.

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