Healthier Choices (OTC: HCMC) posts 2025 loss, restructures debt and faces going concern warning
Healthier Choices Management Corp. reported a 2025 net loss from continuing operations of $7.0 million, narrowing from $8.1 million in 2024, on de minimis sales as it pivots away from closed vape retail stores toward monetizing its Q-Cup and other vaporizer patents.
The company completed the September 2024 spin-off of its grocery and wellness segment into HCWC, which is now reported as discontinued operations. As of December 31, 2025, cash was $1.1 million and working capital was negative $0.3 million. A key step was settling $4.0 million of related-party debt through issuing 43,889,786,222 common shares.
Healthier Choices also secured an undrawn $5 million revolving credit facility at 12% interest, maturing on December 31, 2026, to support liquidity. Even with these measures, auditors highlighted recurring losses and operating cash outflows, raising substantial doubt about the company’s ability to continue as a going concern despite management’s plans to cut costs, expand licensing, and seek additional capital.
Positive
- None.
Negative
- None.
Insights
HCMC’s 2025 10-K shows shrinking losses but acute going-concern risk.
Healthier Choices Management Corp. is now a focused vaporizer IP and licensing play after spinning off its grocery and wellness operations into HCWC in September 2024. Continuing operations generated de minimis sales in 2025, driving a net loss from continuing operations of $7.0 million, modestly better than $8.1 million in 2024, mainly via lower stock-based compensation and tighter costs.
Liquidity is the central issue. As of December 31, 2025, the company held $1.1 million of cash and negative working capital of $0.3 million, after using $3.9 million of operating cash in 2025. Management executed a related-party debt-for-equity swap, settling $4.0 million of payables to HCWC by issuing 43,889,786,222 common shares, and arranged an undrawn $5 million revolving facility at a 12% rate through December 31, 2026.
Auditors nevertheless issued a going concern emphasis, citing recurring losses and insufficient internally generated cash flows. Future performance depends heavily on successfully commercializing Q-Cup and related patents, managing litigation outcomes, controlling consulting and operating expenses post-spin, and accessing the credit line or additional external capital on acceptable terms.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended:
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from: _____________ to _____________
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
Address
of Principal Executive Office:
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| OTC Pink Marketplace |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management assessment of the effectiveness of its internal
controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes No
The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was
approximately $
Indicate
the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
INDEX
| Page | |
| PART I | |
| Item 1. Business | 3 |
| Item 1A. Risk Factors | 8 |
| Item 1B. Unresolved Staff Comments | 8 |
| Item 1C. Cybersecurity | 8 |
| Item 2. Properties | 9 |
| Item 3. Legal Proceedings | 9 |
| Item 4. Mine Safety Disclosures | 9 |
| PART II | |
| Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 10 |
| Item 6. Selected Financial Data | 10 |
| Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 16 |
| Item 8. Financial Statements and Supplementary Data | 16 |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 16 |
| Item 9A. Controls and Procedures | 16 |
| Item 9B. Other Information | 17 |
| PART III | |
| Item 10. Directors, Executive Officers and Corporate Governance | 18 |
| Item 11. Executive Compensation | 21 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters | 24 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 25 |
| Item 14. Principal Accounting Fees and Services | 26 |
| PART IV | |
| Item 15. Exhibits, Financial Statement Schedules | 26 |
| Exhibit Index | 27 |
| SIGNATURES | 28 |
| 2 |
PART I
Item 1. Business.
Healthier Choices Management Corp. (the “Company” or “HCMC”) is focused on marketing its current product offerings, including its patented Q-Cup and Imitine. HCMC also will continue to seek to monetize its intellectual property through royalty and licensing agreements, facilitated by its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. HCMC’s IP portfolio includes patents related to innovative products, such as the Q-Cup and Imitine.
The Company administers and intends to augment its intellectual property portfolio via its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC.
The Company continues to promote its patented Q-Cup™ technology directly to consumers in the vaping market. This cutting-edge design includes a small quartz cup that users can fill with cannabis or CBD concentrate. Once placed in a Q-Cup™ Tank or Globe, the cup is heated externally without direct contact with the concentrate. This innovative approach provides greater efficiency and a convenient solution for consumers who vape concentrates for both medicinal and recreational use.
Spin-Off
HCMC 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, the Grocery segment was operated under the holding company Healthy Choice Wellness Corp. (“HCWC”). HCWC was a subsidiary of HCMC, and 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.”
HCWC distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock (the “Distribution”). For each 208,632 shares of HCMC common stock held as of 5:00 p.m., Eastern Daylight Time (EDT), on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one share of Class A common stock and three 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.
As a result of the Spin-Off, the operating results for the HCWC business through the date of the Spin-Off are reported in Net Loss from Discontinued Operations in the Consolidated Statements of Operations for all periods presented. Unless otherwise noted, all amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company’s continuing operations. For additional information, see Note 2, “Discontinued Operations” of the consolidated financial statements.
| 3 |
VAPORIZER BUSINESS
Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, HCMC manages, and intends to expand, its intellectual property portfolio. Additionally, HCMC markets its patented Q-Unit™ and Q-Cup® technology through its wholly owned subsidiary The Vape Store, Inc. Information on these products and the technology is available on the Company’s website at www.theQcup.com.
Our Improvements and Product Development on Intellectual Property
We have developed, trademarked and are preparing to commercialize additional products. We include product development expenses as part of our operating expenses. In October 2018, we announced the granting of three US patents related to our Q-Cup™ technology. This Q-Cup™ technology provides microdosing potentially more efficiency depending on the vaping method and an “on the go” solution for consumers who prefer to vape concentrates either medicinally or recreationally. In addition, we have a suite of patent applications pending in the United States. There is no assurance that we will be awarded patents for of any of these pending patent applications. From 2019 through December 31, 2025, the Company was granted 9 new patents related to electronic vaporizers.
Business Strategy
The Company has implemented a comprehensive strategy to maximize the value of its intellectual property assets. Central to this strategy is the formation of HCMC Intellectual Property Holdings, LLC, a wholly owned subsidiary dedicated to managing and marketing the Company’s intellectual property. This subsidiary ensures focused efforts on monetization, holding all patents, trademarks, and other intellectual property. The Company actively pursues licensing agreements, both exclusive and non-exclusive, to generate revenue while fostering innovation across various industries. These agreements are tailored to meet the needs of different partners, ensuring flexibility and maximizing the reach of the Company’s patents. Additionally, the Company seeks strategic partnerships with entities that can benefit from its patented technologies, resulting in joint ventures, co-development agreements, and shared research and development efforts. These collaborations enhance the value of the Company’s intellectual property through shared expertise and resources, contributing to increased revenue and market presence.
The Company is committed to protecting its intellectual property through active patent enforcement, which involves monitoring the market for potential infringements and taking legal action when necessary. Successful enforcement efforts can lead to settlements, licensing fees, and increased recognition of the Company’s intellectual property. Furthermore, the Company leverages its patents to develop new products and improve existing ones, such as the Q-CUP® brand vape material containers and related hardware components, which are based on patented technology. Continued innovation in product development enhances market competitiveness and drives sales.
The Company is focused on expanding its patent coverage internationally by filing for patents in key global markets, thereby broadening its protection and opening up new opportunities for monetization. International expansion allows the Company to tap into diverse markets and establish a strong global presence. Investing in continuous innovation and research and development is essential for maintaining a robust patent portfolio. Ongoing research ensures that the Company’s patents remain relevant and valuable, enhancing existing patents and leading to the creation of new ones, driving long-term growth. Effective marketing and awareness campaigns are undertaken to showcase the benefits of the Company’s patented technologies, including promotion at industry conferences, through publications, and via digital channels. These efforts raise awareness and attract potential partners and licensees, highlighting the practical applications and value of the Company’s patents.
By implementing these strategies, the Company aims to maximize the commercial and economic value of its patent assets, driving growth and sustainability.
Competition
Competition in the vaporizer and e-liquid industry is intense. We compete with other sellers, most notably Altria Group, Inc., JT International, Imperial Tobacco, and Reynolds American, Inc., which are big tobacco companies that have businesses that compete in the segment. The nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low.
As discussed above, we compete against “big tobacco”, U.S. cigarette manufacturers of both conventional tobacco cigarettes and electronic cigarettes like Altria Group, Inc., JT International, Imperial Tobacco, and Reynolds American, Inc. We believe that “big tobacco” is devoting more attention and resources to developing, acquiring technology patents, and offering electronic cigarettes, vaporizers and e-liquids as these markets grow. Because of their well-established sales and distribution channels, marketing expertise and significant resources, “big tobacco” is better positioned than small competitors like us to capture a larger share of the electronic cigarette market. We also compete against numerous other smaller manufacturers or importers. There can be no assurance that we will be able to compete successfully against any of our competitors, some of whom have far greater resources, capital, experience, market penetration, sales and distribution channels than us.
| 4 |
Manufacturing
We have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products to meet our design specifications. Our customers associate certain characteristics of our products including the weight, feel, draw, unique flavor, packaging and other attributes of our products to the brands we market, distribute and sell. Any interruption in supply and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several third-party manufacturers to manufacture our products to our specifications. We contract with our manufacturers on a purchase order basis. We do not have any output or requirements contracts with any of our manufacturers. Our manufacturers provide us with finished products, which we hold in inventory for distribution, sale and use.
Patent Litigation
Third party patent lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights have and could force us to do one or more of the following:
| ● | stop selling products or using technology that contains the allegedly infringing intellectual property; | |
| ● | incur significant legal expenses; | |
| ● | pay substantial damages to the party whose intellectual property rights we may be found to be infringing; | |
| ● | redesign those products that contain the allegedly infringing intellectual property; or | |
| ● | attempt to obtain a license to the relevant intellectual property from third parties, which may not be available to us on reasonable terms or at all. |
Future third party lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights could have a material adverse effect on our business, results of operations and financial condition.
We are required to obtain licenses to patents or proprietary rights of others and may be required to obtain more in the future and as the product continues to evolve. We cannot assure you that any future licenses required under any such patents or proprietary rights would be made available on terms acceptable to us or at all. If we do not obtain such licenses, we could encounter delays in product market introductions while we attempt to design around such patents, or could find that the development, manufacture, or sale of products requiring such licenses could be foreclosed. Litigation may be necessary to defend against claims of infringement asserted against us by others, or assert claims of infringement to enforce patents issued to us or exclusively licensed to us, to protect trade secrets or know-how possessed by us, or to determine the scope and validity of the proprietary rights of others. In addition, we may become involved in oppositions in foreign jurisdictions, reexamination declared by the United States Patent and Trademark Office, or interference proceedings declared by the United States Patent and Trademark Office to determine the priority of inventions with respect to our patent applications or those of our licensors. Litigation, opposition, reexamination or interference proceedings could result in substantial costs to and diversion of effort by us, and may have a material adverse impact on us. In addition, we cannot assure you that our efforts to maintain or defend our patents will be successful.
Patent Enforcement
On November 30, 2020, the Company filed a patent infringement lawsuit against Philip Morris USA, Inc. and Philip Morris Products S.A. in the U.S. District Court (“District Court”) for the Northern District of Georgia (the “Complaint”). The lawsuit alleged infringement on HCMC-owned patent(s) by the Philip Morris product known and marketed as “IQOS™.”
| 5 |
On September 26, 2023, HCMC filed a patent infringement lawsuit against R.J. Reynolds Vapor Company (“RJR”) in the U.S. District Court for the Middle District of North Carolina in connection with HCMC’s assertions that RJR’s Vuse electronic cigarette infringes one of HCMC’s patents (the “HCMC RJR Patent”). RJR has sought an inter-parties review by the Board of the HCMC RJR Patent.
On November 22, 2024, HCMC received a ruling from the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) denying an appeal of HCMC of a decision of the United States Patent and Trademark Office Patent Trial and Appeal Board (the “Board”) relating to the inter partes review of an HCMC patent. The Board had ruled that the previously granted HCMC patent that served as the basis of HCMC’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. was not patentable and denied of HCMC’s request to amend the claims if invalidity of the patent was affirmed. Consequently, this lawsuit was dismissed on December 31, 2024.
Regulations
Since a 2010 U.S. Court of Appeals decision, the Food and Drug Administration (“FDA”) is permitted to regulate electronic cigarettes as “tobacco products” under the Family Smoking Prevention and the Tobacco Control Act. Under this decision, the FDA is not permitted to regulate electronic cigarettes as “drugs” or “devices” or a “combination product” under the Federal Food, Drug and Cosmetic Act unless they are marketed for therapeutic purposes. This is contrary to anti-smoking devices like nicotine patches, which undergo more extensive FDA regulation. Because the Company does not market its electronic cigarettes for therapeutic purposes, the Company’s electronic cigarettes are subject to being classified as “tobacco products” under the Tobacco Control Act. The Tobacco Control Act grants the FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction of nicotine yields of a tobacco product to zero.
On September 9, 2020 the FDA began enforcing rules that extended its regulatory authority to electronic cigarettes and certain other tobacco products under the Tobacco Control Act. The rules required that electronic cigarette and e-liquid manufacturers (i) register with the FDA and report electronic cigarette products and ingredient listings; (ii) market new electronic cigarette products only after FDA review; (iii) only make direct and implied claims of reduced risk if the FDA confirms that scientific evidence supports the claim and that marketing the electronic cigarette product will benefit public health as a whole; (iv) not distribute free samples; (v) implement minimum age and identification restrictions to prevent sales to individuals under age 21; (vi) include a health warning; and (vii) not sell electronic cigarettes in vending machines, unless in a facility that never admits youth. It is not known how long finalizing and implementing this regulatory process may take. Accordingly, the Company has responded by beginning to take the necessary steps to ensure compliance.
In this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by the FDA under the Tobacco Control Act. Costs, however, could be substantial and could have a material adverse effect on the Company’s business, results of operations and financial condition. In addition, failure to comply with the Tobacco Control Act and with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on the Company’s business, financial condition and results of operations and ability to market and sell the Company’s products. At present, it is difficult to predict whether the Tobacco Control Act will impact the Company to a greater degree than competitors in the industry, thus affecting the Company’s competitive position.
State and local governments currently legislate and regulate tobacco products, including what is considered a tobacco product, how tobacco taxes are calculated and collected, to whom and by whom tobacco products can be sold and where tobacco products may or may not be smoked. State and local regulation of the e-cigarette market and the usage of e-cigarettes is beginning to accelerate.
At present, neither the Prevent All Cigarette Trafficking Act (which prohibits the use of the U.S. Postal Service to mail most tobacco products, which would require individuals and businesses that make interstate sales of cigarettes or smokeless tobacco to comply with state tax laws) nor the Federal Cigarette Labeling and Advertising Act (which governs how cigarettes can be advertised and marketed) apply to electronic cigarettes. The application of either or both of these federal laws to vaporizers and electronic cigarettes would have a material adverse effect on the Company’s business, results of operations and financial condition.
On July 1, 2015, the FDA published a document entitled “Advanced notice of proposed rulemaking” or the Advance. Through the Advance, the FDA solicited public comments on whether it should issue rules with respect to nicotine exposure warning and child-resistant packaging for e-liquids containing nicotine. Following public comment, the FDA may issue proposed rules in furtherance of the purposes outlined in the Advance and ultimately pass the rules as proposed or in modified form. We cannot predict whether rules will be passed or if they will have a material adverse effect on our future results of operations and financial conditions.
| 6 |
The Company expects that the tobacco industry will experience significant regulatory developments over the next few years, driven principally by the World Health Organization’s FCTC. The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:
| ● | the levying of substantial and increasing tax and duty charges; | |
| ● | restrictions or bans on advertising, marketing and sponsorship; | |
| ● | the display of larger health warnings, graphic health warnings and other labelling requirements; | |
| ● | restrictions on packaging design, including the use of colors and generic packaging; | |
| ● | restrictions or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines; | |
| ● | requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents’ levels; | |
| ● | requirements regarding testing, disclosure and use of tobacco product ingredients; | |
| ● | increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors; | |
| ● | elimination of duty free allowances for travelers; and | |
| ● | encouraging litigation against tobacco companies. |
If vaporizers, and electronic cigarettes, are subject to one or more significant regulatory initiates enacted under the FCTC, the Company’s business, results of operations and financial condition could be materially and adversely affected.
Seasonality
Our business is active throughout the calendar year and does not experience significant fluctuation caused by seasonal changes in consumer purchasing.
Insurance and Risk Management
We use a combination of insurance and self-insurance to cover workers’ compensation, general liability, product liability, director and officers’ liability, employment practices liability, associate healthcare benefits and other casualty and property risks. Changes in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers and changes in discount rates could all affect ultimate settlements of claims. We evaluate our insurance requirements and providers on an ongoing basis.
| 7 |
Segment Information
The Company operates as a single segment that includes all of its continuing operations. The Company previously had two reportable segments: Grocery and Vape. The Grocery segment was spun-off on September 13, 2024 and is now reported as discontinued operations for all periods through that date.
Going Concern and Management’s Plan
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate the continuation of the Company as a going concern for the next twelve months from the issuance of this Form 10-K 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 consolidated financial statements do not necessarily purport to represent realizable or settlement values.
The Company currently and historically has reported net losses and cash outflows from operations. As of December 31, 2025, cash totaled approximately $1.1 million and negative working capital of $0.3 million. A significant improvement to the Company’s financial position occurred on December 31, 2025, when the Company settled $4.0 million of intercompany debt through the issuance of 43,889,786,222 shares of common stock to Healthy Choice Wellness Corp. (“HCWC”), a related party. This strategic debt-for-equity transaction eliminated a substantial current liability and significantly strengthened the Company’s balance sheet.
On November 7, 2024, the Company entered into a commitment letter with an investor establishing a $5 million revolving credit facility (the “Facility”). On April 11, 2025, the Company and the lender amended the agreement to extend the maturity date from April 30, 2026 to December 31, 2026. As of December 31, 2025, the Company had not drawn on this facility, leaving the full $5 million available for working capital purposes. The interest rate on any amount borrowed is 12% per annum.
Management has implemented and continues to pursue the following initiatives to address liquidity needs and support ongoing operations:
| ● | Debt Restructuring Success: The settlement of $4.0 million in debt through equity issuance has materially improved the Company’s financial position by eliminating a significant liability while preserving cash resources. | |
| ● | Credit Facility Availability: The undrawn $5 million credit facility provides immediate liquidity access through December 31, 2026, with funds available for working capital needs. | |
| ● | Revenue Initiatives: The Company is actively pursuing commercialization opportunities, including licensing negotiation, marketing and distribution with third party, and exploration of additional strategic partnerships for existing product lines. | |
| ● | Cost Management: Implementation of expense reduction measures, including optimization of consulting expenditures and operational efficiencies following the spin-off of HCWC. | |
| ● | Strategic Financing: Continued evaluation of additional financing alternatives, including potential equity offerings or strategic investments, to support growth initiatives and working capital requirements. |
Based on the successful completion of the $4.0 million debt settlement, the availability of the $5 million credit facility, and management’s ongoing initiatives to commercialize products and manage expenses, the Company believes its existing cash resources and available credit will enable it to meet its obligations and capital requirements for at least the twelve months from the date these financial statements are issued. The success of these plans is dependent upon various factors, foremost being the ability to reduce outside consulting expenses and the ability to secure additional capital from outside investors. There can be no assurance that such plans will be successful.
Item 1A. Risk Factors.
Not applicable to smaller reporting companies.
Item 1B. Unresolved Staff Comments.
None
Item 1C. Cybersecurity
| 8 |
The following is a list of measures that were implemented as part of our increased focus on cybersecurity:
| ● | Complete endpoint protection - All endpoints have been covered by an enhanced endpoint protection agent. | |
| ● | Cloud infrastructure - Critical infrastructure started moving to the cloud and protected by enhanced anti-virus and recurring backup policies. | |
| ● | Email services have been put through a rigorous intelligent phishing and spam filter to prevent attacks |
In addition, our third-party vendors and service providers play a role in our cybersecurity. These third parties are integral to our operations but pose cybersecurity challenges due to their access to our data and our reliance for various aspects of our operations, including our supply chain. We conduct due diligence before onboarding new vendors and maintain ongoing evaluations to ensure compliance with our security standards.
As
of the date of this report,
Item 2. Properties.
The Company operates its business from our headquarter located in Hollywood, Florida. This leased property aggregates approximately 10,000 square feet and includes headquarter and warehouse.
Item 3. Legal Proceedings.
No response is required under Item 103 of Regulation S-K.
Item 4. Mine Safety Disclosures.
None.
| 9 |
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is currently listed on the OTC Pink marketplace under the symbol “HCMC”.
As of March 27, 2026, there were approximately 1,400 stockholders of record for our common stock. A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
As of March 27, 2026, the last reported sale price of our common stock on the OTC Pink Marketplace was $0.0001 per share.
We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on any of our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on the existing conditions, including our operating results, financial conditions, contractual restrictions, capital requirements, business prospects and other factors our Board may deem relevant.
On August 18, 2022, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold and issued 14,722 shares of its Series E Redeemable Convertible Preferred Stock to institutional investors for $1,000 per share or an aggregate subscription of $13.25 million. The number of shares issued to each participant is based on subscription amount multiplied by conversion rate of 1.1111. As of December 31, 2025, 1,585 shares of Series E preferred stock were converted into common stock, and 12,026 shares of Series E preferred stock were redeemed. As of March 27, 2026, 1,111 shares of Series E Redeemable Convertible Preferred Stock remained outstanding.
Item 6. Selected Financial Data.
Not required for smaller reporting companies.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included elsewhere in this report. “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations” contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.
Cautionary Note Regarding Forward Looking Statements
This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this report, including statements regarding our future financial position, liquidity, business strategy, plans and objectives of management for future operations, are forward-looking statements.
Forward-looking statements contained in this report include:
| ● | Our liquidity; | |
| ● | Opportunities for our business; and | |
| ● | Growth of our business. |
| 10 |
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “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, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are contained in the Risk Factors contained herein. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business, see the Risk Factors below.
Factors Affecting Our Performance
We believe the following factors affect our performance:
Pending Patent: We have developed, trademarked and are preparing to commercialize additional products. We include product development expenses as part of our operating expenses. In October 2018, we announced the granting of three US patents related to our Q-Cup™ technology. In addition, we have a suite of patent applications pending in the United States. There is no assurance that we will be awarded patents for any of these pending patent applications. There is no assurance that we can monetize the patents.
Manufacturing: We have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products to meet our design specifications. We depend on third party manufacturers for our vaporizer e-liquid and accessories. Any interruption in supply and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several third-party manufacturers to manufacture our products to our specifications.
Results of Operations
The following table sets forth our Consolidated Statements of Operations on a continuing basis for the years ended December 31, 2025 and 2024 which is used in the following discussions of our results of operations:
| For the Year Ended December 31, | 2025 to 2024 | |||||||||||
| 2025 | 2024 | Change $ | ||||||||||
| SALES | $ | 2,979 | $ | 501 | $ | 2,478 | ||||||
| COST OF SALES | 30,920 | 66,806 | (35,886 | ) | ||||||||
| GROSS PROFIT | (27,941 | ) | (66,305 | ) | 38,364 | |||||||
| OPERATING EXPENSES | 7,005,006 | 8,437,425 | (1,432,419 | ) | ||||||||
| LOSS FROM OPERATIONS | (7,032,947 | ) | (8,503,730 | ) | 1,470,783 | |||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Loss on investment | - | (1,336 | ) | 1,336 | ||||||||
| Other (expense) income, net | (19,739 | ) | 263,782 | (283,521 | ) | |||||||
| Interest income, net | 34,741 | 126,000 | (91,259 | ) | ||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | 15,002 | 388,446 | (373,444 | ) | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ | (7,017,945 | ) | $ | (8,115,284 | ) | $ | 1,097,339 | ||||
| 11 |
Net sales and cost of sales were de minimis for the years ended December 31, 2025 and 2024. The Company closed all its brick-and-mortar retail vape stores, as management had shifted its retail sales focus to the wholesale and online channel. The Company wrote off approximately $66,600 obsolete inventory in year 2024 as a result of the retail store closure. The sales for the years ended December 31, 2025 and 2024 continued to be significantly impacted by the inability to bring new products to market via distribution.
Total selling, general and administrative expenses decreased $1.4 million from $8.4 million for the year ended December 31, 2024 to $7.0 million for the year ended December 31, 2025. The decrease was primarily due to a decrease in stock compensation.
Total other income (expenses), net of $15,000 for the year ended December 31, 2025 includes $20,000 other expense and offset by approximately $35,000 interest income. Total other income (expenses), net of $0.4 million for the year ended December 31, 2024 includes $0.3 million of other income and interest income of $0.1 million, offset by approximately $1,000 loss on investment.
Liquidity and Capital Resources
The following table and the discussion present the Company’s cash activities on continuing basis as of December 31, 2025 and December 31, 2024.
| For the year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (3,881,117 | ) | $ | (579,557 | ) | ||
| Investing activities | - | (47,185 | ) | |||||
| Financing activities | 3,374,806 | (1,838,197 | ) | |||||
| Net decrease in cash from continuing operations | $ | (506,311 | ) | $ | (2,464,939 | ) | ||
| Net decrease in cash from discontinued operations | - | (1,422,580 | ) | |||||
| Total net decrease in cash | $ | (506,311 | ) | $ | (3,887,519 | ) | ||
| 12 |
Our net cash used in operating activities of $3.9 million for the year ended December 31, 2025 resulted from our net loss of $7.0 million and a net cash usage of $0.3 million from changes in operating assets and liabilities, and a non-cash adjustment of $3.4 million. Our net cash used in operating activities of $0.6 million for the year ended December 31, 2024 resulted from our net loss of $8.1 million and a net cash provided by changes in operating assets and liabilities of $2.8 million, and a non-cash adjustment of $4.8 million.
The net cash used in investing activities of $0 for the year ended December 31, 2025. The net cash used in investing activities of $47,000 for the year ended December 31, 2024 resulted from purchases of property and equipment.
The net cash provided by financing activities of $3.4 million for the year ended December 31, 2025 consists of $3.8 million cash proceeds from related party, and offset by $0.4 million payment of line of credit. The net cash used in financing activities of $1.8 million for the year ended December 31, 2024 is due to $4.1 million net transfer to HCWC related to Spin-Off and $2.3 million cash proceeds from related party.
At December 31, 2025 and December 31, 2024, we did not have any material financial guarantees or other contractual commitments with trade 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. The majority of our cash is concentrated in one large financial institution and are generally in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company has not experienced any losses on its cash and cash equivalents. The following table presents the Company’s cash position on continuing basis as of December 31, 2025 and December 31, 2024.
December 31, 2025 | December 31, 2024 | |||||||
| Cash | $ | 1,140,488 | $ | 1,193,567 | ||||
| Total assets | $ | 1,467,870 | $ | 2,220,449 | ||||
| Percentage of total assets | 77.7 | % | 53.8 | % | ||||
As of December 31, 2025, the Company had cash of $1.1 million and negative working capital of $0.3 million. The Company has incurred recurring net losses and operations have not provided cash flows. The Company expects to continue incurring losses for the foreseeable future.
In December 2025, the Company improved its liquidity position by settling approximately $4.0 million debt with a related party through equity issuance. This transaction eliminated a significant current liability and strengthened the Company’s balance sheet.
On November 7, 2024, the Company entered into a commitment letter with an investor that will allow the Company to draw up to $5 million from a revolving credit facility (the “Facility”) through August 31, 2025. Any advances will be used for working capital purposes. Any amounts borrowed pursuant to the Facility will be repayable in full on April 30, 2026 and the interest rate on the amounts borrowed is 12% per annum. On April 11, 2025, the Company and the lender amended the agreement to extend the maturity date from April 30, 2026 to December 31, 2026. The Company anticipates its current cash and its ability to draw from the $5 million credit line with private lender will be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements.
| 13 |
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements other than operating leases for retail locations, equipment, and vehicles.
Seasonality
We do not consider our business to be seasonal.
Climate-Related Considerations
We have evaluated the potential impact of climate change on our business, including regulatory, physical, and market-related risks. Based on our assessment, we do not believe that climate change currently poses a material risk to our operations or financial performance. Our retail sales operations are not significantly affected by climate-related factors, such as extreme weather or emissions regulations. Nevertheless, we will continue to monitor any developments that could indirectly impact on our business, such as changes in consumer behavior or supply chain disruptions related to climate change.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. These estimates include useful lives and impairment of long-lived assets, deferred taxes and related valuation allowances, allocation of corporate general expenses, the fair value determination of shares issued in the debt settlement, and the valuation of the assets and liabilities acquired in business combinations. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized:
| ● | Identification of the contract, or contracts, with a customer; | |
| ● | Identification of the performance obligations in the contract; | |
| ● | Determination of the transaction price; | |
| ● | Allocation of the transaction price to the performance obligations in the contract; and | |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
| 14 |
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. |
Deferred Taxes and Valuation Allowance
We account for income taxes pursuant to the asset and liability method of accounting for income taxes pursuant to FASB ASC740, “Income Taxes.” Deferred tax assets and liabilities are recognized for taxable temporary differences and operating loss carry forwards. Temporary differences are the differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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 generally accepted accounting principles (GAAP). Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternative to, net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. Non-GAAP financial measures may not be indicative of the historical operating results of the Company, nor are they intended to be predictive of potential future financial results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.
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.
| 15 |
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, stock compensation, change in contingent consideration, also adjusted for non-recurring other expense (income), net, loss on investment, 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.
The following table presents the Company’s Adjusted EBITDA reconciliation on continuing basis as of December 31, 2025 and December 31, 2024.
| 2025 | 2024 | |||||||
| Reconciliation from net loss to adjusted EBITDA: | ||||||||
| Operating loss | $ | (7,017,945 | ) | $ | (8,115,284 | ) | ||
| Interest expense | 582 | 16,359 | ||||||
| Depreciation and amortization | 47,817 | 65,270 | ||||||
| EBITDA | (6,969,546 | ) | (8,033,655 | ) | ||||
| Stock-based compensation expense | 3,395,528 | 4,619,500 | ||||||
| Loss on investment | - | 1,336 | ||||||
| Other expense (income), net | 19,739 | (263,782 | ) | |||||
| Interest income | (35,323 | ) | (142,359 | ) | ||||
| Adjusted EBITDA | $ | (3,589,602 | ) | $ | (3,818,960 | ) | ||
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to smaller reporting companies.
Item 8. Financial Statements and Supplementary Data.
See pages F-1 through F-26.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. 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, did not carry out an evaluation on internal controls during the year ended December 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. As an evaluation was not carried out, 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.
| 16 |
Inherent Limitations of Internal Controls over Financial Reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting that occurred during the year ending December 31, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting. 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 December 31, 2025 and noted the material weaknesses as follows:
| ● | The Company had ineffective design, implementation and operation of controls over logical access, program change management, and vendor management controls. The Company controls on IT should have included the following: |
| ○ | appropriate restrictions that would adequately prevent users from gaining inappropriate access to the financially relevant systems. | |
| ○ | 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. | |
| ○ | Obtaining and reviewing key third party service provider SOC reports. |
Our management concluded that considering internal control deficiencies, in the aggregate, rise to the level of material weaknesses, we did not maintain effective internal control over financial reporting as of December 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”).
Remediation Efforts
Following this assessment and during the twelve months ended December 31, 2025, we have undertaken an action plan to strengthen internal controls and procedures:
| ● | 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. | |
| ● | Using business intelligence to combine business analytics, data tools and infrastructure to help the Company quickly identify the issues in POS system and facilitate internal control over financial reporting. Developing dashboards for operation to monitor the margin at store level, department level and sku level. |
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.
Item 9B. Other Information.
| 17 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The following table sets forth information regarding our executive officers and directors as of December 31, 2025:
| Name | Age | Position | ||
| Executive Officers: | ||||
| Jeffrey Holman | 58 | Chief Executive Officer, Chairman and Director | ||
| John A. Ollet | 63 | Chief Financial Officer | ||
| Christopher Santi | 55 | President and Chief Operating Officer | ||
| Non-Employee Directors: | ||||
| Clifford J. Friedman | 64 | Director | ||
| Dr. Anthony Panariello | 66 | Director |
Executive Officers
Jeffrey Holman has been our Chairman of the Board and Chief Executive Officer since April 2014. From February 2013 until March 4, 2015, Mr. Holman serviced as our President. Mr. Holman has been a member of our Board since May 2013 and has served as a member of the Board of Directors of our subsidiary Smoke Anywhere, USA since its inception on March 24, 2008. Mr. Holman has been the Chief Executive Officer of the Healthy Choice Wellness Corp. (“HCWC”) since September 2022 and has served on its board of directors since September 2022. Since 1998, Mr. Holman has been the President of Jeffrey E. Holman & Associates, P.A., a South Florida based law firm. He has also been a Partner in the law firm of Holman, Cohen & Valencia since 2000. Mr. Holman was selected as a director for his business and legal experience. In addition, as one of the founders of Smoke Anywhere, Mr. Holman possesses an in-depth understanding of the challenges, risks and characteristics unique to our industry.
Christopher Santi has been our Chief Operating Officer since December 12, 2012, and has also served as the President since April 11, 2016. Mr. Santi served as the President and Chief Operating Officer of HCWC since September 2022. Previously, Mr. Santi served as Director of Operations of the Company beginning in October 2011. Mr. Santi served as the National Sales Manager of Collages.net from November 2007 to October 2011.
John A. Ollet has been our Chief Financial Officer since December 12, 2016. Mr. Ollet has served as the Chief Financial Officer of HCWC since September 2022 and on the HCWC board of directors since August 2024. Mr. Ollet previously served as Executive Vice President-Finance for Systemax, Inc. (NYSE:SYX) from 2006 to 2016. His prior chief financial officer experience also includes serving as Vice President and Chief Financial Officer of Arrow Cargo Holdings, Inc., an airline logistics company, and VP Finance /CFO - The Americas - Cargo Division, KLM Royal Dutch Airlines, an airline company. He also previously served as Vice President Finance/Administration at Sterling-Starr Maritime Group, Inc. and served on the audit staff of Arthur Andersen & Co. Mr. Ollet received a bachelor’s degree in Finance/Economics and a master’s degree in business administration from Florida International University. Mr. Ollet is a Certified Public Accountant.
Non-Employee Directors
Anthony Panariello, M.D. has been a director since April 15, 2016. Dr. Panariello is a Board Certified in Pulmonology and Internal Medicine in Florida and has been in private practice since 1996, serving as an attending physician at a number of hospitals. Dr. Panariello is a member of the College of Physicians and the American College of Chest Physicians. Additionally, Dr. Panariello currently serves as a Lieutenant Commander in the Medical Corps of the United States Navy Reserve. Dr. Panariello received his Bachelor of Science from the State University of New York at Stony Brook and his medical degree from the Autonomous University of Guadalajara.
Clifford J. Friedman has been a director since April 15, 2016. Mr. Friedman is a certified public accountant in Coral Springs, Florida and manages his own public accounting, tax and consulting practice since 2001. From 1992 to 2000, Mr. Friedman was Vice President - Finance and Administration of the Box Worldwide, Inc., a Viacom company. He received an M.B.A. from Nova Southeastern University and his B.B.A. from Pace University.
| 18 |
Corporate Governance
Board Responsibilities
The Board oversees, counsels, and directs management in the long-term interest of the Company and its stockholders. The Board’s responsibilities include establishing broad corporate policies and reviewing the overall performance of the Company. The Board is not, however, involved in the operating details on a day-to-day basis.
Board Committees and Charters
The Board and its Committees meet throughout the year and act by written consent from time-to-time as appropriate. The Board delegates various responsibilities and authority to different Board Committees. Committees regularly report on their activities and actions to the Board.
The Board currently has and appoints the members of: The Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of these committees have a written charter which can be found on our corporate website at www.healthiercmc.com/committee-charters/.
The following table identifies the independent and non-independent current Board and committee members:
| Name | Independent | Audit | Compensation | Nominating And Corporate Governance | ||||
| Jeffrey Holman | ||||||||
| Dr. Anthony Panariello | X | X | X | X | ||||
| Clifford J. Friedman | X | X | X | X |
Director Independence
Our Board has determined that Clifford J. Friedman and Dr. Anthony Panariello are independent in accordance with standards under the OTC Pink Marketplace. Our Board determined that as a result of being an executive officer, Messrs. Jeffrey Holman is not independent under the OTC Pink Marketplace. Our Board has also determined that Clifford J. Friedman and Dr. Anthony Panariello are independent under the OTC Pink Marketplace independence standards for Audit and Compensation Committee members.
Committees of the Board
Audit Committee
The Audit Committee, which currently consists of Clifford J. Friedman (chair) and Dr. Anthony Panariello, reviews the Company’s financial reporting process on behalf of the Board and administers our engagement of the independent registered public accounting firm. The Audit Committee approves all audit and non-audit services and reviews the independence of our independent registered public accounting firm.
Audit Committee Financial Expert
Our Board has determined that Clifford J. Friedman is qualified as an Audit Committee Financial Expert, as that term is defined by the rules of the SEC and in compliance with the Sarbanes-Oxley Act of 2002.
Compensation Committee
The function of the Compensation Committee is to determine the compensation of our executive officers. The Compensation Committee has the power to set performance targets for determining periodic bonuses payable to executive officers and may review and make recommendations with respect to stockholder proposals related to compensation matters. Additionally, the Compensation Committee is responsible for administering the Company’s equity compensation plans including the Company’s 2015 Equity Incentive Plan, as amended.
The members of the Compensation Committee are all independent directors within the meaning of applicable Nasdaq Listing Rules and all of the members are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.
| 19 |
Nominating and Corporate Governance Committee
The responsibilities of the Nominating and Corporate Governance Committee include the identification of individuals qualified to become Board members, the selection of nominees to stand for election as directors, the oversight of the selection and composition of committees of the Board, establish procedures for the nomination process including procedures and the oversight of the evaluations of the Board and management. The Nominating and Corporate Governance Committee has not established a policy with regard to the consideration of any candidates recommended by stockholders since no stockholders have made any recommendations. If we receive any stockholder recommended nominations, the Nominating Committee will carefully review the recommendation(s) and consider such recommendation(s) in good faith.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has ever been an officer or employee of the Company. None of our executive officers serve, or have served during the last fiscal year, as a member of our compensation committee or other Board committee performing equivalent functions of any entity that has one or more executive officers serving on our Board or on our compensation committee.
Board Assessment of Risk
The Board is actively involved in the oversight of risks that could affect the Company. This oversight is conducted primarily through the Audit Committee, but the full Board has retained responsibility for general oversight of risks. The Audit Committee considers and reviews with our independent public accounting firm and management the adequacy of our internal controls, including the processes for identifying significant risks and exposures, and elicits recommendations for the improvements of such procedures where desirable. In addition to the Audit Committee’s role, the full Board is involved in oversight and administration of risk and risk management practices. Members of our senior management have day-to-day responsibility for risk management and establishing risk management practices, and members of management are expected to report matters relating specifically to the Audit Committee directly thereto, and to report all other matters directly to the Board as a whole. Members of our senior management have an open line of communication to the Board and have the discretion to raise issues from time-to-time in any manner they deem appropriate, and management’s reporting on issues relating to risk management typically occurs through direct communication with directors or committee members as matters requiring attention arise. Members of our senior management regularly attend portions of the Board’s meetings, and often discuss the risks related to our business.
Code of Ethics
The Company has a code of ethics, “Business Conduct: “Code of Conduct and Policy,” that applies to all of the Company’s employees, including its principal executive officer, principal financial officer and principal accounting officer, and the Board. A copy of this code is available on the Company’s website at http://www.healthiercmc.com/code-of-conduct. The Company intends to disclose any changes in or waivers from its code of ethics by posting such information on its website or by filing a Current Report on Form 8-K.
Stockholder Communications
Although we do not have a formal policy regarding communications with our Board, stockholders may communicate with the Board by writing to us at Healthier Choices Management Corp., 3800 N 28th Way, Hollywood, FL 33020, Attention: Corporate Secretary, or by facsimile (954) 251-3057. Stockholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.
| 20 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and the other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC rules to furnish us with copies of all Section 16(a) reports they file.
Based solely on a review of the reports furnished to us, or written representations from reporting persons that all reportable transactions were reported and that no Form 5s were required, we believe that during 2024 our officers, directors and greater than 10% owners timely filed all reports they were required to file under Section 16(a).
ITEM 11. Executive Compensation
The following information is related to the compensation paid, distributed or accrued by us for fiscal 2025 and 2024 to all Chief Executive Officers (principal executive officers) serving during the two years and the other most highly compensated executive officers serving at the end of the last fiscal year whose compensation exceeded $100,000. We refer to these individuals as our “named executive officers.”
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Restricted Stock Awards(1) $ | All Other Compensation ($) | Total | ||||||||||||||||||
| Jeffrey Holman | 2025 | 396,017 | - | - | - | 396,017 | ||||||||||||||||||
| Chief Executive Officer | 2024 | 695,169 | - | 695,169 | ||||||||||||||||||||
| Christopher Santi | 2025 | 188,615 | - | - | - | 188,615 | ||||||||||||||||||
| President and Chief Operating Officer | 2024 | 405,352 | - | - | 405,352 | |||||||||||||||||||
| John Ollet | 2025 | 146,751 | - | - | - | 146,751 | ||||||||||||||||||
| Chief Financial Officer | 2024 | 331,723 | - | 331,723 | ||||||||||||||||||||
The above table represented the compensation directly paid by the Company. On September 13, 2024, HCMC completed the Spin-Off of its grocery segment into a separate publicly traded company HCWC. As part of the Spin-Off, HCMC and HCWC entered into a Transition Services Agreement (“TSA”), under which each company agreed to provide certain transitional support services to the other for a specified period to ensure an orderly separation. Throughout fiscal year 2024, certain executives of HCMC continued to provide services to both HCMC and HCWC while remaining employed and compensated by HCMC. Pursuant to the TSA, HCMC allocated $0.7 million of the total compensation costs for these executives to HCWC based on the time spent supporting HCWC’s business operations. The allocation covered base salary, annual incentives, benefits, and other applicable compensation elements.
In fiscal year 2025, the three executives continued serving for both HCMC and HCWC under the TSA, but HCMC and HCWC paid the executives directly for the service. For the fiscal year ended December 31, 2025, the aggregate base salary paid by HCWC to the Named Executive Officers listed above was approximately $0.8 million.
Named Executive Officer Employment Agreements
On August 13, 2018, the Company amended and restated its existing employment agreement with Jeffrey Holman, the Company’s Chief Executive Officer (the “Holman Employment Agreement”). The Holman Employment Agreement provides for an annual base salary of $450,000 and a target bonus only in an amount ranging from 20% to 200% of his base salaries subject to the Company meeting certain earnings before interest, taxes depreciation and amortization performance milestones. The Holman Employment Agreement automatically renews each year unless terminated by either party on 30 days’ prior notice. Mr. Holman is entitled to receive severance payments, including two years of his then base salary and other benefits in the event of a change of control, termination by the Company without cause, termination for good reason by the executive or non-renewal by the Company. The Term is automatically renewed for successive one-year terms unless notice of non-renewal is given by either party at least 30 days before the end of the Term. The current Term expired on August 13, 2025. The above description of the terms of the Holman Employment Agreement is not complete and is qualified by reference to the complete document.
| 21 |
On February 26, 2021, the Company entered into an amended and restated employment agreement (the “Santi Employment Agreement”) with the Company’s President and Chief Operating Officer, Christopher Santi. Pursuant to the Employment Agreement Amendment. Mr. Santi received a base salary of approximately $400,000 for 2024 and his salary has increased 10% in each subsequent year. The term is automatically renewed for successive one-year terms unless notice of non-renewal is given by either party at least 30 days before the end of the Term. The current Term expires on February 26, 2026. The above description of the terms of the Santi Employment Agreement is not complete and is qualified by reference to the complete document.
On February 2, 2022, the Company entered into a second amended and restated employment agreement (the “Ollet Employment Agreement”) with the Company’s Chief Financial Officer, John Ollet. Pursuant to the Employment Agreement Amendment, Mr. Ollet will continue to be employed as the Company’s Chief Financial Officer through February 14, 2025. Mr. Ollet received a base salary of approximately $300.000 for 2024 and his salary will increase 10% in each subsequent calendar year. The term is automatically renewed for successive one-year terms unless notice of non-renewal is given by either party at least 30 days before the end of the Term. The current Term expires on February 2, 2026. The above description of the terms of the Ollet Employment Agreement is not complete and is qualified by reference to the complete document.
Termination Provisions
The table below describes the severance payments that our Named Executive Officers are entitled to in connection with a termination of their employment upon death, disability, dismissal without cause, Change of Control or for Good Reason. All of the termination provisions are intended to comply with Section 409A of the Internal Revenue Code of 1986 and the Regulations thereunder.
| Holman | Santi/Ollet | |||
| Death or Total Disability | Any amounts due at time of termination plus full vesting of equity awards | Any amounts due at time of termination | ||
| Dismissal Without Cause or Termination by Executive for Good Reason or upon a Change of Control (1) | Two years of Base Salary, full vesting of equity awards, benefit continuation for eighteen months plus pro-rated bonus if, any, that would have been earned for the fiscal year in which the termination occurs | Fifteen months of Base Salary plus one additional month for every additional four months of service, up to eighteen months’ maximum | ||
| Termination upon a Change of Control (2) | Two years of Base Salary, full vesting of equity awards, benefit continuation for eighteen months plus pro-rated bonus if, any, that would have been earned for the fiscal year in which the termination occurs | Eighteen months of Base Salary |
(1) Good reason is generally (with certain exceptions) defined, in the case of Holman, as (i) a material diminution in their authority, duties or responsibilities, (y) the Company failing to maintain an office in the stated area or (ii) any other action or inaction that constitutes a material breach by the Company of the Employment Agreement. Messrs. Ollet and Santi’s employment agreement do not include the concept of good reason.
(2) Change of Control is generally defined (i) in the case of Holman, as any Change of Control Event as defined in Treasury Regulation Section 1.409A-3(i)(5); and (ii) in the case of Santi, as (w) a sale of substantially all of the Company, (x) any “person” (as such term is defined under the Exchange Act) becomes the beneficial owners of over 50% of the Company’s voting power, (y) a change in the majority of the composition of the Board or (z) a transaction that results in over 50% of the Company’s voting power ceasing to hold a majority of the voting power post-transaction.
| 22 |
Risk Assessment Regarding Compensation Policies and Practices as they Relate to Risk Management
Our compensation program for employees does not create incentives for excessive risk taking by our employees or involve risks that are reasonably likely to have a material adverse effect on us. Our compensation has the following risk-limiting characteristics:
| ● | Our base pay programs consist of competitive salary rates that represent a reasonable portion of total compensation and provide a reliable level of income on a regular basis, which decreases incentive on the part of our executives to take unnecessary or imprudent risks; and | |
| ● | Cash bonus awards are not tied to formulas that could focus executives on specific short-term outcomes. |
Outstanding Awards at Fiscal Year End
Listed below is information with respect to unexercised options that have not vested, and equity incentive plan awards for each named executive officer outstanding as of December 31, 2025:
Outstanding Equity Awards at 2025 Fiscal Year-End
| Number of Shares Issued Under Stock Options | Number of Shares Issued Under Restricted Stock | Stock Options and Restricted Stock Exercise Price ($) Per Share of Stock | Expiration Date | Number of Shares That Have Not Vested (#) | Market Value of Shares That Have Not Vested ($) | |||||||||||||||||||
| Jeffrey Holman | - | 59,075,000,000 | 0.0001 | 8/13/2028 | - | - | ||||||||||||||||||
| Jeffrey Holman | 39,000,000,000 | - | 0.0001 | 2/1/2027 | - | - | ||||||||||||||||||
| Christopher Santi | - | 31,600,000,000 | 0.0001 | 8/13/2028 | - | - | ||||||||||||||||||
| Christopher Santi | 17,000,000,000 | - | 0.0001 | 2/1/2027 | - | - | ||||||||||||||||||
| John Ollet | - | 20,475,000,000 | 0.0001 | 8/13/2028 | - | - | ||||||||||||||||||
| John Ollet | 1,000,000,000 | - | 0.0001 | 12/9/2026 | - | - | ||||||||||||||||||
| John Ollet | 4,000,000,000 | - | 0.0001 | 8/30/2027 | - | - | ||||||||||||||||||
Director Compensation
Non-employee directors are paid an annual fee of $10,000 or $15,000, plus a fee of $1,000 and $1,500 for each meeting attended. The Company did not issue stock award to non-employee directors for the twelve months ended December 31, 2025. Because we do not pay any compensation to employee directors, Mr. Holman is omitted from the following table. Non-employee members of our Board of Directors were compensated for as follows:
Fiscal 2025 Director Compensation
| Name | Fees Earned or Paid in Cash ($) | |||
| Dr. Anthony Panariello | $ | 26,500 | ||
| Clifford J. Friedman | $ | 31,500 | ||
| 23 |
Equity Compensation Plan Information
The 2015 Equity Incentive Plan (the “Plan”) was approved by the Company’s stockholders at the June 26, 2015 stockholders meeting. On November 21, 2016, the Company’s Board of Directors increased the number of shares of common stock available for issuance pursuant to the Plan to 100,000,000,000. On April 23, 2023, the Board of Directors (the “Board”) of HCMC approved the Second Amendment to the 2015 Equity Incentive Plan (the “Amended Plan”). The Amended Plan increased the number of shares of HCMC common stock authorized for issuance under the Amended Plan to 225,000,000,000 shares. The Plan is a broad-based plan in which all employees, consultants, officers, and directors of the Company are eligible to participate. The purpose of the Plan is to further the growth and development of the Company by providing, through ownership of stock of the Company and other equity-based awards, an incentive to its officers and other key employees and consultants who are in a position to contribute materially to the prosperity of the Company, to increase such persons’ interests in the Company’s welfare, by encouraging them to continue their services to the Company, and by enabling the Company to attract individuals of outstanding ability to become employees, consultants, officers and directors of the Company.
The following chart reflects the number of awards granted under equity compensation plans approved and not approved by stockholders and the weighted average exercise price for such plans as of December 31, 2025.
| Name of Plan | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Equity compensation plans approved by security holders | ||||||||||||
| 2015 Equity Incentive Plan | 202,824,722,200 | 0.0001 | 22,175,277,800 | |||||||||
| Total | 202,824,722,200 | 0.0001 | 22,175,277,800 | |||||||||
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
The following table sets forth the number of shares of our common stock beneficially owned as of March 27, 2026, by (i) those persons known by us to be owners of more than 5% of our common stock, (ii) each director, (iii) our Named Executive Officers and (iv) all of our executive officers and directors of as a group. Unless otherwise specified in the notes to this table, the address for each person is: c/o Healthier Choices Management Corp., 3800 North 28th Way, Hollywood, Florida 33020.
| Title of Class | Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (1) | |||||||
| Directors and Executive Officers: | ||||||||||
| Common Stock | Jeffrey E. Holman (2) | 56,300,000,000 | 10.68 | % | ||||||
| Common Stock | Christopher Santi (3) | 30,225,000,000 | 5.73 | % | ||||||
| Common Stock | John Ollet (4) | 19,725,000,000 | 3.74 | % | ||||||
| Common Stock | Dr. Anthony Panariello (5) | 5,242,500,000 | 0.99 | % | ||||||
| Common Stock | Clifford J. Friedman (6) | 5,500,000,000 | 1.04 | % | ||||||
| All directors and officers as a group 5 persons) (7) | 116,992,500,000 | 22.18 | % | |||||||
| 5% Stockholders: | ||||||||||
| Common Stock | Jeffrey E. Holman | 56,300,000,000 | 10.68 | % | ||||||
| Common Stock | Christopher Santi | 30,225,000,000 | 5.73 | % | ||||||
| Total: | 86,525,000,000 | 16.41 | % | |||||||
| 24 |
(1) Beneficial Ownership. Applicable percentages are based on 527,156,418,606 shares of common stock outstanding as of March 27, 2026. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, convertible notes and preferred stock currently exercisable or convertible or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. The table includes shares of common stock, options, warrants, and preferred stock exercisable or convertible into common stock and vested or vesting within 60 days. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them. The table does not include: (i) restricted stock units that do not have the right to vote until they vest, and the shares are delivered or (ii) unvested options that do not vest within 60 days of the date listed above in this footnote.
(2) Holman. Chairman and Chief Executive Officer. Includes 39,000,000,000 vested options, 59,075,000,000 shares of vested restricted Common Stock.
(3) Santi. President and Chief Operation Officer. Includes 17,000,000,000 vested options, 31,600,000,000 shares of vested restricted Common Stock.
(4) Ollet. Chief Financial Officer. Includes 5,000,000,000 vested options. He also holds 20,475,000,000 shares of vested restricted Common Stock.
(5) Panariello. A director. Includes 1,000,000,000 vested options. He also holds 5,412,500,000 shares of vested restricted Common.
(6) Friedman. A director. Includes 990,000,000 vested options, 5,500,000,000 shares of vested restricted Common Stock.
(7) Directors and Executive Officers. Includes executive officers who are not Named Executive Officers under the SEC’s rules and regulations.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
On September 13, 2024, HCWC was spun off from HCMC, becoming an independent, publicly traded company. In connection with the separation, the companies entered into a Transition Services Agreement, under which HCMC continues to provide certain administrative and executive management services to HCWC on a transitional basis. Generally, these services will be provided for a period of up to one year following the Spin-Off. HCWC reimburses HCMC for this portion of shared cost monthly. Following the Spin-Off, the Company recognized a reduction of costs of $0.4 million for services provided to HCWC pursuant to the transition services agreement for year ended December 31, 2024.
The Company had a net due to related party balance of $4.0 million and $0.2 million to HCWC as of December 31, 2025 and 2024, respectively. The increased due to related party balance was a result of continued funding from HCWC to HCMC to support HCMC’s operations during the transition period pursuant to the TSA.
On December 31, 2025, the Company settled a $4.0 million related party payable to HCWC, by issuing 43,889,786,222 shares of HCMC common stock to HCWC. The shares were issued at a contractual price of $0.00009 per share, extinguishing the $3,950,080 payable in full. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Accordingly, the Company extinguished the payable at its carrying amount of $3,950,080, consistent with the principle that when fair value cannot be determined within reasonable limits in a related party context, defaulting to the recorded amount is appropriate. The substance of this transaction is a capital transaction, a conversion of intercompany funding to equity, not a gain-generating event, and therefore no gain was recognized.
Following the transaction, HCWC owns approximately 8% of the Company’s outstanding common stock. HCWC has the ability to exercise significant influence over the Company through common board representation and interchange of managerial personnel. Accordingly, HCWC accounts for its investment in the Company under the equity method of accounting.
Policies and Procedures for Related Party Transactions
We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the prior consent of our audit committee. Our audit committee will review and oversee all transactions with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock or any member of the immediate family of any of the foregoing persons and such person would have a direct or indirect interest. In approving or rejecting any such transactions, our audit committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.
| 25 |
Item 14. Principal Accounting Fees and Services.
Our Audit Committee pre-approves audit and permissible non-audit services performed by its independent registered public accounting firm, as well as the fees charged for such services. All services related to audit fees and audit-related fees charged were pre-approved by the Audit Committee. It is noted that the tax services performed by independent third party were not approved by the Audit Committee. The following table shows the fees for the years ended December 31, 2025 and 2024.
| 2025 | 2024 | |||||||
| Audit (1) | $ | 280,317 | $ | 561,000 | ||||
| Audit - Related | - | - | ||||||
| Tax | 50,507 | - | ||||||
| Other | - | - | ||||||
| Total | $ | 330,824 | $ | 561,000 | ||||
Audit fees — these fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements and our registration statements.
Audit-related fees - the aggregate fees billed for assurance and related services by the principal accountant that are related to the performance of the audit or review of the registrant’s financial statements and are not reported under paragraph (1) above.
Tax fees - the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.
Other fees - the aggregate fees billed other than the services reported in audit, audit-related and tax fees.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
| (a) | Documents filed as part of the report. |
| (1) | Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item. | |
| (2) | Financial Statements Schedules. All schedules are omitted because they are not applicable or because the required information is contained in the consolidated financial statements or notes included in this report. | |
| (3) | Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report. |
| 26 |
FINANCIAL STATEMENT INDEX
| Report of Independent Registered Public Accounting Firm (PCAOB ID # |
F-2 |
| Consolidated Financial Statements | |
| Consolidated Balance Sheets as of December 31, 2025 and 2024 | F-3 |
| Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024 | F-4 |
| Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the Years Ended December 31, 2025 and 2024 | F-5 |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 | F-6 |
| Notes to Consolidated Financial Statements | F-7 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Healthier Choices Management Corp.
Opinion on the Consolidated Financial Statements
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, The Company has incurred recurring net losses and operations have not provided cash flows. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
We determined that there are no critical audit matters.
/s/
We have served as the Company’s auditor since 2025.
March 27, 2026
| F-2 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Accounts receivable, net | - | |||||||
| Inventories | ||||||||
| Prepaid expenses and vendor deposits | ||||||||
| Restricted cash | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property, plant, and equipment, net of accumulated depreciation | ||||||||
| Intangible assets, net of accumulated amortization | ||||||||
| Right of use asset – operating lease, net | ||||||||
| Other assets | - | |||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Line of credit | - | |||||||
| Operating lease liability, current | ||||||||
| Due to related party | - | |||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Operating lease liability, net of current | - | |||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES (SEE NOTE 9) | - | - | ||||||
| CONVERTIBLE PREFERRED STOCK | ||||||||
| Series E redeemable convertible preferred stock, $ | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Common Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
See notes to consolidated financial statements.
| F-3 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| 2025 | 2024 | |||||||
| For the Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| SALES, NET | $ | $ | ||||||
| COST OF SALES | ||||||||
| GROSS PROFIT | ( | ) | ( | ) | ||||
| OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on investment | - | ( | ) | |||||
| Other (expense) income, net | ( | ) | ||||||
| Interest income (expense), net | ||||||||
| TOTAL OTHER INCOME (EXPENSE), NET | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS FROM DISCONTINUED OPERATIONS | - | ( | ) | |||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| NET LOSS PER SHARE-BASIC AND DILUTED | ||||||||
| Continuing Operations | - | - | ||||||
| Discontinued Operations | - | - | ||||||
| TOTAL NET LOSS PER SHARE-BASIC AND DILUTED | $ | - | $ | - | ||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | ||||||||
See notes to consolidated financial statements.
| F-4 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
Series E Redeemable Convertible Preferred Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance – January 1, 2024 | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Issuance of awarded stock | - | - | ( | ) | - | - | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| HCWC Spin-Off | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance – December 31, 2024 | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balance | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Issuance of common stock for debt settlement | - | - | ( | ) | - | |||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||
| Balance – December 31, 2025 | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balance | - | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
See notes to consolidated financial statements.
| F-5 |
HEALTHIER CHOICES MANAGEMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2025 | 2024 | |||||||
| For the year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of assets | ||||||||
| Amortization of right-of-use asset | ||||||||
| Loss on investment | ||||||||
| Write-down of obsolete and slow-moving inventory | ( | ) | ||||||
| Stock-based compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | - | |||||
| Inventories | ( | ) | ||||||
| Prepaid expenses and vendor deposits | ||||||||
| Due from related party | ( | ) | ||||||
| Other current assets | - | |||||||
| Other assets | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Lease liability | ( | ) | ( | ) | ||||
| Cash used in operating activities, discontinued operations | - | ( | ) | |||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | - | ( | ) | |||||
| Cash used in investing activities, discontinued operations | - | ( | ) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | - | ( | ) | |||||
| FINANCING ACTIVITIES: | ||||||||
| Due to related party | ||||||||
| Net transfers to HCWC related to Spin-Off | - | ( | ) | |||||
| Payment on line of credit | ( | ) | - | |||||
| Cash provided by financing activities, discontinued operations | - | |||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET DECREASE IN CASH AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH AND RESTRICTED CASH — BEGINNING OF YEAR | ||||||||
| CASH AND RESTRICTED CASH — END OF YEAR | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock to settle debt with related party | $ | $ | - | |||||
See notes to consolidated financial statements
| F-6 |
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Organization
Healthier Choices Management Corp. (the “Company” or “HCMC”) is a holding company focused on monetizing its intellectual property through royalty and licensing agreements, facilitated by its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. HCMC’s IP portfolio includes patents related to innovative products, such as the Q-Cup and Imitine, which the company actively markets. HCMC is engaged in litigation against prominent tobacco industry player R.J. Reynolds, asserting claims of patent infringement.
The Company administers and intends to augment its intellectual property portfolio via its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC.
The Company continues to promote its patented Q-Cup™ technology directly to consumers in the vaping market. This cutting-edge design includes a small quartz cup that users can fill with cannabis or CBD concentrate. Once placed in a Q-Cup™ Tank or Globe, the cup is heated externally without direct contact with the concentrate. This innovative approach provides greater efficiency and a convenient solution for consumers who vape concentrates for both medicinal and recreational use.
Spin-Off
HCMC 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, the Grocery segment was operated under the holding company Healthy Choice Wellness Corp. (“HCWC”). HCWC was a subsidiary of HCMC, and 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.”
HCWC
distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock (the “Distribution”).
For each
As a result of the Spin-Off, the operating results for the HCWC business through the date of the Spin-Off are reported in Loss from Discontinued Operations in the Consolidated Statements of Operations for all periods presented. Unless otherwise noted, all amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company’s continuing operations. For additional information, see Note 2, “Discontinued Operations.”
| F-7 |
NOTE 2. DISCONTINUED OPERATIONS
On
September 13, 2024, the Company completed the previously announced separation and distribution of its Grocery segment into an independent
publicly traded company, HCWC. The separation was structured as a tax-free spin-off, which occurred by way of a pro rata distribution
to HCMC stockholders.
Cash
of $
During
the third quarter of 2024, the Company recognized a net reduction to retained earnings of $
Following the Spin-Off, the Company entered into several agreements with HCWC that govern the relationship of the parties. These agreements include:
| ● | a Separation Agreement (“SA”) that sets forth HCWC’s and the Company’s agreements regarding the principal actions that both parties take in connection with the Spin-Off and aspects of our relationship following the Spin-Off; | |
| ● | a Transition Services Agreement pursuant to which HCWC and the Company provide each other specified services on a transitional basis to help ensure an orderly transition following the Spin-Off. | |
| ● | a Tax Matters Agreement that governs the respective rights, responsibilities and obligations of HCWC and the Company after the Spin-Off with respect to all tax matters and includes restrictions to preserve the tax-free status of the Spin-Off; and | |
| ● | an Employee Matters Agreement that addresses employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs in which our employees participated prior to the Spin-Off. |
Under
the terms of the transition services agreement, HCMC will provide to HCWC, 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 to HCWC
are recorded within the Consolidated Statements of Operations based on the nature of the services. Following the Spin-Off, the Company
recognized a reduction of costs of $
| F-8 |
Financial Information of Discontinued Operations
Net Loss from Discontinued Operations in the Consolidated Statements of Operations reflects the financial results of the HCWC and includes allocation of general corporate overhead expense of the Company.
The following table summarizes the significant line items included in Net Loss from Discontinued Operations, in the Consolidated Statements of Operations for the thirty-six-week period ended September 13, 2024:
SCHEDULE OF DISCONTINUED OPERATION
Thirty-Six Week Period Ended September 13, 2024 | ||||
| SALES, NET | $ | |||
| COST OF SALES | ||||
| GROSS PROFIT | ||||
| OPERATING EXPENSES, NET | ||||
| Selling, general and administrative | ||||
| Gain on sale of asset | ( | ) | ||
| TOTAL OPERATING EXPENSES, NET | ||||
| LOSS FROM OPERATIONS | ( | ) | ||
| OTHER INCOME (EXPENSE) | ( | ) | ||
| NET LOSS FROM DISCONTINUED OPERATIONS | $ | ( | ) | |
There were no assets or liabilities classified as discontinued operations as of December 31, 2025 and December 31, 2024.
| F-9 |
The following table summarizes the significant operating cash and noncash items, capital expenditures and financing activities of discontinued operations for the period ended September 13, 2024:
Thirty-Six-Week Period Ended September 13, 2024 | ||||
| Net loss | $ | ( | ) | |
| Depreciation and amortization | ||||
| Loss on warrant liability extinguishment | ||||
| Gain on sale of building | ( | ) | ||
| Non-cash interest expense | ||||
| Change in allowance for credit losses | - | |||
| Loss on vendor settlement | - | |||
| Amortization of right-of-use asset | ||||
| Write-down of obsolete and slow-moving inventory | ||||
| Change in contingent consideration | - | |||
| Impairment of goodwill | - | |||
| Accounts receivable | ( | ) | ||
| Inventories | ( | ) | ||
| Prepaid expenses and vendor deposits | ( | ) | ||
| Other current assets | ||||
| Due from related party | ( | ) | ||
| Other assets | ( | ) | ||
| Accounts payable and accrued expenses | ||||
| Contract liabilities | ( | ) | ||
| Lease liability | ( | ) | ||
| NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS | ( | ) | ||
| Payment for acquisition | ( | ) | ||
| Proceeds from sale of Saugerties building | ||||
| Purchases of property and equipment | ( | ) | ||
| NET CASH USED IN INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS | ( | ) | ||
| Proceeds from security purchase agreement | ||||
| Proceeds from acquisition loan | ||||
| Principal payments on loan payable | ( | ) | ||
| Due from related party | ( | ) | ||
| Net transfers to HCWC related to Spin-Off | ( | ) | ||
| NET CASH PROVIDED BY FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS | ||||
| NET DECREASE IN CASH | $ | ( | ) | |
| F-10 |
NOTE 3. GOING CONCERN AND MANAGEMENT’S PLANS
The accompanying 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.
The
Company currently and historically has reported net losses and cash outflows from operations. As of December 31, 2025, cash totaled approximately
$
On
November 7, 2024, the Company entered into a commitment letter with an investor establishing a $
Management has implemented and continues to pursue the following initiatives to address liquidity needs and support ongoing operations:
| ● | Debt
Restructuring Success: The settlement of $ |
|
| ● | Credit
Facility Availability: The undrawn $ |
|
| ● | Revenue Initiatives: The Company is actively pursuing commercialization opportunities, including licensing negotiation, marketing and distribution with third party, and exploration of additional strategic partnerships for existing product lines. | |
| ● | Cost Management: Implementation of expense reduction measures, including optimization of consulting expenditures and operational efficiencies following the spin-off of HCWC. | |
| ● | Strategic Financing: Continued evaluation of additional financing alternatives, including potential equity offerings or strategic investments, to support growth initiatives and working capital requirements. |
Based
on the successful completion of the $
| F-11 |
NOTE 4. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements are prepared in accordance with GAAP. The consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.
On September 13, 2024, the Company completed the previously announced separation and distribution of its grocery segment and wellness centers into an independent publicly traded company, and the historical results of the grocery segment and wellness centers have been reflected as discontinued operations in the Company’s consolidated financial statements for all periods prior to the separation and distribution. Assets and liabilities associated with the grocery segment are classified as assets and liabilities of discontinued operations in the Company’s Consolidated Balance Sheets. Additional disclosures regarding the separation and distribution are provided in Note 2.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, HCMC Intellectual Property Holdings, LLC, and The Vape Store, Inc. (“Vape Store”). All intercompany accounts and transactions have been eliminated in consolidation. Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to HCMC’s continuing operations.
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”, the Company’s Chief Executive Officer, Jeffrey Holman) reviews financial performance and makes decisions on a consolidated basis.
Use of Estimates in the Preparation of the Financial Statements
The preparation of 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 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 inventory provisions, useful lives and impairment of long-lived assets, and deferred taxes and related valuation allowances. Certain management’s estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all of 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 recognizes revenue in accordance with the following five-step model:
| ● | identify arrangements with customers; | |
| ● | identify performance obligations; | |
| ● | determine transaction price; | |
| ● | allocate transaction prices to the separate performance obligations in the arrangement, if more than one exists; and | |
| ● | recognize revenue as performance obligations are satisfied. |
| F-12 |
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 are concentrated in one large financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage.
A
summary of the financial institutions that had a cash in excess of FDIC limits of $
SCHEDULE OF CASH AND CASH EQUIVALENT AND RESTRICTED CASH IN EXCESS OF FDIC LIMIT
December 31, 2025 | December 31, 2024 | |||||||
| Total cash and cash equivalents in excess of FDIC limits | $ | $ | ||||||
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 restricted cash to amounts shown in consolidated statements of cash flow:
SCHEDULE OF RECONCILIATION OF CASH, CASH EQUIVALENT AND RESTRICTED CASH
December 31, 2025 | December 31, 2024 | |||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and restricted cash | $ | $ | ||||||
Restricted Cash
The Company’s restricted cash consisted of cash balances which were restricted as to withdrawal or usage under the August 18, 2022 security purchase agreement for the purpose of funding any amounts due under the Series E Certificate of Designation upon the redemption of the Series E Preferred Stocks. The balance also included cash held in the collateral account to cover the cash draw from the line of credit.
Other Current Assets
The Company’s restricted cash as of December 31, 2025 consisted of cash balances which were restricted as to withdrawal or usage under the August 18, 2022 securities purchase agreement for the purpose of funding any amounts due under the Series E Certificate of Designation upon the redemption of the Series E Preferred Stock. The December 31, 2024 balance also included cash held in the collateral account to cover the cash draw from the line of credit.
| F-13 |
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, displays with useful lives range
from
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits
as income tax expense. There were
Leases
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. 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 in year 2025 and 2024. If the Company enters into a finance lease in the future, it will be accounted for in accordance with ASC Topic 842, Leases.
| F-14 |
Stock-Based Compensation
The Company accounts for stock-based compensation for employees and directors under ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). These standards define a fair value-based method of accounting for stock-based compensation. In accordance with ASC 718, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using an appropriate valuation model, whereby compensation cost is the fair value of the award as determined by the valuation model at the grant date. The resulting amount is charged to expense on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The Company recognize forfeitures as they occur.
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. |
Nonfinancial assets such as goodwill, other intangible assets, and long-lived assets held and used are measured at fair value when there is an indicator of impairment and recorded at fair value when impairment is recognized or for a business combination.
Business Combination
The Company applies the provisions of ASC Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts. Acquisition-related expenses were expensed as incurred and recorded in selling, general, and administrative expenses in the consolidated statements of operations.
Related Party Transactions and Nonmonetary Exchanges
Transactions involving related parties, as defined by ASC 850, Related Party Disclosures, are recorded based on the substance of the transaction rather than merely its legal form. Related party transactions cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.
When the Company extinguishes a monetary liability (such as a related party payable) by issuing nonmonetary assets (such as equity securities) to a related party, the Company assesses whether the fair value of the consideration transferred can be determined within reasonable limits. If fair value cannot be determined within reasonable limits in an arm’s-length context, and the transaction is with a related party, the Company records the extinguishment at the carrying amount of the liability extinguished. Gains are not recognized on such transactions when the substance is a capital transaction or conversion of intercompany funding rather than a gain-generating event. Any difference between the carrying amount of the liability extinguished and the par value of shares issued is recorded as an adjustment to Additional Paid-in Capital.
Recent Accounting Pronouncements
Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including the Financial Accounting Standards Board (“FASB”) and the Securities and Exchange Commission (“SEC”). These authorities issue numerous pronouncements, most of which are not applicable to the Company’s current or reasonably foreseeable operating structure.
| F-15 |
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 CODM, and included in reported segment profit or loss. The ASU is effective for fiscal years beginning after December. 15, 2023, and interim periods within fiscal years beginning after December. 15, 2024. The Company does not believe this will have a material impact on the consolidated financial statements. 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 consolidated financial statements, but resulted in additional expense disclosures and reconciliations in the financial statement footnotes. See Note 5 for details.
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 Company adopted this standard effective January 1, 2025. The adoption resulted in additional disclosures in the income tax footnote but did not impact the Company’s consolidated financial position, results of operations, or cash flows.
NOTE 5. SEGMENT INFORMATION
The Company operates as a single reportable segment. The CODM, who is the Chief Executive Officer, reviews financial information and assesses performance on a consolidated basis. Accordingly, all significant operating decisions are based upon analysis of the Company’s consolidated results of operations, financial position, and cash flows, which constitute the single reportable segment for financial reporting purposes.
The adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, on January 1, 2024, did not change the Company’s reportable segments. The CODM is regularly provided with the consolidated financial statements as presented herein, and no discrete financial information is evaluated for any component below the consolidated level.
All of the Company’s revenue and long-lived assets are attributable to operations within the United States. For the years ended December 31, 2025 and 2024, no single customer accounted for 10% or more of the Company’s total revenue.
NOTE 6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT
December 31, 2025 | December 31, 2024 | |||||||
| Furniture and fixtures | ||||||||
| Computer hardware & equipment | ||||||||
| Other | ||||||||
| Property and equipment, gross | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property, plant, and equipment | $ | $ | ||||||
The
Company incurred approximately $
| F-16 |
NOTE 7. INTANGIBLE ASSET
The Company’s intangible assets consist of patents and capitalized legal fees related to the patents. Intangible assets, net are as follows:
SCHEDULE OF INTANGIBLE ASSETS CONSIST OF PATENTS AND CAPITALIZED LEGAL FEES RELATED TO THE PATENTS
| December 31, 2025 | Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Patent | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
| December 31, 2024 | Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Patent | ( | ) | ||||||||||||
| Intangible assets, net | $ | $ | ( | ) | $ | |||||||||
Amortization
expense was approximately $
The
weighted-average remaining amortization period of the Company’s amortizable intangible assets is approximately
SCHEDULE OF FUTURE ANNUAL ESTIMATED AMORTIZATION EXPENSE
| For the years ending December 31, | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
| F-17 |
NOTE 8. DEBT
Revolving Line of Credit
On
November 3, 2021, the Company entered into an agreement for a new revolving line of credit of $
NOTE 9. COMMITMENTS AND CONTINGENCIES
Employment Agreements
On
August 13, 2018, the Company amended and restated its existing employment agreement with Jeffrey Holman, the Company’s Chief
Executive Officer (the “Holman Employment Agreement”). The Holman Employment Agreement is for an additional
On
February 26, 2021, the Company entered into an amended and restated employment agreement (the “Employment Agreement Amendment”)
with the Company’s President and Chief Operating Officer, Christopher Santi. Pursuant to the Employment Agreement Amendment, Mr.
Santi will continue to be employed as the Company’s President and Chief Operating Officer through January 30, 2024. Mr. Santi will
receive a base salary of $
On
February 2, 2022, the Company entered into a second amended and restated employment agreement (the “Employment Agreement Amendment”)
with the Company’s Chief Financial Officer, John Ollet. Pursuant to the Employment Agreement Amendment, Mr. Ollet will continue
to be employed as the Company’s Chief Financial Officer through February 14, 2025. Mr. Ollet will receive a base salary of $
Legal Proceedings
On
November 30, 2020, the Company filed a patent infringement lawsuit against Philip Morris USA, Inc., and Philip Morris Products S.A. in
the U.S. District Court for the Northern District of Georgia. The lawsuit alleges infringement on HCMC-owned patent(s) by the Philip
Morris product known and marketed as “IQOS®”. Philip Morris claims that it is currently approaching
On
December 31, 2021, the District Court for the Northern District of Georgia effectively dismissed HCMC’s patent infringement action
against Philip Morris USA, Inc. and Philip Morris Products S.A. In connection with such dismissal, the defendants sought to recover attorney’s
fees from the Plaintiff. On February 22, 2022, the District Court for the Northern District of Georgia granted the defendant’s
an award of approximately $
On
April 12, 2023, the U.S. Court of Appeals for the Federal Circuit ruled in favor of HCMC on
In
the first appeal, HCMC appealed the ruling of the District Court dismissing HCMC’s patent infringement action and denying HCMC’s
motion to amend its pleading. In the second appeal, HCMC appealed the District Court’s award of attorneys’ fees to Philip
Morris. In its decisions, the Federal Circuit ruled for HCMC by reversing both of those decisions and remanded the case back to the District
Court for further proceedings. As a result of the ruling, the Company reversed the $
| F-18 |
On November 22, 2024, HCMC received a ruling from the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) denying an appeal of HCMC of a decision of the United States Patent and Trademark Office Patent Trial and Appeal Board (the “Board”) relating to the inter partes review of an HCMC patent. The Board had ruled that the previously granted HCMC patent that served as the basis of HCMC’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. was not patentable and denied of HCMC’s request to amend the claims if invalidity of the patent was affirmed. This lawsuit was dismissed on December 31, 2024.
There
were two lawsuits in connection with alleged claimed battery defects for an electronic cigarette device. One has been dismissed by the
court wherein the plaintiff settled with the Company’s insurance carrier with no economic impact to the Company. In the second
lawsuit, as of December 31, 2023, the Company had reached an arrangement with the plaintiff to resolve the matter, limiting potential
exposure to $
On September 26, 2023, HCMC filed a patent infringement lawsuit against R.J. Reynolds Vapor Company (“RJR”) in the U.S. District Court for the Middle District of North Carolina in connection with HCMC’s assertions that RJR’s Vuse electronic cigarette infringes one of HCMC’s patents.
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 December 31, 2025, with respect to legal costs, we record such costs as incurred.
NOTE 10. STOCKHOLDERS’ EQUITY
Equity Compensation Plans
The
Company’s 2015 Equity Incentive Plan, as amended (the “2015 Plan”), awards grants to employees. On April 23, 2023,
the Board of Directors (the “Board”) of HCMC approved the Second Amendment to the 2015 Equity Incentive Plan (the “Amended
Plan”). The Amended Plan increased the number of shares of HCMC common stock authorized for issuance under the Amended Plan to
The
Company’s 2009 Equity Incentive Plan (the “2009 Plan”) awards grants to employees, non-employee directors and consultants
in connection with their retention and/or continued employment by the Company. The 2009 Plan had
Series E Redeemable Convertible Preferred Stock
On
August 18, 2022, the Company entered into a Securities Purchase Agreement (“HCMC Preferred Stock”) pursuant to which the
Company sold and issued
| F-19 |
As
of December 31, 2025,
The
HCMC Preferred Stock have voting rights on as converted basis at the Company’s next stockholders’ meeting. However, as long
as any shares of HCMC Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority
of the then outstanding shares of the HCMC Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to
the HCMC Preferred Stock or alter or amend the Certificate of Designation, (b) increase the number of authorized shares of HCMC Preferred
Stock, or (c) enter into any agreement with respect to any of the foregoing. Each share of Preferred Stock shall be convertible, at any
time and from time to time at the option of the Holder thereof, into that number of shares of Common Stock (subject to the beneficial
ownership limitations). The conversion price for the HCMC Preferred Stock shall equal $
Upon
any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary that is not a Fundamental Transaction (as
defined in the Certificate of Designation), the holders of HCMC Preferred Stock shall be entitled to receive out of the assets, whether
capital or surplus, of the Company an amount equal to $
Unless earlier converted or extended as set forth below, a holder may require the redemption of all or a portion of the stated value of the HCMC Preferred Stock either (1) six months after closing or (2) the time at which the balance is due and payable upon an event of default.
On
March 1, 2023, the Company entered into a First Amendment to HCMC Series E Preferred Stock with each purchaser (“Purchaser”)
identified as those who participated in the HCMC Series E Preferred Stock, dated as of August 18, 2022. The parties amended the HCMC
Preferred Stock related to the conversion payment whereby upon conversion of the Series E Preferred Stock prior to the record date for
the Spin-Off, the Company will pay the Purchaser ten percent (
On
May 15, 2023, the Company and the Purchaser entered into the Second Amendment to the Securities Purchase Agreement, pursuant to which
the Company agreed to extend the time period for the Conversion Payment eligibility to December 1, 2023. The Company filed an amendment
to the Certificate of Designation to make the redemption price of the Preferred Stock (the “Redemption Price”) equal the
Stated Value regardless of the date on which it is redeemed.
On
October 30, 2023, the Company entered into a Third Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible
Preferred Stock purchasers. The parties agreed to:
On February 20, 2024, the Company entered into a Fourth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the date on which the obligation to acquire the Series A Preferred Stock ceases to June 1, 2024.
On April 8, 2024, the Company entered into a Fifth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to August 1, 2024.
On July 26, 2024, the Company entered into a Sixth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to November 1, 2024.
On November 27, 2024, the Company entered into a Seventh Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to May 31, 2025.
On April 11, 2025, the Company entered into an Eighth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to October 31, 2025.
On October 30, 2025, the Company entered into a Ninth Amendment to the Securities Purchase Agreement with its Series E Redeemable Convertible Preferred Stock purchasers, pursuant to which the Company and such parties agreed to amend the Completion Date to April 1, 2027.
| F-20 |
Debt Settlement through Issuance of Common Stock
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with Healthy Choice Wellness Corp.
(“HCWC”), a related party. Pursuant to this agreement, the Company issued
Restricted Stock
On
April 23, 2023, HCMC’s board of directors approved the issuance of approximately
On
August 23, 2023, the Company granted
On
November 13, 2023, the Company granted
The following table reflects the activity for all unvested restricted stocks during 2025:
SCHEDULE OF UNVESTED RESTRICTED STOCK
| Shares | Weighted Average Grant Date Fair Value | |||||||
| Unvested at January 1, 2025 | $ | |||||||
| Granted | - | - | ||||||
| Vested | ( | ) | ( | ) | ||||
| Forfeited | - | - | ||||||
| Unvested at December 31, 2025 | - | $ | - | |||||
| F-21 |
Stock Options
A summary of option activity during the years ended December 31, 2025 and 2024 is as follows:
SUMMARY OF OPTION ACTIVITY
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Yrs.) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding, January 1, 2024 | $ | $ | - | |||||||||||||
| Options granted | - | - | ||||||||||||||
| Options forfeited or expired | - | - | ||||||||||||||
| Outstanding, December 31, 2024 | $ | $ | - | |||||||||||||
| Options granted | - | - | ||||||||||||||
| Options exercised | - | - | ||||||||||||||
| Options forfeited or expired | - | - | ||||||||||||||
| Outstanding, December 31, 2025 | $ | - | ||||||||||||||
| Exercisable on December 31, 2025 | $ | $ | - | |||||||||||||
During
the years ended December 31, 2025 and 2024, the Company recognized stock-based compensation expense of approximately $
Income (Loss) per Share
Basic income (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon (a) the exercise of stock options (using the treasury stock method); (b) the conversion of Series D and Series E convertible preferred stocks; (c) the exercise of warrants (using the if-converted method); (d) the vesting of restricted stock units; and (e) the conversion of convertible notes payable. Diluted income (loss) per share excludes the potential common shares, as their effect is antidilutive. The following table summarizes the Company’s securities that have been excluded from the calculation of basic and dilutive income (loss) per share as their effect would be anti-dilutive:
SCHEDULE OF DILUTIVE LOSS PER SHARE
| 2025 | 2024 | |||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Preferred stock | ||||||||
| Stock options | ||||||||
| Restricted stock | - | |||||||
| Total | ||||||||
| F-22 |
NOTE 11. RELATED PARTY TRANSACTIONS
Prior to the Spin-Off, HCWC was a subsidiary of HCMC. After Spin-Off, HCWC operated as a separate, stand-alone company, accordingly has had various relationships with HCMC whereby HCMC provided services to HCWC as noted below. Related party transactions prior to the Spin-Off include allocation of general corporate expenses and cash advances between HCMC and HCWC.
Allocation of General Corporate Expenses
The Company provided human resources, accounting, payroll processing, legal and other managerial services to HCWC prior to the Spin-Off. The accompanying consolidated financial statements include allocations of these expenses. Following the Spin-Off, HCWC and HCMC entered into a TSA, under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services 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 the shared expenses to HCWC. The allocation method calculates the
appropriate share of overhead costs to HCWC based on management’s estimate that the sum of management time and resources spent
managing HCWC is approximately equal to the amount of time and resources spent managing HCMC and its subsidiaries. As a result,
Net Parent’s Investment
For
the thirty-six weeks ended September 13, 2024, the net operating expenses of $
Due to Related Party
Prior
to the Spin-Off, there was no intercompany agreement between the Company and HCWC. 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 consolidated balance sheets. At the time of Spin-ff,
the Company had a net receivable balance from HCWC in the amount of $
Settlement of Related Party Payable
On
December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with HCWC to settle the outstanding related
party payable. Pursuant to this agreement, the Company issued
In
accordance with ASC 850, Related Party Disclosures, and SAB Topic 5.T, transactions involving related parties are recorded based on their
substance rather than merely their legal form. Related party transactions cannot be presumed to be carried out on an arm’s-length basis.
Accordingly, the payable was extinguished at its carrying amount of $
For disclosure purposes only, the Company determined the fair value of the common stock issued as of December 31, 2025 in accordance with ASC 820, Fair Value Measurement. HCWC, as the investor, performed an impairment assessment of its investment in the Company using a third-party valuation. That assessment, which utilized a multi-method approach including observable and unobservable inputs, concluded that the fair value of the Company’s common stock exceeded HCWC’s carrying value; therefore, no impairment was recorded.
| F-23 |
NOTE 12. INCOME TAXES
Prior to the legal reorganization completed on September 13, 2024, HCMC included certain carve-out entities, including HCWC, in its consolidated income tax filings within the respective tax jurisdictions. Although HCMC’s 2024 tax returns continued to include HCWC through the Spin-Off date, the income tax provision for 2024 was prepared on a standalone basis, as if HCMC had operated independently for the period presented. Following the Spin-Off, HCMC now files federal and state income tax returns solely for its continuing operations. Deferred tax assets and liabilities recognized as of December 31, 2025, relate only to the Company’s retained businesses and tax attributes. Income taxes continue to be accounted for under the asset and liability method.
The Spin-Off of HCWC was completed on September 13, 2024, through a pro rata distribution of HCWC common stock to HCMC shareholders. The transaction was structured to qualify as tax-free under Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code (“IRC”). In connection with the separation, HCMC and HCWC entered into a Tax Matters Agreement (“TMA”) executed in December 2023 that governs each company’s respective federal and state income tax matters, including the allocation of liabilities and responsibilities for periods before and after the separation:
| ● | Pre-Spin Liabilities: HCMC retains responsibility for all taxes related to HCWC’s operations through the separation date, including audits of consolidated income tax returns for periods ending on or before September 13, 2024. | |
| ● | Post-Spin Liabilities: HCWC is solely responsible for all taxes attributable to its operations after the Spin-Off. | |
| ● | Indemnification: HCWC has agreed to indemnify HCMC for any taxes arising as a result of post-Spin actions that would cause the transaction to fail to qualify for tax-free treatment under IRC Section 355(e) or related provisions. |
During 2025, HCWC completed its analysis of the Spin-Off and the TMA and notified HCMC that HCMC retained all pre-Spin U.S. federal and state net operating loss carryforwards, tax credit carryforwards, and other pre-Spin tax attributes and related temporary differences. Based on this confirmation and management’s review, HCMC updated its assessment of deferred tax assets associated with these retained attributes and recorded adjustments to deferred tax balances and the related valuation allowance to reflect the final allocation of tax attributes between HCMC and HCWC. These adjustments were recognized as a discrete item in the 2025 income tax provision and effective tax rate reconciliation.
The Company did not have a provision for income taxes (current or deferred) for the years ended December 31, 2025 and 2024. The Company presents below (i) a reconciliation of income tax expense (benefit) computed at the U.S. federal statutory rate to the income tax expense (benefit) reflected in the accompanying statement of operations and (ii) a reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the years then ended.
The following table sets forth the reconciliation of income tax expense (benefit) (in dollars):
SCHEDULE OF INCOME TAX RECONCILIATION EXPECTED EXPENSE (BENEFIT)
| 2025 | 2024 | |||||||
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| U.S. federal statutory rate | $ | ( | ) | $ | ( | ) | ||
| State tax benefit net of federal benefit | ( | ) | ( | ) | ||||
| Change in valuation allowance | ||||||||
| True-Up & Deferred Adjustment | - | |||||||
| Forfeitures & Expiration of Stock Comp | 2,029,401 | - | ||||||
| Spin-off tax attribute discrete adjustment | (681,876 | ) | - | |||||
| Other permanent items | ||||||||
| Other | ( | ) | - | |||||
| Income tax provision/(benefit) | $ | - | $ | - | ||||
The following table sets forth the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate (in percentages):
SCHEDULE OF RECONCILIATION INCOME TAX RATE
| Reconciliation of Statutory Rate to Effective Rate | 2025 | 2024 | ||||||
| Statutory U.S. federal income tax rate | % | % | ||||||
| State income taxes, net of federal benefit | % | % | ||||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| True-Up & Deferred Adjustment | ( | )% | % | |||||
| Forfeitures & Expiration of Stock Comp | ( | )% | % | |||||
| Spin-off tax attribute discrete adjustment | % | % | ||||||
| Other Permanent Items | ( | )% | ( | )% | ||||
| Change in Tax Rate | % | % | ||||||
| Other | % | % | ||||||
| Effective income tax rate | % | % | ||||||
| F-24 |
As of December 31, 2025 and 2024, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
| 2025 | 2024 | |||||||
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax assets: | ||||||||
| NOL carryforward | $ | $ | ||||||
| Accrued expenses | - | |||||||
| ASC 842 - Lease Accounting | - | |||||||
| Charitable contributions | ||||||||
| Intangible Assets | ||||||||
| Interest expense | - | |||||||
| Reserves and Allowances | - | |||||||
| Stock Compensation | - | |||||||
| Net book value of fixed assets | - | |||||||
| Unrealized Loss on Investment | - | |||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Net book value of fixed assets | - | ( | ) | |||||
| Total deferred tax liabilities | - | ( | ) | |||||
| Net deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all
of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After
consideration of all of the positive and negative evidence available, management has determined that a valuation allowance is
required at December 31, 2025 and 2024 to reduce the deferred tax assets to amounts that are more likely than not to be realized.
The Company’s valuation increased by approximately $
At
December 31, 2025 the Company had U.S. federal and state net operating loss carryforwards (“NOLs”) of $
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. Among other provisions, the IRA includes a 15% corporate alternative minimum tax on applicable corporations and 1% excise tax on stock repurchases made after December 31, 2022. The IRA is not expected to have a material impact on the consolidated financial statements.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which, among other things, modifies certain business tax provisions, including interest expense limitations, depreciation and amortization rules, and selected energy‑related incentives that interact with the IRA. The Company has evaluated the OBBBA and does not currently expect it to have a material impact on its consolidated financial statements.
The Company had no uncertain tax positions as of December 31, 2025, and 2024.
The Company files a federal income tax return and income tax return in Florida and the Company is generally no longer subject examinations by federal and Florida tax authorities for years before 2022.
NOTE 13. SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were available to be issued. Based upon this review, the Company has identified the following subsequent event that would have required disclosure in the consolidated financial statements.
On February 1, 2026, the Company entered into a settlement agreement with a vendor to resolve approximately $
| F-25 |
EXHIBIT INDEX
| Exhibit | Incorporated by Reference | Filed or Furnished | ||||||||
| No. | Exhibit Description | Form | Date | Number | Herewith | |||||
| 3.1 | Certificate of Incorporation | 10-Q | 11/16/15 | 3.1 | ||||||
| 3.1(a) | Certificate of Amendment to Certificate of Incorporation | 8-K | 3/03/17 | 3.1 | ||||||
| 3.1(b) | Certificate of Amendment to Certificate of Incorporation | S-1 | 7/10/15 | 3.2 | ||||||
| 3.1(c) | Certificate of Amendment to Certificate of Incorporation | S-4 | 12/11/15 | 3.2 | ||||||
| 3.1(d) | Certificate of Amendment to Certificate of Incorporation | 8-K | 2/2/16 | 3.1 | ||||||
| 3.1(e) | Certificate of Amendment to Certificate of Incorporation | 8-K | 3/9/16 | 3.1 | ||||||
| 3.1(f) | Certificate of Amendment to Certificate of Incorporation | 8-K | 6/1/16 | 3.1 | ||||||
| 3.1(g) | Certificate of Amendment to Certificate of Incorporation | 8-K | 8/5/16 | 3.1 | ||||||
| 3.1(h) | Certificate of Designation of Preferences, Rights And Limitations of Series D Convertible Preferred Stock | 8-K | 2/8/21 | 2.1 | ||||||
| 3.1(i) | Cancellation of Certificate of Designations | 10-K | 3/31/22 | 3.1(i) | ||||||
| 3.2 | Bylaws | 8-K | 12/31/13 | 3.4 | ||||||
| 10.2* | 2015 Equity Incentive Plan | S-1 | 6/01/15 | 10.28 | ||||||
| 10.11* | Amendment to Vapor Corp. 2015 Equity Incentive Plan | S-8 | 2/8/17 | 4.2 | ||||||
| 10.12* | Form of Restricted Stock Award Agreement | 8-K | 8/20/18 | 10.4 | ||||||
| 10.13* | Second Amended and Restated Employment Agreement, entered into as of February 26, 2021 by and between the Company and Christopher Santi | 8-K | 3/5/21 | 10.1 | ||||||
| 10.14* | Third Amended and Restated Restricted Stock Agreement dated as of February 12, 2021 by and between Healthier Choices Management Corp. and Jeffrey Holman | 10-K | 3/8/21 | 10.12 | ||||||
| 10.17* | Third Amended and Restated Restricted Stock Agreement dated as of February 12, 2021 by and between Healthier Choices Management Corp. and Anthony Panariello | 10-K | 3/8/21 | 10.15 | ||||||
| 10.18* | Second Amended and Restated Employment Agreement, dated as of February 2, 2022 by and between the Company and John Ollet | 8-K | 2/2/22 | 10.1 | ||||||
| 10.20 | Securities Purchase Agreement, dated as of August 18, 2022, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K | 8/18/2022 | 10.1 | ||||||
| 10.21 | First Amendment to Securities Purchase Agreement, dated as of March 1, 2023, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 3/6/23 | 10.1 | ||||||
| 10.22 | Second Amendment to Securities Purchase Agreement, dated as of May 15, 2023, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 5/19/23 | 10.1 | ||||||
| 10.23 | Third Amendment to Securities Purchase Agreement, dated as of October 30, 2023, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 11/3/23 | 10.1 | ||||||
| 10.24 | Fourth Amendment to Securities Purchase Agreement, dated as of February 20, 2024, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 2/23/24 | 10.1 | ||||||
| 10.25 | Fifth Amendment to Securities Purchase Agreement, dated as of April 8, 2024, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 4/9/24 | 10.1 | ||||||
| 10.26 | Sixth Amendment to Securities Purchase Agreement, dated as of July 24, 2024, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 7/29/24 | 10.1 | ||||||
| 10.27 | Seventh Amendment to Securities Purchase Agreement, dated as of November 27, 2024, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 12/5/24 | 10.1 | ||||||
| 10.28 | Eighth Amendment to Securities Purchase Agreement, dated as of April 11, 2025, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 4/24/25 | 10.1 | ||||||
| 10.29 | Ninth Amendment to Securities Purchase Agreement, dated as of October 30, 2025, by and between Healthier Choices Management Corp. and the purchasers named therein | 8-K/A | 11/6/25 | 10.1 | ||||||
| 10.30 | Stock Purchase and Satisfaction of Debt Agreement is made as of the February 1, 2026, by and among Healthier Choices Management Corp and Healthy Choice Wellness Corp. |
X | ||||||||
| 21.1 | List of Subsidiaries | X | ||||||||
| 23.1 | Consent of TAAD LLP | X | ||||||||
| 31.1 | Certification of Principal Executive Officer (302) | X | ||||||||
| 31.2 | Certification of Principal Financial Officer (302) | X | ||||||||
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer (906) | Furnished** | ||||||||
| 101.INS | Inline XBRL Instance Document | X | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Link base Document | X | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Link base Document | X | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Link base Document | X | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Link base Document | X | ||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | X | ||||||||
* Management contract or compensatory plan or arrangement.
** 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.
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at 3800 North 28th Way, Hollywood, Florida 33020.
| 27 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 27, 2026.
| Healthier Choices Management Corp. | ||
| By: | /s/ Jeffrey Holman | |
| Jeffrey Holman | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Jeffrey Holman | Principal Executive Officer and Director | March 27, 2026 | ||
| Jeffrey Holman | ||||
| /s/ John A. Ollet | Chief Financial Officer | March 27, 2026 | ||
| John A. Ollet | (Principal Financial and Accounting Officer) | |||
| /s/ Clifford J. Friedman | Director | March 27, 2026 | ||
| Clifford J. Friedman | ||||
| /s/ Anthony Panariello | Director | March 27, 2026 | ||
| Anthony Panariello |
| 28 |
FAQ
What is Healthier Choices Management Corp. (HCMC) primary business after the HCWC spin-off?
How did HCMC perform financially in 2025 according to its 10-K?
What is HCMC’s liquidity position and debt structure at December 31, 2025?
Why does HCMC’s auditor raise substantial doubt about its going concern status?
What were the key capital transactions involving HCWC and other creditors?
How many HCMC shares are outstanding and who are the largest holders?
What cybersecurity measures and incidents does HCMC report?
