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. Overview We are a platform for acquiring, developing, patenting, marketing, and distributing plant-based nutraceuticals. Our products have not been evaluated by the FDA or any similar regulatory body for safety and efficacy. Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health. Our mission is to acquire or create products with health and performance benefits that have mass consumer appeal. Guided by this mission, our first two acquisitions formed our current operating subsidiaries, Bergamet, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health. Based on published research from third-party sources, we believe our Bergamet products have been shown to support heart health, support immune response, and address metabolic syndrome. Our Financial Condition and Going Concern Issues 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, 2023 and 2022 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, 2023, we have incurred accumulated net losses of $18,399,673. 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 24 our existing operating expenses and capital requirements. Results of Operations for the Three Months Ended March 31, 2024 and 2023 Introduction We had revenues of $688,786 for the three months ended March 31, 2024, as compared to $614,943 for the three months ended March 31, 2023, an increase of $73,842, or 12%. Our cost of revenue was $280,428 for the three months ended March 31, 2024, as compared to $337,102 for the three months ended March 31, 2023, a decrease of $56,674, or 17%. Revenues and Net Operating Loss Our revenues, operating expenses, and net operating loss for the three months ended March 31, 2024 and 2023, were as follows: Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Increase/ (Decrease) Revenue $ 688,786 $ 614,943 $ 73,842 Cost of Revenue 280,428 337,102 (56,674) Operating expenses: General and administrative 470,431 683,029 (212,598) Total operating expenses 470,431 683,029 (212,598) Net operating loss Other income/(expense) (799,185) (173,968) 625,217 Net gain/(loss) $ (861,259) $ (579,157) $ 282,102 Revenues We had revenues of $688,786 for the three months ended March 31, 2024, as compared to $614,943 for the three months ended March 31, 2023, an increase of $73,842, or 12%. The increase in revenues was mainly due to our increased focus on the Amazon marketplace. Cost of Revenue Our cost of revenue was $280,428 for the three months ended March 31, 2024, as compared to $337,102 for the three months ended March 31, 2023, a decrease of $56,674, or 17%, and consisted of wholesale product costs and packaging. General and Administrative General and administrative expense was $470,431 and $683,029 for the three months ended March 31, 2024 and 2023, respectively, a decrease of $212,598, or 31%. For the three months ended March 31, 2024, general and administrative expenses consisted mainly of advertising fees of $127,849, consulting fees of $105,000, accounting and legal fees of $73,631, stock based compensation of $58,314, and salaries and wages of $44,123. For the three months ended March 31, 2023, general and administrative expenses consisted mainly of advertising of $175,870, consulting fees of $193,405, professional fees of $104,233, and salaries and wages of $35,157. 25 Net Operating Gain/Loss As a result of the items discussed above, our net operating loss was $62,073 for the three months ended March 31, 2024, and our net operating loss was $405,188 for the three months ended March 31, 2023, an decrease of $343,115, or 85%. Other Income and Expense Other income (expense) was $(799,185) and $(173,968) for the three months ended March 31, 2024 and 2023, respectively, an increase of $625,217, or 359%. For the three months ended March 31, 2024, our other income (expense) consisted of interest expenses, net of interest income of $(42,557) and change in fair value on derivative of $(756,628). For the three months ended March 31, 2023, our other income (expense) consisted of interest expenses, net of interest income of $(89,060) and change in fair value on derivative of $(84,908). Net Gain/(Loss) Our net gain (loss) for the three months ended March 31, 2024 was $(861,259), or $(0.30) per share, and our net gain (loss) for the three months ended March 31, 2023, was $(579,157), or $(0.20) per share, an increase of $282,102, or 49%. Liquidity and Capital Resources Introduction During the three months ended March 31, 2024, we were unable to generate sufficient revenues and had negative operating cash flows. Our cash on hand as of December 31, 2023 was $19,441 and as of March 31, 2024 was $87,312. While we had positive net cash from operations for the three months ended March 31, 2024, our monthly cash flow burn rate for the year ended December 31, 2023 was $35,000. We have both 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, 2024, and December 31, 2023, respectively, are as follows: March 31, December 31, Increase/ 2024 2023 (Decrease) Cash $ 87,312 $ 19,441 $ 67,871 Total Current Assets 1,869,978 1,899,678 (29,700) Total Assets 2,604,765 2,635,014 (30,249) Total Current and Total Liabilities 2,453,120 1,680,424 772,696 Our total current assets and total assets decreased slightly during the three months ended March 31, 2024, primarily as a result of our decrease in inventory of $73,469, offset in part by an increase in cash of $67,871. Our accumulated deficit increased during the three months ended March 31, 2024, by $861,259 to $19,260,931. 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. 26 Cash Requirements Our cash on hand as of March 31, 2024 was $87,312. Based on our current level of revenues and monthly burn rate for 2023 of approximately $35,000 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 from operating activities of $18,724 for the three months ended March 31, 2024, compared to net cash used in operating activities of $342,876 for the three months ended March 31, 2023. We use our cash for normal business operations. Our net cash from operating activities for the three months ended March 31, 2024, consisted of our net loss of $861,259, offset in part by our change in fair value on derivative liability of $756,628 and our decrease in inventory of $73,469. Our net cash used in operating activities for the three months ended March 31, 2023, consisted of our net loss of $579,157, offset in part by our increase in inventory of $164,922 and our change in fair value on derivative liability of $84,908. Investing Activities We had zero cash flows provided by investing activities for the three months ended March 31, 2024 and 2023. Financing Activities Our net cash provided by financing activities for the three months ended March 31, 2024 was $49,146, compared to $490,429 for the three months ended March 31, 2023. Our net cash provided by financing activities consisted of proceeds from the issuance of notes payable of $118,132, proceeds from the issuance of notes payable related party of $95,000, and proceeds from the issuance of convertible debt of $19,445, offset by repayment of notes payable of $183,430. 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.