8-K: Healthy Extracts Restructures Gummy USA Acquisition

Healthy Extracts Inc. rescinded its initial Gummy USA LLC acquisition agreement, replacing it with a new merger and re-appointing key executives and directors, including Donald Swanson as CEO and Chairman.

Summary

• Healthy Extracts Inc. (Parent) initially entered into a Membership Interest Purchase Agreement (MIPA) on July 19, 2025, to acquire 100% of Gummy USA LLC (GUSA) from its sole member, Donald Swanson.
• As consideration for the initial acquisition, 13,075,920 shares of Parent's common stock were issued to Swanson, representing 77.5% of the issued and outstanding common stock after the transaction.
• Donald Swanson was initially appointed to Parent's Board of Directors as its fourth director, Chairman, and President (later CEO on September 16, 2025).
• Kevin Duke Pitts, previously President, was initially appointed CEO (later President and COO on September 16, 2025).
• Robert Madden, Secretary and CFO, was appointed Manager of GUSA.
• On September 26, 2025, Parent rescinded the MIPA, effective as of its original date, July 19, 2025.
• On September 30, 2025, Parent entered into a new Agreement and Plan of Merger with GUSA and Swanson, merging GUSA into Parent's wholly-owned subsidiary, HE Gummy USA, Inc.
• The 13,075,920 Purchase Shares were re-issued to Swanson, maintaining his 77.5% ownership of Parent's issued and outstanding common stock after the merger.
• Swanson was granted anti-dilution rights to maintain his 77.5% ownership percentage in the event of the exercise of any of Parent's 154,306 outstanding options and warrants.
• Effective September 30, 2025, Donald Swanson was re-appointed to Parent's Board of Directors as its fourth director, Chairman, and Chief Executive Officer.
• Kevin Duke Pitts was re-appointed as Parent's President and Chief Operating Officer.
• Robert Madden was re-appointed as the Manager of GUSA.
• William Bossung resigned as a member of Parent's Board of Directors on October 1, 2025.
• The merger is intended to qualify as a reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code.
• Financial statements and pro forma financial information for Gummy USA LLC will be filed in an amendment to the Current Report not later than 71 days after the filing date.

Sentiment

Score: 7

Explanation: The acquisition of Gummy USA LLC and the integration of Donald Swanson's significant industry expertise are strong positives. The strategic intent to expand in the gummy supplement market with advanced manufacturing capabilities is promising. While the initial rescission and the oral IP lease introduce minor procedural and legal risks, the overall strategic direction and the quality of the acquired asset appear favorable.

Positives

• The acquisition of Gummy USA LLC brings a company with proprietary pharmaceutical-grade manufacturing processes and significant purchase orders into Healthy Extracts Inc.
• Donald Swanson, the founder and former CEO of Gummy USA LLC, brings over eight years of deep experience in pharmaceutical-grade manufacturing and gummy innovation, including expertise in automated controls, advanced fluid dynamics, and blockchain-enabled product authentication.
• The merger is structured to qualify as a tax-free reorganization under U.S. federal income tax law, which is beneficial for the parties involved.
• Swanson's anti-dilution rights protect his significant ownership stake, aligning his long-term interests with the company's success.

Negatives

• The rescission of the initial Membership Interest Purchase Agreement (MIPA) and subsequent re-structuring via a merger agreement suggests potential issues or complexities with the original transaction's legal or financial framework.
• The IP Lease, which grants the Company the right to use Swanson's intellectual property, is currently an oral agreement, introducing a degree of legal risk, although it is stated it will be reduced to writing within 90 days.
• Donald Swanson's 77.5% ownership of the company's common stock post-transaction represents significant dilution for existing shareholders and grants him substantial control.
• The financial statements for Gummy USA LLC are not yet available and will be filed in an amendment within 71 days, meaning investors do not have immediate access to the acquired entity's financial performance.
• The resignation of William Bossung from the Board of Directors shortly after the new merger agreement could be a point of concern.

Risks

• The IP Lease, currently an oral agreement, carries inherent risks until it is formally reduced to writing, potentially leading to disputes over terms or enforceability.
• There is a risk that the merger may not ultimately qualify as a tax-free reorganization if certain actions are taken or omitted, which could result in adverse tax consequences.
• The indemnification provisions include a $50,000 deductible and a maximum liability capped at the value of the Stock Consideration, and exclude punitive, incidental, consequential, special, or indirect damages, which could limit recovery for certain losses.
• The lack of immediate financial statements for Gummy USA LLC means investors are making decisions without a complete financial picture of the acquired business.
• Donald Swanson's substantial 77.5% ownership and anti-dilution rights could concentrate control and decision-making power, potentially limiting the influence of other shareholders.
• The Stock Consideration shares issued to Swanson are restricted securities under Rule 144 of the Securities Act, limiting their immediate liquidity and transferability.

Future Outlook

The merger is intended to qualify as a tax-free reorganization, and the Parent and Surviving Corporation plan to continue Gummy USA's historic business or use its assets. The oral IP Lease agreement is expected to be formalized in writing within 90 days. Financial statements for Gummy USA LLC will be filed within 71 days. Donald Swanson holds anti-dilution rights to maintain his 77.5% ownership, and Parent will provide registration rights for his shares in future public offerings.

Management Comments

• Donald Swanson brings over eight years of deep experience in pharmaceutical-grade manufacturing and gummy innovation, having successfully designed and implemented state-of-the-art production facilities.
• Swanson's proprietary processes deliver unmatched precision, and under his leadership, Gummy USA has secured significant purchase orders and is positioned to set a new industry benchmark for quality, regulatory compliance, and supply chain efficiency.
• His expertise spans automated controls, advanced fluid dynamics, and blockchain-enabled product authentication, solving critical production inefficiencies and protecting brand integrity.

Industry Context

This acquisition positions Healthy Extracts Inc. to expand its presence in the custom gummy nutritional supplements manufacturing sector. The emphasis on pharmaceutical-grade manufacturing, regulatory compliance, and advanced production technologies (automated controls, fluid dynamics, blockchain) aligns with growing consumer demand for high-quality, transparent, and efficiently produced health supplements. The integration of Gummy USA LLC's capabilities and Donald Swanson's expertise could enhance Healthy Extracts' competitive edge in a market increasingly focused on product integrity and supply chain efficiency.

Comparison to Industry Standards

• The filing states that Gummy USA has positioned itself to set a new industry benchmark for quality, regulatory compliance, and supply chain efficiency. However, no specific comparable companies, projects, or quantitative results are provided within the filing to benchmark this claim against global industry standards.

Management Changes

Corporate Governance

Legal Proceedings

• The Rescission Agreement and General Mutual Release includes mutual general releases between Healthy Extracts Inc., Gummy USA LLC, and Donald Swanson, discharging each other from any claims related to the initial Membership Interest Purchase Agreement.

Related Party Transactions

• The acquisition of Gummy USA LLC was from its sole member, Donald Swanson, who subsequently became a significant shareholder (77.5%), Chairman, and CEO of Healthy Extracts Inc.
• An oral Intellectual Property (IP) Lease agreement exists between Donald Swanson (or his affiliate) and the Company, under which Swanson is paid a royalty of $0.05 per unit for the use of his intellectual property. This agreement is to be formalized in writing within 90 days.

Stakeholder Impact

• **Shareholders**: Existing shareholders experienced significant dilution due to the issuance of 13,075,920 shares to Donald Swanson, resulting in his 77.5% ownership. The acquisition of Gummy USA LLC could bring long-term value, but the concentration of ownership and anti-dilution rights for Swanson may limit the influence of other shareholders. Swanson also gains registration rights for his shares.
• **Employees**: Gummy USA LLC employees are now part of Healthy Extracts Inc. Key management changes occurred at Healthy Extracts Inc., with Donald Swanson becoming CEO and Kevin Duke Pitts becoming President and COO.
• **Customers and Suppliers**: Gummy USA LLC's business operations are expected to continue under the new structure, potentially benefiting from the resources and strategic direction of Healthy Extracts Inc., which could lead to enhanced product offerings and supply chain stability.

Next Steps

• Healthy Extracts Inc. will file an amendment to the Current Report within 71 days to include the financial statements and pro forma financial information for Gummy USA LLC.
• The oral IP Lease agreement between Swanson (or his affiliate) and the Company will be reduced to writing within 90 days after closing.
• Parent will issue additional shares to Donald Swanson to maintain his 77.5% ownership percentage upon the exercise of any of the 154,306 outstanding options and warrants.
• Parent will provide registration rights to Donald Swanson for his shares in future public offerings, subject to certain conditions.

Key Dates

Recommendation

The acquisition of Gummy USA LLC and the integration of Donald Swanson's expertise are strategically positive for Healthy Extracts Inc., potentially enhancing its market position in gummy nutritional supplements. However, the substantial dilution of existing shareholders (77.5% ownership by Swanson), the initial rescission of the prior acquisition agreement, and the current oral nature of the IP license agreement introduce elements of risk and uncertainty. A 'Hold' recommendation is appropriate until Gummy USA's financial performance is fully disclosed and the IP agreement is formalized, allowing for a clearer assessment of the combined entity's value and operational stability.

Keywords

Acquisition, Merger, Gummy USA LLC, Healthy Extracts Inc., Donald Swanson, SEC Filing, Corporate Governance, Equity Issuance, Anti-Dilution Rights, Nutritional Supplements, Pharmaceutical Manufacturing, Form 8-K