10-K: Healthy Extracts Inc. Reports Full Year 2023 Results, Cites Growth in Nutraceutical Market

Healthy Extracts Inc. released its 10-K filing for the fiscal year ended December 31, 2023, highlighting growth in revenue and ongoing challenges in achieving profitability.

Summary

• Healthy Extracts Inc. is a platform focused on acquiring, developing, and distributing plant-based nutraceuticals.
• The company's products target the heart, brain, and immune health markets.
• The nutraceutical market is experiencing a 7.8% compounded annual growth rate (CAGR) and is expected to reach $441 billion by 2026.
• The company's BergaMet products address the heart health market, which is projected to grow at a 4.6% CAGR to reach $55.3 billion by 2027.
• UBN products target the brain health market, which is growing at a 9.4% CAGR to reach $15.7 billion by 2030.
• Healthy Extracts reported a net loss of $2,472,931 for the year ended December 31, 2023, compared to a net loss of $983,121 in 2022.
• The company's revenue increased by 10% to $2,485,866 in 2023 from $2,251,469 in 2022.
• The company's gross margin ranges from 60% to 80%, depending on the product and market channel.
• The company had limited cash resources of $19,441 as of December 31, 2023.
• The company's auditors have expressed substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is revenue growth and the company operates in a growing market, the significant net loss, limited cash, and going concern warning from auditors raise serious concerns. The company's competitive advantages are offset by significant financial risks.

Positives

• The company experienced a 10% increase in revenue year-over-year.
• The company operates in high-growth nutraceutical markets.
• The company has high gross margin categories, ranging from 60% to 80%.
• The company has an exclusive licensing agreement for gel-pack delivery systems.
• The company's BergaMet PRO+ product has a higher BPF content than competitors.
• The company is expanding its product portfolio to include gut health supplements.
• The company is exploring strategic acquisition opportunities.

Negatives

• The company experienced a significant net loss of $2,472,931 in 2023.
• The company has limited cash resources of $19,441 as of December 31, 2023.
• The company's auditors have expressed substantial doubt about its ability to continue as a going concern.
• The company relies on a single supplier for licensing and manufacturing.
• The company faces intense competition from larger, more established companies.
• The company has a limited operating history in its current business.
• The company is not profitable and does not expect to be profitable in the near future.

Risks

• The company relies on a single supplier relationship for licensing and manufacturing, and the termination of that agreement could have a material effect on the cost of products.
• The company has a limited operating history and is not profitable, with no assurance of future profitability.
• The company's success is linked to the size and growth rate of the vitamin, mineral, and supplement market, which is subject to change.
• The company is dependent on consumer perception of the safety and quality of its products.
• The company faces intense competition from larger, more established companies.
• The company may be unable to obtain adequate supplies of raw materials at favorable prices.
• The company will require additional financing in the future, which may not be available on acceptable terms.
• The company is subject to numerous laws and regulations that apply to the manufacturing and sale of nutritional supplements.
• The company's success is dependent on the accuracy and reliability of its information processing systems.
• The company received a warning letter from the FDA in November 2022 regarding claims about one of its products.

Future Outlook

The company plans to expand its product portfolio to include gut health supplements and introduce more products in gel-pack format. They also intend to further expand sales channels and evaluate potential acquisition opportunities.

Management Comments

• Management believes that the company's BergaMet products have been shown to support heart health, support immune response, and address metabolic syndrome.
• Management believes that the company's UBN brain health formulations have been in development for more than 20 years, over which time its effects have been supported by third-party research studies.

Industry Context

The company operates in the growing nutraceutical market, which is driven by factors such as changing lifestyles, a desire to move away from prescription medicine, an aging population, and increased life expectancy. The company's focus on heart and brain health aligns with major health concerns and market trends.

Comparison to Industry Standards

• The company's gross margin of 60% to 80% is competitive within the nutraceutical industry.
• The company's BergaMet PRO+ product with 47% BPF content is a differentiator compared to competitors with lower concentrations, such as Ortho Molecular's 38% BPF product.
• The company's exclusive licensing agreement with Gelteq for gel-pack delivery systems provides a competitive advantage in North America.
• The company's reliance on a single supplier for key ingredients is a risk, as many nutraceutical companies diversify their supply chains.
• The company's net loss and limited cash resources are concerning compared to more established and profitable players in the industry.

Legal Proceedings

• BergaMet NA, LLC, a subsidiary, received a warning letter from the FDA in November 2022 regarding claims about its Cholesterol Command product.
• The company responded to the warning letter and hired a third-party to review its advertising.

Related Party Transactions

• The company has entered into numerous transactions with Jay Decker, its majority shareholder, including acquisitions, note conversions, and securities purchase agreements.
• The company has also entered into transactions with other officers and directors.

Stakeholder Impact

• Shareholders face the risk of losing their investment due to the company's financial challenges and going concern issues.
• Employees may be impacted by potential cost-cutting measures or restructuring due to the company's financial situation.
• Customers may be affected by potential product shortages or changes in product offerings.
• Suppliers may face uncertainty regarding future orders and payments.
• Creditors face the risk of non-payment due to the company's limited cash resources.

Next Steps

• The company plans to expand its product portfolio to include gut health supplements.
• The company plans to introduce more products in gel-pack format.
• The company plans to further expand its sales channels.
• The company will continue to evaluate potential acquisition opportunities.
• The company will need to raise additional capital to fund future growth and operations.

Key Dates

Keywords

nutraceuticals, heart health, brain health, immune health, Citrus Bergamot, BPF, gel packs, dietary supplements, KETONOMICS, MCT, FDA, reverse stock split