Healthier Choices Management Corp.
For the period ended Dec 31, 2024. Filed Apr 14, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Apr 14, 2025
HCMCStored price and day change unavailable
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-27.
0001493152-24-011537
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-04-14.
0001641172-25-004607
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 47 previous paragraphs and 43 current paragraphs.
25 unchanged; 9 reworded; 9 added; 13 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Pending Patent: We have developed, trademarked and are preparing to commercialize additional products. We include product development expenses as part of our operating expenses. In October 2018, we announced the granting of three US patents related to our Q-Cup™ technology. In addition, we have a suite of patent applications pending in the United States. There is no assurance that we will be awarded patents for any of these pending patent applications. There is no assurance that we can monetize the patents.
Current report
Manufacturing: We have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products to meet our design specifications. We depend on third party manufacturers for our vaporizer e-liquid and accessories. Any interruption in supply and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several third-party manufacturers to manufacture our products to our specifications.
Current report
Net sales and cost of sales were de minimis for the years ended December 31, 2024 and 2023. The Company closed all its brick-and-mortar retail vape stores, as management had shifted its retail sales focus to the wholesale and online channel. The Company wrote off approximately $66,600 obsolete inventory in year 2024 as a result of the retail store closure. The sales for the years ended December 31, 2024 and 2023 continued to be significantly impacted by the inability to bring new products to market via distribution.
Current report
Total other income (expenses), net of $0.4 million for the year ended December 31, 2024 includes $0.3 million of other income and interest income of $0.1 million, offset by approximately $1,000 loss on investment. Net other expense of $1.1 million for the year ended December 31, 2023 includes $1.5 million provision for legal settlement in connection with alleged claimed battery defects for an electronic cigarette device, and $8,500 loss on investment, offset by $0.4 million of interest income.
Current report
The following table and the discussion present the Company’s cash activities on continuing basis as of December 31, 2024 and December 31, 2023.
Current report
On November 7, 2024, the Company entered into a commitment letter with an investor that will allow the Company to draw up to $5 million from a revolving credit facility (the “Facility”) through August 31, 2025. Any advances will be used for working capital purposes. Any amounts borrowed pursuant to the Facility will be repayable in full on April 30, 2026 and the interest rate on the amounts borrowed is 12% per annum. The Company anticipates its current cash and its ability to draw from the $5 million credit line with private lender will be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements.
Current report
Climate-Related Considerations
Current report
We have evaluated the potential impact of climate change on our business, including regulatory, physical, and market-related risks. Based on our assessment, we do not believe that climate change currently poses a material risk to our operations or financial performance. Our retail sales operations are not significantly affected by climate-related factors, such as extreme weather or emissions regulations. Nevertheless, we will continue to monitor any developments that could indirectly impact on our business, such as changes in consumer behavior or supply chain disruptions related to climate change.
Current report
The following table presents the Company’s Adjusted EBITDA reconciliation on continuing basis as of December 31, 2024 and December 31, 2023.
Removed paragraphs (13)
Previous report
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, as well as ten located in New York and New Jersey. The Company closed its last 4 remaining retail vape stores during the calendar year ended December 31, 2022, as management had shifted its retail sales focus to the wholesale and online channel. The adverse industry trends and increasing federal and state regulations that, if implemented, may negatively impact future wholesale and online operations in vapor segment.
Previous report
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 our operating results in the future.
Previous report
Net vapor sales decreased $0.3 million to $0.6 thousand for the year ended December 31, 2023 as compared to $0.3 million for the same period in 2022. The decrease in sales was primarily due to closing all our retail vape stores throughout 2022, as management shifted its retail sales focus to the wholesale and online channel. The sales for 2023 were significantly impacted by technical issues associated with the processing of credit card payments on the Q-Cup.com website and the inability to bring new products to market via distribution. Net grocery sales increased $26.6 million to $55.7 million for the year ended December 31, 2023 as compared to $29.0 million for the same period in 2022. The $27.6 million increase in grocery sales was primarily a result of a full year operations for the year ended December 31, 2023 of Mother Earth’s Storehouse acquired in February 2022, Green’s Natural Foods acquired in October 2022 and the acquisition of Ellwood Thompson’s in October 2023, offset by a decrease in same-store sales of $1.0 million.
Previous report
Vapor cost of goods sold for the year ended December 31, 2023 and 2022 were $0.01 million and $0.1 million, respectively, a decrease of $0.1 million. The decrease in cost of goods sold was primarily due to closing all of our retail vape stores throughout 2022, as management shifted its retail sales focus to build the wholesale and online channel. Grocery store cost of goods sold for the year ended December 31, 2023 and 2022 were $35.3 million and $18.9 million, respectively, an increase of $17.5 million was primarily a result of full year operations in 2023 of Mother Earth’s Storehouse acquired in February 2022, Green’s Natural Foods acquired in October 2022 and the acquisition of Ellwood Thompson’s in October 2023, offset by a decrease in same-store cost of goods sold of $1.1 million.
Previous report
The Company had an impairment of $6.1 million for the year ended December 31, 2023. The Company experienced recurring losses coupled with the reduction in same store revenue, a highly competitive industry and certain operational costs that have impacted our expectations such that future growth and profitability is lower than previous estimates. Furthermore, during the fourth quarter of 2023, the Company operated with negative working capital which, although not a determinant on its own, when combined with the other factors indicated that the Company’s goodwill of $6.1 million was determined to be impaired for the year ended December 31, 2023.
Previous report
Total other (expenses) income, net of $0.5 million for the year ended December 31, 2023 includes $0.8 million of other income related to the change in fair value of the contingent consideration with Green’s Natural Foods seller’s earn-out, interest income of $0.2 million, offset by $0.01 million loss on investment, and $1.5 million provision for probable and estimable legal matter issue. Net other income of $1.5 million for the year ended December 31, 2022 includes a gain on employee retention tax credit of $0.9 million, change in fair value of the contingent consideration with Green’s Natural Foods seller’s earn-out of $0.3 million, and interest income of $0.2 million, offset by $0.01 million loss on investment.
Previous report
Impairment of Long-Lived Assets
Previous report
We review long-lived assets for impairment including intangible assets with determinable useful lives whenever events or changes in circumstances indicate that the carrying value of the corresponding asset group may not be realizable. The Company estimated future undiscounted cash flows associated with the asset group are compared to the asset group’s carrying amount to determine if an impairment of such asset is necessary. This requires us to make long-term forecasts of the future revenues and costs related to the assets groups subject to review. Forecasts require assumptions about demand for our products and future market conditions. Estimating future cash flows requires significant judgment, and our projections may vary from cash flows eventually realized. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. The effect of any impairment would be reflected in operating income in the Consolidated Statements of Operations. In addition, we estimate the useful lives of our long-lived assets and other intangibles and periodically review these estimates to determine whether these lives are appropriate.
Previous report
Goodwill
Previous report
Goodwill is the excess of consideration paid for an acquired entity over the fair value of the amounts assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the company hires third party valuation firm to perform valuation and assessment to determine the acquisition date fair value of the acquired company’s tangible and identifiable intangible assets and liabilities.
Previous report
Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If the entity determines that this threshold is met, then the company may apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The company determines fair value through multiple valuation techniques and weights the results accordingly. The company is required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of its reporting units. The company has elected to perform its annual goodwill impairment review on September 30 of each year or more often if deemed necessary.
Previous report
Business Combinations
Previous report
The Company applies the provisions of ASC Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts. Acquisition costs are expensed as incurred and recorded in selling, general and administrative expenses in the consolidated statements of operations.
Reworded paragraphs (9)
Previous wording
The following table sets forth our Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 which is used in the following discussions of our results of operations:
Current wording
The following table sets forth our Consolidated Statements of Operations on a continuing basis for the years ended December 31, 2024 and 2023 which is used in the following discussions of our results of operations:
Previous wording
Total selling, general and administrative expenses increased $13.3 million from $18.9 million for the year ended December 31, 2022 to $32.2 million for the year ended December 31, 2023. The increase of $11.3 million was a result of full year operations for the year ended December 31, 2023 of Mother Earth’s Storehouse acquired in February 2022, Green’s Natural Foods acquired in October 2022 as well as the acquisition of Ellwood Thompson’s in October 2023. The remaining increase was primarily due to an increase in stock compensation of $3.4 million, offset by $0.8 million decrease in professional fees, coupled with a decrease in headquarter payroll and payroll benefits of $0.6 million.
Current wording
Total selling, general and administrative expenses increased $1.0 million from $7.5 million for the year ended December 31, 2023 to $8.4 million for the year ended December 31, 2024. The increase was primarily due to an increase in stock compensation.
Previous wording
Our net cash used in operating activities of $4.7 million for the year ended December 31, 2023 resulted from our net loss of $18.5 million and a net cash usage of $1.9 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $15.6 million. Our net cash used in continuing operating activities of $3.8 million for the year ended December 31, 2022 resulted from our net loss of $7.2 million and a net cash usage of $0.2 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $3.5 million.
Current wording
Our net cash used in operating activities of $0.6 million for the year ended December 31, 2024 resulted from our net loss of $8.1 million and a net cash provided by changes in operating assets and liabilities of $2.8 million, and a non-cash adjustment of $4.8 million. Our net cash used in continuing operating activities of $2.2 million for the year ended December 31, 2023 resulted from our net loss of $8.6 million, a net cash provided by changes in operating assets and liabilities of $2.7 million, and a non-cash adjustment of $3.7 million.
Previous wording
The net cash used in investing activities of $0.8 million for the year ended December 31, 2023 resulted from the acquisition of Ellwood Thompson’s, the collection of a note receivable, and purchases of a patent and property and equipment. The net cash used in investing activities of $10.7 million for the year ended December 31, 2022 resulted from the collection of a note receivable, the acquisition of new businesses and purchases of a patent and property and equipment.
Current wording
The net cash used in investing activities of $47,000 for the year ended December 31, 2024 resulted from purchases of property and equipment. The net cash provided by investing activities of $161,000 for the year ended December 31, 2023 resulted from the collection of a note receivable of $178,000, offset by purchases of a patent and property and equipment of $17,000.
Previous wording
The net cash used in financing activities of $13.5 million for the year ended December 31, 2023 is due to Series E Preferred Stock redemptions and exercises, payment for deferred offering cost related with the spin off, and principle payment on loan payable. The net cash provided by financing activities of $12.8 million for the year ended December 31, 2022 is due to proceeds received from Securities Purchase Agreement of $12.8 million, partially offset by a principal payment of $0.09 million on promissory note.
Current wording
The net cash used in financing activities of $1.8 million for the year ended December 31, 2024 is due to $4.1 million net transfer to HCWC related to Spin-Off and $2.3 million cash proceeds from related party. The net cash used in financing activities of $16.4 million for the year ended December 31, 2023 is due to Series E Preferred Stock redemptions and exercises, payment for deferred offering cost related with the spin off, and net parent investment.
Previous wording
Our cash balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. The majority of our cash are concentrated in one large financial institution and are generally in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company has not experienced any losses on its cash and cash equivalents. The following table presents the Company’s cash position as of December 31, 2023 and December 31, 2022.
Current wording
Our cash balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. The majority of our cash are concentrated in one large financial institution and are generally in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company has not experienced any losses on its cash and cash equivalents. The following table presents the Company’s cash position on continuing basis as of December 31, 2024 and December 31, 2023.
Previous wording
As of December 31, 2023, the Company had cash of $5.1 million and negative working capital of $0.5 million. The Company has incurred recurring net losses and operations have not provided cash flows. The Company expects to continue incurring losses for the foreseeable future and may need to raise additional capital to satisfy business obligations, and to continue as a going concern. We believe that current cash on hand and cash flow from operations will not be sufficient to fund our working capital and other cash requirements over the next twelve months.
Current wording
As of December 31, 2024, the Company had cash of $1.2 million and negative working capital of $0.7 million. The Company has incurred recurring net losses and operations have not provided cash flows. The Company expects to continue incurring losses for the foreseeable future.
Previous wording
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. These estimates and assumptions include useful lives and impairment of long-lived assets, goodwill, deferred taxes and related valuation allowances, and the valuation of the assets and liabilities acquired in business combinations. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the financial statements and actual results could differ from the estimates and assumptions.
Current wording
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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. These estimates include useful lives and impairment of long-lived assets, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. We 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.
Previous wording
The following discussion and analysis contains 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 generally accepted accounting principles (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.
Current wording
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 generally accepted accounting principles (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.