HCWC 10-K
Healthy Choice Wellness Corp. (HCWC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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INDEX
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PART I
Item 1. Business.
Healthy Choice Wellness Corp. (the “Company” or “HCWC” or “we” or “our” or “us”) is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives.
Through its wholly owned subsidiaries, the Company operates:
| ● | Healthy Choice Markets, Inc. (DBA Ada’s Natural Market), a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 2, LLC (DBA Paradise Health & Nutrition), operating three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 3, LLC (DBA Mother Earth’s Storehouse), an organic and health food and vitamin chain in New York’s Hudson Valley, which has been in existence for over 40 years. |
| ● | Healthy Choice Markets IV, LLC (DBA Green’s Natural Foods), managing eight stores in New York and New Jersey, offering a selection of 100% organic produce, all-natural and non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. |
| ● | Healthy Choice Markets V, LLC (DBA Ellwood Thompson’s), an organic and natural health food and vitamin store located in Richmond, Virginia. |
| ● | Healthy Choice Markets VI, LLC (DBA GreenAcres Market), an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market offers organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands. |
Through its wholly owned subsidiary, Healthy U Wholesale, the Company sells vitamins and supplements, as well as health, beauty, and personal care products on its website www.TheVitaminStore.com.
SPIN-OFF
Healthier Choices Management Corp. (“HCMC” or the “Parent”) announced on August 22, 2022 that its Board of Directors approved the separation of the grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off” or “Separation”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC.
On September 13, 2024 (the “Spin-Off Date”), after the NYSE American (“NYSEAM”) market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock commenced trading on the NYSEAM under the stock ticker “HCWC.”
HCMC distributed all the outstanding shares of HCMC common stock held by it on a pro rata basis to holders of HCMC’s common stock. For each 208,632 shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one (1) share of Class A common stock and three (3) shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.
Prior to the Spin-Off, HCMC secured binding commitments of $13.25 million in equity financing for HCWC from the same group of investors that invested $13.25 million in HCMC Series E Preferred Stock. Pursuant to the Securities Purchase Agreement for the HCMC Series E Stock (“HCMC Series E SPA”), the purchasers of HCMC Series E Stock will also be required to purchase Series A Convertible Preferred Stock of HCWC in the same subscription amounts that the Purchasers paid for the HCMC Series E Stock (regardless of whether or not such HCMC Series E Stock has been converted into HCMC common stock). On October 30, 2025, the parties to the HCMC Series E SPA entered into a Ninth Amendment to HCMC Series E SPA, pursuant to which HCMC and such parties agreed to amend the Completion Date to April 1, 2027. As of December 31, 2025, HCWC has received $5.25 million of the committed $13.25 million, leaving the contractually obligated $8.0 million binding commitments to be fulfilled. The parties, which comprise of the institutional investors that participated in the Spin-off as described above, have communicated their intent to further extend the Completion Date. For further details regarding the remaining $8.0 million commitment and its significance to the Company’s liquidity, see Note 2 - Going Concern.
NATURAL AND ORGANIC GROCERIES AND DIETARY SUPPLEMENTS BUSINESS
Local. Organic. Fresh. Three words that define Healthy Choice Markets! With Ada’s Natural Market, a full-service grocery store and Greenleaf Grill, Ada’s flagship fast casual in-store restaurant, serving Fort Myers, FL, along with the eight Green’s Natural Foods Stores in New Jersey and New York, three Paradise Health & Nutrition locations in the greater Melbourne, FL area, one Mother Earth’s Storehouse location in Hudson Valley, NY, one Ellwood Thompson store located in Richmond Virginia, five GreenAcres Market stores located in Oklahoma and Kansas, all serving their respective local communities, our stores provide all-natural and organic products in a friendly and helpful atmosphere, with aisles of traditional grocery complete with frozen, healthy home, vitamins & supplements, health & beauty, fresh produce, hormone and antibiotic free meats and bulk foods. Ada’s Natural Market, Green’s Natural Foods, Paradise Health & Nutrition, Mother Earth’s Storehouse, Ellwood Thompson’s and GreenAcres Market all offer chef-prepared ready-to-go foods and fresh-baked-daily baked goods.
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Collectively, we focus on providing high-quality products at affordable prices, exceptional customer service, nutrition education and community outreach. We strive to generate long-term relationships with our customers based on quality and service by:
| ● | selling only all-natural and organic groceries; | |
| ● | offering affordable prices and a shopper-friendly retail environment; and | |
| ● | providing dine-in options at our Greenleaf Grill, Organic Juice Bar, and our free-trade coffee bar. |
Our History and Founding Principles
We are committed to maintaining the following founding principles, which have helped foster our growth:
| ● | Quality. Every product on our shelves must go through a rigorous screening and approval process. Our mission includes providing the highest quality groceries and supplements, Natural Grocers branded products, European and United States Department of Agriculture (USDA) certified organic and fresh produce at the best prices in the industry. | |
| ● | Community. The Ada’s, Paradise, Mother Earth’s Storehouse, Green’s Natural Foods, Ellwood Thompson’s and now GreenAcres Market brands have each been serving their respective communities for approximately 40+ years. | |
| ● | Employees. Our employees make our companies great. We work hard to ensure that our employees are able to live a healthy, balanced lifestyle. We support them with free nutrition education programs, competitive pay and excellent benefits. |
Our Market
We operate within the natural products retail industry, which is a subset of the United States grocery industry and the dietary supplement business. This industry includes conventional supermarkets, natural, gourmet and specialty food markets, mass and discount retailers, warehouse clubs, independent health food stores, dietary supplement retailers, drug stores, farmers’ markets, food co-ops, mail order and online retailers and multi-level marketers. Industry-wide sales of natural and organic foods and dietary supplements have experienced meaningful growth over the past several years, and we believe that growth will continue for the foreseeable future.
We believe the growth in sales of natural and organic foods and dietary supplements continues to be driven by numerous factors, including:
| ● | greater consumer focus on high-quality nutritional products; | |
| ● | an increased awareness of the importance of good nutrition to long-term wellness; | |
| ● | aging communities that are seeking healthy lifestyle alternatives; | |
| ● | heightened consumer awareness about the importance of food quality and a desire to avoid pesticide residues, growth hormones, artificial ingredients and genetically engineered ingredients in foods; | |
| ● | growing consumer concerns over the use of harmful chemical additives in body care and household cleaning supplies; | |
| ● | well-established natural and organic brands, which generate additional industry awareness and credibility with consumers; and | |
| ● | the growth in the number of consumers with special dietary requirements as a result of allergies, chemical sensitivities, auto-immune disorders and other conditions. |
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Our Competitive Strengths
We are well-positioned to capitalize on favorable natural and organic grocery and dietary supplement industry dynamics as a result of the following competitive strengths:
Strict focus on high-quality natural and organic grocery products. We offer high-quality products and brands, including an extensive selection of widely-recognized natural and organic food, dietary supplements, body care products, pet care products and books. We offer our customers approximately 10,000 Stock Keeping Units (SKUs) of natural and organic products. We believe our broad product offering enables our customers to shop our stores for substantially all of their grocery and dietary supplement purchases. In our grocery departments, we primarily sell USDA certified organic produce and do not approve for sale grocery products that are known to contain artificial colors, flavors, preservatives or sweeteners or partially hydrogenated or hydrogenated oils. In addition, we only sell pasture-raised, humanely-raised dairy products. Consistent with this strategy, our product selection does not include items that do not meet our strict quality guidelines. Our store managers enhance our robust product offering by customizing their stores’ selections to address the preferences of local customers.
Engaging customer service experience based on education and empowerment. We strive to offer consistently exceptional customer service in a shopper-friendly environment, which we believe creates a differentiated shopping experience, enhances customer loyalty and generates repeat visits from our clientele. A key aspect of our customer service model is to provide free nutrition education to our customers. We believe this focus provides an engaging retail experience while also empowering our customers to make informed decisions about their health. We offer our science-based nutrition education through our trained employees, our newsletter and sales flyer, community out-reach programs, one-on-one nutrition health coaching, nutrition classes and cooking demonstrations.
Our Growth Strategies
We expect to pursue several strategies to help return the overall business to profitable growth, including:
Expand our store base. We intend to expand our store base through the acquisition of new stores.
Increase sales from existing customers. In order to increase our average ticket and the number of customer transactions, we plan to continue offering an engaging customer experience by providing science-based nutrition education and a differentiated merchandising strategy that delivers affordable, high-quality natural and organic grocery products and dietary supplements. We also plan to continue to utilize targeted marketing efforts to reach our existing customers, which we anticipate will drive customer transactions and convert occasional, single-category customers into core, multi-category customers.
Create new revenue streams. The Company has initiated the implementation of new in-house baking commissaries at the following banners: Mother Earth’s Storehouse (serving Mother Earth’s Storehouse and all 8 Green’s Natural Foods Stores), Ada’s Natural Market (serving Ada’s Natural Market and all 3 Paradise Stores), and GreenAcres Market Bradley Fair (serving all 5 GreenAcres Market stores). These commissaries will generate new revenue while driving additional traffic to retail locations. Additionally, the Company intends to launch a wholesale business to supply bread and pies to local restaurants and businesses, further establishing its commitment to serving local communities.
Grow our customer base. We plan to implement several measures aimed at building our brand awareness and growing our customer base, including: (i) continuously improving the design of all our websites to enhance functionality, create a more engaging user experience and increase its reach and effectiveness; (ii) introducing customer appreciation programs at all our stores; and (iii) developing new collateral marketing materials. We believe offering nutrition education has historically been one of our most effective marketing strategies for reaching new customers and increasing the demand for natural and organic groceries and dietary supplements in our markets.
Improve operating margins. We expect to continue to improve our operating margins as we benefit from investments we have made or are making in fixed overhead and information technology. As we add additional stores, we expect to achieve greater economies of scale through sourcing and distribution. To achieve additional operating margin expansion, we intend to further optimize performance, maintain appropriate store labor levels and effectively manage product selection and pricing.
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Our Products
Product Selection Guidelines. We have a set of strict quality guidelines covering all products we sell. For example:
| ● | we do not approve for sale food known to contain artificial colors, flavors, preservatives or sweeteners or partially hydrogenated or hydrogenated oils or phthalates or parabens, regardless of the proportion of its natural or organic ingredients; | |
| ● | we sell USDA certified organic produce; and | |
| ● | we sell meats naturally raised without hormones, antibiotics or treatments and that were not fed animal by-products. |
Our product review team analyzes all new products and approves them for sale based on ingredients, price and uniqueness within the current product set. We actively research new products in the marketplace through our product vendors, private label manufacturers, scientific findings, customer requests and general trends in popular media. Our stores are able to fully merchandise all departments by providing an extensive assortment of natural and organic products. We do not believe we need to sell conventional products to fill our selection, increase our margins or attract more customers.
What We Sell. We operate both a full-service natural and organic grocery stores and dietary supplement stores within our retail locations. The following is a breakdown of our product mix:
| ● | Grocery. We offer a broad selection of natural and organic grocery products with an emphasis on minimally processed and single ingredient products that are not known to contain artificial colors, flavors, preservatives or sweeteners or partially hydrogenated or hydrogenated oils. Additionally, we carry a wide variety of products associated with special diets such as gluten free, vegetarian and non-dairy. | |
| ● | Produce. We sell USDA-certified organic produce and source from local, organic producers whenever feasible. Our selection varies based on seasonal availability, and we offer a variety of organic produce offerings that are not typically found at conventional food retailers. | |
| ● | Bulk Food and Private Label Products. We sell a wide selection of private label repackaged bulk and other products, including nuts, water, pasta, canned seafood, dried fruits, grains, granolas, honey, eggs, herbs, spices and teas. | |
| ● | Dry, Frozen and Canned Groceries. We offer a wide variety of natural and organic dry, frozen and canned groceries, including cereals, soups, baby foods, frozen entrees and snack items. We offer a broad selection of natural chocolate bars, and energy, protein and food bars. | |
| ● | Meats and Seafood. We offer naturally-raised or organic meat products. The meat products we offer come from animals that have never been treated with antibiotics or hormones or fed animal by-products. Additionally, we only buy from companies we believe employ humane animal-raising practices. Our seafood items are generally frozen at the time of processing and sold from our freezer section, thereby ensuring freshness and reducing food spoilage and safety issues. | |
| ● | Dairy Products and Dairy Substitutes. We offer a broad selection of natural and organic dairy products such as milk, eggs, cheeses, yogurts and beverages, as well as non-dairy substitutes made from almonds, coconuts, rice and soy. | |
| ● | Prepared Foods. Our stores have a convenient selection of refrigerated prepared fresh food items, including salads, sandwiches, salsa, hummus and wraps. The size of this offering varies by location. | |
| ● | Bread and Baked Goods. We receive regular deliveries of a wide selection of bakery products for our bakery section, which includes an extensive selection of gluten-free items. | |
| ● | Beverages. We offer a wide variety of non-alcoholic and alcoholic beverages containing natural and organic ingredients. |
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| ● | Dietary Supplements. We offer a wide selection of vitamins, supplements and natural remedies. Our staff is well educated and trained on multiple aspects of natural medicine. | |
| ● | Health, Beauty, and Personal Care. We offer a full range of cosmetics, skin care, hair care, fragrance and personal care products containing natural and organic ingredients. Our body care offerings range from bargain-priced basics to high-end formulations. | |
| ● | Household and General Merchandise. Our offerings include sustainable, hypo-allergenic and fragrance-free household products, including cleaning supplies, paper products, dish and laundry soap and other common household products, including diapers. |
Quality Assurance. We endeavor to ensure the quality of the products we sell. We work with reputable suppliers we believe are compliant with established regulatory and industry guidelines. Our purchasing department requires a complete supplier and product profile as part of the approval process. Our dietary supplement suppliers must follow Food and Drug Administration (FDA) current good manufacturing practices supported by quality assurance testing for both the base ingredients and the finished product. We expect our suppliers to comply with the industry’s best practices for food safety.
Many of our suppliers are inspected and certified under the USDA National Organic Program, voluntary industry associations, and other third-party auditing programs with regards to additional ingredients, manufacturing and handling standards. We operate all our stores in compliance with the National Organic Program standards, which restricts the use of certain substances for cleaning and pest control and requires rigorous recordkeeping, among other requirements.
Our Pricing Strategy
We believe our pricing strategy allows our customers to shop our stores on a regular basis for their groceries and dietary supplements.
The key elements of our pricing strategy include:
| ● | heavily advertised discounts supported by manufacturer participation; |
| ● | in-store specials generally lasting for 30 days and not advertised outside the store; |
| ● | managers’ specials, such as clearance, overstock, short-dated or promotional incentives; and |
| ● | specials on seasonally harvested produce. |
As we expand our store base, we believe there are opportunities for increased leverage in fixed costs, such as administrative expenses, as well as increased economies of scale in sourcing products. We strive to keep our product, operating and general and administrative costs low, which allows us to continue to offer attractive pricing for our customers.
Store Management and Staffing. Our store staffing includes a manager and assistant manager, with department managers in each of the dietary supplement, grocery, dairy and frozen, produce, body care and receiving departments, as well as several non-management employees. Our regional manager is responsible for monthly store profit and loss, including labor, merchandising and inventory costs.
To ensure a high level of service, all employees receive training and guidance on customer service skills, product attributes and nutrition education. Employees are carefully trained and evaluated based on a requirement that they present nutrition information in an appropriate and legally compliant educational context while interacting with customers. Additionally, store employees are cross-trained in various functions, including cashier duties, stocking and receiving product.
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Inventory. We use a robust merchandise management and perpetual inventory system that values goods at the lower of cost and net realizable value using the average cost method. We manage shelf stock based on weeks-on-hand relative to sales, resupply time and minimum economic order quantity.
Sourcing and Vendors. We source from approximately 1,000 suppliers and offer over 4,000 brands. These suppliers range from small independent businesses to multi-national conglomerates. For the years ended December 31, 2025, approximately 31% of our total purchases were from Kehe Distributors, LLC (“Kehe”), 17% of purchases were from Four Seasons Produce, and 10% of our total purchases were from UNFI. For the year ended December 31, 2024, approximately 25% of our total purchases were from UNFI, 17% from Four Seasons Produce, and 12% from Kehe. We maintain good relations with all our suppliers and believe we have adequate alternative supply methods, including self-distribution.
We have longstanding relationships with our suppliers, and we require disclosure from them regarding quality, freshness, potency and safety data information. Our bulk food private label products are packaged by us in pre-packed sealed bags to help prevent contamination while in transit and in our stores. Unlike most of our competitors, most of our private label nuts, trail mix and flour are refrigerated in our warehouse and stores to maintain freshness.
New Reward Program. In August 2024, the Company transitioned its customer loyalty program from a points-based system to a VIP membership structure. Under the original loyalty program, customers earned redeemable loyalty points based on qualifying purchases, which have been discontinued. The new VIP program provides members with immediate discounts on qualifying purchases, replacing the accrual of future points. This modification did not require a restatement of prior-period revenue. However, the elimination of future loyalty point accruals reduces the Company’s ongoing contract liability obligations, as discounts under the VIP program are recognized as reductions to revenue at the time of sale.
New Marketing Program. HCWC has established a robust COOP marketing revenue program generated through a collaborative approach that emphasizes community engagement and shared values. The revenue in this context is driven by promoting national and locally sourced, organic, and sustainable products, which align with the priorities of the HCWC.
Our Employees
As of December 31, 2025, HCWC employed approximately 430 employees across its retail, warehouse, and corporate operations. Our employees are central to delivering our mission of providing exceptional service and products to our customers. Commitment to our employees is one of our founding principles. Employees are eligible for health, long-term disability, vision and dental insurance coverage, as well as Company paid short-term disability and life insurance benefits, after they meet eligibility requirements. Additionally, our employees are offered a 401(k) retirement savings plan with discretionary contribution matching opportunities. This further offers our employees the opportunity to become more familiar with our products, which we believe improves the customer service our employees are able to provide. We believe these and other factors result in higher retention rates and encourage our employees to appreciate our culture, which helps them better promote our brand.
Our Customers
The growth in the natural and organic grocery and dietary supplement industries and growing consumer interest in health and nutrition have led to an increase in our core customer base. We believe the demands for affordable, nutritious food and dietary supplements are shared attributes of our core customers, regardless of their socio-economic status. Additionally, we believe our core customers prefer a retail store environment that offers carefully selected natural and organic products and dietary supplements. Our customers tend to be interested in health and nutrition, and expect our store employees to be highly knowledgeable about these topics and related products.
Competition
The grocery and dietary supplement retail business is a large, fragmented and highly competitive industry, with few barriers to entry. Our competition varies by market and includes conventional supermarkets such as Publix and Winn-Dixie, mass or discount retailers such as Sprout’s Farmers Market, Wal-Mart and Target, natural and gourmet markets such as Whole Foods and The Fresh Market, specialty food retailers such as Trader Joe’s, independent health food stores, dietary supplement retailers, drug stores, farmers’ markets, food co-ops, mail order and online retailers and multi-level marketers. These businesses compete with us for customers on the basis of price, selection, quality, customer service, shopping experience or any combination of these or other factors. They also compete with us for products and locations. In addition, some of our competitors are expanding to offer a greater range of natural and organic foods. We believe our commitment to carrying only carefully vetted, affordably priced and high-quality natural and organic products and dietary supplements, as well as our focus on providing nutritional education, differentiate us in the industry and provide a competitive advantage.
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Online Sales
HCWC is your online source for the leading products in the all-natural vitamin and supplement, and health, beauty, and personal care categories of Healthier Living.
Backed by 30+ years of combined experience in the health and nutrition industry, we provide our customers with only the best products on the market — Try our exclusive offering of Ada’s Naturals brand products or any of the top products from the most recognized national natural health brands in the industry.
| ● | VITAMINS & SUPPLEMENTS: |
| ○ | Product categories include, but are not limited to: Vitamins, Minerals & Herbals, Immunity, Multivitamins, Sports Nutrition, Protein Powders, Collagen, Stress & Anxiety, Sleep & Relax, Brain Health, Pain & Inflammation, Probiotics, Energy & Stamina, Joint & Bone Support, Digestion, Fish Oils, Just for Men, Kids/Children/Teens, and more. | |
| ○ | Product varieties include, but are not limited to: Apple Cider Vinegar, BCAA, Biotin, Calcium, Chlorophyll, CLA, Collagen Peptides, Creatine, Elderberry, Omega-3’s, Garlin, Glucosamine, Iron, Magnesium, Melatonin, Potassium, Prenatals, Probiotics, Protein Powders (Plant and Whey), Ashwaghanda Turmeric, Ginseng, Vitamin B,C,D,E,K+, Zinc, and more. | |
| ○ | Product brands include, but are not limited to: Ada’s Naturals, Enzymedica, Garden of Life, Natural Vitality, New Chapter, Renew Life, Solgar, and more. |
| ● | HEALTH, BEAUTY, AND PERSONAL CARE: |
| ○ | Product categories include, but are not limited to: Oral Care, Hair Care, Body Wash, Skin & Face, Deodorant, Suncare, Soaps, Shaving, Feminine Hygiene, Lip Balms, Ear Candles, Lotions, Hand Sanitizers, Essential Oils, and more. | |
| ○ | Product varieties include, but are not limited to: Body Wash, Deodorant, Ear Candles, Shampoos, Conditioners, Toothpaste, Mouthwashes, Shaving, Bar Soaps, Liquid Soaps, Suncare, and more. |
| ● | Product brands include, but are not limited to: Ada’s Naturals, Alba Botanica, Aura Cacia, Derma-E, Desert Essence, Dr. Bronners, Every Man Jack, Heritage Store, Himalaya Botanique, Life-Flo, Lily of the Desert, Natracare, Naturally Fresh, Oral Essentials, South of France, Tea Tree Therapy, Thai Deodorant Stone, Thayers, and more. |
Seasonality
Our business is active throughout the calendar year and does not experience significant fluctuation caused by seasonal changes in consumer purchasing.
Insurance and Risk Management
We use a combination of insurance and self-insurance to cover workers’ compensation, general liability, product liability, director and officers’ liability, employment practices liability, associate healthcare benefits and other casualty and property risks. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers and changes in discount rates could all affect ultimate settlements of claims. We evaluate our insurance requirements and providers on an ongoing basis.
Information Technology Systems
We have made significant investments in overhead and information technology infrastructure, including purchasing, receiving, inventory, point of sale, accounting automation, reporting and financial systems.
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Segment Information
The Company has two operating segments: Grocery and Wellness. These operating segments have been aggregated into a single reportable segment in accordance with Accounting Standards Codification (“ASC”) 280 Segment Reporting, because they have similar economic characteristics and are similar with respect to the nature of the products sold, the product acquisition process, the types of customers served, the methods used to distribute products, and the nature of the regulatory environment.
The Company’s Chief Operating Decision Maker (CODM) reviews financial results and allocates resources at the consolidated level, as the aggregated segments operate as one integrated business unit. There were no inter-segment revenues during the period.
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate the continuation of the Company as a going concern for the next twelve months from the issuance of this Form 10-K 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 consolidated 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. Cash and cash equivalents increased to approximately $3.0 million as of December 31, 2025, compared to $2.1 million as of December 31, 2024, driven by increased sales and improved sales margin. Working capital deficit increased from negative $2.2 million as of December 31, 2024, to negative $2.7 million as of December 31, 2025, primarily due to increase in trade payable and accrued liabilities. Net losses improved to $3.9 million for the year ending December 31, 2025 from $4.5 million for the year ended December 31, 2024. Net cash provided by operating activities increased to $1.0 million in 2025 from $3.1 million cash used in operations in 2024, respectively.
The Company’s liquidity needs through December 31, 2025 have been satisfied through the initial public offering and financing agreement with private lenders.
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 Company contracted a third-party consultant, whose expertise is streamlining operations, to identify areas of improvement and cost savings. The Company enacted the consultant’s recommendations to realize savings and achieve profitability. The Company plans on evaluating non-performing stores and continuing to expand via acquisition which will help achieve profitability. Also, the Company is formulating plans to raise capital from outside investors and from equity offerings, as it has done in the past, to fund operating losses and also provide capital for further business acquisitions.
On July 18, 2024, HCWC entered into a $7.5 million loan and security agreement with a private lender to support its expansion plans and funding of any working capital needs, of which $4.2 million was used for the July 18, 2024 purchase of GreenAcres Market. The face amount of the loan is $7,500,000 with 12% annual interest and has a maturity date of July 17, 2027. On July 24, 2024, the Company finalized the closing of Saugerties building sale with all parties involved and received net proceeds of $695,000.
On August 18, 2022, HCMC entered into a Securities Purchase Agreement (“HCMC Preferred Stock”) pursuant to which HCMC sold and issued 14,722 shares of its Series E Convertible Preferred Stock to institutional investors for $1,000 per share or an aggregate subscription of $13.25 million. This same group of investors committed to invest $13.25 million in HCWC after the Spin-Off and IPO transactions were completed. As such, HCWC entered into an agreement to sell shares of its Series A Convertible Preferred Stock (the “Series A Preferred Stock”), with the gross proceeds from such offering expected to be $13.25 million. The institutional investors that acquired HCMC Series E Preferred Stock are contractually required to purchase the Series A Preferred Stock in the same dollar amounts as they invested in the HCMC Series E Preferred Stock (regardless of whether or not such HCMC Series E Preferred Stock has been converted into HCMC common stock).
On May 12, 2025, the Company entered into a Securities Purchase Agreement to issue 3,250 shares of HCWC Preferred Stock with a stated value of $1,000 per share and par value of $0.001 per share. On June 20, 2025, HCWC entered into an Amended and Restated Securities Purchase Agreement (the “SPA”), pursuant to which the Company sold 3,250 shares of its HCWC Preferred Stock to the same institutional investors for an aggregate subscription price of $3,250,000. On November 11, 2025, the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to sell 2,000 shares of the HCWC Preferred Stock to investors for an aggregate subscription price of $2,000,000. As of December 31, 2025, the Company has sold $5.25 million of HCWC Preferred Stock, with binding commitments to purchase an additional $8.0 million in Preferred Stock from the same investors who purchased HCMC Series E Preferred Stock. On October 30, 2025, HCMC and the parties who participated the HCMC Series E SPA entered into a Ninth Amendment to HCMC Series E SPA, pursuant to which HCMC and such parties agreed to amend the Completion Date to April 1, 2027. The Ninth Amendment to the HCMC Series E SPA extends the timeframe for these same institutional investors to fulfill their remaining contractual commitment to purchase the additional $8.0 million of HCWC Series A Preferred Stock.
The Company believes that its cash on hand, together with the operational initiatives described above, including cost reductions, working capital improvements, store optimization, and the committed $8.0 million equity financing anticipated to be raised by April 1, 2027, will enable the Company to meet its obligations and capital requirements for at least the twelve months from the date these consolidated financial statements are issued. Accordingly, no adjustment has been made to the consolidated financial statements to account for this uncertainty.
Item 1A. Risk Factors.
Not applicable to smaller reporting companies.
Item 1B. Unresolved Staff Comments.
None.
| 8 |
Item 1C. Cybersecurity
The following is a list of measures that were implemented as part of our increased focus on cybersecurity:
| ● | Complete endpoint protection - All endpoints have been covered by an enhanced endpoint protection agent. | |
| ● | Cloud infrastructure - Critical infrastructure started moving to the cloud and protected by enhanced anti-virus and recurring backup policies. | |
| ● |
In
addition, our
As
of the date of this report,
Item 2. Properties.
The Company operates its business from numerous facilities in Florida, Virginia, New York, New Jersey, Kansas and Oklahoma. These leased facilities include our headquarters location, warehouse and retail stores. In addition to real estate leases, the Company also leases mission-critical data center equipment under a long-term finance lease to support its corporate and store operations.
As of December 31, 2025, we had 19 retail stores in Florida, New York, New Jersey, Virginia, Kansas and Oklahoma, which aggregate approximately 181,000 square feet, 19 stores are leased by our grocery stores. The Company considers these retail store locations strategically important to its operations, serving key markets in the Southeastern, Northeastern, and Midwestern United States. The Company believes the properties used by our grocery stores are in good operating condition and are suitable for the conduct of its business.
Our headquarters and warehouse are located in Hollywood, Florida which aggregates approximately 10,000 square feet.
Item 3. Legal Proceedings.
No response is required under Item 103 of Regulation S-K.
Item 4. Mine Safety Disclosures.
None.
| 9 |
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is currently listed on the NYSE American exchange under the symbol “HCWC”.
As of March 16, 2026, there were approximately 177 stockholders of record for our common stock. A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
As of March 16, 2026, the last reported sale price of our common stock on the NYSE American exchange was $0.28 per share.
We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on any of our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on the existing conditions, including our operating results, financial conditions, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.
Item 6. Selected Financial Data.
Not required for smaller reporting companies.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included elsewhere in this report. “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations” contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Cautionary Note Regarding Forward Looking Statements
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy, plans and objectives of management for future operations, are forward-looking statements.
Forward-looking statements contained in this report include:
| ● | Our liquidity; |
| ● | Opportunities for our business; and |
| ● | Growth of our business. |
| 10 |
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “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, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are contained in the Risk Factors contained herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business, see the Risk Factors below.
Factors Affecting Our Performance
We believe the following factors affect our performance:
Retail: We believe the operating performance of our retail stores will affect our revenue and financial performance. The Company has four natural and organic groceries and dietary supplement stores located in Florida, nine located in New York and New Jersey, one store in Virginia, as well as five stores in Kansas and Oklahoma.
Increased Competition: Food retail is a large and competitive industry. Our competition varies and includes national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller specialty stores, and farmers’ markets. In addition, we compete with restaurants and other dining options in the food-at-home and food-away-from-home markets. The opening and closing of competitive stores, as well as restaurants and other dining options, in regions where we operate will affect our results. In addition, changing consumer preferences with respect to food choices and to dining out or at home can impact us. We also expect increased product supply and the downward pressure on prices to continue and impact our operating results in the future.
Overview and Significant Events
The following material events significantly affected the Company’s financial condition and results of operations for the year ended December 31, 2025:
| 1. | Standalone Operations: Following the Spin-Off from HCMC in September 2024, the Company operated as an independent, publicly-traded entity for the full year, incurring standalone public company costs. | |
| 2. | Strategic Acquisition: The acquisition of GreenAcres Market in July 2024 was the primary driver of revenue growth, adding five stores and contributing significantly to sales. | |
| 3. | Liquidity and Capital Resources: The Company has incurred net losses and negative working capital. Management’s plans to address this, including cost-reduction initiatives and a committed equity financing, are critical to continuing as a going concern (see detailed discussion in Liquidity and Capital Resources). | |
| 4. | Related-Party Transaction: The settlement of an intercompany receivable with HCMC resulted in a non-cash investment asset. | |
| 5. | Internal Controls: The Company is remediating material weaknesses in internal controls identified during the year. |
Results of Operations
The following table sets forth our Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 which is used in the following discussions of our results of operations:
| For the Years Ended December 31, | 2025 to 2024 | |||||||||||
| 2025 | 2024 | Change $ | ||||||||||
| SALES | $ | 78,205,678 | $ | 69,370,803 | $ | 8,834,875 | ||||||
| COST OF SALES | 47,548,514 | 42,305,494 | 5,243,020 | |||||||||
| GROSS PROFIT | 30,657,164 | 27,065,309 | 3,591,855 | |||||||||
| OPERATING EXPENSES, NET | ||||||||||||
| Selling, general and administrative | 33,141,280 | 29,047,933 | 4,093,347 | |||||||||
| Gain on sale of asset | - | (205,146 | ) | 205,146 | ||||||||
| TOTAL OPERATING EXPENSES, NET | 33,141,280 | 28,842,787 | 4,298,493 | |||||||||
| LOSS FROM OPERATIONS | (2,484,116 | ) | (1,777,478 | ) | (706,638 | ) | ||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Loss on debt extinguishment | (441,130 | ) | (1,888,889 | ) | 1,447,759 | |||||||
| Other income, net | 2,315 | 8,552 | (6,237 | ) | ||||||||
| Interest (expense) income, net | (1,012,871 | ) | (848,651 | ) | (164,220 | ) | ||||||
| TOTAL OTHER (EXPENSE) INCOME, NET | (1,451,686 | ) | (2,728,988 | ) | 1,277,302 | |||||||
| NET LOSS | $ | (3,935,802 | ) | $ | (4,506,466 | ) | $ | 570,664 | ||||
| 11 |
Sales increased $8.8 million to $78.2 million for the year ended December 31, 2025 as compared to $69.4 million for the same period in 2024. The increase was primarily due to a full year of operations from the GreenAcres Market acquisition (acquired in July 2024), which contributed approximately $7.8 million, and a $1.0 million increase in same-store sales.
Cost of goods sold for the years ended December 31, 2025 and 2024 were $47.5 million and $42.3 million, respectively, an increase of $4.8 million was primarily a result of full year operations in 2025 of GreenAcres Market acquisition acquired in July 2024, and $0.4 million increase in same-store cost of goods sold.
Total operating expenses increased $4.3 million from $28.8 million for the year ended December 31, 2024 to $33.1 million for the year ended December 31, 2025. The increase of $3.0 million was a result of full year operations for the year ended December 31, 2025 of GreenAcres Market acquisition acquired in July 2024, $1.2 million increase in professional fee, taxes, license and permit, and $0.1 million increase in stock-based compensation expense.
Total other (expenses) income, net of $1.5 million for the year ended December 31, 2025 consists of $0.4 million loss on debt extinguishment, and net interest expense of $1.1 million. Total other (expenses) income, net of $2.7 million for the year ended December 31, 2024 consists of $1.9 million loss on debt extinguishment, and net interest expense of $0.8 million.
The year-over-year improvement in net loss was impacted by several significant items in 2024 that are not expected to recur with similar magnitude:
| ● | 2024 benefited from a non-recurring gain of $0.2 million on the sale of our Saugerties, NY building. No similar gain was recorded in 2025. | |
| ● | 2024 incurred certain non-recurring costs associated with the Spin-Off from HCMC and our initial public offering. While public company costs continue, the discrete, incremental costs of those transactions are not expected to repeat. |
Lease Commitments, Known Trends and Uncertainties
Our retail operations are substantially dependent on leased facilities. As of December 31, 2025, we had total lease liabilities of $10.7 million, comprised of $10.6 million for operating leases (primarily for our 19 retail stores and headquarters) and $0.1 million for a finance lease on data center equipment. The weighted-average remaining lease term for operating lease is 4 years, with a weighted-average discount rate of 5.30%. Lease expense for the year ended December 31, 2025 was $3.9 million, compared to $4.2 million in 2024. The overall decrease is primarily attributable to a significant reduction in variable lease costs, which are primarily based on property taxes and are expensed as incurred. Looking forward, we expect overall lease expense to be influenced by two key factors: the expiration of certain leases and potential new commitments at market rates, and fluctuations in variable costs, primarily property taxes, which are inherently uncertain but have trended lower in the current year. Rising interest rates and inflation could increase the cost of future lease obligations. While the weighted-average discount rate increased marginally to 5.30% from 5.19% in 2024, a sustained rate hike environment may elevate borrowing costs for future lease liabilities.
Liquidity and Capital Resources
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | 996,054 | $ | (3,064,842 | ) | |||
| Investing activities | (4,136,956 | ) | (4,977,793 | ) | ||||
| Financing activities | 4,104,048 | 8,676,527 | ||||||
| Net increase in cash | $ | 963,146 | $ | 633,892 | ||||
| 12 |
Our net cash provided by operating activities of $1.0 million for the year ended December 31, 2025 resulted from our net loss of $3.9 million and a net cash usage of $3.8 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $8.7 million. Our net cash used in operating activities of $3.1 million for the year ended December 31, 2024 resulted from our net loss of $4.5 million and a net cash usage of $7.6 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $9.0 million.
The net cash used in investing activities of $4.1 million for the year ended December 31, 2025 consists of $3.8 million payment to related party, and $0.3 million purchases of property and equipment, offset by the proceeds from sale of equipment. On December 31, 2025, the Company settled the outstanding $4.0 million receivable from HCMC (including the $3.8 million advanced during 2025 plus prior period amounts) by accepting 43.9 billion shares of HCMC common stock. This non-cash transaction converted the related party receivable into an equity method investment (see Note 13). The investment was initially recorded at the carrying amount of the receivable surrendered ($4.0 million), with no gain recognized, consistent with related party accounting guidance. The Company obtained a third-party valuation of the investment and determined that no impairment was necessary as of December 31, 2025. This transaction did not impact the Company’s cash position but reduced the related party receivable balance to zero as of year-end. The net cash used in investing activities of $5.0 million for the year ended December 31, 2024 consists of $5.5 million payment for GreenAcres Market acquisition, $0.2 million purchases of property and equipment, offset by $0.7 million proceeds from sale of Saugerties building.
The net cash provided by financing activities of $4.1 million for the year ended December 31, 2025 consists of net cash proceeds of $5.1 million from HCWC Series A Preferred Stock offering and principal payment on loan payable of $1.0 million. The net cash provided by financing activities of $8.7 million for the year ended December 31, 2024 consists of cash proceeds of $1.7 million from Security Purchase Agreement signed on January 18, 2024, $7.5 million cash proceeds from Loan and Security Agreement signed on July 18, 2024, $2.6 million cash proceeds from initial public offering, $1.7 million net parent investment from HCMC, $2,000 cash proceeds from warrant exercise, offset by principal payment on loan payable of $2.5 million and $2.3 million payment to HCMC.
At December 31, 2025 and December 31, 2024, we did not have any material financial guarantees or other contractual commitments with trade vendors that are reasonably likely to have an adverse effect on liquidity.
Our cash and cash equivalents balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. Most of our cash and cash equivalents are concentrated in two financial institutions. The portion of our balance held as cash deposits in these institutions is generally in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit.
The Company has not experienced any losses on its cash or cash equivalents. The following table presents the Company’s cash position as of December 31, 2025 and December 31, 2024.
December 31, 2025 | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | 3,019,618 | $ | 2,056,472 | ||||
| Total assets | $ | 33,497,719 | $ | 34,112,517 | ||||
| Cash and cash equivalents as a percentage of total assets | 9.0 | % | 6.0 | % | ||||
As of December 31, 2025, the Company had cash and cash equivalents of $3.0 million and negative working capital of $2.7 million. While the Company may continue to report net losses in the near term due to non-cash charges such as depreciation, amortization, and stock-based compensation, the Company generated positive cash flow from operations of $1.0 million for the year ended December 31, 2025, reflecting improved operating performance. The Company’s liquidity needs through December 31, 2025 have been satisfied through initial public offering and financing agreements with private lenders and investors. Also, the Company is formulating plans to raise capital from outside investors and from equity offerings, as it has done in the past, to fund operating losses and also provide capital for further business acquisitions. Based on its cash on hand, positive cash flow from operations, and planned security offerings, management believes the Company will be able to meet its obligations and capital requirements for at least twelve months from the date these consolidated financial statements are issued.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements other than operating leases for retail locations, equipment, and vehicles.
Seasonality
We do not consider our business to be seasonal.
Cybersecurity
We recognize that cybersecurity is of critical importance to our success. We are committed to maintaining robust cybersecurity and data protection and continuously evaluating the impact of cybersecurity threats, considering both immediate and potential long-term effects of these threats on our business strategy, operations, and financial condition. Our board oversees cybersecurity risks through quarterly updates from the Chief Operating Officer.
Climate-Related Considerations
We have evaluated the potential impact of climate change on our business, including regulatory, physical, and market-related risks. Based on our assessment, we do not believe that climate change currently poses a material risk to our operations or financial performance. Our retail sales operations are not significantly affected by climate-related factors, such as extreme weather or emissions regulations. Nevertheless, we will continue to monitor any developments that could indirectly impact on our business, such as changes in consumer behavior or supply chain disruptions related to climate change.
| 13 |
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The consolidated financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. These estimates and assumptions include promotional discounts, manufacturer coupons and rebates, return allowances that are netted against revenue, useful lives and impairment of long-lived assets, goodwill and impairment, equity method investments, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the consolidated financial statements and actual results could differ from the estimates and assumptions.
Revenue Recognition
The Company recognizes revenue in accordance with the Financial Accounting Standards Board (FASB) ASC 606, Revenue from Contracts with Customers. The core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, return allowances, and sales and consumption taxes, are recorded when products are delivered, title passes to customers and collection is likely to occur. Title passes to customers at the point of sale for retail and upon delivery of products for wholesale. Return allowances, which reduce revenue, are estimated using historical experience.
The Company promotes its products with trade incentives and promotions. These programs include sales discounts, rebates, coupons, volume-based incentives, refunds, and returns, which represent variable considerations. The estimation of variable consideration involves judgment and is constrained to avoid overstatement of revenue. The Company applies the expected value method or the most likely amount method, depending on which better predicts the consideration to which it will be entitled. Management evaluates these estimates on a quarterly basis. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions.
To achieve this core principle, five basic criteria must be met before revenue can be recognized:
| ● | Identification of the contract, or contracts, with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
The Company does not have significant revenue recognized over time due to the nature of retail store operations. The Company recognizes revenue at a point in time when control of goods or services transfers to the customer.
Impairment of Long-Lived Assets
We review long-lived assets for impairment including intangible assets with determinable useful lives whenever events or changes in circumstances indicate that the carrying value of the corresponding asset group may not be realizable. The Company estimated future undiscounted cash flows associated with the asset group are compared to the asset group’s carrying amount to determine if an impairment of such asset is necessary. This requires us to make long-term forecasts of the future revenues and costs related to the assets groups subject to review. Forecasts require assumptions about demand for our products and future market conditions. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. The effect of any impairment would be reflected in operating income in the Consolidated Statements of Operations. In addition, we estimate the useful lives of our long-lived assets and other intangibles and periodically review these estimates to determine whether these lives are appropriate.
| 14 |
Goodwill
Goodwill is the excess of consideration paid for an acquired entity over the fair value of the amounts assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the company hires a third-party valuation firm to perform valuation and assessment to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities.
Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is met, then the company may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The company determines fair value through multiple valuation techniques and weighs the results accordingly. The company is required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its reporting units. The company has elected to perform its annual goodwill impairment review on September 30 of each year or more often if deemed necessary.
Business Combinations
The Company applies the provisions of ASC Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts. Acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses in the consolidated statements of operations.
Deferred Taxes and Valuation Allowance
We account for income taxes pursuant to the asset and liability method of accounting for income taxes pursuant to FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for taxable temporary differences and operating loss carry forwards. Temporary differences are the differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Fair Value Measurements
The fair value framework under FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows:
| ● | Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; | |
| ● | Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and | |
| ● | Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. |
Recurring Fair Value Measurements
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and borrowings. Management believes that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, and borrowings are representative of their respective fair values.
Nonrecurring Fair Value Measurements
The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets, goodwill and equity method investment. The Company reviews the carrying amounts of such assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value.
Equity Method Investment and Other-Than-Temporary Impairment Assessment
The Company accounts for investments in entities over which it has the ability to exercise significant influence using the equity method of accounting. These investments are initially recorded at cost and subsequently adjusted to recognize the Company’s proportionate share of the investee’s net income or loss.
The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that a decline in value may have occurred that is other-than-temporary. This assessment requires significant judgment, including:
| ● | Estimating the fair value of the investment, which often involves the use of unobservable (Level 3) inputs when quoted market prices are not available or are not considered representative of fair value; | |
| ● | Analyzing the financial condition, operating results, and business prospects of the investee; | |
| ● | Assessing the severity and duration of any decline in value; and | |
| ● | Evaluating specific factors affecting the investee, such as liquidity constraints, legal proceedings, or changes in the regulatory environment. |
If a decline is determined to be other-than-temporary, the Company recognizes an impairment charge in the consolidated statements of operations equal to the excess of the investment’s carrying amount over its estimated fair value. Future changes in the assumptions underlying these estimates could result in material impairment charges.
Non-GAAP Financial Measures
The following discussion and analysis contain a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternative to, net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. Non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future financial results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.
Management believes stockholders benefit from referring to the Adjusted EBITDA (a non-GAAP metric) in planning, forecasting, and analyzing future periods. Management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means of evaluating period-to-period comparison.
| 15 |
EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternative measure of profitability to net income. Management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of significant non-cash and non-recurring charges that affect comparability between reporting periods. We define Adjusted EBITDA as net loss adjusted for non-cash charges for depreciation and amortization, impairment of goodwill, stock compensation, change in contingent consideration, also adjusted for non-recurring other expenses (income), net, loss on investment, and interest income. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items.
We have included a reconciliation of our non-GAAP financial measure to net loss as calculated in accordance with GAAP. We believe that providing the non-GAAP financial measure, together with reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to specific definitions being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable rules of the Securities and Exchange Commission.
| 2025 | 2024 | |||||||
| Reconciliation from net loss to adjusted EBITDA: | ||||||||
| Net loss | $ | (3,935,802 | ) | $ | (4,506,466 | ) | ||
| Interest expense | 1,012,871 | 848,651 | ||||||
| Depreciation and amortization | 1,717,461 | 1,576,457 | ||||||
| EBITDA | (1,205,470 | ) | (2,081,358 | ) | ||||
| Stock compensation | 97,500 | - | ||||||
| Loss on debt extinguishment | 441,130 | 1,888,889 | ||||||
| Other expenses (income), net | (2,315 | ) | (8,552 | ) | ||||
| Adjusted EBITDA | $ | (669,155 | ) | $ | (201,021 | ) | ||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 8. Financial Statements and Supplementary Data.
See pages F-1 through F-25.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. 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 during the year ended December 31, 2025 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. Based on the evaluation, our Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective.
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Inherent Limitations of Internal Controls over Financial Reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ending December 31, 2025 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting. 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 December 31, 2025 and noted the material weaknesses as follows:
| ● | Segregation of Duties and Journal Entry Review: Management does not evidence independent preparer and reviewer of journal entries to demonstrate adequate segregation of duties and the precision of the review of journal entries. |
| ● | Ineffective design and implementation over Information Technology General Controls (“ITGCs”): |
| (a) | Multiple individuals in the accounting software system have virtually unlimited access to the accounting application and to the inventory point of sale applications. As such, such individuals can post journal entries and change pricing, which poses a risk that duties amongst employees with incompatible roles are not adequately segregated. | |
| (b) | Ineffective design, implementation and operation of controls over logical user access, physical security, change management, cyber security, and vendor management. The Company should have had controls for: |
| (i) | Periodic review of access rights for networks and applications on a defined periodic basis, at least once per year; | |
| (ii) | Ensuring adequate physical safeguards and environmental controls over the Company’s servers at all Company locations, including stores; | |
| (iii) | Performing a cybersecurity assessment, training all personnel, performing phishing exercises, obtaining cybersecurity insurance; and performing third party audits when appropriate; | |
| (iv) | 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. | |
| (v) | Obtaining and reviewing third party service provider SOC reports, and; |
| ● | Lack of Formal Related Party Transaction Policy: The Company did not maintain a formal written policy and related controls for the timely identification, evaluation, and accounting treatment of transactions with related parties. The absence of this formal framework resulted in the initial misapplication of accounting guidance for a significant related party transaction during the year. |
| ● | Ineffective Controls over Statement of Cash Flows Preparation: Controls over the preparation and review of the statement of cash flows were ineffective, resulting in the misclassification of cash flows related to advances made to a related party. |
Our management concluded that considering internal control deficiencies, in the aggregate, rise to the level of material weaknesses, we did not maintain effective internal control over financial reporting as of December 31, 2025 based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Remediation Efforts
Following this assessment and during the twelve months ended December 31, 2025, we have undertaken an action plan to strengthen internal controls and procedures.
| ● | With respect to segregation of duties and journal entry review, the Company is implementing a formal review and approval process for all journal entries that includes requirements for independent preparer and reviewer sign-offs, with supporting documentation retained to evidence proper segregation of duties. The Company is also enhancing the precision of journal entry reviews through standardized review checklists and periodic monitoring by senior accounting personnel. | |
| ● | Regarding Information Technology General Controls, the Company is developing a comprehensive IT control framework that includes policies and procedures for logical user access, including periodic access rights reviews for networks and applications on at least an annual basis. The Company is implementing enhanced physical security and environmental controls over its servers at all locations, including retail stores. Additionally, the Company is performing a formal cybersecurity assessment, which will include mandatory training for all personnel, phishing exercises, and obtaining cybersecurity insurance. The Company is also establishing controls to ensure that IT program and data changes affecting financial applications and underlying accounting records are properly identified, tested, authorized, and implemented. Procedures are being implemented to obtain and review third-party service provider SOC reports on a regular basis, and to review and enforce Service-Level Agreements for all IT service relationships across the Company. | |
| ● | With respect to related party transactions, the Company is developing and implementing a formal written policy that establishes requirements for the timely identification, evaluation, approval, and accounting treatment of transactions with related parties in accordance with GAAP. | |
| ● | With respect to the preparation and review of the statement of cash flows, the Company is enhancing procedures to ensure proper classification and disclosure, including specific review protocols for transactions with related parties and other non-routine items. The Company intends to engage external consultants, as needed, to assist with complex accounting matters and to provide independent review of significant transactions. |
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.
Item 9B. Other Information.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table sets forth information regarding our executive officers and directors as of December 31, 2025:
| Name | Age | Position | ||
| Executive Officers: | ||||
| Jeffrey Holman | 58 | Chief Executive Officer, Chairman and Director | ||
| John A. Ollet | 63 | Chief Financial Officer and Director | ||
| Christopher Santi | 55 | President and Chief Operating Officer | ||
| Non-Employee Directors: | ||||
| Gary Bodzin | 69 | Director | ||
| Behnam Myers | 51 | Director | ||
| Michael Lerman | 61 | Director |
Executive Officers
Jeffrey Holman is our Chairman of the Board and Chief Executive Officer. He is a Founding member of our original operating subsidiary since its inception in December 2008. Mr. Holman helped to acquire and grow all the assets currently owned by HCWC. He has been the President of Jeffrey E. Holman & Associates, P.A., a South Florida Based law firm, since 1998. Mr. Holman graduated from the State University of New York at Binghamton in 1989 with a Bachelor’s Degree, Benjamin N. Cardozo School of Law in 1995 with a degree in Juris Doctor.
Christopher Santi is our President and Chief Operating Officer, served as Director of Operations of the Company beginning in October 2011. Mr. Santi served as the National Sales Manager of Collages.net from November 2007 to October 2011. Mr. Santi holds a Bachelor of Arts from Lehigh University in Psychology, as well as a Master of Arts from the Miami Institute of Psychology.
John A. Ollet is our Chief Financial Officer. Mr. Ollet previously served as Executive Vice President of Finance for Systemax, Inc. (NYSE: SYX) from 2006 to 2016. His prior experience as a Chief Financial Officer (CFO) includes roles as Vice President (VP) and CFO of Arrow Cargo Holdings, Inc., an airline logistics company, and as VP of Finance and CFO of The Americas Cargo Division at KLM Royal Dutch Airlines. He also served as Vice President (VP) of Finance and Administration at Sterling-Starr Maritime Group, Inc., and was a member of the audit staff at Arthur Andersen & Co. Mr. Ollet holds a bachelor’s degree in Finance and Economics and a Master of Business Administration (MBA) from Florida International University. He is a Certified Public Accountant (CPA).
Non-Employee Directors
Gary A. Bodzin. Gary Bodzin has served as a director of HCWC since May 2023. Since 1987, Mr. Bodzin has been serving as President of Trans-State Title Insurance Agency, LLC, a company located in Aventura, FL, offering escrow, title and closing services for commercial and residential real estate transactions, where he oversees all title and closing operations. Mr. Bodzin has also worked as an attorney at law representing clients almost exclusively in real estate transactions since 1982. Mr. Bodzin received his Bachelor of Science in Business Administration from the University of Florida and his Juris Doctor from the University of Miami Law School. We believe Mr. Bodzin is qualified to serve as a director of HCWC because of his real estate, finance and legal expertise and related ability to advise our growth and expansion strategy.
Michael Lerman. Michael Lerman has served as a director of HCWC since May 2023. Since November 2005, Mr. Lerman has served as Vice President of Development and Marketing for Markbuilt Homes, a boutique private residential development and construction company in Union, NJ. From March 1998 to August 2005, he worked as Director of Retail Property Administration then as Director of Land/Property Acquisition and Development at Garden Commercial Properties, a property management company in Short Hills, NJ. During his tenure at Garden Commercial Properties, Mr. Lerman oversaw all phases of retail commercial development and management, negotiated commercial leases, and was responsible for marketing. Earlier in his career, Mr. Lerman was associate counsel at Rinaldo and Rinaldo, a law firm. Mr. Lerman received his Bachelor of Arts from Rutgers College and his Master of Business Administration from Rutgers College, Graduate School of Management. He also received his Juris Doctor from Benjamin N. Cardozo School of Law. We believe Mr. Lerman is qualified to serve as director of HCWC because of his extensive experience in business development and management as well as his retail and acquisition experience and related ability to provide valuable guidance.
Behnam J. Myers, DO, MPH. Behnam Myers, DO, MPH, has served as a director of HCWC since May 2023. Dr. Myers is a board-certified orthopedic surgeon who has been practicing since 2006, and has been managing his own private practice, Spine Solutions, since 2012 in Hollywood, FL. In 2006, Dr. Myers completed his orthopedic surgery residency at Parkway Regional Medical Center as part of Nova Southeastern University’s Orthopedic Surgery Residency Program. He then completed a Spine Surgery Fellowship in 2007 at the Cleveland Clinic Spine Institute in Weston, FL. Dr. Myers received his Bachelor of Science from the University of California at Riverside, his Master of Public Health from Loma Linda University and his medical degree from University of New England College of Medicine. We believe Dr. Myers is qualified to serve as a director of HCWC because of his medical expertise and medical practice-related business experience.
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Corporate Governance
Board Responsibilities
The Board oversees, counsels, and directs management in the long-term interest of the Company and its stockholders. The Board’s responsibilities include establishing broad corporate policies and reviewing the overall performance of the Company. The Board is not, however, involved in the operating details on a day-to-day basis.
Board Committees and Charters
The Board and its Committees meet throughout the year and act by written consent from time-to-time as appropriate. The Board delegates various responsibilities and authority to different Board Committees. Committees regularly report on their activities and actions to the Board.
The Board currently has and appoints the members of: The Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of these committees have a written charter which can be found on our corporate website at https://hcwc.com/committee-charters.
The following table identifies the independent and non-independent current Board and committee members:
| Name | Independent | Audit | Compensation | Nominating And Corporate Governance | ||||||||||
| Jeffrey Holman | ||||||||||||||
| John Ollet | ||||||||||||||
| Gary Bodzin | X | X | X | X | ||||||||||
| Behnam Myers | X | X | X | X | ||||||||||
| Michael Lerman | X | X | X | X |
Director Independence
Our Board has determined that Gary Bodzin (Director), Behnam Myers (Director), and Michael Lerman (Director) meet the criteria for independence as defined by the NYSE American listing standards. In accordance with these standards, the Board concluded that Jeffrey Holman and John Ollet, due to their roles as executive officers of the Company, are not independent under the NYSE American. Furthermore, the Board affirmed that Messrs. Bodzin, Myers, and Lerman satisfy the NYSE American’s heightened independence requirements for service on both the Audit Committee and Compensation Committee.
Committees of the Board
Audit Committee
The Audit Committee, which currently consists of Gary Bodzin (chair), Behnam Myers and Michael Lerman, reviews the Company’s financial reporting process on behalf of the Board and administers our engagement of the independent registered public accounting firm. The Audit Committee approves all audit and non-audit services and reviews the independence of our independent registered public accounting firm.
Audit Committee Financial Expert
Our Board has determined that Gary Bodzin is qualified as an Audit Committee Financial Expert, as that term is defined by the rules of the SEC and in compliance with the Sarbanes-Oxley Act of 2002.
Compensation Committee
The function of the Compensation Committee is to determine the compensation of our executive officers. The Compensation Committee has the power to set performance targets for determining periodic bonuses payable to executive officers and may review and make recommendations with respect to stockholder proposals related to compensation matters. Additionally, the Compensation Committee is responsible for administering the Company’s equity compensation plans.
The members of the Compensation Committee are all independent directors within the meaning set forth in the NYSE American Company Guide.
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Nominating and Corporate Governance Committee
The responsibilities of the Nominating and Corporate Governance Committee include the identification of individuals qualified to become Board members, the selection of nominees to stand for election as directors, the oversight of the selection and composition of committees of the Board, establish procedures for the nomination process including procedures and the oversight of the evaluations of the Board and management. The Nominating and Corporate Governance Committee has not established a policy with regard to the consideration of any candidates recommended by stockholders since no stockholders have made any recommendations. If we receive any stockholder recommended nominations, the Nominating Committee will carefully review the recommendation(s) and consider such recommendation(s) in good faith.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has ever been an officer or employee of the Company. None of our executive officers serve, or have served during the last fiscal year, as a member of our compensation committee or other Board committee performing equivalent functions of any entity that has one or more executive officers serving on our Board or on our compensation committee.
Clawback Policy
In accordance with SEC Rule 10D-1 and NYSE American listing standards, the Company has adopted a clawback policy to recover erroneously awarded incentive-based compensation in the event of a financial restatement resulting from material noncompliance with financial reporting requirements. This policy applies to current and former executive officers, and recovery is required regardless of fault. The Compensation Committee is responsible for administering the policy, which is filed as Exhibit 97.1 to this Annual Report on Form 10-K.
Board Assessment of Risk
The Board is actively involved in the oversight of risks that could affect the Company. This oversight is conducted primarily through the Audit Committee, but the full Board has retained responsibility for general oversight of risks. The Audit Committee considers and reviews with our independent public accounting firm and management the adequacy of our internal controls, including the processes for identifying significant risks and exposures, and elicits recommendations for the improvements of such procedures where desirable. In addition to the Audit Committee’s role, the full Board is involved in oversight and administration of risk and risk management practices. Members of our senior management have day-to-day responsibility for risk management and establishing risk management practices, and members of management are expected to report matters relating specifically to the Audit Committee directly thereto, and to report all other matters directly to the Board as a whole. Members of our senior management have an open line of communication to the Board and have the discretion to raise issues from time-to-time in any manner they deem appropriate, and management’s reporting on issues relating to risk management typically occurs through direct communication with directors or committee members as matters requiring attention arise. Members of our senior management regularly attend portions of the Board’s meetings, and often discuss the risks related to our business.
Code of Ethics
The Company has a code of ethics, “Business Conduct: “Code of Conduct and Policy,” that applies to all of the Company’s employees, including its principal executive officer, principal financial officer and principal accounting officer, and the Board. A copy of this code is available on the Company’s website at https://hcwc.com/code-of-conduct. The Company intends to disclose any changes in or waivers from its code of ethics by posting such information on its website or by filing a Current Report on Form 8-K.
Stockholder Communications
Although we do not have a formal policy regarding communications with our Board, stockholders may communicate with the Board by writing to us at Healthy Choice Wellness Corp., 3800 N 28th Way, Unit# 1, Hollywood, FL 33020, Attention: Corporate Secretary, or by facsimile at (954) 251-3057. Stockholders who wish to direct their correspondence to a specific Board member may indicate this in their submission, and the communication will be forwarded accordingly.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and the other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC rules to furnish us with copies of all Section 16(a) reports they file.
Based solely on a review of the reports furnished to us, or written representations from reporting persons that all reportable transactions were reported and that no Form 5s were required, we believe that during 2025 our officers, directors and greater than 10% owners timely filed all reports they were required to file under Section 16(a).
ITEM 11. Executive Compensation
Following the spin-off from HCMC in September 2024, HCWC became an independent, publicly traded company. However, during the fiscal year 2024, the executive compensation structure remained intertwined with HCMC due to transitional arrangements and shared leadership responsibilities. For the entirety of 2024, the three executives who serve in leadership roles at both HCMC and HCWC continued to receive their full compensation directly from HCMC. For the year ended December 31, 2024, the total executive compensation paid by HCMC for these executives was approximately $1.4 million. In accordance with an internal allocation arrangement, approximately $0.7 million was allocated to HCWC to reflect the portion of the executives’ time and services dedicated to HCWC’s business. These allocations were made in accordance with the terms of the Transition Services Agreement (“TSA”), which was established to facilitate an orderly transition following the spin-off.
For the fiscal year ended December 31, 2025, approximately $0.7 million of executive compensation continued to be paid by HCMC under the Transition Services Agreement, with the remaining compensation paid directly by the Company.
The Compensation Committee of HCWC’s Board of Directors is in the process of developing and approving an independent compensation structure that aligns with HCWC’s business objectives and shareholder interests. HCWC’s Board of Directors has formed a Compensation Committee responsible for overseeing future executive compensation policies. The Committee will evaluate and establish appropriate compensation structures to attract and retain key executive talent while ensuring alignment with HCWC’s strategic goals.
The following table sets forth summary compensation information for the fiscal years ended December 31, 2025 and 2024 for our named executive officers, reflecting only the compensation expense allocated to or paid directly by the Company.:
Name and Principal Position | Year | Salary
($) | Bonus ($) | Restricted Stock
Awards(1) | All Other Compensation | Total | |||||||||||||||||
| Jeffrey Holman | 2025 | 332,026 | - | 480,000 | - | 812,026 | |||||||||||||||||
| Chief Executive Officer | 2024 | 329,585 | - | - | - | 329,585 | |||||||||||||||||
| Christopher Santi | 2025 | 216,512 | - | 240,000 | - | 456,512 | |||||||||||||||||
| President and Chief Operating Officer | 2024 | 202,676 | - | - | - | 202,676 | |||||||||||||||||
| John Ollet | 2025 | 165,917 | - | 240,000 | - | 405,917 | |||||||||||||||||
| Chief Financial Officer | 2024 | 165,862 | - | - | - | 165,862 | |||||||||||||||||
| (1) | The amounts reported in the “Stock Awards” column represent the grant-date fair value of restricted stock awards (“RSAs”), calculated in accordance with ASC 718. |
Named Executive Officer Employment Agreements
We currently do not have any employment or other agreements in effect with our named executive officers.
Outstanding Awards at Fiscal Year End
Listed below is information with respect to restricted stock awards that have not been vested under the equity incentive plan for each named executive officers as of December 31, 2025:
Outstanding Equity Awards at 2025 Fiscal Year-End
| Number of Shares of Stock That Have Not Vested (#) | Market Value of Shares of Stock That Have Not Vested ($) (1) | Grant Date | Vesting Schedule | |||||||||
| Jeffrey Holman | 800,000 | $ | 200,800 | 11/12/2025 | vest in eight (8) equal quarterly installments, commencing on the three month anniversary of the Grant Date | |||||||
| Christopher Santi | 400,000 | $ | 100,400 | 11/12/2025 | vest in eight (8) equal quarterly installments, commencing on the three month anniversary of the Grant Date | |||||||
| John Ollet | 400,000 | $ | 100,400 | 11/12/2025 | vest in eight (8) equal quarterly installments, commencing on the three month anniversary of the Grant Date | |||||||
| (1) | The market value is calculated by multiplying the number of unvested shares by the closing market price of the Company’s common stock on December 31, 2025, which was $0.251 per share. |
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On February 24, 2026, the Compensation Committee approved the grant of an aggregate of 2,545,719 shares of restricted Class A common stock to certain executive officers, directors, and employees under the Company’s 2024 Equity Incentive Plan. The restricted stock vests in eight equal quarterly installments over a two-year period commencing three months after the grant day. with full acceleration upon a Change of Control or a Major Financing.
The following table summarizes the restricted stock grants awarded on February 24, 2026 to the Company’s named executive officers:
| Name | Number of Shares of Restricted Stock | |||
| Jeffrey Holman Chief Executive Officer | 785,488 | |||
| Christopher Santi - President and Chief Operating Officer | 589,116 | |||
| John Ollet - Chief Financial Officer | 589,116 | |||
Risk Assessment Regarding Compensation Policies and Practices as they Relate to Risk Management
Our compensation program for employees does not create incentives for excessive risk taking by our employees or involve risks that are reasonably likely to have a material adverse effect on us. Our compensation has the following risk-limiting characteristics:
| ● | Our base pay programs consist of competitive salary rates that represent a reasonable portion of total compensation and provide a reliable level of income on a regular basis, which decreases incentive on the part of our executives to take unnecessary or imprudent risks; and |
| ● | Cash bonus awards are not tied to formulas that could focus executives on specific short-term outcomes. |
Director Compensation
Non-employee directors are paid a monthly fee of $1,000 and $1,500 for each meeting attended. The Audit Committee chairman receives $15,000 annually and the Compensation Committee chairman receives $10,000 annually. Each director receives an award of 200,000 shares of restricted common stock. The grant-date fair value per share was $0.60, resulting in a total fair value of $120,000 for each director. Because we do not pay any compensation to employee directors, Mr. Holman and Mr. Ollet are omitted from the following table. Non-employee members of our Board of Directors were compensated as follows:
Fiscal 2025 Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)* | Total Compensation | |||||||||
| Gary Bodzin | $ | 46,500 | $ | 120,000 | $ | 166,500 | ||||||
| Behnam Myers | $ | 31,500 | $ | 120,000 | $ | 151,500 | ||||||
| Michael Lerman | $ | 41,500 | $ | 120,000 | $ | 161,500 | ||||||
* The amounts reported in the “Stock Awards” column represent the grant-date fair value of restricted stock awards (“RSAs”) granted to each non-employee director on November 12, 2025, computed in accordance with ASC Topic 718.
As of December 31, 2025, Mr. Bodzin, Mr. Myers, and Mr. Lerman each held 200,000 unvested restricted shares, respectively.
Subsequent to December 31, 2025, on February 24, 2026, each non-employee director received an additional award of 100,000 shares of restricted stock under the 2024 Equity Incentive Plan. For additional information regarding these post-year-end grants, see Item 12, Security Ownership of Certain Beneficial Owners and Management, and Note 21, Subsequent Events, to the consolidated financial statements.
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Equity Compensation Plan Information
Our Stock Incentive Plan
The Healthy Choice Wellness Corp 2024 Equity Incentive Plan (the “Stock Incentive Plan”) became effective on September 16, 2024 as part of the SEC approval of HCWC. A form of the Stock Incentive Plan is filed as an exhibit to the registration statement, of which this prospectus forms a part. The following description of the Stock Incentive Plan is qualified in its entirety by reference to the Stock Incentive Plan.
Overview
The Stock Incentive Plan provides the Company with the ability to grant equity-based and cash incentive awards to its employees, non-employee directors, consultants and independent contractors. Such incentive awards are granted to attract, retain and motivate the Company’s service providers and help align them with the Company’s financial success over the long term and the interests of the Company and our stockholders. The Stock Incentive Plan will terminate ten years from inception unless terminated sooner.
Stock Incentive Plan Share Reserve; Limits; Adjustments
As of December 31, 2025, the aggregate number of shares of Common Stock authorized for issuance under the Stock Incentive Plan (the “Plan”) is 2,600,000 shares. This total consists of an initial authorization of 1,400,000 shares established in connection with the Spin-off, plus subsequent annual increases pursuant to the Plan’s “evergreen” provision. Under this provision, the share reserve automatically increases on the first day of each fiscal year, commencing in 2025 and continuing through 2032. The annual increase is calculated as the lesser of: (A) 12.5% of the total outstanding shares of Common Stock as of the last day of the immediately preceding fiscal year; or (B) A lesser number of shares as determined by the Board of Directors or the Compensation Committee. The Company may satisfy its obligations for awards granted under the Plan through the issuance of authorized but unissued shares or through the transfer of treasury shares.
Shares subject to an equity award are counted only to the extent they are actually issued. Thus, awards that terminate by expiration, forfeiture, cancellation, or otherwise are settled in cash in lieu of shares, or exchanged for awards not involving shares, shall again be available for grant under the Stock Incentive Plan.
Any shares withheld to satisfy tax withholding obligations on awards issued under the Stock Incentive Plan, tendered to pay the exercise price of an award under the Stock Incentive Plan and shares repurchased on the open market with the proceeds of an option exercise will not be eligible to be again available for grant under the Stock Incentive Plan. Any substitute awards shall not be counted against the shares available for granting awards under the Stock Incentive Plan.
The number of shares that may be issued or subject to outstanding awards, the option price or grant price applicable to outstanding awards and other value determinations are subject to adjustment by the committee to reflect stock dividends, stock splits, reverse stock splits, spin-offs, and other corporate events or transactions, including without limitation distributions of stock or property other than normal cash dividends.
Non-employee directors can be granted any of the awards available under the Stock Incentive Plan except incentive stock options (“ISOs”), which are only available for employees. The Board shall from time to time determine the nature and number of awards to be granted to non-employee directors. The aggregate value of all compensation granted or paid, as applicable, to a non-employee director with respect to any calendar year, including awards granted and cash fees paid by the Company to such non-employee director, will not exceed $500,000, calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes.
Administration
The Stock Incentive Plan will be administered by the committee appointed by the Board from among its members, provided that the full Board may act at any time as the committee. In the case of awards intended to qualify for the exemption from Section 16(b) of the Securities Exchange Act of 1934 that is available under Rule 16b-3, a subcommittee of the Board composed of at least two directors who are “outside directors” is responsible for administering the Stock Incentive Plan and has the final discretion, responsibility and authority to interpret the terms and intent of the Stock Incentive Plan and any related documentation, to determine eligibility for awards and the terms and conditions of awards, and to adopt rules, regulations, forms, instruments, and guidelines. The committee may delegate administrative duties and powers to one or more of its members or to one or more officers, agents, or advisers. The committee may also delegate to one or more officers the power to designate other employees (other than officers subject to Section 157(c) of the Delaware General Corporate Law) to be recipients of awards.
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Eligibility
Employees, non-employee directors, consultants and independent contractors of the Company who are selected by the compensation committee are eligible to participate in the Stock Incentive Plan.
Types of Awards
The Stock Incentive Plan provides that the compensation committee may grant awards of various types. A description of each of the types of awards follows.
Stock Options
The committee may grant both ISOs and nonqualified stock options (“NQSOs”) under the Stock Incentive Plan. Eligibility for ISOs is limited to employees of the Company and its subsidiaries. The exercise price for options cannot be less than the fair market value of the Company’s Class A common stock as of the date of grant. The latest expiration date cannot be later than the tenth anniversary of the date of grant. Fair market value under the Stock Incentive Plan may be determined by reference to market prices on a particular trading day or on an average of trading days. The exercise price may be paid by means approved by the committee, which may include cash or check, the tendering of previously acquired Class A common stock, a reduction in shares issuable upon exercise which have a value at the time of exercise that is equal to the option price (a “net exercise”), to the extent permitted by applicable law, the proceeds of sale from a broker-assisted cashless exercise or any other legal consideration that the committee may deem appropriate on such basis as the committee may determine in accordance with the Stock Inventive Plan.
Stock Appreciation Rights
The committee may grant stock appreciation rights (“SARs”) under the Stock Incentive Plan either alone or in tandem with stock options. The grant price of an SAR cannot be less than the fair market value of the Company’s Class A common stock as of the date of grant.
Restricted Stock
The committee may award restricted Class A common stock and restricted stock units. Restricted stock awards consist of shares of stock that are transferred to the participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. A holder of restricted stock is treated as a current stockholder and is entitled to dividend and voting rights. The committee will determine the restrictions and conditions applicable to each award of restricted stock.
Performance-Based Restricted Shares and Performance-Based Restricted Share Units
Performance-based restricted shares and performance-based restricted share units may be granted under the Stock Incentive Plan. The performance cycle for each award will be determined by the committee and specify the performance goals that are to be achieved by the participant and a formula for determining the amount of any payment to be made.
In the case of performance-based restricted shares, during the period for which a substantial risk of forfeiture is to continue, the participant will not have any right to transfer any rights under the award, but the participant will have voting and other ownership rights (except for any rights to a liquidating distribution). Prior to payment of the award of performance-based restricted share units, the participant will not have any right to transfer any rights under the award or have any rights of ownership, including the right to vote.
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For both performance-based restricted shares and performance-based restricted share units, the committee may on or after the grant date authorize the payment of dividend equivalents on the performance-based restricted shares or performance-based restricted share units in cash or securities with respect to any dividends or other distributions paid by the Company. Any dividend equivalents paid, or adjustments made with respect to the dividends paid in Common Stock will be subject to the same restrictions as the underlying award.
Following the completion of a performance cycle, the committee will determine whether the performance goals that have been chosen for a particular performance period have been met and calculate and determine the amount of the award earned for such performance cycle. Awards may be adjusted upwards or downwards in the sole discretion of the committee.
Cash-Based Awards
The committee may grant cash-based awards under the Stock Incentive Plan that specify the amount of cash to which the award pertains, the conditions under which the award will be vested and payable, and such other conditions as the committee may determine that are consistent with the terms of the Stock Incentive Plan.
Other Stock-Based Awards
The committee may grant equity-based or equity-related awards, referred to as “other stock-based awards,” other than options, SARs, restricted stock, restricted stock units, performance shares, or performance units. The terms and conditions of such other stock-based awards shall be determined by the committee. Payment under any other stock-based awards will be made in shares of Class A common stock or cash, as determined by the committee.
Termination of Employment
Except as otherwise provided in the award agreement or other written agreement between the participant and the Company, vesting of awards will cease upon termination of the participant’s continued service. Notwithstanding any other provision of the Stock Incentive Plan to the contrary, the committee may in its sole discretion determine the rights of participants with respect to awards upon termination of employment or service as a director.
Treatment of Awards Upon a Change in Control
In the event of a “change in control” of the Company, as defined in the Stock Incentive Plan, then unless otherwise provided in an award agreement, the committee may, in its sole discretion: (a) cancel awards for a cash payment equal to their fair value (as determined in the sole discretion of the committee), (b) provide for the issuance of replacement awards, (c) terminate options without providing accelerated vesting, (d) immediately vest the unvested portion of any award or (e) take any other action with respect to the awards the committee deems appropriate. The treatment of awards upon a change in control may vary among participants and types of awards in the committee’s sole discretion. Awards subject to performance goals shall be settled upon a “change in control” of the Company based upon the extent to which the performance goals underlying such awards have been achieved as determined in the sole discretion of the committee.
Amendment of Awards or Stock Incentive Plan
The committee may at any time alter, amend, modify, suspend, or terminate the Stock Incentive Plan or any outstanding award in whole or in part. No amendment of the Stock Incentive Plan will be made without stockholder approval if stockholder approval is required by law or stock exchange rule. No amendment may adversely affect the rights of any participant without his or her consent under an outstanding award, unless specifically provided for in the Stock Incentive Plan.
| 25 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
The following table sets forth the number of shares of our common stock beneficially owned as of March 16, 2026, by (i) those persons known by us to be owners of more than 5% of our common stock, (ii) each director, (iii) our Named Executive Officers and (iv) all of our executive officers and directors of as a group. Unless otherwise specified in the notes to this table, the address for each person is: c/o Healthy Choice Wellness Corp., 3800 North 28th Way, Unit# 1, Hollywood, Florida 33020. All references to “common stock” are related to the Company’s Class A common stock as no Class B common stock is outstanding.
| 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) | 1,179,412 | 5.18 | % | ||||||
| Common Stock | Christopher Santi (3) | 629,488 | 2.77 | % | ||||||
| Common Stock | John Ollet (4) | 428,177 | 1.88 | % | ||||||
| Common Stock | Gary Bodzin (5) | 25,000 | 0.11 | % | ||||||
| Common Stock | Behnam Myers (6) | 25,000 | 0.11 | % | ||||||
| Common Stock | Michael Lerman (7) | 25,000 | 0.11 | % | ||||||
| All directors and officers as a group (6 persons) (8) | 2,312,077 | 10.16 | % | |||||||
| 5% Stockholders: | ||||||||||
| Common Stock | Jeffrey E. Holman | 5.18 | % | |||||||
(1) Beneficial Ownership. Applicable percentages are based on 22,750,825 shares of common stock outstanding as of March 16, 2026. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, convertible notes and preferred stock currently exercisable or convertible or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. The table includes shares of common stock, options, warrants, and preferred stock exercisable or convertible into common stock and vested or vesting within 60 days. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them. The table does not include restricted stock awards that do not have the right to vote until they vest and the shares are delivered.
(2) Holman. Chairman and Chief Executive Officer. Includes (a) 1,079,412 shares of common stock held directly, and (b) 100,000 shares of common stock underlying restricted stock awards that vested on February 12, 2026. Does not include 700,000 unvested shares of restricted stock awards.
(3) Santi. President and Chief Operating Officer. Includes (a) 579,488 shares of common stock held directly, and (b) 50,000 shares of common stock underlying restricted stock awards that vested on February 12, 2026. Does not include 350,000 unvested shares of restricted stock awards.
(4) Ollet. Chief Financial Officer. Includes (a) 378,177 shares of common stock held directly, and (b) 50,000 shares of common stock underlying restricted stock awards that vested on February 12, 2026. Does not include 350,000 unvested shares of restricted stock awards.
(5) Bodzin. A director. Includes 25,000 shares of common stock underlying restricted stock awards that vested on February 12, 2026. Does not include 175,000 unvested shares of restricted stock awards.
(6) Myers. A director. Includes 25,000 shares of common stock underlying restricted stock awards that vested on February 12, 2026. Does not include 175,000 unvested shares of restricted stock awards.
(7) Lerman. A director. Includes 25,000 shares of common stock underlying restricted stock awards that vested on February 12, 2026. Does not include 175,000 unvested shares of restricted stock awards.
(8) Directors and Executive Officers. Includes executive officers who are not Named Executive Officers under the SEC’s rules and regulations.
| 26 |
Subsequent to December 31, 2025, on February 24, 2026, the Compensation Committee approved the grant of an aggregate of 2,545,719 shares of restricted Class A common stock to certain executive officers, directors, and employees under the Company’s 2024 Equity Incentive Plan. The restricted stock vests in eight equal quarterly installments over a two-year period, with the first installment scheduled to vest on May 24, 2026.
Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, shares that vest within 60 days of the date of this report are deemed beneficially owned and are included in the table above. Because the first vesting date is three months after the Grant Date, which is more than 60 days from the filing date of this Annual Report on Form 10-K, none of these restricted shares are included in the beneficial ownership table. These shares will be reflected in future filings as they vest.
The following table sets forth the restricted stock grants awarded on February 24, 2026 to the directors and Named Executive Officers:
| Name | Number of Shares of Restricted Stock | |||
| Jeffrey Holman - Chief Executive Officer | 785,488 | |||
| Christopher Santi - President and Chief Operating Officer | 589,116 | |||
| John Ollet - Chief Financial Officer | 589,116 | |||
| Gary Bodzin - Director | 100,000 | |||
| Behnam Myers - Director | 100,000 | |||
| Michael Lerman - Director | 100,000 | |||
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Relationship with HCMC and Transition Services Agreement
HCMC provided human resources, accounting, payroll processing, legal, and other managerial services to HCWC prior to the Spin-Off. On September 13, 2024, HCWC was spun off from HCMC, becoming an independent, publicly traded company. Following the Spin-Off, HCWC and HCMC entered into a TSA, under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services are provided on a transitional basis and will continue for a period of up to one year following the Spin-Off. Following the Spin-Off, HCWC recognized shared overhead costs of $0.4 million in 2024 for services provided under the TSA and settled these billings with HCMC on a monthly basis.
The Company had a net due from related party balance of $4.0 million and $0.2 million from HCMC as of December 31, 2025 and 2024, respectively. The increase in due from related party balance was a result of continued funding from HCWC to HCMC to support HCMC’s operations during the transition period pursuant to the TSA.
On December 31, 2025, the Company settled an approximately $4.0 million intercompany receivable from related party HCMC by accepting 43,889,786,222 shares of HCMC common stock. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Accordingly, the Company measured the investment at the carrying amount of the receivable surrendered, consistent with the principle that when fair value cannot be determined within reasonable limits in a related party context, defaulting to the recorded amount is appropriate. The substance of this transaction is a conversion of intercompany funding to equity, not an income-generating event, and therefore no gain was recognized.
The investment is accounted for under the equity method of accounting (see Note 13) because the Company retains significant influence over HCMC through common board representation. The investment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, consistent with ASC 323-10-35-32 Investments—Equity Method and Joint Ventures. To assess recoverability, the Company obtained a third-party valuation of the HCMC shares received. The valuation, which used unobservable inputs (Level 3) under ASC 820, indicated that the fair value of the investment exceeded its carrying amount. Accordingly, no impairment was recognized as of December 31, 2025.
Policies and Procedures for Related Party Transactions
We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related party transaction with us without the prior consent of our audit committee. Our audit committee reviews and oversees all transactions with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock or any member of the immediate family of any of the foregoing persons, in which such person has a direct or indirect interest. In approving or rejecting any such transactions, our audit committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
| 27 |
Item 14. Principal Accounting Fees and Services.
Our Audit Committee pre-approves audit and permissible non-audit services performed by its independent registered public accounting firm, as well as the fees charged for such services. All services related to audit fees and audit-related fees charged were pre-approved by the Audit Committee. The following table shows the fees for the years ended December 31, 2025 and 2024.
| 2025 | 2024 | |||||||
| Audit (1) | $ | 654,681 | $ | 456,488 | ||||
| Audit - Related | - | 352,306 | ||||||
| Tax | 35,000 | 14,208 | ||||||
| Other | - | 54,075 | ||||||
| Total | $ | 689,681 | $ | 877,077 | ||||
Audit fees — these fees relate to the audit of our consolidated annual financial statements and the review of our interim quarterly condensed consolidated financial statements and our registration statements.
Audit-related fees - the aggregate fees billed for assurance and related services by the principal accountant that are related to the performance of the audit or review of the registrant’s financial statements and are not reported under paragraph (1) above.
Tax fees - the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.
Other fees - the aggregate fees billed other than the services reported in audit, audit-related and tax fees.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
| (a) | Documents filed as part of the report. |
| (1) | Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item. |
| (2) | Financial Statements Schedules. All schedules are omitted because they are not applicable or because the required information is contained in the consolidated financial statements or notes included in this report. |
| (3) | Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report. |
| 28 |
FINANCIAL STATEMENT INDEX
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders of Healthy Choice Wellness Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Healthy Choice Wellness Corp. (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Emphasis of Matter
As discussed in Note 2 to the consolidated financial statements, the Company has experienced recurring losses from operations and has a net working capital deficit. Management’s evaluation of the events and conditions and management’s plans to mitigate those matters are also described in Note 2. Our opinion is not modified with respect to that matter.
/s/
We have served as the Company’s auditor since 2024.
March 16, 2026
| F-2 |
HEALTHY CHOICE WELLNESS CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses and vendor deposits | ||||||||
| Other current assets | ||||||||
| Due from related party | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property, plant, and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Right of use assets – operating lease | ||||||||
| Right of use assets – finance lease | ||||||||
| Investment in other entity - related party | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Contract liabilities | ||||||||
| Current portion of loan payable | ||||||||
| Operating lease liability, current | ||||||||
| Finance lease liability, current | ||||||||
| Other liabilities | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Loan payable, net of current portion | ||||||||
| Operating lease liability, net of current | ||||||||
| Finance lease liability, net of current | ||||||||
| Other long-term liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (SEE NOTE 16) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common Stock, $ par value per share, shares authorized; and shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively. | ||||||||
| Series A convertible preferred stock, $ par value per share, shares authorized, and shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | |||||||
See notes to consolidated financial statements.
| F-3 |
HEALTHY CHOICE WELLNESS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For The Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| SALES, NET | $ | $ | ||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES, NET | ||||||||
| Selling, general and administrative | ||||||||
| Gain on sale of asset | ( | ) | ||||||
| TOTAL OPERATING EXPENSES, NET | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on debt extinguishment | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ( | ) | ||||
| LOSS BEFORE TAXES | ( | ) | ( | ) | ||||
| INCOME TAX BENEFIT | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED NET LOSS PER SHARE | $ | ) | $ | ) | ||||
| BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES | ||||||||
See notes to consolidated financial statements.
| F-4 |
HEALTHY CHOICE WELLNESS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
| Common Stock | Series A Convertible Preferred Stock | Additional Paid-In | Net Investment | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | From Parent | Deficit | Total | |||||||||||||||||||||||||
| Balance – January 1, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
| Issuance of common stock for Spin-Off and transfer of former parent investment to additional paid in capital | - | ( | ) | |||||||||||||||||||||||||||||
| Issuance of common stock for IPO | - | |||||||||||||||||||||||||||||||
| Exercise of warrants | - | |||||||||||||||||||||||||||||||
| Net transfers to former parent | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance – December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Issuance of common stock for debt conversion | - | |||||||||||||||||||||||||||||||
| Issuance of Series A convertible preferred stock | - | |||||||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | ( | ) | |||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance – December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
See notes to consolidated financial statements.
| F-5 |
HEALTHY CHOICE WELLNESS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on debt extinguishment | ||||||||
| Gain on sale of building and equipment | ( | ) | ( | ) | ||||
| Amortization of right-of-use assets | ||||||||
| Write-down of obsolete and slow-moving inventory | ||||||||
| Non-cash interest expense | ||||||||
| Stock-based compensation expense | ||||||||
| Change in allowance for credit losses | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and vendor deposits | ( | ) | ( | ) | ||||
| Other current assets | ( | ) | ||||||
| Due to related party | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Other liabilities | ||||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| INVESTING ACTIVITIES | ||||||||
| Payment for acquisition | ( | ) | ||||||
| Proceeds from sale of Saugerties, NY building | ||||||||
| Due from related party | ( | ) | ||||||
| Proceeds from sale equipment | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from security purchase agreement | ||||||||
| Principal payments on loan payable | ( | ) | ( | ) | ||||
| Principal payments on finance lease liability | ( | ) | ||||||
| Proceeds from acquisition loan | ||||||||
| Proceeds from initial public offering (IPO) | ||||||||
| Proceeds from Series A preferred stock offering | ||||||||
| Payment for IPO-related cost | ( | ) | ||||||
| Investment from parent company | ||||||||
| Due from related party | ( | ) | ||||||
| Proceeds from warrant exercised | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENTS — END OF YEAR | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Promissory note related to acquisition | $ | $ | ||||||
| Right-of-use assets obtained in exchange for finance lease liabilities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Conversion of related party receivable into investment in related party | $ | $ | ||||||
See notes to consolidated financial statements
| F-6 |
HEALTHY CHOICE WELLNESS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Organization
Healthy Choice Wellness Corp. (the “Company” or “HCWC” or “we” or “our” or “us”) is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives.
Through its wholly owned subsidiaries, the Company operates:
| ● | Healthy Choice Markets, Inc. (DBA Ada’s Natural Market), a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 2, LLC (DBA Paradise Health & Nutrition), with three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 3, LLC (DBA Mother Earth’s Storehouse), an organic and health food and vitamin store in New York’s Hudson Valley, which has been in existence for over 40 years. |
| ● | Healthy Choice Markets IV, LLC (DBA Green’s Natural Foods), with eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. |
| ● | Healthy Choice Markets V, LLC (DBA Ellwood Thompson’s), an organic and natural health food and vitamin store located in Richmond, Virginia. |
| ● | Healthy Choice Markets VI, LLC (DBA GreenAcres Market), an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market offers organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands. |
Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company operates a Healthy Choice Wellness Center in Kingston, NY.
This center offers multiple vitamin drip mixes and intramuscular shots for clients to choose from that are designed to help boost immunity, fight fatigue and stress, reduce inflammation, enhance weight loss, and efficiently deliver antioxidants and anti-aging mixes. Additionally, there are IV vitamin mixes and shots for health, beauty, and re-hydration.
Through its wholly owned subsidiary, Healthy U Wholesale, the Company sells vitamins and supplements, as well as health, beauty, and personal care products on its website www.TheVitaminStore.com.
| F-7 |
Sourcing and Vendors
We
source from multiple suppliers. These suppliers range from small independent businesses to multinational conglomerates. For the years
ended December 31, 2025 and 2024, approximately
Spin-Off
Healthier Choices Management Corp. (“HCMC” or the “Parent”) announced on August 22, 2022 that its Board of Directors approved the separation of the grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off” or “Separation”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC, which operated the Ada’s Natural Market, Paradise Health & Nutrition, Mother Earth’s Storehouse, Green’s Natural Foods, Ellwood Thompson’s, and GreenAcres Market retail brands, as well as licensed wellness centers and Healthy U Wholesale.
On September 13, 2024 (the “Spin-Off Date”), after the New York Stock Exchange American (“NYSEAM”) market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock commenced trading on the NYSEAM under the stock symbol “HCWC.”
HCMC distributed all the outstanding shares of common stock held by it on a pro rata basis to holders of HCMC’s common stock. For each shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one () share of Class A common stock and three () shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.
HCMC
has secured binding commitments of $
NOTE 2. GOING CONCERN
The accompanying 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.
Conditions Giving Rise to Substantial Doubt
The
Company currently and historically has reported net losses and cash outflows from operations. Cash and cash equivalents increased to
approximately $
Management’s Plans to Alleviate Substantial Doubt
Management has developed and initiated several operational and financing plans to mitigate the conditions that raise substantial doubt. Operationally, the Company has engaged a third-party operations consultant to identify cost-saving opportunities, the recommendations of which have been implemented. Management is also evaluating the performance of existing stores and rightsizing or closing underperforming locations as necessary, while pursuing strategic acquisitions to expand the Company’s store base and achieve economies of scale.
On the financing front, the Company has secured
binding commitments from institutional investors to purchase $
Management believes that the combination of these operational initiatives and committed equity financing will enable the Company to meet its obligations and capital requirements for at least twelve months from the date these financial statements are issued.
Conclusion
Based on the above, management has concluded that its plans alleviate
the substantial doubt raised by the Company’s historical operating results and financial condition. The
Company believes its cash on hand and the commitment of $
| F-8 |
NOTE 3. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP.
The Company has historically operated as part of HCMC and not as a standalone company. Financial statements representing the historical operations of HCMC’s grocery segment have been derived from HCMC’s historical accounting records and are presented on a carve-out basis through the Spin-Off date. The Company’s financial statements for the period September 14, 2024 through December 31, 2024 and whole year of 2025 are consolidated financial statements based on the reported results of HCWC as a stand-alone company. HCMC completed steps to spin off its grocery segment and wellness business into HCWC on September 13, 2024. The entities under the grocery segment and wellness business were contributed (100%) to HCWC, as such the accompanying consolidated financial statements through the Spin-Off date have been contributed to HCWC using their carryover basis in accordance with Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) for entities under common control. All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company are included in the consolidated financial statements. The consolidated financial statements also include allocations of certain general, administrative, sales and marketing expenses from HCMC through the Spin-Off date. However, the amounts recognized by the Company are not necessarily representative of the amounts that would have been reflected in the consolidated financial statements had the Company operated independently of HCMC. Related-party allocations are discussed further in Note 19.
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 CODM reviews financial performance and makes decisions on a consolidated basis.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Healthy Choice Markets, Inc. (“Ada’s Natural Market”), Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), Healthy Choice Markets IV, LLC (Green’s Natural Foods), Healthy Choice Markets V, LLC (Ellwood Thompson’s), Healthy Choice Markets VI, LLC (GreenAcres Market), Healthy Choice Wellness, LLC, and Healthy U Wholesale, Inc (“The Vitamin Store, LLC”). All intercompany accounts and transactions have been eliminated in consolidation.
Net Parent Investment
The accompanying consolidated financial statements for year ended December 31, 2024 were derived from the consolidated financial statements of HCMC on a carve-out basis though the Spin-Off date, and the consolidated financial statements also include allocations of certain general, administrative, legal, and marketing expenses from HCMC. The primary components of the Net Parent Investment are intercompany balances other than related party payables, the allocation of shared costs, and funding received to cover any shortfall in operating cash requirements. Balances between HCMC and the Company that were not historically cash settled are included in Net Parent Investment. Net Parent Investment represents the cumulative investment by HCMC in the Company through the Spin-Off date. Upon Spin-Off, the Company reclassed the balance in net parent investment to additional paid-in capital.
Use of Estimates in the Preparation of the Financial Statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include promotional discounts, manufacturer coupons and rebates, return allowances that are netted against revenue, useful lives and impairment of long-lived assets, goodwill and impairment, equity method investments, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. Certain management’s estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.
Revenue Recognition
Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, return allowances, and sales and consumption taxes, are recorded when products are delivered, title passes to customers and collection is likely to occur. Title passes to customers at the point of sale for retail and upon delivery of products for wholesale. Return allowances, which reduce revenue, are estimated using historical experience.
The Company promotes its products with trade incentives and promotions. These programs include sales discounts, rebates, coupons, volume-based incentives, refunds, and returns, which represent variable considerations. The estimation of variable consideration involves judgment and is constrained to avoid overstatement of revenue. The Company applies the expected value method or the most likely amount method, depending on which better predicts the consideration to which it will be entitled. Management evaluates these estimates on a quarterly basis. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions.
| F-9 |
The Company recognizes revenue in accordance with the following five-step model:
| ● | identify arrangements with customers. | |
| ● | identify performance obligations. | |
| ● | determine transaction price. | |
| ● | allocate transaction prices to the separate performance obligations in the arrangement, if more than one exists; and | |
| ● | recognize revenue as performance obligations are satisfied. |
The Company does not have significant revenue recognized over time due to the nature of retail store operation. The Company recognizes revenue at a point in time when control of goods or services transfers to the customer.
Shipping and Handling
Shipping
charges billed to customers are included in net sales and the related shipping and handling costs are included in cost of sales. For
the years ended December 31, 2025 and 2024, shipping and handling costs of approximately $
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original maturity of three months or less, when purchased, to be cash and cash equivalents. Our cash equivalents are comprised of money market funds held in a brokerage account. The Company’s cash is deposited with major financial institutions, and at times, account balances may exceed federally insured limits. The Company has not experienced any losses on its cash accounts and believes it is not exposed to any significant credit risk on its cash. The Company’s money market funds are not insured by the Federal Deposit Insurance Corporation (“FDIC”). This account is protected by the Securities Investor Protection Corporation (“SIPC”), which protects against the loss of cash and securities in the event of a brokerage failure, subject to certain limitations. SIPC protection does not cover market losses on investments.
Accounts Receivable, Contract Assets and Contract Liabilities
Accounts receivables are claims to consideration which are unconditional; meaning no performance obligations remain for the Company and only the passage of time is necessary before collection. Contract assets are distinguished from accounts receivable as performance obligations remain before claims to consideration become unconditional. By nature of the Company’s operations, contract assets are typically not recognized. Contract liabilities are recorded when customers transfer consideration in advance of delivery of products or services, which the Company records for gift cards and loyalty reward programs. When one party to an arrangement performs before the other(s), the Company records an account receivable, contract asset or contract liability.
The
majority of arrangements with customers contain one performance obligation: to provide a distinct set of products or services. Most performance
obligations are satisfied simultaneously as the Company exchanges products or services for customer payment. Exceptions include gift
cards and loyalty rewards, for which the Company has a performance obligation to deliver products or services at a future date. As gift
cards are purchased and loyalty points earned, contract liabilities are recorded until the performance obligations are satisfied through
delivery of products or services or breakage based on gift card and loyalty reward program term limits. For the years ended December
31, 2025 and 2024, the contract liability balances were approximately $
The Company’s breakage policy is twenty-four months for gift cards and twelve months for loyalty rewards. Loyalty rewards are earned at five percent on qualifying purchases and the reward functions as an allocation of transaction price from the period earned by the customer to the period the performance obligation is satisfied by the Company. As such, all contract liabilities are expected to be recognized within a twenty-four-month period.
In August 2024, the Company transitioned its customer loyalty program from a points-based system to a VIP membership structure. Under the original loyalty program, customers earned redeemable loyalty points based on qualifying purchases, which have been discontinued. Existing unredeemed loyalty points remained valid for redemption until January 31, 2025. The new VIP program provides members with immediate discounts on qualifying purchases, replacing the accrual of future points. The elimination of future loyalty point accruals reduces the Company’s ongoing contract liability obligations, as discounts under the VIP program are recognized as reductions to revenue at the time of sale.
| F-10 |
Other Current Assets
Other current assets are the non-trade related assets that the Company owns, benefits from, or uses to generate income that can be converted into cash within one year of the operating cycle, whichever is longer. Included in “Other current assets” on our consolidated balance sheets are amounts primarily related to other receivables or non-trade receivable from other companies. These financial assets are subject to the Current Expected Credit Loss (“CECL”) model under ASC 326, Financial Instruments—Credit Losses. Management has determined that no allowance for credit losses is required as of December 31, 2025 and December 31, 2024, due to the short-term nature of these receivables, the creditworthiness of the counterparties, and historical collection experience indicating no credit losses. The Company will continue to monitor credit risk and adjust the allowance if conditions change.
Deferred Offering Costs
The Company capitalizes certain legal, accounting, underwriting, and other costs directly associated with in-process equity financings, including costs related to shelf registration statements, until such time as the financing is completed. Upon completion of an equity offering, these costs are reclassified to additional paid-in capital as a reduction of the gross proceeds received. Should a financing be abandoned, the deferred offering costs are expensed immediately in the consolidated statements of operations. Costs incurred in connection with the preparation and filing of shelf registration statements are deferred and expensed ratably over the period during which the shelf is available for use, or charged to operations if the shelf is abandoned.
Inventories
Inventories are measured at the lower of cost and net realizable value using the average cost method. If the cost of the inventories exceeds their net realizable value, adjustments are recorded to write down excess carrying value to their net realizable value. The Company’s inventories consist primarily of merchandise available for resale, such as fresh produce, perishable grocery items and non-perishable consumable goods. Slow-moving inventory is rotated out and obsolete inventory is removed (expensed) on a monthly basis.
Property, Plant, and Equipment
Property,
plant, and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over
the expected useful life of the respective asset, after the asset is placed in service. Revenue earning property, plant, and equipment
includes signage, furniture and fixtures, building, computer hardware, appliance, cooler, displays with useful lives range from two to
Identifiable Intangible Assets
Identifiable
intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Finite-lived
intangible assets are amortized over
Goodwill
Goodwill
represents the excess of the purchase price over the fair value of net assets acquired in business combinations. As of December 31, 2025,
the Company had goodwill of $
Impairment of Long-Lived Assets and Goodwill
Our long-lived assets include property and equipment, finite-lived intangible assets (such as trade names, customer relationships, and non-compete agreements), and goodwill. Long-lived assets, other than goodwill, are depreciated or amortized over their estimated useful lives. The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents the excess of purchase price over the fair values assigned to the underlying identifiable net assets of acquired businesses.
Long-lived assets, such as property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is measured by comparing the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount over the asset’s or asset group’s estimated fair value. Fair value is determined based on quoted market prices, discounted cash flows, or appraisals, as appropriate. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.
Goodwill is reviewed annually for impairment unless circumstances dictate the need for more frequent assessment. We perform our annual goodwill impairment testing as of September 30 of each year. The accounting guidance provides entities an option of performing a qualitative assessment (the “Step-zero” test) before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is more-likely-than-not that the goodwill is not impaired, the entity would not need to proceed to the quantitative goodwill impairment testing process. For our single reporting unit’s annual testing, we performed a qualitative assessment and considered various macroeconomic, industry, and company-specific factors. Based on this assessment, management concluded that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. Accordingly, no quantitative impairment test was required and no impairment was identified.
| F-11 |
During the fourth quarter of 2025, the Company’s stock price traded below its book value per share for a sustained period. As a sustained decline in market capitalization below book value is a potential indicator of impairment, management concluded that a triggering event had occurred. As a result of this triggering event, the Company performed an interim quantitative goodwill impairment assessment as of December 31, 2025. For this interim assessment, we elected to utilize the quantitative goodwill impairment testing process, as permitted in the accounting guidance, by comparing the estimated fair value of the reporting unit to its carrying value. The interim impairment testing resulted in an implied fair value for the reporting unit that exceeded its carrying value, including goodwill.
The goodwill impairment test requires judgment, including identifying reporting units, assigning assets and liabilities to reporting units, and determining the fair value of the reporting unit. Significant judgments required to estimate the fair value of our reporting unit include estimating future cash flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions. We use internal discounted cash flow models to estimate fair value. These cash flow estimates are derived from historical experience, third-party market data and a market approach, and future long-term business plans and include assumptions of future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate.
Equity Method Investments
The Company accounts for investments in entities over which it has the ability to exercise significant influence, but not control, using the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures. Significant influence is presumed when ownership exceeds 20%, but is evaluated based on qualitative factors as outlined in ASC 323-10-15-6, including representation on the investee’s board of directors, participation in policy-making processes, material intra-entity transactions, and interchange of managerial personnel. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to recognize the Company’s proportionate share of the investee’s net income or loss, which is recognized in the consolidated statements of operations. These investments are reviewed for impairment whenever events or changes in circumstances indicate that a decrease in the value of the investment has occurred that is other-than-temporary.
Debt
The Company accounts for debt in accordance with ASC 470, Debt and records specific incremental costs paid to third parties in connection with the issuance of long-term debt are deferred as a direct deduction from the carrying value of the associated debt liability on its consolidated balance sheet. The deferred financing costs are amortized as interest expense over the term of the related debt using the effective interest method.
For convertible debt instruments, the Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under ASC 815, Derivatives and Hedging (“ASC 815”) to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If an embedded derivative is bifurcated from share-settled convertible debt, then the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value. The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method. The convertible debt and the derivative liability are presented in aggregate on the Consolidated Balance Sheets. The derivative liability is remeasured at each reporting period with changes in fair value recorded in the Consolidated Statements of Operations and Comprehensive Income within other income (expense), net.
Advertising
Advertising
expense is classified as selling, general and administrative expense on the consolidated statements of operations. The Company expenses
advertising costs as incurred. For the years ended December 31, 2025 and 2024, the company incurred advertising expenses of $
401(k) retirement savings plan
The
Company’s employees are offered a 401(k)-retirement savings plan with discretionary contribution matching opportunities. 401K employer
expense amounted to $
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. There is no dilution for the years ended December 31, 2025 and 2024.
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES | ||||||||
| BASIC AND DILUTED NET LOSS PER SHARE | $ | ) | $ | ) | ||||
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were
Leases
The Company leases retail stores, warehouse space, and office facilities under non-cancellable operating leases. Additionally, the Company has a finance lease for data center equipment.
Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company’s incremental borrowing rates. Related lease Right-of-use (“ROU”) assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from landlords, plus any prepaid rent and direct costs from executing the leases.
At the adoption of ASC 842 Leases, the Company elected the following practical expedients, which continue to be applied as part of its accounting policies:
| ● | Lease Identification: The Company elected not to reassess whether any expired or existing contracts entered into prior to adoption are or contain leases. | |
| ● | Lease Classification: The Company elected not to reassess the lease classification for any expired or existing leases. All leases previously classified as operating leases under ASC Topic 840 continue to be classified as operating leases, and any leases previously classified as capital leases under ASC 840 are classified as finance leases under ASC 842. |
Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease cost primarily represents the difference between the actual property tax obligations for the period and the initial estimates included in the Company’s lease liability. The Company’s lease liability includes an estimate for future property tax payments over the lease term. Variable lease payments are recognized as lease expense as they are incurred.
| F-12 |
Fair Value Measurements
The fair value framework under FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows:
| ● | Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; | |
| ● | Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and | |
| ● | Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. |
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Recurring Fair Value Measurements
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and borrowings. Management believes that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, and borrowings are representative of their respective fair values.
Nonrecurring Fair Value Measurements
The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets, goodwill and equity method investment. The Company reviews the carrying amounts of such assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurement of the assets are considered to be Level 3 measurements.
Variable Interest Entities
The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.
Business Combination
The Company applies the provisions of ASC 805 in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing identifiable assets and liabilities, including intangible assets of acquired businesses at their fair value at the date of acquisition. When the Company acquires control of a business, any previously held equity interest also is remeasured to fair value. The excess of the purchase consideration and any previously held equity interest over the fair value of identifiable net assets acquired is goodwill. If the fair value of identifiable net assets acquired exceeds the purchase consideration and any previously held equity interest, the difference is recognized in the consolidated statements of operations immediately as a gain or loss on acquisition. Acquisition-related expenses are expensed as incurred and the expenses are recorded in operating expenses in the consolidated statements of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Compensation cost for restricted stock awards and other equity instruments granted to employees and directors is measured based on the grant-date fair value of the award. The fair value of restricted stock is determined based on the closing market price of the Company’s common stock on the grant date. Compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period (ranging from one to three years). The Company accounts for forfeitures as they occur; therefore, compensation expense is recognized only for awards that ultimately vest, and no estimation of future forfeitures is made. For awards granted to non-employees, the Company follows ASC 505-50, Equity—Equity-Based Payments to Non-Employees, and measures the awards at fair value on the measurement date.
Related Party Transactions and Nonmonetary Exchanges
Transactions involving related parties, as defined by ASC 850, Related Party Disclosures, are recorded based on the substance of the transaction rather than merely its legal form. Related party transactions cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.
When the Company exchanges a monetary asset for a nonmonetary asset (such as equity securities) in a transaction with a related party, if the fair value of the asset received cannot be determined within reasonable limits in an arm’s-length context, and the transaction is with a related party, it is appropriate to default to the recorded amount of the asset surrendered. Gains are not recognized on such transactions when the substance is a capital contribution or conversion of intercompany funding rather than an income-generating event.
Recent Accounting Pronouncements
Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including FASB and the SEC.
On December 14, 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The Company adopted this standard effective January 1, 2025 on a retrospective basis, applying the new disclosure requirements to all periods presented. The adoption resulted in additional disclosures in the income tax footnote but did not impact the Company’s consolidated financial position, results of operations, or cash flows.
| F-13 |
On November 27, 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which requires public entities to consider relevant qualitative and quantitative factors when determining whether segment expense categories and amounts are significant, and identify segment expenses on the basis of amounts that are regularly provided to the CODM, and included in reported segment profit or loss. The ASU is effective for fiscal years beginning after Dec. 15, 2023, and interim periods within fiscal years beginning after Dec. 15, 2024. The Company adopted this standard effective January 1, 2024, applying it retrospectively to all periods presented. As the Company has one reportable segment, the adoption had no material impact on the Company’s financial statements, but resulted in additional expense disclosures and reconciliations in the financial statement footnotes. See Note 5 for details.
In November 2024, the FASB issued ASU 2024-03 (“ASU 2024-03”), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The prescribed categories include purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. This authoritative guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements.
Subsequent to the end of the second quarter of 2025, on July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, the restoration of 100% bonus depreciation, the introduction of new Section 174A permitting immediate expensing of domestic research and experimental expenditures, modifications to Section 163(j) interest expense limitations, updates to the rules governing global intangible low-taxed income, amendments to energy credit provisions, and the expansion of Section 162(m) aggregation requirements. The Company has evaluated the impact of the OBBBA and does not currently expect it to have a material impact on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this Update provide (1) guidance on measuring expected credit losses using a probabilistic method and (2) a practical expedient for all entities that simplifies the estimation of expected credit losses for current trade accounts receivable and contract assets arising from revenue transactions. The Update is effective for public business entities for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU effective for the fiscal year beginning January 1, 2025. The Company has elected the practical expedient provided therein. Accordingly, the Company’s estimate of expected credit losses on its trade accounts receivable and other receivables is now based solely on historical loss experience and current asset-specific conditions. This change has been applied retrospectively as of the beginning of the annual period of adoption. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this Update clarify and expand the existing guidance on capitalizing implementation costs for cloud computing arrangements that are service contracts. The Update is effective for public business entities for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted for any interim period. The Company is currently evaluating the impact of this guidance on its accounting for cloud-based software arrangements.
| F-14 |
NOTE 4. CONCENTRATIONS
Cash and Cash Equivalents
A
summary of the financial institutions that had cash in excess of FDIC limits of $
| December 31, 2025 | December 31, 2024 | |||||||
| Total cash in excess of FDIC limits of $ | $ | $ | ||||||
A
summary of the financial institution that had cash in excess of SIPC limits of $
| December 31, 2025 | December 31, 2024 | |||||||
| Total cash equivalents in excess of SIPC limits of $ | $ | $ | ||||||
Our investments in money market funds are recorded at fair value, and funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The following table summarizes cash equivalents that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
| Level 1 | December 31, 2025 | December 31, 2024 | ||||||
| Money market funds | $ | $ | ||||||
The following table provides a reconciliation of cash and cash equivalents to amounts shown in the audited consolidated statements of cash flows:
| December 31, 2025 | December 31, 2024 | |||||||
| Cash | $ | $ | ||||||
| Cash equivalents | ||||||||
| Total cash and cash equivalents | $ | $ | ||||||
Sourcing and Vendors
We
source from approximately 1,000 suppliers and offer well-over 4,000 brands. These suppliers range from small independent businesses to
multi-national conglomerates. We purchased approximately
As mentioned, KeHe replaced UNFI and becomes our primary supplier of dry grocery and frozen food products starting from January 2025. Our customer distribution agreement with KeHe commenced from March 1, 2024 and has an initial term through February 28, 2027. Either party may terminate the agreement for defaults by the other party of certain provisions of the agreement. We are obligated to purchase a minimum annual volume of products from KeHe, except in certain defined circumstances when such purchasing obligation is excused. Pricing under our agreement with KeHe is on a “cost plus” basis. We believe KeHe has sufficient warehouse capacity and distribution technology to service our existing stores’ distribution needs for natural foods and products. Unlike certain other key suppliers, our relationship with Four Seasons Produce is not governed by a long-term contractual agreement, and purchases are made on a purchase-order basis.
We have longstanding relationships with our suppliers, and we require disclosure from them regarding quality, freshness, potency and safety data information. Our bulk food private label products are packaged by us in pre-packed sealed bags to help prevent contamination while in transit and in our stores. Unlike most of our competitors, most of our private label nuts, trail mix, and flours are refrigerated in our warehouse and stores to maintain freshness.
| F-15 |
NOTE 5. SEGMENT REPORTING AND DISAGGREGATION OF REVENUES
The
Company operates in
The Company’s CODM reviews financial results and allocates resources at the consolidated level, as the aggregated segments operate as one integrated business unit. No segment-specific financial metrics are used by the CODM to assess performance.
The Company adopted ASU 2023-07 effective January 1, 2024, on a retrospective basis. As the Company operates as a single reportable segment, the adoption did not have an impact on the Company’s consolidated financial statements. However, it did result in enhanced disclosures related to segment expenses and reconciliations to consolidated totals. Specifically, the Company has begun disclosing segment-specific expenses that are regularly reviewed by the CODM, Jeffrey Holman, the Company’s Chief Executive Officer, in accordance with the new standard. This adoption did not have an impact on the Company’s consolidated financial statements.
The following table summarizes the significant segment expenses:
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Advertising | $ | $ | ||||||
| Payroll and Benefits | ||||||||
| Occupancy | ||||||||
| Depreciation and Amortization | ||||||||
| Bank Service Charges and Merchant Account Fees | ||||||||
| Other selling, general and administrative expenses | ||||||||
| Total significant reporting segment expenses | ||||||||
| Unallocated amount | ||||||||
| Total consolidated operating expenses | $ | $ | ||||||
The following table summarizes the reconciliations of reportable segment profit or loss and assets to the Company’s consolidated totals:
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Segment net operating income (loss) | $ | $ | ||||||
| Unallocated amount | ( | ) | ( | ) | ||||
| Consolidated loss from operation | $ | ( | ) | $ | ( | ) | ||
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Total reporting segment assets | $ | $ | ||||||
| Unallocated amount | ||||||||
| Consolidated total assets | $ | $ | ||||||
When the Company prepares its internal management reporting to evaluate business performance, we disaggregate revenue into the following categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors, including the nature of products sold, product acquisition processes, customer types, distribution methods, and regulatory environments.
December 31, 2025 | December 31, 2024 | |||||||
| Retail Grocery | $ | $ | ||||||
| Food service/restaurant | ||||||||
| Online/eCommerce | ||||||||
| Total revenue | $ | $ | ||||||
The Company does not have significant revenue recognized over time due to the nature of retail store operation. The Company recognizes revenue at a point in time when control of goods or services transfers to the customer. Revenue is recognized as follows:
| ● | Retail Sales: At the point of sale when payment is received, products are physically transferred, and title passes. | |
| ● | Advertising Services (COOP Revenue): When promotional materials are distributed to end-user customers. |
| F-16 |
NOTE 6. ACCOUNTS RECEIVABLE, NET
Accounts
receivable is mainly related to CO-OP billing from each of the HCWC entities. HCWC bills its vendors for advertising
vendors’ products in our sales channels. Advertising revenue is included in sales revenue in the consolidated statement of operations.
The Company recorded advertising revenue of approximately $
The
Company’s credit loss is attributable to accounts receivable, and the Company determines the required allowance for expected
credit losses using information such as customer credit history, current conditions, and reasonable and supportable forecasts about
the future. Amounts are recorded to the allowance when it is determined that expected credit losses may occur. The Company reserved
approximately $
NOTE 7. INVENTORIES
Inventories
are measured at the lower of cost and net realizable value using the average cost method. If the cost of the inventories exceeds their
market value, adjustments are recorded to write down excess inventory to its net realizable value. The Company, as a result of its physical
inventory observations recorded the write down of inventories amounting to approximately $
NOTE 8. ACQUISITIONS
The purchase method of accounting in accordance with ASC 805 was applied for the Ellwood Thompson’s acquisition and GreenAcres Market acquisition, respectively. This requires the total cost of an acquisition to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisition is attributable to expected operational synergies from combining the operations of the acquired business with those of the Company. Acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses in the consolidated statements of operations.
| F-17 |
GreenAcres Market
On July 18, 2024, the Company through its wholly owned subsidiary, Healthy Choice Markets VI, LLC, entered into an Asset Purchase Agreement with (i) GreenAcres Markets of Oklahoma, LLC, an Oklahoma limited liability company, (ii) GACorp, Inc., a Kansas corporation; and (iii) the group of equity holders owning the majority interests of the Sellers. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities related to five GreenAcres Market’s grocery stores in Kansas and Oklahoma. The Company continued to operate the grocery stores under their existing name.
The
cash purchase price under the Asset Purchase Agreement was $
The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:
July 18, 2024 | ||||
| Purchase Consideration | ||||
| Cash consideration paid | $ | |||
| Promissory note | ||||
| Total Purchase Consideration | $ | |||
| Purchase price allocation | ||||
| Inventory | $ | |||
| Property, plant, and equipment | ||||
| Intangible assets | ||||
| Goodwill | ||||
| Net assets acquired | $ | |||
| Finite-lived intangible assets | ||||
| Trade Names ( | $ | |||
| Non-Compete Agreement ( | ||||
| Total intangible assets | $ | |||
Revenue and Earnings
The following unaudited pro forma summary presents consolidated information of the Company including GreenAcres Market, as if the business combinations had occurred on January 1, 2024, the earliest period presented herein:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Sales | $ | $ | ||||||
| Net loss | ( | ) | ( | ) | ||||
The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible, fixed assets depreciation and lease amortization. The proforma data gives effects to actual operating results prior to the acquisition. These proforma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred as of the beginning of each period presented or that may be obtained in future periods.
| F-18 |
NOTE 9. ASSETS HELD FOR SALE
On
February 7, 2024, the Company closed the operation of the Saugerties, NY store. The decision was based on management’s plan to
maximize the profitability of the grocery segment. The Company transferred all operating assets and liabilities to other neighboring
stores. The building, which is owned by the Company, has a net carrying value of approximately $
On
July 24, 2024, the Company finalized the closing of Saugerties, NY building sale with all parties involved and received net proceeds
of $
NOTE 10. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following as of December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Displays | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Computer hardware & equipment | ||||||||
| Other | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property, plant, and equipment | $ | $ | ||||||
The
Company incurred approximately $
NOTE 11. INTANGIBLE ASSETS
Intangible assets, net consist of the following as of December 31, 2025 and 2024:
| December 31, 2025 | Useful Lives (Years) | Gross Carrying | Accumulated Amortization | Net Carrying | ||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Customer relationships | ( | ) | ||||||||||||
| Non-compete | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
| December 31, 2024 | Useful Lives (Years) | Gross Carrying | Accumulated Amortization | Net Carrying | ||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Customer relationships | ( | ) | ||||||||||||
| Non-compete | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
Intangible
assets are amortized on a straight-line basis. Amortization expense was approximately $
| F-19 |
The
weighted-average remaining amortization period of the Company’s amortizable intangible assets is approximately
| For the years ending December 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 12. GOODWILL
Goodwill represents the excess of the purchase price
over the fair value of net assets acquired in business combinations. As of December 31, 2025, the Company had goodwill of $
The Company tests goodwill for impairment annually on September 30 or more frequently if there are indicators that the carrying amount of the goodwill exceeds its estimated fair value. During the fourth quarter of 2025, the Company’s stock price traded below its book value per share for a sustained period. As a decline in market capitalization below book value is a potential indicator of impairment, management concluded that a triggering event had occurred, necessitating an interim quantitative impairment test as of December 31, 2025. For this interim test, the fair value of the single reporting unit was estimated using a combination of an income approach and a market approach, consistent with the methodology used in the annual test. The Company used significant judgment to estimate the fair value of this single reporting unit including estimating future cash flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions, future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate. As of December 31, 2025, the estimated fair value of the Company’s single reporting unit exceeded its carrying value. The income approach and market approach yielded consistent fair value estimates, providing a sufficient margin of safety despite the recent decline in the Company’s stock price. Accordingly, no goodwill impairment was recognized for the year ended December 31, 2025.
The changes in the carrying amount of goodwill as of December 31, 2025 and December 31, 2024 are as follows:
December 31, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Acquisitions | ||||||||
| Impairment | ||||||||
| Ending balance | $ | $ | ||||||
NOTE 13. INVESTMENT IN OTHER ENTITY-RELATED PARTY
The Company accounts for its investments in other entities under the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the entity. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable.
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with its former parent HCMC. Pursuant
to this agreement, the Company settled an intercompany receivable due from HCMC with a carrying value of approximately $
Initial Measurement
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Accordingly, the Company measured the investment at the carrying amount of the receivable surrendered. This treatment is consistent with the principle that when fair value cannot be determined within reasonable limits in a related party context, defaulting to the recorded amount of the asset relinquished is appropriate. The substance of this transaction is a conversion of intercompany funding to equity, not an income-generating event; therefore, no gain was recognized.
Equity Method Assessment
Although the Company’s ownership interest in HCMC is approximately
A member of the Company’s senior management serves as Chairman of the Board of HCMC. Given that HCMC’s board consists of only three members, this represents disproportionate board representation relative to the Company’s ownership percentage and demonstrates that the Company has the ability to exercise significant influence over HCMC’s operating and financial policies. While the board representation is temporary in nature, as the Company and HCMC have committed to separate their boards and management teams in early 2026, under U.S. GAAP the equity method is applied regardless of whether the ability to exercise significant influence is intended to be temporary.
Accordingly, the investment is accounted for using the equity method from the date of acquisition, December 31, 2025. The Company will apply the equity method prospectively beginning in the fiscal year ending December 31, 2026, recognizing its proportionate share of HCMC’s earnings or losses in future periods. For the year ended December 31, 2025, no equity method earnings or losses were recognized because the investment was acquired on the last day of the fiscal year. HCMC’s pre-acquisition losses are not attributable to the Company, as the ownership period did not commence until the acquisition date.
Impairment Assessment
The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To assess recoverability as of December 31, 2025, the Company obtained a third-party valuation of the HCMC shares received.
The fair value of the shares was estimated using a multi-method approach in accordance with ASC 820. The valuation utilized unobservable inputs (Level 3), including a probability-weighted litigation asset model, and was cross-referenced against an observable arm’s-length transaction and the OTC Markets closing price at December 31, 2025. Based on this valuation, the estimated fair value of the investment exceeded its carrying amount. Accordingly, no impairment was recognized as of December 31, 2025.
Related Party Considerations
HCMC is a related party as the Company’s former parent prior to the Spin-Off completed on September 13, 2024, and due to the common board representation and management overlap described above. The terms of the settlement were negotiated and approved by the Company’s Board of Directors.
Variable Interest Entities (Unconsolidated)
The Company has evaluated its investment in its former parent HCMC under ASC 810 Consolidation and determined that HCMC meets the definition of a VIE. HCMC is considered a VIE due to its negative equity position, which indicates that the equity at risk is insufficient to permit the entity to finance its activities without additional subordinated financial support.
The
Company holds a variable interest in HCMC through its ownership of approximately
The
Company’s maximum exposure to loss as a result of its involvement with this unconsolidated VIE is limited to its equity investment.
As of December 31, 2025, the carrying value of this investment was $
| F-20 |
NOTE 14. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At December 31, 2025 and December 31, 2024, accounts payable and accrued expenses consisted of:
December 31, 2025 | December 31, 2024 | |||||||
| Trade creditors | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total | $ | $ | ||||||
NOTE 15. DEBT
The following table provides a breakdown of the Company’s debt as of December 31, 2025 and 2024 is presented below:
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Promissory note and convertible note | $ | $ | ||||||
| Debt discount and issuance cost | ( | ) | ( | ) | ||||
| Total debt, net of debt discount and issuance costs | ||||||||
| Current portion of long-term debt | ( | ) | ( | ) | ||||
| Current portion of debt discount and issuance cost | ||||||||
| Long-term debt | $ | $ | ||||||
Promissory Note
In
connection with the Green’s Natural Foods acquisition, on October 14, 2022, the Company issued a secured promissory note (the “Greens
Note”) in the principal amount of $
In
connection with the Ellwood Thompson’s acquisition, on October 1, 2023, the Company issued a secured promissory note (the “Ellwood
Note”) in the principal amount of $
On
January 18, 2024, HCWC entered into a Securities Purchase Agreement (the “Bridge Financing”) with institutional investors
whereby (a) HCWC issued a total of approximately $
On April 8, 2024, HCWC and the institutional investors entered into an amendment to the January 18, 2024 agreement whereby HCWC agreed to issue warrants (the “Bridge Warrants”) exercisable at $ per share to purchase shares of Class A common stock (the “Bridge Warrant Shares”) in lieu of Bridge Shares. The parties agreed to terminate any existing obligations of the institutional investors to acquire HCWC Bridge Shares as part of the IPO transaction.
On the Spin-Off Date, after the NYSEAM market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock was traded on the NYSEAM under the stock symbol “HCWC.”
Upon
the completion of the IPO, HCWC paid in full the principal amount of Notes and OID. At December 31, 2024, the outstanding principal balance
of the Notes and debt discount related with the Notes were at $
The Company used the intrinsic value model to determine the fair value of the Bridge Warrants on April 18, 2024 and remeasured the fair value on September 16, 2024, and concluded that the fair value of the Bridge Warrants at September 16, 2024 was $. Due to the fact that Bridge Warrants exercise was contingent upon the IPO, the Company did not recognize the warrant liability until the Spin-off date. The Bridge Warrants were exercised on September 17, 2024 by institutional investors. Upon warrant exercise, shares of Class A common stock were issued and the warrant liability was eliminated against the loss on debt extinguishment in the amount of $.
| F-21 |
In
connection with the GreenAcres Market acquisition, on August 23, 2024, the Company issued a secured promissory note (the “GreenAcres
Note”) in the principal amount of $
Convertible Note
On
July 18, 2024 (the “Loan Effective Date”), the Company entered into a loan and security agreement with a private lender for
a $
Throughout the year ended December 31, 2025, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with the holders of the Acquisition Loan (the “Noteholders”), who are unrelated third parties, to convert portions of the outstanding principal and accrued interest into shares of the Company’s Class A common stock. These conversions were accounted for as debt extinguishments. The difference between the carrying amount of the extinguished debt and the fair value of the common stock issued was recognized as a loss on debt extinguishment.
In summary, as a result of these exchange agreements during the year ended December 31, 2025, the Company exchanged approximately $3.0 million of outstanding principal of the Acquisition Loan in exchange for shares of the Company’s common stock.
The following table summarizes the conversion activity during the year ended December 31, 2025:
| Exchange Agreement Date | Principal Converted | Shares Issued | ||||||
| March 2, 2025 | $ | |||||||
| April 3, 2025 | ||||||||
| May 1, 2025 | ||||||||
| July 15, 2025 | ||||||||
| October 24, 2025 | ||||||||
| Total | $ | |||||||
As
a result of these debt conversions, the Company recorded a net loss on extinguishment of debt of approximately $
As of December 31, 2025, the Company had $
Future Principal Payments
The Company may, at its option, at any time or from time to time prepay the outstanding principal amount or any accrued but unpaid interest, in each case in whole or in part, without penalty or premium, provided that any such prepayment of any outstanding amount of principal shall be accompanied by the payment of all accrued but unpaid interest on the amount of principal being prepaid, plus any costs and fees incurred.
The
following table summarizes the
| For the years ending December 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total | $ | |||
| F-22 |
NOTE 16. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On
July 31, 2024, one of the Company’s subsidiaries, Healthy Choice Markets IV, LLC, was served with a lawsuit filed by a former employee
alleging violations of state and federal wage and hour laws. The Company successfully resolved the complaint for a $
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 December 31, 2025. With respect to legal costs, we record such costs as incurred.
NOTE 17. STOCKHOLDERS’ EQUITY
Spin-Off
HCMC announced on August 22, 2022 that its Board of Directors approved separation of the Grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC, which operated the Ada’s Natural Market, Paradise Health & Nutrition, Mother Earth’s Storehouse, Green’s Natural Foods, Ellwood Thompson’s, and GreenAcres Market retail brands, as well as licensed wellness centers and Healthy U Wholesale.
On the Spin-Off Date, after the NYSEAM market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock was traded on the NYSEAM under the stock symbol “HCWC.”
HCMC distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock. For each shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one (1) share of Class A common stock and three (3) shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.
Debt Conversion
On
March 2, 2025, the Company entered into an agreement with certain note holders to exchange $
On
April 3, 2025, the Company entered into an agreement with certain note holders to exchange $
On
May 1, 2025, the Company entered into an agreement with the same note holders to exchange $
On
July 15, 2025, the Company entered into an agreement with the same note holders to exchange $
All of the above debt conversion agreements were completed on their respective dates, and the related shares of Class A common stock were issued accordingly.
On
October 24, 2025, the Company entered into an agreement with the same note holders to exchange $
| F-23 |
Series A Convertible Preferred Stock
The Company is authorized to issue shares of Series A convertible preferred stock with par value of $, none of which have been previously issued.
Prior
to the Spin-Off, HCMC secured binding commitments of $
Restricted Stock
On
August 19, 2025, the Compensation Committee of the Company’s Board of Directors approved the grant of an aggregate of
The following table reflects the activity for all unvested restricted stocks during 2025:
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Unvested at January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Unvested at December 31, 2025 | $ | |||||||
As of December 31, 2025, there was approximately $ of total unrecognized compensation cost related to unvested restricted stock awards granted under the 2024 Equity Incentive Plan. This cost is expected to be recognized over a weighted-average period of approximately years. The weighted-average grant-date fair value of restricted stock awards granted during 2025 was $ per share.
The Company accounts for forfeitures of restricted stock awards in accordance with ASC 718, Compensation—Stock Compensation. The Company has elected to account for forfeitures as they occur. Under this policy, compensation cost is recognized only for awards that ultimately vest. Shares that are forfeited due to an employee’s failure to satisfy a service condition (such as termination of employment prior to vesting) become available for future grant under the 2024 Equity Incentive Plan, consistent with the terms of the plan.
As of December 31, 2025, shares of common stock and shares of Series A Convertible Preferred Stock are outstanding.
For information regarding restricted stock grants approved subsequent to December 31, 2025, see Note 21, Subsequent Events.
| F-24 |
NOTE 18. LEASES
The
Company has various lease agreements with terms of up to
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2025.
| Maturity of Lease Liabilities by Fiscal Year | Operating Leases | Finance Leases | ||||||
| 2026 | $ | $ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total undiscounted operating lease payments | $ | $ | ||||||
| Less: Imputed interest | ( | ) | ( | ) | ||||
| Present value of lease liabilities | $ | $ | ||||||
The following summarizes the Company’s leases:
| Balance Sheet Classification | December 31, 2025 | December 31, 2024 | ||||||
| Operating lease right of use assets | $ | $ | ||||||
| Finance lease right of use assets | ||||||||
| Total right of use assets | $ | $ | ||||||
| Operating lease liability, current | $ | $ | ||||||
| Finance lease liability, current | ||||||||
| Operating lease liability, net of current | ||||||||
| Finance lease liability, net of current | ||||||||
| Total lease liabilities | $ | $ | ||||||
The
amortization of the right-of-use asset for operating lease of approximately $
The following table provides a summary of other information related to the leases at December 31, 2025 and 2024:
| Other Information | December 31, 2025 | December 31, 2024 | ||||||
| Weighted-average remaining lease term for operating leases | ||||||||
| Weighted-average discount rate for operating leases | % | % | ||||||
| Weighted-average remaining lease term for finance leases | - | |||||||
| Weighted-average discount rate for finance leases | % | |||||||
Rent
expense under operating lease for the years ended December 31, 2025 and 2024 was approximately $
The following table represents the components of lease expense for twelve months ended December 31, 2025 and 2024:
| For the Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost | ||||||||
| Variable lease cost | ||||||||
| Short-term lease cost | ||||||||
| Total lease expense | $ | $ | ||||||
The
aggregate cash payments under the operating leasing arrangement was approximately $
| F-25 |
NOTE 19. RELATED PARTY TRANSACTIONS
Prior to the Spin-Off, the Company has not historically operated as a separate, stand-alone company and, accordingly has had various relationships with HCMC whereby HCMC provided services to the Company as noted below. Related party transactions prior to Spin-Off include allocation of general corporate expenses and advances from parent.
Allocation of General Corporate Expenses
HCMC provided human resources, accounting, payroll processing, legal and other managerial services to the Company prior to the Spin-Off. The accompanying consolidated financial statements include allocations of these expenses. Following the Spin-Off, HCWC and HCMC entered into a TSA, under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services are provided on a transitional basis and will continue for a period of up to one year following the Spin-Off.
Management
adopted a proportional cost allocation method to allocate HCMC expenses to the Company. The allocation method calculates the appropriate
share of overhead costs to the Company based on management’s estimate that the sum of management time and resources spent managing
the Company is approximately equal to the amount of time and resources spent managing HCMC and its subsidiaries. As a result, 50% of
HCMC overhead on a weighted average basis was allocated to the Company based on the fact that management spent equal amount of time managing
HCMC and the Company. The Company believes the allocation methodology used is reasonable and has been consistently applied, and results
in an appropriate allocation of costs incurred. However, these allocations may not be indicative of the cost had the Company been a stand-alone
entity or of future services. HCMC allocated approximately $
Investment by Parent
For
the thirty-six weeks ended September 13, 2024, the net operating expenses of $
Due from Related Party
Prior
to Spin-Off, there was no intercompany agreement between the Company and HCMC. Management has determined those 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. At the time of Spin-Off,
the Company had a net payable balance to HCMC in the amount of $
On December 31, 2025, the Company entered
into a Stock Purchase and Satisfaction of Debt Agreement with HCMC, pursuant to which the Company settled the outstanding $
Agreements with HCMC
The Company entered into several agreements with the former parent that, among other things, effect 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 the Company’s agreements regarding the principal actions that both parties will take in connection with the Spin-Off and aspects of our relationship following the Spin-Off; | |
| ● | a Transition Services Agreement (“TSA”) pursuant to which HCMC and the Company 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 the Company 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. |
| F-26 |
Under
the terms of the transition services agreement, HCMC provides to the Company, on a transitional basis, certain services or
functions, including information technology, accounting, human resources, and payroll functions. Generally, these services are
provided for a period of up to one year following the Spin-Off. Consideration and costs for the transition services are
determined using several billing methodologies as described in the agreements, including customary billing and pass-through billing.
Costs for transition services provided by the former parent are recorded within the Consolidated Statements of Operations based on
the nature of the services. Following the Spin-Off, the Company recognized costs of $
NOTE 20. INCOME TAXES
Overview and Spin-Off
Prior to September 13, 2024, the date of the Spin-Off of HCWC as a stand-alone entity, separate tax returns were not filed as they were included in the consolidated tax reporting of the former parent entity HCMC. On September 13, 2024, HCWC completed its separation from HCMC through a tax-free distribution of HCWC common stock to HCMC shareholders. The Spin-Off was structured to qualify as tax-free under Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code (IRC).
Pursuant to the Tax Matters Agreement (TMA) executed with HCMC in December 2023:
| ● | Pre-Spin Liabilities: HCMC retains responsibility for all taxes related to HCWC’s operations prior to September 13, 2024, including audits of HCMC’s consolidated returns. | |
| ● | Post-Spin Liabilities: HCWC is solely responsible for taxes attributable to its operations after the Spin-Off. | |
| ● | Indemnification: HCWC indemnifies HCMC for taxes arising from post-Spin actions that jeopardize the transaction’s tax-free status (e.g., violations of IRC Section 355(e)). |
For periods prior to the Spin-Off, HCWC’s tax provision was calculated using the separate return method, as if HCWC had operated as a standalone taxpayer. Deferred tax assets and liabilities, including net operating losses (NOLs), were allocated to HCWC based on the carryover tax basis of assets and liabilities transferred in the Spin-Off. This method preserves the tax-free nature of the transaction.
As of December 31, 2025 and 2024, all amounts related to the Company’s tax positions are recognized on the Consolidated Balance Sheet. Income taxes are accounted for under the asset and liability method.
Correction of Prior Period Amounts (ASC 250)
During the fiscal year ended December 31, 2025, the Company completed its analysis of the tax consequences of the Spin-Off and the TMA. Based on information and analyses that became available in 2025, including the finalization of HCMC’s 2024 consolidated tax returns, the Company determined that certain deferred tax assets reported in the 2024 consolidated financial statements were incorrectly attributed to HCWC and should have been retained by HCMC. Specifically, the following pre-spin tax attributes were incorrectly included in the 2024 deferred tax asset balance:
| ● | Net operating loss carryforwards generated prior to September 13, 2024. | |
| ● | Tax basis in goodwill and other intangible assets arising from pre-spin acquisitions. | |
| ● | Temporary differences related to warrant liabilities | |
| ● | Temporary differences prior to September 13, 2024. |
In accordance with ASC 250, Accounting Changes and Error Corrections, the Company has evaluated the materiality of this error on both the prior period (2024) and the current period (2025). The correction of this error had no impact on the Company’s previously reported consolidated statements of operations, total assets, liabilities, or cash flows for any period, as the Company maintains a full valuation allowance against its net deferred tax assets and the adjustment was fully offset by a corresponding reduction in the valuation allowance. Accordingly, management has concluded that the error was immaterial to the 2024 financial statements and that correction of the error in 2025 would not materially misstate the 2025 financial statements.
The following table presents the effect of the correction on the previously reported 2024 balances. The 2024 balances presented herein have been revised to reflect this correction.
As of December 31, 2024
| As Previously Reported | Adjustment | As Revised | ||||||||||
| Deferred tax assets: | ||||||||||||
| NOL carryforward | $ | $ | ( | ) | $ | |||||||
| Intangible assets | ( | ) | ||||||||||
| Warrant liability | ( | ) | ||||||||||
| Interest expense | ( | ) | ||||||||||
| ASC 842 - Lease Accounting | ||||||||||||
| Charitable contributions | ( | ) | ||||||||||
| UNICAP 263a Adjustment | ( | ) | ||||||||||
| Allowances | ( | ) | ||||||||||
| Total deferred tax assets | ( | ) | ||||||||||
| Deferred tax liabilities: | ||||||||||||
| Net book value of fixed assets | ( | ) | ( | ) | ||||||||
| Intangible assets | ( | ) | ( | ) | ||||||||
| Total deferred tax liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net deferred tax assets | ( | ) | ||||||||||
| Valuation allowance | ( | ) | ( | ) | ||||||||
| Net deferred tax assets | $ | $ | $ | |||||||||
The adjustment to the 2024 NOL carryforward reflects the removal of pre-spin federal and state net operating losses.
| F-27 |
Income Tax Provision
The Company did not have a provision for income taxes (current or deferred) for the years ended December 31, 2025 and 2024. The following table reconciles income tax expense (benefit) computed at the U.S. federal statutory rate to the income tax expense (benefit) reflected in the accompanying statement of operations, and reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years then ended. The 2024 amounts have been revised to reflect the correction described above.
| Year Ended December 31, 2025 | Year Ended December 31, 2024 (As Revised) | |||||||||||||||
| Amount | Rate % | Amount | Rate % | |||||||||||||
| U.S. federal statutory rate | $ | ( | ) | % | $ | ( | ) | % | ||||||||
| State tax benefit net of federal benefit | ( | ) | % | ( | ) | % | ||||||||||
| Change in valuation allowance | - | % | - | % | ||||||||||||
| True-Up & Deferred Adjustment | % | % | ||||||||||||||
| Debt extinguishment | - | % | % | |||||||||||||
| Other permanent items | - | % | % | |||||||||||||
| Change in tax rate | % | % | ||||||||||||||
| Other | - | % | % | |||||||||||||
| Pre Spin-off tax adjustment | % | - | % | |||||||||||||
| Income tax provision/(benefit) | $ | % | $ | % | ||||||||||||
The 2024 revised income tax provision uses the full-year consolidated net loss before taxes of $
For the year ended December 31, 2025, the Company made no cash payments for income taxes, net of refunds received. Accordingly, disaggregation by jurisdiction is not applicable.
The
reconciliation of the U.S. federal statutory income tax rate of
| ● | The
expected tax benefit at the federal statutory rate of $ | |
| ● | Additional
reconciling items include debt extinguishment of $ |
The
net effect of these items results in an effective tax rate of
Deferred Tax Assets and Liabilities
As of December 31, 2025 and 2024, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following:
| Year Ended December 31, | ||||||||
| 2025 | 2024 revised | |||||||
| Deferred tax assets: | ||||||||
| NOL carryforward | $ | $ | ||||||
| Accrued expenses | ||||||||
| Stock Compensation | ||||||||
| Interest expense | ||||||||
| ASC 842 - Lease Accounting | ||||||||
| Charitable contributions | ||||||||
| UNICAP 263a Adjustment | ||||||||
| Allowances | ||||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Net book value of fixed assets | ( | ) | ( | ) | ||||
| Intangible assets | ( | ) | ( | ) | ||||
| UNICAP 263a Adjustment | ( | ) | ||||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
Valuation Allowance
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
After consideration of all of the positive and negative evidence available—including the Company’s history of cumulative losses, negative working capital, and going concern uncertainties—management has determined that a valuation allowance is required at December 31, 2025 and 2024 to reduce the deferred tax assets to amounts that are more likely than not to be realized.
The
valuation allowance was $
Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax assets may be necessary.
Net Operating Loss Carryforwards
At
December 31, 2025, the Company had U.S. federal and state post-2017 net operating loss carryforwards (“NOLs”) of approximately
$
Certain net operating loss carryforwards are also subject to annual limitations under Internal Revenue Code Section 382 and separate return limitation year (SRLY) rules, which may restrict the amount of pre-change losses that can be utilized in future periods. Florida, Kansas, and Oklahoma net operating losses generated in taxable years beginning after December 31, 2017, may be carried forward indefinitely and do not expire; however, NOLs in these states are subject to an annual limitation of 80% of taxable income. New York, New Jersey, and Virginia net operating losses expire after twenty years.
| F-28 |
Recent Tax Legislation
On
August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. Among other provisions, the IRA includes
a
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which, among other things, modifies certain business tax provisions, including interest expense limitations, depreciation and amortization rules, and selected energy-related incentives that interact with the IRA. The Company has evaluated the OBBBA and does not currently expect it to have a material impact on its consolidated financial statements.
Uncertain Tax Positions
The
Company had
NOTE 21. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the 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 consolidated financial statements.
On
January 14, 2026, the Company converted $
On
February 10, 2026, the Company entered into an Exchange Agreement with the same holders of its outstanding promissory notes issued pursuant
to the Loan and Security Agreement dated July 18, 2024. Under the terms of the agreement, the holders agreed to exchange an aggregate
principal amount of $
On February 25, 2026, the Company converted $
On February 24, 2026, the Compensation Committee of the Board of Directors approved the grant of an aggregate of shares of restricted
Class A common stock to certain executive officers, directors, and employees under the Company’s 2024 Equity Incentive Plan. The restricted
stock vests in eight equal quarterly installments over a two-year period, with full acceleration upon a Change of Control or a Major Financing resulting in net proceeds to the Company in excess of $
On March 6, 2026, the Company converted $
On March 10, 2026, the Company converted $
| F-29 |
EXHIBIT INDEX
| 29 |
* Management contract or compensatory plan or arrangement.
** 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.
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at 3800 North 28th Way, Unit# 1, Hollywood, Florida 33020.
| 30 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 16, 2026.
| Healthy Choice Wellness Corp. | ||
| By: | /s/ Jeffrey Holman | |
| Jeffrey Holman | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Jeffrey Holman | Principal Executive Officer and Director | March 16, 2026 | ||
| Jeffrey Holman | ||||
| /s/ John A. Ollet | Chief Financial Officer | March 16, 2026 | ||
| John A. Ollet | (Principal Financial and Accounting Officer) | |||
| /s/ Gary Bodzin | Director | March 16, 2026 | ||
| Gary Bodzin | ||||
| /s/ Behnam Myers | Director | March 16, 2026 | ||
| Behnam Myers | ||||
| /s/ Michael Lerman | Director | March 16, 2026 | ||
| Michael Lerman |
| 31 |