This Management's Discussion and Analysis ("MD&A") is intended to provide an understanding of our financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. This discussion should be read in conjunction with the Condensed Consolidated Unaudited Financial Statements contained in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related notes and MD&A of Financial Condition and Results of operations appearing in our Annual Report on Form 10-K as of and for the years ended December 31, 2021 and 2020. The results of operations for an interim period may not give a true indication of results for future interim periods or for the year.

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. All forward-looking statements are based on management's existing beliefs about present and future events outside of management's control and on assumptions that may prove to be incorrect. If any underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or intended. We undertake no obligation to publicly update or revise any forward-looking statements to reflect actual results, changes in expectations or events or circumstances after the date this Quarterly Report on Form 10-Q is filed.

When this report uses the words "we," "us," "our," or "FICAAR" and the "Company," they refer to Ficaar, Inc.





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 Three Months Ended June 30, 2022 to Three Months Ended June 30,
2021



Results of Operations



                           Three Months ended June 30,                        Percent
                              2022               2021           Change        Change
Revenues                 $      600,495       $         -     $  600,495          100%
Gross profit                    333,816                 -        333,816          100%
Operating expenses             (811,798 )          (5,825 )     (805,973 )     13,836%
Other income (expense)         (177,448 )        (240,406 )      (62,958 )        -26%
Net loss                 $     (655,430 )     $  (246,231 )   $ (409,199 )        166%

Net revenues for the three months ended June 30, 2022 were $600,495 as compared to $-0- for the three months ended June 30, 2021 which resulted from the merger of HyEdge.

Gross profit for the three months ended June 30, 2022 was $333,816 as compared to $-0- for the three months ended June 30, 2021.

Total operating expenses were $811,798 for the three months ended June 30, 2022 compared to $5,825 for the three months ended June 30, 2021. The 13,836% increase was primarily attributable to the additional operating expenses resulting from the merger of HyEdge, specifically $488,425 in sales and marketing expenses and $142,393 in payroll and compensation.

Other income (expense) was $(177,448) for the three months ended June 30, 2022 compared to $(240,406) for the three months ended June 30,2021. The $62,958 decrease was primarily the reduction in derivative expenses associated with embedded liabilities in convertible debt borrowings.

For the three months ended June 30, 2022, the Company reported a net loss of $655,430 as compared to a net loss of $246,231 for the three months ended June 30, 2021. The $409,199 increase in net loss for the three months ended June 30, 2022 mainly arose from the additional net loss resulting from the merger of HyEdge.











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Comparison of Six Months Ended June 30, 2022 to Six Months Ended June 30, 2021





Results of Operations



                           Six Months ended June 30,                          Percent
                              2022              2021           Change         Change
Revenues                 $     1,196,118     $        -     $  1,196,118          100%
Gross profit                     653,723              -          653,723          100%
Operating expenses            (1,743,012 )      (12,858 )     (1,730,154 )     13,456%
Other income (expense)          (373,014 )     (242,607 )       (130,407 )         54%
Net loss                 $    (1,462,303 )   $ (255,465 )   $ (1,206,838 )        472%

Net revenues for the six months ended June 30, 2022 were $1,196,118 as compared to $-0- for the six months ended June 30, 2021 which resulted from the merger of HyEdge.

Gross profit for the six months ended June 30, 2022 was $653,723 as compared to $-0- for the six months ended June 30, 2021.

Total operating expenses were $1,743,012 for the six months ended June 30, 2022 compared to $12,858 for the six months ended June 30, 2021. The 13,456% increase was primarily attributable to the additional operating expenses resulting from the merger of HyEdge, specifically $1,069,467 in sales and marketing expenses and $281,019 in payroll and compensation.

Other income (expense) was $(373,014) for the six months ended June 30, 2022 compared to $(242,607) for the six months ended June 30,2021. The $130,407 increase was primarily $269,488 in amortization of debt discount offset by $217,011 decrease in derivative expenses associated with embedded liabilities in convertible debt and $84,082 increase in interest expenses associated with borrowings.

For the six months ended June 30, 2022, the Company reported a net loss of $1,462,303 as compared to a net loss of $255,465 for the six months ended June 30, 2021. The $1,206,838 increase in net loss for the six months ended June 30, 2022 mainly arose from the additional net loss resulting from the merger of HyEdge.

Liquidity and Capital Resources

As of June 30, 2022, the Company had $73,275 in cash to fund its operations. The Company reported working capital deficit of $5,424,691 at June 30, 2022 as compared to a working capital deficit of $4,855,836 at December 31, 2021, representing an increase in working capital deficit by $568,855.

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 or all 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.











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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, which dilution may be significant depending on the terms of the transactions.





Operating Activities:

For the six months ended June 30, 2022, net cash flow used by operating activities was $(697,579) compared to $(11,198) for the six months ended June 30, 2021. The decreases in cash flow used for operating activities for 2022 period were primarily due to increases in operating expenditures resulting from the HyEdge merger.

Investing and Financing Activities:

Net cash flows provided by (used) in investing and financing activities for the six months ended June 30, 2022 were $520,000 from sales of common stock shares compared to $11,198 in net payments from borrowings for the six months ended June 30, 2021.

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 $3,236,411 as of June 30, 2022. These conditions raise substantial doubt about the Company's ability to continue absent raising sufficient capital to fund continued operations. Management expects to incur additional losses in the foreseeable future and recognizes the need to raise capital to remain viable. The accompanying financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Transaction with Related Parties:





None



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 three months June 30, 2022 had a material effect on our operations.











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