UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2025

 

Or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____

 

Commission file number: 001-42274

 

HEALTHY CHOICE WELLNESS CORP.

(Exact name of Registrant as specified in its charter)

 

Delaware		88-4128927
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
3800 North 28th Way, Unit# 1 Hollywood, Florida		33020
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: 305-600-5004

 

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.

 

☒ Yes ☐ No

 

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).

 

☒ Yes ☐ No

 

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	☐
Non-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 ☒ No

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		HCWC		NYSE American

 

As of May 9, 2025, there were 12,152,113 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 

TABLE OF CONTENTS

 

	PAGE
PART I FINANCIAL INFORMATION	3
ITEM 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024	3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	4
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	32
ITEM 4. Controls and Procedures	32
PART II OTHER INFORMATION	34
ITEM 1. Legal Proceedings	34
ITEM 1A. Risk Factors	34
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
ITEM 3. Defaults Upon Senior Securities	34
ITEM 4. Mine Safety Disclosures	34
ITEM 5. Other Information	34
ITEM 6. Exhibits	34
Signatures	35
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HEALTHY CHOICE WELLNESS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31, 2025				December 31, 2024
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	1,792,418			$	2,056,472
Accounts receivable, net			471,127				509,763
Inventories			7,042,303				6,445,560
Prepaid expenses and vendor deposits			252,331				475,088
Due from related party			1,159,251				190,268
Other current assets			199,426				29,806
TOTAL CURRENT ASSETS			10,916,856				9,706,957
Property, plant, and equipment, net			1,968,596				1,976,469
Intangible assets, net			5,144,950				5,441,478
Goodwill			2,212,000				2,212,000
Right of use assets			13,314,626				14,232,240
Other assets			528,181				543,373
TOTAL ASSETS		$	34,085,209			$	34,112,517
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	7,971,627			$	6,131,534
Contract liabilities			41,576				80,456
Current portion of loan payable			1,697,545				2,131,336
Operating lease liability, current			3,641,723				3,596,987
TOTAL CURRENT LIABILITIES			13,352,471				11,940,313
Loan payable, net of current portion			8,945,746				9,207,772
Operating lease liability, net of current			9,661,901				10,584,431
TOTAL LIABILITIES			31,960,118				31,732,516
COMMITMENTS AND CONTINGENCIES (SEE NOTE 18)			-
STOCKHOLDERS’ EQUITY
Common Stock, $0.001 par value per share, 560,000,000 shares authorized; 10,575,749 and 9,815,749 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.			10,566				9,816
Series A convertible preferred stock, $0.001 par value per share, 40,000,000 shares authorized, 0 share issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.			-				-
Additional paid-in capital			3,557,842				3,101,092
Accumulated deficit			(1,443,317	)			(730,907	)
TOTAL STOCKHOLDERS’ EQUITY			2,125,091				2,380,001
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	34,085,209			$	34,112,517

 

See notes to unaudited condensed consolidated financial statements

 

 

HEALTHY CHOICE WELLNESS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended March 31,
		2025				2024
SALES, NET		$	20,259,606			$	15,894,358
COST OF SALES			12,407,696				9,839,981
GROSS PROFIT			7,851,910				6,054,377
OPERATING EXPENSES, NET			8,261,585				6,656,123
LOSS FROM OPERATIONS			(409,675	)			(601,746	)
OTHER INCOME (EXPENSE)
Loss on debt extinguishment			(7,500	)			-
Other income, net			2,496				3,355
Interest expense, net			(297,731	)			(103,072	)
TOTAL OTHER INCOME (EXPENSE)			(302,735	)			(99,717	)
LOSS BEFORE TAXES			(712,410	)			(701,463	)
INCOME TAX BENEFIT			-				-
NET LOSS		$	(712,410	)		$	(701,463	)
BASIC AND DILUTED NET LOSS PER SHARE		$	(0.07	)		$	(0.08	)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES			10,049,082				9,226,860

 

See notes to unaudited condensed consolidated financial statements

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(Unaudited)

 

		Common Stock								Additional Paid-In				Accumulated
		Shares				Amount				Capital				Deficit				Total
Balance – January 1, 2025			9,815,749			$	9,816			$	3,101,092		-	$	(730,907	)		$	2,380,001
Issuance of common stock for debt conversion			750,000				750				456,750				-				457,500
Net loss			-				-				-		-		(712,410	)			(712,410	)
Balance – March 31, 2025			10,565,749			$	10,566				3,557,842		-	$	(1,443,317	)		$	2,125,091

 

		Common Stock								Net Transfer From Former				Accumulated
		Shares				Amount				Parent				Deficit				Total
Balance – January 1, 2024			-			$	-			$	8,988,122			$	-			$	8,988,122
Balance			-			$	-			$	8,988,122			$	-			$	8,988,122
Net transfer from parent			-				-				695,207				-				695,207
Net loss			-				-				(701,463	)			-				(701,463	)
Balance – March 31, 2024			-			$	-			$	8,981,866			$	-				8,981,866
Balance			-			$	-			$	8,981,866			$	-				8,981,866

 

 

HEALTHY CHOICE WELLNESS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Three Months Ended March 31,
		2025				2024
OPERATING ACTIVITIES
Net loss		$	(712,410	)		$	(701,463	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			429,990				363,141
Amortization of debt discount and issuance cost			16,982				18,841
Loss on asset disposal			1,831				-
Amortization of right-of-use assets			917,614				715,633
Write-down of obsolete and slow-moving inventory			596,423				743,419
Loss on debt extinguishment			7,500				-
Changes in operating assets and liabilities:
Accounts receivable			38,636				(38,102	)
Inventories			(1,193,166	)			(691,628	)
Prepaid expenses and vendor deposits			222,757				2,297
Other current assets			(169,620	)			(28,986	)
Due from related party			(2,399	)			(948,083	)
Other assets			15,192				(7,420	)
Accounts payable and accrued expenses			1,840,093				(1,269,675	)
Contract liabilities			(38,881	)			(27,597	)
Lease liabilities			(877,794	)			(678,946	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			1,092,748				(2,548,569	)
INVESTING ACTIVITIES
Purchases of property and equipment			(127,419	)			(74,220	)
NET CASH USED IN INVESTING ACTIVITIES			(127,419	)			(74,220	)
FINANCING ACTIVITIES
Proceeds from security purchase agreement			-				1,700,000
Principal payments on loan payable			(262,799	)			(171,752	)
Investment from parent company			-				695,207
Due from related party			(966,584	)			-
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(1,229,383	)			2,223,455
NET DECREASE IN CASH AND CASH EQUIVALENTS			(264,054	)			(399,334	)
CASH — BEGINNING OF PERIOD			2,056,472				1,422,580
CASH — END OF PERIOD		$	1,792,418			$	1,023,246
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest		$	298,324			$	103,072
Cash paid for income tax		$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES
Debt to equity conversion		$	450,000				-

 

See notes to unaudited condensed consolidated financial statements

 

 

HEALTHY CHOICE WELLNESS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1. ORGANIZATION

 

Organization

 

Healthy Choice Wellness Corp. (the “Company” or “HCWC” or “we” or “our” or “us”) is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives.

 

Through its wholly owned subsidiaries, the Company operates:

 

●	Ada’s Natural Market, a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.
●	Paradise Health & Nutrition’s three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.
●	Mother Earth’s Storehouse, an organic and health food and vitamin store in New York’s Hudson Valley, which has been in existence for over 40 years.
●	Greens Natural Foods’ eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products.
●	Ellwood Thompson’s, an organic and natural health food and vitamin store located in Richmond, Virginia.
●	GreenAcres Market, an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market offers organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands.

 

Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company operates a Healthy Choice Wellness Center in Kingston, NY and has a licensing agreement for a Healthy Choice Wellness Center located at the Casbah Spa and Salon in Fort Lauderdale, FL.

 

These centers offer multiple vitamin drip mixes and intramuscular shots for clients to choose from that are designed to help boost immunity, fight fatigue and stress, reduce inflammation, enhance weight loss, and efficiently deliver antioxidants and anti-aging mixes. Additionally, there are IV vitamin mixes and shots for health, beauty, and re-hydration.

 

Through its wholly owned subsidiary, Healthy U Wholesale, the Company sells vitamins and supplements, as well as health, beauty, and personal care products on its website www.TheVitaminStore.com.

 

 

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, 2025, approximately 14% of our total purchases were from UNFI, and 26% of our total purchases were from Kehe Distributors, LLC (“KeHe”). For the three months ended March 31, 2024, approximately 37% of our total purchases were from UNFI. No other supplier exceeded 10% of total purchases in either period.

 

Spin-Off

 

Healthier Choices Management Corp. (“HCMC” or the “Parent”) announced on August 22, 2022 that its Board of Directors approved the separation of the grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off” or “Separation”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC, which operated the Ada’s Natural Market, Paradise Health & Nutrition, Mother Earth’s Storehouse, Greens Natural Foods, Ellwood Thompson’s, and GreenAcres Market retail brands, as well as licensed wellness centers and Healthy U Wholesale.

 

On September 13, 2024 (the “Spin-Off Date”), after the New York Stock Exchange American (“NYSEAM”) market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock commenced trading on the NYSEAM under the stock symbol “HCWC.”

 

HCMC distributed all the outstanding shares of common stock held by it on a pro rata basis to holders of HCMC’s common stock. For each 208,632 shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one (1) share of Class A common stock and three (3) shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.

 

HCMC has secured binding commitments of $13.25 million in equity financing for HCWC from the same group of investors that invested $13.25 million in HCMC Series E Preferred Stock. Pursuant to the Securities Purchase Agreement for the HCMC Series E Stock (“HCMC Series E SPA”), the purchasers of HCMC Series E Stock will also be required to purchase Series A Preferred Stock of HCWC in the same subscription amounts that the Purchasers paid for the HCMC Series E Stock (regardless of whether or not such HCMC Series E Stock has been converted into HCMC common stock).

 

NOTE 2. GOING CONCERN

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values.

 

As of March 31, 2025, the Company had cash and cash equivalents of approximately $1.8 million and negative working capital of $2.4 million. For the three months ended March 31, 2025, the Company incurred net losses of approximately $0.7 million and cash provided by operating activities of approximately $1.1 million. The Company’s liquidity needs through March 31, 2025 have been satisfied through initial public offering and financing agreement with private lenders.

 

On July 18, 2024, HCWC entered into a $7.5 million loan and security agreement with a private lender to support its expansion plans and funding of any working capital needs, of which $4.2 million was used for the July 18, 2024 purchase of GreenAcres Market. The face amount of the loan is $7,500,000 with 12% annual interest and has a maturity date of July 17, 2027. On July 24, 2024, the Company finalized the closing of Saugerties building sale with all parties involved and received net proceeds of $695,000.

 

 

On August 18, 2022, HCMC entered into a Securities Purchase Agreement (“HCMC Preferred Stock”) pursuant to which the HCMC sold and issued 14,722 shares of its Series E Convertible Preferred Stock to institutional investors for $1,000 per share or an aggregate subscription of $13.25 million. This same group of investors committed to invest $13.25 million in HCWC after the Spin-Off and IPO transactions were completed. As such, HCWC entered into an agreement to sell shares of its Series A Convertible Preferred Stock (the “Series A Preferred Stock”), with the gross proceeds from such offering expected to be $13.25 million. The institutional investors that acquired HCMC Series E Preferred Stock are contractually required to purchase the Series A Preferred Stock in the same dollar amounts as they invested in the HCMC Series E Preferred Stock (regardless of whether or not such HCMC Series E Preferred Stock has been converted into HCMC common stock).

 

The Company believes its cash on hand and the commitment of $13.25 million raised through its security offering noted above will enable the Company to meet its obligations and capital requirements for at least the twelve months from the date these financial statements are issued. Accordingly, no adjustment has been made to the financial statements to account for this uncertainty.

 

NOTE 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements are prepared in accordance with GAAP.

 

The Company has historically operated as part of HCMC and not as a standalone company through the Spin-Off date. Financial statements representing the historical operations of HCMC’s grocery segment have been derived from HCMC’s historical accounting records and are presented on a carve-out basis through the Spin-Off date. The Company’s financial statements for the period January 1, 2025 through March 31, 2025 are condensed consolidated financial statements based on the reported results of HCWC as a stand-alone company. HCMC completed steps to spin off its grocery segment and wellness business into HCWC on September 13, 2024. The entities under the grocery segment and wellness business were contributed (100%) to HCWC, as such the accompanying condensed consolidated financial statements through the Spin-Off date have been contributed to HCWC using their carryover basis in accordance with Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) for entities under common control. All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company are included in the condensed consolidated financial statements. The condensed consolidated financial statements also include allocations of certain general, administrative, sales and marketing expenses from HCMC though the Spin-Off date. However, the amounts recognized by the Company are not necessarily representative of the amounts that would have been reflected in the condensed consolidated financial statements had the Company operated independently of HCMC. Related party allocations are discussed further in Note 16. The condensed consolidated financial statements do not include all the notes in the same detail as the annual 10-K filing.

 

Segment Reporting

 

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision makers, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company operates as a single reportable segment, as the Chief Operating Decision Maker (‘CODM”) reviews financial performance and makes decisions on a consolidated basis.

 

Unaudited Interim Condensed Consolidated Financial Statements

 

The interim condensed consolidated balance sheet as of March 31, 2025, 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, 2025 and 2024 and cash flows for the three months ended March 31, 2025 and 2024 are unaudited. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements relating to the three-month periods are also unaudited, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025. The condensed consolidated balance sheet as of December 31, 2024 was derived from the Company’s audited 2024 financial statements contained in the above referenced Form 10-K. Results of the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the full year ending December 31, 2025.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Healthy Choice Markets, Inc. (“Ada’s Natural Market”), Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), Healthy Choices Markets 3 Real Estate LLC, Healthy Choice Markets IV, LLC (Green’s Natural Foods), Healthy Choice Markets V, LLC (Ellwood Thompson’s), Healthy Choice Markets VI, LLC (GreenAcres Market), Healthy Choice Wellness, LLC, and Healthy U Wholesale, Inc (“The Vitamin Store, LLC”). All intercompany accounts and transactions have been eliminated in consolidation.

 

 

Net Parent Investment

 

The accompanying condensed consolidated financial statements were derived from the consolidated financial statements of HCMC on a carve-out basis though the Spin-Off date, and the condensed consolidated financial statements also include allocations of certain general, administrative, legal, and marketing expenses from HCMC. The primary components of the Net Parent Investment are intercompany balances other than related party payables, the allocation of shared costs, and funding received to cover any shortfall in operating cash requirements. Balances between HCMC and the Company that were not historically cash settled are included in Net Parent Investment. Net Parent Investment represents the cumulative investment by HCMC in the Company through the Spin-Off date. Upon Spin-Off, the Company reclassed the balance in net parent investment to additional paid-in capital.

 

Use of Estimates in the Preparation of the Financial Statements

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include promotional discounts, manufacturer coupons and rebates, return allowances that are netted against revenue, useful lives and impairment of long-lived assets, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. Certain of management’s estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.

 

Revenue Recognition

 

Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, return allowances, and sales and consumption taxes, are recorded when products are delivered, title passes to customers and collection is likely to occur. Title passes to customers at the point of sale for retail and upon delivery of products for wholesale. Return allowances, which reduce revenue, are estimated using historical experience.

 

The Company promotes its products with trade incentives and promotions. These programs include sales discounts, rebates, coupons, volume-based incentives, refunds, and returns, which represent variable considerations. The estimation of variable consideration involves judgment and is constrained to avoid overstatement of revenue. The Company applies the expected value method or the most likely amount method, depending on which better predicts the consideration to which it will be entitled. Management evaluates these estimates on a quarterly basis. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions.

 

 

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 operation. The Company recognizes revenue at a point in time when control of goods or services transfers to the customer.

 

Shipping and Handling

 

Shipping charges billed to customers are included in net sales and the related shipping and handling costs are included in the cost of sales. The Company incurred shipping and handling costs of approximately $26,000 and $27,000 for the three months ended March 31, 2025 and 2024, respectively.

 

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. The majority of the Company’s cash is concentrated in one financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage. The Company has not experienced any losses in such accounts. The Company did not have any cash equivalents as of March 31, 2025 and December 31, 2024.

 

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, 2025, December 31, 2024, and January 1, 2024, the contract liability balances were approximately $42,000, $80,000 and $208,000, respectively.

 

The Company’s breakage policy is twenty-four months for gift cards and twelve months for loyalty rewards. Loyalty rewards are earned at five percent on qualifying purchases and the reward functions as an allocation of transaction price from the period earned by the customer to the period the performance obligation is satisfied by the Company. As such, all contract liabilities are expected to be recognized within a twenty-four-month period.

 

In August 2024, the Company transitioned its customer loyalty program from a points-based system to a VIP membership structure. Under the original loyalty program, customers earned redeemable loyalty points based on qualifying purchases, which have been discontinued. Existing unredeemed loyalty points remained valid for redemption until January 31, 2025. The new VIP program provides members with immediate discounts on qualifying purchases, replacing the accrual of future points. The elimination of future loyalty point accruals reduces the Company’s ongoing contract liability obligations, as discounts under the VIP program are recognized as reductions to revenue at the time of sale.

 

 

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 model under ASC 326 . Management has determined that no allowance for credit losses is required as of March 31, 2025 and December 31, 2024, due to the short-term nature of these receivables, the creditworthiness of the counterparties, and historical collection experience indicating no credit losses. The Company will continue to monitor credit risk and adjust the allowance if conditions change.

 

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 two2 to seven years. Leasehold improvements are amortized over the shorter of the life of the improvement or the term of the lease.

 

Identifiable Intangible Assets

 

Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets are amortized over 4 to 13 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

Impairment of Long-Lived Assets

 

The Company reviews all long-lived assets such as property and equipment and amortized intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future cash flows expected to be generated by the asset or asset group. Impairment is measured by the amount by which the carrying value of the asset(s) exceeds their fair value. There were no triggering events that would indicate impairment of long-lived assets in the three months period ended on March 31, 2025 and twelve months ended December 31, 2024.

 

Goodwill

 

The Company assesses the carrying amounts of goodwill for recoverability on at least an annual basis or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value-based test. In performing the Company’s analysis of goodwill, the Company first evaluates qualitative factors, including relevant events and circumstances, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value should be recognized; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, and the useful life over which cash flows will occur. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for the Company. Our annual impairment test is conducted on September 30 of each year or more often if deemed necessary.

 

In July 2024, the Company acquired GreenAcres Market and recorded goodwill of $2,212,000 from the acquisition.

 

During the three months ended March 31, 2025 and 2024, there were no goodwill impairment charges recognized by the Company in the unaudited interim condensed consolidated statements of operations.

 

 

Advertising

 

Advertising expense is classified as selling, general and administrative expense on the condensed consolidated statements of operations. The Company expenses advertising costs as incurred. The Company incurred advertising expenses of approximately $158,000 for the three months ended March 31, 2025 and 2024, respectively.

 

401(k) retirement savings plan

 

The Company’s employees are offered a 401(k)-retirement savings plan with discretionary contribution matching opportunities. 401K employer expense amounted to $48,000 and $21,000 for the three months ended March 31, 2025 and 2024, respectively.

 

Earnings per share

 

Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of stock awards. There is no dilution for the three months ended March 31, 2025 and 2024.

 

On September 16, 2024, the Company separated from HCMC. As referenced in Note 1. Organization, the Separation resulted in the initial issuance of approximately 9.2 million shares of HCWC common stock. For purposes of computing basic and diluted earnings per common share for the three months ended March 31, 2024, the number of HCWC common shares issued upon separation and distribution was used to reflect the outstanding shares.

 

The following table sets forth the computation of basic and diluted earnings per share attributable to the Company’s stockholders.

 SCHEDULE OF EARNINGS PER SHARES

		Three Months Ended March 31,
		2025				2024
NET LOSS		$	(712,410	)		$	(701,463	)
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES			10,049,082				9,226,860
BASIC AND DILUTED NET LOSS PER SHARE		$	(0.07	)		$	(0.08	)

 

Income Taxes

 

The Company’s income taxes are included in HCMC’s consolidated return through the Spin-Off date. For the purposes of the condensed consolidated financial statements, the income taxes for the Company have been presented on a separate return basis, under which a new stand-alone set of deferred tax assets and liabilities is created based on the financial statements.

 

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2025 and December 31, 2024. The Company had no uncertain tax positions as of March 31, 2025 and December 31, 2024.

 

Leases

 

The Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company’s incremental borrowing rates. Related lease right-of-use (“ROU”) assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from landlords, plus any prepaid rent and direct costs from executing the leases.

 

At the adoption of ASC 842, the Company elected the following practical expedients, which continue to be applied as part of its accounting policies:

 

	●	Lease Identification: The Company elected not to reassess whether any expired or existing contracts entered into prior to adoption are or contain leases.
	●	Lease Classification: The Company elected not to reassess the lease classification for any expired or existing leases. All leases previously classified as operating leases under ASC Topic 840 continue to be classified as operating leases, and any leases previously classified as capital leases under ASC Topic 840 are classified as finance leases under ASC 842.

 

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease payments are recognized as lease expense as they are incurred.

 

 

The Company did not have finance leases as of March 31, 2025 and 2024. If the Company enters into a finance lease in the future, it will be accounted for in accordance with ASC 842.

 

Fair Value Measurements

 

The fair value framework under FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows:

 

	●	Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities;
	●	Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
	●	Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.

 

Recurring Fair Value Measurements

 

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, operating, derivatives and borrowings. Management believes that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, and borrowings are representative of their respective fair values. All derivatives are recognized as either assets or liabilities on the balance sheet at fair value at the end of each quarter.

 

Nonrecurring Fair Value Measurements

 

The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets and goodwill. The Company reviews the carrying amounts of such assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurement of the assets are considered to be Level 3 measurements.

 

Business Combination

 

The Company applies the provisions of ASC 805 in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing identifiable assets and liabilities, including intangible assets of acquired businesses at their fair value at the date of acquisition. When the Company acquires control of a business, any previously held equity interest also is remeasured to fair value. The excess of the purchase consideration and any previously held equity interest over the fair value of identifiable net assets acquired is goodwill. If the fair value of identifiable net assets acquired exceeds the purchase consideration and any previously held equity interest, the difference is recognized in the condensed consolidated statements of operations immediately as a gain or loss on acquisition. Acquisition-related expenses are expensed as incurred and the expenses are recorded in operating expenses in the condensed consolidated statements of operations.

 

Recent Accounting Pronouncements

 

Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including FASB and the SEC.

 

On December 14, 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The adoption of this pronouncement is not expected to have a material impact on the Company’s consolidated financial statements.

 

On November 27, 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which requires public entities to consider relevant qualitative and quantitative factors when determining whether segment expense categories and amounts are significant, and identify segment expenses on the basis of amounts that are regularly provided to the CODM, and included in reported segment profit or loss. The ASU is effective for fiscal years beginning after Dec. 15, 2023, and interim periods within fiscal years beginning after Dec. 15, 2024. The Company adopted this standard effective January 1, 2024, applying it retrospectively to all periods presented. As the Company has one reportable segment, the adoption had no material impact on the Company’s financial statements but resulted in additional expense disclosures and reconciliations in the financial statement footnotes. See Note 7 for details.

 

In November 2024, the FASB issued ASU 2024-03 (“ASU 2024-03”), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The prescribed categories include purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. This authoritative guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements

 

 

NOTE 4. CONCENTRATIONS

 

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. The majority of the Company’s cash is concentrated in one large financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage.

 

The Company has not experienced any losses in such accounts. The Company did not have any cash equivalents as of March 31, 2025 and December 31, 2024.

 

A summary of the financial institution that had cash in excess of FDIC limits of $250,000 on March 31, 2025 and December 31, 2024 is presented below:

SCHEDULE OF CASH IN EXCESS OF FDIC LIMITS 

		March 31, 2025				December 31, 2024
Total cash in excess of FDIC limits of $250,000		$	415,853			$	715,852

 

The Company continually monitors its positions with, and the credit quality of the financial institutions with which it invests, as deposits are held in excess of federally insured limits. The Company has not experienced any losses in such accounts.

 

The following table provides a reconciliation of cash and cash equivalents to amounts shown in unaudited condensed consolidated statements of cash flow:

SCHEDULE OF RECONCILIATION OF CASH AND CASH EQUIVALENTS 

		March 31, 2025				December 31, 2024
Cash		$	1,792,418			$	2,056,472

 

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 71% and 73% of the goods we sell from our top 20 suppliers for the three months ended March 31, 2025 and 2024, respectively. For the three months ended March 31, 2025, approximately 14% of our total purchases were from UNFI, and 26% of our total purchases were from KeHe. For the three months ended March 31, 2024, approximately 37% of our total purchases were from UNFI. No other supplier exceeded 10% of total purchases in either period. We maintain good relations with all our suppliers and believe we have adequate alternative supply methods, including self-distribution.

 

As mentioned, KeHe is replacing UNFI and will 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.

 

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.

 

 

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 $328,000 and $113,000 for the three months ended March 31, 2025 and 2024, respectively. The Company’s accounts receivable amounted to approximately $471,000, $510,000 and $128,000 at March 31, 2025, December 31, 2024 and January 1, 2024, respectively.

 

The Company’s credit loss is attributable to accounts receivable, and the Company determines the required allowance for expected credit losses using information such as customer credit history, current conditions, and reasonable and supportable forecasts about the future. Amounts are recorded to the allowance when it is determined that expected credit losses may occur. The Company reserved approximately $23,000 and $28,000 in credit loss as of March 31, 2025 and December 31, 2024, respectively.

 

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 $596,000 and $743,000 for the three months ended March 31, 2025 and 2024, respectively. The Company’s inventories consist primarily of merchandise available for resale.

 

NOTE 7. SEGMENT INFORMATION AND DISAGGREGATION OF REVENUES

 

The Company operates in two operating segments: Grocery and Wellness. In accordance with ASC 280, these segments have been aggregated into a single reportable segment because they share similar economic characteristics and meet all aggregation criteria, including similar nature of products sold, product acquisition process, customer base, distribution methods, and regulatory environment.

 

The Company’s CODM reviews financial results and allocates resources at the consolidated level, as the aggregated segments operate as one integrated business unit. No segment-specific financial metrics are used by the CODM to assess performance.

 

The Company adopted ASU 2023-07 effective January 1, 2024, on a retrospective basis. As the Company operates as a single reportable segment, the adoption did not have an impact on the Company’s consolidated financial statements. However, it did result in enhanced disclosures related to segment expenses and reconciliations to consolidated totals. Specifically, the Company has begun disclosing segment-specific expenses that are regularly reviewed by the CODM, Jeffrey Holman, the Company’s Chief Executive Officer, in accordance with the new standard.

 

The following table summarizes the significant segment expenses:

 SCHEDULE OF SIGNIFICANT SEGMENT EXPENSES

		Three Months Ended March 31,
		2025				2024
Advertising		$	157,872			$	158,069
Payroll and Benefits			3,896,602				3,322,550
Occupancy			1,823,446				1,420,209
Depreciation and Amortization			429,910				363,141
Bank Service Charges and Merchant Account Fees			400,269				300,539
Other selling, general and administrative expenses			461,918				396,407
Total significant reporting segment expenses		$	7,170,017			$	5,960,915

 

 

The following table summarizes the reconciliations of reportable segment profit or loss and assets to the Company’s consolidated totals:

 SCHEDULE OF RECONCILIATIONS OF REPORTABLE SEGMENT

		Three Months Ended March 31,
		2025				2024
Segment net operating income (loss)		$	681,893			$	93,460
Unallocated amount			(1,091,568	)			(695,206	)
Consolidated loss from operation		$	(409,675	)		$	(601,746	)

 

		March 31, 2025				December 31, 2024
Total reporting segment assets		$	31,878,125			$	30,698,054
Unallocated amount			2,207,084				3,414,463
Consolidated total assets		$	34,085,209			$	34,112,517

 

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.

SCHEDULE DISAGGREGATED REVENUES

		March 31, 2025				March 31, 2024
Retail Grocery		$	18,452,867			$	13,478,803
Food service/restaurant			1,786,799				2,414,995
Online/eCommerce			19,940				560
Total revenue		$	20,259,606			$	15,894,358

 

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 (COOP Revenue): When promotional materials are distributed to end-user customers.

 

NOTE 8. ACQUISITIONS

 

The Company applies the provisions of ASC Topic 805, Business Combinations and Topic 820, Fair Value Measurement in the accounting for acquisitions of businesses.

 

GreenAcres Market

 

On July 18, 2024, the Company through its wholly owned subsidiary, Healthy Choice Markets VI, LLC, entered into an Asset Purchase Agreement with (i) GreenAcres Markets of Oklahoma, LLC, an Oklahoma limited liability company, (ii) GACorp, Inc., a Kansas corporation; and (iii) the group of equity holders owning the majority interests of the Sellers. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities related to five GreenAcres Market’s grocery stores in Kansas and Oklahoma. The Company continued to operate the grocery stores under their existing name.

 

The cash purchase price under the Asset Purchase Agreement was $5,475,000, and a promissory note provided to the seller of $1,825,000. In addition, the Company entered into five new lease agreements with the landlords of the grocery stores.

 

 

The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:

SCHEDULE OF PURCHASE PRICE ALLOCATION

		July 18, 2024
Purchase Consideration
Cash consideration paid		$	5,475,000
Promissory note			1,568,000
Total Purchase Consideration		$	7,043,000
Purchase price allocation
Inventory		$	2,400,000
Property, plant, and equipment			127,000
Intangible assets			2,304,000
Goodwill			2,212,000
Net assets acquired		$	7,043,000
Finite-lived intangible assets
Trade Names (13 years)		$	1,584,000
Non-Compete Agreement (5 years)			720,000
Total intangible assets		$	2,304,000

 

Revenue and Earnings

 

The following unaudited pro forma summary presents consolidated information of the Company, including GreenAcres Market, as if the business combinations had occurred on January 1, 2024, the earliest period presented herein:

SCHEDULE OF UNAUDITED PROFORMA INFORMATION 

		Three Months Ended March 31, 2024
Sales		$	19,842,795
Net loss		$	(724,174	)

 

The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible, fixed assets depreciation and lease amortization. The proforma data gives effects to actual operating results prior to the acquisition. These proforma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred as of the beginning of each period presented or that may be obtained in future periods.

 

NOTE 9. ASSETS HELD FOR SALE

 

On February 7, 2024, the Company closed the operation of the Saugerties, NY store. The decision was based on management’s plan to maximize the profitability of the grocery segment. The Company transferred all operating assets and liabilities to other neighboring stores. The building, which is owned by the Company, has a net carrying value of approximately $544,000 and was put up for sale in February at its fair market value. The Company has classified the building as held for sale in accordance with ASC 360, “Property, Plant, and Equipment.” The building was previously classified as property, plant, and equipment (PP&E) and included in long-term assets.

 

On July 24, 2024, the Company finalized the closing of Saugerties, NY building sale with all parties involved and received net proceeds of $695,000. The building was sold at fair market value of $749,000 and the Company paid approximately $54,000 in legal fees, commission and other miscellaneous expenses. The title and deed were transferred on the closing date.

 

 

NOTE 10. PROPERTY, PLANT, AND EQUIPMENT

 

Property, plant, and equipment consist of the following as of March 31, 2025 and December 31, 2024:

 SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

		March 31, 2025				December 31, 2024
Displays		$	312,146			$	312,146
Furniture and fixtures			772,891				720,657
Leasehold improvements			2,050,792				1,991,953
Computer hardware & equipment			221,175				209,029
Other			711,002				710,682
Property, plant and equipment gross			4,068,006				3,944,467
Less: accumulated depreciation and amortization			(2,099,410	)			(1,967,998	)
Total property, plant, and equipment		$	1,968,596			$	1,976,469

 

The Company incurred approximately $133,000 of depreciation expense for the three months ended March 31, 2025 and 2024, respectively.

 

NOTE 11. INTANGIBLE ASSETS

 

Intangible assets, net consist of the following as of March 31, 2025 and December 31, 2024:

SCHEDULE OF INTANGIBLE ASSETS, NET  

March 31, 2025		Useful Lives (Years)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Trade names		8-13 years		$	4,444,000			$	(1,542,509	)		$	2,901,491
Customer relationships		4-6 years			2,669,000				(1,703,056	)			965,944
Non-compete		4-5 years			2,322,000				(1,044,485	)			1,277,515
Intangible assets, net				$	9,435,000			$	(4,290,050	)		$	5,144,950

 

December 31, 2024		Useful Lives (Years)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Trade names		8-13 years		$	4,444,000			$	(1,427,798	)		$	3,016,202
Customer relationships		4-6 years			2,669,000				(1,628,639	)			1,040,361
Non-compete		4-5 years			2,322,000				(937,085	)			1,384,915
Intangible assets, net				$	9,435,000			$	(3,993,522	)		$	5,441,478

 

 

Intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was approximately $297,000 and $230,000 for the three months ended March 31, 2025 and 2024, respectively. Future annual estimated amortization expense is as follows:

SCHEDULE OF FUTURE ANNUAL ESTIMATED AMORTIZATION EXPENSE 

Years ending December 31,
2025 (remaining nine months)		$	884,085
2026			1,103,576
2027			964,771
2028			655,332
2029			447,896
Thereafter			1,089,290
Total		$	5,144,950

 

NOTE 12. GOODWILL

 

The Company tests goodwill for impairment annually on September 30 or more frequently if there are indicators that the carrying amount of goodwill exceeds its estimated fair value.

 

There was no impairment of goodwill during the three months ended March 31, 2025 and 2024.

 

The changes in the carrying amount of goodwill as of March 31, 2025 and December 31, 2024 are as follows:

 SCHEDULE OF GOODWILL

		March 31, 2025				December 31, 2024
Beginning balance		$	2,212,000			$	-
Acquisitions			-				2,212,000
Impairment			-				-
Ending balance		$	2,212,000			$	2,212,000

 

NOTE 13. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

At March 31, 2025 and December 31, 2024, accounts payable and accrued expenses consisted of:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES 

		March 31, 2025				December 31, 2024
Trade creditors		$	7,073,251			$	5,133,782
Accrued expenses			898,376				997,752
Total		$	7,971,627			$	6,131,534

 

 

NOTE 14. DEBT

 

A breakdown of the Company’s debt as of March 31, 2025 and December 31, 2024 is presented below:

SCHEDULE OF DEBT 

		March 31, 2025				December 31, 2024
Promissory note		$	10,910,592			$	11,623,392
Debt discount and issuance cost			(267,301	)			(284,283	)
Total debt, net of debt discount and issuance costs			10,643,291				11,339,109
Current portion of long-term debt			(1,766,419	)			(2,200,210	)
Current portion of debt discount and issuance cost			68,874				68,873
Long-term debt		$	8,945,746			$	9,207,772

 

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 $3,000,000 as a portion of the purchase price. The Greens Note has a five-year term, an interest rate of 6.0% per annum and is secured by the assets of the Green’s Natural Foods. The outstanding balance was approximately $1,662,000 and $1,809,000 as of March 31, 2025 and December 31, 2024, respectively. The Company incurred approximately $26,000 and $35,000 interest expense for the three months ended March 31, 2025 and 2024, respectively.

 

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 $750,000, and discounted present value of $718,000 as a portion of the purchase price. The Ellwood Note has a five-year term, an interest rate of 6.0% per annum. The outstanding balance of the Ellwood Note was approximately $560,000 and $595,000 in principal amount as of March 31, 2025 and December 31, 2024, respectively. The Company recognized interest expense of approximately $9,000 and $11,000 for the three months ended March 31, 2025, and 2024, respectively.

 

On January 18, 2024, HCWC entered into a Securities Purchase Agreement (the “Bridge Financing”) with institutional investors whereby (a) HCWC issued a total of approximately $1,889,000 in unsecured promissory notes (the “Notes”) and (b) on the date of the pricing of HCWC’s initial public offering (“IPO”), HCWC would deliver shares of its common stock equal to approximately $1,889,000 divided by the IPO price (“Bridge Shares”). The aggregate gross proceeds received from the investors in connection with the Security Purchase Agreement (“SPA”) was $1,700,000. The Notes were issued at a 10% original issue discount (“OID”) and accrue interest at a rate of 10% per annum beginning 60 days after issuance of the Notes. All accrued and unpaid principal and interest shall be due and payable upon the earlier of (1) the closing of the IPO, (2) January 18, 2025 or (3) upon an event of default as defined in the Notes.

 

 

On April 8, 2024, HCWC and the institutional investors entered into an amendment to the January 18, 2024 agreement whereby HCWC agreed to issue warrants (the “Bridge Warrants”) exercisable at $0.01 per share to purchase 188,889 shares of Class A common stock (the “Bridge Warrant Shares”) in lieu of Bridge Shares. The parties agreed to terminate any existing obligations of the institutional investors to acquire HCWC Bridge Shares as part of the IPO transaction.

 

On the Spin-Off Date, after the NYSEAM market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock was traded on the NYSEAM under the stock symbol “HCWC.”

 

Upon the completion of the IPO, HCWC paid in full the principal amount of Notes and OID. HCWC incurred approximately $23,500 of debt issuance costs in connection with the issuance of the Notes, which, together with the OID of approximately $189,000, was recorded as a debt discount and was amortized over the life of the Notes using the straight-line method since such method was not materially different from the interest method. At March 31, 2025, the outstanding principal balance of the Notes and debt discount related with the Notes were at $0.

 

The Company used the intrinsic value model to determine the fair value of the Bridge Warrants on April 18, 2024 and remeasured the fair value on September 16, 2024, and concluded that the fair value of the Bridge Warrants at September 16, 2024 was $1,887,001. Due to the fact that Bridge Warrants exercise was contingent upon the IPO, the Company did not recognize the warrant liability until the Spin-off date. The Bridge Warrants were exercised on September 17, 2024 by institutional investors. Upon warrant exercise, 188,889 shares of Class A common stock were issued and the warrant liability was eliminated against the loss on derivative liability in the amount of $1,888,889.

 

On July 18, 2024 (the “Loan Effective Date”), the Company entered into a loan and security agreement with a private lender for a $7,500,000 loan (the “Acquisition Loan”). A portion of the Acquisition Loan proceeds were used to acquire GreenAcres Markets. The loan is guaranteed by all of the subsidiaries of the Company (the “Guarantors”) and secured by all of the assets of the Company and the Guarantors. The Acquisition Loan has a term of three years and interest accrues at a rate of 12% on amounts borrowed. The Acquisition Loan may be prepaid at any time at a premium in the amount of ten percent (10%) of the principal amount of the Acquisition Loan outstanding prior to such prepayment. Payments on the Acquisition Loan are required to be made as follows: $1,125,000 on first anniversary of the Loan Effective Date, $1,875,000 on the second anniversary of the Loan Effective Date, and the remaining outstanding principal balance of principal and accrued interest on the third anniversary of the Loan Effective Date. On March 2, 2025, the Company entered into an agreement with the Acquisition Loan holders to exchange $450,000 of outstanding principal under its existing Loan and Security Agreement dated July 18, 2024 for 750,000 shares of the Company’s Class A common stock. Following this transaction, $7,050,000 in principal remains outstanding as of March 31, 2025 under the Loan and Security Agreement.

 

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 $1,825,000 as a portion of the purchase price. The GreenAcres Note has a five-year term, an interest rate of 6.0% per annum and is secured by the assets of the GreenAcres Market. The outstanding balance was approximately $1,639,000 and $1,720,000 as of March 31, 2025 and December 31, 2024, respectively. The Company incurred approximately $25,000 and $0 interest expense for the three months ended March 31, 2025 and 2024, respectively.

 

The Company may, at its option, at any time or from time to time prepay the outstanding principal amount or any accrued but unpaid interest, in each case in whole or in part, without penalty or premium, provided that any such prepayment of any outstanding amount of principal shall be accompanied by the payment of all accrued but unpaid interest on the amount of principal being prepaid, plus any costs and fees incurred.

 

 

The following table summarizes the five-year5 repayment schedule:

 SCHEDULE OF DEBT REPAYMENT

For the years ending December 31,
2025 (remaining nine months)		$	1,487,410
2026			3,016,526
2027			5,595,359
2028			534,923
2029			276,374
Total		$	10,910,592

 

NOTE 15. LEASES

 

The Company has various lease agreements with terms up to 20 years. All the leases are classified as operating leases.

 

Maturity of lease liabilities under our non-cancellable operating leases as of March 31, 2025 were as follows:

 SCHEDULE OF MATURITY OF LEASE LIABILITIES

Payments due by period
2025 (remaining nine months)		$	3,171,587
2026			3,833,066
2027			2,956,171
2028			2,280,186
2029			1,617,808
Thereafter			824,584
Total undiscounted operating lease payments		$	14,683,402
Less: Imputed interest			(1,379,778	)
Present value of operating lease liabilities		$	13,303,624

 

The following table summarizes the Company’s operating leases:

 SCHEDULE OF COMPANY’S OPERATING LEASE

Balance Sheet Classification		March 31, 2025				December 31, 2024
Right of use assets		$	13,314,626			$	14,232,240
Operating lease liability, current		$	3,641,723			$	3,596,987
Operating lease liability, net of current			9,661,901				10,584,431
Total operating lease liabilities		$	13,303,624			$	14,181,418

 

The amortization of the right-of-use assets of approximately $918,000 and $716,000 for the three months ended March 31, 2025 and 2024, respectively, were included in operating cash flows.

 

The following table provides a summary of other information related to the leases at March 31, 2025 and December 31, 2024:

 SCHEDULE OF OPERATING LEASE TERM

Other Information		March 31, 2025				December 31, 2024
Weighted-average remaining lease term for operating leases			4 years				4 years
Weighted-average discount rate for operating leases			5.21	%			5.19	%

 

Rent expense for the three months ended March 31, 2025 and 2024 was approximately $976,000 and $923,000, respectively. It is included in selling, general and administrative expenses in the accompanying condensed consolidated carve-out statements of operations.

 

 

The components of lease expenses for the three months ended March 31, 2025 and 2024 were as follows:

 SCHEDULE OF COMPONENTS OF LEASE EXPENSE

		Three Months Ended March 31,
		2025				2024
Operating lease cost		$	900,913			$	637,101
Variable lease cost			58,787				207,546
Short-term lease cost			16,701				78,532
Total rent expense		$	976,401			$	923,179

 

The aggregate cash payments under the leasing arrangement were approximately $878,000 and $679,000 for the three months ended March 31, 2025 and 2024, respectively, were included in operating cash flows.

 

NOTE 16. RELATED PARTY TRANSACTIONS

 

Prior to the Spin-Off, the Company has not historically operated as a separate, stand-alone company and, accordingly has had various relationships with HCMC whereby HCMC provided services to the Company as noted below. Related party transactions prior to Spin-Off include allocation of general corporate expenses and advances from parent.

 

Allocation of General Corporate Expenses

 

HCMC provided human resources, accounting, payroll processing, legal and other managerial services to the Company prior to the Spin-Off. The accompanying condensed consolidated financial statements for three months ended March 31, 2024 include allocations of these expenses in the amount of $0.6 million. Following the Spin-Off, HCWC and HCMC entered into a Transition Services Agreement (“TSA”), under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services are provided on a transitional basis and will continue for a period of up to one year following the Spin-Off.

 

Management adopted a proportional cost allocation method to allocate HCMC expenses to the Company. The allocation method calculates the appropriate share of overhead costs to the Company based on management’s estimate that the sum of management time and resources spent managing the Company is approximately equal to the amount of time and resources spent managing HCMC and its subsidiaries. As a result, 50% of HCMC overhead on a weighted average basis was allocated to the Company based on the fact that management spent equal amount of time to manage HCMC and the Company. The Company believes the allocation methodology used is reasonable and has been consistently applied, and results in an appropriate allocation of costs incurred. However, these allocations may not be indicative of the cost had the Company been a stand-alone entity or of future services. For the three months ended March 31, 2025, HCWC established its independent payroll system but continues to share certain staff with HCMC. HCMC and HCWC continue providing human resources, accounting, payroll processing, and other managerial services to each other based on the TSA. Management continued using 50% proportional cost allocation method to split the shared cost. HCWC directly funds its 50% share and records its 50% share as Operating Expenses in its financial statements. The pre-Spin-Off allocated amounts were not settled in cash and were included in the Net Parent’s Investment.

 

 

Investment by Parent

 

For the three months ended March 31, 2024, the net operating expenses of $0.7 million incurred by HCMC on behalf of the Company were included in the Net Parent’s Investment. Upon Spin-Off, the Company wrote off the net parent investment balance to additional paid-in capital.

 

Intercompany Receivable and Payable

 

Prior to Spin-Off, there was no intercompany agreement between the Company and HCMC. Management has determined those intercompany receivables and payables will be settled within twelve months after the balance sheet date. As a result, the Company’s intercompany balances are reflected as “due to” or “due from” accounts in the condensed consolidated balance sheets. At the time of Spin-off, the Company had a net payable balance to HCMC in the amount of $1.2 million, and the Company paid the balance in full to settle on the Spin-Off date of September 13, 2024. The Company had a net intercompany receivable balance of $1.2 million and $0.2 million from HCMC as of March 31, 2025 and December 31, 2024, respectively. The increased intercompany receivable balance was a result of continued funding from HCWC to HCMC to support HCMC’s operations during the transition period, as compliant with the TSA. HCWC’s cash advances to HCMC are transitional, short-term, and repayable within 12 months.

 

The intercompany receivable from HCMC is considered a financial asset subject to CECL. Management has determined that no allowance for credit losses is required as of March 31, 2025 and December 31, 2024, due to the short-term nature of the receivable, HCMC’s ability to fulfill obligations under the Transition Services Agreement (TSA). The Company will continue to monitor credit risk and adjust the allowance if conditions change.

 

Agreements with HCMC

 

The Company entered into several agreements with the former parent that, among other things, effect the separation and govern the relationship of the parties following the Spin-Off. These agreements include:

 

	●	a Separation Agreement that will set forth HCMC’s and the Company’s agreements regarding the principal actions that both parties will take in connection with the Spin-Off and aspects of our relationship following the Spin-Off;
	●	a Transition Services Agreement pursuant to which HCMC and the Company will provide each other specified services on a transitional basis to help ensure an orderly transition following the Spin-Off.
	●	a Tax Matters Agreement (“TMA”) that will govern the respective rights, responsibilities and obligations of HCMC and the Company after the Spin-Off with respect to all tax matters and will include restrictions to preserve the tax-free status of the Spin-Off; and
	●	an Employee Matters Agreement (“EMA”) that will address employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs in which our employees participated prior to the Spin-Off.

 

Under the terms of the transition services agreement, the HCMC will provide to the Company, on a transitional basis, certain services or functions, including information technology, accounting, human resources, and payroll functions. Generally, these services will be provided for a period of up to one year following the Spin-Off. Consideration and costs for the transition services will be determined using several billing methodologies as described in the agreements, including customary billing and pass-through billing. Costs for transition services provided by the former parent are recorded within the Condensed Consolidated Statements of Operations based on the nature of the services.

 

 

NOTE 17. STOCKHOLDERS’ EQUITY

 

Spin-Off

 

HCMC announced on August 22, 2022 that its Board of Directors approved separation of the Grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC, which operated the Ada’s Natural Market, Paradise Health & Nutrition, Mother Earth’s Storehouse, Greens Natural Foods, Ellwood Thompson’s, and GreenAcres Market retail brands, as well as licensed wellness centers and Healthy U Wholesale.

 

On the Spin-Off Date, after the NYSEAM market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock was traded on the NYSEAM under the stock symbol “HCWC.”

 

HCMC distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock. For each 208,632 shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one (1) share of Class A common stock and three (3) shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.

 

On March 2, 2025, the Company entered into an agreement with certain note holders to exchange $450,000 of outstanding principal under its existing Loan and Security Agreement dated July 18, 2024 for 750,000 shares of the Company’s Class A common stock. The exchange price of $0.60 per share equated to the closing bid price of the Company’s Class A common stock on February 28, 2025. Following this transaction, $7,050,000 in principal remains outstanding under the Loan and Security Agreement.

 

The Company is authorized to issue 40,000,000 shares of Series A convertible preferred stock with par value of $0.001, none of which have been previously issued. As of March 31, 2025, no shares of Series A convertible preferred stock are issued and outstanding.

 

HCMC has secured binding commitments of $13.25 million in equity financing for HCWC from the same group of investors that invested $13.25 million in HCMC Series E Preferred Stock. Pursuant to the Securities Purchase Agreement for the HCMC Series E Stock (“HCMC Series E SPA”), the purchasers of HCMC Series E Stock will also be required to purchase Series A Preferred Stock of HCWC in the same subscription amounts that the Purchasers paid for the HCMC Series E Stock (regardless of whether or not such HCMC Series E Stock has been converted into HCMC common stock).

 

As of March 31, 2025, 10,565,749 shares of class A common stock were outstanding.

 

NOTE 18. COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

On July 31, 2024, one of the Company’s subsidiaries, Healthy Choice Markets IV, LLC, was served with a lawsuit filed by a former employee alleging violations of state and federal wage and hour laws. The Company believes the claims are without merit and intends to vigorously defend against the lawsuit. While the outcome of this litigation cannot be predicted with certainty, the Company does not believe that the lawsuit, if adversely resolved, would have a material adverse effect on its financial condition, results of operations, or cash flows.

 

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, 2025. With respect to legal costs, we record such costs as incurred.

 

NOTE 19. SUBSEQUENT EVENTS

 

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 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 3, 2025, the Company entered into an agreement with certain note holders to exchange $500,000 of outstanding principal under its existing Loan and Security Agreement dated July 18, 2024 for 1,136,364 shares of the Company’s Class A common stock. Following this transaction, $6,550,000 in principal remains outstanding under the Loan and Security Agreement.

 

On May 1, 2025, the Company entered into an agreement with the same note holders to exchange $362,727 of outstanding principal under its existing Loan and Security Agreement dated July 18, 2024 for 863,636 shares of the Company’s Class A common stock. As of the date the Company files its 10-Q, 450,000 shares of common stock were issued in exchange for $189,000 of outstanding principal under the loan, leaving 413,636 shares of common stock to be issued and $173,727 of debt to be converted. Following this transaction, $6,361,000 in principal remains outstanding under the Loan and Security Agreement. The conversion has further strengthened the Company’s balance sheet by reducing its debt obligations.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONDENSED CONSOLIDATED OPERATIONS

 

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements. The terms “we,” “us,” “our,” and the “Company” refer to Healthy Choice Wellness Corp. and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), Healthy Choices Markets 3 Real Estate LLC, Healthy Choice Markets IV, LLC (“Green’s Natural Foods”), Healthy Choice Markets V, LLC (“Ellwood Thompson’s), Healthy Choice Markets VI, LLC (GreenAcres Market), Healthy Choice Wellness, LLC, The Vitamin Store, LLC, and Healthy U Wholesale, Inc. All intercompany accounts and transactions have been eliminated in consolidation.

 

Company Overview

 

Healthy Choice Wellness Corp. is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives.

 

Through its wholly owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC, Healthy Choice Markets 3, LLC, Healthy Choice Markets IV, LLC, Healthy Choice Markets V, LLC and Healthy Choice Markets VI, LLC respectively, the Company operates:

 

	●	Ada’s Natural Market, a natural and organic grocery store offering fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products, and natural household items.
	●	Paradise Health & Nutrition’s three stores that likewise offer fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.
	●	Mother Earth’s Storehouse, an organic and health food and vitamin store in New York’s Hudson Valley, which has been in existence for over 40 years.
	●	Greens Natural Foods’ eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy “grab & go” foods; a full selection of vitamins & supplements; as well as health and beauty products.
	●	Ellwood Thompson’s, an organic and natural health food and vitamin store located in Richmond, Virginia.
	●	GreenAcres Market, an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market is a chain of premier natural foods stores, offering organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands.

 

Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company operates a Healthy Choice Wellness Center in Kingston, NY and has a licensing agreement for a Healthy Choice Wellness Center located at the Casbah Spa and Salon in Fort Lauderdale, FL.

 

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.

 

 

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 cash outflows from operations. As of March 31, 2025, the Company had cash of approximately $1.8 million and negative working capital of $2.4 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 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, 2025 and 2024 that is used in the following discussions of our results of operations:

 

		Three Months Ended March 31,								2025 to 2024
		2025				2024				Change $
SALES		$	20,259,606			$	15,894,358			$	4,365,248
COST OF SALES			12,407,696				9,839,981				2,567,715
GROSS PROFIT			7,851,910				6,054,377				1,797,533
OPERATING EXPENSES			8,261,585				6,656,123				1,605,462
LOSS FROM OPERATIONS			(409,675	)			(601,746	)			192,071
OTHER INCOME (EXPENSE)
Loss on debt extinguishment			(7,500	)			-				(7,500	)
Other income, net			2,496				3,355				(859	)
Interest (expense) income, net			(297,731	)			(103,072	)			(194,659	)
TOTAL (EXPENSE) INCOME, NET			(302,735	)			(99,717	)			(203,018	)
NET LOSS		$	(712,410	)		$	(701,463	)		$	(10,947	)

 

 

Net sales increased $4.4 million to $20.3 million for the three months ended March 31, 2025 as compared to $15.9 million for the same period in 2024. The increase in grocery sales of $3.7 million was primarily due to the acquisition of GreenAcres Market acquired in July 2024, and increase in same-store sales of $0.7 million. The increase in same-store sales was mainly attributable to the success of our new customer loyalty program

 

Cost of goods sold for the three months ended March 31, 2025 and 2024 were $12.4 million and $9.8 million, respectively. The increase of $2.3 million is primarily due to the acquisition of GreenAcres Market, and in increase in same-store cost of goods sold of $0.3 million. Gross profit was $7.9 million and $6.1 million for the three months ended March 31, 2025 and 2024, respectively. Gross margin as a percentage of sales increased approximately 0.7% as compared to the same period in prior year.

 

Total operating expenses for the three months ended March 31, 2025 and 2024 were $8.3 million and $6.7 million, respectively. The increase of $1.6 million is due to $1.3 million from the acquisition of GreenAcres Market and $0.5 million increase in professional fees, and offset by $0.2 million decrease in same-store insurance expense and payroll and benefits expense.

 

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 expense of approximately $2,000, offset by $8,000 loss on debt extinguishment. Total other income (expense), net of $0.1 million for the three months ended March 31, 2024 primarily consists of interest expense of $103,000 and other miscellaneous income of $3,000.

 

Lease Commitments, Known Trends and Uncertainties

 

As of March 31, 2025, the Company has operating lease obligations totaling $13.3 million. The weighted-average remaining lease term is 4 years, with a weighted-average discount rate of 5.21%. Rent expense for the three months ended March 31, 2025 was $976,000, compared to $923,000 for the same period in 2024. This increase reflects new leases and variable payments expensed as incurred. We expect rent expense to rise incrementally over the next two years as additional leases reset to higher rates. Rising interest rates and inflation could increase the cost of future lease obligations. While the weighted-average discount rate increased marginally to 5.21% from 5.19% in 2024, a sustained rate hike environment may elevate borrowing costs for future lease liabilities.

 

Liquidity and Capital Resources

 

		Three Months Ended March 31,
		2025				2024
Net cash provided by (used in)
Operating activities		$	1,092,748			$	(2,548,569	)
Investing activities			(127,419	)			(74,220	)
Financing activities			(1,229,383	)			2,223,455
		$	(264,054	)		$	(399,334	)

 

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. Our net cash used in operating activities of approximately $2.5 million for the three months ended March 31, 2024 resulted from a net loss of $0.7 million, offset by a non-cash adjustment of $1.8 million and a net cash usage of $3.6 million from changes in operating assets and liabilities.

 

The net cash used in investing activities of $0.1 million for the three months ended March 31, 2025 and 2024 is due to purchases of property and equipment.

 

The net cash used in financing activities of $1.2 million for the three months ended March 31, 2025 consists of principal payment on loan payable of $0.3 million and $0.9 million payment to related party. The net cash provided by financing activities of approximately $2.2 million for the three months ended March 31, 2024 consists of cash proceeds of $1.7 million from Security Purchase Agreement (“SPA”) signed on January 18, 2024, $0.7 million of net parent investment from HCMC, and $0.2 million principal payment on loan payable.

 

 

At March 31, 2025 and December 31, 2024, we did not have any material financial guarantees or other contractual commitments with vendors that are reasonably likely to have an adverse effect on liquidity.

 

Our cash 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 one financial institution and is generally in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash. The following table presents the Company’s cash position as of March 31, 2025 and December 31, 2024.

 

		March 31, 2025				December 31, 2024
Cash		$	1,792,418			$	2,056,472
Total assets		$	34,085,209			$	34,112,517
Cash as a percentage of total assets			5.26	%			6.03	%

 

The Company reported a net loss of $0.7 million for the three months ended March 31, 2025. The Company also had negative working capital of $2.4 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.

 

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.

 

 

Management believes stockholders benefit from referring to the Adjusted EBITDA in planning, forecasting, and analyzing future periods. Management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means of evaluating period to period comparison.

 

EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income. Management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of significant non-cash and non-recurring charges that effect comparability between reporting periods. We define Adjusted EBITDA as net loss adjusted for non-cash charges for depreciation and amortization, impairment of goodwill, change in contingent consideration, also adjusted for non-recurring other expense (income), and interest income. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items.

 

We have included a reconciliation of our non-GAAP financial measure to net loss as calculated in accordance with GAAP. We believe that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to specific definitions being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable rules of the Securities and Exchange Commission.

 

		For The Three Months Ended March 31,
		2025				2024
Reconciliation from net loss to adjusted EBITDA:
Net loss		$	(712,410	)		$	(701,463	)
Interest expense			297,731				103,072
Depreciation and amortization			429,990				363,141
EBITDA			15,311				(235,250	)
Other income, net			5,004				(3,355	)
Adjusted EBITDA		$	20,315			$	(238,605	)

 

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.

 

 

There have been no material changes to the Company’s critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 2024 Annual Report, which we believe are the most critical to our business and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the preparation of our condensed consolidated financial statements.

 

Seasonality

 

We do not consider our business to be seasonal.

 

Cybersecurity

 

We recognize that cybersecurity is of critical importance to our success. We are committed to maintaining robust cybersecurity and data protection and continuously evaluating the impact of cybersecurity threats, considering both immediate and potential long-term effects of these threats on our business strategy, operations, and financial condition. Our board oversees cybersecurity risks through quarterly updates from the Chief Operating Officer.

 

Cautionary Note Regarding Forward-Looking Statements

 

This report includes forward-looking statements including statements regarding retail expansion, the future demand for our products, competition, the adequacy of our cash resources and our authorized Common Stock, and our continued ability to raise capital.

 

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

 

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include our future common stock price, customer acceptance of our products, and proposed federal and state regulation. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We are required to report under Section 404(a) of Sarbanes-Oxley regarding the effectiveness of our internal control over financial reporting.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our Principal Executive Officer and Principal Financial Officer, carried out an evaluation on internal controls as of March 31, 2025 in regard to the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. Based on the evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was ineffective as of March 31, 2025 and noted the material weaknesses as follows:

 

●	Failure to have properly documented and designed disclosure controls and procedures and testing of the operating effectiveness of our internal control over financial reporting.
●	Segregation of duties due to lack of personnel.
●	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)	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.
	(c)	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.

 

 

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, 2025 based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

Planned Remediation

 

Management continues to work to improve its controls related to our material weaknesses listed above. In order to achieve the timely implementation of the above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:

 

	●	Continuing to increase headcount across the Company, with a particular focus on hiring individuals with strong internal control backgrounds and inventory expertise.
	●	Establishing policies and procedures in the IT area to mitigate data breach, unauthorized access and address segregation of duties, as well as review key third party service provider SOC reports.

 

We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

 

Changes in Internal Controls over Financing Reporting

 

Following the Spin-Off, new corporate and governance functions, such as finance, tax and treasury, have been implemented in order to meet all regulatory requirements for a standalone public company. Further, the former parent will continue to provide various services and functions under the terms of the transition services agreement, many of which use a shared technology platform, including human resources, payroll and certain logistics functions. Except as detailed above, during the quarter ended March 31, 2025, there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

On July 31, 2024, one of the Company’s subsidiaries, Healthy Choice Markets IV, LLC, was served with a lawsuit filed by a former employee alleging violations of state and federal wage and hour laws. The Company believes the claims are without merit and intends to vigorously defend against the lawsuit. While the outcome of this litigation cannot be predicted with certainty, the Company does not believe that the lawsuit, if adversely resolved, would have a material adverse effect on its financial condition, results of operations, or cash flows.

 

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, 2025. With respect to legal costs, we record such costs as incurred.

 

ITEM 1A. RISK FACTORS.

 

Not Applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Not Applicable.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION.

 

In February 2025, our executive officers, through Schwab brokerage, adopted a “Rule 10b5-1 trading arrangement” as such term is defined in Item 408(a) of Regulations S-K. This trading arrangement is intended to satisfy the Rule 10b5-1 affirmative defense. This trading arrangement is anticipated to commence in May, 2025, and expires after a twelve-month-period, unless earlier terminated in accordance with its terms, and covers the disposition of up to 2 million shares of our common stock. The remaining terms of the trading arrangement are confidential. No additional directors or officers informed us of the adoption, modification, or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

 

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.

 

 

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 9, 2025	By:	/s/ Jeffrey Holman
		Jeffrey Holman
		Chief Executive Officer
Date: May 9, 2025	By:	/s/ John Ollet
		John Ollet
		Chief Financial Officer