HEALTHIER CHOICES MANAGEMENT CORP. The following discussion and analysis should be read in conjunction with our
unaudited interim condensed consolidated financial statements and related notes
appearing elsewhere in this report on Form 10-Q. In addition to historical
information, this discussion and analysis contains forward-looking statements
that involve risks, uncertainties, and assumptions. Our actual results may
differ materially from those anticipated in these forward-looking statements.
The terms "we," "us," "our," and the "Company" refer to
Company Overview
Liquidity
The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company incurred a loss from operations of approximately
Rights Offering
On
On
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Factors Affecting Our Performance
We believe the following factors affect our performance:
Vapor Retail: We believe the operating performance of our vapor retail stores
will affect our revenue and financial performance. The Company has a total of
six retail vape stores, which are located in
Inventory Management: Our vapor segment revenue trends are affected by an evolving product acceptance and consumer demand. We are creating and offering new products to our retail vapor customers. Evolving product development and technology impacts our licensing and intellectual properties spending. We expect the transition to vaporizer and advanced technology and enhanced performance products to continue and will impact our overall operating results in the future.
Results of Operations
The following table sets forth our unaudited condensed consolidated Statements
of Operations for the three months ended
Three Months Ended September 30, 2020 to 2021
2021 2020 Change $
SALES
Vapor sales, net $ 466,181 $ 594,145 $ (127,964)
Grocery sales, net 2,803,327 2,753,648 49,679
TOTAL SALES, NET 3,269,508 3,347,793 (78,285)
Cost of sales vapor 186,522 256,461 (69,939)
Cost of sales grocery 1,706,597 1,729,213 (22,616)
GROSS PROFIT 1,376,389 1,362,119 14,270
OPERATING EXPENSES
Selling, general and administrative 2,427,256 2,195,275 231,981
Impairment of intangible assets - 380,646 (380,646)
Total operating expenses 2,427,256 2,575,921 (148,665)
LOSS FROM OPERATIONS (1,050,867) (1,213,802) 162,935
OTHER INCOME (EXPENSE)
Loss on investment (557) (2,571) 2,014
Interest income (expense), net 1,543 (84,592) 86,135
Total other income (expense), net 986 (87,163) 88,149
NET INCOME (LOSS) $ (1,049,881) $ (1,300,965) $ 251,084 Net Vapor sales decreased
Vapor cost of goods sold for the three months ended
Grocery cost of goods sold for the three months ended
Total operating expenses decreased
Net other income of
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The following table sets forth our unaudited consolidated Statements of
Operations for the nine months ended
Nine Months Ended September 30, 2021 to 2020
2021 2020 Change $
SALES
Vapor sales, net $ 1,671,098 $ 1,888,480 $ (217,382)
Grocery sales, net 8,450,055 8,804,397 (354,342)
TOTAL SALES, NET 10,121,153 10,692,877 (571,724)
Cost of sales vapor 657,171 787,998 (130,827)
Cost of sales grocery 5,133,228 5,461,574 (328,346)
GROSS PROFIT 4,330,754 4,443,305 (112,551)
OPERATING EXPENSES
Selling, general and administrative 6,599,224 6,735,815 (136,591)
Impairment of intangible assets - 380,646 (380,646)
Total operating expenses 6,599,224 7,116,461 (517,237)
LOSS FROM OPERATIONS (2,268,470) (2,673,156) 404,686
OTHER INCOME (EXPENSE)
Gain (loss) on investment 10,954 (13,714) 24,668
Interest expense, net (76,888) (123,969) 47,081
Gain on extinguishment of debt, net 767,930 - 767,930
Total other income (expense), net 701,996 (137,783) 839,779
NET LOSS $ (1,566,474) $ (2,810,939) $ 1,244,465 Net Vapor sales decreased
Vapor cost of goods sold for the nine months ended
Grocery cost of goods sold for the nine months ended
Total operating expenses decreased
Net other income of
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Liquidity and Capital Resources
Nine Months Ended September 30,
2021 2020
Net cash provided by (used in)
Operating activities$ (2,044,147) $ (1,653,279) Investing activities (25,106) (90,311) Financing activities 27,316,225 3,206,574$ 25,246,972 $ 1,462,984
Our net cash used in operating activities of
The net cash used in investing activities of
The net cash provided by financing activities of
At
Our cash balances are kept liquid to support our growing acquisition and
infrastructure needs for operational expansion. The majority of our cash and
cash equivalents are concentrated in one financial institution and are generally
in excess of the
September 30, 2021 December 31, 2020
Cash $ 28,172,447 $ 925,475
Total assets $ 36,614,834 $ 11,874,993
Percentage of total assets 76.94% 7.79%
The Company reported a net loss of
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial condition and results of
operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in
We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.
There have been no material changes to the Company's critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 2020 Annual Report, which we believe are the most critical to our business and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the preparation of our condensed consolidated financial statements.
Seasonality
We do not consider our business to be seasonal.
Cautionary Note Regarding Forward-Looking Statements
This report includes forward-looking statements including statements regarding retail expansion, the future demand for our products, the transition to vaporizer and other products, competition, the adequacy of our cash resources and our authorized Common Stock, and our continued ability to raise capital.
The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include our future common stock price, the timing of future Series D preferred stock exercises and stock sales, customer acceptance of our products, and proposed federal and state regulation. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.
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