HCMC 10-Q
Healthier Choices Management Corp. (HCMC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For
the quarterly period ended
Or
For the transition period from _____ to _____
Commission
file number:
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| OTC Pink Marketplace |
As of August 19, 2026, there were shares of the registrant’s common stock, par value $ per share, outstanding.
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2026 (Unaudited) | December 31, 2025 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses and vendor deposits | ||||||||
| Restricted cash | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property, plant, and equipment, net of accumulated depreciation | ||||||||
| Intangible assets, net of accumulated amortization | ||||||||
| Right of use asset – operating lease, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Loan payable, current | ||||||||
| Operating lease liability, current | ||||||||
| Due to related party | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (SEE NOTE 9) | ||||||||
| CONVERTIBLE PREFERRED STOCK | ||||||||
| Series
E redeemable convertible preferred stock, $ par value per share, shares authorized, shares issued and outstanding
as of June 30, 2026 and December 31, 2025, respectively; aggregate liquidation preference of $ | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common Stock, $ par value per share, shares authorized; and shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 3 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| SALES, NET | $ | $ | $ | $ | ||||||||||||
| COST OF SALES | ||||||||||||||||
| GROSS PROFIT | ( | ) | ( | ) | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
RECLASSIFICATION OF PAYROLL EXPENSE – TSA TERMINATION | ( | ) | ( | ) | ||||||||||||
| GAIN (LOSS) FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Loss on disposal of asset | ( | ) | ||||||||||||||
| Other income, net | ||||||||||||||||
| Interest (expense) income, net | ( | ) | ( | ) | ||||||||||||
| TOTAL OTHER (EXPENSE) INCOME, NET | ( | ) | ( | ) | ||||||||||||
| NET INCOME (LOSS) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| NET LOSS PER SHARE-BASIC AND DILUTED | $ | $ | $ | $ | ||||||||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | ||||||||||||||||
See notes to unaudited condensed consolidated financial statements
| 4 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
(UNAUDITED)
| Series E Redeemable Convertible Preferred Stock | Common Stock | Additional Paid In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – April 1, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Warrants vested for services | - | - | - | |||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||
| Balance – June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series
E Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – April 1, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Balance – June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| 5 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(UNAUDITED)
| Series E Redeemable Convertible | Additional | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – January 1, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issuance of common stock for debt settlement | - | - | ||||||||||||||||||||||||||
| Warrants vested for services | - | - | - | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Balance – June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series
E Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – January 1, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||
| Balance – June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
See notes to unaudited condensed consolidated financial statements
| 6 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on asset disposal | ||||||||
| Warrants vested for services | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of right-of-use asset | ||||||||
| Stock-based compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and vendor deposits | ||||||||
| Other current assets | ( | ) | ||||||
| Due to related party | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loan agreement | ||||||||
| Proceeds from convertible note payable | ||||||||
| Payment on line of credit | ( | ) | ||||||
| Due to related party | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENT AND RESTRICTED CASH | ( | ) | ||||||
| CASH, CASH EQUIVALENT AND RESTRICTED CASH— BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENT AND RESTRICTED CASH — END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Issuance of promissory note in connection with debt settlement | $ | $ | ||||||
| Issuance of common stock to settle debt | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements.
| 7 |
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION
Organization
Healthier Choices Management Corp. (the “Company” or “HCMC”) is a holding company focused on monetizing its intellectual property through its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. The Company seeks to further monetize its patent suite through development and production of its patented products, including the Q-Cup™ technology and Imitine, licensing and royalty agreements, and enforcement actions against infringers of its intellectual property.
The Company administers and intends to augment its intellectual property portfolio via its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC.
The Company continues to promote its patented Q-Cup™ technology directly to consumers in the vaping market. This cutting-edge design includes a small quartz cup that users can fill with cannabis or CBD concentrate. Once placed in a Q-Cup™ Tank or Globe, the cup is heated externally without direct contact with the concentrate. This innovative approach provides greater efficiency and a convenient solution for consumers who vape concentrates for both medicinal and recreational use.
In connection with the Company’s strategic initiative to monetize its intellectual property through the development and production of new products, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with a third party distributor on November 27, 2025, to commercialize a new product line utilizing the Company’s NatureTine™ ingredient (the “Quitcubes” product line). Under the Distribution Agreement, the distributor is responsible for marketing, customer fulfillment, and website management, while the Company is responsible for manufacturing the product.
The launch of the Quitcubes product line, originally anticipated to commence in the first quarter of 2026, was delayed as the Company worked to establish the necessary operational infrastructure to execute the Distribution Agreement. As a result, the Company recorded no net sales from the Quitcubes product line for the three and six months ended June 30, 2026.
Subsequent to June 30, 2026, the Company has made significant progress in establishing the required operational infrastructure. Management is now working with the distributor to finalize the remaining steps and expects the official commercial launch of the Quitcubes product line to occur in the third quarter of 2026. However, there can be no assurance that the launch will occur as planned, or if launched, that the product line will generate material revenue or positive cash flow.
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 resources and assess performance. The Company operates as a single reportable segment, as the chief operating decision maker (“CODM”, the Company’s Chief Executive Officer, Jeffrey Holman) reviews financial performance and makes decisions on a consolidated basis.
| 8 |
NOTE 2. GOING CONCERN AND MANAGEMENT’S PLANS
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values.
The
Company currently and historically has reported net losses and cash outflows from operations. As of June 30, 2026, the Company had cash
and cash equivalent of approximately $
On
March 27, 2026, the Company entered into a $
On June 26, 2026, the Company
received $
Management has made plans to reduce certain costs and raise needed capital, however there can be no assurance the Company can successfully implement these plans. The success of these plans is dependent upon various factors, foremost being the ability to reduce outside consulting expenses and the ability to secure additional capital from outside investors. There can be no assurance that such plans will be successful.
Management
believes that the Company’s cash on hand, together with the availability of up to $
NOTE 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do not include all the information and disclosures required by GAAP. The Company has made estimates and judgments affecting the amounts reported in the Company’s unaudited condensed consolidated financial statements and the accompanying notes. The actual results experienced by the Company may differ materially from the Company’s estimates. The condensed consolidated financial information is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods presented.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2026. The condensed consolidated balance sheet as of December 31, 2025 was derived from the Company’s audited 2025 financial statements contained in the above referenced Form 10-K. Results of the three and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full year ending December 31, 2026.
| 9 |
Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2025 Annual Report.
NOTE 4. CONCENTRATIONS
Cash, Cash Equivalent and Restricted Cash
The Company considers all highly liquid instruments with an original maturity of three months or less, when purchased, to be cash and cash equivalent. The majority of the Company’s cash and cash equivalent are concentrated in one large financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage.
A
summary of the financial institution that had cash, cash equivalent and restricted cash in excess of FDIC limits of $
| June 30, 2026 | December 31, 2025 | |||||||
| Total
cash and cash equivalent in excess of FDIC limits of $ | $ | $ | ||||||
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 in such accounts.
The following table provides a reconciliation of cash, cash equivalent and restricted cash to amounts shown in unaudited condensed consolidated statements of cash flow:
| June 30, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalent | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash | $ | $ | ||||||
Restricted Cash
The Company’s restricted cash consisted of cash balances which were restricted as to withdrawal or usage under the August 18, 2022 Securities Purchase Agreement for the purpose of funding any amounts due under the Series E Certificate of Designation upon the redemption of the Series E Preferred Stock.
| 10 |
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Furniture and fixtures | ||||||||
| Computer hardware & equipment | ||||||||
| Other fixed assets | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property, plant, and equipment | $ | $ | ||||||
The
Company incurred approximately $
NOTE 6. INTANGIBLE ASSETS
The Company’s intangible assets consist of patents and capitalized legal fees related to the patents. Intangible assets, net are as follows:
| June 30, 2026 | Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Patent | $ | $ | ( | ) | $ | |||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
| December 31, 2025 | Useful
Lives (Years) | Gross
Carrying Amount | Accumulated
Amortization | Net
Carrying Amount | ||||||||||
| Patent | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
Intangible
assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was approximately $
| Years ending December 31, | ||||
| 2026 (remaining six months) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
| 11 |
NOTE 7. DEBT
Private Lender Credit Facility
On
November 7, 2024, the Company entered into a $
Sabby Volatility Warrant Master Fund, Ltd. Credit Facility
On
March 27, 2026, the Company entered into a Loan Agreement (the “Sabby Loan Agreement”) with Sabby Volatility Warrant Master
Fund, Ltd. (the “Lender”), providing for a $
As
of June 30, 2026, the outstanding principal balance under the Sabby Facility was $
Promissory Note
On
February 1, 2026, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with a legal vendor to settle outstanding
amount in excess of $
| ● | Equity
financing of $ | |
| ● | Change of control of the Company | |
| ● | The Chief Executive Officer no longer serves in that role | |
| ● | Bankruptcy or dissolution of the Company | |
| ● | The
Company has $ |
The note is classified as a current liability and recorded at face value. The issuance of the Note was a non-cash financing activity. Accordingly, it has been excluded from the statement of cash flows and disclosed in the supplemental schedule of non-cash investing and financing activities.
Convertible Promissory Note
On June 26, 2026, the Company
received $
| 12 |
NOTE 8. STOCKHOLDERS’ EQUITY
Series E Convertible Preferred Stock
On
August 18, 2022, the Company entered into a Securities Purchase Agreement (“Series E Preferred Stock”) pursuant to which
the Company sold and issued shares of its Series E Redeemable Convertible Preferred Stock to institutional investors for $per share or an aggregate subscription of $ million. The number of shares issued to each participant is based on subscription amount
multiplied by conversion rate of
The
HCMC Series E Preferred Stock shall have 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 $
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 $ 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 (
On
May 15, 2023, 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.
On
October 30, 2023, the Company entered into a Third Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible
Preferred Stock purchasers. The parties agreed to:
On February 20, 2024, the Company entered into a Fourth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the date on which the obligation to acquire the Series E Preferred Stock ceases to June 1, 2024.
On April 8, 2024, the Company entered into a Fifth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to August 1, 2024.
| 13 |
On July 26, 2024, the Company entered into a Sixth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to November 1, 2024.
On November 27, 2024, the Company entered into a Seventh Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to May 31, 2025.
On April 11, 2025, the Company entered into an Eighth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to October 31, 2025.
On October 30, 2025, the Company entered into a Ninth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to April 1, 2027.
Through
June 30, 2026, shares of Series E preferred stock have been cumulatively converted into shares of common stock as
a result of the Series E preferred stock conversion, and shares of Series E preferred stock have been cumulatively redeemed, and
approximately $
Stock Options and Restricted Stock
During the three and six months ended June 30, 2026 and 2025, stock options of the Company were exercised into common stock.
The Company recognized stock-based compensation of approximately $ and $ during the three months ended June 30, 2026 and 2025, and approximately $ and $ during the six months ended June 30, 2026 and 2025, respectively in connection with amortization of restricted stock and stock options. Stock based compensation is included as part of total operating expenses in the accompanying unaudited condensed consolidated statements of operations.
Warrants Granted for Services
On April 24, 2026, the Company entered into a Consulting Agreement with Active Ventures, LLC (the “Consultant”) to provide services related to developing a crypto acquisition strategy over a three-year consulting term. In consideration for these services, the Company granted the Consultant Pre-Funded Warrants to purchase up to shares of common stock, exercisable at $ per share. The warrants vest in 12 equal tranches of shares each, with Tranche 1 vesting on April 24, 2026, and the remaining tranches vesting at subsequent intervals over 33 months.
The warrants were valued at approximately $
Debt Settlement through Issuance of Common Stock
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with Healthy Choice Wellness Corp. (“HCWC”),
a related party. Pursuant to this agreement, the Company issued shares of its common stock to HCWC at a contractual price
of $
On
February 1, 2026, the Company entered into a settlement agreement with a vendor to resolve approximately $
Earning Per Share
Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of stock awards. For the three and six months ended June 30, 2026 and 2025, diluted EPS is the same as basic EPS because all potentially dilutive securities are anti-dilutive. Under GAAP, diluted EPS must be disclosed even when equal to basic EPS. All potentially dilutive securities were excluded from the diluted EPS calculation because their inclusion would have been anti-dilutive (i.e., reduce the loss per share), which is not permitted under GAAP.
| As of June 30, | ||||||||
| 2026 | 2025 | |||||||
| Preferred stock | ||||||||
| Stock options | ||||||||
| Restricted stock | ||||||||
| Pre-Funded Warrants | ||||||||
| Total | ||||||||
| 14 |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| NET INCOME (LOSS) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES | ||||||||||||||||
| BASIC AND DILUTED NET LOSS PER SHARE | $ | $ | $ | $ | ||||||||||||
NOTE 9. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
There
were two lawsuits in connection with alleged claimed battery defects for an electronic cigarette device. One has been dismissed by the
court wherein the plaintiff settled with the Company’s insurance carrier with no economic impact to the Company. In the second
lawsuit, as of December 31, 2023, the Company had reached an arrangement with the plaintiff to resolve the matter, limiting potential
exposure to $
On September 26, 2023, HCMC filed a patent infringement lawsuit against R.J. Reynolds Vapor Company (“RJR”) in the U.S. District Court for the Middle District of North Carolina in connection with HCMC’s assertions that RJR’s Vuse electronic cigarette infringes one of HCMC’s patents.
On November 17, 2023, RJR filed a motion to dismiss the action. HCMC opposed on December 22, 2023.
On September 18, 2024, RJR filed an inter partes review of the patent-in-suit at the United States Patent and Trademark Office (“USPTO”).
In March 2026, the Patent Trial and Appeal Board issued a decision in favor of RJR in the ongoing patent dispute. On June 1, 2026, HCMC filed an appeal to the ruling in the U.S. Court of Appeals for the Federal Circuit.
From time to time the Company is involved in legal proceedings arising in the ordinary course of our business. We believe that there is no other litigation pending that is likely to have, individually or in the aggregate, a material adverse effect on our financial condition or results of operations as of June 30, 2026. With respect to legal costs, we record such costs as incurred.
NOTE 10. RELATED PARTY TRANSACTIONS
Prior to the Spin-Off, HCWC was a subsidiary of HCMC. Following the Spin-Off on September 13, 2024, the Company and HCWC operate as separate, publicly traded companies, though they remain related parties due to common ownership history and ongoing agreements.
Due to Related Party
Prior
to the Spin-Off, there was no intercompany agreement between the Company and HCWC. Management has determined that intercompany receivables
and payables will be settled within twelve months after the balance sheet date. As a result, the Company’s intercompany balances
are reflected as “due to” or “due from” accounts in the consolidated balance sheets. After the Spin-Off, the
Company and HCWC provided services to each other pursuant to the separation agreements to facilitate a smooth transition. The Company
had a net due to related party balance of $
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Settlement of Related Party Payable
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with HCWC to settle the outstanding related
party payable. Pursuant to this agreement, the Company issued shares of its common stock to HCWC in full and final settlement
of the payable, which had a carrying value of $
In
accordance with ASC 850, Related Party Disclosures, and SAB Topic 5.T, transactions involving related parties are recorded based on their
substance rather than merely their legal form. Related party transactions cannot be presumed to be carried out on an arm’s-length
basis. Accordingly, the payable was extinguished at its carrying amount of $
For disclosure purposes only, the Company determined the fair value of the common stock issued as of December 31, 2025 in accordance with ASC 820, Fair Value Measurement. HCWC, as the investor, performed an impairment assessment of its investment in the Company using a third-party valuation. That assessment, which utilized a multi-method approach including observable and unobservable inputs, concluded that the fair value of the Company’s common stock exceeded HCWC’s carrying value; therefore, no impairment was recorded.
Agreements with HCWC
The Company entered into several agreements with HCWC that, among other things, affect the separation and govern the relationship of the parties following the Spin-Off. These agreements include:
| ● | a Separation Agreement that sets forth HCMC’s and HCWC’s agreements regarding the principal actions that both parties take in connection with the Spin-Off and aspects of our relationship following the Spin-Off; | |
| ● | a Transition Services Agreement pursuant to which HCMC and HCWC provide each other specified services on a transitional basis to help ensure an orderly transition following the Spin-Off. | |
| ● | a Tax Matters Agreement (“TMA”) that governs the respective rights, responsibilities and obligations of HCMC and HCWC after the Spin-Off with respect to all tax matters and includes restrictions to preserve the tax-free status of the Spin-Off; and | |
| ● | an Employee Matters Agreement (“EMA”) that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs in which our employees participated prior to the Spin-Off. |
Termination of Transition Services Agreement
On August 10, 2026, the Company and HCWC entered
into a Termination Agreement, which formally terminated the TSA effective as of January 1, 2026. The Termination Agreement provides for
a mutual release of any liability or obligation under the TSA from and after the effective date. As a result, no further services will
be provided by the Company to HCWC under the TSA. Management determined that the payroll costs primarily benefited HCWC and that the corresponding
liability was legally extinguished. Accordingly, during the three months ended June 30, 2026, the Company reclassified the payroll expense
and recognized a reduction in operating expenses of $
NOTE 11. SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were available to be issued. Based upon this review, the Company identified the following subsequent event that would have required disclosure in the condensed consolidated financial statements.
Digital Asset Initiative
On June 30, 2026, the Company publicly announced a new initiative to pursue opportunities in the digital asset ecosystem through its RAGE (Risk Assessment Gauging Enterprise) platform. On July 1, 2026 and July 8, 2026, the Company announced the acquisition of two digital tokens in connection with this initiative. As of the date of this filing, these tokens have not been delivered to the Company. No cash consideration has been paid, and no asset has been recognized on the balance sheet.
Subsequent to the balance sheet date, management has been actively evaluating this initiative in light of the Company’s current liquidity position, the volatility and regulatory uncertainties associated with the digital asset ecosystem, and the Company’s core strategic objectives. The Company will account for the tokens upon delivery in accordance with ASU 2023-08, which requires crypto assets within its scope to be measured at fair value with changes recognized in earnings. There can be no assurance that the tokens will be delivered, or if delivered, that they will generate any future revenue or positive cash flow.
Convertible Promissory Note
On
July 6, 2026, the Company issued a convertible promissory note to Pinz Capital Special Opportunities Fund, LP in the principal amount
of $
Termination of Transition Services Agreement
On August 10, 2026, the Company and HCWC entered into a Termination Agreement, which formally terminated the Transition Services Agreement effective as of January 1, 2026. The Termination Agreement provides for a mutual release of any liability or obligation under the TSA from and after the effective date. As a result, no further services will be provided by the Company to HCWC under the TSA, and all outstanding balances thereunder will be settled in the normal course of business. See Note 10 – Related Party Transactions for additional information.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONDENSED CONSOLIDATED OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements. The terms “we,” “us,” “our,” and the “Company” refer to Healthier Choices Management Corp. and its wholly-owned subsidiaries, HCMC Intellectual Property Holdings, LLC and The Vape Store, Inc. (“Vape Store”). All intercompany accounts and transactions have been eliminated in consolidation.
Company Overview
Healthier Choices Management Corp. is a holding company focused on monetizing its intellectual property through its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. The Company seeks to further monetize its patent suite through development and production of its patented products, including the Q-Cup™ technology and Imitine, licensing and royalty agreements, and enforcement actions against infringers of its intellectual property.
Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, the Company manages and intends to expand on its intellectual property portfolio.
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.
As disclosed in Note 1 to the condensed consolidated financial statements, the Company entered into a Distribution Agreement on November 27, 2025, to commercialize a new product line, Quitcubes, utilizing the Company’s NatureTine™ ingredient. The distributor is responsible for marketing, customer fulfillment, and website management, while the Company is responsible for manufacturing. The launch was originally anticipated in the first quarter of 2026 but was delayed as the Company established the necessary operational infrastructure. As a result, the Company recorded no net sales from Quitcubes for the three and six months ended June 30, 2026. Subsequent to quarter end, the Company has made significant progress and expects the official commercial launch to occur in the third quarter of 2026. Management believes the successful launch of Quitcubes is critical to generating future revenue and addressing the Company’s recurring losses.
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Liquidity
The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company currently and historically has reported net losses and cash outflows from operations. As of June 30, 2026, the Company had cash and cash equivalent of approximately $1.2 million and negative working capital of $0.7 million. The Company’s liquidity needs through June 30, 2026 have been satisfied through financing agreement with private lenders.
On March 27, 2026, the Company terminated its prior $5 million credit facility with a private lender, and entered into a new $5 million Sabby Loan Agreement. The Sabby Facility matures on December 31, 2026, bears interest at 12% per annum, and allows for advances from time to time subject to the terms and conditions of the loan agreement. In connection with the Sabby Facility, the Company received an initial advance of $500,000. The remaining $4.5 million is available for future draws.
On June 26, 2026, the Company received $50,000 in cash proceeds from Pinz Capital Special Opportunities Fund, LP in connection with a convertible promissory note. The formal loan agreement was executed on July 6, 2026. The note matures May 5, 2030, bears interest at 12% per annum, payable in kind, with principal and interest due in ten equal monthly installments beginning on the third anniversary of issuance, subject to earlier conversion. The proceeds from this note provided additional liquidity to support the Company’s operations.
Management has made plans to reduce certain costs and raise the capital needed, however there can be no assurance the Company can successfully implement these plans. The success of these plans is dependent upon various factors, foremost being the ability to reduce outside consulting expenses and the ability to secure additional capital from outside investors. There can be no assurance that such plans will be successful.
Management believes that the Company’s cash on hand, together with the availability of up to $4.5 million in additional draws under the Sabby Loan Agreement, and the $50,000 in proceeds received on June 26, 2026 (with the formal loan agreement executed on July 6, 2026), will enable the Company to meet its obligations and capital requirements for at least twelve months from the date these financial statements are issued. Accordingly, no adjustment has been made to the financial statements to account for this uncertainty.
Factors Affecting Our Performance
We believe the following factors affect our performance:
Pending Patent: We have developed, trademarked and are preparing to commercialize additional products. We include product development expenses as part of our operating expenses. In October 2018, we announced the granting of three US patents related to our Q-Cup™ technology. In addition, we have a suite of patent applications pending in the United States. There is no assurance that we will be awarded patents for any of these pending patent applications. There is no assurance that we can monetize the patents.
Manufacturing: We have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products to meet our design specifications. We depend on third party manufacturers for our vaporizer e-liquid and accessories. Any interruption in supply and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several third-party manufacturers to manufacture our products to our specifications.
Results of Operations
The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended June 30, 2026 and 2025 that is used in the following discussions of our results of operations:
| Three Months Ended June 30, | 2026 to 2025 | |||||||||||
| 2026 | 2025 | Change $ | ||||||||||
| SALES, NET | $ | - | $ | 1,000 | $ | (1,000 | ) | |||||
| COST OF SALES | - | 23,834 | (23,834 | ) | ||||||||
| GROSS PROFIT | - | (22,834 | ) | 22,834 | ||||||||
| OPERATING EXPENSES | 243,767 | 1,980,776 | (1,737,009 | ) | ||||||||
| RECLASSIFICATION OF PAYROLL EXPENSE – TSA TERMINATION | (328,373 | ) | - | (328,373 | ) | |||||||
| GAIN (LOSS) FROM OPERATIONS | 84,606 | (2,003,610 | ) | 2,088,216 | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Other income, net | - | 3,070 | (3,070 | ) | ||||||||
| Interest (expense) income, net | (9,370 | ) | 8,743 | (18,113 | ) | |||||||
| TOTAL OTHER (EXPENSE) INCOME, NET | (9,370 | ) | 11,813 | (21,183 | ) | |||||||
| NET INCOME (LOSS) | $ | 75,236 | $ | (1,991,797 | ) | $ | 2,067,033 | |||||
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Net sales and cost of sales were de minimis for the three months ended June 30, 2026 and 2025. The Company closed all its brick-and-mortar retail vape stores, as management had shifted its retail sales focus to the wholesale and online channel. The sales and cost of sales for the three months ended June 30, 2026 and 2025 continued to be significantly impacted by the inability to bring new products to market via distribution.
Total operating expenses decreased by approximately $1.7 million to $0.2 million for the three months ended June 30, 2026 compared to $2.0 million for the same period in 2025. After giving effect to the reclassification of payroll expense of $328,373 resulting from the termination of the TSA and mutual release of obligations with HCWC, total net operating expenses were $(84,606) for the three months ended June 30, 2026, representing a decrease of approximately $2.1 million from the same period in 2025. The decrease was driven by a $1.1 million reduction in stock-based compensation expense and a $0.7 million reduction in payroll and benefits, professional fees, and taxes, licenses and permits. In addition, the reclassification of shared payroll expense of approximately $0.3 million resulted from the termination of the TSA and mutual release of obligations with HCWC, as management determined that payroll costs incurred by HCMC during the period primarily benefited HCWC and should be allocated to HCWC, reducing operating expenses by $328,373 for the three months ended June 30, 2026.
Total other (expense) income, net was approximately $9,000 for the three months ended June 30, 2026, which was primarily attributable to interest expense. Total other (expense) income, net was $12,000 for the three months ended June 30, 2025, consisting of interest income of $9,000 and other miscellaneous income of $3,000.
The following table sets forth our unaudited condensed consolidated Statements of Operations for the six months ended June 30, 2026 and 2025 that is used in the following discussions of our results of operations:
| Six Months Ended June 30, | 2026 to 2025 | |||||||||||
| 2026 | 2025 | Change $ | ||||||||||
| SALES, NET | $ | - | $ | 2,780 | $ | (2,780 | ) | |||||
| COST OF SALES | - | 25,312 | (25,312 | ) | ||||||||
| GROSS PROFIT | - | (22,532 | ) | 22,532 | ||||||||
| OPERATING EXPENSES | 1,050,392 | 4,150,490 | (3,100,098 | ) | ||||||||
| RECLASSIFICATION OF PAYROLL EXPENSE – TSA TERMINATION | (328,373 | ) | - | (328,373 | ) | |||||||
| LOSS FROM OPERATIONS | (722,019 | ) | (4,173,022 | ) | 3,451,003 | |||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Loss on disposal of asset | - | (22,809 | ) | 22,809 | ||||||||
| Other income, net | 12,500 | 3,070 | 9,430 | |||||||||
| Interest (expense) income, net | (2,040 | ) | 17,288 | (19,328 | ) | |||||||
| TOTAL OTHER INCOME (EXPENSE), NET | 10,460 | (2,451 | ) | 12,911 | ||||||||
| NET LOSS | $ | (711,559 | ) | $ | (4,175,473 | ) | $ | 3,463,914 | ||||
Net sales and cost of sales were de minimis for the six months ended June 30, 2026 and 2025. The Company closed all its brick-and-mortar retail vape stores, as management had shifted its retail sales focus to the wholesale and online channel. The sales and cost of sales for the six months ended June 30, 2026 and 2025 continued to be significantly impacted by the inability to bring new products to market via distribution.
Total operating expenses decreased by approximately $3.1 million to $1.1 million for the six months ended June 30, 2026 compared to $4.2 million for the same period in 2025. After giving effect to the reclassification of payroll expense of $328,373 resulting from the termination of the TSA and mutual release of obligations with HCWC, total net operating expenses were $722,019 for the six months ended June 30, 2026, representing a decrease of approximately $3.5 million from the same period in 2025. The decrease was driven by a $2.2 million reduction in stock-based compensation expense and a $0.9 million reduction in payroll and benefits, professional fees, and bank service fees. In addition, the reclassification of payroll expense of approximately $0.3 million resulted from the termination of the TSA and mutual release of obligations with HCWC, as management determined that payroll costs incurred by HCMC during the period primarily benefited HCWC and should be allocated to HCWC, reducing operating expenses by $328,373 for the six months ended June 30, 2026.
Total other income (expense), net was approximately $10,000 for the six months ended June 30, 2026, primarily attributable to a miscellaneous income of approximately $12,000 and partially offset by interest expense of approximately $2,000. Total other income (expense), net was $2,000 for the six months ended June 30, 2025, consisting of $22,000 loss on asset disposal, offset by net interest income of $17,000 and other miscellaneous income of $3,000.
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Liquidity and Capital Resources
The following table and the discussion present the Company’s cash activities on continuing basis for six months ended June 30, 2026 and 2025:
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (620,855 | ) | $ | (1,992,379 | ) | ||
| Investing activities | - | - | ||||||
| Financing activities | 677,449 | 1,465,455 | ||||||
| Total net increase (decrease) in cash | $ | 56,594 | $ | (526,924 | ) | |||
Our net cash used in operating activities of approximately $0.6 million for the six months ended June 30, 2026 resulted from a net loss of $0.7 million, offset by a non-cash adjustment of $36,000 and a net increase of $55,000 from changes in operating assets and liabilities. Our net cash used in operating activities of approximately $2.0 million for the six months ended June 30, 2025 resulted from a net loss of $4.2 million, offset by a non-cash adjustment of $2.3 million and a net cash change of $0.1 million from changes in operating assets and liabilities.
There was no cash used in investing activities for the six months ended June 30, 2026 and 2025.
The net cash provided by financing activities of $0.7 million for the six months ended June 30, 2026 is primarily due $0.1 million net transfers from HCWC, and $0.5 million cash proceeds from Sabby loan advance, and $50,000 cash proceeds from convertible note received on June 26, 2026 (with the formal loan agreement executed on July 6, 2026). The net cash provided by financing activities of $1.5 million for the six months ended June 30, 2025 is primarily due to $1.9 million net transfers from HCWC and $0.4 million cash payment of the credit line.
At June 30, 2026 and December 31, 2025, 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 operations. Most of our cash and cash equivalent are concentrated in one financial institution and is generally in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash. The following table presents the Company’s cash position as of June 30, 2026 and December 31, 2025.
| June 30, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalent | $ | 1,197,082 | $ | 1,140,488 | ||||
| Total assets | $ | 1,494,518 | $ | 1,467,870 | ||||
| Cash and cash equivalent as a percentage of total assets | 80.1 | % | 77.7 | % | ||||
The Company reported a net loss from continuing operation of $0.7 million for the six months ended June 30, 2026. The Company also had negative working capital of $0.7 million. The Company expects to continue incurring losses for the foreseeable future.
The Company anticipates its current cash and its ability to draw from the $5 million credit line with private lender will be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting 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. These estimates include useful lives and impairment of long-lived assets, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. 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.
| 20 |
Seasonality
We do not consider our business to be seasonal.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements including statements regarding retail expansion, the future demand for our products, the transition to vaporizer and other products, competition, the adequacy of our cash resources and our authorized Common Stock, and our continued ability to raise capital.
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include our future common stock price, 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, carried out an evaluation on internal controls as of June 30, 2026 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 a result of the evaluation, 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 control over financial reporting. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was ineffective as of June 30, 2026 and noted the material weaknesses as follows:
| ● | Failure to have properly documented and designed disclosure controls and procedures and testing of the operating effectiveness of our internal control over financial reporting. |
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| ● | Segregation of duties due to lack of personnel. | |
| ● | The Company had ineffective design, implementation and, operation of controls over logical access, program change management, and vendor management controls. The Company controls on IT should have included the following: |
| ○ | Appropriate restrictions that would adequately prevent users from gaining inappropriate access to the financially relevant systems. | |
| ○ | IT program and data changes affecting the Company’s financial IT applications and underlying accounting records, should be identified, tested, authorized and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate. | |
| ○ | Obtaining and reviewing key third party service provider SOC reports. |
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 June 30, 2026 based on the criteria set forth in Internal 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 above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:
| ● | Continuing to increase headcount across the Company, with a particular focus on hiring individuals with strong internal control backgrounds and inventory expertise. | |
| ● | Establishing policies and procedures in the IT area to mitigate data breach, unauthorized access and address segregation of duties, as well as review key third party service provider SOC reports. |
We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Controls over Financing Reporting
Except as detailed above, during the quarter ended June 30, 2026, there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There were two lawsuits in connection with alleged claimed battery defects for an electronic cigarette device. One had been dismissed by the court wherein the plaintiff settled with the Company’s insurance carrier with no economic impact to the Company. In the second lawsuit, as of December 31, 2023, the Company had reached an arrangement with the plaintiff to resolve the matter, limiting potential exposure of the Company to $1.5 million which was reflected in accounts payable and accrued expenses, representing management’s estimate of the probable settlement amount based on the current status of discussions. This arrangement was formalized by a signed agreement on July 1, 2024 and the Company accrued $1.5 million at June 30, 2024. As of May 31, 2025, the Company already paid $1,500,000 in full.
On September 26, 2023, HCMC filed a patent infringement lawsuit against R.J. Reynolds Vapor Company (“RJR”) in the U.S. District Court for the Middle District of North Carolina in connection with HCMC’s assertions that RJR’s Vuse electronic cigarette infringes one of HCMC’s patents.
On November 17, 2023, RJR filed a motion to dismiss the action. HCMC opposed on December 22, 2023.
On September 18, 2024, RJR filed an inter partes review of the patent-in-suit at the United States Patent and Trademark Office (“USPTO”).
In March 2026, the Patent Trial and Appeal Board issued a decision in favor of RJR in the ongoing patent dispute. On June 1, 2026, HCMC filed an appeal to the ruling in the U.S. Court of Appeals for the Federal Circuit. The appeal is presently pending, with appeals briefs due at the end of August 2026, subject to extension of time.
From time to time the Company is involved in legal proceedings arising in the ordinary course of our business. We believe that there is no other litigation pending that is likely to have, individually or in aggregate, a material adverse effect on our financial condition or results of operations as of June 30, 2026. 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.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS.
See the exhibits listed in the accompanying “Index to Exhibits.”
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INDEX TO EXHIBITS
| Exhibit | Incorporated by Reference | Filed or Furnished | ||||||||
| No. | Exhibit Description | Form | Date | Number | Herewith | |||||
| 10.1 | Loan Agreement, dated as of March 27, 2026, among Healthier Choices Management Corp., and Sabby Volatility Warrant Master Fund, Ltd. | 8-K | 4/3/2026 | 10.1 | ||||||
| 10.2 | Letter Agreement, dated March 27, 2026, by and between HCMC and Hal Mintz | 8-K | 4/3/2026 | 10.1 | ||||||
| 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 | Inline XBRL Instance Document | Filed | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | Filed | ||||||||
* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HEALTHIER CHOICES MANAGEMENT CORP. | ||
| Date: August 19, 2026 | By: | /s/ Jeffrey Holman |
| Jeffrey Holman | ||
| Chief Executive Officer | ||
| Date: August 19, 2026 | By: | /s/ John Ollet |
| John Ollet | ||
| Chief Financial Officer | ||
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