We believe and are seeing in our current stores that there is a large consumer demand centered on vaporizer products and the “atmosphere” created by the vape stores. We believe that our reputation and our experience in the vaporizer industry, from a development, customer service and production perspective, give us an advantage in attracting customers.

Competition in the vaporizer and e-liquid industry is intense. We compete with other sellers of vaporizes, most notably Altria Group, Inc., JT International, Imperial Tobacco, and Reynolds American, Inc., which are big tobacco companies that have vaporizer and electronic cigarette business segments. The nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low. Our direct competitors sell products that are substantially similar to ours excluding any products which we hold patents. As a general matter, we have access to market and sell the similar vaporizers as our competitors and we sell our products at substantially similar prices as our competitors; accordingly, the key competitive factors for our success is the quality of service we offer our customers, the scope and effectiveness of our marketing efforts, including media advertising campaigns and, increasingly, the ability to identify and develop new sources of customers.

As discussed above, we compete against “big tobacco”, U.S. cigarette manufacturers of both conventional tobacco cigarettes and electronic cigarettes like Altria Group, Inc., JT International, Imperial Tobacco, and Reynolds American, Inc. We compete against “big tobacco” who offers not only conventional tobacco cigarettes and electronic cigarettes and vaporizers, but also smokeless tobacco products such as “snus” (a form of moist ground smokeless tobacco that is usually sold in sachet form that resembles small tea bags), chewing tobacco and snuff. “Big tobacco” has nearly limitless resources, global distribution networks in place and a customer base that is fiercely loyal to their brands. Furthermore, we believe that “big tobacco” is devoting more attention and resources to developing, acquiring technology patents, and offering electronic cigarettes, vaporizers and e-liquids as these markets grow. Because of their well-established sales and distribution channels, marketing expertise and significant resources, “big tobacco” is better positioned than small competitors like us to capture a larger share of the electronic cigarette market. We also compete against numerous other smaller manufacturers or importers of cigarettes. There can be no assurance that we will be able to compete successfully against any of our competitors, some of whom have far greater resources, capital, experience, market penetration, sales and distribution channels than us. If our major competitors were, for example, to significantly increase the level of price discounts offered to consumers, we could respond by offering price discounts, which could have a materially adverse effect on our business, results of operations and financial condition.

We have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products to meet our design specifications. We depend on third party manufacturers for our vaporizer e-liquid and accessories. Our customers associate certain characteristics of our products including the weight, feel, draw, unique flavor, packaging and other attributes of our products to the brands we market, distribute and sell. Any interruption in supply and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several third-party manufacturers to manufacture our products to our specifications.

We currently utilize several manufacturers both domestically and internationally. We contract with our manufacturers on a purchase order basis. We do not have any output or requirements contracts with any of our manufacturers. Our manufacturers provide us with finished products, which we hold in inventory for distribution, sale and use.

Third party patent lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights have and could force us to do one or more of the following:

Future third party lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights could have a material adverse effect on our business, results of operations and financial condition.

We are required to obtain licenses to patents or proprietary rights of others and may be required to obtain more in the future and as the product continues to evolve. We cannot assure you that any future licenses required under any such patents or proprietary rights would be made available on terms acceptable to us or at all. If we do not obtain such licenses, we could encounter delays in product market introductions while we attempt to design around such patents, or could find that the development, manufacture, or sale of products requiring such licenses could be foreclosed. Litigation may be necessary to defend against claims of infringement asserted against us by others, or assert claims of infringement to enforce patents issued to us or exclusively licensed to us, to protect trade secrets or know-how possessed by us, or to determine the scope and validity of the proprietary rights of others. In addition, we may become involved in oppositions in foreign jurisdictions, reexamination declared by the United States Patent and Trademark Office, or interference proceedings declared by the United States Patent and Trademark Office to determine the priority of inventions with respect to our patent applications or those of our licensors. Litigation, opposition, reexamination or interference proceedings could result in substantial costs to and diversion of effort by us, and may have a material adverse impact on us. In addition, we cannot assure you that our efforts to maintain or defend our patents will be successful.

On November 30, 2020, the Company filed a patent infringement lawsuit against Philip Morris USA, Inc. and Philip Morris Products S.A. in the U.S. District Court (“District Court”) for the Northern District of Georgia (the “Complaint”).  The lawsuit alleged infringement on HCMC-owned patent(s) by the Philip Morris product known and marketed as “IQOS™.”  Philip Morris claims that it is currently approaching 14 million users of its IQOS® product and has reportedly invested over $3 billion in their smokeless tobacco products. On December 3, 2021, the District Court effectively dismissed HCMC’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A.  On December 14, 2021, the Company filed an appeal of the District Court’s dismissal of the Company’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. HCMC believes the District Court committed legal error by dismissing its complaint for patent infringement and also by denying the Company’s motion to amend its pleading.

Since a 2010 U.S. Court of Appeals decision, the Food and Drug Administration (“FDA”) is permitted to regulate electronic cigarettes as “tobacco products” under the Family Smoking Prevention and the Tobacco Control Act. Under this decision, the FDA is not permitted to regulate electronic cigarettes as “drugs” or “devices” or a “combination product” under the Federal Food, Drug and Cosmetic Act unless they are marketed for therapeutic purposes. This is contrary to anti-smoking devices like nicotine patches, which undergo more extensive FDA regulation. Because the Company does not market its electronic cigarettes for therapeutic purposes, the Company’s electronic cigarettes are subject to being classified as “tobacco products” under the Tobacco Control Act. The Tobacco Control Act grants the FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction of nicotine yields of a tobacco product to zero.

On September 9, 2020 the FDA began enforcing rules that extended its regulatory authority to electronic cigarettes and certain other tobacco products under the Tobacco Control Act. The rules required that electronic cigarette and e-liquid manufacturers (i) register with the FDA and report electronic cigarette products and ingredient listings; (ii) market new electronic cigarette products only after FDA review; (iii) only make direct and implied claims of reduced risk if the FDA confirms that scientific evidence supports the claim and that marketing the electronic cigarette product will benefit public health as a whole; (iv) not distribute free samples; (v) implement minimum age and identification restrictions to prevent sales to individuals under age 21; (vi) include a health warning; and (vii) not sell electronic cigarettes in vending machines, unless in a facility that never admits youth. It is not known how long finalizing and implementing this regulatory process may take. Accordingly, the Company has responded by beginning to take the necessary steps to ensure compliance.

In this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by the FDA under the Tobacco Control Act. Costs, however, could be substantial and could have a material adverse effect on the Company’s business, results of operations and financial condition. In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on the Company’s business, financial condition and results of operations and ability to market and sell the Company’s products. At present, it is difficult to predict whether the Tobacco Control Act will impact the Company to a greater degree than competitors in the industry, thus affecting the Company’s competitive position.

State and local governments currently legislate and regulate tobacco products, including what is considered a tobacco product, how tobacco taxes are calculated and collected, to whom and by whom tobacco products can be sold and where tobacco products may or may not be smoked. State and local regulation of the e-cigarette market and the usage of e-cigarettes is beginning to accelerate.

As local regulations expand, vaporizers and electronic cigarettes may lose their appeal as an alternative to cigarettes, which may have the effect of reducing the demand for the Company’s products and as a result have a material adverse effect on the Company’s business, results of operations and financial condition.

At present, neither the Prevent All Cigarette Trafficking Act (which prohibits the use of the U.S. Postal Service to mail most tobacco products, which would require individuals and businesses that make interstate sales of cigarettes or smokeless tobacco to comply with state tax laws) nor the Federal Cigarette Labeling and Advertising Act (which governs how cigarettes can be advertised and marketed) apply to electronic cigarettes. The application of either or both of these federal laws to vaporizers and electronic cigarettes would have a material adverse effect on the Company’s business, results of operations and financial condition.

On July 1, 2015, the FDA published a document entitled “Advanced notice of proposed rulemaking” or the Advance. Through the Advance, the FDA solicited public comments on whether it should issue rules with respect to nicotine exposure warning and child-resistant packaging for e-liquids containing nicotine. Following public comment, the FDA may issue proposed rules in furtherance of the purposes outlined in the Advance and ultimately pass the rules as proposed or in modified form. We cannot predict whether rules will be passed or if they will have a material adverse effect on our future results of operations and financial conditions.

The Company expects that the tobacco industry will experience significant regulatory developments over the next few years, driven principally by the World Health Organization’s FCTC. The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:

If Vaporizers, electronic cigarettes, or e-liquids, are subject to one or more significant regulatory initiates enacted under the FCTC, the Company’s business, results of operations and financial condition could be materially and adversely affected.

Our business is active throughout the calendar year and does not experience significant fluctuation caused by seasonal changes in consumer purchasing.

We use a combination of insurance and self-insurance to cover workers’ compensation, general liability, product liability, director and officers’ liability, employment practices liability, associate healthcare benefits and other casualty and property risks. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers and changes in discount rates could all affect ultimate settlements of claims. We evaluate our insurance requirements and providers on an ongoing basis.

We have made significant investments in overhead and information technology infrastructure, including purchasing, receiving, inventory, point of sale, warehousing, distribution, accounting, reporting and financial systems.

We have two reporting segments, natural and organic retail stores (“Grocery”) and vapor products (“Vapor”), through which we conduct all of our business.

The Company has included the results of the Healthy Choice Wellness Centers under the grocery segment due to its sales being de minimis.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate the continuation of the Company as a going concern for the next twelve months from the issuance of this Form 10-K and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values.

The Company currently and historically has reported net losses and cash outflows from operations. As of December 31, 2021,2022, cash and cash equivalents totaled approximately $26.5$22.9 million. The Company anticipates that its current cash cash equivalent and cash generated from operations will be sufficient to meet the projected operating expenses for the foreseeable future through at least twelve months from the issuance of these consolidated financial statements.

The Company operates its business from numerous facilities in Florida, New York and New York.Jersey. These leased facilities include our headquarters location, warehouse and retail stores.

Grocery Segment. As of December 31, 2021,2022, our Grocery segment had 414 retail stores in Florida, New York and New Jersey which aggregate approximately 28,000102,000 square feet, all of which13 stores are leased by our grocery segment. Healthy Choice Wellness Centers leases a facilityThe Company own the property in Saugerties store in New York.

Our common stock is currently listed on the OTC Pink marketplace under the symbol “HCMC”.

As of March 31, 2022,30, 2023, there were approximately 1,400 stockholders of record for our common stock. A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.

As of March 31, 2022,30, 2023, the last reported sale price of our common stock on the OTC Pink Marketplace was $0.0003$0.0001 per share.

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on any of our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on then existing conditions, including our operating results, financial conditions, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.

On February 7, 2021,August 18, 2022, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold and issued 5,00014,722 shares of its Series DE Convertible Preferred Stock (the “Preferred Stock”) to a single institutional accredited investorinvestors for $1,000 per share or an aggregate subscription of $5,000,000. Subject$13.25 million. The number of shares issued to a customary “9.99% Beneficial Ownership Limitation blocker,” the Preferred Stockeach participant is currently convertible into 2,083,333,333.33 sharesbased on subscription amount multiplied by conversion rate of the Company’s Common Stock at a conversion price1.1111. The Company also incurred offering costs of $0.0024 per share, with such conversion price subject to adjustment as set forth belowapproximately $410,000, which covers legal and described in the Certificate of Designation.consulting fees.

Not required for smaller reporting companies.

You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included elsewhere in this report. “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations” contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy, plans and objectives of management for future operations, are forward-looking statements.

Forward-looking statements contained in this report include:

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “expect,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are contained in the Risk Factors contained herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business, see the Risk Factors below.

We believe the following factors affect our performance:

Retail: We believe the operating performance of our retail stores will affect our revenue and financial performance. The Company has (1) a total of [six] retail vape stores and (2) [four]four natural and organic groceries and dietary supplement stores located in Florida, as well as twoten located in New York.York and New Jersey. The Company has reduced the number ofclosed retail vape stores, dueas management has shifted its retail sales focus to the wholesale and online channel. The adverse industry trends and increasing federal and state regulations that, if implemented, may negatively impact future retail revenues.wholesale and online operations in vapor segment.

Increased Competition: Food retail is a large and competitive industry. Our competition varies and includes national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller specialty stores, and farmers’ markets. In addition, we compete with restaurants and other dining options in the food-at-home and food-away-from-home markets. The opening and closing of competitive stores, as well as restaurants and other dining options, in regions where we operate will affect our results. In addition, changing consumer preferences with respect to food choices and to dining out or at home can impact us. We also expect increased product supply and downward pressure on prices to continue and impact our operating results in the future.

Our Response to the COVID-19 Pandemic: We are proud to provide our guests with high quality, fresh foods and restaurant quality meals, delivered with impeccable service in an exceptionally clean and well-stocked store. With the ongoing COVID-19 pandemic, we continue to carefully monitor and adjust our safety protocols while following public health guideline and local ordinances. We have maintained many of the protocols established at the beginning of the pandemic to keep our team members and guests safe. The COVID-19 pandemic has presented many risks and challenges that we must manage. While we have experienced many challenges, including but not limited to, product shortages, staffing difficulties, and evolving customer shopping behaviors, our focus remains on both offering our customers a high quality service experience and supporting our essential front-line team members. Though we have successfully managed these challenges to date, our operations and financial condition could still be negatively affected by the COVID-19 pandemic and future developments, which are highly uncertain and cannot be predicted.

The following table sets forth our Consolidated Statements of Operations for the years ended December 31, 20212022 and 20202021 which is used in the following discussions of our results of operations:

Net vapor sales decreased $0.41.8 million to $2.10.3 million for the year ended December 31, 20212022 as compared to $2.52.1 million for the same period in 20202021. The decrease in sales was primarily due to a major decrease in foot trafficclosing all retail vape store, as management has shifted its retail sales focus to the wholesale and a decrease in the number of stores open compared to prior year.online channel. Net grocery sales decreasedincreased $0.217.8 million to $11.229.0 million for the year ended December 31, 20212022 as compared to $11.511.2 million for the same period in 20202021. The decrease$18.2 million increase in grocery sales was primarily due to acquisition of Mother Earth's Storehouse and Green's Natural Foods, offset by a decrease in the customer count compared to prior year.same-store sales of $0.4 million.

Vapor cost of goods sold for the year ended December 31, 20212022 and 20202021 were $0.80.1 million and $1.00.8 million, respectively, a decrease of $0.20.7 million. The decrease in cost of goods sold was primarily due to a decreased inclosing retail vape stores, as management has shifted its retail sales focus to the wholesale and product cost.online channel. Grocery store cost of goods sold for the year ended December 31, 20212022 and 20202021 were $7.218.9 million and $7.17.2 million, respectively, an increase of $0.1$12.1 million primarily due to acquisition of Mother Earth's Storehouse and Green's Natural Foods stores, offset by a write-offdecrease in same-store cost of inventory.goods sold of $0.4 million.

Total operating expenses increased $0.88.8 million to $10.0$18.9 million for the year ended December 31, 2021.2022. The increase of $6.0 million is due to the acquisition of Mother Earth's Storehouse and Green's Natural Foods stores, and the remaining increase was primarily due to an increase in professional fees of $1.1$1.7 million, related largely to the patent infringement lawsuit, coupled with payroll and payroll benefits of $0.4 million, partially offset by the impairment of goodwill and intangible assets of $0.4 million in prior year.$0.8 million.

Net other income of $1.4 million for the year ended December 31, 2022 includes a gain on employee retention tax credit of $0.9 million, and interest income of $0.2 million, offset by $0.01 million loss on investment. Net other income of $0.7 million for the year ended December 31, 2021 includes a$0.8 million gain on debt settlements of $0.8 million, partiallysettlement, offset by an interest expense of $0.1 million. Net other expense of $0.3 0.07 million for the year ended December 31, 2020 includes primarily interest expense.

Our net cash used in operating activities of $3.9 million for the year ended December 31, 2022 resulted from our net loss of $7.2 million and a net cash usage of $0.2 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $3.5 million. Our net cash used in continuing operating activities of $3.5 million for the year ended December 31, 2021 resulted from our net loss of $4.0 million and a net cash usage of $0.6 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $1.0 million. Our net cash used in continuing operating activities of $2.3 million for the year ended December 31, 2020 resulted from our net loss from continuing operations of $3.7$4.0 million, offset by a net cash usage of $0.5 million from changes in operating assets and liabilities and a non-cash adjustments of $1.9$0.9 million.

The net cash used in investing activities of $0.1$10.7 million for the year ended December 31, 20212022 resulted from the collection of a note receivable, the acquisition of new businessbusinesses and purchases of a patent and property and equipment. The net cash provided by investing activities of $0.1 million for the year ended December 31, 20202021 resulted from the issuance and collection of a note receivable, and purchases of a patent and property and equipment.

The net cash provided by financing activities of $12.8 million for the year ended December 31, 2022 is due to proceeds received from Securities Purchase Agreement of $12.8 million, partially offset by a principal payment of $0.09 million on promissory note. The net cash used in financing activities of $27.2 million for the year ended December 31, 2021 is due to proceeds received from the Rights Offering of $24.3 million and a Securities Purchase Agreement of $5.0 million, partially offset by a principal payment of $2.0 million on the line of credit. The net cash used in financing activities of $1.8 million for the year ended December 31, 2020 is due to proceeds received from the Paycheck Protection Program of $0.9 million and Term Loan of $2.5 million, partially offset by payments of $1.7 million on the loan payable.

At December 31, 20212022 and December 31, 2020,2021, we did not have any material financial guarantees or other contractual commitments with trade vendors that are reasonably likely to have an adverse effect on liquidity.

Our cash balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. The majority of our cash and cash equivalents are concentrated in three large financial institutions and are generally in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company has not experienced any losses on its cash and cash equivalents. The following table presents the Company’s cash position as of December 31, 20212022 and December 31, 2020.2021.

The Company reported net loss of approximately $4.0$7.2 million for the year ended December 31, 2021.2022. The Company also had positive working capital of $26.2$20.4 million. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to satisfy business obligations, and to continue as a going concern.We believe that current cash on hand and cash flow from operations will be sufficient to fund our working capital and other cash requirements for at least the next twelve months.

We do not have any off-balance sheet arrangements other than operating leases for retail locations, equipment, and vehicles.

We do not consider our business to be seasonal.