Healthy Choice Wellness Corp.(HCWC) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related notes, along with management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Healthy Choice Wellness Corp. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and financial position Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | ASSETS | | | | Cash and cash equivalents | $4,690,026 | $2,056,472 | | Total Current Assets | $14,501,258 | $9,706,957 | | Total Assets | $36,401,719 | $34,112,517 | | LIABILITIES & EQUITY | | | | Total Current Liabilities | $13,231,925 | $11,940,313 | | Total Liabilities | $30,639,333 | $31,732,516 | | Total Stockholders' Equity | $5,762,386 | $2,380,001 | - Total assets increased by $2.29 million (6.7%) from December 31, 2024, to June 30, 2025, primarily driven by an increase in cash and cash equivalents and due from related party[17] - Total stockholders' equity significantly increased by $3.38 million (141.9%) from December 31, 2024, to June 30, 2025, indicating new equity financing[17] Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including sales, cost of sales, gross profit, and net loss over specific periods Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | SALES, NET | $20,199,979 | $15,594,575 | $40,459,585 | $31,488,933 | | COST OF SALES | $12,106,603 | $9,698,119 | $24,514,300 | $19,538,100 | | GROSS PROFIT | $8,093,376 | $5,896,456 | $15,945,285 | $11,950,833 | | LOSS FROM OPERATIONS | $(39,032) | $(481,558) | $(448,708) | $(1,083,304) | | NET LOSS | $(339,359) | $(595,707) | $(1,051,769) | $(1,297,170) | | BASIC AND DILUTED NET LOSS PER SHARE | $(0.03) | $(0.06) | $(0.09) | $(0.14) | - Net sales increased by $4.6 million (29.5%) for the three months ended June 30, 2025, and by $9.0 million (28.5%) for the six months ended June 30, 2025, compared to the same periods in 2024[19] - Net loss decreased for both the three-month period (from $(0.60 million) to $(0.34 million)) and the six-month period (from $(1.30 million) to $(1.05 million)), indicating improved profitability[19] Condensed Consolidated Statements of Changes in Stockholders' Equity This section details changes in the company's equity, including common stock, preferred stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Class A Common Stock Shares Outstanding | 12,565,750 | 9,815,749 | | Series A Convertible Preferred Stock Shares Outstanding | 3,250 | 0 | | Additional Paid-In Capital | $7,532,493 | $3,101,092 | | Accumulated Deficit | $(1,782,676) | $(730,907) | | Total Stockholders' Equity | $5,762,386 | $2,380,001 | - Issuance of common stock for debt conversion contributed $1.31 million to total equity for the six months ended June 30, 2025[21] - Issuance of Series A convertible preferred stock added $3.13 million to total equity for the six months ended June 30, 2025[21] Condensed Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities for the specified periods Condensed Consolidated Statements of Cash Flows | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $2,159,785 | $(3,001,342) | | Net cash used in investing activities | $(205,886) | $(116,978) | | Net cash provided by financing activities | $679,655 | $2,659,986 | | Net increase (decrease) in cash and cash equivalents | $2,633,554 | $(458,334) | | Cash — End of Period | $4,690,026 | $964,246 | - Operating activities generated $2.16 million in cash for the six months ended June 30, 2025, a significant improvement from a $3.00 million cash usage in the prior year[23] - Cash and cash equivalents at the end of the period increased to $4.69 million in 2025 from $0.96 million in 2024[23] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1. ORGANIZATION This note describes the company's business, subsidiaries, and the details of its spin-off from Healthier Choices Management Corp - Healthy Choice Wellness Corp. (HCWC) is a holding company focused on providing healthier daily choices in nutrition and lifestyle alternatives through its wholly-owned subsidiaries[25] - HCWC operates a Healthy Choice Wellness Center, Healthy U Wholesale (online vitamins/supplements), and several natural and organic grocery store chains including Ada's Natural Market, Paradise Health & Nutrition, Mother Earth's Storehouse, Greens Natural Foods, Ellwood Thompson's, and GreenAcres Market[26][27][28][29] - HCWC completed its spin-off from Healthier Choices Management Corp. (HCMC) on September 13, 2024, becoming an independent, publicly traded company on NYSEAM under 'HCWC'[31][32] Key Supplier Concentrations | Supplier | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | KeHe Distributors, LLC | 32% of total purchases | N/A | 29% of total purchases | N/A | | Four Seasons Produce | 19% of total purchases | 20% of total purchases | 17% of total purchases | 18% of total purchases | | UNFI | N/A | 36% of total purchases | 11% of total purchases | 36% of total purchases | NOTE 2. GOING CONCERN This note assesses the company's ability to continue operations, considering its cash position, working capital, and financing commitments - As of June 30, 2025, the Company had $4.7 million in cash and cash equivalents and positive working capital of $1.3 million[35] - For the six months ended June 30, 2025, the Company incurred net losses of approximately $1.1 million but generated cash from operating activities of approximately $2.2 million[35] - Management concluded that no substantial doubt exists about the Company's ability to continue as a going concern, supported by cash on hand and expected proceeds from a $10.0 million equity commitment[35][39] - HCWC secured $13.25 million in equity financing commitments, of which $3.25 million has been received as of June 30, 2025, with $10.0 million remaining[33][38] NOTE 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES This note outlines the accounting principles, revenue recognition policies, and segment reporting approach used in preparing the financial statements - The financial statements are prepared in accordance with GAAP and, through the Spin-Off date, were derived from HCMC's records on a carve-out basis, including allocations of certain expenses[40][41] - The Company operates as a single reportable segment, aggregating its Grocery and Wellness segments due to similar economic characteristics and CODM review at a consolidated level[42][99][100] - Revenue from product sales and services is recognized at a point in time when control transfers to the customer, net of discounts and allowances[47][50] - The Company adopted ASU 2023-07 (Segment Reporting) effective January 1, 2024, retrospectively, resulting in enhanced expense disclosures but no material impact on consolidated financial statements due to its single reportable segment[84][86][101] NOTE 4. CONCENTRATIONS This note details significant concentrations of risk, including cash held in financial institutions and reliance on key suppliers - The majority of the Company's cash is concentrated in one financial institution, exceeding FDIC coverage limits, but no losses have been experienced[90][91] Cash in Excess of FDIC Limits | Date | Amount | | :---------------- | :------------- | | June 30, 2025 | $3,659,384 | | December 31, 2024 | $715,852 | - For the three months ended June 30, 2025, KeHe Distributors accounted for 32% of total purchases and Four Seasons Produce for 19%; for the six months ended June 30, 2025, KeHe was 29%, Four Seasons Produce 17%, and UNFI 11%[93] - KeHe replaced UNFI as the primary supplier for dry grocery and frozen food products starting January 2025, under a contract through February 28, 2027[94] NOTE 5. ACCOUNTS RECEIVABLE, NET This note provides details on accounts receivable, including advertising revenue and the allowance for credit losses - Accounts receivable primarily relates to CO-OP billing for advertising vendors' products, with advertising revenue included in sales[96] Advertising Revenue | Period | 2025 | 2024 | | :-------------------- | :----------- | :---------- | | Three Months Ended June 30 | $734,000 | $66,000 | | Six Months Ended June 30 | $1,062,000 | $179,000 | Accounts Receivable and Credit Loss Allowance | Date | Accounts Receivable | Credit Loss Allowance | | :---------------- | :------------------ | :-------------------- | | June 30, 2025 | $453,000 | $48,000 | | December 31, 2024 | $510,000 | $28,000 | NOTE 6. INVENTORIES This note describes the valuation method for inventories and reports inventory write-downs for the periods presented - Inventories are measured at the lower of cost and net realizable value using the average cost method[98] Inventory Write-Downs | Period | 2025 | 2024 | | :-------------------- | :----------- | :----------- | | Three Months Ended June 30 | $549,000 | $741,000 | | Six Months Ended June 30 | $1,146,000 | $1,485,000 | NOTE 7. SEGMENT INFORMATION AND DISAGGREGATION OF REVENUES This note explains the company's segment reporting and disaggregates revenue by category for the specified periods - The Company operates in two segments (Grocery and Wellness) but aggregates them into a single reportable segment due to similar economic characteristics and consolidated CODM review[99][100] Significant Segment Expenses | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Advertising | $84,061 | $43,161 | $241,933 | $201,230 | | Payroll and Benefits | $3,917,799 | $3,200,050 | $7,814,401 | $6,522,601 | | Occupancy | $1,859,964 | $1,450,702 | $3,683,410 | $2,870,911 | | Depreciation and Amortization | $434,717 | $361,817 | $864,627 | $724,958 | | Bank Service Charges and Merchant Account Fees | $362,079 | $305,093 | $762,348 | $605,632 | | Other selling, general and administrative expenses | $485,621 | $406,318 | $947,538 | $802,725 | | Total significant reporting segment expenses | $7,144,241 | $5,767,141 | $14,314,257 | $11,728,057 | | Unallocated amount | $988,167 | $610,873 | $2,079,736 | $1,306,080 | | Total consolidated operating expenses | $8,132,408 | $6,378,014 | $16,393,993 | $13,034,137 | Revenue Disaggregation by Category | Revenue Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Retail Grocery | $18,304,905 | $13,364,836 | $36,757,772 | $26,802,107 | | Food service/restaurant | $1,877,421 | $2,170,903 | $3,664,220 | $4,585,897 | | Online/eCommerce | $17,653 | $58,836 | $37,593 | $100,929 | | Total revenue | $20,199,979 | $15,594,575 | $40,459,585 | $31,488,933 | NOTE 8. ACQUISITIONS This note details the acquisition of GreenAcres Market grocery stores, including purchase price allocation and pro forma sales information - On July 18, 2024, the Company acquired five GreenAcres Market grocery stores for a cash purchase price of $5.48 million and a promissory note of $1.83 million[106][107] GreenAcres Market Purchase Price Allocation (July 18, 2024) | Asset Category | Amount | | :-------------------------- | :------------- | | Inventory | $2,400,000 | | Property, plant, and equipment | $127,000 | | Intangible assets | $2,304,000 | | Goodwill | $2,212,000 | | Total Purchase Consideration | $7,043,000 | - Pro forma sales for the six months ended June 30, 2025, including GreenAcres Market as if acquired on January 1, 2024, would have been $40.46 million, compared to $39.16 million for the same period in 2024[110] NOTE 9. ASSETS HELD FOR SALE This note describes the classification and subsequent sale of a building previously held for sale - The Company closed its Saugerties, NY store on February 7, 2024, and classified the owned building, with a net carrying value of approximately $0.54 million, as held for sale[111] - The Saugerties building was sold on July 24, 2024, for a fair market value of $0.75 million, yielding net proceeds of $0.70 million after expenses[112] NOTE 10. PROPERTY, PLANT, AND EQUIPMENT This note presents the net carrying value of property, plant, and equipment and reports depreciation expense for the periods Property, Plant, and Equipment, Net | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total Property, Plant, and Equipment (Gross) | $4,146,473 | $3,944,467 | | Less: Accumulated Depreciation and Amortization | $(2,237,839) | $(1,967,998) | | Total Property, Plant, and Equipment, Net | $1,908,634 | $1,976,469 | Depreciation Expense | Period | 2025 | 2024 | | :-------------------- | :----------- | :----------- | | Three Months Ended June 30 | $138,000 | $131,000 | | Six Months Ended June 30 | $272,000 | $265,000 | NOTE 11. INTANGIBLE ASSETS This note details the company's intangible assets, including trade names, customer relationships, and non-compete agreements, along with their amortization Intangible Assets, Net | Category | Useful Lives (Years) | Gross Carrying Amount (June 30, 2025) | Accumulated Amortization (June 30, 2025) | Net Carrying Amount (June 30, 2025) | | :-------------------- | :------------------- | :------------------------------------ | :--------------------------------------- | :------------------------------------ | | Trade names | 8-13 | $4,444,000 | $(1,657,221) | $2,786,779 | | Customer relationships | 4-6 | $2,669,000 | $(1,777,472) | $891,528 | | Non-compete | 4-5 | $2,322,000 | $(1,151,885) | $1,170,115 | | Total Intangible Assets, Net | | $9,435,000 | $(4,586,578) | $4,848,422 | Amortization Expense | Period | 2025 | 2024 | | :-------------------- | :----------- | :----------- | | Three Months Ended June 30 | $297,000 | $230,000 | | Six Months Ended June 30 | $593,000 | $460,000 | Future Annual Estimated Amortization Expense | Years ending December 31, | Amount | | :-------------------------- | :------------- | | 2025 (remaining six months) | $587,556 | | 2026 | $1,103,576 | | 2027 | $964,771 | | 2028 | $655,332 | | 2029 | $447,896 | | Thereafter | $1,089,291 | | Total | $4,848,422 | NOTE 12. GOODWILL This note describes the company's goodwill, its impairment testing policy, and the carrying amount for the reporting periods - Goodwill is tested for impairment annually on September 30 or more frequently if indicators suggest impairment[116] - No goodwill impairment charges were recognized for the three or six months ended June 30, 2025, or 2024[117] Goodwill Carrying Amount | Date | Amount | | :---------------- | :------------- | | June 30, 2025 | $2,212,000 | | December 31, 2024 | $2,212,000 | NOTE 13. ACCOUNTS PAYABLE AND ACCRUED EXPENSES This note provides a breakdown of accounts payable and accrued expenses, highlighting changes between reporting dates Accounts Payable and Accrued Expenses | Category | June 30, 2025 | December 31, 2024 | | :----------------- | :------------ | :---------------- | | Trade creditors | $7,682,254 | $5,133,782 | | Accrued expenses | $778,894 | $997,752 | | Total | $8,461,148 | $6,131,534 | - Total accounts payable and accrued expenses increased by $2.33 million (38.0%) from December 31, 2024, to June 30, 2025, primarily due to an increase in trade creditors[119] NOTE 14. DEBT This note details the company's debt obligations, including promissory notes, debt discounts, and the repayment schedule Debt Breakdown, Net of Discount and Issuance Costs | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Promissory note | $9,968,830 | $11,623,392 | | Debt discount and issuance cost | $(250,129) | $(284,283) | | Total debt, net | $9,718,701 | $11,339,109 | | Current portion of long-term debt | $(1,107,872) | $(2,200,210) | | Current portion of debt discount and issuance cost | $68,874 | $68,873 | | Long-term debt | $8,679,703 | $9,207,772 | - The Company reduced its outstanding principal under the July 18, 2024 Loan and Security Agreement by $1.31 million through debt-to-equity conversions in March, April, and May 2025[128][129][130] Five-Year Debt Repayment Schedule | Years ending December 31, | Amount | | :-------------------------- | :------------- | | 2025 (remaining six months) | $545,648 | | 2026 | $3,016,526 | | 2027 | $5,595,359 | | 2028 | $534,923 | | 2029 | $276,374 | | Total | $9,968,830 | NOTE 15. LEASES This note outlines the company's operating lease agreements, right-of-use assets, lease liabilities, and associated expenses - The Company has various operating lease agreements with terms up to 20 years[134] Operating Lease Liabilities and ROU Assets | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Right of use assets | $12,386,466 | $14,232,240 | | Operating lease liability, current | $3,687,002 | $3,596,987 | | Operating lease liability, net of current | $8,727,705 | $10,584,431 | | Total operating lease liabilities | $12,414,707 | $14,181,418 | Operating Lease Expenses | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $864,402 | $643,036 | $1,719,038 | $1,280,138 | | Variable lease cost | $46,163 | $218,165 | $104,950 | $425,711 | | Short-term lease cost | $63,758 | $79,291 | $126,736 | $157,823 | | Total rent expense | $974,323 | $940,492 | $1,950,724 | $1,863,672 | NOTE 16. RELATED PARTY TRANSACTIONS This note describes transactions and agreements with related parties, particularly with Healthier Choices Management Corp. before and after the spin-off - Prior to the Spin-Off, HCMC provided various services to the Company, with allocated expenses of $0.7 million and $1.3 million for the three and six months ended June 30, 2024, respectively[139] - Post-Spin-Off, HCWC and HCMC entered into a Transition Services Agreement (TSA) for transitional services, with shared costs allocated using a 50% proportional method[139][140] Due from Related Party (HCMC) | Date | Amount | | :---------------- | :------------- | | June 30, 2025 | $2,111,354 | | December 31, 2024 | $190,268 | - The increase in 'due from related party' is due to HCWC's continued funding to HCMC's operations during the transition period, which is short-term and repayable within 12 months[142] NOTE 17. STOCKHOLDERS' EQUITY This note details changes in stockholders' equity, including common stock issuances, preferred stock offerings, and the impact of the spin-off - The Company completed its spin-off from HCMC on September 13, 2024, resulting in the initial issuance of approximately 9.2 million shares of HCWC common stock[146][147] - In March, April, and May 2025, the Company issued 2.75 million shares of Class A common stock in exchange for $1.31 million of outstanding debt[148][149][150] - On June 20, 2025, HCWC completed an offering of 3,250 shares of Series A Convertible Preferred Stock for $3.25 million, with binding commitments for an additional $10.0 million[151][152] - As of June 30, 2025, there were 12.57 million shares of Class A common stock and 3,250 shares of Series A Convertible Preferred Stock outstanding[153] NOTE 18. COMMITMENTS AND CONTINGENCIES This note discloses the company's legal commitments and contingencies, including ongoing lawsuits and their potential financial impact - A lawsuit was filed against a subsidiary on July 31, 2024, by a former employee alleging wage and hour law violations; the Company believes the claims are without merit and does not expect a material adverse effect[154] - The Company is involved in other legal proceedings in the ordinary course of business but does not believe any will have a material adverse effect on its financial condition or results of operations as of June 30, 2025[155] NOTE 19. SUBSEQUENT EVENTS This note reports significant events that occurred after the balance sheet date, including debt conversions and registration statements - On July 15, 2025, the Company exchanged $1.0 million of principal debt for 2.5 million shares of Class A common stock, leaving $5.38 million unpaid under the Credit Agreement[158] - A registration statement on Form S-1 for the resale of 2.36 million shares of Class A common stock (issuable upon conversion of HCWC Preferred Stock) was declared effective on July 23, 2025[159] - On July 22, 2025, a Form S-8 registration statement was filed for 2.63 million shares of Class A common stock under the 2024 Equity Incentive Plan[160] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to 2024, highlighting key performance drivers, liquidity, and critical accounting estimates Company Overview This section provides a high-level description of Healthy Choice Wellness Corp.'s business and operational focus - Healthy Choice Wellness Corp. is a holding company focused on providing healthier daily choices through its subsidiaries, which operate natural and organic grocery stores and wellness centers[163][164][165] Liquidity This section discusses the company's cash position, working capital, and ability to meet its financial obligations - As of June 30, 2025, the Company had approximately $4.7 million in cash and positive working capital of $1.3 million[167] - The financial statements are prepared on a going concern basis, with management believing current liquidity and expected equity commitments will meet obligations for at least the next twelve months[166] Factors Affecting Our Performance This section identifies key internal and external elements influencing the company's operational and financial results - Key factors affecting performance include the operating performance of its retail stores (four in Florida, nine in NY/NJ, one in VA, five in KS/OK) and increased competition from various food retailers and dining options[168][169] - Changing consumer preferences and expected downward pressure on prices also impact operating results[169] Results of Operations This section analyzes the company's financial performance, including sales, gross profit, and net loss, for the reporting periods Three Months Ended June 30, 2025 vs. 2024 | Metric | 2025 | 2024 | Change ($) | | :-------------------- | :----------- | :----------- | :----------- | | Net Sales | $20,199,979 | $15,594,575 | $4,605,404 | | Cost of Sales | $12,106,603 | $9,698,119 | $2,408,484 | | Gross Profit | $8,093,376 | $5,896,456 | $2,196,920 | | Operating Expenses | $8,132,408 | $6,378,014 | $1,754,394 | | Loss from Operations | $(39,032) | $(481,558) | $442,526 | | Net Loss | $(339,359) | $(595,707) | $256,348 | - Net sales increased by $4.6 million (29.5%) for the three months ended June 30, 2025, primarily due to the GreenAcres Market acquisition ($3.5 million) and a $1.1 million increase in same-store sales[170] - Gross margin as a percentage of sales increased by approximately 2.3% for the three months ended June 30, 2025[171] Six Months Ended June 30, 2025 vs. 2024 | Metric | 2025 | 2024 | Change ($) | | :-------------------- | :----------- | :----------- | :----------- | | Net Sales | $40,459,585 | $31,488,933 | $8,970,652 | | Cost of Sales | $24,514,300 | $19,538,100 | $4,976,200 | | Gross Profit | $15,945,285 | $11,950,833 | $3,994,452 | | Operating Expenses | $16,393,993 | $13,034,137 | $3,359,856 | | Loss from Operations | $(448,708) | $(1,083,304) | $634,596 | | Net Loss | $(1,051,769) | $(1,297,170) | $245,401 | - Net sales increased by $9.0 million (28.5%) for the six months ended June 30, 2025, driven by the GreenAcres Market acquisition ($7.2 million) and a $1.8 million increase in same-store sales[174] - Gross margin as a percentage of sales increased by approximately 1.5% for the six months ended June 30, 2025[175] Lease Commitments, Known Trends and Uncertainties This section details the company's lease obligations and discusses potential impacts from economic trends and uncertainties - As of June 30, 2025, the Company has operating lease obligations totaling $12.4 million, with a weighted-average remaining lease term of 4 years and a weighted-average discount rate of 5.24%[178] Rent Expense | Period | 2025 | 2024 | | :-------------------- | :----------- | :----------- | | Three Months Ended June 30 | $974,000 | $940,000 | | Six Months Ended June 30 | $1,951,000 | $1,864,000 | - Rent expense is expected to rise incrementally over the next two years as additional leases reset to higher rates, and rising interest rates and inflation could increase future lease obligation costs[178][179] Liquidity and Capital Resources This section examines the company's cash flow from operating, investing, and financing activities, and its overall capital structure Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 | 2024 | | :-------------------------------- | :----------- | :------------- | | Net cash provided by (used in) Operating activities | $2,159,785 | $(3,001,342) | | Net cash used in Investing activities | $(205,886) | $(116,978) | | Net cash provided by Financing activities | $679,655 | $2,659,986 | | Net increase (decrease) in cash and cash equivalents | $2,633,554 | $(458,334) | - Operating activities generated $2.2 million in cash in 2025, a significant improvement from a $3.0 million usage in 2024, despite a net loss[180] - Financing activities provided $0.7 million in 2025, including $3.1 million from preferred stock offering, offset by loan payments and related party payments[182] Cash Position | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Cash | $4,690,026 | $2,056,472 | | Total assets | $36,401,719 | $34,112,517 | | Cash as a percentage of total assets | 12.88% | 6.03% | Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements that could materially affect the company's financial position - The Company does not have any off-balance sheet arrangements[187] Critical Accounting Estimates This section highlights the significant judgments and assumptions used in preparing the financial statements, which could impact reported results - Critical accounting estimates involve significant judgment, including useful lives and impairment of long-lived assets, deferred taxes, allocation of corporate general expenses, and valuation of acquired assets/liabilities in business combinations[188] - Estimates are based on historical experience, industry knowledge, economic conditions, and regulatory environment, and are re-evaluated quarterly[189] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, such as Adjusted EBITDA, used by management to assess performance - Management uses Adjusted EBITDA as a non-GAAP financial measure to evaluate core operating results, excluding non-cash and non-recurring charges[191][192] Reconciliation from Net Loss to Adjusted EBITDA | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(339,359) | $(595,707) | $(1,051,769) | $(1,297,170) | | Interest expense | $268,955 | $117,977 | $566,685 | $221,049 | | Depreciation and amortization | $434,957 | $361,817 | $864,947 | $724,958 | | EBITDA | $364,553 | $(115,913) | $379,863 | $(351,163) | | Other income, net | $31,372 | $(3,828) | $36,376 | $(7,183) | | Adjusted EBITDA | $395,925 | $(119,741) | $416,239 | $(358,346) | - Adjusted EBITDA showed a positive trend, moving from negative in 2024 to positive in 2025 for both three-month and six-month periods[194] Seasonality This section addresses whether the company's business operations are subject to seasonal fluctuations - The Company does not consider its business to be seasonal[197] Cybersecurity This section discusses the company's approach to managing cybersecurity risks and the board's oversight - The Company recognizes the critical importance of cybersecurity and maintains robust protection, with the board overseeing risks through quarterly updates from the Chief Operating Officer[198] Cautionary Note Regarding Forward-Looking Statements This section provides a disclaimer about the forward-looking nature of certain statements and the inherent risks and uncertainties - The report contains forward-looking statements regarding retail expansion, product demand, competition, cash resources, and capital raising, which are based on current expectations and projections[199][200] - Actual results may differ materially due to factors such as common stock price, customer acceptance, and federal/state regulations[201] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk This section states that quantitative and qualitative disclosures about market risk are not applicable to smaller reporting companies - Quantitative and qualitative disclosures about market risk are not applicable to smaller reporting companies[202] ITEM 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and internal control over financial reporting, identifying material weaknesses and outlining planned remediation efforts Evaluation of Disclosure Controls and Procedures This section reports management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's disclosure controls and procedures were ineffective as of June 30, 2025[204] - Material weaknesses identified include lack of independent preparer and reviewer for journal entries, and ineffective design and implementation of Information Technology General Controls (ITGCs)[205] - ITGC weaknesses include virtually unlimited access to accounting and POS systems for multiple individuals, and ineffective controls over logical user access, physical security, change management, cybersecurity, and vendor management[205][206] Planned Remediation This section outlines the steps management intends to take to address identified material weaknesses in internal controls - Management is working to improve controls, including establishing IT policies and procedures to mitigate data breaches, unauthorized access, and address segregation of duties, as well as reviewing key third-party service provider SOC reports[208] - Remediation will be considered complete only after controls operate for a sufficient period and are tested effectively[208] Changes in Internal Controls over Financing Reporting This section describes any material changes in the company's internal control over financial reporting during the reporting period - Following the Spin-Off, new corporate and governance functions (finance, tax, treasury) have been implemented to meet standalone public company requirements[209] - The former parent continues to provide services under a transition services agreement, many using a shared technology platform[209] - Except for the material weaknesses noted, there were no significant changes in internal control over financial reporting during the quarter ended June 30, 2025[209] PART II - OTHER INFORMATION This section includes legal proceedings, risk factors, equity security sales, defaults, and other miscellaneous disclosures ITEM 1. LEGAL PROCEEDINGS. This section discloses ongoing legal proceedings, including a lawsuit against a subsidiary, and confirms that no other litigation is expected to have a material adverse effect on the Company's financial condition - A lawsuit was filed against Healthy Choice Markets IV, LLC on July 31, 2024, by a former employee alleging state and federal wage and hour law violations[211] - The Company believes the claims are without merit and does not anticipate a material adverse effect on its financial condition, results of operations, or cash flows if adversely resolved[211] ITEM 1A. RISK FACTORS. This section states that risk factors are not applicable to the Company - Risk Factors are not applicable[213] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. This section details the issuance of Class A common stock for debt conversion and the sale of Series A Convertible Preferred Stock, both exempt from registration requirements - For the six months ended June 30, 2025, the Company issued 2.75 million shares of Class A common stock in exchange for $1.3 million of indebtedness, exempt under Section 3(a)(9) and/or Regulation D of the Securities Act[214] - On June 20, 2025, the Company sold 3,250 shares of Series A Convertible Preferred Stock for $3.25 million, convertible into 2.34 million shares of Class A common stock, exempt under Section 4(a)(2) and Rule 506(b) of Regulation D[215] ITEM 3. DEFAULTS UPON SENIOR SECURITIES. This section states that there have been no defaults upon senior securities - There have been no defaults upon senior securities[216] ITEM 4. MINE SAFETY DISCLOSURES. This section states that mine safety disclosures are not applicable - Mine safety disclosures are not applicable[217] ITEM 5. OTHER INFORMATION. This section discloses the adoption of a Rule 10b5-1 trading arrangement by executive officers for the disposition of up to 2 million shares of common stock - In February 2025, executive officers adopted a Rule 10b5-1 trading arrangement, commencing in May 2025, covering the disposition of up to 2 million shares of common stock over a twelve-month period[218] - No shares have been sold pursuant to these trading arrangements to date[218] ITEM 6. EXHIBITS. This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and other required filings - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[220] - Interactive Data Files in Inline XBRL format (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are filed[220] SIGNATURES This section contains the signatures of the Company's Principal Executive Officer and Principal Financial Officer, certifying the report - The report is signed by Jeffrey Holman, Chief Executive Officer, and John Ollet, Chief Financial Officer, on August 14, 2025[224]