graphic
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20222023

Or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number: 001-36469

HEALTHIER CHOICES MANAGEMENT CORP.
(Exact name of Registrant as specified in its charter)

Delaware 84-1070932
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
3800 North 28Th Way  
Hollywood, Florida 33020
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 305-600-5004

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☒
 Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.0001 per share HCMC OTC Pink Marketplace

As of November 10, 2022,July 21, 2023, there were 339,741,632,384463,266,632,384 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.






TABLE OF CONTENTS

PAGE
  
PART I FINANCIAL INFORMATION
1
  
ITEM 1. Financial Statements
1
  
Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20222023 (Unaudited) and December 31, 20212022
1
  
Condensed Consolidated Statements of Operations for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)
2
  
Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)
3
  
Condensed Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)
5
  
Notes to Condensed Consolidated Financial Statements (Unaudited)
6
  
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
1617
  
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
2224
  
ITEM 4. Controls and Procedures
2224
  
PART II OTHER INFORMATION
2326
  
ITEM 1. Legal Proceedings
2326
  
ITEM 1A. Risk Factors
2327
  
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
2327
  
ITEM 3. Defaults Upon Senior Securities
2327
  
ITEM 4. Mine Safety Disclosures
2327
  
ITEM 5. Other Information
2327
  
ITEM 6. Exhibits
2328
  
Signatures
2529
  
Exhibit 31.1
 
  
Exhibit 31.2
 
  
Exhibit 32.1
 
  
Exhibit 32.2
 


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS


 September 30, 2022 (Unaudited)  
December 31,
2021
 June 30, 2023 (Unaudited) 
December 31,
2022
ASSETS           
CURRENT ASSETS           
Cash and cash equivalents $30,009,173  $26,496,404 
Cash$8,481,915 $22,911,892
Accounts receivable, net  53,439   28,481  92,649  55,815
Notes receivable  205,262   247,915  156,297  189,225
Inventories  2,401,903   1,521,199  3,765,070  3,817,192
Prepaid expenses and vendor deposits  295,823   456,397  826,611  322,182
Investment  17,143   23,143  1,371  9,771
Other current assets 1,004,809  1,224,171
Restricted cash  1,325,000   -  628,232  1,778,232
TOTAL CURRENT ASSETS  34,307,743   28,773,539  14,956,954  30,308,480
             
Property and equipment, net of accumulated depreciation  1,528,300   176,988 
Property, plant, and equipment, net of accumulated depreciation 2,974,629  3,112,908
Intangible assets, net of accumulated amortization  2,083,007   947,593  4,544,332  5,005,511
Goodwill  2,657,000   916,000  5,747,000  5,747,000
Right of use asset – operating lease, net  4,785,871   3,543,930  10,634,634  10,604,935
Other assets  108,565   85,437  481,426  476,196
             
TOTAL ASSETS $45,470,486  $34,443,487 $39,338,975 $55,255,030
             
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY             
CURRENT LIABILITIES             
Accounts payable and accrued expenses $3,203,384  $1,642,848 $5,133,314 $5,715,234
Contingent consideration 372,000  774,900
Contract liabilities  57,283   23,178  147,469  198,606
Current portion of line of credit  453,232   418,036 
Line of credit 453,232  453,232
Current portion of loan payment  1,479   2,604  552,001  536,542
Operating lease liability, current  534,493   437,328  1,965,888  2,228,852
TOTAL CURRENT LIABILITIES  4,249,871   2,523,994  8,623,904  9,907,366
             
Loan payable, net of current portion  -   815  2,097,932  2,378,061
Operating lease liability, net of current  3,885,543   2,685,021  8,395,274  8,041,504
TOTAL LIABILITIES  8,135,414   5,209,830  19,117,110  20,326,931
             
COMMITMENTS AND CONTINGENCIES (SEE NOTE 13)         
             
CONVERTIBLE PREFERRED STOCK             
Series E convertible preferred stock, $1,000 par value per share, 14,722 and 0 shares authorized, issued and outstanding as of September 30, 2022 and December 31, 2021, respectively; aggregate liquidation preference of $14.7 million
  14,722,075   - 
Series E redeemable convertible preferred stock, $1,000 par value per share, 14,722 shares authorized, 1,944 shares and 14,722 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; aggregate liquidation preference of $1.9 million and $14.7 million as of June 30, 2023 and December 31, 2022, respectively
 1,944,425  14,722,075
STOCKHOLDERS’ EQUITY             
Series D convertible preferred stock, $1,000 par value per share, 5,000 shares authorized; 800 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively; aggregate liquidation preference of $0.8 million
  800,000   800,000 
Common Stock, $0.0001 par value per share, 750,000,000,000 shares authorized; 339,741,632,384 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
  33,974,163   33,974,163 
Series D convertible preferred stock, $1,000 par value per share, 5,000 shares authorized; 800 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively; aggregate liquidation preference of $0.8 million
 800,000  800,000
Common Stock, $0.0001 par value per share, 750,000,000,000 shares authorized; 463,266,632,384 and 339,741,632,384 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively
 46,326,663  33,974,163
Additional paid-in capital  28,973,580   30,855,824  19,324,774  29,045,802
Accumulated deficit  (41,134,746)  (36,396,330) (48,173,997)  (43,613,941)
TOTAL STOCKHOLDERS’ EQUITY  22,612,997   29,233,657  18,277,440  20,206,024
             
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY $45,470,486  $34,443,487 $39,338,975 $55,255,030

See notes to unaudited condensed consolidated financial statements



1

HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 Three Months Ended  Nine Months Ended Three Months Ended Six Months Ended
 September 30,  September 30, June 30, June 30,
 2022  2021  2022  2021 2023 2022 2023 2022
SALES                       
Vapor sales, net $1,187  $466,181  $256,747  $1,671,098 $- $5,997 $38 $255,560
Grocery sales, net  5,775,543   2,803,327   16,700,596   8,450,055  13,574,896  6,126,063  27,134,602  10,925,053
TOTAL SALES, NET  5,776,730   3,269,508   16,957,343   10,121,153  13,574,896  6,132,060  27,134,640  11,180,613
                           
Cost of sales vapor  364   186,522   112,610   657,171  -  562  653  112,246
Cost of sales grocery  3,909,190   1,706,597   10,674,170   5,133,228  8,493,213  3,800,625  17,137,913  6,764,980
GROSS PROFIT  1,867,176   1,376,389   6,170,563   4,330,754  5,081,683  2,330,873  9,996,074  4,303,387
                           
OPERATING EXPENSES  3,985,377   2,427,256   11,012,070   6,599,224  8,261,343  3,699,273  15,158,780  7,026,693
                           
LOSS FROM OPERATIONS  (2,118,201)  (1,050,867)  (4,841,507)  (2,268,470) (3,179,660)  (1,368,400)  (5,162,706)  (2,723,306)
                           
OTHER INCOME (EXPENSE)                           
Loss (gain) on investment  (11,314)  (557)  (6,000)  10,954 
(Loss) gain on investment (3,943)  1,800  (8,400)  5,314
Change in contingent consideration 425,000  -  402,900  -
Other income, net  4,327   -   27,376   -  4,600  6,175  9,250  23,049
Interest income (expense), net  50,202   1,543   81,715   (76,888)
Gain on debt extinguishment, net  -   -   -   767,930 
Interest income, net 101,248  14,910  198,900  31,513
Total other income (expense), net  43,215   986   103,091   701,996  526,905  22,885  602,650  59,876
                           
NET LOSS $(2,074,986) $(1,049,881) $(4,738,416) $(1,566,474)$(2,652,755) $(1,345,515) $(4,560,056) $(2,663,430)
           
Induced conversions of preferred stock (91,500)  -  (152,500)  -
           
Net loss attributable to common stockholders (2,744,255)  -  (4,712,556)  -
                           
NET LOSS PER SHARE-BASIC AND DILUTED $0.00  $0.00  $0.00  $0.00 $0.00 $0.00 $0.00 $0.00
                           
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED  339,741,632,384   336,603,045,428   339,741,632,384   297,439,560,396  353,854,819,196  339,741,632,384  347,796,604,758  339,741,632,384
                           
                

See notes to unaudited condensed consolidated financial statements


2

HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBERJUNE 30, 2023 AND 2022 and 2021
(Unaudited)
  Series E Convertible Preferred Stock  
Convertible
Preferred Stock
  Common Stock  
Additional
Paid-In
  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance – July 1, 2022
  -  $-   800  $800,000   339,741,632,384  $33,974,163  $30,855,824  $(39,059,760) $26,570,227 
Issuance of Series E Convertible Preferred stock in connection with the Securities Purchase Agreement, net of offering costs  14,722   14,722,075   -   -   -   -   (1,882,244)  -   (1,882,244)
Net loss  -   -   -   -   -   -   -   (2,074,986)  (2,074,986)
Balance – September 30, 2022
  14,722  $14,722,075   800  $800,000   339,741,632,384  $33,974,163  $28,973,580  $(41,134,746) $22,612,997 
 Series E Convertible Preferred Stock  
Convertible
Preferred Stock
  Common Stock  
Additional
Paid-In
  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance – April 1, 2023
  13,496  $13,496,525   800  $800,000   346,441,632,384  $34,644,163  $29,034,802  $(45,521,242) $18,957,723 
Series E convertible preferred stock redeemed  (10,637)  (10,637,100)  -   -   -   -   22,222   -   22,222 
Conversion of series E convertible preferred stock  (915)  (915,000)  -   -   9,150,000,000   915,000   -   -   915,000 
Issuance of award stock  -   -   -   -   107,675,000,000   10,767,500   (10,767,500)  -   - 
Induced conversions of preferred stock  -   -   -   -   -   -   (91,500)  -   (91,500)
Stock-based compensation expense  -   -   -   -   -   -   1,126,750   -   1,126,750 
Net loss  -   -   -   -   -   -   -   (2,652,755)  (2,652,755)
Balance – June 30, 2023
  1,944  $1,944,425   800  $800,000   463,266,632,384  $46,326,663  $19,324,774  $(48,173,997) $18,277,440 



  Series E Convertible Preferred Stock  
Convertible
Preferred Stock
  Common Stock  
Additional
Paid-In
  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance – July 1, 2021
  -   -   5,000  $5,000,000   333,179,132,384  $33,317,913  $26,546,415  $(32,875,464) $31,988,864 
Series D Convertible Preferred Stock exercised  -   -   (4,200)  (4,200,000)  6,562,500,000   656,250   3,543,750   -   - 
 Issuance of common stock in connection with the Rights Offering, net of offering expenses  -   -   -   -   -   -   765,659   -   765,659 
Net loss  -   -   -   -   -   -   -   (1,049,881)  (1,049,881)
Balance – September 30, 2021
  -   -   800  $800,000   339,741,632,384  $33,974,163  $30,855,824  $(33,925,345) $31,704,642 

Series E Convertible Preferred Stock 
Convertible
Preferred Stock
 Common Stock 
Additional
Paid-In
 Accumulated   
 Shares  Amount Shares Amount Shares Amount Capital Deficit Total 
Balance – April 1, 2022
  -  $-   800  $800,000   339,741,632,384  $33,974,163  $30,855,824  $(37,714,245) $27,915,742 
Net loss  -   -   -   -   -   -   -   (1,345,515)  (1,345,515)
Balance – June 30, 2022
  -  $-   800  $800,000   339,741,632,384  $33,974,163  $30,855,824  $(39,059,760) $26,570,227 

See notes to unaudited condensed consolidated financial statements


3

HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20222023 AND 20212022
(UNAUDITED)

  Series E Convertible Preferred Stock  
Convertible
Preferred Stock
  Common Stock  
Additional
Paid-In
  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance – January 1, 2022
  -  $-   800  $800,000   339,741,632,384  $33,974,163  $30,855,824  $(36,396,330) $29,233,657 
Issuance of Series E Convertible Preferred stock in connection with the Securities Purchase Agreement, net of offering costs  14,722   14,722,075   -   -   -   -   (1,882,244)  -   (1,882,244)
Net loss  -   -   -   -   -   -   -   (4,738,416)  (4,738,416)
Balance – September 30, 2022
  14,722  $14,722,075   800  $800,000   339,741,632,384  $33,974,163  $28,973,580  $(41,134,746) $22,612,997 
 Series E Convertible Preferred Stock 
Convertible
Preferred Stock
 Common Stock 
Additional
Paid-In
 Accumulated  
 Shares  Amount Shares Amount Shares Amount Capital Deficit Total
Balance – January 1, 2023
 14,722 $14,722,075  800 $800,000  339,741,632,384 $33,974,163 $29,045,802 $(43,613,941) $20,206,024
Series E convertible preferred stock redeemed (11,193)  (11,192,650)  -  -  -  -  22,222  -  22,222
Conversion of series E convertible preferred stock (1,585)  (1,585,000)  -  -  15,850,000,000  1,585,000  -  -  1,585,000
Issuance of awarded stock -  -  -  -  107,675,000,000  10,767,500  (10,767,500)  -  -
Induced conversions of preferred stock -  -  -  -  -  -  (152,500)  -  (152,500)
Stock-based compensation -  -  -  -  -  -  1,176,750  -  1,176,750
Net loss -  -  -  -  -  -  -  (4,560,056)  (4,560,056)
Balance – June 30, 2023
 1,944 $1,944,425  800 $800,000  463,266,632,384 $46,326,663 $19,324,774 $(48,173,997) $18,277,440




  Series E Convertible Preferred Stock  
Convertible
Preferred Stock
  Common Stock  
Additional
Paid-In
  Accumulated    
  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Total 
Balance – January 1, 2021
  -  $-   16,277  $16,277,116   143,840,848,017  $14,384,084  $3,955,039  $(32,358,871) $2,257,368 
Series C Preferred stock exercised  -   -   (16,277)  (16,277,116)  162,771,153,001   16,277,116   -   -   - 
Stock options exercised  -   -   -   -   2,275,000,000   227,500   -   -   227,500 
Stock-based compensation expense  -   -   -   -   -   -   34,375   -   34,375 
Issuance of Series D Convertible Preferred stock in connection with the Securities Purchase Agreement  -   -   5,000   5,000,000   -   -   -   -   5,000,000 
Series D Convertible Preferred Stock exercised  -   -   (4,200)  (4,200,000)  6,562,500,000   656,250   3,543,750   -   - 
Issuance of common stock  -   -   -   -   1,182,831,056   118,283   1,289,273   -   1,407,556 
Issuance of common stock in connection with the Rights Offering, net of offering cost  -   -   -   -   27,046,800,310   2,704,680   21,639,637   -   24,344,317 
Issuance of awarded stock for officers and board member  -   -   -   -   2,250,000,000   225,000   (225,000)  -   - 
Cancellation of awarded stock for officers and board member  -   -   -   -   (6,187,500,000)  (618,750)  618,750   -   - 
Net loss  -   -   -   -   -   -   -   (1,566,474)  (1,566,474)
Balance – September 30, 2021
  -  $-   800  $800,000   339,741,632,384  $33,974,163  $30,855,824  $(33,925,345) $31,704,642 
 Series E Convertible Preferred Stock 
Convertible
Preferred Stock
 Common Stock 
Additional
Paid-In
 Accumulated  
 Shares  Amount Shares Amount Shares Amount Capital Deficit Total
Balance – January 1, 2022
 - $-  800 $800,000  339,741,632,384 $33,974,163 $30,855,824 $(36,396,330) $29,233,657
Net loss -  -  -  -  -  -  -  (2,663,430)  (2,663,430)
Balance – June 30, 2022
 - $-  800 $800,000  339,741,632,384 $33,974,163 $30,855,824 $(39,059,760) $26,570,227

See notes to unaudited condensed consolidated financial statements

4

HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 Nine Months Ended September 30, Six Months Ended June 30,
 2022  2021 2023 2022
OPERATING ACTIVITIES           
Net loss $(4,738,416) $(1,566,474)$(4,560,056) $(2,663,430)
Adjustments to reconcile net loss to net cash used in operating activities:             
Depreciation and amortization  652,162   379,536  747,485  422,078
Gain (loss) on investment  6,000   (10,954)
Loss (gain) on investment 8,400  (5,314)
Amortization of right-of-use asset  555,726   400,334  1,063,591  377,216
Write-down of obsolete and slow moving inventory  533,343   265,635 
Gain on debt settlement  -   (767,930)
Accrued interest on loan  -   60,809 
Write-down of obsolete and slow-moving inventory 951,373  73,640
Stock-based compensation expense  -   34,375  1,176,750  -
        
Change in contingent consideration (402,900)  -
Changes in operating assets and liabilities:             
Accounts receivable  (24,958)  (34,465) (36,834)  (2,157)
Inventories  (609,468)  (460,232) (899,251)  (189,138)
Prepaid expenses and vendor deposits  160,574   (11,779) (670,178)  212,226
Other current assets 219,362  -
Other assets  (23,128)  4,162  (5,230)  (33,941)
Accounts payable and accrued expenses  1,560,536   11,405  (197,306)  528,247
Contract liabilities  (248,522)  (145) (51,137)  (249,700)
Lease liability  (499,980)  (348,424) (1,002,484)  (340,611)
NET CASH USED IN OPERATING ACTIVITIES  (2,676,131)  (2,044,147) (3,658,415)  (1,870,884)
             
INVESTING ACTIVITIES             
Acquisition of Mother Earth's Storehouse  (5,150,000)  - 
Acquisition of Mother Earth’s Storehouse -  (5,150,000)
Collection of note receivable  42,653   40,831  32,928  27,122
Purchases of property and equipment  (251,840)  (53,437) (148,027)  (213,133)
Purchase of patent  -   (12,500)
NET CASH USED IN INVESTING ACTIVITIES  (5,359,187)  (25,106) (115,099)  (5,336,011)
             
FINANCING ACTIVITIES             
Proceeds from line of credit  35,196   -  -  35,196
Principal payments on loan payable  (1,940)  (255,592) (264,670)  (1,285)
Principal payment on the line of credit  -   (2,000,000)
Proceeds from Rights Offering  -   24,344,317 
Proceeds from preferred stock, net of issuance costs  12,839,831   5,000,000 
Proceeds from exercise of stock options  -   227,500 
NET CASH PROVIDED BY FINANCING ACTIVITIES  12,873,087   27,316,225 
Payment of induced conversions of preferred stock (152,500)  -
Payments for deferred offering costs (218,865)  -
Payment for series E preferred stock redemption (11,170,428)  -
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (11,806,463)  33,911
             
NET INCREASE IN CASH, CASH EQUIVALENT AND RESTRICTED CASH  4,837,769   25,246,972 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH— BEGINNING OF PERIOD  26,496,404   2,925,475 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — END OF PERIOD $31,334,173  $28,172,447 
NET DECREASE IN CASH AND RESTRICTED CASH (15,579,977)  (7,172,984)
CASH AND RESTRICTED CASH— BEGINNING OF PERIOD 24,690,124  26,496,404
CASH AND RESTRICTED CASH — END OF PERIOD$9,110,147 $19,323,420
             
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION             
Cash paid for interest $4,383  $36,792 $87,008 $2,910
Cash paid for income tax $-  $- $- $-
NON-CASH INVESTING AND FINANCING ACTIVITIES             
Issuance of common stock $-  $1,290,260 
Lease acquired $1,797,667  $- 
Issuance of common stock in connection with series E preferred stock conversion$1,585,000 $-
Right-of-use assets obtained in exchange for operating lease liabilities$1,093,290 $1,797,667
1% stated value reduction on preferred stock redemption$22,222 $-
Non-cash deferred offering cost$384,614 $-

See notes to unaudited condensed consolidated financial statements


5


HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. ORGANIZATION

Organization

Healthier Choices Management Corp. (the “Company”) is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives. The

Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, the Company operates manages and intends to expand on its intellectual property portfolio. 

Through its wholly owned subsidiaries, the Company operates:

Ada’s Natural Market, a natural and organic grocery store through its wholly owned subsidiary Healthy Choice Markets, Inc. Ada’s Natural Market and Paradise Health and Nutrition offersoffering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. The Company also sells

Paradise Health & Nutrition’s three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, onpackaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.

Mother Earth’s Storehouse, a two-store organic and health food and vitamin chain in New York’s Hudson Valley, a business that has been in existence for over 40 years.

Greens Natural Foods’ eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products

Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Amazon.com marketplace throughCompany operates:

Licensing agreements for Healthy Choice Wellness Centers located at the Casbah Spa and Salon in Fort Lauderdale, FL, Boston Direct Health in Boston, MA and Green Care Medical Services in Chicago, IL.

These centers offer multiple vitamin drip mixes and intramuscular shots for clients to choose from that are designed to help boost immunity, fight fatigue and stress, reduce inflammation, enhance weight loss, and efficiently deliver antioxidants and anti-aging mixes. Additionally, there are IV vitamin mixes and shots for health, beauty, and re-hydration.

Through its wholly owned subsidiary, Healthy U Wholesale, Inc. TheInc, the Company also operates HCMC Intellectual Property Holdings, LLC, a wholly owned subsidiary formed to hold, marketsells vitamins and expandsupplements, as well as health, beauty, and personal care products on its current intellectual property assets. Thewebsite www.TheVitaminStore.com.

Additionally, the Company markets its patented the Q-Cup™ technology under the vape segment; this patented technology is based on a small, quartz cup called the Q-Cup™, which a customer partially fills with either cannabis or CBD concentrate (approximately 50mg) purchased from a third party. The Q-Cup™ is then inserted into the Q-Cup™ Tank or Globe, whichthat heats the cup from the outside without coming in direct contact with the solid concentrate. This Q-Cup™ technology provides significantly more efficiency and an “on the go” solution for consumers who prefer to vape concentrates either medicinally or recreationally. The Company acquired substantially all of the assets of Mother Earth’s Storehouse on February 9, 2022, which operates a two store organic and health food and vitamin chain in New York’s Hudson Valley, a business that has been operating for over 40 years. The Company expanded its operation into the Health & Wellness segment in November 2021. HCMC acquired substantially all of the assets of EIR Hydration, an IV therapy center located in Roslyn Heights, NY. The Company also has licensing agreements for Healthy Choice Wellness Centers at the Casbah Spa and Salon in Fort Lauderdale, FL and Boston Direct Health in Boston, MA. The activities in the Wellness centers are currently reported under the Grocery segment due to its de minimis nature. From December 2021 through April 2022, the Company either closed its vape stores or sold substantially all of the assets of such stores. This will allow the Company to focus on developing wholesale business and sales through online platform.

COVID-19 Management UpdateSpin-Off

The global outbreakCompany has commenced steps to spin off (“Spin-Off”) its grocery segment and wellness business into a new publicly traded company (hereinafter referred to as “NewCo”). NewCo will continue the path of COVID-19 was declared a pandemicgrowth in the wellness verticals started by HCMC and explore other growth opportunities that comport with HCMC’s healthier lifestyle mission. Following the World Health OrganizationSpin-Off, HCMC will retain its entire patent suite, the Q-Cup® brand, and a national emergency bycontinue to develop its patent suite through R&D as well as continuing its path of enforcing its patent rights against infringers and attempting to monetize said patents through licensing deals.

At the U.S. government in March 2020 and has negatively impacted the U.S. and global economies, disrupted global supply chains and, mandated closures and stay-at-home orders and created significant disruptionstime of the global financial markets. The Company adjusted certain aspectsSpin-Off, HCMC will distribute all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock. Shares of HCMC’s common stock outstanding as of the operationsrecord date for the Spin-Off (the “Record Date”), will entitle the holder thereof to protect their employeesreceive a certain number of shares of Common Stock in NewCo. The distribution will be made in book-entry form by a distribution agent. Fractional shares of Common Stock will not be distributed in the Spin-Off and customers while still meeting customers’ needs.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 stillany fractional amounts will be negatively affected by the COVID-19 pandemic and future developments, which are highly uncertain and cannot be predicted.rounded down. Please see more disclosure in Note 12 Stockholder Equity.

6


Note 2. LIQUIDITY

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern 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 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 June 30, 2023, the Company had cash of approximately $8.5 million and working capital of $6.3 million. The Company anticipates that itsbelieves current cash cash equivalent and cash generated from operations will beon hand is sufficient to meet the projected operating expensesits obligations and capital requirements for the foreseeable future through at least the next twelve months from the issuancedate of these unaudited condensed consolidated financial statements. Management believes with $30.0 million cash on hand atfiling. In the balance sheet date,past, the Company financed its operations primarily through issuances of common stock and convertible preferred stock. However, we have no commitments to obtain such additional financing, and there can be no assurance that the Company’s cashCompany will be sufficientable to coverraise the necessary funds to fund its operation for the 12 months from the date of the filing.operations.



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Note 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The Company has made estimates and judgments affecting the amounts reported in the Company’s unaudited condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022.30, 2023. The condensed consolidated balance sheet as of December 31, 20212022 was derived from the Company’s audited 20212022 financial statements contained in the above referenced Form 10-K. Results of the ninesix months ended SeptemberJune 30, 2022,2023, are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.2023.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 20212022 Annual Report.


Reclassification

Certain amounts in the condensed consolidated financial statements and related notes have been reclassified to conform to the current year presentation. Such reclassifications do not impact the Company’s previously reported financial position or net income (loss). $150,000 inventory shrink was originally presented in the statement of cash flow under change in operating assets inventory in cash used in operating activities for six months ended June 30, 2022, it was reclassified to write-down of obsolete and slow-moving inventoryunder cash used in operating activities in the statement of cash flow.

The change in the fair value measurement on contingent consideration was presented under Other (expense) income, net in the statement of operations for three months ended March 31, 2023. For the three months ended June 30, 2023, the Company presented the change in fair value remeasurement as a separate line in the statement of operations.

7


Note 4. CONCENTRATIONS

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid instruments with an original maturity of three months or less, when purchased, to be cash and cash equivalents. The majority of the Company’s cash and cash equivalents areis concentrated in one large financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage. The Company did not have any cash equivalent as of June 30, 2023, and  December 31, 2022.

A summary of the financial institutionsinstitution that had a cash and cash equivalents in excess of FDIC limits of $250,000 on SeptemberJune 30, 20222023 and December 31, 20212022 is presented below:

 September 30, 2022  December 31, 2021 
Total cash, cash equivalents and restricted cash in excess of FDIC limits of $250,000
 
$
30,749,550
  
$
26,023,593
 
June 30, 2023 December 31, 2022 
Total cash in excess of FDIC limits of $250,000
 
$
7,458,162
  
$
21,682,144
 

The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests, as deposits are held in excess of federally insured limits. The Company’s cash equivalent at September 30, 2022 and December 31, 2021, respectively, was a money market account. The Company has not experienced any losses in such account.
accounts.

The following table provides a reconciliation of cash cash equivalents and restricted cash to amounts shown in unaudited condensed consolidated statements of cash flow: 

 June 30, 2023  June 30, 2022 
Cash $8,481,915  $19,323,420 
Restricted cash  628,232   - 
Total cash and restricted cash $9,110,147  $19,323,420 

  September 30, 2022  September 30, 2021 
Cash and Cash Equivalent $30,009,173  $28,172,447 
Restricted cash  1,325,000   - 
Total cash, cash equivalents and restricted cash $31,334,173  $28,172,447 

Restricted Cash
 
The Company'sCompany’s restricted cash consisted of cash balances which were restricted as to withdrawal or usage under the August 18, 2022 securitysecurities purchase agreement for the purpose of funding any amounts due under the Series E Certificate of Designation upon the redemption of the Series E Preferred Stock.The balance also included cash held  in the collateral account to cover the cash draw from the line of credit.

7
8

Note 5. SEGMENT INFORMATION AND DISAGGREGATION OF REVENUES

In accordance with FASB ASC 280, "Disclosures about Segment of an enterprise and related information", the Company determined it has two reportable segments: grocery and vapor. There are no inter-segment revenues.

The Company's general and administrative costs are not segment specific. As a result, all operating expenses are not managed on segment basis.


The tables below present information about reportable segments for the three months and ninesix months ended SeptemberJune 30, 2022,2023, and 2021:2022:

 Three Months Ended September 30,  Nine Months Ended September 30, 
  2022  2021  2022  2021 
Vapor $1,187  $466,181  $256,747  $1,671,098 
Grocery  5,775,543   2,803,327   16,700,596   8,450,055 
Total revenue $5,776,730  $3,269,508  $16,957,343  $10,121,153 
                 
Retail Vapor $1,187  $466,153  $256,747  $1,671,029 
Retail Grocery  5,187,540   2,475,887   14,944,074   7,438,115 
Food service/restaurant  584,382   305,626   1,743,228   908,476 
Online/eCommerce  3,621   15,199   13,294   85,174 
Wholesale Grocery  -   6,615   -   18,290 
Wholesale Vapor  -   28   -   69 
Total revenue $5,776,730  $3,269,508  $16,957,343  $10,121,153 
                 
(Loss) income from operations-Vapor  (4,998)  66,306   (39,460)  300,573 
(Loss) income from operations-Grocery  (289,653)  52,923   20,397   172,564 
Corporate items  (1,823,550)  (1,170,096)  (4,822,444)  (2,741,607)
Total loss $(2,118,201) $(1,050,867) $(4,841,507) $(2,268,470)
8
 Three Months Ended June 30,  Six Months Ended June 30, 
  2023  2022  2023  2022 
Vapor $-  $5,997  $38  $255,560 
Grocery  13,574,896   6,126,063   27,134,602   10,925,053 
Total revenue $13,574,896  $6,132,060  $27,134,640  $11,180,613 
                 
Retail Vapor $-  $5,997  $-  $255,560 
Retail Grocery  12,017,526   5,478,523   24,067,596   9,756,535 
Food service/restaurant  1,555,372   643,760   3,062,948   1,158,846 
Online/eCommerce  1,998   3,780   4,096   9,672 
Total revenue $13,574,896  $6,132,060  $27,134,640  $11,180,613 
                 
Loss from operations-Vapor  (10,724)  (15,495)  (17,397)  (34,462)
(Loss) income from operations-Grocery  (185,923)  146,114   (462,763)  310,049 
Corporate items  (2,983,013)  (1,499,019)  (4,682,546)  (2,998,893)
Total loss from operations $(3,179,660) $(1,368,400) $(5,162,706) $(2,723,306)



Note 6. NOTES RECEIVABLE AND OTHER INCOME

On September 6, 2018, the Company entered into a secured, 36-month promissory note (the “Note”) with VPR Brands L.P. for $582,260. The Note bears an interest rate of 7.00%, which payments thereunder are $4,141 weekly. The Company records all proceeds related to the interest of the Note as interest income as proceeds are received.

On August 31, 2022, the Company amended and restated the Secured Promissory Note (the "Amended Note") with VPR Brands L.P. to extend the maturity date for one year. The outstanding balance for the Amended Note is $211,355. The Amended Note bears an interest rate of 7.00%, which payments thereunder are $1,500 weekly, with such payments commencing as of September 3, 2022. The Amended Note has a balloon payment of $145,931 for all remaining accrued interest and principal balance due in the final week of the 1-year extension of the Amended Note.

A summary of the Amended Note as of SeptemberJune 30, 20222023 and December 31, 20212022 is presented below:

Description September 30, 2022  December 31, 2021  June 30, 2023 December 31, 2022
Promissory Note $205,262  $247,915  $156,297 $189,225



9

Note 7. ACQUISITION OF MOTHER EARTH’S STOREHOUSE, INC.

On February 9,October 14, 2022, the Company through its wholly owned subsidiary, Healthy Choice Markets 3,IV, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Mother Earth’s StorehouseDean’s Natural Food Market of Shrewsbury, Inc. (“HCM3”), a New Jersey corporation, Green’s Natural Foods, Inc., a Delaware corporation, Dean’s Natural Food Market of Chester, LLC, a New Jersey limited liability company, Dean’s Natural Food Market of Basking Ridge, LLC, a New Jersey limited liability company, and its shareholders.Dean’s Natural Food Market, Inc., a New Jersey corporation (collectively, the “Sellers”), and shareholders of the Sellers. Pursuant to the Purchase Agreement, HCM3the Company acquired certain assets and assumed certain liabilities related to Mother Earth’s grocery storesof an organic and natural health food and vitamin chain with eight store locations in KingstonNew York and Saugerties,northern and central New York. The Company intends to continue to operate the grocery stores under their existing name. Jersey (the “Stores”).

The cash purchase price under the Asset Purchase Agreement was $4,472,500,$5,142,000, with an additional $677,500 paid for inventory at closing. $3,000,000 seller financing in the form of promissory note. In addition, the Company assumedseller is entitled to a lease obligation forcontingent earn-out based on a certain revenue threshold within the Kingston, NY store and entered into an employment agreement withone-year period of the store manager.closing.

The purchase methodCompany recorded $1,108,000 of accounting in accordance with ASC 805, Business Combinations, was appliedcontingent consideration based on the estimated financial performance for the Mother Earth's Storehouse acquisition.  This requiresone year following closing.  The contingent consideration was discounted at an interest rate of 3.8%, which represents the total cost of an acquisitionCompany's weighted average discount rate.  Contingent consideration related to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisition is attributable to expected operational synergies from combining the operations of the acquired businessrecorded at fair value (level 3) with those of the Company.changes in fair value recorded in other expense (income), net.

The purchase price allocation is final asfollowing table summarizes the change in fair value of Septembercontingent consideration from acquisition date to June 30, 2022. 2023:

 Fair Market Value - Level 3 
Balance as of October 14, 2022 $1,108,000 
Remeasurement  (333,100)
Balance as of December 31, 2022  774,900 
Remeasurement  (402,900)
Balance as of June 30, 2023 $372,000 

The following table summarizes the change in fair value of contingent consideration for the three months ended June 30, 2023:

 Fair Market Value - Level 3 
Balance as of March 31, 2023 $797,000 
Remeasurement  (425,000)
Balance as of June 30, 2023 $372,000 

The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:

 October 14, 2022 
Purchase Consideration      
Cash Consideration paid $5,150,000 
Cash consideration paid $5,142,000 
Promissory note  3,000,000 
Contingent consideration issued to Green's Natural seller  1,108,000 
Total Purchase Consideration $9,250,000 
        
Purchase price allocation        
Inventory  805,000  $1,642,000 
Property and equipment  1,278,000   1,478,000 
Intangible assets  1,609,000   3,251,000 
Right of use asset - operating lease  1,797,667 
Right of use asset - Operating lease  6,427,000 
Other liabilities  (283,000)  (211,000)
Operating lease liability  (1,797,667)  (6,427,000)
Goodwill  1,741,000   3,090,000 
Net assets acquired $5,150,000  $9,250,000 
        
Finite-lived intangible assets        
Trade Names/Trademarks $513,000 
Customer Relationships  683,000 
Non-Compete Agreement  413,000 
Trade Names (8 years)
 $1,133,000 
Customer Relationships (6 years)
  1,103,000 
Non-Compete Agreement (5 years)
  1,015,000 
Total intangible assets $1,609,000  $3,251,000 

9
10

The acquisition is structured as asset purchase in a business combination, and goodwill is tax-deductible, and amortizable over 15 years for tax purpose.

Revenue and Earnings

RevenueThe following table represents the combined pro forma revenue and net income for three months ended September 30, 2022 were $3.2 million and $0.01 million, respectively. Revenue and net income were $8.5 million and $0.4 million, respectively, from the date of acquisition through September 30, 2022. Acquisition-related expenses are expensed as incurred. They were recorded in selling, general and administrative expenses and were $0 and $78,000,loss for the three and ninesix months ended SeptemberJune 30, 2022, respectively. They primarily related to legal and other professional fees.2022:

Unaudited Supplemental Pro Forma Information
 For Three Months Ended June 30, 2022  
For Six Months Ended
June 30, 2022
 
Sales $13,875,928  $27,032,375 
Net loss $(1,769,171) $(3,354,452)

The following unaudited pro forma summary presents consolidated information of the Company, including Mother Earth's Storehouse, as if the business combination had occurred on January 1, 2021, the earliest period presented herein:

  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2022  2021  2022  2021 
Sales $5,776,730  $6,842,549  $18,380,486  $20,840,277 
Net (loss)  (2,074,985)  (665,288)  (4,581,680)  (412,696)

The pro forma financial information includes adjustments that are directly attributable to the business combinationscombined proforma revenue and are factually supportable. The pro forma adjustments include incremental amortization of intangible and remove non-recurring transaction costs directly associated with the acquisitions, such as legal and other professional service fees. Cost savings or operating synergies expected to result from the acquisitions are not included in the pro forma results. Fornet loss for the three and ninesix months period ended SeptemberJune 30, 2022 the pro forma financial information excludes $0 and $78,000, respectively,were prepared as though acquisition occurred as of non-recurring acquisition-related expenses. These pro forma results are illustrative only and not indicative of the actual results of operations that would have been achieved nor are they indicative of future results of operations.January 1, 2022.
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Note 8. PROPERTY, &PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following:
 September 30, 2022  December 31, 2021  June 30, 2023  December 31, 2022 
Displays
 
$
305,558
  
$
305,558
  
$
312,146
  
$
312,146
 
Building  575,000   -   575,000   575,000 
Furniture and fixtures  311,521   246,496   580,668   560,256 
Leasehold improvements
  
727,469
   
136,504
   
1,910,719
   
1,910,719
 
Computer hardware & equipment  133,654   151,924   186,654   160,210 
Other
  
345,708
   
315,788
   
688,773
   
587,602
 
  2,398,910   1,156,270   4,253,960   4,105,933 
Less: accumulated depreciation and amortization
  
(870,610
)
  
(979,282
)
  
(1,279,331
)
  
(993,025
)
Total property and equipment $1,528,300  $176,988 
Total property, plant, and equipment, net $2,974,629  $3,112,908 

The Company incurred approximately $64,986143,746 and $22,63063,656 of depreciation expense for the three months ended SeptemberJune 30, 20222023 and 20212022, and $178,575286,306 and $89,155113,592 of depreciation expense for the ninesix months endedSeptember June 30, 20222023 and 2021,2022, respectively.

The Company closed all vape stores in Q2 2022, and disposed all vape stores' furniture and fixtures, computer and equipment, and leasehold improvements. Total gross carrying amount of $287,431 and total accumulated depreciation of $287,247 were reduced from the consolidated balance sheets.


11


Note 9. INTANGIBLE ASSETS

Intangible assets, net are as follows:

September 30, 2022Useful Lives (Years) 
Gross
Carrying Amount
  
Accumulated
Amortization
  
Net
Carrying Amount
 
Trade names / Trademarks8-10 years $1,436,000  $(650,568) $785,432 
June 30, 2023 Useful Lives (Years) 
Gross
Carrying Amount
 
Accumulated
Amortization
 
Net
Carrying Amount
Trade names  8-10 years $2,569,000 $(876,036) $1,692,964
Customer relationships4-5 years  1,566,000   (916,024)  649,976   4-6 years  2,669,000 (1,182,139)  1,486,861
Patents10 years  372,165   (150,145)  222,020   10 years  384,665 (178,891)  205,774
Non-compete4-5 years  651,000   (233,338)  417,662   4-5 years  1,602,000 (443,267)  1,158,733
Website4 years  10,000   (2,083)  7,917 
Intangible assets, net  $4,035,165  $(1,952,158) $2,083,007     $7,224,665 $(2,680,333) $4,544,332

December 31, 2021Useful Lives (Years) 
Gross
Carrying Amount
  
Accumulated
Amortization
  
Net
Carrying Amount
 
Trade names / Trademarks8-10 years $923,000   (536,661) $386,339 
December 31, 2022 Useful Lives (Years) 
Gross
Carrying Amount
 
Accumulated
Amortization
 
Net
Carrying Amount
Trade names  8-10 years  $2,569,000  (725,723)  $1,843,277
Customer relationships4-5 years  883,000   (685,823)  197,177   4-6 years  2,669,000  (1,033,306)  1,635,694
Patents10 years  372,165   (122,233)  249,932   10 years  384,665  (159,658)  225,007
Non-compete4 years  238,000   (133,646)  104,354   4-5 years  1,602,000  (300,467)  1,301,533
Website4 years  10,000   (209)  9,791 
Intangible assets, net  $2,426,165  $(1,478,572) $947,593     $7,224,665 $(2,219,154) $5,005,511

Intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was approximately  $165,101$230,277 and $95,335$165,100 for the three months ended SeptemberJune 30, 2023 and 2022, and 2021,$461,179  and $473,587 and $290,381$308,486 for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. Future annual estimated amortization expense is as follows:

Years ending December 31,      
2022 (remaining three months) $154,715 
2023  411,149 
2023 (remaining six months) $461,179 
2024  411,149   922,358 
2025  404,107   916,858 
2026  309,214   838,877 
2027  694,457 
Thereafter  392,673   710,603 
Total $2,083,007  $4,544,332 

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Note 10. CONTRACT LIABILITIES

The Company’s contract liabilities consist of gift cards and loyalty rewards, for which the Company has a performance obligation to deliver products when customers redeem balances or terms expire through breakage. Our breakage policy is twenty four months for gift cards, twelve months for Grocery loyalty rewards, and six months for Vapor loyalty rewards. As such, all contract liabilities are expected to be recognized within a twenty four month period. Revenue is recognized when gift card and loyalty points are redeemed.

A summary of the net changes in contract liabilities activity at SeptemberJune 30, 20222023 and December 31, 20212022 is presented below:


 September 30, 2022  December 31, 2021 
Beginning balance as January 1, $23,178  $21,262 
Issued  423,321   39,469 
Redeemed  (362,108)  (37,463)
Breakage recognized  (27,108)  (90)
Ending balance $57,283  $23,178 
 June 30, 2023  December 31, 2022 
Beginning balance as January 1, $198,606  $23,178 
Issued  638,501   859,383 
Redeemed  (635,391)  (628,012)
Breakage recognized  (54,247)  (55,943)
Ending balance $147,469  $198,606 

Note 11. DEBT

The following table provides a breakdown of the Company's debt as of SeptemberJune 30, 20222023 and December 31, 20212022 is presented below:

_ September 30, 2022  December 31, 2021 
Line of Credit $453,232  $418,036 
Other debt  1,479   3,419 
Total debt $454,711   421,455 
_ June 30, 2023  December 31, 2022 
Promissory note $2,649,933  $2,913,788 
Other debt  -   815 
Total debt $2,649,933  $2,914,603 
Current portion of long-term debt  (552,001)  (536,542)
Long-term debt $2,097,932  $2,378,061 


Note 12. STOCKHOLDERS’ EQUITY

Rights Offering

On June 18, 2021, the Company issued 27,046,800,310 shares of common stock in connection with the Rights Offering at a subscription price of $0.0010 per share, generating gross proceeds of $27.0 million. The Company incurred direct financing related costs of $2.7 million in connection with the offering resulting in net proceeds to the Company of $24.3 million.

Exchange Agreement

On March 29, 2021, the Company entered into exchange agreements with the holders of indebtedness pursuant to the $2.7 million Loan and Security Agreement (the "Credit Agreement"). Pursuant to the Credit Agreement with the holders of the Company’s indebtedness (the “Notes”) in an aggregate amount of $1.3 million exchanged the Notes for 1,172,964,218 shares at a conversion price of $0.0011 (the "Exchange"). The Notes were issued pursuant to the Credit Agreement dated as of August 18, 2020, among The Vape Store, Inc., the Company, Healthy Choice Markets, Inc., Sabby Healthcare Master Fund, Ltd., and Sabby Volatility Warrant Master Fund, Ltd.  In connection with the Exchange, the Credit Agreement and all related loan documents was terminated and the Holder’s on the assets of the Company and its subsidiaries was cancelled.  The Company recognized a loss on debt extinguishment of $0.1 million.
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Restricted Stock

On January 14, 2021, the Compensation Committee of the Board of Directors of the Company approved an issuance of restricted stock to the Officers and a Director of the Company, in consideration for agreeing to a new vesting schedule for the existing awarded restricted stock. Each individual was granted a 10% increase from the original award agreement for a total of 2.3 billion shares of restricted common stock, which will vest quarterly and equal amounts until December 31, 2022, provided that the grantee remains an employee of the Company through the vesting date.

On March 30, 2021 and June 29, 2021, the Company and the Officers and a Director of the Company agreed to forfeit a total of 6.18 billion of restricted shares of common stock that were due to vest on March 31, 2021 and June 30, 2021. The expense related to such was fully recognized in the fiscal year ended December 31, 2021, as such no additional compensation expense related with restricted stock has been reflected during the current fiscal year.

Series E Convertible Preferred Stock

On August 18, 2022, the Company entered into a Securities Purchase Agreement ("Series E Preferred Stock") pursuant to which the Company sold and issued 14,722 shares of its Series E Redeemable Convertible Preferred Stock to institutional investors for $1,000 per share or an aggregate subscription of $13.25 million. The number of shares issued to each participant is based on subscription amount multiplied by conversion rate of 1.1111. The Company also incurred offering costs of approximately $410,000, which covers legal and consulting fee.

The Company is planning to spin off its grocery segment and wellness business into a new publicly traded company (hereinafter referred to as “NewCo”). NewCo will continue the path of growth in the health verticals started by HCMC and explore other growth opportunities that comport with HCMC’s healthier lifestyle mission. HCMC will retain its entire patent suite, the Q-Cup® brand, and continue to develop its patent suite through R&D as well as continuing its path of enforcing its patent rights against infringers and attempting to monetize said patents through licensing deals. At the time of the Spin-Off, HCMC will distribute all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock (the “Spinoff”).

Pursuant to the Securities Purchase Agreement, purchasers will also be required to purchase Series A ConvertibleE Preferred Stock (“NewCo Series A Stock”) of a newly created public company (“NewCo”) resulting from spin off of HCMC’s grocery and wellness businesses in the same subscription amounts that the Purchasers paid for the HCMC Preferred Stock (the “Spinoff”).
The HCMC Preferred Stock shall havehas voting rights on as converted basis at the Company’s next stockholders’ meeting. However, as long as any shares of HCMC Series E Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the HCMC Series E Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the HCMC Series E Preferred Stock or alter or amend the Certificate of Designation, (b) increase the number of authorized shares of HCMC Series E Preferred Stock, or (c) enter into any agreement with respect to any of the foregoing. Each share of Series E Preferred Stock shall be convertible, at any time and from time to time at the option of the Holder thereof, into that number of shares of Common Stock (subject to the beneficial ownership limitations). The initial conversion price for the HCMC Series E Preferred Stock shall equal $0.0001.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary that is not a Fundamental Transaction (as defined in the Certificate of Designation), the holders of HCMC Series E Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to $1,000 per share of HCMCSeries E Preferred Stock.

Unless earlier converted or extended as set forth below, a holder may require the redemption of all or a portion of the stated value of the HCMC Series E Preferred Stock either (1) six months after closing or (2) the time at which the balance is due and payable upon an event of default.

On March 1, 2023, the Company entered into a First Amendment to HCMC Series E Preferred Stock with each purchaser ("Purchaser") identified as those who participated in the HCMC Series E Preferred Stock, dated as of August 18, 2022.  The parties amended the HCMC Preferred Stock related to the conversion payment whereby upon conversion of the Series E Preferred Stock prior to the record date for the Spin-Off, the Company will pay the Purchaser ten percent (10%) of the stated value of the Series E Preferred Stock converted. The record date was May 1, 2023.

On May 15th, the Company and the Purchaser entered into the Second Amendment to the Securities Purchase Agreement, pursuant to which the Company agreed to extend the time period for the Conversion Payment eligibility to December 1, 2023. The Company filed an amendment to the Certificate of Designation to make the redemption price of the Preferred Stock (the “Redemption Price”) equal the Stated Value regardless of the date on which it is redeemed. Prior to this amendment, the Redemption Price was discounted by 1% for each month after the seven-month anniversary of the Issue Date that the Purchaser elected not to redeem.

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For the three months ended June 30, 2023, 9,150,000,000 shares of common stock were issued as a result of the Series E preferred stock conversion. 10,637 shares of Series E preferred stock were redeemed and approximately $10,615,000 was paid for the redemptions.

As of June 30, 2023, 15,850,000,000 shares of common stock were issued as a result of the Series E preferred stock conversion. 11,193 shares of Series E preferred stock was redeemed and approximately $11,170,000 was paid for redemption.

Pursuant to the Securities Purchase Agreement, purchasers of the Series E Convertible Preferred Stock will also be required to purchase Series A Convertible Preferred Stock of Healthy Choice Wellness Corp. ("HCWC") in the same subscription amounts that the Purchasers paid for the HCMC Series E Preferred Stock. HCWC is the HCMC subsidiary that will be spun off  to HCMC’s stockholders in connection with the spin off of HCMC’s grocery and wellness businesses.


Stock Options and Restricted Stock

During the threesix months ended SeptemberJune 30, 20222023 and 2021, no stock options of the Company were exercised into common stock. During the nine months ended September 30, 2022, no stock options of the Company were exercised into common stock; in comparison to thenine months endedSeptember 30, 2021, where 2,275,000,000stock options of the Company were exercised into common stock.

On April 23, 2023, the Board of Directors (the “Board”) of HCMC approved the Second Amendment to the 2015 Equity Incentive Plan (the “Amended Plan”). The Amended Plan increased the number of shares of HCMC common stock authorized for issuance under the Amended Plan to 225,000,000,000 shares.

On April 23, 2023, HCMC’s board of directors has approved the issuance of approximately an additional 107,675,000,000 shares of restricted common stock to the employees and executive officers of HCMC. Each grant of restricted common stock will commence vesting of 12.5% of the award on February 1, 2024 and will vest in 12.5% increments on the last day of each calendar quarter thereafter through September 30, 2025. All shares of restricted common stock related to the April 23, 2023 issuance remain unvested as of June 30, 2023.

During the three months ended SeptemberJune 30, 20222023 and 20212022, the Company recognized stock-based compensation of approximately $1,127,000 and $0, respectively in connection with amortization of restricted stock and stock options. During the six months ended June 30, 2023 and $0, respectively. . During the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation of approximately $1,177,000 and $0 and $34,375, respectively. Stock based compensation is included as part of selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations.
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Income (Loss) Per Share


The following table summarizes the Company’s securities, in common share equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:

 As of September 30,  As of June 30, 
 2022  2021  2023  2022 
Preferred stock  148,471,000,000   1,250,000,000   20,694,000,000   1,250,000,000 
Stock options  68,587,000,000   68,587,000,000   67,587,000,000   67,587,000,000 
Restricted stock  5,500,000,000   - 
Total  217,058,000,000   69,837,000,000   93,781,000,000   68,837,000,000 

The difference between our common shares outstanding as of June 30, 2023 of 463,266,632,384, and the weighted average number of common shares outstanding in our basic and diluted net loss per share is the exclusion of 107,675,000,000 shares of restricted common stock outstanding which are unvested as of June 30, 2023. There are no other reconciling items except for differences resulting from computing share issuances on a weighted average basis.


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Note 13. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Two lawsuits were filed against the Company and its subsidiaries in connection with alleged claimed battery defects for an electronic cigarette device. Plaintiffs claim these batteries were sold by a store of the Company’s subsidiary and have sued for an undetermined amount of damages (other than a total of $0.4 million of medical costs). The initial complaints were filed between January 2019 and April 2019. We responded to the complaints in 2019 and we exchanged additional support information with the plaintiff for one of the lawsuits in 2021. Given the lack of information presented by the plaintiffs to date, the Company is unable to predict the outcome of these matters and, at this time, cannot reasonably estimate the possible loss or range of loss with respect to these legal proceedings.

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 for the Northern District of Georgia.  The lawsuit alleges 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 for the Northern District of Georgia 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 a notice of appeal of the District Court for the Northern District of Georgia’s dismissal of the Company’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. The appeal brief was filed on February 28, 2022.

On December 3, 2021, the District Court for the Northern District of Georgia effectively dismissed HCMC’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. In connection with such dismissal, the defendants sought to recover attorney’s fees from the Plaintiff. On February 22, 2022, the District Court for the Northern District of Georgia granted the defendant’s an award of approximately $575,000$575,000 in attorneys’ fees to be paid by the Company. The Company has fully provisioned this amount as of December 31, 2021. 2022. HCMC appealed this ruling on June 22, 2022.

On April 12, 2023, the U.S. Court of Appeals for the Federal Circuit ruled in favor of HCMC on two separate appeals it had filed in its patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. pending in the district court for the Northern District of Georgia.

In the first appeal, HCMC appealed the ruling of the District Court dismissing HCMC’s patent infringement action and denying HCMC’s motion to amend its pleading. In the second appeal, HCMC appealed the District Court’s award of attorneys’ fees to Philip Morris. In its decisions, the Federal Circuit ruled for HCMC by reversing both of those decisions and remanded the case back to the District Court for further proceedings. As a result of the ruling, the Company reversed the $575,000 which was previously fully provisioned during the three months ended March 31, 2023.

From time to time the Company is involved in legal proceedings arising in the ordinary course of our business. We believe that there is no other litigation pending that is likely to have, individually or in the aggregate, a material adverse effect on our financial condition or results of operations as of SeptemberJune 30, 20222023. With respect to legal costs, we record such costs as incurred.

Employment Agreement

On February 26, 2021, the Company entered into an amended and restated employment agreement (the “Employment Agreement Amendment”) with the Company’s President and Chief Operating Officer, Christopher Santi. Pursuant to the Employment Agreement Amendment, Mr. Santi will continue to be employed as the Company’s President and Chief Operating Officer through January 30, 2024.  Mr. Santi will receive a base salary of $0.4 million for 2021 and his salary will increase 10% in each subsequent year.

On February 02, 2022, the Company entered into a Second Amended and Restated Employment Agreement (the “Employment Agreement Amendment”) with the Company’s Chief Financial Officer, John Ollet.  Pursuant to the Employment Agreement Amendment, Mr. Ollet will continue to be employed as the Company’s Chief Financial Officer through February 14, 2025.  Mr. Ollet will receive a base salary of $0.3 million for 2022 and his salary will increase 10% in each subsequent calendar year.
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Note 14. SUBSEQUENT EVENTS

On October 14,2022,July 7, 2023, the Company through its wholly owned subsidiary, Healthy Choice Markets IV, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Dean’s Natural Food Marketa patent licensing agreement for one of Shrewsbury, Inc.,its patents in the vape segment. The Company as the licensor, grants to licensee during the term a New Jersey corporation, Green’s Natural Foods, Inc., a Delaware corporation, Dean’s Natural Food Market of Chester, LLC, a New Jersey limited liability company, Dean’s Natural Food Market of Basking Ridge, LLC, a New Jersey limited liability company,non-exclusive right and Dean’s Natural Food Market, Inc., a New Jersey corporation (collectively,license under the “Sellers”),Licensed Patents to make, use, offer to sell, sell, and shareholdersimport licensed products in the territory of the Sellers. PursuantUnited States of America. The licensee will pay to the Purchase Agreement,licensor a royalty based on net sales of all licensed products in the Company acquired certain assets and assumed certain liabilitiesterritory during the term of an organic and natural health food and vitamin chainthe agreement. Either party can cancel the agreement with eight store locations in New York and northern and central New Jersey (the “Stores”).60-days written notice.

The purchase price under the Purchase Agreement is approximately $8,000,000, of which $3,000,000 is in the form of a promissory note. In addition, the seller is entitled to a contingent earn-out based on certain revenue threshold within the one year period of the closing. The purchase price is subject to final inventory adjustment. The Company will assume all lease obligations for the Stores. The transaction closed on October 14,2022. The Company has engaged a professional valuation firm to perform the valuation on the assets acquired and liabilities assumed. Purchase price allocation has not been finalized at the time of filing.

On October 25, 2022, the Company announced that the Board has authorized aggregate common stock repurchases of up to $5 million. HCMC may purchase shares on a discretionary basis from time to time through open market purchases, privately negotiated transactions or other means, including through Rule 10b5-1 trading plans. The timing and amount of the repurchase transactions will be subject to the discretion of HCMC based upon market conditions and other opportunities that HCMC may have for the use or investment of its cash balances. The repurchase program has no expiration date, does not require the purchase of any minimum number of shares and may be suspended, modified or discontinued at any time without prior notice. The number of shares to be purchased and the timing of purchases will be based on the Company's trading windows and available liquidity, general business and market conditions, and other factors, including legal requirements, debt covenant restrictions and alternative investment opportunities. The Company has not repurchased any shares

The lease for HCMC headquarter expired on September 30, 2022. The Company is actively negotiating the lease renewal terms with the new owner of the premise. At the time of the filing, no agreement has been reached yet. The payment of the lease is on month to month.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONDENSED CONSOLIDATED OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements. The terms “we,” “us,” “our,” and the “Company” refer to Healthier Choices Management Corp. and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), Healthy Choices Markets 3 Real Estate LLC, Healthy Choice Markets IV, LLC (“Green's Natural Foods”), HCMC Intellectual Property Holdings, LLC, Healthy Choice Wellness, LLC, The Vitamin Store, LLC, Healthy U Wholesale, Inc., and The Vape Store, Inc. (“Vape Store”). All intercompany accounts and transactions have been eliminated in consolidation.

Company Overview

Healthier Choices Management Corp. is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives.
Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, the Company manages and intends to expand on its intellectual property portfolio.
Through its wholly owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC, and Healthy Choice Markets 3, LLC, and Healthy Choice Markets IV, LLCrespectively, the Company operates:
Ada’s Natural Market, a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.
Paradise Health & Nutrition’s three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.
Mother Earth’s Storehouse, a two store organic and health food and vitamin chain in New York’s Hudson Valley, which has been in existence for over 40 years.
Through its wholly owned subsidiaries, Healthy Choice Markets IV, LLC, the Company acquired Green's Natural Foods on October 14, 2022, a chain of premier natural foods stores in New York and New Jersey area, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. .
•
Green's Natural Foods’ eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products (www.Greensnaturalfoods.com).
Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company has licensing agreements for Healthy Choice Wellness Centers at the Casbah Spa and Salon in Fort Lauderdale, FL, and Boston Direct Health in Boston, MA. These centers offer multiple IV drip “cocktails” for clients to choose from that are designed to help boost immunity, fight fatigue and stress, reduce inflammation, enhance weight loss, and efficiently deliver antioxidants and anti-aging mixes. Additionally, there are cocktails for health, beauty, and re-hydration. (www.HealthyChoiceWellness.com).

Through its wholly owned subsidiary, Healthy U Wholesale Inc., the Company sells vitamins and supplements, as well as health, beauty and personal care products on its website www.TheVitaminStore.com.
Additionally, the Company markets its patented Q-Unit™ and Q-Cup® technology. Information on these products and the technology is available on the Company’s website at www.theQcup.com.

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Liquidity

The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern 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 financial statements do not necessarily purport to represent realizable or settlement values. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The Company incurred a loss from operations of approximately $4.85.2 million for the ninesix months ended SeptemberJune 30, 20222023. As of SeptemberJune 30, 20222023, cash and cash equivalents totaled approximately $30.08.5 million. The Company expects to continue incurring losses for the foreseeable future but we anticipate that ourbelieves current cash on hand is sufficient to meet its obligations and cash equivalentscapital requirements for at least the next twelve months from the date of filing. In the past, the Company financed its operations primarily through issuances of common stock and convertible preferred stock. However, we have no commitments to obtain such additional cash tofinancing, and there can be generated from operationsno assurance that the Company will be sufficientable to cover our projected operating expenses forraise the foreseeable future. Management does not believe there are any substantial doubts about the Company’s abilitynecessary funds to continue as a going concern within a year and a day from the issuance of these unaudited consolidated financial statements.fund its operations.

Factors Affecting Our Performance

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 four natural and organic groceries and dietary supplement stores located in Florida, as well as twoten located in New York. As of April 2022, theYork and New Jersey. The Company assigned the lease of its remaininghas closed retail vape store duestores, as 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. All of the Company's other vape stores had been either closed or had its assets sold from December 2021 to April 2022. This will allow the Company to focus on developing wholesale business and sales through online platform.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.
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Results of Operations

The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended SeptemberJune 30, 20222023 and 20212022 that is used in the following discussions of our results of operations:

 Three Months Ended September 30,  2022 to 2021 Three Months Ended June 30, 2023 to 2022
 2022  2021  Change $ 2023 2022 Change $
SALES                 
Vapor sales, net $1,187  $466,181  $(464,994)$- $5,997 $(5,997)
Grocery sales, net  5,775,543   2,803,327   2,972,216  13,574,896  6,126,063  7,448,833
TOTAL SALES, NET  5,776,730   3,269,508   2,507,222  13,574,896  6,132,060  7,442,836
                    
Cost of sales vapor  364   186,522   (186,158) -  562  (562)
Cost of sales grocery  3,909,190   1,706,597   2,202,593  8,493,213  3,800,625  4,692,588
GROSS PROFIT  1,867,176   1,376,389   490,787  5,081,683  2,330,873  2,750,810
                    
OPERATING EXPENSES                    
Selling, general and administrative  3,985,377   2,427,256   1,558,121  8,261,343  3,699,273  4,562,070
LOSS FROM OPERATIONS  (2,118,201)  (1,050,867)  (1,067,334) (3,179,660)  (1,368,400)  (1,811,260)
                    
OTHER INCOME (EXPENSE)                    
Loss on investment  (11,314)  (557)  (10,757)
Other income  4,327   -   4,327 
(Loss) gain on investment (3,943)  1,800  (5,743)
Change in contingent consideration 425,000  -  425,000
Other income, net 4,600  6,175  (1,575)
Interest income  50,202   1,543   48,659  101,248  14,910  86,338
Total other income (expense), net  43,215   986   42,229  526,905  22,885  504,020
                    
NET LOSS $(2,074,986) $(1,049,881) $(1,025,105)$(2,652,755) $(1,345,515) $(1,307,240)

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NetThe decrease in net vapor sales decreasedapproximately $0.5 millionis primarily due to $1.2 thousandclosing all retail vape stores in the second quarter of 2022, as management has shifted its retail sales focus to the wholesale and online channel. The sales for the three months endedSeptember June 30, 20222023, were significantly impacted by technical issues associated with the processing of credit card payments. Management is continuing to work with the third-party provider to address the matter.

Net grocery sales increased $7.4 million to $13.6 million for the three months ended June 30, 2023 as compared to $0.5$6.1 million for the same period in 2021.2022. The decrease$7.4 million increase in grocery sales iswas primarily due to the impact of  store closings during the second quarter of 2022.

Net grocery sales increased $3.0 million to $5.8 million for the three months endedSeptember 30, 2022 as compared to $2.8 million for the same period in 2021. The increase in sales is primarily due to an increase in the number of stores as a result ofthe acquisition of Mother Earth's Storehouse in February 2022.Green's Natural Foods.

Vapor cost of goods sold for the three months ended SeptemberJune 30, 20222023 and 20212022 were $- thousand and $0.2 million,$1.0 thousand, respectively, a decrease of $0.2 million.$1.0 thousand. The decrease is primarily due to the closing the remaining retail vape stores, during three months ended September 30, 2022 as comparedmanagement has shifted its retail sales focus to the same period in 2021.wholesale and online channel. Gross (loss) profit was $0.8$- thousand and $0.3 million$5.0 thousand for three months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively. Closing retail vape stores will allow the Company focus on developing wholesale business and online platform.

Grocery cost of goods sold for the three months ended SeptemberJune 30, 20222023 and 20212022 were $3.98.5 million and $1.73.8 million, respectively, an respectively. The increase of $2.2 million. The increase$4.7 million is primarily due to an increase in the number of stores from the acquisition of Mother Earth's Storehouse on February 14, 2022. Green's Natural Foods stores. Gross profit was $1.95.1 million and $1.12.3 million for the three months ended SeptemberJune 30, 20222023 and 20212022, respectively. Gross margin as a percentage of sales decreased approximately 10%1% as compared to the same period in prior year as a result of lost sales in in our Florida stores,increased inventory shrink and write off of damaged inventory as a result of Hurricane Ian.reserve.

Total operating expenses increased $1.6approximately $4.6 million to $4.0$8.3 million for the three months ended SeptemberJune 30, 20222023 compared to $2.4$3.7 million for the same period in 2021.2022. The increase is primarily attributabledue to the acquisition of Green's Natural Foods stores of $3.1 million, and increases in professional fees of $0.6$0.2 million, payroll and employee related cost of $0.7 million, depreciation and amortizationbenefit expense of $0.2$0.1 million, and occupancy costsstock compensation expense  of $0.1$1.1 million.

Total net other income increased $42,000$504,000 to $43,000$527,000 for the three months ended SeptemberJune 30, 20222023 compared to $1,000$23,000 for the same period in 2021.2022. The increase in net other income is mainly attributable to increase in interest income as a result of an increase in interest rates,. and change in contingent liability.

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The following table sets forth our unaudited consolidated Statements of Operations for the ninesix months ended SeptemberJune 30, 20222023 and 20212022 that is used in the following discussions of our results of operations:

 Nine Months Ended September 30,  2022 to 2021 Six Months Ended June 30, 2023 to 2022
 2022  2021  Change $ 2023 2022 Change $
SALES                 
Vapor sales, net $256,747  $1,671,098  $(1,414,351)$38 $255,560 $(255,522)
Grocery sales, net  16,700,596   8,450,055   8,250,541  27,134,602  10,925,053  16,209,549
TOTAL SALES, NET  16,957,343   10,121,153   6,836,190  27,134,640  11,180,613  15,954,027
                    
Cost of sales vapor  112,610   657,171   (544,561) 653  112,246  (111,593)
Cost of sales grocery  10,674,170   5,133,228   5,540,942  17,137,913  6,764,980  10,372,933
GROSS PROFIT  6,170,563   4,330,754   1,839,809  9,996,074  4,303,387  5,692,687
                    
OPERATING EXPENSES                    
Selling, general and administrative  11,012,070   6,599,224   4,412,846  15,158,780  7,026,693  8,132,087
LOSS FROM OPERATIONS  (4,841,507)  (2,268,470)  (2,573,037) (5,162,706)  (2,723,306)  (2,439,400)
                    
OTHER INCOME (EXPENSE)                    
Gain (loss) on investment  (6,000)  10,954   (16,954) (8,400)  5,314  (13,714)
Change in contingent consideration 402,900  -  402,900
Other income  27,376   -   27,376  9,250  23,049  (13,799)
Interest income (expense), net  81,715   (76,888)  158,603  198,900  31,513  167,387
Gain on extinguishment of debt, net  -   767,930   (767,930)
Total other income (expense), net  103,091   701,996   (598,905) 602,650  59,876  542,774
                    
NET LOSS $(4,738,416) $(1,566,474) $(3,171,942)$(4,560,056) $(2,663,430) $(1,896,626)


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Net Vaporvapor sales decreased $1.4$0.3 million to $0.3$- million for the ninesix months ended SeptemberJune 30, 20222023 as compared to $1.7$0.3 million for the same period in 2021.2022. The decrease in sales is primarily due to closing the remaining retail vape stores during the ninesix months ended SeptemberJune 30, 2022, as comparedmanagement has shifted its retail sales focus to the same period in 2021.wholesale and online channel. The sales for the six months endedJune 30, 2023 were significantly impacted by technical issues associated with the processing of credit card payments. Management is continuing to work with the third-party provider to address the matter.


Net Grocery sales increased $8.316.2 million to $16.727.1 million for the ninesix months ended SeptemberJune 30, 20222023 as compared to $8.510.9 million for the same period in 20212022. The increase in sales is primarily due to acquisition of Mother Earth's StorehouseGreen's Natural Foods in FebruaryOctober 2022.

Vapor cost of goods sold for the ninesix months ended SeptemberJune 30, 2023 and 2022 were $1.0 thousand and 2021 were $0.1 million and $0.7 million, respectively, a decrease of $0.5$0.1 million. The decrease is primarily due to closing retail stores.stores during calendar year 2022. Gross (loss) profit was $0.1 million$(1.0) thousand and $1.0$0.1 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. Closing retail vape stores will allow the Company focus on developing wholesale business and online platform.

Grocery cost of goods sold for the ninesix months ended SeptemberJune 30, 2023 and 2022 and 2021 were $10.7$17.1 million and $5.1$6.8 million, respectively, an increase of $5.5$10.4 million. The increase is primarily due to the acquisition of Mother Earth's StorehouseGreen's Natural Foods in FebruaryOctober 2022. Gross profit was $6.0$10.0 million and $3.3$4.2 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively.

Total operating expenses increased $4.4$8.1 million to $11.0$15.2 million for the ninesix months ended SeptemberJune 30, 20222023 compared to $6.6$7.0 million for the same period in 2021. Out2022. The increase of the $4.4$6.1 million operating expense increase, $2.5 million increase is due to Mother Earth’s StorehouseGreen's Natural Foods acquisition. The remaining increase is primarily attributable to increases in the professional fees of $1.5 million, office and store expenses of $0.2$0.3 million, payroll and employee related cost of $1.9$0.4 million, depreciation and amortization expenses of $273,000, meals, travel and entertainment of $45,000, insurance of $34,000, and occupancy of $248,000, offset by a decrease$0.1 million, and an increase in stock compensation of $34,000.$1.2 million.

Net other income of $0.6 million for the six months endedJune 30, 2023 includes a loss on investment of $8,000, change in contingent consideration of $403,000, other income of $9,000, and an interest income of $199,000. Net other income of $0.1 million for the ninesix months ended SeptemberJune 30, 2022 includes a loss on investment of $6,000, other income of $27,000,  and an interest income of $82,000. Net other income of $0.7 million for the nine months endedSeptember 30, 2021 includes a gain on debt settlement of $768,000, a gain on investment of $11,000,$5,000, other income of $23,000, and interest expenseincome of $77,000.

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$32,000.
Liquidity and Capital Resources

 Nine Months Ended September 30, Six Months Ended June 30,
 2022  2021 2023 2022
Net cash provided by (used in)      
Net cash (used in) provided by     
Operating activities $(2,676,131) $(2,044,147)$(3,658,415) $(1,870,884)
Investing activities  (5,359,187)  (25,106) (115,099)  (5,336,011)
Financing activities  12,873,087   27,316,225  (11,806,463)  33,911
 $4,837,769  $25,246,972 $(15,579,977) $(7,172,984)


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Our net cash used in operating activities of approximately $2.73.7 million for the ninesix months ended SeptemberJune 30, 20222023 resulted from a net loss of $4.74.6 million, offset by a non-cash adjustment of $1.7$3.5 million and a net cash providedusage of $0.32.6 million from changes in operating assets and liabilities. Our net cash used in operating activities of $2.01.9 million for the ninesix months ended SeptemberJune 30, 20212022 resulted from a net loss of $1.6$2.7 million and a net cash usage of $0.8$0.1 million from changes in operating assets and liabilities, offset by a non-cash adjustment of $0.4$0.9 million.

The net cash used in investing activities of $5.40.1 million for the ninesix months ended SeptemberJune 30, 20222023 resulted from the acquisition of Mother Earth's Storehouse, collection on a note receivable and purchases of property and equipment. The net cash used in investing activities of $25,0005,336,000 for the ninesix months ended SeptemberJune 30, 20212022 resulted from the acquisition of Mother Earth's Storehouse, collection of a note receivable, and purchases of property and equipment.

The net cash provided byused in financing activities of $12,873,00011.8 million for the ninesix months ended SeptemberJune 30, 20222023 is due to proceeds received from the Series E Preferred Stock salesredemption and from proceeds received from line of credit.exercise, payment for deferred offering cost related with spin off, and principle payment on loan payable. The net cash provided by financing activities of $27.334,000 million for the ninesix months ended SeptemberJune 30, 20212022 is due to proceeds received from the stock 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 and loan payment of $0.3 million.credit.

At SeptemberJune 30, 20222023 and December 31, 2021,2022, we did not have any material financial guarantees or other contractual commitments with 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. Most of our cash and cash equivalents areis concentrated in one financial institution and areis generally in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash and cash equivalents.cash. The following table presents the Company’s cash position as of SeptemberJune 30, 20222023 and December 31, 2021.2022.

 September 30, 2022  December 31, 2021 June 30, 2023 December 31, 2022
Cash $30,009,173  $26,496,404 $8,481,915 $22,911,892
Total assets $45,470,486  $34,443,487 $39,338,975 $55,255,030
Percentage of total assets  66.00%  76.93% 21.56%  41.47%

The Company reported a net loss of $4.74.6 million for the ninesix months ended SeptemberJune 30, 20222023. The Company also had positive working capital of $30.16.3 million. The Company expects to continue incurring losses for the foreseeable future, but we do not believe there are any substantial doubts about the Company’s ability to continue as a going concern. The Company'sCompany believes current cash and cash generated from operations will beon hand is sufficient to meet the projected operating expensesits obligations and capital requirements for the foreseeable future through at least the next twelve months from the issuancedate of these unaudited condensed consolidated financial statements.filing. In the past, the Company financed its operations primarily through issuances of common stock and convertible preferred stock. However, we have no commitments to obtain such additional financing, and there can be no assurance that the Company will be able to raise the necessary funds to fund its operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements.

We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

There have been no material changes to the Company’s critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 20212022 Annual Report, which we believe are the most critical to our business and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the preparation of our condensed consolidated financial statements.

Seasonality

We do not consider our business to be seasonal.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements including statements regarding retail expansion, the future demand for our products, the transition to vaporizer and other products, competition, the adequacy of our cash resources and our authorized Common Stock, and our continued ability to raise capital.

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “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 that could cause actual results to differ from those in the forward-looking statements include our future common stock price, the timing of future Series D preferred stock exercises and stock sales, customer acceptance of our products, and proposed federal and state regulation. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.


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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.


ITEM 4. CONTROLS AND PROCEDURES

We are required to report under Section 404(a) of Sarbanes-Oxley regarding the effectiveness of our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Our management, including our Principal Executive Officer and Principal Financial Officer, did not carry out an evaluation on internal controls as of SeptemberJune 30, 20222023 in regard to the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. As an evaluation was not carried out, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.

In planningThe Company’s management is responsible for establishing and performing its audit of our financial statements for the year ended December 31, 2021 in accordance with standards of the Public Company Accounting Oversight Board, our independent registered public accounting firm noted material weaknesses inmaintaining adequate internal control over financial reporting. A listUnder the supervision and with the participation of ourthe Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).  Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was ineffective as of June 30, 2023 and noted the material weaknesses are as follows:

●Failure to have properly documented and designed disclosure controls and procedures and testing of the operating effectiveness of our internal control over financial reporting.

●
Failure to perform periodic and year-end inventory observations in a timely manner and adequate controls to sufficiently perform required rollback procedures of inventory counts to the year-end.

●
Weakness around our purchase orders and inventory procedures, inclusive of year-end physical inventory observation procedures as well as physical count procedures.

●Segregation of duties due to lack of personnel.

●Information technology general controls (ITGCs) were not designed effectively to ensure that appropriate access security controls, change management and data center and network operations ITGCs were in place.

Our management concluded that considering internal control deficiencies that, in the aggregate, rise to the level of material weaknesses, we did not maintain effective internal control over financial reporting as of SeptemberJune 30, 20222023 based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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Planned Remediation

Management continues to work to improve its controls related to our material weaknesses listed above. In order to achieve the timely implementation of the above,controls over the above-mentioned weaknesses, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:

●Continuing to increase headcount across the Company, with a particular focus on hiring individuals with strong internal control backgrounds and inventory expertise.

●Increasing its focus on the Company’s purchase order process in order to better manage inventory thereby improving cash management and ultimately leading to more reliable and precise financial reporting. The Company implemented an open to buy program by comparing purchases with sales to better control overall inventory purchases.

●Using business intelligence to combine business analytics, data tools and infrastructure to help the Company quickly identify the issues in POS system and facilitate internal control over financial reporting.

●
Establishing policies and procedures in the IT area to mitigate data breach, unauthorized access, and address segregation of duties.

We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Controls over Financing Reporting


Except as detailed above, during the quarter ended SeptemberJune 30, 2022,2023, there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.





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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Two lawsuits were filed against the Company and its subsidiaries in connection with alleged claimed battery defects for an electronic cigarette device. Plaintiffs claim these batteries were sold by a store of the Company’s subsidiary and have sued for an undetermined amount of damages (other than a total of $0.4 million of medical costs). The initial complaints were filed between January 2019 and April 2019. We responded to the complaints in 2019 and we exchanged additional support information with the plaintiff for one of the lawsuits in 2021. Given the lack of information presented by the plaintiffs to date, the Company is unable to predict the outcome of these matters and, at this time, cannot reasonably estimate the possible loss or range of loss with respect to these legal proceedings.

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 for the Northern District of Georgia. The lawsuit alleges 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 for the Northern District of Georgia 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 a notice of appeal of the District Court for the Northern District of Georgia’s dismissal of the Company’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. The appeal brief was filed on February 28, 2022.

On December 3, 2021, the District Court for the Northern District of Georgia effectively dismissed HCMC’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. In connection with such dismissal, the defendants sought to recover attorney’s fees from the Plaintiff. On February 22, 2022, the District Court for the Northern District of Georgia granted the defendant’s an award of approximately $575,000 in attorneys’ fees to be paid by the Company. The Company has fully provisioned this amount as of December 31, 2021. HCMC appealed this ruling on June 22, 2022.

On April 12, 2023, the U.S. Court of Appeals for the Federal Circuit ruled in favor of HCMC on two separate appeals it had filed in its patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. pending in the district court for the Northern District of Georgia.

In the first appeal, HCMC appealed the ruling of the District Court dismissing HCMC’s patent infringement action and denying HCMC’s motion to amend its pleading. In the second appeal, HCMC appealed the District Court’s award of attorneys’ fees to Philip Morris. In its decisions, the Federal Circuit ruled for HCMC by reversing both of those decisions and remanded the case back to the District Court for further proceedings.

From time to time the Company is involved in legal proceedings arising in the ordinary course of our business. We believe that there is no other litigation pending that is likely to have, individually or in the aggregate, a material adverse effect on our financial condition or results of operations as of SeptemberJune 30, 2022.2023. With respect to legal costs, we record such costs as incurred.


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ITEM 1A. RISK FACTORS.

Not Applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

Not Applicable.

ITEM 6. EXHIBITS.

See the exhibits listed in the accompanying “Index to Exhibits.”

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INDEX TO EXHIBITS

Exhibit   Incorporated by Reference Filed or Furnished
No. Exhibit Description Form Date Number Herewith
31.1 
Certification of Principal Executive Officer (302)
       Filed
31.2 
Certification of Principal Financial Officer (302)
       Filed
32.1 
Certification of Principal Executive Officer (906)
       Furnished *
32.2 
Certification of Principal Financial Officer (906)
       Furnished *
101.INS XBRL Instance Document       Filed
101.SCH XBRL Taxonomy Extension Schema Document       Filed
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document       Filed
101.DEF XBRL Taxonomy Extension Definition Linkbase Document       Filed
101.LAB XBRL Taxonomy Extension Label Linkbase Document       Filed
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document       Filed
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)       Filed

*This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 HEALTHIER CHOICES MANAGEMENT CORP.
   
Date: November 10, 2022July 24, 2023By:/s/ Jeffrey Holman
  Jeffrey Holman
  Chief Executive Officer
   
Date: November 10, 2022July 24, 2023By:/s/ John Ollet
  John Ollet
  Chief Financial Officer

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