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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ 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 000-54830

SUNSTOCK, INC.

(Exact Name of Registrant as Specified in its Charter)

SANDGATE ACQUISITION CORPORATION

(Former Name of Registrant as Specified in its Charter)

Delaware

46-1856372

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer

Identification No.)

111 Vista Creek Circle

Sacramento, California 95835

(Address of principal executive offices) (zip code)

916-860-9622

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		None		None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock.		SSOK.		None

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒

	Emerging growth company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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. ☐

Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the latest practicable date.

Class	Outstanding at November 13, 2023
Common Stock, par value $0.0001		5,021,857

Preferred Stock, par value $0.0001		-

Documents incorporated by reference: None

TABLE OF CONTENTS

Part I Financial Information		3

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	19

Part II Other Information		21

Item 1.	Legal Proceedings	21

Item 1A	Risk Factors	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Mine Safety Disclosures	21

Item 5.	Other Information	21

Item 6.	Exhibits	22

	Signatures	23

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed and Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (audited)	4

Unaudited Condensed and Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	5

Unaudited Condensed and Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	6

Unaudited Condensed and Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	7

Notes to Unaudited Condensed and Consolidated Financial Statements	8 - 15

SUNSTOCK, INC.

CONDENSED AND CONSOLIDATED BALANCE SHEETS

	September 30, 2023			December 31, 2022
	(unaudited)			(audited)
ASSETS
Current assets
Cash	$	18,081		$	16,691
Inventory – coins		1,041,875			950,637
Inventory – precious metals		753,490			801,022
Prepaid expenses		15,373			5,155

Total current assets		1,828,819			1,773,505

Property and equipment, net		258			424
Right of use lease asset		1,425			11,114

Total assets	$	1,830,502		$	1,785,043

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	566,371		$	480,137
Operating lease liability – current portion		1,425			11,114
SBA loan – current		7,526			5,047
Loans payable – related parties		12,204			6,000

Total current liabilities		587,526			502,298

SBA loan - net of current portion		142,474			144,953

Total liabilities		730,000			647,251

Stockholders’ equity
Preferred stock; $0.0001 par value, 20,000,000 shares authorized; 0 and 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		-			-
Common stock, $0.0001 par value, 100,000,000 shares authorized; 5,021,857 and 4,815,857 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		502			481
Additional paid – in capital		67,279,869			67,053,289
Accumulated deficit		(66,179,869	)		(65,915,978	)

Total stockholders’ equity		1,100,502			1,137,792
Total liabilities, convertible preferred stock, and stockholders’ equity	$	1,830,502		$	1,785,043

The accompanying notes are an integral part of the unaudited condensed and consolidated financial statements

SUNSTOCK, INC.

CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	2023			2022			2023			2022
	For the three months ended September 30,						For the nine months ended September 30,
	2023			2022			2023			2022

Revenues	$	3,003,336		$	3,287,179		$	9,501,467		$	9,807,089
Cost of revenue		2,971,787			3,256,768			9,389,237			9,633,215
Gross profit		31,549			30,411			112,230			173,874

Operating expenses
Professional fees		15,353			12,793			97,634			98,806
Compensation		-			182			-			738
Lawsuit judgment		77,863			-			77,863			-
Other operating expenses		6,907			7,979			23,388			26,319
Total operating expenses		100,123			20,954			198,885			125,863

Profit (loss) from operations		(68,574	)		9,457			(86,655	)		48,011

Other income (expense)
Unrealized loss on investments in precious metals		(21,556	)		(62,779	)		(47,532	)		(113,775	)
Interest expense		(1,443	)		(1,443	)		(4,329	)		(4,329	)
Interest expense related party		(161	)		(4,637	)		(1,775	)		(11,221	)
Gain on debt extinguishment		-			-			-			30,250
Loss on settlement of related party debt		-			-			(123,600	)		-
Total other income (expense), net		(23,160	)		(68,859	)		(177,236	)		(99,075	)

Income (loss) before provision for income taxes		(91,734	)		(59,402	)		(263,891	)		(51,064	)

Provision for income taxes		-			-			-			-

Net income (loss)	$	(91,734	)	$	(59,402	)	$	(263,891	)	$	(51,064	)

Income (loss) per share – basic and diluted	$	(0.02	)	$	(0.01	)	$	(0.05	)	$	(0.01	)

Weighted average number of common shares outstanding – basic and diluted		5,021,857			4,126,387			4,892,069			4,126,387

The accompanying notes are an integral part of the unaudited condensed and consolidated financial statements

SUNSTOCK, INC.

CONDENSED AND CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY

	Shares		Amount		Shares		Amount		In Capital		Deficit			Total
	Convertible Preferred Stock				Common Stock				Additional Paid-		Accumulated
	Shares		Amount		Shares		Amount		In Capital		Deficit			Total
Balance at December 31. 2021 (audited)		-	$	-		4,126,387	$	412	$	62,778,644	$	(62,264,145	)	$	514,911
Net income		-		-		-		-		-		102,893			102,893
Balance at March 31, 2022 (unaudited)		-	$	-		4,126,387	$	412	$	62,778,644	$	(62,161,252	)	$	617,804
Net loss				-				-		-		(94,555	)		(94,555	)
Balance at June 30, 2022 (unaudited)		-	$	-		4,126,387	$	412	$	62,778,644	$	(62,255,807	)	$	523,249
Net loss		-		-		-		-		-		(59,402	)		(59,402	)
Balance at September 30, 2022 (unaudited)		-	$	-		4,126,387	$	412	$	62,778,644	$	(62,315,209	)	$	463,847

Balance at December 31, 2022 (audited)		-	$	-		4,815,857	$	481	$	67,053,289	$	(65,915,978	)	$	1,137,792
Net loss		-		-		-		-		-		(11,646	)		(11,646	)
Balance at March 31, 2023 (unaudited)		-	$	-		4,815,857	$	481	$	67,053,289	$	(65,927,624	)	$	1,126,146
Issuance of common stock for related party notes payable		-		-		206,000		21		226,580		-			226,601
Net loss		-		-		-						(160,511	)		(160,511	)
Balance at June 30, 2023 (unaudited)		-	$	-		5,021,857	$	502	$	67,279,869	$	(66,088,135	)	$	1,192,236
Balance ,beginning value		-	$	-		5,021,857	$	502	$	67,279,869	$	(66,088,135	)	$	1,192,236
Net loss		-		-		-		-		-		(91,734	)		(91,734	)
Net income (loss)		-		-		-		-		-		(91,734	)		(91,734	)
Balance at September 30, 2023 (unaudited)		-	$	-		5,021,857	$	502	$	67,279,869	$	(66,179,869	)	$	1,100,502
Balance , Ending value		-	$	-		5,021,857	$	502	$	67,279,869	$	(66,179,869	)	$	1,100,502

The accompanying notes are an integral part of the unaudited condensed and consolidated financial statements

SUNSTOCK, INC.

CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	2023			2022
	For the nine months ended September30,
	2023			2022
OPERATING ACTIVITIES
Net income (loss)	$	(263,891	)	$	(51,064	)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Unrealized (gain) loss on investment in precious metals		47,532			113,775
Depreciation		166			806
Loss on settlement of related party debt		123,600			-
Gain on extinguishment of debt		-			(30,250	)
Changes in operating assets and liabilities
Inventories – coins		(91,238	)		(160,162	)
Prepaid expenses		(10,218	)		419
Accounts payable and accrued expenses		91,754			(78,233	)
Net cash used in operating activities		(102,295	)		(204,709	)

INVESTING ACTIVITIES
Net cash used in investing activities		-			-

FINANCING ACTIVITIES
Proceeds from loan – related parties		103,685			207,687
Net cash provided by financing activities		103,685			207,687

Net change in cash		1,390			2,978
Cash, beginning of period		16,691			30,168
Cash, end of period	$	18,081		$	33,146

SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES:
Interest	$	-		$	-
Income taxes	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Extinguishment of debt	$	-		$	30,250
Shares issued in exchange for related party debt	$	103,000		$	-

The accompanying notes are an integral part of the unaudited condensed and consolidated financial statements

SUNSTOCK, INC.

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

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.

The Company’s business plan includes the buying, selling and distribution of precious metals, primarily gold. The Company pursues a “ground to coin” strategy, whereby it seeks to acquire mining assets as well as rights to purchase mining production and to sell these metals primarily through retail channels including their own branded coins. The Company emphasizes investment in enduring assets that we believe may provide ‘resource to retail’ conversion upside. Our goal is to provide our shareholders with an exceptional opportunity to capture value in the precious metals sector without incurring many of the costs and risks associated with actual mining operations.

BASIS OF PRESENTATION

The accompanying unaudited condensed and consolidated financial statements of Sunstock, Inc. were prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all disclosures required for financial statements prepared in conformity with U.S. GAAP.

The accompanying condensed and consolidated balance sheet at December 31, 2022, has been derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed and consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022, have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and related notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the unaudited condensed and consolidated financial statements. The unaudited condensed and consolidated financial statements include all material adjustments (consisting of all normal accruals) necessary to make the condensed and consolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ended December 31, 2023 or any future periods.

USE OF ESTIMATES

The preparation of the unaudited condensed and consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made by the Company’s management include realizability and valuation of inventories and value of stock-based transactions.

CONCENTRATION OF RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of September 30, 2023 and December 31, 2022.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

INVENTORIES

INVENTORY - COINS

The Company acquires collectible coins from both companies and individuals and then marks them up for resale. The inventory is recorded at lower of cost or market or net realizable value. Inventory can fluctuate in relation to when it is purchased and when it is sold. Collectible coins inventory was $1,041,875 at September 30, 2023 compared to $950,637 at December 31, 2022.

At each balance sheet date, the Company evaluates its ending inventory quantities on hand and on order and records a provision for excess quantities and obsolescence. Among other factors, the Company considers historical demand and forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining obsolescence and net realizable value. In addition, the Company considers changes in the market value of components in determining the net realizable value of its inventory. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the excess or obsolete inventories.

INVENTORY – PRECIOUS METALS

Inventories of precious metals and coins held for investment at September 30, 2023 include $753,490 of gold and silver bullion and bullion coins and $801,022 at December 31, 2022 and are acquired and initially recorded at fair market value. The fair market value of the bullion and bullion coins is comprised of two components: 1) published market values attributable to the costs of the raw precious metal, and 2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium may be readily determined, as it is published by multiple reputable sources such as Kitco and Apmex. The Company’s inventory is subsequently recorded at fair market values on a quarterly basis. The fair value of the inventory is determined using pricing and data derived from the markets on which the underlying commodities are traded. Precious metals commodities inventories are classified in Level 1 of the valuation hierarchy as defined later in this section. The Company has continuously experienced a shortage of cash and has had significantly past due obligations. While the Company’s preference is to hold the silver and gold bullion to achieve long-term gains, the bullion is available to pay current obligations should the Company not be able to raise cash through issuance of stock or notes payable. Thus, the Company believes that including the gold and silver bullion in current assets under inventory is appropriate.

INVENTORY – PRECIOUS METALS (CONTINUED)

The change in fair value of the precious metals was included in the financial statements herein as recorded on the Company’s Statements of Operations as an unrealized loss in precious metal of $21,556 for the three months ended September 30, 2023, an unrealized loss in precious metals of $62,779 for the three months ended September 30, 2022, an unrealized loss in precious metals of $47,532 for the nine months ended September 30, 2023, and an unrealized loss of $113,775 for the nine months ended September 30, 2022.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 3 to 5 years. Any leasehold improvements are amortized at the lesser of the useful life of the asset or the lease term.

LONG-LIVED ASSETS

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No impairment charges were incurred during the nine months ended September 30, 2023 and 2022. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue, which could result in impairment of long-lived assets in the future.

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.

INCOME TAXES

The Company accounts for income taxes and the related accounts under the liability method. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Therefore, the Company has recorded a full valuation allowance against the net deferred tax assets. The Company’s income tax provision consists of state minimum taxes.

The Company recognizes any uncertain income tax positions on income tax returns at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

There are no unrecognized tax benefits included in the balance sheet that would, if recognized, affect the effective tax rate.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had $0 accrued for interest and penalties on each of the Company’s balance sheets at September 30, 2023 and December 31, 2022.

INCOME (LOSS) PER COMMON SHARE

Basic income (loss) per share represents income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income (loss) that would result from the assumed issuance. The Company had no potential common shares as of September 30, 2023 and September 30, 2022.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures the fair value of certain of its financial assets on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, such as derivative liabilities in relation to the conversion feature of notes payable.

At September 30, 2023 and December 31, 2022, the Company’s financial instruments include cash, precious metals inventory, coins inventory, SBA loan, and accounts payable and accrued expenses. The carrying amount of cash, precious metals inventory, coins inventory, SBA loan, and accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. Inventory – precious metals is at fair value measured under the Level 1 category.

PRINCIPLES OF CONSOLIDATION

We consolidate entities that we control due to ownership of a majority voting interest. All intercompany balances and transactions have been eliminated in consolidation.

NOTE 2 - GOING CONCERN

The Company has not posted annual operating income since inception. It has an accumulated deficit of $66,179,869 as of September 30, 2023. 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. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.

These unaudited condensed and consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue 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 unaudited condensed and 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.

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.

NOTE 3 – PROPERTY AND EQUIPMENT

SCHEDULE OF PROPERTY AND EQUIPMENT

	September 30, 2023			December 31, 2022
Furniture and equipment	$	58,460		$	58,460
Less – accumulated depreciation		(58,202	)		(58,036	)
Total property and equipment	$	258		$	424

Depreciation expense for the three months ended September 30, 2023 and 2022 was $55 and $211, respectively, and for the nine months ended September 30, 2023 and 2022 was $166 and $805, respectively.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

	September 30, 2023		December 31, 2022
Accrued court decision	$	338,171	$	260,308
Accrued consultant fees		133,691		131,500
Accrued audit fees		14,520		8,089
Accrued dividends – preferred stock		36,326		36,326
Expenses owed related party		-		4,631
Accrued interest payable		18,765		14,436
Accrued interest payable related party		12,431		16,176
Other accrued expenses		12,467		8,671
Total	$	566,371	$	480,137

NOTE 5 - RELATED PARTY ACTIVITY

During the nine months ended September 30, 2023, the Company was provided loans totaling $103,685 by the Company’s chief executive officer. The loans bear interest at 6% per annum. There was $12,431 in accrued interest at September 30, 2023.

During the nine months ended September 30, 2023, the Company issued 206,000 shares of common stock to the Company’s chief executive officer in exchange for $97,480 in loan principal and $5,520 in accrued interest.

During the nine months ended September 30, 2022, the Company was provided loans totaling $207,687 by the Company’s chief executive officer. The loans bear interest at 6% per annum. There was $13,292 in accrued interest at September 30, 2022.

As of September 30, 2023, the Company had $36,326 in accrued dividends on preferred stock, of which $19,141 was due to the Company’s chief executive officer.

The following table is a summary of the activity for Loans payable- related parties principal for the nine months ended September 30, 2023 and September 30, 2022:

Balance at 12/31/2021	$	153,100
Loan advances		207,687
		-
Balance at 09/30/2022	$	360,787

Balance at 12/31/2022	$	6,000
Loan advances		103,685
Loan principal converted to common stock		(97,480	)
Balance at 09/30/2023	$	12,205

NOTE 6 – COMMITMENTS AND CONTINGENCIES

The Company leases space for the Retail Store. The lease is for five years and runs through September 2023. The lease calls for payments of $1,305.60 per month for the first year, with a 3% increase per year for years two through five.

As of September 30, 2023, the lease term had expired and the Company was on a month-to-month rent. The Company is currently working on a new lease agreement.

LITIGATION

On August 21, 2020, Boustead Securities, LLC (“Boustead”) filed suit against Sunstock, Inc. (“Sunstock”) in the County of Orange, California. Boustead is an investment banking firm engaged by Sunstock on September 19, 2019 to raise equity. Boustead maintained that Sunstock owed it 87,179 shares of Preferred Stock Warrants and 9,231 shares of Common Stock Warrants. Boustead also sought general damages, interest, and costs of the suit. Sunstock believed that Boustead had not fulfilled its obligations in raising equity and vigorously contested the suit. Sunstock hired an arbitrator but there was no resolution between Sunstock and Boustead. The matter went to trial in September 2021 and on November 2, 2021 the Court determined that Sunstock owed Boustead $260,308 for warrants issued that Sunstock did not honor. $260,308 was accrued and is shown as part of accounts payable and accrued expenses in the balance sheet. See detail in Note 4 above. The warrants are no longer outstanding (see Note 9). All other monetary claims by Boustead were dismissed by the Court. The $260,308 is to be paid in cash. The Company filed an appeal of the judgment on December 9, 2021. On August 17, 2023, the Court found that Sunstock owed Boustead $338,170.87 for damages, attorneys’ fees and costs. Sunstock has accrued an additional $77,863 in the period ended September 30, 2023. $77,863 shows in the statement of operations under lawsuit judgment in operating expenses.

In December 2020, a former employee of Sunstock filed a claim with the California Labor Commission regarding claimed back pay owed. A preliminary hearing was held on January 4, 2021 and the Company is currently awaiting the next step.

INDEMNITIES AND GUARANTEES

The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain actions or transactions. The Company indemnifies its directors, officers, employees and agents, as permitted under the laws of the State of Delaware. In connection with its facility leases, the Company has agreed to indemnify its lessors for certain claims arising from the use of the facilities. The duration of the guarantees and indemnities varies, and is generally tied to the life of the agreement. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets.

CONTINGENCIES

The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. Management is actively monitoring the global situation on its financial condition, liquidity operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition or liquidity for the fiscal year 2023. However, to date there has not been a decrease in sales. The Company believes that in this time of uncertainty, individuals are buying collectible coins as a safe haven. The Company is unable to predict if such buying will continue during this time of uncertainty or if the buying will decrease as events change and evolve.

NOTE 7 – SBA LOAN

In June 2020, the Company received a $150,000 loan (less $100 expense) from the Small Business Administration (“SBA”). The loan is for thirty years, interest is 3.75% per annum, and payments of $731 are monthly beginning twenty-four months after closing.

SCHEDULE OF FUTURE PAYMENTS OF DEBT

	Remaining Loan Payments
2023	$	14,155
2024		8,940
2025		8,940
2026		8,940
2027		8,940
thereafter		200,405
Total remaining loan payments		250,320
Less: imputed interest		(100,320	)
Total loan liability		150,000
Less: current portion		(7,526	)
Long term loan liability	$	142,474

Weighted average remaining lease term		26.7 years

NOTE 8 – PPP LOAN

In February and May 2021, the Company received a $15,125 loan and a $15,125 loan from the federal Paycheck Protection Program (“PPP”), respectively. The loans are for five years, interest is 1.0% per annum, and no payments are due until maturity. The loans were forgiven in the first three months of 2022.

NOTE 9- STOCKHOLDERS’ EQUITY

COMMON STOCK

The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 of preferred stock.

During the nine months ended September 30, 2023, the Company issued 206,000 shares of its common stock to its chief executive officer for the conversion of $97,480 of related party notes payable and $5,520 of accrued interest related party.

During the nine months ended September 30, 2022, the Company issued no shares of its common stock.

NOTE 10 – SUBSEQUENT EVENTS

The Company follows the guidance in FASB ASC Topic 855, Subsequent Events (“ASC 855”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before the consolidated financial statements are issued or are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity evaluates events or transactions that may occur for potential recognition or disclosure in the unaudited condensed and consolidated financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its condensed and consolidated financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The Company has no subsequent events as of the date of this report.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2023, 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

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.

Going Concern

The Company has not posted operating income and has not generated cash from operations since inception. It has an accumulated deficit of $66,179,869 as of September 30, 2023. The Company did not generate cash flow from operations for the nine months ended September 30, 2023 and the year ended 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 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.

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, 2022.

Results of Operations

Discussion of the Three Months ended September 30, 2023 and 2022

The Company generated revenues during the three months ended September 30, 2023 of $3,003,336 as compared to $3,287,179 in revenues posted for the three months ended September 30, 2022. The decrease in revenues is due to lower than expected sales in September 2023.

For the three months ended September 30, 2023 and 2022, cost of sales were $2,971,787 and $3,256,768, respectively, which decrease was driven by the decrease in revenues as disclosed above. Professional fees increased to $15,353 from $12,793 for the three months ended September 30, 2023 and 2022, respectively. Compensation decreased to $0 from $182 for the three months ended September 30, 2023 and 2022, respectively. Lawsuit judgment increased to $77,863 from $0 for the three months ended September 30, 2023 and 2022, respectively, due to a final judgment in relation to the Boustead lawsuit. Other operating expenses decreased to $6,907 from $7,979 for the three months ended September 30, 2023 and 2022, respectively.

Interest expense was $1,443 and $1,443 for the three months ended September 30, 2023 and 2022, respectively. Interest expense related party decreased to $161 for the three months ended September 30, 2023 from $4,637 for the three months ended September 30, 2022.

Unrealized loss on investments in precious metals was $21,556 for the three months ended September 30, 2023 compared to an unrealized loss of $62,779 for the three months ended September 30, 2022 due to a lesser decrease in the price of bullion.

During the three months ended September 30, 2023, the Company posted a net loss of $91,734 as compared to a net loss of $59,402 for the three months ended September 30, 2022. Such change is primarily related to lawsuit judgment in 2023 partially offset by lower unrealized loss on investments in precious metals in 2023 and lower interest expense related party in 2023.

Discussion of the Nine Months ended September 30, 2023 and 2022

The Company generated revenues during the nine months ended September 30, 2023 of $9,501,467 as compared to $9,807,089 in revenues posted for the nine months ended September 30, 2022. The decrease in revenues is due to lower than expected sales in September and June 2023.

For the nine months ended September 30, 2023 and 2022, cost of sales were $9,389,237 and $9,633,215, respectively, which decrease was driven by the decrease in revenues as disclosed above. Professional fees decreased to $97,634 from $98,806 for the nine months ended September 30, 2023 and 2022, respectively. Compensation decreased to $0 from $738 for the nine months ended September 30, 2023 and 2022, respectively. Lawsuit judgement increased to $77,863 from $0 for the nine months ended September 30, 2023 and 2022, respectively, due to a final judgment in relation to the Boustead lawsuit. Other operating expenses decreased to $23,388 from $26,319 for the nine months ended September 30, 2023 and 2022, respectively.

Interest expense was $4,329 and $4,329 for the nine months ended September 30, 2023 and 2022, respectively. Interest expense related party decreased to $1,775 for the nine months ended September 30, 2023 from $11,221 for the nine months ended September 30, 2022.

Unrealized loss on investments in precious metals was $47,532 for the nine months ended September 30, 2023 compared to an unrealized loss of $113,775 for the nine months ended September 30, 2022 due to a lesser decrease in the price of bullion.

During the nine months ended September 30, 2023, the Company posted a net loss of $263,891 as compared to a net loss of $51,064 for the nine months ended September 30, 2022. Such change is primarily related to lower gross profit in 2023, lawsuit judgment in 2023, loss on settlement of related party debt in 2023, and gain on debt extinguishment in 2022 compared to none in 2023, offset by lower unrealized loss in precious metals in 2023 and lower interest expense related party in 2023.

Liquidity and Capital Resources

As of September 30, 2023, the Company had $18,081 in cash and $1,795,365 in inventory of precious metals and coins compared to $16,691 in cash and $1,751,659 in inventory of precious metals and coins at December 31, 2022.

Net cash used in operating activities totaled $102,295 during the nine months ended September 30, 2023 as compared to net cash used in operating activities of $204,709 during the nine months ended September 30, 2022. Consolidated net loss was $263,891 for the nine months ended September 30, 2023 as compared to consolidated net loss of $51,064 for the nine months ended September 30, 2022. Explanation of the difference between these nine months of 2023 and 2022 are explained above in the results of operations of the Company.

Changes in the adjustments to reconcile net income (net loss) for the nine months ended September 30, 2023 and 2022, respectively, consist of unrealized gain or loss on investment in precious metals, depreciation, and gain on extinguishment of debt.

Unrealized loss on investment in precious metals was $47,532 for the nine months ended September 30, 2023 and unrealized loss on investment in precious metals was $113,775 for the nine months ended September 30, 2022. Deprecation was $166 and $806, respectively, for the nine months ended September 30, 2023 and 2022. Gain on extinguishment of debt was $0 and $30,250, respectively, for the nine months ended September 30, 2023 and 2022. Loss on settlement of related party debt was $123,600 and $0, respectively, for the nine months ended September 30, 2023 and 2022.

Changes in assets and liabilities for inventories, prepaid expenses, and accounts payable and accrued expenses totaled a decrease of $9,702 for the nine months ended September 30, 2023 and a decrease of $237,976 for the nine months ended September 30, 2022.

No cash was used in investing activities for the nine months ended September 30, 2023 and 2022, respectively.

Net cash provided by financing activities was $103,685 for the nine months ended September 30, 2023 and net cash provided by financing activities was $207,687 for the nine months ended September 30, 2022, both from notes payable related party.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information not required to be filed by Smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Management must evaluate its internal controls over financial reporting, as required by Sarbanes-Oxley Act, Section 404 (a). The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles or GAAP.

As of September 30, 2023, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of the Company’s internal controls over financial reporting that adversely affected its internal controls and that may be considered to be material weaknesses.

Material Weaknesses:

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 the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified are:

1. the Company does not have accounting personnel that have adequate technical accounting skills to identify terms in agreements that would have material accounting implications on the Company’s consolidated financial statements in accordance with US GAAP, such as permanent vs. temporary equity treatment of the Company’s preferred stock in accordance with ASC 480.

2.the Company does not obtain and retain supporting documentation over the precious metal trade dates and quantities traded and does not properly record the realized gain/loss on the trade according to the fair market value of the items traded on a given date.

3.the Company has an inadequate number of personnel that could accurately and timely record and report the Company’s consolidated financial statements in accordance with US GAAP.

ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)

4. the Company does not perform formal risk assessments over financial reporting and does not evaluate its internal control processes.

Notwithstanding the existence of these material weaknesses in internal control over financial reporting, we believe that the financial statements in this Quarterly on Form 10-Q fairly present, in all material respects, our financial condition in conformity with U.S. generally accepted accounting principles (GAAP). Further, we do not believe the material weaknesses identified had an impact on prior financial statements.

Material Weaknesses:

Remediation:

As part of our ongoing remedial efforts, we have and will continue to, among other things:

1. Expand our accounting policy and controls organization by hiring qualified accounting and finance personnel;

2. Increase our efforts to educate both our existing and expanded accounting policy and control organization on the application of the internal control structure;

3. Emphasize with management the importance of our internal control structure;

4. Seek outside consulting services where our existing accounting policy and control organization believes the complexity of the existing exceeds our internal capabilities.

5. Plan to implement improved accounting systems.

We believe that the foregoing actions will improve our internal control over financial reporting, as well as our disclosure controls and procedures. When funds permit, we intend to perform such procedures and commit such resources as necessary to continue to allow us to overcome or mitigate these material weaknesses such that we can make timely and accurate quarterly and annual financial filings until such time as those material weaknesses are fully addressed and remediated.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting during its current fiscal quarter that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On August 21, 2020, Boustead Securities, LLC (“Boustead”) filed suit against Sunstock, Inc. (“Sunstock”) in the County of Orange, California. Boustead is an investment banking firm engaged by Sunstock on September 19, 2019 to raise equity. Boustead maintained that Sunstock owed it 87,179 shares of Preferred Stock Warrants and 9,231 shares of Common Stock Warrants. Boustead also sought seeking general damages, interest, and costs of the suit. Sunstock believed that Boustead had not fulfilled its obligations in raising equity and vigorously contested the suit. Sunstock hired an arbitrator but there was no resolution between Sunstock and Boustead. The matter went to trial in September 2021 and on November 2, 2021 the Court determined that Sunstock owed Boustead $260,308 for warrants issued that Sunstock did not honor. $260,308 was accrued and is shown as part of accounts payable and accrued expenses in the balance sheet. See detail in Note 4 above. The warrants are no longer outstanding. All other monetary claims by Boustead were dismissed by the Court. The $260,308 is to be paid in cash. The Company filed an appeal of the judgment on December 9, 2021. On August 17, 2023, the Court found that Sunstock owed Boustead $338,170.87 for damages, attorneys’ fees and costs. Sunstock has accrued an additional $77,863 in the period ended September 30, 2023. $77,863 shows in the statement of operations under lawsuit judgment in operating expenses.

ITEM 1A. RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the nine months ended September 30, 2023, the Company issued 206,000 unregistered securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) Not applicable.

(b) Item 407(c)(3) of Regulation S-K:

During the nine months covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

ITEM 6. EXHIBITS

(a) Exhibits

31.1		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements 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.

	SUNSTOCK, INC.

Dated November 13, 2023	By:	/s/ Jason C. Chang
		Jason C. Chang
		President, Chief Executive Officer, Chief Financial Officer

Dated November 13, 2023	By:	/s/ Ramnik Clair
		Ramnik Clair
		Vice President, Board Member

Sunstock, Inc. 10-Q