HOST 10-Q
Host Digital Inc. (HOST)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For
the quarterly period ended
Or
For the transition period from _____ to _____
Commission
file number:
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer
Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
As of October 17, 2025, there were shares of the registrant’s Class A common stock, par value $ per share, outstanding.
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHY CHOICE WELLNESS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid expenses and vendor deposits | ||||||||
| Due from related party | ||||||||
| Other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property, plant, and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Right of use assets | ||||||||
| 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 | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Loan payable, net of current portion | ||||||||
| Operating lease liability, net of current | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (SEE NOTE 18) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Class A Common Stock, $ par value per share, shares authorized; and shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively. | ||||||||
| Series A convertible preferred stock, $ par value per share, shares authorized, shares and share issued and outstanding as of September 30, 2025 and December 31, 2024, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 3 |
HEALTHY CHOICE WELLNESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 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 (expense), net | ( | ) | ||||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 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 unaudited condensed consolidated financial statements
| 4 |
HEALTHY CHOICE WELLNESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
| Class A | Series A Convertible | Additional | ||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – July 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock for debt conversion | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common Stock | Additional Paid-In | Net Investment From | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Parent | Deficit | Total | |||||||||||||||||||
| Balance – July 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 – September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
HEALTHY CHOICE WELLNESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
| Class A | Series A Convertible | Additional | ||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – January 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock for debt conversion | - | |||||||||||||||||||||||||||
| Issuance of Series A convertible preferred stock | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common Stock | Additional Paid-In | Net Investment From | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | 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 – September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| 5 |
HEALTHY CHOICE WELLNESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on sale of building | ( | ) | ||||||
| Amortization of debt discount and issuance cost | ||||||||
| Loss on asset disposal | ||||||||
| Non-cash interest expense | ||||||||
| Amortization of right-of-use assets | ||||||||
| Write-down of obsolete and slow-moving inventory | ||||||||
| Loss on debt extinguishment | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and vendor deposits | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Due from related party | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Lease liabilities | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| INVESTING ACTIVITIES | ||||||||
| Payment for acquisition | ( | ) | ||||||
| Proceeds from sale of Saugerties, NY building | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from Series A preferred stock offering | ||||||||
| Proceeds from security purchase agreement | ||||||||
| Proceeds from acquisition loan | ||||||||
| Proceeds from initial public offering | ||||||||
| Proceeds from warrant exercised | ||||||||
| Principal payments on loan payable | ( | ) | ( | ) | ||||
| Investment from parent company | ||||||||
| Due from related party | ( | ) | ( | ) | ||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | ( | ) | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | ||||||||
| CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS — END OF PERIOD | $ | $ | ||||||
| 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 operating lease liabilities | $ | $ | ||||||
| Debt to equity conversion | $ | $ | ||||||
See notes to unaudited condensed consolidated financial statements
| 6 |
HEALTHY CHOICE WELLNESS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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:
| ● | 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. |
| ● | Paradise Health & Nutrition’s three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Mother Earth’s Storehouse, an organic and health food and vitamin store in New York’s Hudson Valley, which has been in existence for over 40 years. |
| ● | Greens Natural Foods’ eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. |
| ● | Ellwood Thompson’s, an organic and natural health food and vitamin store located in Richmond, Virginia. |
| ● | 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 offer multiple vitamin drip mixes and intramuscular shots for clients to choose from that are designed to help boost immunity, fight fatigue and stress, reduce inflammation, enhance weight loss, and efficiently deliver antioxidants and anti-aging mixes. Additionally, there are IV vitamin mixes and shots for health, beauty, and re-hydration.
Through its wholly owned subsidiary, Healthy U Wholesale, the Company sells vitamins and supplements, as well as health, beauty, and personal care products on its website www.TheVitaminStore.com.
| 7 |
Sourcing and Vendors
We
source from multiple suppliers. These suppliers range from small independent businesses to multinational conglomerates. A supplier is
considered a concentration if it accounts for 10% or more of total purchases in a period. For the three months ended September 30, 2025,
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, Greens 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 (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 $
NOTE 2. GOING CONCERN
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values.
As
of September 30, 2025, the Company had cash and cash equivalents of approximately $
The Company has a binding contractual commitment for $
On
July 18, 2024, HCWC entered into a $
On
July 24, 2024, the Company finalized the closing of Saugerties building sale with all parties involved and received net proceeds of $
| 8 |
On
August 18, 2022, HCMC entered into a Securities Purchase Agreement pursuant to which the HCMC sold and issued shares of its Series
E Convertible Preferred Stock to institutional investors for $ per share or an aggregate subscription of $ million. This same
group of investors committed to invest $ 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 $
On
May 12, 2025, the Company entered into a Securities Purchase Agreement to issue
shares of HCWC Preferred Stock with a stated value of $
per share and par value of $
per share. On June 20, 2025, HCWC entered into an Amended and Restated Securities Purchase Agreement (the “SPA”),
pursuant to which the Company sold
shares (the ‘Shares”) of its HCWC Preferred Stock to the same institutional investors for an aggregate subscription price of $
The
Company believes its cash on hand and the expected proceeds from the remaining $
NOTE 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements are prepared in accordance with GAAP.
The Company has historically operated as part of HCMC and not as a standalone company through the Spin-Off date. 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 January 1, 2025 through September 30, 2025 are condensed 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 condensed 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 condensed consolidated financial statements. The condensed consolidated financial statements also include allocations of certain general, administrative, sales and marketing expenses from HCMC though 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 condensed consolidated financial statements had the Company operated independently of HCMC. Related party allocations are discussed further in Note 16. The condensed consolidated financial statements do not include all the notes in the same detail as the annual 10-K filing.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision makers, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company operates as a single reportable segment, as the Chief Operating Decision Maker (“CODM”) reviews financial performance and makes decisions on a consolidated basis.
Unaudited Interim Condensed Consolidated Financial Statements
The interim condensed consolidated balance sheet as of September 30, 2025, the interim condensed consolidated statements of operations and the interim condensed consolidated statements of changes in stockholders’ equity for the three and nine months ended September 30, 2025 and 2024 and cash flows for the nine months ended September 30, 2025 and 2024 are unaudited. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements relating to the three and nine month periods are also unaudited, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025. The condensed consolidated balance sheet as of December 31, 2024 was derived from the Company’s audited 2024 financial statements contained in the above referenced Form 10-K. Results of the three and nine months ended September 30, 2025, are not necessarily indicative of the results to be expected for the full year ending December 31, 2025.
Principles of Consolidation
The condensed 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 Choices Markets 3 Real Estate LLC, 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.
| 9 |
Net Parent Investment
The accompanying condensed consolidated financial statements for year 2024 were derived from the consolidated financial statements of HCMC on a carve-out basis though the Spin-Off date, and the condensed 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 reclassified the balance in net parent investment to additional paid-in capital.
Use of Estimates in the Preparation of the Financial Statements
The preparation of condensed 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 condensed 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, 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 of 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.
| 10 |
The Company recognizes revenue in accordance with the following five-step model:
| ● | identify arrangements with customers; | |
| ● | identify performance obligations; | |
| ● | determine transaction price; | |
| ● | allocate transaction price 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 operations. 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 the cost of sales.
The Company incurred 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 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. As of September 30, 2025, December
31, 2024, and January 1, 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.
| 11 |
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 business cycle. Included in “Other current assets” on our condensed 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. Management has determined that no allowance for credit losses is required as of September 30, 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.
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, and displays have useful lives ranging 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. Certain identifiable
intangible assets are amortized over
Impairment of Long-Lived Assets
The Company reviews all long-lived assets such as property and equipment and amortized intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future cash flows expected to be generated by the asset or asset group. Impairment is measured by the amount by which the carrying value of the asset(s) exceeds their fair value. There were no triggering events that would indicate impairment of long-lived assets in the three and nine months period ended on September 30, 2025 and twelve months ended December 31, 2024.
Goodwill
The Company assesses the carrying amounts of goodwill for recoverability on at least an annual basis or when events or changes in circumstances indicate evidence of potential impairment exists. In performing the Company’s analysis of goodwill, the Company first evaluates qualitative factors, including relevant events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, and the useful life over which cash flows will occur. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for the Company. Our annual impairment test is conducted on September 30 of each year or more often if deemed necessary.
In
July 2024, the Company acquired GreenAcres Market and recorded goodwill of $
During the three and nine months ended September 30, 2025 and 2024, there were no goodwill impairment charges recognized by the Company in the unaudited interim condensed consolidated statements of operations.
| 12 |
Advertising
Advertising
expense is classified as selling, general and administrative expense on the condensed consolidated statements of operations. The Company
expenses its advertising costs as incurred. The Company incurred advertising expenses of approximately $
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 three and nine months ended September 30, 2025 and 2024.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES | ||||||||||||||||
| BASIC AND DILUTED NET LOSS PER SHARE | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
Income Taxes
The Company’s income taxes are included in HCMC’s consolidated return through the Spin-Off date. For the purposes of the condensed consolidated financial statements, the income taxes for the Company have been presented on a separate return basis, under which a new stand-alone set of deferred tax assets and liabilities is created based on the financial statements.
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 accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). 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, 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 Topic 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.
| 13 |
The Company did not have finance leases as of September 30, 2025 and 2024. If the Company enters into a finance lease in the future, it will be accounted for in accordance with ASC 842.
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, operating, derivatives 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. All derivatives are recognized as either assets or liabilities on the balance sheet at fair value at the end of each quarter.
Nonrecurring Fair Value Measurements
The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets and goodwill. 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.
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 condensed consolidated statements of operations immediately as a gain or loss on acquisition. Acquisition-related expenses are expensed as incurred and are recorded in operating expenses in the condensed consolidated statements of operations.
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 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 adoption of this pronouncement is not expected to have a material impact on the Company’s consolidated financial statements.
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 7 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 is currently assessing the impact of the OBBBA and an estimate of the impact on the Company’s consolidated financial statements is not yet available.
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 is currently evaluating the timing of adoption and the potential impact of this new guidance on its consolidated financial statements, particularly as it relates to its accounts receivable and due from related party balances.
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.
| 14 |
NOTE 4. CONCENTRATIONS
Cash and Cash Equivalents
A summary of the financial institutions that had cash in excess of FDIC limits of $250,000 on September 30, 2025 and December 31, 2024 is presented below:
| September 30, 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 $500,000 on September 30, 2025 and December 31, 2024 is presented below:
| September 30, 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 | September 30, 2025 | December 31, 2024 | ||||||
Money market funds | $ | $ | ||||||
The following table provides a reconciliation of cash and cash equivalents to amounts shown in the unaudited condensed consolidated statements of cash flow:
| September 30, 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.
| 15 |
NOTE 5. ACCOUNTS RECEIVABLE, NET
Accounts
receivable is mainly related to CO-OP billing. HCWC bills its vendors for advertising vendors’ products in our sales channels.
Advertising revenue is included in sales revenue in the condensed 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 6. 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 recorded the write down
of inventories amounting to approximately $
NOTE 7. SEGMENT INFORMATION 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.
The following table summarizes the significant segment expenses:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 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 | $ | $ | $ | $ | ||||||||||||
| 16 |
The following tables summarize the reconciliations of reportable segment profit or loss and assets to the Company’s consolidated totals:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Segment net operating income | $ | $ | $ | $ | ||||||||||||
| Unallocated amount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated loss from operation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| September 30, 2025 | December 31, 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.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 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 operations. 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 (CO-OP Revenue): When promotional materials are distributed to end-user customers. |
NOTE 8. ACQUISITIONS
The Company applies the provisions of ASC Topic 805, Business Combinations and Topic 820, Fair Value Measurement in the accounting for acquisitions of businesses.
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 $
| 17 |
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 combination had occurred on January 1, 2024, the earliest period presented herein:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 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.
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 was owned by the Company, had 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 $
| 18 |
NOTE 10. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 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 September 30, 2025 and December 31, 2024:
| September 30, 2025 | Useful Lives (Years) | Gross Carrying Amount | 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 Amount | ||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Customer relationships | ( | ) | ||||||||||||
| Non-compete | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
| 19 |
Intangible
assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was approximately $
| Years ending December 31, | ||||
| 2025 (remaining three months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
NOTE 12. GOODWILL
The Company tests goodwill for impairment annually on September 30 or more frequently if there are indicators that the carrying amount of goodwill exceeds its estimated fair value.
There
was
The changes in the carrying amount of goodwill as of September 30, 2025 and December 31, 2024 are as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Acquisitions | ||||||||
| Ending balance | $ | $ | ||||||
NOTE 13. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At September 30, 2025 and December 31, 2024, accounts payable and accrued expenses consisted of:
| September 30, 2025 | December 31, 2024 | |||||||
| Trade creditors | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total | $ | $ | ||||||
| 20 |
NOTE 14. DEBT
A breakdown of the Company’s debt as of September 30, 2025 and December 31, 2024 is presented below:
| September 30, 2025 | December 31, 2024 | |||||||
| Promissory 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 Notes
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 $
| 21 |
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. HCWC incurred approximately $
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 derivative liability in the amount of $.
On
July 18, 2024 (the “Loan Effective Date”), the Company entered into a loan and security agreement with a private lender for
a $
On
March 2, 2025, the Company entered into an agreement with the Acquisition Loan 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 $
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 $
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.
| 22 |
The following table summarizes the five-year repayment schedule:
| For the years ending December 31, | ||||
| 2025 (remaining three months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total | $ | |||
NOTE 15. LEASES
The
Company has various lease agreements with terms up to
Maturity of lease liabilities under our non-cancellable operating leases as of September 30, 2025 were as follows:
| Payments due by period | ||||
| 2025 (remaining three months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total undiscounted operating lease payments | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present value of operating lease liabilities | $ | |||
The following table summarizes the Company’s operating leases:
| Balance Sheet Classification | September 30, 2025 | December 31, 2024 | ||||||
| Right of use assets | $ | $ | ||||||
| Operating lease liability, current | $ | $ | ||||||
| Operating lease liability, net of current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The
amortization of the right-of-use assets of approximately $
The following table provides a summary of other information related to the leases at September 30, 2025 and December 31, 2024:
| Other Information | September 30, 2025 | December 31, 2024 | ||||||
| Weighted-average remaining lease term for operating leases | ||||||||
| Weighted-average discount rate for operating leases | % | % | ||||||
Rent
expense for the three months ended September 30, 2025 and 2024 was approximately $
| 23 |
The components of lease expenses for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Variable lease cost | ||||||||||||||||
| Short-term lease cost | ||||||||||||||||
| Total rent expense | $ | $ | $ | $ | ||||||||||||
The
aggregate cash payments under the leasing arrangements were approximately $
NOTE 16. 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 condensed consolidated financial statements for three and nine months ended September 30, 2024 include allocations of these
expenses in the amount of $
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 to manage 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. For the nine months ended September 30, 2025, HCWC established its independent payroll system but continues to share certain staff with HCMC. HCMC and HCWC continue providing human resources, accounting, payroll processing, and other managerial services to each other based on the TSA. Management continued using 50% proportional cost allocation method to split the shared cost. HCWC directly funds its 50% share and records its 50% share as Operating Expenses in its financial statements. The pre-Spin-Off allocated amounts were not settled in cash and were included in the Net Parent’s Investment.
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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 condensed consolidated balance sheets. At the time of
Spin-off, the Company had a net payable balance to HCMC in the amount of $
The due from related party amount is considered a financial asset subject to CECL. Management has determined that no allowance for credit losses is required as of September 30, 2025 and December 31, 2024, due to the short-term nature of the receivable, and HCMC’s ability to fulfill obligations under the Transition Services Agreement (TSA). The Company will continue to monitor credit risk and adjust the allowance if conditions change.
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 will set 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 pursuant to which HCMC and the Company will 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 will govern the respective rights, responsibilities and obligations of HCMC and the Company after the Spin-Off with respect to all tax matters and will include restrictions to preserve the tax-free status of the Spin-Off; and | |
| ● | an Employee Matters Agreement (“EMA”) that will address 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. |
Under the terms of the transition services agreement, the HCMC will provide to the Company, on a transitional basis, certain services or functions, including information technology, accounting, human resources, and payroll functions. Generally, these services will be provided for a period of up to one year following the Spin-Off. Consideration and costs for the transition services will be 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 Condensed Consolidated Statements of Operations based on the nature of the services.
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NOTE 17. STOCKHOLDERS’ EQUITY
Spin-Off
HCMC announced on August 22, 2022 that its Board of Directors approved separation of the Grocery business, including the 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, Greens 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 $
Series A Convertible Preferred Stock
The
Company is authorized to issue shares of preferred stock with par value of $. On May 12, 2025, the Company entered into
a Securities Purchase Agreement to issue shares of Series A Convertible Preferred Stock (the “HCWC Preferred Stock”)
with a stated value of $ per share and par value of $ per share. On June 20, 2025, HCWC entered into an Amended and Restated
Securities Purchase Agreement (the “SPA”), pursuant to which the Company sold shares (the ‘Shares”) of
the HCWC Preferred Stock to three investors (the “Purchasers”) for an aggregate subscription price of $
HCMC
has secured binding commitments of $
Approved Equity Grants
On
September 18, 2025, the Compensation Committee of the Company’s Board of Directors approved the future grant of an aggregate
of
As of September 30, 2025, shares of class A common stock and shares of Series A Convertible Preferred Stock were outstanding.
NOTE 18. 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 September 30, 2025. With respect to legal costs, we record such costs as incurred.
NOTE 19. SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were available to be issued. Based upon this review, the Company has determined that there are no material subsequent events requiring recognition or disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONDENSED CONSOLIDATED OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements. The terms “we,” “us,” “our,” and the “Company” refer to Healthy Choice Wellness Corp. and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), Healthy Choices Markets 3 Real Estate LLC, Healthy Choice Markets IV, LLC (“Green’s Natural Foods”), Healthy Choice Markets V, LLC (“Ellwood Thompson’s), Healthy Choice Markets VI, LLC (GreenAcres Market), Healthy Choice Wellness, LLC, The Vitamin Store, LLC, and Healthy U Wholesale, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
Company Overview
Healthy Choice Wellness Corp. 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, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC, Healthy Choice Markets 3, LLC, Healthy Choice Markets IV, LLC, Healthy Choice Markets V, LLC and Healthy Choice Markets VI, LLC respectively, the Company operates:
| ● | 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. | |
| ● | Paradise Health & Nutrition’s three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. | |
| ● | Mother Earth’s Storehouse, an organic and health food and vitamin store in New York’s Hudson Valley, which has been in existence for over 40 years. | |
| ● | Greens Natural Foods’ eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. | |
| ● | Ellwood Thompson’s, an organic and natural health food and vitamin store located in Richmond, Virginia. | |
| ● | GreenAcres Market, an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market is a chain of premier natural foods stores, offering 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.
Through its wholly owned subsidiary, Healthy U Wholesale Inc., the Company sells vitamins and supplements, as well as health, beauty and personal care products through The Vitamin Store, LLC on its website www.TheVitaminStore.com.
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Liquidity
The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company currently and historically has reported net losses and has reported cash inflows from operations this year. As of September 30, 2025, the Company had cash and cash equivalents of approximately $3.0 million and negative working capital of $0.3 million.
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 stores located in New York and New Jersey, one store located in Virginia, three stores in Kansas, and two stores in 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 downward pressure on prices to continue and impact on our operating results in the future.
Results of Operations
The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended September 30, 2025 and 2024 that is used in the following discussions of our results of operations:
| Three Months Ended September 30, | 2025 to 2024 | |||||||||||
| 2025 | 2024 | Change $ | ||||||||||
| SALES | $ | 19,039,927 | $ | 18,229,463 | $ | 810,464 | ||||||
| COST OF SALES | 11,648,298 | 11,227,644 | 420,654 | |||||||||
| GROSS PROFIT | 7,391,629 | 7,001,819 | 389,810 | |||||||||
| OPERATING EXPENSES, NET | 8,001,051 | 7,374,242 | 626,809 | |||||||||
| LOSS FROM OPERATIONS | (609,422 | ) | (372,423 | ) | (236,999 | ) | ||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Loss on debt extinguishment | (375,500 | ) | (1,888,889 | ) | 1,513,389 | |||||||
| Other income (expense), net | 2,096 | (486 | ) | 2,582 | ||||||||
| Interest expense, net | (241,313 | ) | (396,709 | ) | 155,396 | |||||||
| TOTAL OTHER EXPENSES, NET | (614,717 | ) | (2,286,084 | ) | 1,671,367 | |||||||
| NET LOSS | $ | (1,224,139 | ) | $ | (2,658,507 | ) | $ | 1,434,368 | ||||
Net sales increased $0.8 million to $19.0 million for the three months ended September 30, 2025 as compared to $18.2 million for the same period in 2024. The increase in grocery sales of $0.6 million was primarily due to the acquisition of GreenAcres Market acquired in July 2024, and increase in same-store sales of $0.2 million. The increase in same-store sales was mainly attributable to the success of our new customer loyalty program and CO-OP program.
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Cost of goods sold for the three months ended September 30, 2025 and 2024 were $11.6 million and $11.2 million, respectively. The increase of $0.4 million is primarily due to the acquisition of GreenAcres Market. Gross profit was $7.4 million and $7.0 million for the three months ended September 30, 2025 and 2024, respectively. Gross margin as a percentage of sales increased approximately 0.4% as compared to the same period in prior year.
Total operating expenses for the three months ended September 30, 2025 and 2024 were $8.0 million and $7.4 million, respectively. The total increase of $0.6 million consists of $0.3 million increase from the acquisition of GreenAcres Market and $0.3 million same-store increase in insurance expense, professional fee, and taxes, license and permit expenses.
Total other expenses, net of $0.6 million for the three months ended September 30, 2025 consists of net interest expense of approximately $0.2 million, other miscellaneous income of approximately $2,000, and $0.4 million loss on debt extinguishment. Total other expense, net of $2.3 million for the three months ended September 30, 2024 consists of $1.9 million loss on warrant settlement, and net interest expense of $0.4 million.
The following table sets forth our unaudited condensed consolidated Statements of Operations for the nine months ended September 30, 2025 and 2024 that is used in the following discussions of our results of operations:
| Nine Months Ended September 30, | 2025 to 2024 | |||||||||||
| 2025 | 2024 | Change $ | ||||||||||
| SALES | $ | 59,499,512 | $ | 49,718,396 | $ | 9,781,116 | ||||||
| COST OF SALES | 36,162,598 | 30,765,744 | 5,396,854 | |||||||||
| GROSS PROFIT | 23,336,914 | 18,952,652 | 4,384,262 | |||||||||
| OPERATING EXPENSES, NET | 24,395,045 | 20,408,380 | 3,986,665 | |||||||||
| LOSS FROM OPERATIONS | (1,058,131 | ) | (1,455,728 | ) | 397,597 | |||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Loss on debt extinguishment | (410,418 | ) | (1,888,889 | ) | 1,478,471 | |||||||
| Other income (expense), net | 639 | 6,697 | (6,058 | ) | ||||||||
| Interest (expense) income, net | (807,998 | ) | (617,758 | ) | (190,240 | ) | ||||||
| TOTAL OTHER EXPENSES, NET | (1,217,777 | ) | (2,499,950 | ) | 1,282,173 | |||||||
| NET LOSS | $ | (2,275,908 | ) | $ | (3,955,678 | ) | $ | 1,679,770 | ||||
Net sales increased $9.8 million to $59.5 million for the nine months ended September 30, 2025 as compared to $49.7 million for the same period in 2024. The increase in grocery sales of $7.8 million was primarily due to the acquisition of GreenAcres Market acquired in July 2024, and increase in same-store sales of $2.0 million. The increase in same-store sales was mainly attributable to the success of our new customer loyalty program and CO-OP program.
Cost of goods sold for the nine months ended September 30, 2025 and 2024 were $36.2 million and $30.8 million, respectively. The increase of $4.8 million is primarily due to the acquisition of GreenAcres Market, and an increase in same-store cost of goods sold of $0.6 million. Gross profit was $23.3 million and $19.0 million for the nine months ended September 30, 2025 and 2024, respectively. Gross margin as a percentage of sales increased approximately 1.1% as compared to the same period in prior year.
Total operating expenses for the nine months ended September 30, 2025 and 2024 were $24.4 million and $20.4 million, respectively. The increase of $4.0 million consist of $3.0 million from the acquisition of GreenAcres Market and $1.0 million increase in professional fees, insurance, and tax, license and permit expenses.
Total other expenses, net of $1.2 million for the nine months ended September 30, 2025 consists of net interest expense of $0.8 million, other miscellaneous income of approximately $1,000, and $0.4 million loss on debt extinguishment. Total other expenses, net of $2.5 million for the nine months ended September 30, 2024 consists of $1.9 million loss on warrant settlement, and net interest expense of $0.6 million, offset by $7,000 other miscellaneous income.
Lease Commitments, Known Trends and Uncertainties
As of September 30, 2025, the Company has operating lease obligations totaling $11.5 million. The weighted-average remaining lease term is 4 years, with a weighted-average discount rate of 5.27%. Rent expense for the three months ended September 30, 2025 was $1.0 million, compared to $1.2 million for the same period in 2024. Rent expense for the nine months ended September 30, 2025 was $2.9 million, compared to $3.0 million for the same period 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 rent 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 5.27% from 5.19% in 2024, a sustained rate hike environment may elevate borrowing costs for future lease liabilities.
Liquidity and Capital Resources
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | $ | 1,851,134 | $ | (3,964,320 | ) | |||
| Investing activities | (248,567 | ) | (4,871,680 | ) | ||||
| Financing activities | (658,652 | ) | 9,200,127 | |||||
| $ | 943,915 | $ | 364,127 | |||||
Our net cash provided by operating activities of approximately $1.9 million for the nine months ended September 30, 2025 resulted from a net loss of $2.3 million, offset by a non-cash adjustment of $6.8 million and a net cash usage of $2.6 million from changes in operating assets and liabilities. Our net cash used in operating activities of approximately $4.0 million for the nine months ended September 30, 2024 resulted from resulted from a net loss of $4.0 million, offset by a non-cash adjustment of $7.5 million and a net cash usage of $7.5 million from changes in operating assets and liabilities.
The net cash used in investing activities of $0.2 million for the nine months ended September 30, 2025 was due to purchases of property and equipment. The net cash used in investing activities of $4.9 million for the nine months ended September 30, 2024 consists of $5.5 million payment for GreenAcres Market acquisition, $0.1 million purchases of property and equipment, offset by $0.7 million proceeds from sale of Saugerties building.
The net cash used in financing activities of $0.7 million for the nine months ended September 30, 2025 consists of net proceeds of $3.1 million from HCWC Preferred Stock offering, principal payment on loan payable of $0.8 million and $3.0 million cash advance to related party. The net cash provided by financing activities of $9.2 million for the nine months ended September 30, 2024 consists of cash proceeds of $1.7 million from Security Purchase Agreement (“SPA”) signed on January 18, 2024, $7.5 million cash proceeds from Loan and Security Agreement signed on July 18, 2024, $2.6 million cash proceed 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 $2.3 million and $2.0 million payment to related party.
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At September 30, 2025 and December 31, 2024, we did not have any material financial guarantees or other contractual commitments with vendors that are reasonably likely to have an adverse effect on liquidity.
Our cash 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 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 September 30, 2025 and December 31, 2024.
| September 30, 2025 | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | 3,000,387 | $ | 2,056,472 | ||||
| Total assets | $ | 33,731,345 | $ | 34,112,517 | ||||
| Cash as a percentage of total assets | 8.89 | % | 6.03 | % | ||||
The Company reported a net loss of $2.3 million for the nine months ended September 30, 2025. The Company also had negative working capital of $0.3 million. The Company expects to continue incurring losses for the foreseeable future.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements. These estimates include useful lives and impairment of long-lived assets, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations.
We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
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.
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Management believes stockholders benefit from referring to the Adjusted EBITDA 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.
EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate 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 effect comparability between reporting periods. We define Adjusted EBITDA as net loss adjusted for non-cash charges for depreciation and amortization, impairment of goodwill, change in contingent consideration, also adjusted for non-recurring other expense (income), 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 the 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.
For The Three Months Ended September 30, | For The Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Reconciliation from net loss to adjusted EBITDA: | ||||||||||||||||
| Net loss | $ | (1,224,139 | ) | $ | (2,658,507 | ) | $ | (2,275,908 | ) | $ | (3,955,678 | ) | ||||
| Interest expense | 241,313 | 396,709 | 807,998 | 617,758 | ||||||||||||
| Depreciation and amortization | 432,287 | 423,200 | 1,297,234 | 1,148,158 | ||||||||||||
| EBITDA | (550,539 | ) | (1,838,598 | ) | (170,676 | ) | (2,189,762 | ) | ||||||||
| Loss on debt settlement | 375,500 | 1,888,889 | 410,418 | 1,888,889 | ||||||||||||
| Gain on sale of Saugerties building | - | (205,146 | ) | - | (205,146 | ) | ||||||||||
| Other (expenses) income, net | (2,096 | ) | 486 | (639 | ) | (6,697 | ) | |||||||||
| Adjusted EBITDA | $ | (177,135 | ) | $ | (154,369 | ) | $ | 239,103 | $ | (512,716 | ) | |||||
While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
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There have been no material changes to the Company’s critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 2024 Annual Report, which we believe are the most critical to our business and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the preparation of our condensed consolidated financial statements.
Seasonality
We do not consider our business to be seasonal.
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.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements including statements regarding retail expansion, the future demand for our products, competition, the adequacy of our cash resources and our authorized Common Stock, and our continued ability to raise capital.
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include our future common stock price, customer acceptance of our products, and proposed federal and state regulation. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
We are required to report under Section 404(a) of Sarbanes-Oxley regarding the effectiveness of our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Our management, including our Principal Executive Officer and Principal Financial Officer, carried out an evaluation on internal controls as of September 30, 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 our disclosure controls and procedures were ineffective as of the end of the period covered by this report.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was ineffective as of September 30, 2025 and noted the material weaknesses as follows:
| ● | 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; | |
| (vi) | Review of Service-Level Agreements (SLAs) for all IT service relationships across the Company to ensure active SLAs are in place and enforced. |
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Our management concluded that considering internal control deficiencies that, in the aggregate, rise to the level of material weaknesses, we did not maintain effective internal control over financial reporting as of September 30, 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”).
Planned Remediation
Management continues to work to improve its controls related to our material weaknesses listed above. In order to achieve the timely implementation of the above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:
| ● | Establishing policies and procedures in the IT area to mitigate data breach, unauthorized access and address segregation of duties, as well as review key third party service provider SOC reports. |
We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Controls over Financing Reporting
Following the Spin-Off, new corporate and governance functions, such as finance, tax and treasury, have been implemented in order to meet all regulatory requirements for a standalone public company. Further, the former parent will continue to provide various services and functions under the terms of the transition services agreement, many of which use a shared technology platform, including human resources, payroll and certain logistics functions. Except as detailed above, during the nine months ended September 30, 2025, there were no significant changes in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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 $5,000 settlement fee in September 2025. The Company recognized $5,000 in litigation settlement expense in the Condensed Consolidated Statements of Operations.
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 September 30, 2025. With respect to legal costs, we record such costs as incurred.
ITEM 1A. RISK FACTORS.
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
For the nine months ended September 30, 2025, the Company issued 5,250,001 shares of Class A common stock to the Holders in exchange for $2.1 million of indebtedness pursuant to the Notes. The Company claimed an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), for the private placement of the above referenced Company Class A common stock, pursuant to Section 3(a)(9) of the Securities Act and/or Regulation D promulgated thereunder as involving an exchange by the Company exclusively with its security holders. No commission or other remuneration was paid or given for soliciting the exchange transactions. Other exemptions may apply.
On June 20, 2025, the Company entered into an Amended and Restated Securities Purchase Agreement (the “SPA”), pursuant to which the Company sold 3,250 shares of its Series A Convertible Preferred Stock (the “HCWC Preferred Stock”) to three investors (the “Purchasers”) for an aggregate subscription price of $3,250,000 (the “Offering”). The HCWC Preferred Stock is currently convertible into 2,339,252 shares of Class A common stock at a conversion price of $1.38 per share. The Offering was completed on June 26, 2025. The SPA amended and restated the Securities Purchase Agreement entered into between HCWC and the Purchasers on May 12, 2025. The issuances of the HCWC Preferred Stock and the shares of Class A common stock issuable upon conversion thereof were exempt from registration pursuant to the provisions Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D, as promulgated by the Commission. The shares of HCWC Preferred Stock and the shares of Class A common stock into which they may be converted constitute restricted securities that may not be offered or sold absent their registration for resale or the availability of an exemption therefrom.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
In
ITEM 6. EXHIBITS.
See the exhibits listed in the accompanying “Index to Exhibits.”
INDEX TO EXHIBITS
| Exhibit | Incorporated by Reference | Filed or Furnished | ||||||||
| No. | Exhibit Description | Form | Date | Number | Herewith | |||||
| 31.1 | Certification of Principal Executive Officer (302) | Filed | ||||||||
| 31.2 | Certification of Principal Financial Officer (302) | Filed | ||||||||
| 32.1 | Certification of Principal Executive Officer (906) | Furnished * | ||||||||
| 32.2 | Certification of Principal Financial Officer (906) | Furnished * | ||||||||
| 101.INS | Inline XBRL Instance Document | Filed | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | Filed | ||||||||
* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HEALTHY CHOICE WELLNESS CORP. | ||
| Date: October 17, 2025 | By: | /s/ Jeffrey Holman |
| Jeffrey Holman | ||
| Chief Executive Officer | ||
| Date: October 17, 2025 | By: | /s/ John Ollet |
| John Ollet | ||
| Chief Financial Officer | ||
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