LAS VEGAS, August 14, 2023 — Healthy Extracts Inc. (OTCQB: HYEX), a platform for acquiring, developing, patenting, marketing, and distributing plant-based nutraceuticals, whose proprietary and patented products target select high-growth categories within the multibillion-dollar nutraceuticals market, such as heart, brain and immune health, reported results for the three and six months ended June 30, 2023. All comparisons are to the year-ago period unless otherwise noted.
⦁ Net revenue increased 25% to $588,000 in the second quarter of 2023, and up 29% to $1.2 million for the first half of the year, driven by product line and distribution channel expansion.
⦁ Cost of goods sold (COGS) decreased 10% from the previous quarter to $303,000 in the second quarter of 2023.
⦁ Gross margin improved to 48.4% in the second quarter from 45.2% in the previous quarter, due to a favorable shift to higher margin sales. Increased manufacturing and freight costs resulted in gross margin declining from 58.4% in the year-ago quarter. Gross margins are expected to return to more normal levels in the second half of 2023 with the anticipated further lowering of these costs.
⦁ Net loss in Q2 totaled $1.3 million or $(0.00) per basic and diluted share, primarily due to one-time costs associated with the company’s previously announced acquisition and related planned public offering and Nasdaq uplist, increased manufacturing and freight costs, interest expense, and stock compensation expense. Excluding costs related to the company’s planned acquisition and public offering expenses, regulatory expense, stock compensation expense, change in fair value on derivative expense and interest expense, net loss totaled $69,000 or $(0.00) per share. This compares to net loss of $585,000 or $(0.00) per basic and diluted share in the same year-ago quarter.
⦁ Subscription customers at June 30, 2023 increased 45% versus June 30, 2022, driving a 15% increase in subscription-based revenue for the first half of the year. The growth in subscription revenue helps reduce customer acquisition costs and provides greater visibility into future revenue.
Q2 Operational Highlights
⦁ Commenced initial launch with select customers of a new product designed for sleep apnea. The supplement is designed to encourage better sleep and breathing by supporting the ability of the brain to communicate with the muscle of the diaphragm. The official product roll out is planned for the third quarter of 2023.
⦁ Healthy Extracts’ private-label product line of the company’s top brand ambassador and renowned fitness expert, Whitney Johns, was selected by Amazon to be featured on Prime Day, one of the biggest shopping days of the year. Whitney Johns product line of brain, physical performance and women’s hormone health products were featured by Amazon on its Prime Day major annual shopping event being held on July 11-12. These Whitney Johns products are based on Healthy Extracts plant-based proprietary and patented formulations that are supported by numerous independently published studies.
⦁ World Journal of Advanced Research and Reviews published a beta study that showed a positive effect of the company’s UBN ACTIVATE™ effect on golfers’ energy, focus and scores. The study was also presented at the American College of Sports Medicine conference in May.
“In Q2, we continued to grow our top-line year-over-year at a healthy double-digit pace as our product lines, customer subscriptions, and distribution channels continued to expand,” commented Healthy Extracts president, Duke Pitts. “In June, we introduced an entirely new product designed for those suffering from sleep apnea. We commenced initial shipments in mid-June to select customers, and plan to officially launch the product before the end of the current third quarter.
“We are also preparing to launch several additional new products designed for gut health, arterial flexibility and collagen anti-aging, and a ‘sugar blocker.’ As with our other products, they will be based on our plant-based proprietary and patented formulations that are supported by independently published studies. We plan to launch them before the end of the year.
“Also during the quarter, we realized positive results from a new beta study that investigated the effect of UBN ACTIVATE on golf performance. This initial study suggests that UBN ACTIVATE can improve actual golf performance and the golfer’s perceptions of focus and energy regardless of which mode of transport and play is used.
“The sugar blocker product will include our Citrus Bergamot ingredients. They will be sold as on-the-go gel packs under our exclusive U.S. and Canadian licensing and manufacturing agreement with Gelteq for their advanced gel technology. The gut health and collagen products will also be made available in gel pack format exclusively through WHITNEY JOHNS™ NUTRITION.
“During this year’s Amazon Prime Day on July 11-12, we generated our largest overall sales during any two-day period in our company’s history. They were up 75% over the previous two-day combined sales record, and sales have continued to grow at a strong pace. This demonstrates that as we continue to expand our product lines, we have in place a strong sales channel to support their launch and customer adoption, including Amazon’s popular ‘Subscribe & Save” feature that expands our recurring revenue stream.
“In the traditional retail marketplace, we continue to see sales ramping with Natural Grocers, the nation’s largest family-operated organic and natural grocery retailer. Natural Grocers was the perfect venue for our retail launch last year, given how they provide extensive free science-based nutrition education programs that help their customers make informed buying choices. Natural Grocers’ acclaimed high standards for natural and organic products also represents an important validation of our plant-based formulations for brain health. We expect the in-person retail exposure provided by Natural Grocers to further elevate consumer awareness of our brands, with this also benefiting our online channels.
“Looking ahead, we anticipate our growing sales and product lines to deliver top and bottom-line expansion over the coming quarters. We will continue to focus on expanding our recurring revenue stream from subscriptions and maintaining our traditional high gross margin.
“We plan to continue pursuing strategic acquisitions that would further enhance our plant-based portfolio and build upon the successful acquisitions of BergametNA™ for heart health and Ultimate Brain Nutrients™ for brain health. We believe we have built a solid platform for ongoing expansion and growing our presence in the various markets we serve.”
Q2 Financial Summary
Net revenue in the second quarter of 2023 increased 25% to $588,000 from $470,000 in the same year-ago quarter, primarily due to product line and distribution channel expansion.
Gross profit totaled $285,000 or 48.4% of net revenue as compared to $274,000 or 58.4% of net revenue in the same year-ago quarter. The decrease in gross margin was a result of the increase in manufacturing and freight costs. Gross margins are expected to return to normal levels in the second half of 2023.
Operating expenses increased $653,000 to $1.5 million compared to the same year-ago quarter. The increase in operating expenses was due to increased general and administrative expenses.
Net loss totaled $1.3 million or $(0.00) per basic and diluted share compared to a net loss of $859,000 or $(0.00) per basic and diluted share in the same year-ago quarter. The increased net loss was primarily due to one-time costs associated with the company’s previously announced acquisition and related planned public offering and Nasdaq uplist, increased manufacturing and freight costs, interest expense, and stock compensation expense.
Excluding costs related to the company’s planned acquisition and public offering expenses, regulatory expense, stock compensation expense, change in fair value on derivative expense and interest expense, net loss totaled $69,000. This compares to net loss of $585,000 or $(0.00) per basic and diluted share in the same year-ago quarter.
Cash totaled $92,500 as of June 30, 2023, compared to $213,000 on March 31, 2023.
First Half 2023 Financial Summary
Net revenue in the second quarter of 2023 increased 29% to $1.2 million from $933,000 in the same year-ago period, primarily due to product line and distribution channel expansion.
Gross profit totaled $563,000 or 46.8% of net revenue as compared to $599,000 or 64.2% of net revenue in the same year-ago period. The decrease in gross margin was a result of the increase in manufacturing and freight costs. Gross margins are expected to return to normal levels in the second half of 2023.
Operating expenses increased $965,000 to $2.2 million compared to the same year-ago period. The increase in operating expenses was due to increased general and administrative expenses.
Net loss for the first half totaled $1.8 million or $(0.01) per basic and diluted share. The increased net loss was primarily due to the same factors in Q2. Excluding costs related to the company’s planned acquisition and public offering expenses, regulatory expense, stock compensation expense, change in fair value on derivative expense and interest expense, net loss totaled $497,000 or $(0.00) per basic and diluted share. This compares to net loss of $628,000 or $(0.00) per basic and diluted share in the same year-ago period.
About Healthy Extracts “Live Life Young Again”
Healthy Extracts Inc. is a platform for acquiring, developing, researching, patenting, marketing, and distributing, plant-based nutraceuticals.
The company’s subsidiaries, BergametNA™ and Ultimate Brain Nutrients™ (UBN), offer nutraceutical natural heart and brain health supplements. This includes the only heart health supplement distributed in North America containing Citrus Bergamot SuperFruit™. This superfruit has the highest known concentration of polyphenols and flavonoids.
UBN’s KETONOMICS® proprietary formulations, which have been designed to enhance brain activity, focus, headache and cognitive behavior, provide many sales and intellectual property licensing opportunities.
Forward-Looking Statements and Safe Harbor Notice
All statements other than statements of historical facts included in this press release are “forward-looking statements” (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements include our expectations and those statements that use forward-looking words such as “projected,” “expect,” “possibility” and “anticipate.” The achievement or success of the matters covered by such forward-looking statements involve significant risks, uncertainties and assumptions. Actual results could differ materially from current projections or implied results. Investors should read the risk factors set forth in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2023, and future periodic reports filed with the SEC. All of the Company’s forward-looking statements are expressly qualified by all such risk factors and other cautionary statements.
The Company cautions that statements and assumptions made in this news release constitute forward-looking statements and make no guarantee of future performance. Forward-looking statements are based on estimates and opinions of management at the time statements are made. The information set forth herein speaks only as of the date hereof. The Company and its management undertake no obligation to revise these statements following the date of this news release.
Food and Drug Administration Disclosure
The product and formulation featured in this release is not for use by or sale to persons under the age of 12. This product should be used only as directed on the label. Consult with a physician before use if you have a serious medical condition or use prescription medications. A doctor’s advice should be sought before using this and any supplemental dietary product. These statements have not been evaluated by the FDA. This product is not intended to diagnose, treat, cure or prevent any disease.
BergametNA™, Ultimate Brain Nutrients™, UBN™, Citrus Bergamot SuperFruit™ and F4T® are registered trademarks of Healthy Extracts Inc.™