You should read the following discussion and analysis of our financial condition
and results of operations together with the section entitled "Selected Financial
Data" and our financial statements and related notes included elsewhere in this
Registration Statement. Some of the information contained in this discussion and
analysis or set forth elsewhere in this Registration Statement, including
information with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and
uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." Our
actual results may differ materially from those described below.
We define our accounting periods as follows: "fiscal 2021" - January 1, 2021
through December 31, 2021.
This Management's Discussion and Analysis ("MD&A") reports on the operating
results and financial condition of the Company for the years ended December 31,
2021 and December 31, 2020. The MD&A should be read in conjunction with the
Company's audited consolidated financial statements for the year ended December
31, 2021 ("Annual Financial Statements").
The MD&A and Annual Financial Statements have been prepared in accordance with
general accepted principles in the United States of America ("GAAP").
All significant intercompany balances and transactions were eliminated on
consolidation.
Company History and Summary
HFactor, Inc., formerly known as Ficaar, Inc. (the "Company" or "HFactor" or
"Ficaar") was incorporated in July 2001 in the State of Georgia under the name
OwnerTel, Inc. The name of the Company was changed to Ficaar, Inc. in December
of 2007 and to HFactor, Inc. on September 2, 2021.
The Company's fiscal year end is December 31.
On May 28, 2021, David Cicalese ("Cicalese"), an officer and Board member of
Ficaar entered into an agreement with Gail Levy whereby Cicalese agreed to sell
29,900,000 shares, representing a majority interest in Ficaar, to Levy. Acting
as the majority shareholder of the Company, Levy then caused Ficaar to enter
into an Agreement and Plan of Merger (the "Merger Agreement") between the
Company, FCAA Merger Sub I, Inc. ("Merger Sub"), a Delaware corporation and
wholly owned subsidiary of Ficaar, and HyEdge, Inc. ("Target" or "HyEdge"), a
Delaware corporation, wherein Merger Sub and Target would merge, with Target
surviving the transaction as a wholly owned subsidiary of Ficaar (the "Merger").
The Merger Agreement was executed on August 6, 2021 and the Merger closed on
August 9, 2021. The Merger effected a change in control and was accounted for as
a "reverse acquisition" whereby Target is the accounting acquiror for financial
statement purposes. Accordingly, for all periods subsequent to the Closing Date,
the financial statements of the Company reflect the historical financial
statements of HyEdge and any operations of the Company subsequent to the Merger.
Plan of Operations
BUSINESS DESCRIPTION
HFactor water was created by Gail Levy, HyEdge's founder and CEO. Gail is a
successful serial entrepreneur who was looking for a new product that could
alleviate the toxic side effects of the cancer chemotherapeutic drugs that had
riddled a dear friend. As she researched the properties of hydrogen water, she
became more and more enthralled by its potential. Ms. Levy felt she could honor
her friend by making hydrogen water immaculate, effective, and accessible to
everyone. Enlivened by this mission, she collected a team of experts to help her
engineer a natural process to combine hydrogen with water with zero impurities
and optimal impact. In 2017, she launched her flagship product through retail
and ecommerce channels. HFactor was developed and is manufactured by a team of
experts in the U.S. and utilizes a patented chemical-free and magnesium-free
process to infuse free hydrogen into its water. Its award winning,
environmentally friendly ergonomic pouch keeps the hydrogen potent and pure and
makes it extremely portable.
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HFactor's anti-inflammatory and antioxidant benefits appeal to a wide population
across every age group, positioning HFactor to capture significant share in an
expanding market. The global market for bottled water is projected to reach
$215B by 2025. HFactor has demonstrated significant market traction, with $2.87M
sales in 2020, 30M+ followers across Social Media channels.
The quality of our product is achieved through a proprietary manufacturing
process. A reverse osmosis filtering system and patent-protected infusion
process ensures efficacy, purity, and taste. The efficacy of hydrogen water is
backed by over 1,000 published peer reviewed studies demonstrating that hydrogen
positively impacts fitness, health, lifestyle, recovery, and wellness.
Our sales strategy involves a diversified, multi-channel approach. Our products
are currently on shelves in approximately 5,000+ retail stores across 20 chains
in addition to our growing ecommerce presence. Our company prides itself on
having a low carbon footprint, primarily due to our eco-conscious packaging and
free mail-in recycling program through our partnership with Teracycle.
Our mission statement is to build a brand and corporate culture that, at its
essence, exhibits strength in oneself and in one's community. We promote a
foundation of "doing well by doing good". This foundation enables HFactor to
produce and distribute the highest quality "better for you" consumer products
that are conscious to the community, mind, body, and the environment
Comparison of Year Ended December 31, 2021 to Year Ended December 30, 2020
Results of Operations
Year ended December 31, Percent
2021 2020 Change Change
Revenues $ 751,773 $ - $ 751,773 100%
Gross profit 331,573 - 331,573 100%
Operating expenses (1,119,228 ) (16,562 ) (1,102,666 ) 6,658%
Other income (expense) (805,038 ) (8,686 ) (796,352 ) 9,168%
Net loss $ (1,592,693 ) $ (25,248 ) $ (1,567,445 ) 6,208%
Net revenues for the year ended December 31, 2021 were $751,773 as compared to
$-0- for the year ended December 31, 2020 which resulted from the merger of
HyEdge.
Gross profits for the year ended December 30, 2021 were $331,573 as compared to
$-0- for the year ended December 31, 2020.
Total operating expenses were $1,119,228 for the year ended December 31, 2021
compared to $16,562 for the year ended December 31, 2020. The 6,6587% increase
was primarily attributable to the additional operating expenses resulting from
the merger of HyEdge, specifically $654,847 in sales and marketing expenses and
$225,148 in payroll and compensation.
Other income (expense) was $(805,038) for the year ended December 31, 2021
compared to $(8,686) for the year ended December 31, 2020. The $796,352 increase
was primarily $619,399 in amortization of debt discount and derivative expenses
associated with embedded liabilities in convertible debt, $124,406 in change in
fair market value of derivatives and $94,390 increase in interest expenses
associated with borrowings.
For the year ended December 31, 2021, the Company reported a net loss of
$1,592,693 as compared to a net loss of $25,248 for the year ended December 31,
2020. The $1,567,445 increase in net loss for the year ended December 31, 2021
mainly arose from the additional net loss resulting from the merger of HyEdge.
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Liquidity and Capital Resources
As of December 31, 2021, the Company had $250,854 in cash to fund its
operations. The Company reported working capital deficit of $4,855,836 at
December 31, 2021 as compared to a working capital deficit of $66,694 at
December 31, 2020, representing an increase in working capital deficit by
$4,789,142.
The Company does not believe its current cash balance will be sufficient to
allow the Company to fund its planned operating activities for the next twelve
months. The ability of the Company to continue as a going concern is dependent
on the Company obtaining adequate capital to fund operating losses until it
becomes profitable. If the Company is unable to obtain adequate capital, it
could be forced to cease operations or substantially curtail some of its planned
activities. These conditions raise substantial doubt as to the Company's ability
to continue as a going concern. The accompanying financial statements do not
include any adjustments relating to the recoverability and classification of
recorded assets and classification of liabilities should the Company be unable
to continue as a going concern.
As the Company continues to incur losses, achieving profitability is dependent
on achieving a level of revenues adequate to support the Company's cost
structure. The Company may never achieve profitability, and unless and until it
does, the Company will continue to need to raise additional capital. Management
intends to fund future operations through additional private or public equity
offering and may seek additional capital through arrangements with strategic
partners of from other sources. There can be no assurances, however, that
additional funding will be available on terms acceptable to the Company, or at
all. Any equity financing may be dilutive to existing shareholders.
Operating Activities:
For the year ended December 31, 2021, net cash flow used by operating activities
was $(826,956) compared to -$0- for the year ended December 31, 2020. The
decreases in cash flow used for operating activities for both periods were
primarily due to increases in operating expenditures.
Investing and Financing Activities:
Net cash flows provided by (used) in investing and financing activities for the
year ended December 31, 2021 were $226,190 in net repayments from borrowings,
offset with $650,000 from sales of common stock shares and $654,000 in proceeds
from borrowings compared to $-0- for the year ended December 31, 2020.
Liquidity and Capital Resource Measures:
The Company's primary source of liquidity has been from convertible loans and
third party and related party loans.
Going Concern
The Company has experienced a net loss and had an accumulated deficit of
$4,598,617 as of December 21, 2021. The success of our business plan during the
next 12 months and beyond will be contingent upon generating sufficient revenue
to cover our costs of operations and/or upon obtaining additional financing.
Transaction with Related Parties:
None
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Critical Accounting Policies
Refer to Note 2 in the Consolidated Financial Statements for a summary of
recently adopted and recently issued accounting standards and their related
effects or anticipated effects on our consolidated results of operations and
financial condition.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that are reasonably likely to
have a current or future material effect on our financial condition, revenue or
expenses, results of operations, liquidity, capital expenditures or capital
resources.
Inflation and Changing Prices
We do not believe that inflation nor changing prices for the year ended December
31, 2021 had a material effect on our operations.
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