10-Q: Healthy Extracts Reports Q3 Loss Amid Gummy USA Merger

Sentiment:

Quarterly Report 14 November 2025 4:37 PM

Healthy Extracts Inc. reported a net loss of $727,133 for the nine months ended September 30, 2025, despite a 20% revenue increase, as it completed a significant merger with Gummy USA LLC.

Delay expectedThe acquisition of Hyperion, L.L.C. and Online Publishing & Marketing, LLC, initiated on January 13, 2023, was not completed, and a Notice of Termination was received on April 18, 2024.The Membership Interest Purchase Agreement (MIPA) with Gummy USA LLC, entered on July 19, 2025, was rescinded on September 26, 2025, and a new merger agreement was subsequently entered into, effective October 1, 2025, indicating a structural delay in the acquisition process.

Capital raiseManagement explicitly states plans to "keep seeking funding through debt and equity financing" to mitigate going concern issues and support growth.The company's ability to continue as a going concern is dependent on raising additional capital from the sale of its common stock or other means.Future financing will likely be dilutive to stockholders.

Worse than expectedNet loss significantly increased to $(727,133) for the nine months ended September 30, 2025, from $(393,742) in the prior year.Gross profit decreased by 2.1% despite a 20% increase in revenue, indicating a substantial rise in cost of goods sold.Operating cash flow turned negative, with $202,634 used in operating activities for the nine months ended September 30, 2025, compared to $240,090 provided in the prior year.Operating expenses (General and Administrative) increased by 44%, outpacing revenue growth.Management explicitly stated "doubt about the entity's ability to continue as a going concern."Disclosure controls and procedures were deemed "not effective" due to material weaknesses.

Summary

Net loss for the nine months ended September 30, 2025, was $(727,133), an increase from $(393,742) for the same period in 2024.
Revenue increased by 20% to $2,817,910 for the nine months ended September 30, 2025, from $2,342,091 in the prior year.
Gross profit decreased by 2.1% to $1,465,062 for the nine months ended September 30, 2025, from $1,496,906 in 2024.
Operating expenses (General and Administrative) rose by 44% to $2,139,630 for the nine months ended September 30, 2025.
The company completed a merger with Gummy USA LLC, issuing 13,075,920 common shares, representing 77.5% of outstanding stock, to Donald Swanson.
Total assets increased substantially to $26,191,067 as of September 30, 2025, primarily due to the Gummy USA LLC acquisition.
Management expressed substantial doubt about the company's ability to continue as a going concern within one year.
Disclosure controls and procedures were deemed not effective as of September 30, 2025, due to material weaknesses.

Sentiment

Score: 3

Explanation: While revenue grew, the company experienced a larger net loss, decreased gross profit margin, increased operating expenses, and negative operating cash flow. The going concern warning and ineffective disclosure controls are significant concerns, despite the strategic acquisition of Gummy USA LLC.

Positives

Revenue increased by 20% to $2,817,910 for the nine months ended September 30, 2025, compared to $2,342,091 in the prior year.
Revenue increased by 23% to $917,975 for the three months ended September 30, 2025, compared to $744,916 in the prior year.
The acquisition of Gummy USA LLC significantly expanded the company's asset base to $26,191,067 as of September 30, 2025, from $2,377,973 at December 31, 2024.
Cash on hand increased to $189,452 as of September 30, 2025, from $112,020 at December 31, 2024.
The change in fair value on derivative resulted in a gain of $67,423 for the nine months ended September 30, 2025, compared to a loss of $273,436 in the prior year.

Negatives

Net loss increased to $(727,133) for the nine months ended September 30, 2025, from $(393,742) in the prior year.
Gross profit decreased by 2.1% to $1,465,062 for the nine months ended September 30, 2025, despite higher revenue.
Cost of revenue as a percentage of revenues significantly increased to 48% for the nine months ended September 30, 2025, from 36% in the prior year.
Operating expenses (General and Administrative) increased by 44% to $2,139,630 for the nine months ended September 30, 2025, outpacing revenue growth.
Operating cash flow shifted from positive $240,090 in the nine months ended September 30, 2024, to negative $202,634 in the same period of 2025.
Accumulated deficit increased to $(19,967,477) as of September 30, 2025.
Management expressed "substantial doubt about the entity's ability to continue as a going concern" within one year.
Disclosure controls and procedures were deemed "not effective" as of September 30, 2025, due to material weaknesses.

Risks

Substantial doubt exists about the company's ability to continue as a going concern within one year due to accumulated net losses and reliance on external financing.
Inability to raise additional capital through debt or equity financing on commercially favorable terms could lead to business failure and loss of stockholder investment.
Future equity financing will likely be dilutive to existing stockholders.
Disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses, increasing the risk of financial misstatement.
Forward-looking statements are inherently uncertain and risky, and actual results may differ materially from expectations.
Risks related to international, national, and local general economic and market conditions, demographic changes, ability to sustain, manage, or forecast growth, raw material costs and availability, new product development and introduction, existing government regulations, adverse publicity, competition, the loss of significant customers or suppliers, fluctuations and difficulty in forecasting operating results, changes in business strategy, business disruptions, the ability to attract and retain qualified personnel, and the ability to protect technology.
The litigation process is inherently uncertain, and the resolution of legal matters might have a material adverse effect upon financial condition and/or results of operations.

Future Outlook

Management expects strong revenue growth to continue due to direct consumer sales and marketing efforts. However, the ability to continue as a going concern is dependent on raising additional capital and achieving significant operating revenues.

Management Comments

"Over the last year, we have focused on increasing revenue, maintaining our margins, and generating positive cash flow from our existing operations. In large part, we have been successful in meeting these objectives and our business has remained relatively unchanged."
"We expect strong growth to increase as our direct consumer sales and marketing efforts continue to perform."
"Management plans to keep seeking funding through debt and equity financing which are intended to mitigate the conditions that have raise substantial doubt about the entitys ability to continue as a going concern."
"The reduced cost as a percentage of revenues in the three months ended September 30, 2025 was due to efficiencies as a result of increased revenue."

Industry Context

The company operates in the multi-billion dollar plant-based nutraceuticals market, targeting high-growth categories such as heart, brain, and immune health. The acquisition of Gummy USA LLC suggests an expansion within the health supplements sector, potentially into gummy-format products, aligning with consumer trends for convenient supplement delivery.

Comparison to Industry Standards

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Disclosure Controls and Procedures Effectiveness	Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses identified in the Annual Report on Form 10-K.	2025-09-30	Indicates a heightened risk of financial misstatement and lack of adequate internal controls over financial reporting, potentially impacting investor confidence and regulatory compliance.

Legal Proceedings

No updates to the disclosure of legal proceedings in the Annual Report on Form 10-K. Management believes currently pending or threatened matters are not expected to have a material adverse effect on financial position or results of operations.

Related Party Transactions

Unsecured debt A: $666 outstanding from a shareholder as of September 30, 2025, with 0% interest and no due date.
Unsecured debt I: $177,500 outstanding from a related party as of September 30, 2025, with 15% interest, due June 30, 2025 (now overdue).
Unsecured debt L: $192,433 outstanding from a related party as of September 30, 2025, with 15% interest, due November 13, 2027.
Unsecured debt N: $333,125 outstanding from a related party as of September 30, 2025, with 12% interest, due July 20, 2026.
Unsecured debt O: $78,000 outstanding from a related party as of September 30, 2025, with 12% interest, due January 31, 2026.
No expenses totaling salaries were paid to an officer and director for the nine months ended September 30, 2025.

Stakeholder Impact

Shareholders: Potential for significant dilution from future equity financing; increased risk due to going concern warning and ineffective disclosure controls; potential long-term value from Gummy USA LLC acquisition if successfully integrated and profitable.
Creditors: Increased risk due to going concern warning and reliance on future financing for debt repayment; several related-party debts outstanding.
Employees: No direct impact mentioned, but ongoing financial instability could affect job security or compensation.
Customers: Continued availability of health supplement products; no significant customer concentration risk identified.
Suppliers: No direct impact mentioned, but financial instability could affect payment terms or relationships.

Next Steps

Continue direct consumer sales and marketing efforts to drive revenue growth.
Seek additional funding through debt and equity financing to address going concern issues and support operations.
Address material weaknesses in disclosure controls and procedures.
Complete the consolidation analysis for the Gummy USA LLC merger.

Key Dates

Date	Description
2014-12-19	Company incorporated in Nevada as Grey Cloak Tech Inc.
2015-03-06	Bylaws of Grey Cloak Tech Inc. incorporated by reference from Form S-1.
2016-07-28	Convertible promissory note #1 executed.
2017-01-19	Maturity date for Convertible promissory note #1.
2017-02-28	Authorized common shares increased to 500,000,000; authorized preferred stock increased to 75,000,000; 25,000,000 shares designated Series A Convertible Preferred Stock.
2017-10-16	Amended and Restated Certificate of Designation filed, reducing Series A Preferred Stock to 1,333,334 shares and changing conversion/voting rights.
2018-01-31	Authorized common shares increased to 1,000,000,000.
2018-04-30	Authorized common shares increased to 2,500,000,000.
2019-02-04	All preferred stock converted into common stock.
2019-03-01	Unsecured debt A received from a shareholder.
2020-03-02	Unsecured debt A received from a shareholder.
2020-04-03	Acquisition of Ultimate Brain Nutrients completed.
2020-06-01	Unsecured debt A received from a shareholder.
2020-10-23	Name changed from Grey Cloak Tech Inc. to Healthy Extracts Inc.
2022-02-02	Issued 16,667 warrants to an individual.
2022-02-22	Unsecured debt B loan received.
2022-05-12	Convertible promissory note #3 executed.
2022-05-25	Convertible promissory note #2 executed.
2022-10-07	Secured debt C loan agreed.
2023-01-01	Unsecured debt I agreed and signed.
2023-01-13	Entered Acquisition Agreement for Hyperion, L.L.C. and Online Publishing & Marketing, LLC (subsequently terminated).
2023-01-24	Convertible promissory note #4 executed.
2023-03-20	Unsecured debt D loan received.
2023-05-19	Secured debt E loan agreed.
2023-07-26	Secured debt F loan agreed.
2023-09-01	Unsecured debt H line of credit received.
2023-10-31	Convertible promissory note #4 extended.
2023-12-19	Secured debt G loan agreed.
2023-12-29	Authorized common shares decreased to 50,000,000; 120-for-1 reverse stock split effectuated.
2024-01-01	Unsecured debt H converted to Unsecured Debt.
2024-03-18	Unsecured debt D closed and rolled into unsecured debt J.
2024-04-15	Secured debt K loan agreed.
2024-04-18	Received Notice of Termination of Acquisition Agreement from Hyperion, L.L.C. and Online Publishing & Marketing, LLC.
2024-11-14	Unsecured debt L loan received.
2025-02-01	Entered into new lease agreement for warehouse facilities, expiring in 2028.
2025-04-16	Convertible promissory note #3 converted by note holder and common stock shares issued.
2025-06-20	Secured debt M loan agreed.
2025-07-19	Entered Membership Interest Purchase Agreement (MIPA) with Gummy USA LLC (GUSA) and Donald Swanson.
2025-07-21	Unsecured debt N loan received.
2025-07-31	Unsecured debt O loan received.
2025-09-26	Rescinded MIPA with Gummy USA LLC.
2025-09-30	Effective as of October 1, 2025, entered Agreement and Plan of Merger with GUSA and Swanson; re-issued 13,075,920 common shares to Swanson.
2025-11-14	Date financial statements were available to be issued and filing date of the 10-Q.

Recommendation

sell

The company faces significant financial challenges, including increasing net losses, negative operating cash flow, and a stated "going concern" warning. While revenue growth is positive, it is outpaced by rising costs, leading to declining gross profit margins and increased operating expenses. The ineffective disclosure controls and procedures further compound the risk. The Gummy USA LLC acquisition, while substantial, introduces integration risk and its financial impact is yet to be fully realized and consolidated. Given the fundamental financial weaknesses and high operational risks, a seasoned investor would likely recommend selling the stock.

Keywords

Healthy Extracts Inc., 10-Q, Quarterly Report, Nutraceuticals, Health Supplements, Gummy USA LLC, Acquisition, Financial Results, Net Loss, Revenue Growth, Going Concern, Disclosure Controls, SEC Filing, Corporate Governance, Stock-based Compensation, Convertible Debt, Nevada Corporation

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