Healthier Choices Management Corp.

Previous wording

On September 13, 2024, HCMC completed the Spin-off of our Grocery business into an independent publicly traded company HCWC. As a result, the operating results for the HCWC through the date of the Spin-off are reported in Loss from Discontinued Operations in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets.

Current wording

On September 13, 2024, HCMC completed the Spin-off of our Grocery business into an independent publicly traded company HCWC. As a result, the operating results for the HCWC through the date of the Spin-off are reported in Net Loss from Discontinued Operations in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets.

Previous wording

Healthier Choices Management Corp. is a holding company focused on monetizing its intellectual property through royalty and licensing agreements, facilitated by its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. HCMC’s IP portfolio includes patents related to innovative products, such as the Q-Cup and Imitine, which the company actively markets. In addition, HCMC is engaged in legal actions against major companies like Philip Morris and R.J. Reynolds for patent infringement.

Current wording

Healthier Choices Management Corp. is a holding company focused on monetizing its intellectual property through royalty and licensing agreements, facilitated by its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. HCMC’s IP portfolio includes patents related to innovative products, such as the Q-Cup and Imitine, which the company actively markets. In addition, HCMC is engaged in legal actions against R.J. Reynolds for patent infringement.

Previous wording

The Company currently and historically has reported net losses and cash outflows from operations. As of September 30, 2024, the Company had cash and cash equivalent of approximately $2.5 million and positive working capital of $0.2 million. The Company’s liquidity needs through September 30, 2024 have been satisfied through financing agreement with private lenders.

Current wording

The Company currently and historically has reported net losses and cash outflows from operations. As of March 31, 2025, the Company had cash and cash equivalent of approximately $1.2 million and negative working capital of $1.7 million. The Company’s liquidity needs through March 31, 2025 have been satisfied through financing agreement with private lenders.

Previous wording

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. Our customers associate certain characteristics of our products including the weight, feel, draw, unique flavor, packaging and other attributes of our products to the brands we market, distribute and sell. 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 wording

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.

Previous wording

Total operating expenses of $2.1 million for the three months ended September 30, 2024 remained consistent with the same period in 2023.

Current wording

Total operating expenses of $2.2 million for the three months ended March 31, 2025 remained consistent with the same period in 2024.

Previous wording

Total other income (expense), net of $275,000 for the three months ended September 30, 2024 consists of net interest income of $15,000, and $260,000 reversal of accrued professional fee. Total other income (expense), net of $65,000 for the three months ended September 30, 2023 primarily consists of interest income of $75,000, and other expense of $11,000.

Current wording

Total other income (expense), net of $14,000 for the three months ended March 31, 2025 consists of $23,000 loss on asset disposal offset by net interest income of $9,000. Total other income (expense), net of $43,000 for the three months ended March 31, 2024 primarily consists of interest income of $44,000, and loss on investment of $1,000.

Previous wording

The following table sets forth our unaudited consolidated statements of cash flows on continuing basis for the nine months ended September 30, 2024 and 2023.

Current wording

The following table and the discussion present the Company’s cash activities on continuing basis for three months ended March 31, 2025 and 2024:

Previous wording

Our net cash provided by operating activities of approximately $1.0 million for the nine months ended September 30, 2024 resulted from a net loss of $5.9 million, offset by a non-cash adjustment of $3.6 million and a net cash change of $3.4 million from changes in operating assets and liabilities. Our net cash used in operating activities of approximately $2.4 million for the nine months ended September 30, 2023 resulted from a net loss of $5.1 million, offset by a non-cash adjustment of $2.4 million and a net cash change of $0.4 million from changes in operating assets and liabilities.

Current wording

Our net cash used in operating activities of approximately $1.0 million for the three months ended March 31, 2025 resulted from a net loss of $2.2 million, offset by a non-cash adjustment of $1.2 million and a net cash change of $40,000 from changes in operating assets and liabilities. Our net cash provided by operating activities of approximately $0.2 million for the three months ended March 31, 2024 resulted from a net loss of $2.2 million, offset by a non-cash adjustment of $1.2 million and a net cash change of $1.2 million from changes in operating assets and liabilities.

Previous wording

The net cash used in investing activities of $47,000 for the nine months ended September 30, 2024 resulted from purchases of property and equipment. The net cash provided by investing activities of $176,000 for the nine months ended September 30, 2023 resulted from collection on a note receivable and purchases of property and equipment.

Current wording

There was no cash used in investing activities for the three months ended March 31, 2025. The net cash used in investing activities of $47,000 for the three months ended March 31, 2024 resulted from purchases of property and equipment.

Previous wording

The net cash used in financing activities of $2.1 million for the nine months ended September 30, 2024 is primarily due to $4.1 million net transfer to HCWC related to Spin-Off and $2.0 million cash proceeds from related party. Net cash used in financing activities of approximately $13.7 million for the nine months ended September 30, 2023 is due to Series E Preferred Stock redemption and exercise, payment for deferred offering cost related with Spin-Off, and net parent investment.

Current wording

The net cash provided by financing activities of $0.5 million for the three months ended March 31, 2025 is primarily due to $1.0 million net transfer from HCWC and $0.5 million cash payment of the credit line. Net cash used in financing activities of approximately $0.9 million for the three months ended March 31, 2024 is due to $0.7 million investment in HCWC and $0.2 million payment for deferred offering cost related with Spin-Off.

Previous wording

The Company reported a net loss from continuing operation of $5.9 million for the nine months ended September 30, 2024. The Company also had positive working capital of $0.2 million. The Company expects to continue incurring losses for the foreseeable future.

Current wording

The Company reported a net loss from continuing operation of $2.2 million for the three months ended March 31, 2025. The Company also had negative working capital of $1.8 million. The Company expects to continue incurring losses for the foreseeable future.

Previous wording

There have been no material changes to the Company’s critical accounting policies and estimates except allocation of corporate general expense as compared to the critical accounting policies and estimates described in the 2023 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. Allocation of corporate general expenses to HCWC was a result of recently completed spin-Off of HCWC, which led to a reevaluation of how corporate general expenses were allocated. The Company adopted a proportional cost allocation method to allocate parent expense to the carve-out entity.

Current wording

There have been no material changes to the Company’s critical accounting policies and estimates except allocation of corporate general expense as compared to the critical accounting policies and estimates described in the 2024 Annual Report, which we believe are the most critical to our business and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the preparation of our condensed consolidated financial statements. Allocation of corporate general expenses to HCWC in year 2024 was a result of recently completed spin-Off of HCWC, which led to a reevaluation of how corporate general expenses were allocated. The Company adopted a proportional cost allocation method to allocate parent expense to the carve-out entity. There was no expense allocation for the three months ended March 31, 2025.