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 May 15, 2026, 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
| March 31, 2026 | December 31, 2025 | |||||||
| (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 – operating lease | ||||||||
| Right-of-use assets – finance lease | ||||||||
| Investment in other entity - related party | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Contract liabilities | ||||||||
| Current portion of loan payable | ||||||||
| Operating lease liability, current | ||||||||
| Finance lease liability, current | ||||||||
| Other liabilities | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Loan payable, net of current portion | ||||||||
| Operating lease liability, net of current | ||||||||
| Finance lease liability, net of current | ||||||||
| Other long-term liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (SEE NOTE 17) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common Stock, $ par value per share, shares authorized; and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively. | ||||||||
| Series A convertible preferred stock, $ par value per share, shares authorized, shares issued and outstanding as of March 31, 2026 and December 31, 2025, 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 | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| SALES, NET | $ | $ | ||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on debt extinguishment | ( | ) | ( | ) | ||||
| Other (expense) income, net | ( | ) | ||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Loss from equity investment | ( | ) | ||||||
| Impairment loss on equity method investment | ( |
) | ||||||
| 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 MARCH 31, 2026 AND 2025
(Unaudited)
| Class A | Series A Convertible | Additional | ||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – January 1, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock for debt conversion | - | |||||||||||||||||||||||||||
| Issuance of restricted stock awards | - | ( | ) | |||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance – January 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of common stock for debt conversion | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance – March 31, 2025 | $ | $ | ( | ) | $ | |||||||||||||||
| 5 |
HEALTHY CHOICE WELLNESS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on asset disposal | ||||||||
| Amortization of debt discount and issuance cost | ||||||||
| Loss on debt extinguishment | ||||||||
| Stock-based compensation expense | ||||||||
| Amortization of right-of-use assets | ||||||||
| Write-down of obsolete and slow-moving inventory | ||||||||
| Change in allowance for credit losses | ( | ) | ||||||
| Loss on equity method investment | ||||||||
| Impairment loss on equity method investment | ||||||||
| 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 | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | ( | ) | ||||||
| INVESTING ACTIVITIES | ||||||||
| Cash received from the related party | ||||||||
| Cash advanced to related party | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Principal payments on loan payable | ( | ) | ( | ) | ||||
| Principal payments on finance lease liability | ( | ) | ||||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ) | ( | ) | ||||
| NET DECREASE 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 | ||||||||
| 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. The Company was spun off from its former parent, Healthy Choice Markets Corp. (“HCMC”), on September 13, 2024.
Through its wholly owned subsidiaries, the Company operates:
| ● | Healthy Choice Markets, Inc. (DBA Ada’s Natural Market), a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 2, LLC (DBA Paradise Health & Nutrition), with three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 3, LLC (DBA Mother Earth’s Storehouse), an organic and health food and vitamin store in New York’s Hudson Valley, which has been in existence for over 40 years. |
| ● | Healthy Choice Markets IV, LLC (DBA Green’s Natural Foods), with eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. |
| ● | Healthy Choice Markets V, LLC (DBA Ellwood Thompson’s), an organic and natural health food and vitamin store located in Richmond, Virginia. |
| ● | Healthy Choice Markets VI, LLC (DBA GreenAcres Market), an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market offers organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands. |
Through its wholly owned subsidiary, Healthy 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 March 31, 2026,
approximately
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.
Conditions Giving Rise to Substantial Doubt
The Company currently and
historically has reported net losses and cash outflows from operations. As
of March 31, 2026, the Company had cash and cash equivalents of approximately $
Management’s Plans to Alleviate Substantial Doubt
Management has developed and initiated several operational and financing plans to mitigate the conditions that raise substantial doubt.
Operationally, the Company has engaged a third-party consultant to identify cost-saving opportunities, the recommendations of which have been implemented. These cost-saving measures are expected to reduce selling, general and administrative expenses and improve net income, thereby positively impacting operating cash flows. Management is also evaluating the performance of existing stores and rightsizing operations as necessary to improve store-level profitability and reduce cash burn. Additionally, the Company is pursuing strategic acquisitions to expand its store base and achieve economies of scale, which management believes will enhance profitability and generate positive operating cash flows over the long term.
On
the financing front, the Company has secured binding commitments from institutional investors to purchase $
Management believes that the combination of these operational initiatives and committed equity financing will enable the Company to meet its obligations and capital requirements for at least twelve months from the date these financial statements are issued.
Conclusion
Based
on the above, management has concluded that its plans alleviate the substantial doubt raised by the Company’s historical operating
results and financial condition. The Company believes its cash on hand and the commitment of $
| 8 |
NOTE 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2026. The condensed consolidated balance sheet as of December 31, 2025 included herein was derived from the audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for complete financial statements. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026 or any future period.
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 March 31, 2026, the interim condensed consolidated statements of operations and the interim condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2026 and 2025 and cash flows for the three months ended March 31, 2026 and 2025 are unaudited. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements relating to the three 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.
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 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 |
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, goodwill and impairment, equity method investment, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, stock-based compensation, and the valuation of the assets and liabilities acquired in business combinations. Certain management’s estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.
Revenue Recognition
Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, and return allowances, 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.
The Company generates co-op advertising revenue by billing vendors for advertising their products in the Company’s sales channels. Revenue is recognized at the point in time when the advertising is delivered in the Company’s sales channels, which is when the performance obligation is satisfied.
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 March 31, 2026, December
31, 2025, and January 1, 2025, the contract liability balances were approximately $
The Company’s breakage policy is twenty-four months for gift cards. 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 prior loyalty program, customers earned redeemable loyalty points based on qualifying purchases, which have been discontinued. Existing unredeemed loyalty points all expired on January 31, 2025. The existing 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, Financial Instruments-Credit Losses. Management has determined that no allowance for credit losses is required as of March 31, 2026 and December 31, 2025, due to the short-term nature of these receivables, the creditworthiness of the counterparties, and historical collection experience indicating no credit losses. The Company will continue to monitor credit risk and adjust the allowance if conditions change.
Deferred Offering Costs
The Company capitalizes certain legal, accounting, underwriting, and other costs directly associated with in-process equity financings, including costs related to shelf registration statements, until such time as the financing is completed. Upon completion of an equity offering, these costs are reclassified to additional paid-in capital as a reduction of the gross proceeds received. Should a financing be abandoned, the deferred offering costs are expensed immediately in the condensed consolidated statements of operations. Costs incurred in connection with the preparation and filing of shelf registration statements are deferred and expensed ratably over the period during which the shelf is available for use, or charged to operations if the shelf is abandoned.
Inventories
Inventories are measured at the lower of cost and net realizable value using the average cost method. If the cost of the inventories exceeds their net realizable value, adjustments are recorded to write down excess carrying value to their net realizable value. The Company’s inventories consist primarily of merchandise available for resale, such as fresh produce, perishable grocery items and non-perishable consumable goods. Slow-moving inventory is rotated out and obsolete inventory is removed (expensed) on a monthly basis.
Property, Plant, and Equipment
Property,
plant, and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over
the expected useful life of the respective asset, after the asset is placed in service. Revenue earning property, plant, and equipment
includes signage, furniture and fixtures, building, computer hardware, appliance, cooler, 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 finite-lived intangible assets are
amortized over
Goodwill
Goodwill
represents the excess of the purchase price over the fair value of net assets acquired in business combinations. As of March 31, 2026,
the Company had goodwill of $
| 12 |
During
the three months ended March 31, 2026, the Company recognized
Impairment of Long-Lived Assets and Goodwill
Our long-lived assets include property and equipment, finite-lived intangible assets (such as trade names, customer relationships, and non-compete agreements), and goodwill. Long-lived assets, other than goodwill, are depreciated or amortized over their estimated useful lives. The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents the excess of purchase price over the fair values assigned to the underlying identifiable net assets of acquired businesses.
Long-lived assets, such as property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is measured by comparing the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount over the asset’s or asset group’s estimated fair value. Fair value is determined based on quoted market prices, discounted cash flows, or appraisals, as appropriate. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.
Goodwill is reviewed annually for impairment unless circumstances dictate the need for more frequent assessment. We perform our annual goodwill impairment testing as of September 30 of each year. The accounting guidance provides entities an option of performing a qualitative assessment (the “Step-zero” test) before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is more-likely-than-not that the goodwill is not impaired, the entity would not need to proceed to the quantitative goodwill impairment testing process. For our single reporting unit’s annual testing, we performed a qualitative assessment and considered various macroeconomic, industry, and company-specific factors. Based on this assessment, management concluded that
there is less than a 50% chance that the reporting unit’s fair value is below its carrying amount. Therefore, no goodwill impairment exists.
During the three months ended March 31, 2026, the Company performed a qualitative assessment and identified no triggering events. Based on this assessment, management concluded that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. Therefore, no quantitative impairment test was required, and no goodwill impairment was recognized for the period. For further information regarding goodwill and the quantitative impairment test performed during the year ended December 31, 2025, see Note 10 - Goodwill.
The goodwill impairment test requires judgment, including identifying reporting units, assigning assets and liabilities to reporting units, and determining the fair value of the reporting unit. Significant judgments required to estimate the fair value of our reporting unit include estimating future cash flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions. We use discounted cash flow models to estimate fair value. These cash flow estimates are derived from historical experience, third-party market data and a market approach, and future long-term business plans and include assumptions of future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate.
| 13 |
Equity Method Investment
The Company accounts for investments in entities over which it has the ability to exercise significant influence, but not control, using the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures. Significant influence is presumed when ownership exceeds 20%, but is evaluated based on qualitative factors as outlined in ASC 323-10-15-6, including representation on the investee’s board of directors, participation in policy-making processes, material intra-entity transactions, and interchange of managerial personnel. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to recognize the Company’s proportionate share of the investee’s net income or loss, which is recognized in the condensed consolidated statements of operations.
The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that a decrease in the value of the investment has occurred that is other-than-temporary. If an impairment is identified, the Company measures the fair value of the investment using a multi-method approach under Accounting Standards Codification Topic 820, Fair Value Measurement (“ASC 820”), incorporating observable market inputs and unobservable inputs as appropriate. An impairment loss is recognized in the condensed consolidated statements of operations to the extent that the carrying amount exceeds the estimated fair value. Impairment losses are not subsequently reversed. See Note 11 for additional information regarding the Company’s equity method investment and related impairment recognized during the three months ended March 31, 2026.
Debt
The Company accounts for debt in accordance with ASC 470, Debt and records specific incremental costs paid to third parties in connection with the issuance of long-term debt are deferred as a direct deduction from the carrying value of the associated debt liability on its condensed consolidated balance sheet. The deferred financing costs are amortized as interest expense over the term of the related debt using the effective interest method.
For convertible debt instruments, the Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under ASC 815, Derivatives and Hedging (“ASC 815”) to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If an embedded derivative is bifurcated from share-settled convertible debt, then the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value. The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method. The convertible debt and the derivative liability are presented in aggregate on the Condensed Consolidated Balance Sheets. The derivative liability is remeasured at each reporting period with changes in fair value recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income within other income (expense), net.
Advertising
Advertising
expense is classified as selling, general and administrative expense on the 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. 401(k) employer
expense amounted to $
Basic loss per common share is computed as loss applicable to common stockholders divided by the weighted-average number of common shares outstanding for the period. Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common stock. For the three months ended March 31, 2026 and 2025, all potential common shares were excluded from the diluted loss per share calculation because their effect would be anti-dilutive.
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Basic weighted average shares outstanding | ||||||||
| Dilutive effect of unvested restricted shares | ||||||||
| Dilutive effect of Series A convertible preferred stock | ||||||||
| Dilutive effect of convertible debt | ||||||||
| Diluted weighted average shares outstanding | ||||||||
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Restricted common stock grants | ||||||||
| Series A convertible preferred stock (as converted to common) | ||||||||
| Total anti-dilutive shares excluded | ||||||||
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
| 14 |
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were
Leases
The Company leases retail stores, warehouse space, and office facilities under non-cancellable operating leases. Additionally, the Company has a finance lease for data center equipment.
Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company’s incremental borrowing rates. Related lease Right-of-use (“ROU”) assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from landlords, plus any prepaid rent and direct costs from executing the leases.
At the adoption of Accounting Standards Codification Topic 842, Leases (“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.
Fair Value Measurements
The fair value framework under FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows:
| ● | Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; | |
| ● | Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and | |
| ● | Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. |
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
| 15 |
Recurring Fair Value Measurements
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and borrowings. Management believes that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, and borrowings are representative of their respective fair values.
Nonrecurring Fair Value Measurements
The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets, goodwill and equity method investment. The Company reviews the carrying amounts of such assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurement of the assets are considered to be Level 3 measurements.
Variable Interest Entities
The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.
Business Combination
The Company applies the provisions of Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing 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.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Compensation cost for restricted stock awards and other equity instruments granted to employees and directors is measured based on the grant-date fair value of the award. The fair value of restricted stock is determined based on the closing market price of the Company’s common stock on the grant date. Compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period (ranging from one to three years). The Company accounts for forfeitures as they occur; therefore, compensation expense is recognized only for awards that ultimately vest, and no estimation of future forfeitures is made. For awards granted to non-employees, the Company follows ASC 505-50, Equity—Equity-Based Payments to Non-Employees, and measures the awards at fair value on the measurement date.
Related Party Transactions and Nonmonetary Exchanges
Transactions involving related parties, as defined by ASC 850, Related Party Disclosures, are recorded based on the substance of the transaction rather than merely its legal form. Related party transactions cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.
When the Company exchanges a monetary asset for a nonmonetary asset (such as equity securities) in a transaction with a related party, if the fair value of the asset received cannot be determined within reasonable limits in an arm’s-length context, and the transaction is with a related party, it is appropriate to default to the recorded amount of the asset surrendered. Gains are not recognized on such transactions when the substance is a capital contribution or conversion of intercompany funding rather than an income-generating event.
| 16 |
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 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.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this Update provide (1) guidance on measuring expected credit losses using a probabilistic method and (2) a practical expedient for all entities that simplifies the estimation of expected credit losses for current trade accounts receivable and contract assets arising from revenue transactions. The Update is effective for public business entities for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU effective for the fiscal year beginning January 1, 2025. The Company adopted this ASU prospectively, applying the amendments from the adoption date forward without restatement of prior periods. The Company has elected the practical expedient provided therein. Accordingly, the Company’s estimate of expected credit losses on its trade accounts receivable is now based solely on historical loss experience and current asset-specific conditions. This change has been applied retrospectively as of the beginning of the annual period of adoption. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this Update clarify and expand the existing guidance on capitalizing implementation costs for cloud computing arrangements that are service contracts. The Update is effective for public business entities for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted for any interim period. The Company is currently evaluating the impact of this guidance on its accounting for cloud-based software arrangements.
In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The update (i) adds a scope exception from derivative accounting for contracts with underlyings based on a party’s own operations or activities and (ii) clarifies that share-based payments received from a customer are initially accounted for under Topic 606 rather than as derivatives or equity securities. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The update clarifies the applicability of Topic 270, improves the navigability of interim disclosure requirements, and establishes a principle that an entity must disclose events or changes since the last annual reporting period that have a material impact on the entity. The guidance is effective for interim periods within fiscal years beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its interim financial statement disclosures.
Reclassification
During the three months ended March 31, 2025, the Company previously classified cash advances to its former parent HCMC, as financing activities on the condensed consolidated statement of cash flows. Upon further review, management has determined that such advances represent lending activities and should be classified as investing activities. Accordingly, the Company has reclassified the $966,584 cash outflow to HCMC for the three months ended March 31, 2025 from financing activities to investing activities to conform to the current period presentation. This reclassification had no effect on the Company’s net decrease in cash and cash equivalents, net loss, or any other line items within the condensed consolidated financial statements for the period presented.
| 17 |
NOTE 4. CONCENTRATIONS
Cash and Cash Equivalents
A
summary of the financial institutions that had cash in excess of FDIC limits of $
| March 31, 2026 | December 31, 2025 | |||||||
| Total cash in excess of FDIC limits of $ | $ | $ | ||||||
A
summary of the financial institution that had cash in excess of SIPC limits of $
| March 31, 2026 | December 31, 2025 | |||||||
| 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 | March 31, 2026 | December 31, 2025 | ||||||
| Money market funds | $ | $ | ||||||
The following table provides a reconciliation of cash and cash equivalents to amounts shown in the statements of cash flow:
| March 31, 2026 | December 31, 2025 | |||||||
| 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
For
the three months ended March 31, 2026, 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.
| 18 |
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 arising from contracts with customers under ASC
606. The Company has early adopted ASU 2025-05 and elected the practical expedient permitted for current accounts receivable. Under this
expedient, the Company assumes that current conditions as of the balance sheet date remain unchanged for the remaining life of the receivables;
accordingly, the Company is not required to develop reasonable and supportable forecasts of future economic conditions for these assets.
The allowance is determined based on customer credit history and current conditions. 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 condensed consolidated financial statements. However, it did result in enhanced disclosures related to segment expenses and reconciliations to consolidated totals. Specifically, the Company has begun disclosing segment-specific expenses that are regularly reviewed by the CODM, Jeffrey Holman, the Company’s Chief Executive Officer, in accordance with the new standard. This adoption did not have an impact on the Company’s condensed consolidated financial statements.
The following table summarizes the significant segment expenses:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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 | $ | $ | ||||||
| 19 |
The following tables summarize the reconciliations of reportable segment profit or loss and assets to the Company’s consolidated totals:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Segment net operating income | $ | $ | ||||||
| Unallocated amount | ( | ) | ( | ) | ||||
| Consolidated loss from operations | $ | ( | ) | $ | ( | ) | ||
| March 31, 2026 | December 31, 2025 | |||||||
| 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 March 31, | ||||||||
| 2026 | 2025 | |||||||
| Retail Grocery | $ | $ | ||||||
| Food service | ||||||||
| 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. |
| 20 |
NOTE 8. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | |||||||
| 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 9. INTANGIBLE ASSETS
Intangible assets, net consist of the following as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying | ||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Customer relationships | ( | ) | ||||||||||||
| Non-compete | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
| December 31, 2025 | Useful Lives (Years) | Gross Carrying | Accumulated Amortization | Net Carrying | ||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||||
| Customer relationships | ( | ) | ||||||||||||
| Non-compete | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
Intangible
assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was approximately $
| Years ending December 31, | ||||
| 2026 (remaining nine months) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ |
| 21 |
NOTE 10. GOODWILL
Goodwill
represents the excess of the purchase price over the fair value of net assets acquired in business combinations. As of March 31, 2026,
the Company had goodwill of $
The Company tests goodwill for impairment annually on September 30 or more frequently if there are indicators that the carrying amount of goodwill exceeds its estimated fair value.
Goodwill Impairment Assessment — Three Months Ended March 31, 2026
During the first quarter of 2026, the Company performed a qualitative assessment (Step 0) of goodwill impairment for its single reporting unit. No triggering events were identified during the quarter. In particular, the Company considered that its stock price as of March 31, 2026 remained near book value per share, and no adverse changes in macroeconomic conditions, industry trends, cost factors, or financial performance were observed.
Based on this qualitative assessment, management concluded that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. Accordingly, no quantitative impairment test was required, and the Company determined that goodwill was not impaired as of March 31, 2026.
Goodwill Impairment Assessment — Year Ended December 31, 2025
During
the fourth quarter of 2025, the Company’s stock price traded below its book value per share for a sustained period. As a decline
in market capitalization below book value is a potential indicator of impairment, management concluded that a triggering event had occurred,
necessitating an interim quantitative impairment test as of December 31, 2025. For this interim test, the fair value of the single reporting
unit was estimated using a combination of an income approach and a market approach, consistent with the methodology used in the annual
test. The Company used significant judgment to estimate the fair value of this single reporting unit including estimating future cash
flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions,
future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate. As of
December 31, 2025, the estimated fair value of the Company’s single reporting unit exceeded its carrying value. The income approach
and market approach yielded consistent fair value estimates, providing a sufficient margin of safety despite the recent decline in the
Company’s stock price. Accordingly,
The changes in the carrying amount of goodwill as of March 31, 2026 and December 31, 2025 are as follows:
| March 31, 2026 | December 31, 2025 | |||||||
| Beginning balance | $ | $ | ||||||
| Acquisitions | ||||||||
| Ending balance | $ | $ | ||||||
NOTE 11. INVESTMENT IN OTHER ENTITY-RELATED PARTY
The Company accounts for its investments in other entities under the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the entity. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable.
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with its former parent HCMC. Pursuant
to this agreement, the Company settled an intercompany receivable due from HCMC with a carrying value of approximately $
| 22 |
Initial Measurement
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Accordingly, the Company measured the investment at the carrying amount of the receivable surrendered. This treatment is consistent with the principle that when fair value cannot be determined within reasonable limits in a related party context, defaulting to the recorded amount of the asset relinquished is appropriate. The substance of this transaction is a conversion of intercompany funding to equity, not an income-generating event; therefore, no gain was recognized.
Ownership Changes During the Period
As
of December 31, 2025, HCMC had approximately billion shares of common stock outstanding. The Company held shares,
representing approximately
On
February 1, 2026, HCMC entered into a Stock Purchase and Satisfaction of Debt Agreement with a vendor, issuing shares of
common stock to settle $
Equity Method Assessment
Although the Company’s ownership interest in HCMC remains below the 20% presumptive threshold for significant influence, a member of the Company’s senior management serves as Chairman of the Board of HCMC. As of March 31, 2026, HCMC’s board consists of three members, and the Company continues to hold disproportionate board representation relative to its ownership percentage. This representation provides the Company with the ability to exercise significant influence over HCMC’s operating and financial policies. As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, the Company and HCMC have committed to separate their boards and management teams. As of March 31, 2026, this separation had not yet been completed. Accordingly, the investment continues to be accounted for using the equity method during the three months ended March 31, 2026.
Equity Method Loss Recognition
HCMC
has historically incurred net losses and continues to do so. For the three months ended March 31, 2026, HCMC reported a net loss of approximately
$
Summarized Financial Information of Equity Method Investee (HCMC)
As of March 31, 2026, the Company’s equity method
investment in HCMC represented approximately
| HCMC – Summarized Balance Sheet Information | 31-Mar-26 | December 31, 2025 | ||||||
| (Unaudited) | ||||||||
| Current assets | $ | $ | ||||||
| Noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Current liabilities | ||||||||
| Noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Redeemable convertible preferred stock | ||||||||
| Total stockholders’ deficit | ( | ) | ( |
) | ||||
| Total liabilities, redeemable convertible preferred stock and stockholders’ deficit | ||||||||
| Three Months Ended March 31, | ||||||||
| HCMC – Summarized Statement of Operations Information | 2026 | 2025 | ||||||
| Net sales | $ | $ | ||||||
| Cost of sales | $ | $ | ||||||
| Gross profit | $ | $ | ||||||
| Loss from operations | $ | ( | ) | $ | ( |
) | ||
| Net loss | $ | ( | ) | $ | ( |
) | ||
| 23 |
Impairment Assessment
The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To assess recoverability as of March 31, 2026, the Company performed an internal valuation of the investment. The internal valuation was based on the third-party valuation obtained as of December 31, 2025, adjusted for subsequent changes in the investee’s financial position, share issuances, and observable market prices as of March 31, 2026.
During the three months ended March 31, 2026, the Company recorded an impairment
loss of $
Related Party Considerations
HCMC is a related party as the Company’s former parent prior to the Spin-Off completed on September 13, 2024. Prior to the Spin-Off, the Company and HCMC were under common control and had significant intercompany relationships. Following the Spin-Off, the Company and HCMC continue to have common board representation and management overlap as described above. The terms of the settlement were negotiated and approved by the Company’s Board of Directors, which has a majority of independent directors.
Variable Interest Entities (Unconsolidated)
The Company has evaluated its investment in its former parent, HCMC, under ASC 810, Consolidation, and has determined that HCMC meets the definition of a VIE. HCMC is considered a VIE primarily due to its negative equity position, which indicates that the equity at risk is insufficient to permit the entity to finance its activities without additional subordinated financial support.
The Company holds a variable interest in HCMC through its ownership of approximately 8.3% of HCMC’s outstanding common stock as of March 31, 2026. The Company is not the primary beneficiary of HCMC because it does not have the power to direct the activities that most significantly impact HCMC’s economic performance. Such power resides with HCMC’s Board of Directors, of which the Company holds one of three seats, with independent directors holding the majority vote. Accordingly, the Company does not consolidate HCMC. We will continue to absorb portions of HCMC’s expected losses or gains commensurate with our 8.3% equity interest in HCMC, until we conclude we no longer hold a significant influence over HCMC, at which point we will consider whether the investment should be accounted for at fair value.
The Company’s maximum exposure to loss as a result of its involvement with this unconsolidated VIE is limited to its equity investment.
The carrying value of the investment as of March 31, 2026, reflects (i) the initial carrying value of $
NOTE 12. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At March 31, 2026 and December 31, 2025, accounts payable and accrued expenses consisted of:
| March 31, 2026 | December 31, 2025 | |||||||
| Trade creditors | $ | $ | ||||||
| Accrued expenses | ||||||||
| Total | $ | $ | ||||||
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NOTE 13. DEBT
A breakdown of the Company’s debt as of March 31, 2026 and December 31, 2025 is presented below:
| March 31, 2026 | December 31, 2025 | |||||||
| 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 $
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 $
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Acquisition Loan
On
July 18, 2024 (the “Loan Effective Date”), the Company entered into a loan and security agreement with a private lender for
a $
Throughout the year ended December 31, 2025 and first quarter of 2026, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with the holders of the Acquisition Loan (the “Noteholders”), who are unrelated third parties, to convert portions of the outstanding principal and accrued interest into shares of the Company’s Class A common stock. These conversions were accounted for as debt extinguishments. The difference between the carrying amount of the extinguished debt and the fair value of the common stock issued was recognized as a loss on debt extinguishment.
In
summary, as a result of these exchange agreements during the first quarter of 2026, the Company exchanged approximately $
The following table summarizes the conversion activity during the three months ended March 31, 2026, and during the year ended December 31, 2025:
| Exchange Agreement Date | Principal Converted | Shares Issued | ||||||
| October 24, 2025 | $ | |||||||
| February 10, 2026 | ||||||||
| Total converted in first quarter of 2026 | $ | |||||||
| Exchange Agreement Date | Principal Converted | Shares Issued | ||||||
| March 2, 2025 | $ | |||||||
| April 3, 2025 | ||||||||
| May 1, 2025 | ||||||||
| July 15, 2025 | ||||||||
| October 24, 2025 | ||||||||
| Total converted in year 2025 | $ | |||||||
As
a result of these debt conversions, the Company recorded a net loss on extinguishment of debt of approximately $
As
of March 31, 2026, the Company had $
Future Principal Payments
The Company may, at its option, at any time or from time to time prepay the outstanding principal amount or any accrued but unpaid interest, in each case in whole or in part, without penalty or premium, provided that any such prepayment of any outstanding amount of principal shall be accompanied by the payment of all accrued but unpaid interest on the amount of principal being prepaid, plus any costs and fees incurred.
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The following table summarizes the five-year repayment schedule:
| For the years ending December 31, | ||||
| 2026 (remaining nine months) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total | $ | |||
NOTE 14. LEASES
The
Company has various lease agreements with terms of up to
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of March 31, 2026
| Maturity of Lease Liabilities by Fiscal Year | Operating Leases | Finance Leases | ||||||
| 2026 (remaining nine months) | $ | $ | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total undiscounted operating lease payments | $ | $ | ||||||
| Less: Imputed interest | ( | ) | ( | ) | ||||
| Present value of lease liabilities | $ | $ | ||||||
In January 2026, the Company, through its wholly-owned subsidiary Healthy Choice Markets 2, LLC, renewed the lease for its store located in West Melbourne, Florida for a five-year term commencing January 1, 2026 through December 31, 2030. All other material terms of the original lease, including the Company’s obligation to pay its pro-rata share of real estate taxes, common area maintenance, insurance, and other operating expenses, remain in effect. The renewal was accounted for as a remeasurement of the existing lease liability and right-of-use asset as of January 1, 2026 using the Company’s incremental borrowing rate at that date.
The following table summarizes the Company’s operating leases:
| Balance Sheet Classification | March 31, 2026 | December 31, 2025 | ||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Finance lease right-of-use assets | ||||||||
| Total right-of-use assets | $ | $ | ||||||
| Operating lease liability, current | $ | $ | ||||||
| Finance lease liability, current | ||||||||
| Operating lease liability, net of current | ||||||||
| Finance lease liability, net of current | ||||||||
| Total lease liabilities | $ | $ | ||||||
The
amortization of the right-of-use assets of approximately $
The following table provides a summary of other information related to the leases at March 31, 2026 and December 31, 2025:
| Other Information | March 31, 2026 | December 31, 2025 | ||||||
| Weighted-average remaining lease term for operating leases | ||||||||
| Weighted-average discount rate for operating leases | % | % | ||||||
| Weighted-average remaining lease term for finance leases | ||||||||
| Weighted-average discount rate for finance leases | % | |||||||
Rent
expense for the three months ended March 31, 2026 and 2025 was approximately $
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The components of lease expenses for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Operating lease cost | $ | $ | ||||||
| Finance lease cost | ||||||||
| Variable lease cost | ||||||||
| Short-term lease cost | ||||||||
| Total lease expense | $ | $ | ||||||
The
aggregate cash payments under the leasing arrangements were approximately $
NOTE 15. RELATED PARTY TRANSACTIONS
The Company was spun off from HCMC (the “Former Parent”) on September 13, 2024. Prior to the Spin-Off, the Company did not operate as a stand-alone entity. Following the Spin-Off, the Company and the Former Parent operate as separate, publicly traded companies, though they remain related parties due to common ownership history and ongoing agreements.
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. Following the Spin-Off, HCWC and HCMC entered into a TSA, under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services were provided on a transitional basis and were expected to continue for a period of up to one year following the Spin-Off.
Management adopted a proportional cost allocation method to allocate HCMC expenses to the Company. The allocation method calculated 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 was 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 an equal amount of time managing HCMC and the Company. The Company believed the allocation methodology used was reasonable and had been consistently applied, and resulted in an appropriate allocation of costs incurred. However, these allocations were not necessarily indicative of the cost had the Company been a stand-alone entity or of future services.
Settlement of Related Party Receivable
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with HCMC, pursuant to which the Company
settled an outstanding $
Subsequent Activity – Due from Related Party
As of March 31, 2026, the Company had a due from related party balance
of approximately $
Agreements with HCMC
The Company entered into several agreements with the former parent that, among other things, effect the separation and govern the relationship of the parties following the Spin-Off. These agreements include:
| ● | a Separation Agreement that sets forth HCMC’s and the Company’s agreements regarding the principal actions that both parties 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 provide each other specified services on a transitional basis to help ensure an orderly transition following the Spin-Off. | |
| ● | a Tax Matters Agreement (“TMA”) that governs the respective rights, responsibilities and obligations of HCMC and the Company after the Spin-Off with respect to all tax matters and includes restrictions to preserve the tax-free status of the Spin-Off; and | |
| ● | an Employee Matters Agreement (“EMA”) that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs in which our employees participated prior to the Spin-Off. |
Under the terms of the transition services agreement, the HCMC provides to the Company, on a transitional basis, certain services or functions, including information technology, accounting, human resources, and payroll functions. Generally, these services will be provided for a period of up to one year following the Spin-Off. Consideration and costs for the transition services are determined using several billing methodologies as described in the agreements, including customary billing and pass-through billing. Costs for transition services provided by the former parent are recorded within the Condensed Consolidated Statements of Operations based on the nature of the services.
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NOTE 16. STOCKHOLDERS’ EQUITY
Spin-Off
HCMC announced on August 22, 2022 that its Board of Directors approved separation of the Grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC, which operated the Ada’s Natural Market, Paradise Health & Nutrition, Mother Earth’s Storehouse, Green’s Natural Foods, Ellwood Thompson’s, and GreenAcres Market retail brands, as well as licensed wellness centers and Healthy U Wholesale.
On the Spin-Off Date, after the NYSEAM market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock was traded on the NYSEAM under the stock symbol “HCWC.”
HCMC distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock. For each shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one (1) share of Class A common stock and three (3) shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.
Debt Conversion
During
2025 and the three months ended March 31, 2026, the Company converted approximately $
Series A Convertible Preferred Stock
The Company is authorized to issue shares of preferred stock with par value of $.
On
August 18, 2022, HCMC entered into a Securities Purchase Agreement (“HCMC Preferred Stock”) pursuant to which 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 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 $
On
November 11, 2025, the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to sell
shares of the HCWC Preferred Stock to investors for an aggregate subscription price of $
As
of March 31, 2026, the Company has sold $
Restricted Stock
On
August 19, 2025, the Compensation Committee of the Company’s Board of Directors approved the grant of an aggregate of
On
February 24, 2026, the Compensation Committee of the Board of Directors approved the grant of an aggregate of
shares of restricted Class A common stock to certain executive officers, directors, and employees under the Company’s 2024
Equity Incentive Plan. The restricted stock vests in eight equal quarterly installments over a two-year period, with full
acceleration upon a Change of Control or a Major Financing resulting in net proceeds to the Company in excess of $
As of March 31, 2026, million shares of restricted Class A common stock were issued, and shares were vested. For the three months ended March 31, 2026 and 2025, approximately $ and $ of stock-based compensation expense related to these awards were recognized in the accompanying condensed consolidated financial statements.
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The following table reflects the activity for all unvested restricted stocks during the three months ended March 31, 2026:
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Unvested at January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Unvested at December 31, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ( | ) | ||||
| Forfeited | ||||||||
| Unvested at March 31, 2026 | ||||||||
As of March 31, 2026, there was approximately $ of total unrecognized compensation cost related to unvested restricted stock awards granted under the 2024 Equity Incentive Plan. This cost is expected to be recognized over a weighted-average period of approximately years.
The Company accounts for forfeitures of restricted stock awards in accordance with ASC 718, Compensation—Stock Compensation. The Company has elected to account for forfeitures as they occur. Under this policy, compensation cost is recognized only for awards that ultimately vest. Shares that are forfeited due to an employee’s failure to satisfy a service condition (such as termination of employment prior to vesting) become available for future grant under the 2024 Equity Incentive Plan, consistent with the terms of the plan.
As of March 31, 2026, shares of class A common stock and shares of Series A Convertible Preferred Stock were outstanding.
NOTE 17. 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 March 31, 2026. With respect to legal costs, we record such costs as incurred.
NOTE 18. SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were available to be issued. Based upon this review, the Company identified the following subsequent event that would have required disclosure in the condensed consolidated financial statements.
On
April 1, 2026, the Company converted $
On May 6, 2026, the Company converted
$
On
May 11, 2026, the Company converted $
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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. (“Ada’s Natural Market”), Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), Healthy Choice Markets IV, LLC (“Green’s Natural Foods”), Healthy Choice Markets V, LLC (“Ellwood Thompson’s), Healthy Choice Markets VI, LLC (GreenAcres Market), Healthy Choice Wellness, LLC, 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:
| ● | Healthy Choice Markets, Inc. (DBA Ada’s Natural Market), a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 2, LLC (DBA Paradise Health & Nutrition), operating three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. |
| ● | Healthy Choice Markets 3, LLC (DBA Mother Earth’s Storehouse), an organic and health food and vitamin chain in New York’s Hudson Valley, which has been in existence for over 40 years. |
| ● | Healthy Choice Markets IV, LLC (DBA Green’s Natural Foods), managing eight stores in New York and New Jersey, offering a selection of 100% organic produce, all-natural and non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products. |
| ● | Healthy Choice Markets V, LLC (DBA Ellwood Thompson’s), an organic and natural health food and vitamin store located in Richmond, Virginia. |
| ● | Healthy Choice Markets VI, LLC (DBA GreenAcres Market), an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market offers organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands. |
Through its wholly owned subsidiary, Healthy U Wholesale 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 outflows from operations this quarter. As of March 31, 2026, the Company had cash and cash equivalents of approximately $2.3 million and negative working capital of $4.1 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 March 31, 2026 and 2025 that is used in the following discussions of our results of operations:
| Three Months Ended March 31, | 2026 to 2025 | |||||||||||
| 2026 | 2025 | Change $ | ||||||||||
| SALES | $ | 18,245,038 | $ | 20,259,606 | $ | (2,014,568 | ) | |||||
| COST OF SALES | 11,311,193 | 12,407,696 | (1,096,503 | ) | ||||||||
| GROSS PROFIT | 6,933,845 | 7,851,910 | (918,065 | ) | ||||||||
| OPERATING EXPENSES, NET | 8,549,384 | 8,261,585 | 287,799 | |||||||||
| LOSS FROM OPERATIONS | (1,615,539 | ) | (409,675 | ) | (1,205,864 | ) | ||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Loss on debt extinguishment | (176,806 | ) | (7,500 | ) | (169,306 | ) | ||||||
| Other (expense) income, net | (2,874 | ) | 2,496 | (5,370 | ) | |||||||
| Interest expense, net | (192,555 | ) | (297,731 | ) | 105,176 | |||||||
| Equity method loss | (65,507 | ) | - | (65,507 | ) | |||||||
| Impairment loss on equity method investment | (1,623,922 | ) | - | (1,623,922 | ) | |||||||
| TOTAL OTHER EXPENSES, NET | (2,061,664 | ) | (302,735 | ) | (1,758,929 | ) | ||||||
| NET LOSS | $ | (3,677,203 | ) | $ | (712,410 | ) | $ | (2,964,793 | ) | |||
Net sales decreased $2.0 million to $18.2 million for the three months ended March 31, 2026 as compared to $20.2 million for the same period in 2025. The decrease consisted of a same-store sales decrease of $2.2 million, partially offset by a $0.2 million increase in CO-OP revenue.
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Cost of goods sold for the three months ended March 31, 2026 and 2025 were $11.3 million and $12.4 million, respectively. The decrease was driven by a $2.2 million reduction in net sales, which directly lowered variable cost of goods sold. Gross margin decreased 0.8 percentage points to 38.0% from 38.8% in the prior year period, primarily due to unfavorable product mix.
Total operating expenses for the three months ended March 31, 2026 and 2025 were $8.5 million and $8.3 million, respectively. The $0.2 million increase was primarily attributable to stock-based compensation expense, which was not incurred in the prior year period.
Total other expenses, net for the three months ended March 31, 2026 were $2.1 million, consisting of net interest expense of approximately $0.2 million, loss on debt extinguishment of approximately $0.2 million, equity method loss of approximately $0.1 million, and impairment loss on equity method investment of $1.6 million. Total other (expenses) income, net of $0.3 million for the three months ended March 31, 2025 consists of net interest expense of $0.3 million, other miscellaneous income of approximately $2,000, offset by $8,000 loss on debt extinguishment.
Lease Commitments, Known Trends and Uncertainties
As of March 31, 2026, the Company has operating lease obligations totaling $10.0 million, with a weighted-average remaining term of 3 years and a weighted-average discount rate of 5.52%. Rent expense for the three months ended March 31, 2026 was approximately $1.0 million, consistent with the same period in 2025. Future rent expense may be affected by lease expirations and new commitments at market rates, as well as fluctuations in property taxes, which have trended lower in the current year. Rising interest rates could increase the cost of future lease obligations, as evidenced by the increase in the weighted-average discount rate to 5.52% from 5.30% in the prior year.
As of March 31, 2026, the Company holds an equity method investment in its former parent HCMC, with a carrying value of approximately $2.3 million. During the three months ended March 31, 2026, the Company recorded an impairment loss of $1,623,922 on its equity method investment due to an adverse PTAB IPR ruling that materially reduced the fair value of the investee. The fair value was estimated using a multi-method approach under ASC 820, incorporating observable transaction prices and a probability-weighted litigation model. Key assumptions used in the valuation included the probability of successful outcomes in the investee’s pending litigation, the timing and amount of future cash flows, and the discount rate applied. The impairment loss is included in other income (expense) in the condensed consolidated statement of operations. Future adverse developments in the investee’s litigation, continued operating losses, further dilution of the Company’s ownership percentage, or a sustained decline in the investee’s market value could result in additional material impairment charges in future periods.
Liquidity and Capital Resources
The following table summarizes the Company’s cash flows for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) provided by | ||||||||
| Operating activities | $ | (199,615 | ) | $ | 1,092,748 | |||
| Investing activities | (184,816 | ) | (1,094,003 | ) | ||||
| Financing activities | (285,677 | ) | (262,799 | ) | ||||
| $ | (670,108 | ) | $ | (264,054 | ) | |||
Our net cash used in operating activities of approximately $0.2 million for the three months ended March 31, 2026 resulted from a net loss of $3.7 million and a net cash usage of $0.4 million from changes in operating assets and liabilities, offset by a non-cash adjustment of $3.9 million. Our net cash provided by operating activities of approximately $1.1 million for the three months ended March 31, 2025 resulted from a net loss of $0.7 million, offset by a non-cash adjustment of $2.0 million and a net cash usage of $0.2 million from changes in operating assets and liabilities.
The net cash used in investing activities of $0.2 million for the three months ended March 31, 2026 consists of $0.1 million cash advance to related party and $0.1 million purchases of property and equipment. The net cash used in investing activities of $1.1 million for the three months ended March 31, 2025 consists of $1.0 million payment to related party and $0.1 million purchases of property and equipment.
Net cash used in financing activities for both the three months ended March 31, 2026 and 2025 consists of $0.3 million in principal payments on loan payable.
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At March 31, 2026 and December 31, 2025, we did not have any material financial guarantees or other contractual commitments with vendors that are reasonably likely to have an adverse effect on liquidity.
Our cash 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 March 31, 2026 and December 31, 2025.
| March 31, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalents | $ | 2,349,510 | $ | 3,019,618 | ||||
| Total assets | $ | 29,703,162 | $ | 33,497,719 | ||||
| Cash and cash equivalents as a percentage of total assets | 7.9 | % | 9.0 | % | ||||
The Company reported a net loss of $3.7 million for the three months ended March 31, 2026. The Company also had negative working capital of $4.1 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 and assumptions include promotional discounts, manufacturer coupons and rebates, return allowances that are netted against revenue, useful lives and impairment of long-lived assets, goodwill and impairment, equity method investments and equity method investments impairment, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, stock-based compensation, 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.
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Reconciliation from net loss to adjusted EBITDA: | ||||||||
| Net loss | $ | (3,677,203 | ) | $ | (712,410 | ) | ||
| Interest expense | 192,555 | 297,731 | ||||||
| Depreciation and amortization | 389,483 | 429,990 | ||||||
| EBITDA | (3,095,165 | ) | 15,311 | |||||
| Loss on debt settlement | 176,806 | - | ||||||
| Equity method loss | 65,507 | - | ||||||
| Impairment loss on equity method investment | 1,623,922 | - | ||||||
| Stock compensation | 236,169 | - | ||||||
| Other (expenses) income, net | 2,874 | 5,004 | ||||||
| Adjusted EBITDA | $ | (989,887 | ) | $ | 20,315 | |||
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 2025 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 March 31, 2026 in regard to the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. 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.
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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 March 31, 2026 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. |
| ● | Lack of Formal Related Party Transaction Policy: The Company did not maintain a formal written policy and related controls for the timely identification, evaluation, and accounting treatment of transactions with related parties. The absence of this formal framework resulted in the initial misapplication of accounting guidance for a significant related party transaction during the year. In addition, during the first quarter of 2026, the Company impaired this investment by $1,623,922. Management initially had not identified an impairment charge because of a recent negative decision issued by the Patent Trial and Appeal Board (“PTAB”) in the Inter Parties Review (“IPR”) proceeding initiated by R.J. Reynolds Vapor Company against HCMC. The Company will appeal this decision. However, this triggering event should have been evaluated and reflected in the Company’s impairment analysis. |
| ● | Ineffective Controls over Statement of Cash Flows Preparation: Controls over the preparation and review of the statement of cash flows were ineffective, resulting in the misclassification of cash flows related to advances made to a related party. |
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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 March 31, 2026 based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Planned Remediation
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, management identified material weaknesses in our internal control over financial reporting and initiated an action plan to remediate these deficiencies. During the three months ended March 31, 2026, we continued to execute on this plan. Progress during the quarter included the following:
| ● | Segregation of Duties and Journal Entry Review: Remediation of this control is dependent upon the remediation of information technology general controls (“ITGCs”), specifically the removal or mitigation of super user privileges within the Company’s accounting systems that currently allow certain individuals to create, approve, and post journal entries without independent review. During the quarter, the Company began developing a formal journal entry review process, including requirements for independent preparer and reviewer sign-offs. However, because super user privileges remain in place, segregation of duties has not yet been achieved, and individual journal entries were not subject to effective independent review during the quarter. The Company expects to complete remediation of ITGCs and implement the journal entry review process in a future period. | |
| ● | Information Technology General Controls: The Company continued to develop its comprehensive IT control framework. Periodic access rights reviews for networks and applications are underway. Enhanced physical security and environmental controls over servers at all locations have been deployed. The formal cybersecurity assessment is progressing, with mandatory training and phishing exercises being conducted, and cybersecurity insurance has been obtained. Work continues on establishing controls for IT program and data changes affecting financial applications, as well as procedures for reviewing third-party service provider SOC reports and enforcing Service-Level Agreements. | |
| ● | Related Party Transactions: The Company is finalizing a formal written policy for the identification, evaluation, approval, and accounting treatment of related party transactions. Implementation of this policy is expected during the second quarter of 2026. In addition, the Company is implementing enhanced procedures for the timely identification and evaluation of impairment indicators, including formal quarterly reviews of investee-specific events and documented assessments of their impact on fair value. | |
| ● | Statement of Cash Flows Preparation and Review: Enhanced procedures for the preparation and review of the statement of cash flows, including specific review protocols for related party transactions and other non-routine items, continue to be refined and applied. The Company continues to engage external consultants, as needed, to assist with complex accounting matters and provide independent review of significant transactions. |
We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Controls over Financial Reporting
During the three months ended March 31, 2026, there were no significant changes in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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 March 31, 2026. With respect to legal costs, we record such costs as incurred.
ITEM 1A. RISK FACTORS.
Not Applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
For the three months ended March 31, 2026, the Company issued 2,835,075 shares of Class A common stock to the Holders in exchange for approximately $0.8 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. On November 11, 2025, the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to sell 2,000 shares of the HCWC Preferred Stock to investors for an aggregate subscription price of $2,000,000. The HCWC Preferred Stock is currently convertible into 1,449,275 shares of the Company’s Class A Common Stock at a conversion price of $1.38 per share. 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
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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: May 15, 2026 | By: | /s/ Jeffrey Holman |
| Jeffrey Holman | ||
| Chief Executive Officer | ||
| Date: May 15, 2026 | By: | /s/ John Ollet |
| John Ollet | ||
| Chief Financial Officer | ||
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Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Jeffrey Holman, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Healthy Choice Wellness Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 15, 2026
| /s/ Jeffrey Holman | |
| Jeffrey Holman | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, John Ollet, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Healthy Choice Wellness Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 15, 2026
| /s/ John Ollet | |
| John Ollet | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Healthy Choice Wellness Corp. (the “Company”) on Form 10-Q for the period ending March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof, I, Jeffrey Holman, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and | |
| 2. | The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 15, 2026
| /s/ Jeffrey Holman | |
| Jeffrey Holman | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Healthy Choice Wellness Corp. (the “Company”) on Form 10-Q for the period ending March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof, I, John Ollet, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| 1. | The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and | |
| 2. | The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 15, 2026
| /s/ John Ollet | |
| John Ollet | |
| Chief Financial Officer | |
| (Principal Financial Officer) |