HEALTHIER CHOICES MANAGEMENT CORP.

(HCMC)
Delayed OTC Markets  -  03:59 2022-08-11 pm EDT
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08/01HEALTHIER CHOICES MANAGEMENT CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONDENSED CONSOLIDATED OPERATIONS (form 10-Q)
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HEALTHIER CHOICES MANAGEMENT CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

03/31/2022 | 05:38pm EDT
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.


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:


Retail: We believe the operating performance of our retail stores will affect
our revenue and financial performance. The Company has (1) a total of [six]
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.




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Results of Operations

The following table sets forth our Consolidated Statements of Operations for the years ended December 31, 2021 and 2020 which is used in the following discussions of our results of operations:

                                                       For the Year Ended December 31,        2021 to 2020
                                                           2021                 2020            Change $
SALES:
Vapor sales, net                                     $      2,084,813       $   2,458,945     $    (374,132 )
Grocery sales, net                                         11,235,041          11,461,800          (226,759 )
Total Sales                                                13,319,854          13,920,745          (600,891 )
Cost of sales vapor                                           839,599           1,033,805          (194,206 )
Cost of sales grocery                                       7,187,701           7,109,719            77,982
GROSS PROFIT                                                5,292,554           5,777,221          (484,667 )

EXPENSES:
Impairment of goodwill and intangible assets                        -             380,646          (380,646 )
Selling, general and administrative                        10,033,048           8,844,947         1,188,101
Total operating expenses                                   10,033,048           9,225,593           807,455
Operating loss                                             (4,740,494 )     

(3,448,372 ) (1,292,122 )


OTHER INCOME (EXPENSES):
Gain on debt settlements                                      767,930                   -           767,930
Other expenses, net                                               (26 )              (100 )              74
Interest expense, net                                         (65,281 )          (272,651 )         207,370
Gain (loss) on investment                                         412              (1,269 )           1,681
Total other income (expense), net                             703,035            (274,020 )         977,055

NET LOSS                                             $     (4,037,459 )     $  (3,722,392 )   $    (315,067 )



Net vapor sales decreased $0.4 million to $2.1 million for the year ended
December 31, 2021 as compared to $2.5 million for the same period in 2020. The
decrease in sales was primarily due to a major decrease in foot traffic and a
decrease in the number of stores open compared to prior year.  Net grocery sales
decreased $0.2 million to $11.2 million for the year ended December 31, 2021 as
compared to $11.5 million for the same period in 2020. The decrease in sales was
primarily due to a decrease in the customer count compared to prior year.

Vapor cost of goods sold for the year ended December 31, 2021 and 2020 were $0.8
million and $1.0 million, respectively, a decrease of $0.2 million. The decrease
in cost of goods sold was primarily due to a decreased in sales and product
cost. Grocery store cost of goods sold for the year ended December 31, 2021 and
2020 were $7.2 million and $7.1 million, respectively, an increase of $0.1
million primarily due to a write-off of inventory.

Total operating expenses increased $0.8 million to $10.0 million for the year
ended December 31, 2021. The increase was primarily due to an increase in
professional fees of $1.1 million and payroll benefits of $0.4 million,
partially offset by the impairment of goodwill and intangible assets of $0.4
million in prior year.

Net other income of $0.7 million for the year ended December 31, 2021 includes a
gain on debt settlements of $0.8 million, partially offset by an interest
expense of $0.1 million. Net other expense of $0.3 million for the year ended
December 31, 2020 includes primarily interest expense.




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Liquidity and Capital Resources


                                    For the year ended December 31,
                                        2021                 2020
Net cash provided by (used in):
Operating activities              $     (3,528,205 )     $  (2,281,797 )
Investing activities                       (87,322 )           (75,202 )
Financing activities                    27,186,456           1,771,293
                                  $     23,570,929       $    (585,706 )



Our net cash used in operating activities of $3.5 million for the year ended
December 31, 2021 resulted from our net loss of $4.0 million and a net cash
usage of $0.6 million from changes in operating assets and liabilities, offset
by a non-cash adjustments of $1.0 million. Our net cash used in continuing
operating activities of $2.3 million for the year ended December 31, 2020
resulted from our net loss from continuing operations of $3.7 million, offset by
a net cash usage of $0.5 million from changes in operating assets and
liabilities and a non-cash adjustments of $1.9 million.

The net cash used in investing activities of $0.1 million for the year ended
December 31, 2021 resulted from the collection of a note receivable, the
acquisition of new business and purchases of a patent and property and
equipment. The net cash provided by investing activities of $0.1 million for the
year ended December 31, 2020 resulted from the issuance and collection of a note
receivable, and purchases of a patent and property and equipment.

The net cash provided by financing activities of $27.2 million for the year
ended December 31, 2021 is due to proceeds received from the Rights Offering of
$24.3 million and a Securities Purchase Agreement of $5.0 million, partially
offset by a principal payment of $2.0 million on the line of credit. The net
cash used in financing activities of $1.8 million for the year ended December
31, 2020 is due to proceeds received from the Paycheck Protection Program of
$0.9 million and Term Loan of $2.5 million, partially offset by payments
of $1.7 million on the loan payable.

At December 31, 2021 and December 31, 2020, 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 and
cash equivalents are concentrated in three large financial institutions 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 as of
December 31, 2021 and December 31, 2020.

                              December 31, 2021       December 31, 2020

Cash                         $        26,496,404     $           925,475
Total assets                 $        34,443,487     $        11,874,993
Percentage of total assets                  76.9 %                   7.8 %



The Company reported net loss of approximately $4.0 million for the year ended
December 31, 2021. The Company also had positive working capital of $26.2
million. The Company expects to continue incurring losses for the foreseeable
future and may need to raise additional capital to satisfy business obligations,
and to continue as a going concern.

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.

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Non-GAAP Financial Measures


The following discussion and analysis contains 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.

We define Adjusted EBITDA as net loss from operations adjusted for non-cash
charges for depreciation and amortization and stock compensation. 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 charges that effect comparability between reporting
periods. 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 loss from
operations 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.

                                                                   2021             2020

Reconciliation of Adjusted EBITDA to net loss allocable to common stockholders: Operating loss

                                                 $ (4,740,494 )   $ (3,448,372 )
Impairment of goodwill and intangible assets                              - 

380,646

Depreciation and amortization                                       497,408 

550,098

Stock-based compensation expense                                     34,375           78,029
Adjusted EBITDA                                                $ (4,208,711 )   $ (2,439,599 )






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