HEALTHIER CHOICES MANAGEMENT CORP. 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;
? Increase demand for vaporizers and related products;
? 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 a total of nine retail
vape stores and four natural and organic groceries and dietary supplement stores
which are located in
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Results of Operations
The following table sets forth our Consolidated Statements of Operations for the
years ended
For the Year Ended December 31, 2020 to 2019
2020 2019 Change $
SALES:
Vapor sales, net $ 2,458,945 $ 4,134,701 $ (1,675,756)
Grocery sales, net 11,461,800 10,979,305 482,495
Total Sales 13,920,745 15,114,006 (1,193,261)
Cost of sales vapor 1,033,805 1,690,734 (656,929)
Cost of sales grocery 7,109,719 6,939,028 170,691
GROSS PROFIT 5,777,221 6,484,244 (707,023)
EXPENSES:
Impairment of goodwill and intangible assets 380,646 481,314 (100,668)
Selling, general and administrative 8,844,947 10,417,214 (1,572,267)
Total operating expenses 9,225,593 10,898,528 (1,672,935)
Operating loss (3,448,372) (4,414,284) 965,912
OTHER INCOME (EXPENSES):
Gain on revaluation of warrants - 1,719,816 (1,719,816)
Other income, net (100) (2,524) 2,424
Interest expense, net (272,651) (35,527) (237,124)
Gain (loss) on investment (1,269) (66,857) 65,588
Total other income (expense), net (274,020) 1,614,908 (1,888,928)
NET INCOME (LOSS) $ (3,722,392) $ (2,799,376) $ (923,016) Net vapor sales decreased
Vapor cost of goods sold for the twelve months ended
Total operating expenses decreased
The Company determined that the carrying value of intangible assets in
connection with the acquisition of
Net other expenses of
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Liquidity and Capital Resources
For the year ended December 31,
2020 2019
Net cash provided by (used in):
Operating activities$ (2,288,914) $ (3,535,241) Investing activities (75,202) 126,754 Financing activities 1,764,176 (127,351)$ (599,940) $ (3,535,838)
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 three large financial institutions and are
generally in excess of the
December 31, 2020 December 31, 2019
Cash $ 925,475 $ 1,525,415
Total assets $ 11,874,993 $ 14,006,669
Percentage of total assets 7.8% 10.9%
The Company reported net loss of approximately
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
2020 2019
Reconciliation of Adjusted EBITDA to net loss allocable to common stockholders: Operating loss
$ (3,448,372) $ (4,414,284) Impairment of goodwill and intangible assets 380,646 481,314 Depreciation and amortization 550,098 594,940 Stock-based compensation expense 78,029 374,241 Adjusted EBITDA$ (2,439,599) $ (2,963,789)
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