Healthier Choices Management Corp 10-Q for FY2023 Q2

Healthier Choices Management Corp. (HCMC)

10-Q 2023-07-24 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

Healthier Choices Management Corp filed this 10-Q on July 24, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $13.57M; up 121.4% from $6.13M a year earlier
Net loss: $2.65M; compared with a net loss of $1.35M a year earlier
Diluted EPS: $0.00; compared with $0.00 a year earlier

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

3800 North 28Th Way
Hollywood, Florida		33020
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	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 June 30, 2023 (Unaudited) and December 31, 2022	1

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

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

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	5

Notes to Condensed Consolidated Financial Statements (Unaudited)	6

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	24

ITEM 4. Controls and Procedures	24

PART II OTHER INFORMATION	26

ITEM 1. Legal Proceedings	26

ITEM 1A. Risk Factors	27

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	27

ITEM 3. Defaults Upon Senior Securities	27

ITEM 4. Mine Safety Disclosures	27

ITEM 5. Other Information	27

ITEM 6. Exhibits	28

Signatures	29

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

	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				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

	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

	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	$	-

	June 30, 2023				December 31, 2022
Total cash in excess of FDIC limits of $250,000		$	7,458,162			$	21,682,144

	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

	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	)

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

	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

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

	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

	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

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

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

	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	)

	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

	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

	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)

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

	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