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
Healthier Choices Management Corp. is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives. Through its wholly owned subsidiaryHCMC Intellectual Property Holdings, LLC , the Company manages and intends to expand on its intellectual property portfolio. Through its wholly owned subsidiaries,Healthy Choice Markets, Inc. , Healthy Choice Markets 2, LLC, and Healthy Choice Markets 3, LLC, respectively, the Company operates: •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.
•
bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items.
•
chain in
years.
Through its wholly owned subsidiary,
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
at the
same services as the
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.
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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
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 four natural and organic
groceries and dietary supplement stores located in
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 unaudited condensed consolidated Statements
of Operations for the three months ended
Three Months Ended June 30, 2022 to 2021 2022 2021 Change $ SALES Vapor sales, net $ 5,997$ 590,980 $ (584,983) Grocery sales, net 6,126,063 2,794,912 3,331,151 TOTAL SALES, NET 6,132,060 3,385,892 2,746,168 Cost of sales vapor 562 237,333 (236,771) Cost of sales grocery 3,800,625 1,684,903 2,115,722 GROSS PROFIT 2,330,873 1,463,656 867,217 OPERATING EXPENSES Selling, general and administrative 3,699,273 2,149,087 1,550,186 LOSS FROM OPERATIONS (1,368,400) (685,431) (682,969) OTHER INCOME (EXPENSE) Gain (loss) on investment 1,800 (14,614) 16,414 Other income, net 6,175 - 6,175 Interest income (expense), net 14,910 (5,516) 20,426 Gain on debt settlements - 885,226 (885,226) Total other income (expense), net 22,885 865,096 (842,211) NET (LOSS) INCOME$ (1,345,515) $ 179,665 $ (1,525,180)
Net vapor sales decreased approximately
Net grocery sales increased
Vapor cost of goods sold for the three months ended
Grocery cost of goods sold for the three months ended
Total operating expenses increased
Net other income of
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The following table sets forth our unaudited consolidated Statements of
Operations for the six months ended
Six Months Ended June 30, 2022 to 2021 2022 2021 Change $ SALES Vapor sales, net$ 255,560 $ 1,204,916 $ (949,356) Grocery sales, net 10,925,053 5,646,729 5,278,324 TOTAL SALES, NET 11,180,613 6,851,645 4,328,968 Cost of sales vapor 112,246 470,648 (358,402) Cost of sales grocery 6,764,980 3,426,631 3,338,349 GROSS PROFIT 4,303,387 2,954,366 1,349,021 OPERATING EXPENSES Selling, general and administrative 7,026,693 4,171,970 2,854,723 LOSS FROM OPERATIONS (2,723,306) (1,217,604) (1,505,702) OTHER INCOME (EXPENSE) Gain on investment 5,314 11,511 (6,197) Other income 23,049 - 23,049 Interest income (expense), net 31,513 (78,430) 109,943 Gain on extinguishment of debt, net - 767,930 (767,930)
Total other income (expense), net 59,876 701,011 (641,135)
NET LOSS$ (2,663,430) $ (516,593) $ (2,146,837)
Net Vapor sales decreased
Vapor cost of goods sold for the six months ended
Grocery cost of goods sold for the six months ended
Total operating expenses increased
Net other income of
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Liquidity and Capital Resources
Six Months EndedJune 30, 2022 2021
Net cash provided by (used in)
Operating activities$ (1,870,884) $ (1,443,509) Investing activities (5,336,011) (14,269) Financing activities 33,911 27,871,187$ (7,172,984) $ 26,413,409
Our net cash used in operating activities of approximately
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. Most of our cash and cash
equivalents are concentrated in one financial institution and are generally in
excess of the
June 30, 2022 December 31, 2021 Cash$ 19,323,420 $ 26,496,404 Total assets$ 33,832,198 $ 34,443,487 Percentage of total assets 57.12% 76.93%
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 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.
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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