HEALTHY EXTRACTS INC. 10-Q

ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission. Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. 13 Summary Overview We were incorporated on December 19, 2014 in the State of Nevada. We had revenues of $1,465,782 in the year ended December 31, 2021 and $1,276,559 in the year ended December 31, 2020. We had revenues of $463,386 for the three months ended March 31, 2022. On February 4, 2019, we acquired BergaMet NA, LLC, a Delaware limited liability company (“BergaMet”). BergaMet is a wholly-owned subsidiary through which we conduct our nutraceuticals business. On April 3, 2020, we acquired Ultimate Brain Nutrients, LLC, a Delaware limited liability company (“UBN”). UBN is a wholly-owned subsidiary through which we conduct our plant-based neuro-products business. Overview BergaMet NA, LLC On February 4, 2019, we issued and exchanged shares of our common stock for all of the outstanding equity securities of BergaMet. BergaMet is an established company that was already generating revenues when we acquired it. Ultimate Brain Nutrients, LLC On April 3, 2020, we issued and exchanged shares of our common stock for all of the outstanding equity securities of UBN. UBN is a science-based company that develops unique, plant-based health technology neuro-products that provide natural brain solutions. UBN has numerous proprietary products, with four unique patent-pending formulations and two patents issued. Going Concern As a result of our financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2021 and 2020 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. From inception (December 19, 2014) through the end of December 31, 2021, we have incurred accumulated net losses of $14,943,620. In order to continue as a going concern we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues. If we are not able to do this we may not be able to continue as an operating company. At our current revenue and burn rate, we have an immediate cash need, and thus we must raise capital by issuing debt or through the sale of our stock. However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements. Results of Operations for the Three Months Ended March 31, 20221 and 2021 Introduction We had revenues of $463,386 for the three months ended March 31, 2022, compared to $170,433 for the three months ended March 31, 2021. Revenues for the three months ended December 31, 2021 were $671,589. Our cost of revenue for the three months ended March 31, 2022 were $138,681, compared to $41,442 for the three months ended March 31, 2021. 14 Our operating expenses were $370,357 for the three months ended March 31, 2022, compared to $716,087 for the three months ended March 31, 2021, a decrease of $345,729, or 48%. Our operating expenses consisted entirely of general and administrative expenses. Revenues and Net Operating Loss Our revenue, operating expenses, net operating loss, and net gain (loss) for the three months ended March 31, 2022 and 2021 were as follows: Three Months Ended Three Months Ended March 31, March 31, 2022 2021 Revenue $ 463,386 $ 170,433 Cost of Revenue 138,681 41,442 Gross Profit 324,705 128,991 Operating expenses: General and administrative 370,357 716,087 Total operating expenses 370,357 716,087 Other income (expense) Interest expenses, net of interest income (32,957) (15,759 Change in fair value on derivative 78,978 (690,780) Loss on extinguishment of debt - - SBA Loan Forgiveness - - Impairment of Assets - - Gain on sale of asset 2,643 - Total other income (expense) 48,664 (706,540) Net income (loss) $ 3,011 $ (1,293,636) Revenues We had revenues of $463,386 for the three months ended March 31, 2022, compared to $170,433 for the three months ended March 31, 2021, a, increase of $292,953, or 172%. Revenues for the three months ended December 31, 2021 were $671,589. Our cost of revenue for the three months ended March 31, 2022 were $138,681, or 30% of revenue, compared to $41,442 for the three months ended March 31, 2021, or 24% of revenue. Cost of Revenue Cost of revenue was $138,681 for the three months ended March 31, 2022, compared to $41,442 for the three months ended March 31, 2021, an increase of $97,239, or 235%. Gross profit was $324,705 for the three months ended March 31, 2022, compared to $128,991 for the three months ended March 31, 2021, an increase of $195,714, or 152%. Cost of revenue as a percentage of revenues was 30% for the three months ended March 31, 2022, compared to 24% for the three months ended March 31, 2021. General and Administrative General and administrative expenses were $370,357 for the three months ended March 31, 2022, compared to $716,087 for the three months ended March 31, 2021. In the three months ended March 31, 2022, general and administrative expenses consisted mainly of advertising $162,329, consulting fees $97,750, professional fees 43,870, and salary and wages $35,489. In the three months ended March 31, 2021, general and administrative expenses 15 consisted mainly of consulting fees $172,500, professional fees $368,960, salary and wages $30,446, advertising $82,729, and postage $7,625. Other Income (Expense) Other income (expense) was $48,664 for the three months ended March 31, 2022, compared to $(706,540) for the three months ended March 31, 2021, an increase of $755,204, or 107%. In the three months ended March 31, 2022, other income (expense) consisted of interest expenses, net of interest income of $(32,957), change in fair value on derivative of $78,978, and gain on sale of asset of $2,643. In the three months ended March 31, 2021, other income (expense) consisted of interest expense, net of interest income of $(15,759) and change in fair value on derivative of $(690,780). Change in fair value of derivative was related to the conversion of convertible debts into common stock shares . Net Income (Loss) Net income (loss) was $3,011 and $(1,293,636), or $0.00 and $0.00 per share, for the three months ended March 31, 2022 and 2021. Our net income (loss) various from period to period primarily because of the change in fair value on derivative. Liquidity and Capital Resources Introduction During the three months ended March 31, 2022, we were unable to generate sufficient revenues and had negative operating cash flows. Our cash on hand as of December 31, 2021 was $222,098, and as of March 31, 2022 was $92,286. The decrease in cash on hand was primarily from our net cash used in operating activities of $(108,408), plus net cash used in investing activities of $(7,987) and net cash provided by financing activities of $(13,417). Our monthly cash flow burn rate for 2021 (not including inventory purchases) was approximately $37,000, and for the three months ended March 31, 2022 it was approximately $36,000. We have strong short and medium term cash needs. We anticipate that these needs will be satisfied through increased revenues and the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs. Our cash, current assets, total assets, current liabilities, and total liabilities as of March 31, 2022 and December 31, 2021, respectively, are as follows: March 31, December 31, Increase/ 2022 2021 (Decrease) Cash $ 92,286 $ 222,098 $ (129,812) Total Current Assets 2,209,981 2,313,404 (103,423) Total Assets 2,949,158 3,029,579 (80,421) Total Current and Total Liabilities 503,826 558,841 (55,015) Our total current assets and total assets decreased during the three months ended March 31, 2022 primarily as a result of our decrease in cash of $129,812 and accounts receivable of $24,169, offset by our increase in inventory of $50,558. Our total current and total liabilities decreased by $55,015 during the three months ended March 31, 2022 primarily because of a decrease in accrued liabilities of $54,767 and derivative liabilities of $78,978, offset by an increase in accounts payable of $68,153 and convertible debt of $35,000. Our accumulated deficit decreased during the three months ended March 31, 2022 by $3,011 to $14,940,609. In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts. 16 Cash Requirements Our cash on hand as of March 31, 2022 was $92,286. Based on our current level of revenues and monthly burn rate of approximately $36,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings. Sources and Uses of Cash Operating Activities We had net cash used in operating activities of $(108,408) for the three months ended March 31, 2022, compared to $(635,261) for the three months ended March 31, 2021. We use our cash for normal business operations. Our net cash used in operating activities for the three months ended March 31, 2022 consisted of our net gain of $3,011 plus our increase in accounts payable of $68,153, offset by our change in fair value on derivative liability of $(78,978), decrease in accrue liabilities of $(54,767), and decrease in inventory of $(50,558). Our net cash used in operating activities for the three months ended March 31, 2021 consisted of our net loss of $1,293,636, plus a decrease in inventory of $61,961, offset by a change in fair value on derivative liability of $690,780 and accrued interest payable of $50,298. Investing Activities We had $(7,987) in cash flows provided by investing activities for the three months ended March 31, 2022, compared to $(37,888) for the three months ended March 31, 2021. Financing Activities Our net cash provided by financing activities for the three months ended March 31, 2022 was $(13,417), compared to $846,880 for the three months ended March 31, 2021. Our net cash provided by financing activities consisted of proceeds from the issuance of convertible debt of $202,000, offset primarily by payments for repayment of convertible debt of $(167,000). ITEM 3 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, we are not required to provide the information required by this Item.