See notes to unaudited condensed consolidated financial statements

HEALTHIER CHOICES MANAGEMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
SALES
Vapor sales, net $ 1,410,003 $ 1,474,581 $ 4,398,942 $ 5,313,849
Grocery sales, net 1,447,040 1,575,037 5,349,800 2,085,293
TOTAL SALES, NET 2,857,043 3,049,618 9,748,742 7,399,142

Cost of sales vapor 709,445 655,856 1,877,686 2,441,715
Cost of sales grocery 893,838 939,606 3,118,563 1,251,872
GROSS PROFIT 1,253,760 1,454,156 4,752,493 3,705,555

OPERATING EXPENSES
Advertising 16,243 36,008 74,902 58,110
Selling, general and administrative 4,256,080 2,456,313 12,208,030 7,064,511
Impairment of goodwill and intangible assets - - - 1,977,829
Retail store and kiosk closing costs - 9,243 - 342,503
Total operating expenses 4,272,323 2,501,564 12,282,932 9,442,953
LOSS FROM OPERATIONS (3,018,563 ) (1,047,408 ) (7,530,439 ) (5,737,398 )

OTHER INCOME (EXPENSE)
Gain (loss) on repurchase of Series A warrants (20,160 ) 3,437,221 (94,955 ) 5,189,484
Change in fair value of derivative liabilities - (4,812,510 ) - (18,489,507 )
Other income 9,665 - 20,126 -
Interest income 4,463 21,845 26,441 38,418
Interest expense (419 ) (3,162 ) (3,552 ) (12,854 )
Total other expense, net (6,451 ) (1,356,606 ) (51,940 ) (13,274,459 )

Net loss from continuing operations (3,025,014 ) (2,404,014 ) (7,582,379 ) (19,011,857 )
Net income (loss) from discontinued operations 204,507 (8,915 ) 281,483 (777,119 )
NET LOSS $ (2,820,507 ) $ (2,412,929 ) $ (7,300,896 ) $ (19,788,976 )

NET LOSS PER SHARE-BASIC AND DILUTED
Continuing operations $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )
Discontinued operations $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 )
NET LOSS PER SHARE -BASIC AND DILUTED $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.01 )

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED 29,327,284,303 5,428,877,583 25,138,693,169 1,966,720,262

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
SALES
Vapor sales, net	$	-	$	5,997	$	38	$	255,560
Grocery sales, net		13,574,896		6,126,063		27,134,602		10,925,053
TOTAL SALES, NET		13,574,896		6,132,060		27,134,640		11,180,613

Cost of sales vapor		-		562		653		112,246
Cost of sales grocery		8,493,213		3,800,625		17,137,913		6,764,980
GROSS PROFIT		5,081,683		2,330,873		9,996,074		4,303,387

OPERATING EXPENSES		8,261,343		3,699,273		15,158,780		7,026,693

LOSS FROM OPERATIONS		(3,179,660)		(1,368,400)		(5,162,706)		(2,723,306)

OTHER INCOME (EXPENSE)
(Loss) gain on investment		(3,943)		1,800		(8,400)		5,314
Change in contingent consideration		425,000		-		402,900		-
Other income, net		4,600		6,175		9,250		23,049
Interest income, net		101,248		14,910		198,900		31,513
Total other income (expense), net		526,905		22,885		602,650		59,876

NET LOSS	$	(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

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED		353,854,819,196		339,741,632,384		347,796,604,758		339,741,632,384

See notes to unaudited condensed consolidated financial statements

HEALTHIER CHOICES MANAGEMENT CORP.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

~~NINE~~

FOR THE THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~

~~(UNAUDITED)~~

Common Stock Additional
Paid-In Accumulated
Shares Amount Capital Deficit Total
Balance – January 1, 2017 14,213,861,174 $ 1,421,386 $ 3,782,818 $ (2,746,658 ) $ 2,457,546

Issuance of common stock in connection with cashless exercise of Series A warrants 15,125,005,934 1,512,501 (1,208,429 ) - 304,072
Issuance of stock options in connection with professional services - - 9,000 - 9,000
Stock options exercised 10,000,000 1,000 - - 1,000
Stock-based compensation expense - - 5,338,508 - 5,338,508
Net loss - - - (7,300,896 ) (7,300,896 )
Balance – September 30, 2017 29,348,867,108 $ 2,934,887 $ 7,921,897 $ (10,047,554 ) $ 809,230

2023 AND 2022

(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 – 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 – 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

HEALTHIER CHOICES MANAGEMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(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, 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, 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

HEALTHIER CHOICES MANAGEMENT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(UNAUDITED)~~

Nine Months Ended
September 30,
2017 2016
OPERATING ACTIVITIES
Net loss $ (7,300,896 ) $ (19,788,976 )
Adjustments to reconcile net loss to net cash used in operating activities:
(Income) loss from discontinued operations (281,483 ) 777,119
Change in allowances for bad debt (22,633 ) 52,684
Depreciation and amortization 261,456 223,772
Loss on disposal of property and equipment - 103,312
Accretion of discounts on notes receivable from related party - (7,242 )
Accrued interest on notes receivable from related party - (8,773 )
(Gain) loss on repurchase of Series A warrants �� 94,955 (5,189,484 )
Write-down of obsolete and slow moving inventory 290,574 295,940
Stock-based compensation expense 5,338,508 61,794
Stock-based expense in connection with professional services 9,002 -
Impairment of goodwill and intangible assets - 1,977,829
Change in fair value of derivative liabilities - 18,489,507
Net cash used in discontinued operations (221,424 ) (2,996,504 )
Changes in operating assets and liabilities:
Due from merchant credit card processors 1,862 (20,708 )
Accounts receivable (26,506 ) (319,407 )
Inventories (479,406 ) (438,509 )
Prepaid expenses and vendor deposits 1,769 410
Other assets 8,872 (2,573 )
Accounts payable 21,124 165,777
Accrued expenses (200,323 ) (344,579 )
Customer deposits - 17,997
NET CASH USED IN OPERATING ACTIVITIES (2,504,549 ) (6,950,614 )

INVESTING ACTIVITIES
Acquisition of grocery store business - (2,910,612 )
Proceeds received from sale of tradename - 100,000
Issuance of note receivable to related party in conjunction with sale of wholesale business - (500,000 )
Collection of loans receivable - 139,765
Purchases of patent (50,000 ) -
Purchases of property and equipment (114,168 ) (29,763 )
NET CASH USED IN INVESTING ACTIVITIES (164,168 ) (3,200,610 )

FINANCING ACTIVITIES
Proceeds from loan payable 13,977 -
Principal payments on loan payable (897 ) -
Payments for repurchase of Series A warrants (2,427,267 ) (3,278,827 )
Principal payments of capital lease obligations (53,054 ) (50,050 )
Proceeds from exercise of stock options 1,000 -
NET CASH USED IN FINANCING ACTIVITIES (2,466,241 ) (3,328,877 )

DECREASE IN CASH (5,134,958 ) (13,480,101 )
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD 13,366,272 27,214,991
CASH AND CASH EQUIVALENTS — END OF PERIOD $ 8,231,314 $ 13,734,890

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 3,552 $ 12,854

NON-CASH INVESTING AND FINANCING ACTIVITIES
Recognition of discounts in connection with notes receivables to related party $ - $ (46,850 )
Issuance of common stock in connection with cashless exercise of Series A warrants $ 304,072 $ 4,498,048
Cancellation of treasury stock $ - $ 140,591

Preliminary Purchase Price Allocation in connection with the grocery store acquisition:
Amount allocated to goodwill
$ - $ 481,314
Property and equipment - 500,225
Intangible assets - favorable lease - 890,000
Intangible assets - customer relationships - 60,000
Intangible assets - tradenames and technology - 824,500
Inventory - 253,524
Accrued expenses - (98,951 )
Cash used in the grocery store acquisition $ - $ 2,910,612

Sale of Vape Wholesale Inventory and Business
Consideration received:
Note receivable from related party, net of discount $ - $ 356,895
Note receivable from related party, net of discount - 470,485
Treasury stock - 140,591
Total consideration - 967,971
Assets and liabilities transferred:
Inventory - (258,743 )
Accounts receivable, net - (244,735 )
Vendor deposits - (40,949 )
Accrued expenses - (35,273 )
Customer deposits - 17,850
Loss on repurchase of treasury stock - 61,850
Cash used in the sale of wholesale business $ - $ (500,000 )

(Unaudited)

	Six Months Ended June 30,
	2023		2022
OPERATING ACTIVITIES
Net loss	$	(4,560,056)	$	(2,663,430)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		747,485		422,078
Loss (gain) on investment		8,400		(5,314)
Amortization of right-of-use asset		1,063,591		377,216
Write-down of obsolete and slow-moving inventory		951,373		73,640
Stock-based compensation expense		1,176,750		-
Change in contingent consideration		(402,900)		-
Changes in operating assets and liabilities:
Accounts receivable		(36,834)		(2,157)
Inventories		(899,251)		(189,138)
Prepaid expenses and vendor deposits		(670,178)		212,226
Other current assets		219,362		-
Other assets		(5,230)		(33,941)
Accounts payable and accrued expenses		(197,306)		528,247
Contract liabilities		(51,137)		(249,700)
Lease liability		(1,002,484)		(340,611)
NET CASH USED IN OPERATING ACTIVITIES		(3,658,415)		(1,870,884)

INVESTING ACTIVITIES
Acquisition of Mother Earth’s Storehouse		-		(5,150,000)
Collection of note receivable		32,928		27,122
Purchases of property and equipment		(148,027)		(213,133)
NET CASH USED IN INVESTING ACTIVITIES		(115,099)		(5,336,011)

FINANCING ACTIVITIES
Proceeds from line of credit		-		35,196
Principal payments on loan payable		(264,670)		(1,285)
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 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	$	87,008	$	2,910
Cash paid for income tax	$	-	$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES
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

HEALTHIER CHOICES MANAGEMENT CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(UNAUDITED)~~

Note 1. ORGANIZATION ~~GOING CONCERN, AND BASIS OF PRESENTATION~~

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 Company operates thirteen vape retail stores in the Southeast region of the United States of America. The Company offers e-liquids vaporizers and related products through~~

Through its vape retail stores. The Company sold its wholesale business on July 31, 2016. The sale of the wholesale business was not contemplated prior to July 1, 2016. The sale of the wholesale business qualifies as a discontinued operation and, accordingly,wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, the Company ~~has excluded results for the wholesale business operations from the Company’s continuing operations in the unaudited consolidated Statements of Operations for all periods presented.~~

~~On June 1, 2016,~~manages and intends to expand on its intellectual property portfolio.

Through its wholly owned subsidiaries, the Company ~~acquired the business assets of~~ operates:

Ada’s ~~Whole Food~~Natural Market, ~~LLC,~~ a natural and organic grocery store ~~through~~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, 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 ~~Markets, Inc.~~Wellness, LLC, the Company 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, 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 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, that 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.

Spin-Off

The Company has commenced steps to spin off (“Spin-Off”) its grocery ~~store has been~~segment and wellness business into a ~~leader~~new publicly traded company (hereinafter referred to as “NewCo”). NewCo will continue the path of growth in the ~~natural grocery market in Fort Myers, Florida~~wellness verticals started by HCMC and explore other growth opportunities that comport with HCMC’s healthier lifestyle mission. Following the Spin-Off, 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. Shares of HCMC’s common stock outstanding as of the record date for the ~~past 40 years, offering fresh, natural and organic products and specializing~~Spin-Off (the “Record Date”), will entitle the holder thereof to receive a certain number of shares of Common Stock in ~~facilitating~~NewCo. The distribution will be made in book-entry form by a ~~healthy, well balanced lifestyle. In addition to a comprehensive selection~~distribution agent. Fractional shares of ~~vitamins and health & beauty products, the grocery store provides a fresh café and an organic juice bar.~~

In September 2017, Hurricane Irma struck Florida and caused major power outages to several of the Company’s operating facilities. Due to the loss of electricity, which lasted approximately one week, the Company suffered lost sales and inventory spoilage. The Company intends to submit insurance claims to recover the cost of lost sales and inventory spoilage, however, such claims have not, and mayCommon Stock will not be ~~accepted by our insurance carrier.~~

~~Going Concern~~distributed in the Spin-Off and ~~Liquidity~~

any fractional amounts will be rounded down. Please see more disclosure in Note 12 Stockholder Equity.

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 ~~incurred a loss~~currently and historically has reported net losses and cash outflows from ~~operations~~operations. As of June 30, 2023, the Company had cash of approximately ~~$7.5~~$8.5 million ~~for the nine months ended September 30, 2017. As~~and working capital of ~~September 30, 2017, cash and cash equivalents totaled approximately $8.2~~$6.3 million. ~~While we anticipate that our~~The Company believes current cash ~~cash equivalents, and cash to be generated from operations will be~~on hand is sufficient to meet ~~our projected operating plans~~its obligations and capital requirements for at least the ~~foreseeable future through a year and a day~~next twelve months from the ~~issuance~~date of ~~these unaudited consolidated financial statements, should we require additional funds (either~~filing. In the past, the Company financed its operations primarily through ~~equity or debt financings, collaborative agreements or from other sources)~~ issuances of common stock and convertible preferred stock. However, we have no commitments to obtain such additional financing, and ~~we may not~~there can be no assurance that the Company will be able to ~~obtain any such additional financing on terms favorable~~raise the necessary funds to ~~us, or at all. If adequate financing is not available, the Company will further delay, postpone or terminate product and service expansion and curtail certain selling, general and administrative~~fund its operations.

Note 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The ~~inability to raise additional financing may have a material adverse effect on the future performance of the Company.~~

~~Sourcing and Vendors~~

We source from multiple suppliers. These suppliers range from small independent businesses to multinational conglomerates. For the nine months ended September 30, 2017, we purchased approximately 75% of the goods we sell from our top 20 suppliers and approximately 40% of our total purchases were from one vendor.

~~Basis of Presentation and Principles of Consolidation~~

~~The Company’s~~accompanying unaudited consolidated financial statements are prepared in accordance with GAAP. The unaudited consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The terms “we,” “us,” “our,” and the “Company” refer to Healthier Choices Management Corp. and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., Vaporin, Inc., The Vape Store, Inc. (“Vape Store”), Smoke Anywhere U.S.A., Inc. (“Smoke”), Emagine the Vape Store, LLC (“Emagine”), IVGI Acquisition, Inc., Vapormax Franchising LLC, Vaporin LLC, and Vaporin Florida, Inc. All intercompany accounts and transactions have been eliminated in consolidation.

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Unaudited Interim Financial Information~~

~~The 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 ~~and reflect~~may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited but reflects all normal ~~recurring~~ adjustments that are, in the opinion of management, ~~are~~ necessary ~~for~~to provide a fair ~~presentation~~statement of ~~the interim financial information. The~~ results ~~of operations~~ for the interim periods ~~presented~~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, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2023. The condensed consolidated balance sheet as of December 31, 2022 was derived from the Company’s audited 2022 financial statements contained in the above referenced Form 10-K. Results of the six months ended June 30, 2023, are not necessarily indicative of the results to be expected for ~~any subsequent quarter or for~~ the full year ending December 31, ~~2017. Certain information and footnotes normally included in financial statements prepared in accordance with GAAP~~2023.

Significant Accounting Policies

There have been ~~omitted under~~no material changes in the ~~instructions~~Company’s significant accounting policies to ~~Form 10-Q and Article 10 of Regulation S-X of~~those previously disclosed in the ~~Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements and notes included herein should be read~~2022 Annual Report.

Reclassification

Certain amounts in ~~conjunction with~~ the ~~audited~~condensed consolidated financial statements and related notes ~~thereto as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for such year as filed with the SEC on March 27, 2017.~~

~~Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Reclassifications~~

~~Certain prior period amounts in the unaudited consolidated financial statements related to stock splits and the sale of discontinued operations~~ have been reclassified to conform to the current ~~period’s~~year presentation. ~~No changes to~~Such reclassifications do not impact the Company’s previously reported financial position or net ~~loss were made~~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 ~~result~~separate line in the statement of ~~such reclassifications.~~

~~Segment Reporting~~

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision makers, or decision-making group, in making decisions on how to allocate resourcesoperations.

Note 4. CONCENTRATIONS

Cash and ~~assess performance. The Company’s decision-making group is the senior executive management team.~~ Restricted Cash

The Company considers all highly liquid instruments with an original maturity of three months or less, when purchased, to be cash and ~~the decision-making group views the Company’s operations and manage its business as two operating segments. All long-lived assets of the Company reside in the U.S.~~

~~Use of Estimates in the Preparation of the Financial Statements~~

The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the valuation of assets and liabilities acquired in business combinations. Certain of management’s estimates could be affected by external conditions, including those unique to the Company’s industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from those estimates. The Company re-evaluates all accounting estimates at least quarterly based on these conditions and records adjustments when necessary.

~~Shipping and Handling~~

Shipping charges billed to customers are included in net sales and the related shipping and handling costs are included in cost of sales. For the nine months ended September 30, 2017 and 2016 shipping and handling costs of approximately $80,000 and $173,000, respectively, were included in cost of sales.

~~Concentration of Risk~~

Our cash ~~balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion.~~equivalents. The majority of ~~our~~the Company’s cash ~~and cash equivalents are~~is concentrated in ~~three~~one large financial ~~institutions and are generally~~institution, which is in excess of ~~the~~ Federal Deposit Insurance Corporation ~~(“FDIC”) insurance limit.~~(FDIC) coverage. The Company did not have any cash equivalent as of June 30, 2023, and December 31, 2022.

A summary of the financial institution that had cash in excess of FDIC limits of $250,000 on June 30, 2023 and December 31, 2022 is presented below:

	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 has not experienced any losses ~~on its~~in such accounts.

The following table provides a reconciliation of cash and restricted cash ~~equivalents.~~

~~At September 30, 2017, accounts receivable~~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

Restricted Cash

The Company’s restricted cash consisted of cash balances ~~included a concentration from three customers with receivable balances ranging from approximately $15,000~~which were restricted as to ~~$17,000, all~~withdrawal or usage under the August 18, 2022 securities purchase agreement for the purpose of ~~which are greater than 10%~~funding any amounts due under the Series E Certificate of Designation upon the redemption of the ~~total net accounts receivable balance. At December 31, 2016, accounts receivable balances~~Series E Preferred Stock. The balance also included ~~a concentration~~cash held in the collateral account to cover the cash draw from ~~three customers~~the line of credit.

Note 5. SEGMENT INFORMATION AND DISAGGREGATION OF REVENUES

In accordance with ~~receivable balances ranging from approximately $9,000 to $24,000, all~~FASB ASC 280, "Disclosures about Segment of ~~which are greater than 10% of the total net accounts receivable balance.~~

~~For the nine months ended September 30, 2017~~an enterprise and ~~2016,~~related information", the Company ~~did not have any customers with sales in excess of 10% of total sales.~~

determined it has two reportable segments: grocery and vapor. There are no inter-segment revenues.

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Inventories~~

~~Inventories are stated at average cost. If the cost of the inventories exceeds their net realizable value, provisions are recorded to write down excess inventory to its net realizable value.~~

The ~~Company’s inventories consist primarily of merchandise available for resale, such as fresh produce, perishable grocery items~~Company's general and ~~non-perishable consumable goods.~~

~~Identifiable Intangible Assets and Goodwill~~

Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets are amortized over 3 and 15 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indefinite-lived intangible assets, such as goodwilladministrative costs are not amortized. The Company assesses the carrying amounts of goodwill for recoverability on at least an annual basis or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value based test. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, and the useful life over which cash flows will occur. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for the Company.

During the third quarter of 2017, we changed the date of our annual impairment test from December 31st to September 30th. We believe the change in accounting principle related to changing our annual impairment testing date did not delay, accelerate, or avoid an impairment charge. We have determined that this change in accounting principle is preferable under the circumstances and does not result in adjustments to our financial statements when applied retrospectively. Our 2017 annual impairment test resulted in no impairment being recorded for the nine months ended September 30, 2017.

~~Adopted Accounting Pronouncements~~

In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 did not have a significant impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The adoption of ASU 2016-09 did not have a significant impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in ASU 2017-01 are to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The adoption of ASU 2017-01 did not have a significant impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 along with amending other parts of the goodwill impairment test. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. At adoption, this update will require a prospective approach. The adoption of ASU 2017-04 did not have a significant impact on the Company’s consolidated financial statements.

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Recently Issued Accounting Pronouncements~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which was subsequently modified in August 2015 by ASU No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date”.segment specific. As a result, ~~the ASU No. 2014-09 is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017.~~ all operating expenses are not managed on segment basis.

The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20). The Company will adopt the standard on January 1, 2018, but is still considering whether to use the retrospective or modified retrospective transition method. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and annual and interim periods thereafter, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15 (Topic 230), “Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments”. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures.

In July 2017, the FASB issued a two-part ASU No. 2017-11, I “Accounting for Certain Financial Instruments With Down Round Features” and II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception”. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements.

~~Note 3. DISCONTINUED OPERATIONS~~

Effective July 31, 2016, the Company sold its wholesale inventory and the related business operations (collectively, “Wholesale Business Assets”). The sale of the wholesale business qualifies as discontinued operations, and accordingly, the Company has excluded results for the wholesale business operations from the Company’s continuing operations in the unaudited consolidated Statements of Operations for all periods presented. The following table shows the results of the Company’s wholesale operations included in the loss from discontinued operations. Sales shown in the following table are the elimination of sales returns reserves for which customers did not return products.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016

Wholesale vapor sales, net $ 204,507 $ 281,398 $ 288,965 $ 3,125,736

Cost of sales – vapor wholesale - 203,482 - 2,832,564
Expenses – advertising selling, general and administrative - 86,831 7,482 1,070,291
Total - 290,313 7,482 3,902,855
Net income (1oss) from discontinued operations attributable to the wholesale business $ 204,507 $ (8,915 ) $ 281,483 $ (777,119 )

~~The major classes of assets and liabilities of discontinued operations on the balance sheet are as follow:~~

September 30,
2017 December 31, 2016
Assets
Accounts receivable $ - $ 39,493
Due from merchant credit card processor, net - 13,410
Total current assets from discontinued operations $ - $ 52,903

Liabilities
Accrued expenses - 555,810
Total current liabilities from discontinued operations $ - $ 555,810

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Note 4. ACQUISITION OF ADA’S WHOLE FOOD MARKET~~

On April 1, 2016, the Company’s wholly owned subsidiary Healthy Choice Markets Inc., entered into a Business Sale Agreement with Ada’s Whole Food Market LLC (the “Seller”) to purchase certain operating assets and assumed certain payables and a store lease obligation that constituted the business of Ada’s Natural Market grocery store (the “Grocery Acquisition”). The Grocery Acquisition was consummated on June 1, 2016 and the Company operates the grocery store under the same name, location, and management. At the closing of these transactions, the Company also entered into an employment agreement with the store manager.

~~Note 5. SEGMENT INFORMATION~~

Prior to the second quarter of 2016, the Company had a single reportable business segment, as it was a distributor and retailer of vapor products including vaporizers, e-liquids and electronic cigarettes. On June 1, 2016, the Company completed the Grocery Acquisition (see Note 4) and added a reportable segment. On July 31, 2016, the Company sold its wholesale inventory and related operations. The Company has excluded the results for the wholesale business, as discontinued operations, from the Company’s continuing operations for all periods presented. Management determines thetables below present information about reportable segments based on the internal reporting used by our Chief Operating Decision Makers to evaluate performance and to assess where to allocate resources. The Company evaluates segment performance based on the segment gross profit before corporate expenses.

~~Summarized below are the total net sales and segment operating loss~~ for ~~each reporting segment:~~

Three Months Ended
Net Sales Segment Gross Profit
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Vapor sales, net $ 1,410,003 $ 1,474,581 $ 700,558 $ 818,725
Grocery sales, net 1,447,040 1,575,037 553,202 635,431
Total sales $ 2,857,043 $ 3,049,618 1,253,760 1,454,156

Operating expenses 4,272,323 2,501,564
Operating loss (3,018,563 ) (1,047,408 )
Other expense, net (6,451 ) (1,356,606 )
Net loss from continuing operations (3,025,014 ) (2,404,014 )
Net income (loss) from discontinued operations 204,507 (8,915 )
Net loss $ (2,820,507 ) $ (2,412,929 )

For the three months ~~ended September 30, 2017, depreciation~~ and ~~amortization was $17,011 and $68,125 for Vapor and Grocery, respectively. For the three~~six months ended ~~September~~June 30, ~~2016, depreciation~~2023, and ~~amortization was $16,991 and $53,305 for Vapor and Grocery, respectively.~~

Nine Months Ended
Net Sales Segment Gross Profit
September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Vapor sales, net $ 4,398,942 $ 5,313,849 $ 2,521,256 $ 2,872,134
Grocery sales, net 5,349,800 2,085,293 2,231,237 833,421
Total sales $ 9,748,742 $ 7,399,142 4,752,493 3,705,555

Operating expenses 12,282,932 9,442,953
Operating loss (7,530,439 ) (5,737,398 )
Other expense, net (51,940 ) (13,274,459 )
Net loss from continuing operations (7,582,379 ) (19,011,857 )
Net income (loss) from discontinued operations 281,483 (777,119 )
Net loss $ (7,300,896 ) $ (19,788,976 )

For the nine months ended September 30, 2017, depreciation and amortization was $50,270 and $197,985 for Vapor and Grocery, respectively. For the nine months ended September 30, 2016, depreciation and amortization was $58,239 and $70,757 for Vapor and Grocery, respectively.

2022:

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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 ~~FROM RELATED PARTY~~

In connection with the sale of its wholesale business, the Company entered into two notes receivable with a related party. As consideration for the sale of wholesale inventory and business the Company received a secured, one-year promissory note in the principal amount of $370,000 (the “Acquisition Note”) bearing an interest rate of 4.5%, which payments thereunder are $10,000 monthly, with such payments commencing on October 28, 2016, with a balloon payment of the remainder of principal and interest due on July 29, 2017. As ofAND OTHER INCOME

On September ~~30, 2017, the balloon payment had not been received.~~

~~The buyer and~~6, 2018, the Company entered into a secured, ~~36-month~~36-month promissory note in (the ~~principal amount of $500,000 (the “Promissory Note”~~“Note”) ~~bearing~~with VPR Brands L.P. for $582,260. The Note bears an interest rate of ~~prime plus 2%, resetting annually on July 29~~^th7.00%, which payments thereunder are ~~$14,000 per month,~~$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 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 ~~on January 26, 2017, with subsequent installments payable on the same day~~as of ~~each month thereafter, and in the 37~~^th ~~month~~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 June 30, 2023 and December 31, 2022 is presented below:

Description		June 30, 2023			December 31, 2022
Promissory Note		$	156,297		$	189,225

Note 7. ACQUISITION

On October 14, 2022, 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 Market of Shrewsbury, Inc., 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 Dean’s Natural Food Market, Inc., a New Jersey corporation (collectively, the “Sellers”), and shareholders of the Sellers. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities of an organic and natural health food and vitamin chain with eight store locations in New York and northern and central New Jersey (the “Stores”).

The cash purchase price under the Asset Purchase Agreement was $5,142,000, with $3,000,000 seller financing in the form of promissory note. In addition, the seller is entitled to a contingent earn-out based on ~~July 29, 2019.~~ a certain revenue threshold within the one-year period of the closing.

The Company ~~records all proceeds~~recorded $1,108,000 of contingent consideration based on the estimated financial performance for the one year following closing. The contingent consideration was discounted at an interest rate of 3.8%, which represents the Company's weighted average discount rate. Contingent consideration related to ~~both notes as~~the acquisition is recorded at fair value (level 3) with changes in fair value recorded in other ~~income as proceeds are received.~~ expense (income), net.

The ~~notes were issued by an affiliate~~following table summarizes the change in fair value of contingent consideration from acquisition date to June 30, 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 ~~Company’s former Chief Executive Officer.~~

net assets acquired at the acquisition date:

	October 14, 2022
Purchase Consideration
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	$	1,642,000
Property and equipment		1,478,000
Intangible assets		3,251,000
Right of use asset - Operating lease		6,427,000
Other liabilities		(211,000	)
Operating lease liability		(6,427,000	)
Goodwill		3,090,000
Net assets acquired	$	9,250,000

Finite-lived intangible assets
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	$	3,251,000

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

The following table represents the combined pro forma revenue and net loss for the three and six months ended June 30, 2022:

	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 combined proforma revenue and net loss for the three and six months period ended June 30, 2022 were prepared as though acquisition occurred as of January 1, 2022.

Note 8. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following:

	June 30, 2023			December 31, 2022
Displays	$	312,146		$	312,146
Building		575,000			575,000
Furniture and fixtures		580,668			560,256
Leasehold improvements		1,910,719			1,910,719
Computer hardware & equipment		186,654			160,210
Other		688,773			587,602
		4,253,960			4,105,933
Less: accumulated depreciation and amortization		(1,279,331	)		(993,025	)
Total property, plant, and equipment, net	$	2,974,629		$	3,112,908

The Company incurred approximately $143,746 and $63,656 of depreciation expense for the three months endedJune 30, 2023 and 2022, and $286,306 and $113,592 of depreciation expense for the six months ended June 30, 2023 and 2022, respectively.

Note 7.9. INTANGIBLE ASSETS

Intangible assets, net are as follows:

September 30, 2017
Useful Lives
(Years)

Gross
Carrying Amount

Accumulated
Amortization

Net Carrying
Amount

Favorable lease 15 years $ 890,000 $ (77,629 ) $ 812,371
Trade names 10 years 820,000 (149,000 ) 671,000
Customer relationships 5 years 60,000 (16,000 ) 44,000
Technology 10 years 75,000 (5,000 ) 70,000
Website 3 years 4,500 (2,000 ) 2,500
Intangible assets, net $ 1,849,500 $ (249,629 ) $ 1,599,871

December 31, 2016
Useful Lives
(Years)

Gross
Carrying Amount

Accumulated
Amortization

Net Carrying
Amount

Favorable lease 15 years $ 890,000 $ (33,859 ) $ 856,141
Trade names 10 years 820,000 (87,500 ) 732,500
Customer relationships 5 years 60,000 (7,000 ) 53,000
Technology 10 years 25,000 (937 ) 24,063
Website 3 years 4,500 (875 ) 3,625
Intangible assets, net $ 1,799,500 $ (130,171 ) $ 1,669,329

I~~ntangible~~

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 relationships		4-6 years		2,669,000		(1,182,139)		1,486,861
Patents		10 years		384,665		(178,891)		205,774
Non-compete		4-5 years		1,602,000		(443,267)		1,158,733
Intangible assets, net			$	7,224,665	$	(2,680,333)	$	4,544,332

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 relationships		4-6 years		2,669,000		(1,033,306)		1,635,694
Patents		10 years		384,665		(159,658)		225,007
Non-compete		4-5 years		1,602,000		(300,467)		1,301,533
Intangible assets, net			$	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 ~~amounted to $119,458~~was approximately $230,277 and ~~$51,155~~$165,100 for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, and $461,179 and $308,486 for the six months ended June 30, 2023 and 2022, respectively. Future annual estimated amortization expense is as follows:

Years ending December 31,
2017 (remaining three months) $ 40,340
2018 161,361
2019 160,486
2020 159,861
2021 152,861
Thereafter 924,962
Total $ 1,599,871

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Years ending December 31,
2023 (remaining six months)	$	461,179
2024		922,358
2025		916,858
2026		838,877
2027		694,457
Thereafter		710,603
Total	$	4,544,332

Note 10. CONTRACT LIABILITIES

A summary of the contract liabilities activity at June 30, 2023 and December 31, 2022 is presented below:

	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 June 30, 2023 and December 31, 2022 is presented below:

_	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 8.12. STOCKHOLDERS’ EQUITY

~~Reverse Splits~~

Series E Convertible Preferred Stock

On ~~June 1, 2016,~~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 HCMC Series E Preferred Stock has 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 Series 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 15^th, 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.

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 six months ended June 30, 2023 and 2022, no stock options of the Company were exercised into common stock.

On April 23, 2023, the Board of Directors ~~effected a reverse~~(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 ~~split~~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 ~~at a ratio~~related to the April 23, 2023 issuance remain unvested as of ~~1-for-20,000. All share and per share amounts have been retroactively adjusted to reflect the reverse stock splits.~~

~~Compensatory Common Stock Summary~~

June 30, 2023.

During the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, the Company recognized stock-based compensation ~~expense related to compensatory Common~~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 2022, the Company recognized stock-based compensation of approximately $1,177,000 and $0, respectively. Stock ~~in the amount of $0 and $52,000, respectively. Stock-based~~based compensation ~~expense~~ is included as part of selling, general and administrative expense in the accompanying unaudited condensedconsolidated statements of operations. ~~As of September 30, 2017, there was no unamortized expense remaining related to stock awards because the remaining non-vested shares vested on April 1, 2016.~~

~~Series A Warrants~~

~~Through September 30, 2017, 1 Series A warrant has been exercised through the cashless exercise provision, resulting in the issuance of 15,125,005,934 shares of the Company’s common stock.~~

~~A summary of warrant activity for the nine months ended September 30, 2017 is presented below:~~

Exercise Price
Warrant
Common Stock
Equivalent
Remaining Contractual Term
Outstanding at January 1, 2017 $ 0.0001 634,754,364,551 3.60
Warrants repurchased $ (0.000021 ) (114,796,220,280 )
Cashless exercises for common stock $ (0.0001 ) (15,125,005,934 )
Black Scholes Value adjustment $ (0.0001 ) (198,093,264 )

Outstanding at September 30, 2017 $ 0.0001 504,635,045,073 2.85

Pursuant to the Series A warrant agreement, the Black Scholes value is calculated by a third-party and utilized in calculating the warrant common stock equivalents at the point of cashless exercise. As such, the value is computed at the end of each reporting period to determine the amount of warrant common stock equivalents outstanding using the formula below:

~~(Series A warrants exercised * Black Scholes Value) / closing common stock bid price as of two trading days prior.~~

~~A summary of the outstanding warrant common stock equivalents at January 1, 2017 and September 30, 2017 is presented below:~~

September 30,
2017 January 1,
2017
Warrants outstanding 33 42
Black Scholes value 1,519,079 1,519,297
Closing bid stock price $ 0.0001 $ 0.0001
Warrant common stock equivalent 504,635,045,073 634,754,364,551

~~Stock Options~~

During the three months ended September 30, 2017 and 2016, the Company recognized stock-based compensation of approximately $2,038,000 and $2,000, respectively, in connection with the amortization of stock options, net of recovery of stock-based charges for forfeited unvested stock options. During the nine months ended September 30, 2017 and 2016, the Company recognized stock-based compensation of approximately $5,339,000 and $10,000, respectively. Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations.

At September 30, 2017, the amount of unamortized stock-based compensation expense associated with unvested stock options granted to employees, directors and consultants was approximately $3.3 million, which will be amortized over a weighted average period of 0.6 years. At December 31, 2016, the amount of unamortized stock-based compensation expense associated with unvested stock options granted to employees, directors and consultants was approximately $0.5 million, which will be amortized over a weighted average period of 1.7 years.

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Loss per~~

Income (Loss) Per Share

Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed using the weighted average number of shares of common stock outstanding and, if dilutive, potential shares of common stock outstanding during the period. Potential common shares consist of incremental shares of common stock issuable upon (a) the exercise of stock options (using the treasury stock method); (b) the exercise of warrants (using the if-converted method). For the nine months ended September 30, 2017 and 2016, diluted loss per share excludes the potential shares of common stock, as their effect is antidilutive.

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

September 30, 2017 September 30, 2016

Stock options 86,911,261,360 11,360
Warrants 504,635,045,073 655,691,759,993
Total 591,546,306,433 655,691,771,353

~~Note 9. FAIR VALUE MEASUREMENTS~~

	As of June 30,
	2023		2022
Preferred stock		20,694,000,000		1,250,000,000
Stock options		67,587,000,000		67,587,000,000
Restricted stock		5,500,000,000		-
Total		93,781,000,000		68,837,000,000

The ~~fair value framework under FASB’s guidance requires~~difference between our common shares outstanding as of June 30, 2023 of 463,266,632,384, and the ~~categorization~~weighted average number of ~~assets~~common shares outstanding in our basic and ~~liabilities into three levels based upon~~diluted net loss per share is the ~~assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure~~exclusion of ~~fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels~~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 ~~categorizing assets and liabilities under the fair value measurement requirements are as follows:~~

●

~~Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities;~~

●

Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

●

~~Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.~~

Nonfinancial assets such as goodwill, other intangible assets, and long-lived assets held and used are measured at fair value and tested for impairment annually, or when there is an indicator of impairment between annual tests.

~~The following table summarizes the liabilities measured at fair value~~differences resulting from computing share issuances on a ~~recurring basis as of September 30, 2017:~~

Level 1 Level 2 Level 3 Total
LIABILITIES
Derivative liabilities – non-consenting warrants $ - $ 398,952 $ - $ 398,952
Derivative liabilities – consenting warrants - 9,832,745 - 9,832,745
Total derivative liabilities $ - $ 10,231,697 $ - $ 10,231,697

weighted average basis.

~~HEALTHIER CHOICES MANAGEMENT CORP.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~The following table summarizes the liabilities measured at fair value on a recurring basis as of December 31, 2016:~~

Level 1 Level 2 Level 3 Total
LIABILITIES
Derivative liabilities – non-consenting warrants $ - $ 955,173 $ - $ 955,173
Derivative liabilities – consenting warrants - 11,912,906 - 11,912,906
Total derivative liabilities $ - $ 12,868,079 $ - $ 12,868,079

The Company determined that its offer to purchase its Series A warrants for $0.000021 per warrant was the best indicator of the fair value of the derivative liabilities as of September 30, 2017 and December 31, 2016.

Note ~~10.~~13. COMMITMENTS AND CONTINGENCIES

~~Employment and Consulting and Other Related Party Agreements~~

~~On April 8, 2016, Gregory Brauser informed the Board of his decision to resign from the Board and as President of the Company. Mr. Brauser’s resignation was not due to any disagreement with~~

Legal Proceedings

Two lawsuits were filed against the Company on any matters relating to the Company’s operations, policies or practices. Through GAB Management Group, Inc., Mr. Brauser serves as a consultant to the Company pursuant to an Executive Services Consulting Agreement dated as of April 11, 2016 (the “Consulting Agreement”), the term of which is two years. Under the Consulting Agreement, GAB Management Group, Inc., will receive the following benefitsand its subsidiaries in connection with ~~consulting services that its principal, Mr. Brauser, provides~~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 ~~Company: (1)~~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 ~~engagement fee~~award of ~~$50,000 payable at~~approximately $575,000 in attorneys’ fees to be paid by the ~~time~~Company. The Company has fully provisioned this amount as of December 31, 2022. HCMC appealed this ruling on June 22, 2022.

On April 12, 2023, the ~~Consulting Agreement is executed,~~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 ~~(2) thereafter monthly installments~~Philip Morris Products S.A. pending in the district court for the Northern District of ~~$10,000~~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 ~~24 months.~~

~~Legal Proceedings~~

F~~rom~~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 ~~may be~~is involved in ~~various claims and~~ legal ~~actions~~proceedings arising in the ordinary course of our business. We ~~do not~~believe that there is no other litigation pending that is likely to have, ~~any legal proceedings which have~~individually or in the aggregate, a material ~~impact~~adverse effect on our financial condition or results of operations as of June 30, 2023. With respect to legal costs, we record such costs as incurred.

Note 14. SUBSEQUENT EVENTS

On July 7, 2023, the Company entered into a patent licensing agreement for one of its patents in the vape segment. The Company as the licensor, grants to licensee during the term a non-exclusive right and license under the Licensed Patents to make, use, offer to sell, sell, and import licensed products in the territory of the United States of America. The licensee will pay to the ~~financial statements as~~licensor a royalty based on net sales of ~~September 30, 2017.~~

~~Purchase Commitments~~

~~At September 30, 2017 and December 31, 2016, the Company had vendor deposits of approximately $3,000 and $7,000, respectively, which are included as a component of prepaid expenses and vendor deposits~~all licensed products in the ~~consolidated balance sheets.~~

territory during the term of the agreement. Either party can cancel the agreement with 60-days written notice.

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 as a result of certain factors, including but not limited to those set forth under “Risk Factors” in our Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on March 27, 2017.statements. The terms “we,” “us,” “our,” and the “Company” refer to Healthier Choices Management Corp. and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., ~~Vaporin,~~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, ~~Smoke, Emagine, IVGI Acquisition,~~ Inc.~~, Vapormax Franchising LLC, Vaporin LLC, and Vaporin Florida, Inc.~~ (“Vape Store”). All intercompany accounts and transactions have been eliminated in consolidation.

Company Overview

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 Company operates thirteen vape retail stores in the Southeast region of the United States of America. The Company offers e-liquids vaporizers and related products through~~

Through its vape retail stores. The Company sold its wholesale business on July 31, 2016. The sale of the wholesale business was not contemplated prior to July 1, 2016. The sale of the wholesale business qualifies as a discontinued operation and accordinglywholly owned subsidiary HCMC Intellectual Property Holdings, LLC, the Company ~~has excluded results for the wholesale business operations from the Company’s continuing operations in the unaudited consolidating Statements of Operations for all periods presented.~~

~~On June 1, 2016,~~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, LLC respectively, the Company ~~acquired the business assets of~~ operates:

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.

•

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 ~~Markets, Inc. The grocery store~~Wellness, LLC, the Company has ~~been a leader in~~licensing agreements for Healthy Choice Wellness Centers at the ~~natural grocery market~~Casbah Spa and Salon in Fort ~~Myers, Florida~~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 ~~past 40 years, offering fresh, natural~~Company sells vitamins and ~~organic~~supplements, as well as health, beauty and personal care products on its websitewww.TheVitaminStore.com.

Additionally, the Company markets its patented Q-Unit™ and Q-Cup® technology. Information on these products and ~~specializing in facilitating a healthy, well balanced lifestyle. In addition to a comprehensive selection of vitamins and health & beauty products,~~ the ~~grocery store provides a fresh café and an organic juice bar.~~

~~Going Concern and~~ technology is available on the Company’s website atwww.theQcup.com.

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.

~~We had~~

The Company incurred a ~~large number~~loss from operations of ~~warrants outstanding with features that made the warrants more debt-like than equity and could possibly result in cash outflows. Additionally,~~approximately $5.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, we reported a net loss~~2023. As of ~~$7,300,896~~June 30, 2023, cash totaled approximately $8.5 million. The Company believes current cash on hand is sufficient to meet its obligations and ~~had a working~~ capital ~~deficit of $1,991,339. These factors raised substantial doubt about our ability to continue as a going concern.~~

~~During 2016 and early 2017, we took steps to mitigate these factors by:~~

	●	~~increasing the number of authorized shares to 750,000,000,000 so that there would be sufficient shares available for issuance should all the warrant holders exercise; and~~

	●	entering into a Fifth Amended and Restated Series A Warrant Standstill Agreement (the “Fifth Amendment”) with warrant holders to effectively eliminate the possibility that warrant holders will exercise for anything other than shares.

~~The above steps substantially lowered our potential cash exposure. As a result, as of~~requirements for at least the next twelve months from the date of filing. In the ~~issuance~~past, the Company financed its operations primarily through issuances of ~~these financial statements,~~ common stock and convertible preferred stock. However, we ~~believe our plans~~ have ~~alleviated substantial doubt about our ability~~no commitments to ~~sustain operations for~~obtain such additional financing, and there can be no assurance that the ~~foreseeable future through a year and a day from~~Company will be able to raise the ~~issuance of these unaudited consolidated financial statements.~~

necessary funds to 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 ~~a total of thirteen retail~~four natural and organic groceries and dietary supplement stores ~~which are~~ located in Florida, ~~Georgia~~as well as ten located in New York and ~~Alabama.~~New Jersey. The Company has ~~ceased plans to increase the number of~~closed retail vape stores, ~~due~~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 wholesale and online operations in vapor segment.

Increased Competition: Food retail ~~revenues.~~

~~Inventory Management~~:is a large and competitive industry. Our ~~revenue trends are affected by an evolving product acceptance~~competition varies and ~~consumer demand. We are creating~~includes national, regional, and ~~offering new products to our retail customers. Evolving product development~~local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller specialty stores, and ~~technology impacts our licensing~~farmers’ markets. In addition, we compete with restaurants and ~~intellectual properties spending. We expect the transition to vaporizer and advanced technology and enhanced performance products to continue and will impact our operating results~~other dining options in the ~~future.~~

~~Increased Competition~~:food-at-home and food-away-from-home markets. The ~~launch by national competitors~~opening and closing of ~~branded vaporizer~~competitive stores, as well as restaurants and ~~e-cigarette products have made it more difficult~~other dining options, in regions where we operate will affect our results. In addition, changing consumer preferences with respect to ~~compete on prices~~food choices and to ~~secure business.~~dining out or at home can impact us. We also expect increased ~~vaporizer~~ product supply and downward pressure on prices to continue and impact our operating results in the future. We market and sell the similar vaporizers and e-liquids as our competitors and we sell our products at substantially similar prices as our competitors; accordingly, the key competitive factors for our success is to maintain the quality of service we offer our customers and effective marketing efforts.

Results of Operations

The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended June 30, 2023 and 2022 that is used in the following discussions of our results of operations:

	Three Months Ended June 30,				2023 to 2022
	2023		2022		Change $
SALES
Vapor sales, net	$	-	$	5,997	$	(5,997)
Grocery sales, net		13,574,896		6,126,063		7,448,833
TOTAL SALES, NET		13,574,896		6,132,060		7,442,836

Cost of sales vapor		-		562		(562)
Cost of sales grocery		8,493,213		3,800,625		4,692,588
GROSS PROFIT		5,081,683		2,330,873		2,750,810

OPERATING EXPENSES
Selling, general and administrative		8,261,343		3,699,273		4,562,070
LOSS FROM OPERATIONS		(3,179,660)		(1,368,400)		(1,811,260)

OTHER INCOME (EXPENSE)
(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		101,248		14,910		86,338
Total other income (expense), net		526,905		22,885		504,020

NET LOSS	$	(2,652,755)	$	(1,345,515)	$	(1,307,240)

The decrease in net vapor sales is primarily due to closing 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 ended June 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 $7.4 million to $13.6 million for the three months ended June 30, 2023 as compared to $6.1 million for the same period in 2022. The $7.4 million increase in grocery sales was primarily due to the acquisition of Green's Natural Foods.

Vapor cost of goods sold for the three months ended June 30, 2023 and 2022 were $- thousand and $1.0 thousand, respectively, a decrease of $1.0 thousand. The decrease is primarily due to closing retail vape stores, as management has shifted its retail sales focus to the wholesale and online channel. Gross (loss) profit was $- thousand and $5.0 thousand for three months ended June 30, 2023 and 2022, respectively.

Grocery cost of goods sold for the three months endedJune 30, 2023 and 2022 were $8.5 million and $3.8 million, respectively. The increase of $4.7 million is primarily due to the acquisition of Green's Natural Foods stores. Gross profit was $5.1 million and $2.3 million for the three months endedJune 30, 2023 and 2022, respectively. Gross margin as a percentage of sales decreased approximately 1% as compared to the same period in prior year as a result of increased inventory shrink and inventory reserve.

Total operating expenses increased approximately $4.6 million to $8.3 million for the three months ended June 30, 2023 compared to $3.7 million for the same period in 2022. The increase is due to the acquisition of Green's Natural Foods stores of $3.1 million, and increases in professional fees of $0.2 million, payroll and benefit expense of $0.1 million, and stock compensation expense of $1.1 million.

Total net other income increased $504,000 to $527,000 for the three months ended June 30, 2023 compared to $23,000 for the same period in 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.

The following table sets forth our unaudited consolidated Statements of Operations for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 that is used in the following discussions of our results of operations:

Three Months Ended
September 30, 2016 to 2017
2017 2016 Change
SALES
Vapor sales, net $ 1,410,003 $ 1,474,581 $ (64,578 )
Grocery sales, net 1,447,040 1,575,037 (127,997 )
TOTAL SALES, NET 2,857,043 3,049,618 (192,575 )

Cost of sales vapor 709,445 655,856 53,589
Cost of sales grocery 893,838 939,606 (45,768 )
GROSS PROFIT 1,253,760 1,454,156 (200,396 )

OPERATING EXPENSES
Advertising 16,243 36,008 (19,765 )
Selling, general and administrative 4,256,080 2,456,313 1,799,767
Retail store and kiosk closing costs - 9,243 (9,243 )
Total operating expenses 4,272,323 2,501,564 1,770,759
LOSS FROM OPERATIONS (3,018,563 ) (1,047,408 ) (1,971,155 )

OTHER INCOME (EXPENSE)
Gain (loss) on repurchases of Series A warrants (20,160 ) 3,437,221 (3,457,381 )
Change in fair value of derivative liabilities - (4,812,510 ) 4,812,510
Other income 9,665 - 9,665
Interest income 4,463 21,845 (17,382 )
Interest expense (419 ) (3,162 ) 2,743
Total other expense, net (6,451 ) (1,356,606 ) 1,350,155

Net loss from continuing operations (3,025,014 ) (2,404,014 ) (621,000 )
Net income (loss) from discontinued operations 204,507 (8,915 ) 213,422
NET LOSS $ (2,820,507 ) $ (2,412,929 ) $ (407,578 )

	Six Months Ended June 30,				2023 to 2022
	2023		2022		Change $
SALES
Vapor sales, net	$	38	$	255,560	$	(255,522)
Grocery sales, net		27,134,602		10,925,053		16,209,549
TOTAL SALES, NET		27,134,640		11,180,613		15,954,027

Cost of sales vapor		653		112,246		(111,593)
Cost of sales grocery		17,137,913		6,764,980		10,372,933
GROSS PROFIT		9,996,074		4,303,387		5,692,687

OPERATING EXPENSES
Selling, general and administrative		15,158,780		7,026,693		8,132,087
LOSS FROM OPERATIONS		(5,162,706)		(2,723,306)		(2,439,400)

OTHER INCOME (EXPENSE)
Gain (loss) on investment		(8,400)		5,314		(13,714)
Change in contingent consideration		402,900		-		402,900
Other income		9,250		23,049		(13,799)
Interest income (expense), net		198,900		31,513		167,387
Total other income (expense), net		602,650		59,876		542,774

NET LOSS	$	(4,560,056)	$	(2,663,430)	$	(1,896,626)

Net vapor sales decreased ~~$64,578~~$0.3 million to ~~$1,410,003~~$- million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 as compared to ~~$1,474,581~~$0.3 million for the same period in ~~2016.~~2022. The decrease in sales is primarily due to closing the ~~decreased number of thirteen~~remaining retail vape stores ~~open~~ during the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022, as management has shifted its retail sales focus to the 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 $16.2 million to $27.1 million for the six months endedJune 30, 2023 as compared to ~~fourteen retail stores~~$10.9 million for the same period in ~~2016.~~

~~Net grocery sales decreased $127,997 to $1,447,040 for the three months ended September 30, 2017 as compared to $1,575,037 for the same period in 2016.~~2022. The ~~decrease~~increase in sales is primarily due to ~~Ada’s~~acquisition of Green's Natural ~~Market suffering an extended power outage caused by hurricane Irma, resulting~~Foods in ~~lost sales and inventory spoilage.~~

October 2022.

Vapor cost of goods sold for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 were ~~$709,445~~$1.0 thousand and ~~$655,856,~~$0.1 million, respectively, ~~an increase~~a decrease of ~~$53,589.~~$0.1 million. The ~~increase~~decrease is primarily due to ~~increases in product costs~~closing retail stores during calendar year 2022. Gross (loss) profit was $(1.0) thousand and $0.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2017 as compared to~~2023 and 2022, respectively. Closing retail vape stores will allow the ~~same period in 2016. Gross profit from retail stores was $700,558~~Company focus on developing wholesale business and ~~$818,725 for the three months ended September 30, 2017 and 2016, respectively.~~

online platform.

Grocery cost of goods sold for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 were ~~$893,838~~$17.1 million and ~~$939,606,~~$6.8 million, respectively, ~~a decrease~~an increase of ~~$45,768.~~$10.4 million. The ~~decrease~~increase is primarily due to ~~Ada’s~~the acquisition of Green's Natural ~~Market suffering an extended power outage caused by hurricane Irma, resulting~~Foods in ~~lost sales and lower cost of goods sold, which was offset by spoiled inventory estimated at $80,000.~~October 2022. Gross profit ~~from grocery~~ was ~~$553,202~~$10.0 million and ~~$635,431~~$4.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively.

~~Selling, general and administrative~~

Total operating expenses increased ~~$1,799,767~~$8.1 million to ~~$4,256,080~~$15.2 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2023 compared to ~~$2,456,313~~$7.0 million for the same period in ~~2016.~~2022. The increase of $6.1 million is due to Green's Natural Foods acquisition. The remaining increase is primarily attributable to increases in ~~stock-based compensation of $2,035,595, payroll and benefits of $41,341 and depreciation and amortization of $17,323, offset by decreases in~~the professional fees of ~~$216,046,~~$0.3 million, payroll and employee related cost of $0.4 million, occupancy ~~costs~~ of ~~$43,913, taxes, licenses~~$0.1 million, and ~~permits~~an increase in stock compensation of ~~$15,920 and bank service charges and merchant account fees of $12,897.~~

Net other expense of $6,451 for the three months ended September 30, 2017 includes interest income of $4,463, other income of $9,665, loss on repurchase of Series A warrants of $20,160, and interest expense of $419. $1.2 million.

Net other income of ~~$1,356,606~~$0.6 million for the ~~three~~six months ended ~~September~~June 30, ~~2016~~2023 includes a ~~$4,812,510~~ loss on investment of $8,000, change in ~~the fair value~~ contingent consideration of ~~the derivative liabilities, $3,437,221 gain on repurchase of Series A warrants, $21,845 of interest income, and $3,162 of interest expense.~~

Net income from discontinued operations increased $213,422 to $204,507 for the three months ended September 30, 2017 as compared to net loss of $8,915 for the same period in 2016. See Note 3 – Discontinued Operations for further detail.

The following table sets forth our unaudited consolidated Statements of Operations for the nine months ended September 30, 2017 and 2016 that is used in the following discussions of our results of operations:

Nine Months Ended
September 30, 2016 to 2017
2017 2016 Change
SALES
Vapor sales, net $ 4,398,942 $ 5,313,849 $ (914,907 )
Grocery sales, net 5,349,800 2,085,293 3,264,507
TOTAL SALES, NET 9,748,742 7,399,142 2,349,600

Cost of sales vapor 1,877,686 2,441,715 (564,029 )
Cost of sales grocery 3,118,563 1,251,872 1,866,691
GROSS PROFIT 4,752,493 3,705,555 1,046,938

OPERATING EXPENSES
Advertising 74,902 58,110 16,792
Selling, general and administrative 12,208,030 7,064,511 5,143,519
Impairment of goodwill and intangible assets - 1,977,829 (1,977,829 )
Retail store and kiosk closing costs - 342,503 (342,503 )
Total operating expenses 12,282,932 9,442,953 2,839,979
LOSS FROM OPERATIONS (7,530,439 ) (5,737,398 ) (1,793,041 )

OTHER INCOME (EXPENSE)
Gain (loss) on repurchases of Series A warrants (94,955 ) 5,189,484 (5,284,439 )
Change in fair value of derivative liabilities - (18,489,507 ) 18,489,507
Other income 20,126 - 20,126
Interest income 26,441 38,418 (11,977 )
Interest expense (3,552 ) (12,854 ) 9,302
Total other expense, net (51,940 ) (13,274,459 ) 13,222,519

Net loss from continuing operations (7,582,379 ) (19,011,857 ) 11,429,478
Net income (loss) from discontinued operations 281,483 (777,119 ) 1,058,602
NET LOSS $ (7,300,896 ) $ (19,788,976 ) $ 12,488,080

Net vapor sales decreased $914,907 to $4,398,942 for the nine months ended September 30, 2017 as compared to $5,313,849 for the same period in 2016. The decrease in sales is primarily due to the decreased number of thirteen stores open during the nine months ended September 30, 2017 as compared to fourteen to twenty retail stores for the same period in 2016.

Net grocery sales increased $3,264,507 to $5,349,800 for the nine months ended September 30, 2017 as compared to $2,085,293 for the same period in 2016. The increase in sales is due to Ada’s Natural Market being acquired in June 2016, and as such, 2016 has four months of activity compared to nine months activity in 2017.

Vapor cost of goods sold for the nine months ended September 30, 2017 and 2016 were $1,877,686 and $2,441,715, respectively, a decrease of $564,029. The decrease in cost of goods sold is primarily due to the decreased number of thirteen stores open during the nine months ended September 30, 2017 as compared to fourteen to twenty retail stores for the same period in 2016. Gross profit from retail stores was $2,521,256 and $2,872,134 for the nine months ended September 30, 2017 and 2016, respectively.

Grocery cost of goods sold for the nine months ended September 30, 2017 and 2016 were $3,118,563 and $1,251,872, respectively, an increase of $1,866,691. The increase is due to Ada’s Natural Market being acquired in June 2016, and as such, 2016 has four months of activity compared to nine months activity in 2017. Gross profit from grocery was $2,231,237 and $833,421 for the nine months ended September 30, 2017 and 2016, respectively.

Selling, general and administrative expenses increased $5,143,519 to $12,208,030 for the nine months ended September 30, 2017 compared to $7,064,511 for the same period in 2016. The increase is primarily attributable to increases in stock-based compensation of $5,276,714, payroll and benefits of $623,634, insurance of $43,319, depreciation and amortization of $37,684, and occupancy of $39,473, offset by decreases in professional fees of $911,779. Operating expenses also included charges for impairment of goodwill and intangible assets of $1,977,829 and retail store and kiosk closing costs of $342,503 for the nine months ended September 30, 2016 which did not occur for the same period in 2017.

~~Net other expense of $51,940 for the nine months ended September 30, 2017 includes a $94,955 loss on repurchase of Series A warrants,~~$403,000, other income of ~~$20,126,~~$9,000, and an interest income of ~~$26,441 and interest expense of $3,552.~~$199,000. Net other ~~expense~~income of ~~$13,274,459~~$0.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 includes ~~$5,189,484~~a gain on ~~repurchase~~investment of ~~Series A warrants, change in the fair value~~$5,000, other income of ~~the derivative liabilities of $18,489,507,~~$23,000, and interest income of ~~$38,418, and interest expense of $12,854.~~

Income from discontinued operations increased $1,058,602, to $281,483 for the nine months ended September 30, 2017 as compared to net loss of $777,119 for the same period in 2016. See Note 3 – Discontinued Operations for further detail.

$32,000.

Liquidity and Capital Resources

Nine Months Ended
September 30,

2017 2016

Net cash used in operating activities $ (2,504,549 ) $ (6,950,614 )
Net cash used in investing activities (164,168 ) (3,200,610 )
Net cash used in financing activities (2,466,241 ) (3,328,877 )
$ (5,134,958 ) $ (13,480,101 )

	Six Months Ended June 30,
	2023		2022
Net cash (used in) provided by
Operating activities	$	(3,658,415)	$	(1,870,884)
Investing activities		(115,099)		(5,336,011)
Financing activities		(11,806,463)		33,911
	$	(15,579,977)	$	(7,172,984)

Our net cash used in operating activities of ~~$2,504,549~~approximately $3.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 resulted from ~~our~~a net loss of ~~$7,300,896,~~$4.6 million, offset by a non-cash adjustment of $3.5 million and a net cash usage of ~~$672,608~~$2.6 million from changes in operating assets and liabilities. Our net cash used in operating activities of $1.9 million for the six months endedJune 30, 2022 resulted from a net loss of $2.7 million and a net cash usage of $0.1 million from changes in operating assets and liabilities, offset by a non-cash ~~adjustments~~adjustment of $5,468,955. Our net cash used in discontinued operations of $221,424 for the nine months ended September 30, 2017 resulted from our net income from discontinued operations of $281,483 and a net cash usage of $502,907 from changes in assets and liabilities from discontinued operations. Our net cash used in operating activities of $6,950,614 for the nine months ended September 30, 2016 resulted from our net loss of $19,788,976 and by net cash provided of $941,592 from changes in operating assets and liabilities and by non-cash adjustments of $13,779,954. Our net cash used in discontinued operations of $2,996,504 for the nine months ended September 30, 2016 resulted from our net loss from discontinued operations of $777,119, offset by a net cash usage of $2,219,385 from changes in assets and liabilities from discontinued operations.

$0.9 million.

The net cash used in investing activities of ~~$164,168~~$0.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 resulted~~2023 resulted from ~~the~~collection on a note receivable and purchases of ~~a patent and~~ property and ~~equipment.~~equipment. The net cash used in investing activities of ~~$3,200,610~~$5,336,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2016 is primarily due to~~2022 resulted from the acquisition of Mother Earth's Storehouse, collection of a note receivable, and purchases of property and equipment ~~and the Grocery Acquisition.~~

The net cash used in financing activities of ~~$2,466,241~~$11.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 is due to ~~repurchases of~~ Series ~~A warrants totaling $2,427,267, payment of $53,054 of capital lease obligation and payment of $897 in loan payments, offset by proceeds from a loan payable of $13,977~~E Preferred Stock redemption and exercise, ~~of stock options of $1,000.~~payment for deferred offering cost related with spin off, and principle payment on loan payable. The net cash ~~used in~~provided by financing activities of ~~$3,328,877~~$34,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~ 2022is due to ~~repurchases~~proceeds received from the line of ~~Series A warrants totaling $3,278,827 and payment of capital lease obligation of $50,050.~~

credit.

At ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016,~~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. ~~The majority~~Most of our cash ~~and cash equivalents are~~is concentrated in ~~three~~one financial ~~institutions~~institution and ~~are~~is 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~~Company’s cash position as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016.~~

September 30,
2017 December 31, 2016

Cash $ 8,231,314 $ 13,366,272
Total assets $ 12,175,070 $ 17,234,751
Percentage of total assets 67.61 % 77.55 %

2022.

June 30, 2023 December 31, 2022
Cash $ 8,481,915 $ 22,911,892
Total assets $ 39,338,975 $ 55,255,030
Percentage of total assets 21.56% 41.47%

The Company reported a net loss of ~~$7,300,896~~$4.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023. The Company also had ~~negative~~positive working capital of ~~$1,991,339.~~$6.3 million. The Company expects to continue incurring losses for the foreseeable future, ~~and may need to raise additional capital to satisfy warrant obligations, and~~but we do not believe there are any substantial doubts about the Company’s ability to continue as a going concern. AsThe Company believes current cash on hand is sufficient to meet its obligations and capital requirements for at least the next twelve months from the date of ~~October 22, 2017,~~filing. In the past, the Company ~~had approximately $7.9 million~~financed its operations primarily through issuances of ~~cash. The decrease in cash from September 30, 2017 is primarily attributable~~common stock and convertible preferred stock. However, we have no commitments to ~~operating expenses.~~

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.

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 ~~2016~~2022 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,~~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~~common stock price, the timing of future ~~warrant~~Series D preferred stock exercises and stock sales, ~~having the authorized capital to issue stock to exercising Series A warrant holders,~~ 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.

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 June 30, 2023 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.

The Company’s management is responsible for establishing and maintaining adequate internal ~~controls~~control over financial ~~reporting, as such term is defined in Exchange Act Rule 13a-15(f).~~reporting. Under the supervision and with the participation of ~~our~~the Company’s management, including ~~our principal executive, financial~~the Chief Executive Officer and ~~accounting officer, we conducted an evaluation of~~Chief Financial Officer, the Company evaluated the effectiveness of ~~our~~the design and operation of its internal ~~controls~~control over financial reporting ~~as of September 30, 2017. This evaluation was~~ based on the framework established in Internal ~~Control-Integrated~~Control - Integrated Framework ~~(2013)~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(“COSO”)~~(2013 framework).

~~In planning~~ Based on that evaluation, the Company’s Chief Executive Officer and performing its audit of our financial statements for the year ended December 31, 2016 in accordance with standards of the Public Company Accounting Oversight Board, our prior independent registered public accounting firm (“Prior Auditor”) noted a number of deficiencies in internal control over financial reporting that required audit adjustments that were made to such financial statements. Although our Prior AuditorChief Financial Officer concluded that ~~not all of the deficiencies rose to the level of a material weakness, they advised us that the combination of such deficiencies constitutes a material weakness in~~ the Company’s internal control over financial reporting ~~related to~~was ineffective as of June 30, 2023 and noted the ~~overall maintenance of the books and records in full accordance with U.S. GAAP.~~

~~Our Prior Auditor considered the overall deficiency to be related to overall maintenance of our books and records in full accordance with GAAP. This was~~material weaknesses as ~~a result of insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting function due to limited personnel.~~

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 ~~September~~June 30, ~~2017~~2023 based on the criteria set forth in ~~COSO.~~

~~Changes in~~ Internal ~~Control~~Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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 controls over ~~Financial Reporting~~

~~Following this assessment~~the above-mentioned weaknesses, management has commenced the following actions and ~~during the first and second quarters of fiscal year 2017, we have undertaken~~will continue to assess additional opportunities for remediation on an ~~action plan to strengthen internal controls and procedures:~~

ongoing basis:

●

~~We built out~~Continuing to increase headcount across the Company, with a ~~new accounting team by filling our Chief Financial Officer, Controller~~particular focus on hiring individuals with strong internal control backgrounds and ~~Accounting Manager positions with personnel possessing extensive experience working at large, publicly-traded companies with exposure to SEC reporting and numerous areas of technical accounting.~~inventory expertise.

●

~~Our SEC reporting was brought in-house as the function was previously accomplished using outside consultants; providing for a more efficient reporting process than that experienced in 2016.~~

●

~~Our management has increased~~Increasing its focus on the Company’s ~~month-end account reconciliation~~purchase order process in order to ~~provide for~~better manage inventory thereby improving cash management and ultimately leading to more reliable and precise financial ~~statements.~~reporting. The Company implemented an open to buy program by comparing purchases with sales to better control overall inventory purchases.

~~Our management continues~~

●

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 ~~review ways~~improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in ~~which we can make improvements in~~our internal control over financial ~~reporting.~~

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 June 30, 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.

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 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. 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.

From time to time the Company ~~may be~~is involved in ~~various claims and~~ legal ~~actions~~proceedings arising in the ordinary course of our business. We ~~do not~~believe that there is no other litigation pending that is likely to have, ~~any legal proceedings which have~~individually or in the aggregate, a material ~~impact to the~~adverse effect on our financial ~~statements~~condition or results of operations as of ~~September~~June 30, ~~2017.~~

2023. With respect to legal costs, we record such costs as incurred.

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.”

~~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: October 23, 2017~~	~~By:~~	~~/s/ Jeffrey Holman~~
		~~Jeffrey Holman~~
		~~Chief Executive Officer~~

~~Date: October 23, 2017~~	~~By:~~	~~/s/ John Ollet~~
		~~John Ollet~~
		~~Chief Financial Officer~~

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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be ~~deemed incorporated~~signed on its behalf by ~~reference into any filing, in accordance with Item 601 of Regulation S-K.~~

the undersigned thereunto duly authorized.

	HEALTHIER CHOICES MANAGEMENT CORP.

Date: July 24, 2023	By:	/s/ Jeffrey Holman
		Jeffrey Holman
		Chief Executive Officer

Date: July 24, 2023	By:	/s/ John Ollet
		John Ollet
		Chief Financial Officer

Delaware		84-1070932
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3800 North 28^Th28Th Way
Hollywood, FLFlorida		33020
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~☒	Smaller reporting company	☒
		Emerging growth company	☐

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

	PAGE

PART I FINANCIAL INFORMATION	1

ITEM 1. Financial Statements	1

Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2023 (Unaudited) and December 31, ~~2016~~2022	1

Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 (Unaudited)	2

Condensed Consolidated ~~Statement~~Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the ~~Nine~~Three and Six Months ~~ended September~~Ended June 30, ~~2017~~2023 and 2022 (Unaudited)	3

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months ~~ended September~~Ended June 30, ~~2017~~2023 and ~~2016~~2022 (Unaudited)	4

~~Notes to Consolidated Financial Statements (Unaudited)~~	5

Notes to Condensed Consolidated Financial Statements (Unaudited)	6

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1417

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	1924

ITEM 4. Controls and Procedures	1924

PART II OTHER INFORMATION	2026

ITEM 1. Legal Proceedings	2026

ITEM 1A. Risk Factors	2027

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	2027

ITEM 3. Defaults Upon Senior Securities	2027

ITEM 4. Mine Safety Disclosures	2027

ITEM 5. Other Information	2027

ITEM 6. Exhibits	2028

Signatures	2129

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

		September 30, 2017			December 31, 2016
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	8,231,314			$13,366,272
Due from merchant credit card processors, net of reserves			28,410			30,272
Accounts receivable, net of allowance of $10,734 and $33,367, respectively			74,937			25,798
Inventories			937,383			748,551
Prepaid expenses and vendor deposits			91,460			93,229
Current assets from discontinued operations			-			52,903
TOTAL CURRENT ASSETS			9,363,504			14,317,025

Property and equipment, net of accumulated depreciation of $345,211 and $293,398, respectively			611,096			638,926
Intangible assets, net			1,599,871			1,669,329
Goodwill			481,314			481,314
Other assets			119,285			128,157

TOTAL ASSETS		$	12,175,070		$	17,234,751

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	541,710		$	520,586
Accrued expenses			579,353			779,676
Current portion of capital lease			-			53,054
Current portion of loan payable			2,083			-
Derivative liabilities – non-consenting warrants			398,952			955,173
Derivative liabilities – consenting warrants			9,832,745			11,912,906
Current liabilities from discontinued operations			-			555,810
TOTAL CURRENT LIABILITIES			11,354,843			14,777,205

Loan payable, net of current portion			10,997			-

TOTAL LIABILITIES			11,365,840			14,777,205

COMMITMENTS AND CONTINGENCIES (SEE NOTE 10)

STOCKHOLDERS’ EQUITY
Common Stock, $.0001 par value per share, 750,000,000,000 shares authorized; 29,348,867,108 and 14,213,861,174 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively			2,934,887			1,421,386
Additional paid-in capital			7,921,897			3,782,818
Accumulated deficit			(10,047,554	)		(2,746,658	)
TOTAL STOCKHOLDERS’ EQUITY			809,230			2,457,546

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	12,175,070		$	17,234,751

	June 30, 2023 (Unaudited)		December 31, 2022
ASSETS
CURRENT ASSETS
Cash	$	8,481,915	$	22,911,892
Accounts receivable, net		92,649		55,815
Notes receivable		156,297		189,225
Inventories		3,765,070		3,817,192
Prepaid expenses and vendor deposits		826,611		322,182
Investment		1,371		9,771
Other current assets		1,004,809		1,224,171
Restricted cash		628,232		1,778,232
TOTAL CURRENT ASSETS		14,956,954		30,308,480

Property, plant, and equipment, net of accumulated depreciation		2,974,629		3,112,908
Intangible assets, net of accumulated amortization		4,544,332		5,005,511
Goodwill		5,747,000		5,747,000
Right of use asset – operating lease, net		10,634,634		10,604,935
Other assets		481,426		476,196

TOTAL ASSETS	$	39,338,975	$	55,255,030

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	5,133,314	$	5,715,234
Contingent consideration		372,000		774,900
Contract liabilities		147,469		198,606
Line of credit		453,232		453,232
Current portion of loan payment		552,001		536,542
Operating lease liability, current		1,965,888		2,228,852
TOTAL CURRENT LIABILITIES		8,623,904		9,907,366

Loan payable, net of current portion		2,097,932		2,378,061
Operating lease liability, net of current		8,395,274		8,041,504
TOTAL LIABILITIES		19,117,110		20,326,931

COMMITMENTS AND CONTINGENCIES (SEE NOTE 13)

CONVERTIBLE PREFERRED STOCK
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 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		19,324,774		29,045,802
Accumulated deficit		(48,173,997)		(43,613,941)
TOTAL STOCKHOLDERS’ EQUITY		18,277,440		20,206,024

TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY	$	39,338,975	$	55,255,030

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
SALES
Vapor sales, net	$	1,410,003		$	1,474,581		$	4,398,942		$	5,313,849
Grocery sales, net		1,447,040			1,575,037			5,349,800			2,085,293
TOTAL SALES, NET		2,857,043			3,049,618			9,748,742			7,399,142

Cost of sales vapor		709,445			655,856			1,877,686			2,441,715
Cost of sales grocery		893,838			939,606			3,118,563			1,251,872
GROSS PROFIT		1,253,760			1,454,156			4,752,493			3,705,555

OPERATING EXPENSES
Advertising		16,243			36,008			74,902			58,110
Selling, general and administrative		4,256,080			2,456,313			12,208,030			7,064,511
Impairment of goodwill and intangible assets		-			-			-			1,977,829
Retail store and kiosk closing costs		-			9,243			-			342,503
Total operating expenses		4,272,323			2,501,564			12,282,932			9,442,953
LOSS FROM OPERATIONS		(3,018,563	)		(1,047,408	)		(7,530,439	)		(5,737,398	)

OTHER INCOME (EXPENSE)
Gain (loss) on repurchase of Series A warrants		(20,160	)		3,437,221			(94,955	)		5,189,484
Change in fair value of derivative liabilities		-			(4,812,510	)		-			(18,489,507	)
Other income		9,665			-			20,126			-
Interest income		4,463			21,845			26,441			38,418
Interest expense		(419	)		(3,162	)		(3,552	)		(12,854	)
Total other expense, net		(6,451	)		(1,356,606	)		(51,940	)		(13,274,459	)

Net loss from continuing operations		(3,025,014	)		(2,404,014	)		(7,582,379	)		(19,011,857	)
Net income (loss) from discontinued operations		204,507			(8,915	)		281,483			(777,119	)
NET LOSS	$	(2,820,507	)	$	(2,412,929	)	$	(7,300,896	)	$	(19,788,976	)

NET LOSS PER SHARE-BASIC AND DILUTED
Continuing operations	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
NET LOSS PER SHARE -BASIC AND DILUTED	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED		29,327,284,303			5,428,877,583			25,138,693,169			1,966,720,262

	September 30, 2017		December 31, 2016
Assets
Accounts receivable	$	-	$	39,493
Due from merchant credit card processor, net		-		13,410
Total current assets from discontinued operations	$	-	$	52,903

Liabilities
Accrued expenses		-		555,810
Total current liabilities from discontinued operations	$	-	$	555,810

	Three Months Ended
	Net Sales				Segment Gross Profit
	September 30, 2017		September 30, 2016		September 30, 2017			September 30, 2016
Vapor sales, net	$	1,410,003	$	1,474,581	$	700,558		$	818,725
Grocery sales, net		1,447,040		1,575,037		553,202			635,431
Total sales	$	2,857,043	$	3,049,618		1,253,760			1,454,156

Operating expenses						4,272,323			2,501,564
Operating loss						(3,018,563	)		(1,047,408	)
Other expense, net						(6,451	)		(1,356,606	)
Net loss from continuing operations						(3,025,014	)		(2,404,014	)
Net income (loss) from discontinued operations						204,507			(8,915	)
Net loss					$	(2,820,507	)	$	(2,412,929	)

	Nine Months Ended
	Net Sales				Segment Gross Profit
	September 30, 2017		September 30, 2016		September 30, 2017			September 30, 2016
Vapor sales, net	$	4,398,942	$	5,313,849	$	2,521,256		$	2,872,134
Grocery sales, net		5,349,800		2,085,293		2,231,237			833,421
Total sales	$	9,748,742	$	7,399,142		4,752,493			3,705,555

Operating expenses						12,282,932			9,442,953
Operating loss						(7,530,439	)		(5,737,398	)
Other expense, net						(51,940	)		(13,274,459	)
Net loss from continuing operations						(7,582,379	)		(19,011,857	)
Net income (loss) from discontinued operations						281,483			(777,119	)
Net loss					$	(7,300,896	)	$	(19,788,976	)

September 30, 2017	Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Favorable lease	15 years	$	890,000	$	(77,629	)	$	812,371
Trade names	10 years		820,000		(149,000	)		671,000
Customer relationships	5 years		60,000		(16,000	)		44,000
Technology	10 years		75,000		(5,000	)		70,000
Website	3 years		4,500		(2,000	)		2,500
Intangible assets, net		$	1,849,500	$	(249,629	)	$	1,599,871

Years ending December 31,
2017 (remaining three months)	$	40,340
2018		161,361
2019		160,486
2020		159,861
2021		152,861
Thereafter		924,962
Total	$	1,599,871

	Exercise Price			Warrant Common Stock Equivalent			Remaining Contractual Term
Outstanding at January 1, 2017	$	0.0001			634,754,364,551			3.60
Warrants repurchased	$	(0.000021	)		(114,796,220,280	)
Cashless exercises for common stock	$	(0.0001	)		(15,125,005,934	)
Black Scholes Value adjustment	$	(0.0001	)		(198,093,264	)

Outstanding at September 30, 2017	$	0.0001			504,635,045,073			2.85

	September 30, 2017		January 1, 2017
Warrants outstanding		33		42
Black Scholes value		1,519,079		1,519,297
Closing bid stock price	$	0.0001	$	0.0001
Warrant common stock equivalent		504,635,045,073		634,754,364,551

	Level 1		Level 2		Level 3		Total
LIABILITIES
Derivative liabilities – non-consenting warrants	$	-	$	398,952	$	-	$	398,952
Derivative liabilities – consenting warrants		-		9,832,745		-		9,832,745
Total derivative liabilities	$	-	$	10,231,697	$	-	$	10,231,697

	Three Months Ended September 30,						2016 to 2017
	2017			2016			Change
SALES
Vapor sales, net	$	1,410,003		$	1,474,581		$	(64,578	)
Grocery sales, net		1,447,040			1,575,037			(127,997	)
TOTAL SALES, NET		2,857,043			3,049,618			(192,575	)

Cost of sales vapor		709,445			655,856			53,589
Cost of sales grocery		893,838			939,606			(45,768	)
GROSS PROFIT		1,253,760			1,454,156			(200,396	)

OPERATING EXPENSES
Advertising		16,243			36,008			(19,765	)
Selling, general and administrative		4,256,080			2,456,313			1,799,767
Retail store and kiosk closing costs		-			9,243			(9,243	)
Total operating expenses		4,272,323			2,501,564			1,770,759
LOSS FROM OPERATIONS		(3,018,563	)		(1,047,408	)		(1,971,155	)

OTHER INCOME (EXPENSE)
Gain (loss) on repurchases of Series A warrants		(20,160	)		3,437,221			(3,457,381	)
Change in fair value of derivative liabilities		-			(4,812,510	)		4,812,510
Other income		9,665			-			9,665
Interest income		4,463			21,845			(17,382	)
Interest expense		(419	)		(3,162	)		2,743
Total other expense, net		(6,451	)		(1,356,606	)		1,350,155

Net loss from continuing operations		(3,025,014	)		(2,404,014	)		(621,000	)
Net income (loss) from discontinued operations		204,507			(8,915	)		213,422
NET LOSS	$	(2,820,507	)	$	(2,412,929	)	$	(407,578	)