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 Healthier Choices
Management Corp. and its wholly-owned subsidiaries, Healthy Choice Markets,
Inc., Healthy Choice Markets 2, LLC ("Paradise Health and Nutrition"), Healthy
Choice Markets 3, LLC ("Mother Earth's Storehouse"), Healthy Choices Markets 3
Real Estate LLC, HCMC Intellectual Property Holdings, LLC, Healthy Choice
Wellness, LLC, The Vitamin Store, LLC, Healthy U Wholesale, Inc., The Vape
Store, Inc. ("Vape Store"), Vaporin, Inc. ("Vaporin"), Smoke Anywhere U.S.A.,
Inc. ("Smoke"), Emagine the Vape Store, LLC ("Emagine"), IVGI Acquisition, Inc.,
Vapormax Franchising LLC, Vaporin LLC, and Vaporin Florida, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
Healthier Choices Management Corp. is a holding company focused on providing
consumers with healthier daily choices with respect to nutrition and other
Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC,
the Company manages and intends to expand on its intellectual property
Through its wholly owned subsidiaries, Healthy Choice Markets, Inc., Healthy
Choice Markets 2, LLC, and Healthy Choice Markets 3, LLC, respectively, the
• Ada's Natural Market, a natural and organic grocery store offering fresh
produce, bulk foods, vitamins and supplements, packaged groceries, meat and
seafood, deli, baked goods, dairy products, frozen foods, health & beauty
products and natural household items.
• Paradise Health & Nutrition's three stores that likewise offer fresh produce,
bulk foods, vitamins and supplements, packaged groceries, meat and seafood,
deli, baked goods, dairy products, frozen foods, health & beauty products and
natural household items.
• Mother Earth's Storehouse, a two store organic and health food and vitamin
chain in New York's Hudson Valley, which has been in existence for over 40
Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company
• Healthy Choice Wellness Center (Roslyn Heights, NY) a corporately owned IV
therapy center offering multiple IV drip "cocktails" for clients to choose
from. These cocktails are designed to help boost immunity, fight fatigue and
stress, reduce inflammation, enhance weight loss, and efficiently deliver
antioxidants and anti-aging mixes. Additionally, there are cocktails for
health, beauty and re-hydration.
• The Company also has a licensing agreement for a Healthy Choice Wellness Center
at the Casbah Spa and Salon in Fort Lauderdale, FL, offering essentially the
same services as the Roslyn Heights, NY location.
Through its wholly owned subsidiary, Healthy U Wholesale, the Company sells
vitamins and supplements, as well as health, beauty and personal care products
on its website www.TheVitaminStore.com.
Additionally, the Company markets its patented Q-Unit™ and Q-Cup® technology.
Information on these products and the technology is available on the Company's
website at www.theQcup.com.
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
The Company incurred a loss from operations of approximately $1.4 million for
the three months ended March 31, 2022. As of March 31, 2022, cash and cash
equivalents totaled approximately $20.6 million. The Company expects to continue
incurring losses for the foreseeable future and we anticipate that our current
cash and cash equivalents to be generated from operations will be sufficient to
cover our projected operating expenses for the foreseeable future. Management do
not believe there are any substantial doubts about the Company's ability to
continue as a going concern within a year and a day from the issuance of these
unaudited consolidated financial statements.
Factors Affecting Our Performance
We believe the following factors affect our performance:
Retail: We believe the operating performance of our retail stores will affect
our revenue and financial performance. The Company has (1) a total of four
retail vape stores and (2) four natural and organic groceries and dietary
supplement stores located in Florida, as well as two located in New York. The
Company has reduced the number of retail vape stores due to adverse industry
trends and increasing federal and state regulations that, if implemented, may
negatively impact future retail revenues.
Increased Competition: Food retail is a large and competitive industry. Our
competition varies and includes national, regional, and local conventional
supermarkets, national superstores, alternative food retailers, natural foods
stores, smaller specialty stores, and farmers' markets. In addition, we compete
with restaurants and other dining options in the food-at-home and
food-away-from-home markets. The opening and closing of competitive stores, as
well as restaurants and other dining options, in regions where we operate will
affect our results. In addition, changing consumer preferences with respect to
food choices and to dining out or at home can impact us. We also expect
increased product supply and downward pressure on prices to continue and impact
our operating results in the future.
Our Response to the COVID-19 Pandemic: We are proud to provide our guests with
high quality, fresh foods and restaurant quality meals, delivered with
impeccable service in an exceptionally clean and well-stocked store. With the
ongoing COVID-19 pandemic, we continue to carefully monitor and adjust our
safety protocols while following public health guideline and local ordinances.
We have maintained many of the protocols established at the beginning of the
pandemic to keep our team members and guests safe. The COVID-19 pandemic has
presented many risks and challenges that we must manage. While we have
experienced many challenges, including but not limited to, product shortages,
staffing difficulties, and evolving customer shopping behaviors, our focus
remains on both offering our customers a high quality service experience and
supporting our essential front-line team members. Though we have successfully
managed these challenges to date, our operations and financial condition could
still be negatively affected by the COVID-19 pandemic and future developments,
which are highly uncertain and cannot be predicted.
Results of Operations
The following table sets forth our unaudited condensed consolidated Statements
of Operations for the three months ended March 31, 2022 and 2021 that is used in
the following discussions of our results of operations:
Three Months Ended March 31, 2021 to 2022
2022 2021 Change $
Vapor sales, net $ 249,563 $ 613,936 $ (364,373 )
Grocery sales, net 4,798,990 2,851,817 1,947,173
TOTAL SALES, NET 5,048,553
Cost of sales vapor 111,684 233,315 (121,631 )
Cost of sales grocery 2,964,355 1,741,728 1,222,627
GROSS PROFIT 1,972,514 1,490,710 481,804
Selling, general and administrative 3,327,420 2,022,883 1,304,537
Total operating expenses 3,327,420 2,022,883 1,304,537
LOSS FROM OPERATIONS (1,354,906 )
(532,173 ) (822,733 )
OTHER INCOME (EXPENSE)
Gain on investment 3,514 26,126 (22,612 )
Other income, net 16,874 - 16,874
Interest income (expense), net 16,603 (72,915 ) 89,518
Loss on debt settlements - (117,296 ) 117,296
Total other income (expense), net 36,991 (164,085 ) 201,076
NET LOSS $ (1,317,915 ) $ (696,258 ) $ (621,657 )
Net vapor sales decreased approximately $0.4 million to $0.2 million for the
three months ended March 31, 2022 as compared to $0.6 million for the same
period in 2021. The decrease in sales is primarily due to a decrease in the
number of stores open during the three months ended March 31, 2022 as compared
to the same period in 2021.
Net grocery sales increased $1.9 million to $4.8 million for the three months
ended March 31, 2022 as compared to $2.9 million for the same period in 2021.
The increase in sales is primarily due to an increase in the number of stores as
a result of the acquisition of Mother Earth's Storehouse in February 2022.
Vapor cost of goods sold for the three months ended March 31, 2022 and 2021 were
$0.1 million and $0.2 million, respectively, a decrease of $0.1 million. The
decrease is primarily due to decreases in sales and product costs during three
months ended March 31, 2022 as compared to the same period in 2021. Gross profit
was $0.1 million and $0.4 million for three months ended March 31, 2022 and
Grocery cost of goods sold for the three months ended March 31, 2022 and 2021
were $3.0 million and $1.7 million, respectively, an increase of $1.2 million.
The increase is primarily due to an increase in the number of stores from the
acquisition of Mother Earth's Storehouse during the three months ended March 31,
2022 as compared to the same period in 2021. Gross profit was $1.8 million and
$1.1 million for the three months ended March 31, 2022 and 2021, respectively.
Total operating expenses increased $1.3 million to $3.3 million for the three
months ended March 31, 2022 compared to $2.0 million for the same period in
2021. The increase is primarily attributable to an increase in professional fees
of $0.4 million, payroll and employee related cost of $0.5 million, office and
store expense of $0.2 million, occupancy costs of $0.1 million and depreciation
and amortization of $0.1 million.
Net other income of $37,000 for the three months ended March 31, 2022 includes
other income of $17,000, interest income of $17,000 and a gain on investment of
$4,000. Net other expense of $164,000 for the three months ended March 31, 2021
includes a loss on debt settlements of $117,000, interest expense of $73,000,
offset by a gain on investment of $26,000.
Liquidity and Capital Resources
Three Months Ended March 31,
Net cash provided by (used in)
Operating activities $ (679,629 ) $ (656,370 )
Investing activities (5,263,503 ) (17,677 )
Financing activities 34,558 3,064,741
$ (5,908,574 ) $ 2,390,694
Our net cash used in operating activities of approximately $0.7 million for the
three months ended March 31, 2022 resulted from a net loss of $1.3 million,
offset by a non-cash adjustment of $0.4 million and a net cash provided of $0.2
million from changes in operating assets and liabilities. Our net cash used in
operating activities of $0.7 million for the three months ended March 31, 2021
resulted from a net loss of $0.7 million and a net cash usage of $0.3 million
from changes in operating assets and liabilities, offset by a non-cash
adjustment of $0.4 million.
The net cash used in investing activities of $5.3 million for the three months
ended March 31, 2022 resulted from the acquisition of Mother Earth's Storehouse,
collection on a note receivable, and purchases of property and equipment. The
net cash used in investing activities of $18,000 for the three months
ended March 31, 2021 resulted from the collection of a note receivable, and
purchases of patents and property and equipment.
The net cash provided by financing activities of $35,000 for the three months
ended March 31, 2022 is due to proceeds received from the line of credit. The
net cash provided by financing activities of $3.1 million for the three months
ended March 31, 2021 is due to proceeds received from the Securities Purchase
Agreement of $5.0 million, partially offset by a principal payment of $2.0
million on the line of credit.
At March 31, 2022 and December 31, 2021, we did not have any material financial
guarantees or other contractual commitments with vendors that are reasonably
likely to have an adverse effect on liquidity.
Our cash balances are kept liquid to support our growing acquisition and
infrastructure needs for operational expansion. Most of our cash and cash
equivalents are concentrated in one financial institution and are generally in
excess of the 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 as of March 31, 2022 and December 31, 2021.
March 31, 2022 December 31, 2021
Cash $ 20,587,830 $ 26,496,404
Total assets $ 35,434,565 $ 34,443,487
Percentage of total assets 58.10 % 76.93 %
The Company reported a net loss of $1.3 million for the three months ended March
31, 2022. The Company also had positive working capital of $20.2 million. The
Company expects to continue incurring losses for the foreseeable future and we
do not believe there are any substantial doubts about the Company's ability to
continue as a going concern.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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 the United States, or U.S. GAAP. The preparation of these
condensed consolidated financial statements requires us to exercise considerable
judgment with respect to establishing sound accounting policies and in making
estimates and assumptions that affect the reported amounts of our assets and
liabilities, our recognition of revenues and expenses, and disclosure of
commitments and contingencies at the date of the condensed consolidated
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
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 2021 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.
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
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