HEALTHY EXTRACTS INC. 10-K

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 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 Annual Report 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 audited financial statements and related notes elsewhere in this Form 10-K, which have been prepared in accordance with accounting principles generally accepted in the United States. Overview Since our acquisitions of Bergamet and UBN, we have focused on increasing revenue, maintaining our margins, and generating positive cash flow from our existing operations. In part, at least with respect to Bergamet and UBN, we have been successful in meeting these objectives and our business has remained relatively unchanged. In October 2025, we acquired Gummy USA, which accelerated our revenue growth and increased our gross profit. We are a platform for acquiring, developing, patenting, marketing, and distributing plant-based nutraceuticals. Our proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health. Our products have not been evaluated by the FDA or any similar regulatory body for safety and efficacy. Our mission is to acquire or create products with health and performance benefits that have mass consumer appeal. Gummy USA added contract manufacturing and formulation services to our offering, and we now operate at the intersection of nutraceutical manufacturing, drug delivery innovation, and precision formulation technologies. Guided by this mission, our first two acquisitions (in 2019 and 2020, respectively) formed our historical operating subsidiaries, BergaMet NA, LLC, which offers nutraceutical heart and immune health products, and UBN, which offers nutraceutical products for brain health. Our Gummy USA acquisition (in 2025), which is operated as our subsidiary HE Gummy USA, Inc., added technical capabilities and a manufacturing architecture to support our own needs as well as those of third-parties. 46 Our Financial Condition and Going Concern Issues Our net loss from inception to December 31, 2025 was $20,121,462, and we had limited cash resources at December 31, 2025 of $146,935. Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our auditor’s report reflects that our ability to continue as a going concern is dependent upon our ability to raise additional capital from the sale of common stock or other means and, ultimately, the achievement of significant operating revenues. If we are unable to continue as a going concern, our business will fail and stockholders will lose their investment in our company. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, financing will likely be dilutive to our stockholders. Results of Operations for the Years Ended December 31, 2025 and 2024 Introduction We had revenues of $4,511,997 for the year ended December 31, 2025, compared to $3,113,279 for the year ended December 31, 2024. Our cost of revenue for the year ended December 31, 2025 was $2,089,506, compared to $1,201,959 for the year ended December 31, 2024. Our operating expenses were $3,366,341 for the year ended December 31, 2025, compared to $2,094,469 for the year ended December 31, 2024. Our operating expenses consisted entirely of general and administrative expenses. Our net income (loss) was $(881,119) for the year ended December 31, 2025, compared to $(840,671) for the year ended December 31, 2024. Revenues and Net Operating Loss Our revenue, cost of revenue, gross profit, operating expenses, other income (expense), and net loss for the years ended December 31, 2025 and 2024 were as follows: Year Ended Year Ended December 31, December 31, 2025 2024 Revenue $ 4,511,997 $ 3,113,279 Cost of Revenue 2,089,506 1,201,959 Gross Profit 2,422,491 1,911,320 Operating expenses: General and administrative 3,366,341 2,094,469 Total operating expenses 3,366,341 2,094,469 Other income (expense) Interest expenses, net of interest income (210,279) (186,252) Change in fair value on derivative 273,010 (471,270) Total other income (expense) 62,731 (657,522) Net income (loss) $ (881,119) $ (840,671) 47 Revenues We had revenues of $4,511,997 for the year ended December 31, 2025, compared to $3,113,279 for the year ended December 31, 2024, an increase of $1,398,719, or 45%. We expect revenue growth to increase as our direct consumer sales and marketing efforts continue to perform. Cost of Revenue Our cost of revenue for the year ended December 31, 2025 was $2,089,506, compared to $1,201,959 for the year ended December 31, 2024, an increase of $887,547, or 74%. Gross profit for the year ended December 31, 2025 was $2,422,491, compared to $1,911,320 for the year ended December 31, 2024, an increase of $511,172, or 27%. Cost of revenue as a percentage of revenues was 46% for the year ended December 31, 2025, compared to 39% for the year ended December 31, 2024. General and Administrative Our general and administrative expenses were $3,366,341 for the year ended December 31, 2025, compared to $2,094,469 for the year ended December 31, 2024, an increase of $1,271,872, or 108%. In the year ended December 31, 2025, general and administrative expenses consisted mainly of advertising of $903,952, consulting fees of $506,843, stock-based compensation $481,782, salaries and wages of $371,679 and accounting and legal fees of $296,675. In the year ended December 31, 2024, general and administrative expenses consisted mainly of advertising of $697,533, consulting fees of $405,050, stock-based compensation $241,858, salaries and wages of $191,200 and accounting and legal fees of $261,076. For the year ended December 31, 2025, the increase was due in part to additional advertising spends and stock-based compensation expense recognition . Other Income (Expense) Other income (expense) was $62,731 for the year ended December 31, 2025, compared to $(657,522) for the year ended December 31, 2024, a decrease of $720,253, or 146%. In the year ended December 31, 2025, other income (expense) consisted of interest expense, net of interest income of ($210,279) and change in fair value on derivative of $273,010. In the year ended December 31, 2024, other income (expense) consisted of interest expense, net of interest income of ($186,252) and change in fair value on derivative of $(471,270). Change in fair value of derivative was related to reduction in convertible debts balances and the conversion of convertible debts into shares of common stock. Net Income (Loss) Net income (loss) was $(881,119), or $(0.09) per share, for the year ended December 31, 2025, compared to $(840,671), or $(0.28) per share, for the year ended December 31, 2024. Our net income (loss) varies from period to period primarily because of the change in fair value on derivative and our increase in general and administrative expenses. 48 Liquidity and Capital Resources Introduction During the year ended December 31, 2025, we had significant positive operating cash flows. Our cash on hand as of December 31, 2024 was $146,935. While we had positive net cash from operations for the years ended December 31, 2025 and 2024, 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 consistently satisfy our cash flow needs. Our cash, current assets, total assets, and current and total liabilities as of December 31, 2025 and 2024 were as follows: December 31, December 31, Increase/ 2024 2024 (Decrease) Cash $ 146,935 $ 112,020 $ 34,916 Total Current Assets 1,327,317 1,659,387 (332,070) Total Assets 27,824,664 2,377,973 25,446,691 Total Current and Non-current Liabilities 3,795,099 1,967,596 1,827,503 Our total current assets decreased slightly during the year ended December 31, 2025 primarily as a result of our decrease in inventory of $517,859, offset in part by an increase in accounts receivable of $176,747 and cash of $34,916. Our total assets increased significantly as a result of our increase in fixed assets of $4,229,638, goodwill of $20,930,662, and right of use asset, net of $513,929. Our accumulated deficit increased during the year ended December 31, 2025, by $881,119 to $20,121,462. 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. Cash Requirements Our cash on hand as of December 31, 2025 was $146,935. While we had positive net cash from operations for the years ended December 31, 2025 and 2024, we have both short- and medium-term cash needs and 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 $165,520 for the year ended December 31, 2025, compared to $281,968 for the year ended December 31, 2024. We use our cash for normal business operations. Our net cash from operating activities for the year ended December 31, 2025 consisted of our net loss of $881,119, offset by increase in inventory of $546,161, and common stock issued for services of $384,150 and warrants issued for services of $309,500, offset in part by our change in fair value on derivative liability of $273,010. Our net cash from operating activities for the year ended December 31, 2024 consisted of our net loss of $840,671, offset in part by our change in fair value on derivative liability of $471,270, warrants issued for services of $301,858, and our decrease in inventory of $265,067. 49 Investing Activities Our net cash provided by investing activities was $56,301 for the year ended December 31, 2025, compared to zero for the year ended December 31, 2024. Our net cash provided by investing activities for the year ended December 31, 2025 consisted of the Gummy USA merger of $75,603 and fixed asset purchases of $19,302. Financing Activities Our net cash used in financing activities for the year ended December 31, 2025 was $186,906, compared to $189,389 for the year ended December 31, 2024. Our net cash used in financing activities for the year ended December 31, 2025 consisted primarily of proceeds from the issuance of notes payable related party of $400,000 and proceeds from the issuance of notes payable of $160,000, offset by payments for repayment of convertible debt of $212,780, payments for repayment of notes payable of $456,670, and payments for repayment of notes payable related party of $77,455. ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item. 50