Healthier Choices Management Corp.: Form 10-Q for the period ended Jun 30, 2026

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, HCMC Intellectual Property Holdings, LLC and The Vape Store, Inc. (“Vape Store”). All intercompany accounts and transactions have been eliminated in consolidation.

Company Overview

Healthier Choices Management Corp. is a holding company focused on monetizing its intellectual property through its wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC. The Company seeks to further monetize its patent suite through development and production of its patented products, including the Q-Cup™ technology and Imitine, licensing and royalty agreements, and enforcement actions against infringers of its intellectual property.

Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, the Company manages and intends to expand on its intellectual property portfolio.

Additionally, the Company markets its patented the Q-Cup™ technology under the vape segment; this patented technology is based on a small, quartz cup called the Q-Cup™, which a customer partially fills with either cannabis or CBD concentrate (approximately 50mg) purchased from a third party. The Q-Cup™ is then inserted into the Q-Cup™ Tank or Globe, that heats the cup from the outside without coming in direct contact with the solid concentrate. This Q-Cup™ technology provides significantly more efficiency and an “on the go” solution for consumers who prefer to vape concentrates either medicinally or recreationally.

As disclosed in Note 1 to the condensed consolidated financial statements, the Company entered into a Distribution Agreement on November 27, 2025, to commercialize a new product line, Quitcubes, utilizing the Company’s NatureTine™ ingredient. The distributor is responsible for marketing, customer fulfillment, and website management, while the Company is responsible for manufacturing. The launch was originally anticipated in the first quarter of 2026 but was delayed as the Company established the necessary operational infrastructure. As a result, the Company recorded no net sales from Quitcubes for the three and six months ended June 30, 2026. Subsequent to quarter end, the Company has made significant progress and expects the official commercial launch to occur in the third quarter of 2026. Management believes the successful launch of Quitcubes is critical to generating future revenue and addressing the Company’s recurring losses.

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 currently and historically has reported net losses and cash outflows from operations. As of June 30, 2026, the Company had cash and cash equivalent of approximately $1.2 million and negative working capital of $0.7 million. The Company’s liquidity needs through June 30, 2026 have been satisfied through financing agreement with private lenders.

On March 27, 2026, the Company terminated its prior $5 million credit facility with a private lender, and entered into a new $5 million Sabby Loan Agreement. The Sabby Facility matures on December 31, 2026, bears interest at 12% per annum, and allows for advances from time to time subject to the terms and conditions of the loan agreement. In connection with the Sabby Facility, the Company received an initial advance of $500,000. The remaining $4.5 million is available for future draws.

On June 26, 2026, the Company received $50,000 in cash proceeds from Pinz Capital Special Opportunities Fund, LP in connection with a convertible promissory note. The formal loan agreement was executed on July 6, 2026. The note matures May 5, 2030, bears interest at 12% per annum, payable in kind, with principal and interest due in ten equal monthly installments beginning on the third anniversary of issuance, subject to earlier conversion. The proceeds from this note provided additional liquidity to support the Company’s operations.

Management has made plans to reduce certain costs and raise the capital needed, however there can be no assurance the Company can successfully implement these plans. The success of these plans is dependent upon various factors, foremost being the ability to reduce outside consulting expenses and the ability to secure additional capital from outside investors. There can be no assurance that such plans will be successful.

Management believes that the Company’s cash on hand, together with the availability of up to $4.5 million in additional draws under the Sabby Loan Agreement, and the $50,000 in proceeds received on June 26, 2026 (with the formal loan agreement executed on July 6, 2026), will enable the Company to meet its obligations and capital requirements for at least twelve months from the date these financial statements are issued. Accordingly, no adjustment has been made to the financial statements to account for this uncertainty.

Factors Affecting Our Performance

We believe the following factors affect our performance:

Pending Patent: We have developed, trademarked and are preparing to commercialize additional products. We include product development expenses as part of our operating expenses. In October 2018, we announced the granting of three US patents related to our Q-Cup™ technology. In addition, we have a suite of patent applications pending in the United States. There is no assurance that we will be awarded patents for any of these pending patent applications. There is no assurance that we can monetize the patents.

Manufacturing: We have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products to meet our design specifications. We depend on third party manufacturers for our vaporizer e-liquid and accessories. Any interruption in supply and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several third-party manufacturers to manufacture our products to our specifications.

Results of Operations

The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended June 30, 2026 and 2025 that is used in the following discussions of our results of operations:

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Net sales and cost of sales were de minimis for the three months ended June 30, 2026 and 2025. The Company closed all its brick-and-mortar retail vape stores, as management had shifted its retail sales focus to the wholesale and online channel. The sales and cost of sales for the three months ended June 30, 2026 and 2025 continued to be significantly impacted by the inability to bring new products to market via distribution.

Total operating expenses decreased by approximately $1.7 million to $0.2 million for the three months ended June 30, 2026 compared to $2.0 million for the same period in 2025. After giving effect to the reclassification of payroll expense of $328,373 resulting from the termination of the TSA and mutual release of obligations with HCWC, total net operating expenses were $(84,606) for the three months ended June 30, 2026, representing a decrease of approximately $2.1 million from the same period in 2025. The decrease was driven by a $1.1 million reduction in stock-based compensation expense and a $0.7 million reduction in payroll and benefits, professional fees, and taxes, licenses and permits. In addition, the reclassification of shared payroll expense of approximately $0.3 million resulted from the termination of the TSA and mutual release of obligations with HCWC, as management determined that payroll costs incurred by HCMC during the period primarily benefited HCWC and should be allocated to HCWC, reducing operating expenses by $328,373 for the three months ended June 30, 2026.

Total other (expense) income, net was approximately $9,000 for the three months ended June 30, 2026, which was primarily attributable to interest expense. Total other (expense) income, net was $12,000 for the three months ended June 30, 2025, consisting of interest income of $9,000 and other miscellaneous income of $3,000.

The following table sets forth our unaudited condensed consolidated Statements of Operations for the six months ended June 30, 2026 and 2025 that is used in the following discussions of our results of operations:

Net sales and cost of sales were de minimis for the six months ended June 30, 2026 and 2025. The Company closed all its brick-and-mortar retail vape stores, as management had shifted its retail sales focus to the wholesale and online channel. The sales and cost of sales for the six months ended June 30, 2026 and 2025 continued to be significantly impacted by the inability to bring new products to market via distribution.

Total operating expenses decreased by approximately $3.1 million to $1.1 million for the six months ended June 30, 2026 compared to $4.2 million for the same period in 2025. After giving effect to the reclassification of payroll expense of $328,373 resulting from the termination of the TSA and mutual release of obligations with HCWC, total net operating expenses were $722,019 for the six months ended June 30, 2026, representing a decrease of approximately $3.5 million from the same period in 2025. The decrease was driven by a $2.2 million reduction in stock-based compensation expense and a $0.9 million reduction in payroll and benefits, professional fees, and bank service fees. In addition, the reclassification of payroll expense of approximately $0.3 million resulted from the termination of the TSA and mutual release of obligations with HCWC, as management determined that payroll costs incurred by HCMC during the period primarily benefited HCWC and should be allocated to HCWC, reducing operating expenses by $328,373 for the six months ended June 30, 2026.

Total other income (expense), net was approximately $10,000 for the six months ended June 30, 2026, primarily attributable to a miscellaneous income of approximately $12,000 and partially offset by interest expense of approximately $2,000. Total other income (expense), net was $2,000 for the six months ended June 30, 2025, consisting of $22,000 loss on asset disposal, offset by net interest income of $17,000 and other miscellaneous income of $3,000.

Liquidity and Capital Resources

The following table and the discussion present the Company’s cash activities on continuing basis for six months ended June 30, 2026 and 2025:

Our net cash used in operating activities of approximately $0.6 million for the six months ended June 30, 2026 resulted from a net loss of $0.7 million, offset by a non-cash adjustment of $36,000 and a net increase of $55,000 from changes in operating assets and liabilities. Our net cash used in operating activities of approximately $2.0 million for the six months ended June 30, 2025 resulted from a net loss of $4.2 million, offset by a non-cash adjustment of $2.3 million and a net cash change of $0.1 million from changes in operating assets and liabilities.

There was no cash used in investing activities for the six months ended June 30, 2026 and 2025.

The net cash provided by financing activities of $0.7 million for the six months ended June 30, 2026 is primarily due $0.1 million net transfers from HCWC, and $0.5 million cash proceeds from Sabby loan advance, and $50,000 cash proceeds from convertible note received on June 26, 2026 (with the formal loan agreement executed on July 6, 2026). The net cash provided by financing activities of $1.5 million for the six months ended June 30, 2025 is primarily due to $1.9 million net transfers from HCWC and $0.4 million cash payment of the credit line.

At June 30, 2026 and December 31, 2025, 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 operations. Most of our cash and cash equivalent are concentrated in one financial institution and is generally in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash. The following table presents the Company’s cash position as of June 30, 2026 and December 31, 2025.

The Company reported a net loss from continuing operation of $0.7 million for the six months ended June 30, 2026. The Company also had negative working capital of $0.7 million. The Company expects to continue incurring losses for the foreseeable future.

The Company anticipates its current cash and its ability to draw from the $5 million credit line with private lender will be sufficient to meet projected operating expenses for the foreseeable future through at least twelve months from the issuance of the consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting 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 financial statements.

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. These estimates include useful lives and impairment of long-lived assets, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. 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.

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, 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.

We are required to report under Section 404(a) of Sarbanes-Oxley regarding the effectiveness of our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Our management, including our Principal Executive Officer and Principal Financial Officer, carried out an evaluation on internal controls as of June 30, 2026 in regard to the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. As a result of the evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was ineffective as of June 30, 2026 and noted the material weaknesses as follows:

• Failure to have properly documented and designed disclosure controls and procedures and testing of the operating effectiveness of our internal control over financial reporting.
• Segregation of duties due to lack of personnel.
• The Company had ineffective design, implementation and, operation of controls over logical access, program change management, and vendor management controls. The Company controls on IT should have included the following:
• Appropriate restrictions that would adequately prevent users from gaining inappropriate access to the financially relevant systems.
• IT program and data changes affecting the Company’s financial IT applications and underlying accounting records, should be identified, tested, authorized and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate.
• Obtaining and reviewing key third party service provider SOC reports.

Our management concluded that considering internal control deficiencies that, in the aggregate, rise to the level of material weaknesses, we did not maintain effective internal control over financial reporting as of June 30, 2026 based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Planned Remediation

Management continues to work to improve its controls related to our material weaknesses listed above. In order to achieve the timely implementation of the above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:

• Continuing to increase headcount across the Company, with a particular focus on hiring individuals with strong internal control backgrounds and inventory expertise.
• Establishing policies and procedures in the IT area to mitigate data breach, unauthorized access and address segregation of duties, as well as review key third party service provider SOC reports.

We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Controls over Financing Reporting

Except as detailed above, during the quarter ended June 30, 2026, there were no significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.