Healthier Choices Management Corp 10-K for FY2021

Healthier Choices Management Corp. (HCMC)

10-K 2022-03-31 For: 2021-12-31

Added on April 06, 2026

About this 10-K

Healthier Choices Management Corp filed this 10-K on March 31, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $13.32M; down 4.3% from $13.92M a year earlier
Net loss: $4.04M; compared with a net loss of $3.72M a year earlier
Diluted EPS: $0.00; compared with $0.00 a year earlier

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Delaware		001-36469		84-1070932
(State or Other Jurisdiction of Incorporation or Organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

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

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

	Page

PART I

Item 1. Business	1

Item 1A. Risk Factors	13

Item 1B. Unresolved Staff Comments	13

Item 2. Properties	13

Item 3. Legal Proceedings	13

Item 4. Mine Safety Disclosures	13

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14

Item 6. Selected Financial Data	14

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 7A. Quantitative and Qualitative Disclosures About Market Risk	19

Item 8. Financial Statements and Supplementary Data	19

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	19

Item 9A. Controls and Procedures	19

Item 9B. Other Information	19

PART III

Item 10. Directors, Executive Officers and Corporate Governance	20

Item 11. Executive Compensation	23

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	25

Item 13. Certain Relationships and Related Transactions, and Director Independence	26

Item 14. Principal Accounting Fees and Services	26

PART IV

Item 15. Exhibits, Financial Statement Schedules	27

Exhibit Index	28

SIGNATURES	30

	For the Year Ended December 31,						2021 to 2020
	2021			2020			Change $
SALES:
Vapor sales, net	$	2,084,813		$	2,458,945		$	(374,132	)
Grocery sales, net		11,235,041			11,461,800			(226,759	)
Total Sales		13,319,854			13,920,745			(600,891	)
Cost of sales vapor		839,599			1,033,805			(194,206	)
Cost of sales grocery		7,187,701			7,109,719			77,982
GROSS PROFIT		5,292,554			5,777,221			(484,667	)

EXPENSES:
Impairment of goodwill and intangible assets		-			380,646			(380,646	)
Selling, general and administrative		10,033,048			8,844,947			1,188,101
Total operating expenses		10,033,048			9,225,593			807,455
Operating loss		(4,740,494	)		(3,448,372	)		(1,292,122	)

OTHER INCOME (EXPENSES):
Gain on debt settlements		767,930			-			767,930
Other expenses, net		(26	)		(100	)		74
Interest expense, net		(65,281	)		(272,651	)		207,370
Gain (loss) on investment		412			(1,269	)		1,681
Total other income (expense), net		703,035			(274,020	)		977,055

NET LOSS	$	(4,037,459	)	$	(3,722,392	)	$	(315,067	)

	December 31, 2021			December 31, 2020

Cash	$	26,496,404		$	925,475
Total assets	$	34,443,487		$	11,874,993
Percentage of total assets		76.9	%		7.8	%

	2021			2020
Reconciliation of Adjusted EBITDA to net loss allocable to common stockholders:
Operating loss	$	(4,740,494	)	$	(3,448,372	)
Impairment of goodwill and intangible assets		-			380,646
Depreciation and amortization		497,408			550,098
Stock-based compensation expense		34,375			78,029
Adjusted EBITDA	$	(4,208,711	)	$	(2,439,599	)

Name	Age	Position
Executive Officers:
Jeffrey Holman	55	Chief Executive Officer, Chairman and Director
John A. Ollet	59	Chief Financial Officer
Christopher Santi	51	President and Chief Operating Officer

Non-Employee Directors:
Clifford J. Friedman	60	Director
Dr. Anthony Panariello	62	Director

Name	Independent	Audit	Compensation	Nominating And Corporate Governance
Jeffrey Holman
Dr. Anthony Panariello	X	X	X	X
Clifford J. Friedman	X	X	X	X

Name and Principal Position	Year	Salary ($)		Bonus ($)		Restricted Stock/ (Forfeited) ⁽¹⁾$			Restricted Stock Awards⁽¹⁾$		All Other Compensation ($)		Total

Jeffrey Holman	2021		578,579		250,000		(302,500	)		110,000		-		636,079
Chief Executive Officer	2020		494,430		-		-			-		-		494,430

Christopher Santi	2021		359,192		160,000		(220,000	)		80,000		-		379,192
President and Chief Operating Officer	2020		331,058		-		-			-		-		331,058

	Holman	Santi/Ollet
Death or Total Disability	Any amounts due at time of termination plus full vesting of equity awards	Any amounts due at time of termination

Dismissal Without Cause or Termination by Executive for Good Reason or upon a Change of Control (1)	Two years of Base Salary, full vesting of equity awards, benefit continuation for eighteen months plus pro-rated bonus if, any, that would have been earned for the fiscal year in which the termination occurs	Fifteen months of Base Salary plus one additional month for every additional four months of service, up to eighteen months’ maximum

Termination upon a Change of Control (2)	Two years of Base Salary, full vesting of equity awards, benefit continuation for eighteen months plus pro-rated bonus if, any, that would have been earned for the fiscal year in which the termination occurs	Eighteen months of Base Salary

	Number of Shares Issued Under Stock Options		Number of Shares Issued Under Restricted Stock		Stock Options and Restricted Stock Exercise Price ($) Per Share of Stock		Expiration Date	Number of Shares That Have Not Vested (#)		Market Value of Shares That Name Have Not Vested ($)
Jeffrey Holman		-		9,075,000,000		0.0001	8/13/2028		9,075,000,000		907,500
Jeffrey Holman		39,000,000,000		-		0.0001	2/1/2027		-		-
Christopher Santi		-		6,600,000,000		0.0001	8/13/2028		6,600,000,000		660,000
Christopher Santi		17,000,000,000		-		0.0001	2/1/2027		-		-
John Ollet		-		2,475,000,000		0.0001	8/13/2028		2,475,000,000		247,500
John Ollet		1,000,000,000		-		0.0001	12/9/2026		-		-
John Ollet		4,000,000,000		-		0.0001	8/30/2027		-		-

Name	Fees Earned or Paid in Cash ($)

Dr. Anthony Panariello		$	26,000
Clifford J. Friedman		$	26,000

Name of Plan	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders
2015 Equity Incentive Plan		89,712,508,480		0.0001		10,287,491,520
Total		89,712,508,480		-		10,287,491,520

Title of Class	Beneficial Owner	Amount and Nature of Beneficial Owner ⁽¹⁾		Percent of Class ⁽¹⁾
Directors and Executive Officers:
Common Stock	Jeffrey E. Holman (2)		43,537,500,000		11.50	%
Common Stock	Christopher Santi (3)		20,300,000,000		5.69	%
Common Stock	John Ollet (4)		6,237,500,000		1.81	%
Common Stock	Dr. Anthony Panariello (5)		1,206,250,000		0.35	%
Common Stock	Clifford J. Friedman (6)		1,500,000,000		0.44	%
All directors and officers as a group (5 persons) (7)			72,781,250,000		18.07	%

5% Stockholders:
None			-		0	%
Total:			72,781,250,000		18.07	%

	2021 ($)		2020 ($)
Audit Fees (1)	$	226,000	$	188,000
Total	$	226,000	$	188,000

Report of Independent Registered Public Accounting Firm (PCAOB ID # 688)	F-2

Consolidated Financial Statements

Consolidated Balance Sheets as of December 31, 2021 and 2020	F-3

Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020	F-4

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 2020	F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020	F-6

Notes to Consolidated Financial Statements	F-7

	December 31, 2021			December 31, 2020

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	26,496,404		$	925,475
Accounts receivable		28,481			23,675
Notes receivable		247,915			-
Inventories		1,521,199			1,749,246
Prepaid expenses and vendor deposits		456,397			286,065
Investment		23,143			22,731
TOTAL CURRENT ASSETS		28,773,539			3,007,192

Restricted Cash		-			2,000,000
Property and equipment, net of accumulated depreciation		176,988			230,719
Intangible assets, net of accumulated amortization		947,593			1,248,352
Goodwill		916,000			916,000
Notes receivable		-			304,511
Right of use asset – operating lease, net		3,543,930			4,078,621
Other assets		85,437			89,598
TOTAL ASSETS	$	34,443,487		$	11,874,993

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,642,848		$	1,085,663
Contract liabilities		23,178			21,262
Operating lease liability, current		437,328			474,686
Current portion of line of credit		418,036			2,000,000
Current portion of loan payment		2,604			2,072,484
TOTAL CURRENT LIABILITIES		2,523,994			5,654,095

Loan payable, net of current portion		815			849,009
Operating lease liability, net of current		2,685,021			3,114,521
TOTAL LIABILITIES		5,209,830			9,617,625

COMMITMENTS AND CONTINGENCIES (SEE NOTE 12)

STOCKHOLDERS’ EQUITY
Series C convertible preferred stock, $1,000 par value per share, 30,000 shares authorized; 0 and 16,277 shares issued and outstanding as of December 31, 2021 and 2020, respectively; aggregate liquidation preference of $16.3 million for 2020.		-			16,277,116
Series D convertible preferred stock, $1,000 par value per share, 5,000 shares authorized; 800 and 0 shares issued and outstanding as of December 31, 2021 and 2020, respectively; aggregate liquidation preference of $0.8 million		800,000			-
Common Stock, $0.0001 par value per share, 750,000,000,000 shares authorized; 339,741,632,384 and 143,840,848,017 shares issued and outstanding as of December 31, 2021 and 2020, respectively		33,974,163			14,384,084
Additional paid-in capital		30,855,824			3,955,039
Accumulated deficit		(36,396,330	)		(32,358,871	)
TOTAL STOCKHOLDERS’ EQUITY		29,233,657			2,257,368
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	34,443,487		$	11,874,993

	Convertible Preferred Stock						Common Stock						Additional Paid-In			Accumulated
	Shares			Amount			Shares			Amount			Capital			Deficit			Total
Balance – January 1, 2020		20,150		$	20,150,116			67,698,494,244		$	6,769,849		$	7,618,245		$	(28,636,479	)	$	5,901,731

Issuance of common stock in connection with cashless exercise of Series A warrants		-			-			37,412,353,772			3,741,235			(3,741,235	)		-			-
Cancellation of Series B Convertible Preferred Stock		(20,150	)		(20,150,116	)		-			-			-			-			(20,150,116	)
Issuance of Series C Convertible Preferred Stock		20,150			20,150,116			-			-			-			-			20,150,116
Series C Preferred stock exercised		(3,873	)		(3,873,000	)		38,730,000,001			3,873,000			-			-			-
Stock-based compensation expense		-			-			-			-			78,029			-			78,029
Net loss		-			-			-			-			-			(3,722,392	)		(3,722,392	)
Balance – December 31, 2020		16,277			16,277,116			143,840,848,017		$	14,384,084		$	3,955,039		$	(32,358,871	)	$	2,257,368
Series C Preferred stock exercised		(16,277	)		(16,277,116	)		162,771,153,001			16,277,116			-			-			-
Stock options exercised		-			-			2,275,000,000			227,500			-			-			227,500
Issuance of Series D Convertible Preferred stock in connection with the Securities Purchase Agreement		5,000			5,000,000			-			-			-			-			5,000,000
Series D Convertible Preferred Stock exercised		(4,200	)		(4,200,000	)		6,562,500,000			656,250			3,543,750			-			-
Issuance of common stock		-			-			1,182,831,056			118,283			1,289,273			-			1,407,556
Issuance of common stock in connection with the Rights Offering, net of offering expenses		-			-			27,046,800,310			2,704,680			21,639,637			-			24,344,317
Issuance of awarded stock for officers		-			-			2,200,000,000			220,000			(220,000	)		-			-
Issuance of awarded stock for board member		-			-			50,000,000			5,000			(5,000	)		-			-
Cancellation of awarded stock for officers		-			-			(6,050,000,000	)		(605,000	)		605,000			-			-
Cancellation of awarded stock for board member		-			-			(137,500,000	)		(13,750	)		13,750			-			-
Stock-based compensation expense		-			-			-			-			34,375			-			34,375
Net loss		-			-			-			-			-			(4,037,459	)		(4,037,459	)
Balance – December 31, 2021		800		$	800,000			339,741,632,384		$	33,974,163		$	30,855,824		$	(36,396,330	)	$	29,233,657

	December 31, 2021			December 31, 2020

Customer A		30	%		0	%
Customer B		12	%		0	%
Customer C		0	%		34	%

Description	Fair Value Measurements Using Quoted Prices in Active Market (Level 1)				Mark to Market				December 31, 2021
Investment		$	22,731			$	412			$	23,143

	December 31, 2021		December 31, 2020

Vapor Business	$	188,793	$	304,614
Grocery Business		1,332,406		1,444,632
Total	$	1,521,199	$	1,749,246

	December 31,
Description	2021			2020
Promissory Note		$	247,915		$	304,511

	Year Ended December 31,
	2021			2020

Displays	$	305,558		$	305,558
Furniture and fixtures		246,496			246,496
Leasehold improvements		136,504			128,004
Computer hardware & equipment		151,924			143,082
Other		315,788			276,711
		1,156,270			1,099,851
Less: accumulated depreciation and amortization		(979,282	)		(869,132	)
Total property and equipment	$	176,988		$	230,719

	December 31, 2021		December 31, 2020

Beginning balance	$	916,000	$	956,000
Impairment of goodwill-retail business		-		(40,000	)
Ending balance	$	916,000	$	916,000

December 31, 2021	Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	4-5 years	$	883,000	$	(685,823	)	$	197,177
Trade names	8-10 years		923,000		(536,661	)		386,339
Patents	10 years		372,165		(122,233	)		249,932
Non-compete	4 years		238,000		(133,646	)		104,354
Website	4 years		10,000		(209	)		9,791
Intangible assets, net		$	2,426,165	$	(1,478,572	)	$	947,593

For the years ending December 31,
2022	$	389,456
2023		150,591
2024		150,591
2025		143,549
2026		48,655
Thereafter		64,751
Total	$	947,593

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Term (Yrs.)		Aggregate Intrinsic Value

Outstanding, January 1, 2020		69,862,230,680		$	0.00		7	$	-
Options granted		-			0.00				-
Options forfeited or expired		-			0.00				-
Outstanding, December 31, 2020		69,862,230,680		$	0.00		6	$	-
Options granted		-			0.00				-
Options exercised		(2,275,000,000	)		0.00				-
Options forfeited or expired		-			0.00				-
Outstanding, December 31, 2021		67,587,230,680		$	0.00		5		-
Exercisable at December 31, 2021		67,587,230,680		$	0.00		5	$	-

Maturity of Lease Liabilities by Fiscal Year
2022	$	572,335
2023		450,877
2024		342,005
2025		337,685
2026		267,759
Thereafter		1,941,250
Total undiscounted operating lease payments	$	3,911,911
Less: Imputed interest		(789,562	)
Present value of operating lease liabilities	$	3,122,349

Balance Sheet Classification	December 31, 2021		December 31, 2020
Right of use asset	$	3,543,930	$	4,078,621

Operating lease liability, current	$	437,328	$	474,686
Operating lease liability, net of current		2,685,021		3,114,521
Total operating lease liabilities	$	3,122,349	$	3,589,207

Other Information
Weighted-average remaining lease term for operating leases	10 years
Weighted-average discount rate for operating leases		4.74	%

	December 31, 2021
Operating lease cost	$	389,538
Variable lease cost		372,608
Short-term lease cost		139,291
Total rent expense	$	901,437

	Year Ended
	Net Sales				Segment Gross Profit
	December 31, 2021		December 31, 2020		December 31, 2021			December 31, 2020
Vapor	$	2,084,813	$	2,458,945	$	1,245,214		$	1,425,140
Grocery		11,235,041		11,461,800		4,047,340			4,352,081
Total	$	13,319,854	$	13,920,745		5,292,554			5,777,221
Corporate expenses						10,033,048			9,225,593
Operating loss						(4,740,494	)		(3,448,372	)
Corporate other income (expense), net						703,035			(274,020	)
Net loss						(4,037,459	)		(3,722,392	)

Exhibit		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date	Number	Herewith

1.1	Form of Underwriting Agreement	S-1	7/10/15	1.1
2.1(a)	Business Sale Offer and Acceptance Agreement, dated April 11, 2016, by and between Vapor Corp. and Ada’s Whole Food Market LLC	8-K	5/23/16	2.1
2.1(b)	Asset Purchase Agreement, dated July 29, 2016, by and between Vapor Corp. and VPR Brands, L.P.	8-K	8/3/16	1.1
2.1(c)	Asset Purchase Agreement, dated November 19, 2018, by and among the Company and Paradise Health Foods, Inc.	8-K	11/21/18	2.1
2.1(d)	Membership Interest Purchase Agreement, dated December 14, 2018, by and among Healthy U Wholesale, Inc. and the Sellers named therein	8-K	12/26/18	2.2
2.1(e)	Asset Purchase Agreement, dated February 8, 2022, by and among the Healthy Choice Markets 3, LLC, Mother Earth’s Storehouse Inc., Christopher Schneider and Kevin Schneider	8-K	2/8/22	2.1
2.1(f)	Commercial Contract of Sale, dated of 9th day of February, 2022, between Mother Earth’s Storehouse, Inc. and Healthy Choice Markets 3 Real Estate LLC				X
3.1	Certificate of Incorporation	10-Q	11/16/15	3.1
3.1(a)	Certificate of Amendment to Certificate of Incorporation	8-K	3/03/17	3.1
3.1(b)	Certificate of Amendment to Certificate of Incorporation	S-1	7/10/15	3.2
3.1(c)	Certificate of Amendment to Certificate of Incorporation	S-4	12/11/15	3.2
3.1(d)	Certificate of Amendment to Certificate of Incorporation	8-K	2/2/16	3.1
3.1(e)	Certificate of Amendment to Certificate of Incorporation	8-K	3/9/16	3.1
3.1(f)	Certificate of Amendment to Certificate of Incorporation	8-K	6/1/16	3.1
3.1(g)	Certificate of Amendment to Certificate of Incorporation	8-K	8/5/16	3.1
3.1(h)	Certificate of Designation of Preferences, Rights And Limitations of Series D Convertible Preferred Stock	8-K	2/4/21	3.1
3.1(i)	Cancellation of Certificate of Designations				X
3.2	Bylaws	8-K	12/31/13	3.4
10.1	Form of Securities Purchase Agreement dated March 3, 2015	8-K	3/05/15	10.1
10.2*	2015 Equity Incentive Plan	S-1	6/01/15	10.28
10.3	Form of Letter Agreement dated June 19, 2015	8-K	6/25/15	10.4
10.4	Form of Letter Agreement dated June 19, 2015	8-K	6/25/15	10.5
10.9	RLOC Credit Agreement, dated December 23, 2021, by and among Healthier Choices Management Corp. and Professional Bank				X
10.10	Revolving Credit Note, dated December 31, 2019, issued by Healthier Choices Management Corp. in favor of Professional Bank				X

	Healthier Choices Management Corp.

	By:	/s/ Jeffrey Holman
		Jeffrey Holman
		Chief Executive Officer
		(Principal Executive Officer)