Healthy Choice Wellness : Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

About this update from Healthy Choice Wellness Corp.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF CONDENSED CONSOLIDATED OPERATIONS 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 Healthy Choice Wellness 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, Healthy Choice Markets IV, LLC ("Green's Natural Foods"), Healthy Choice Markets V, LLC ("Ellwood Thompson's), Healthy Choice Markets VI, LLC (GreenAcres Market), Healthy Choice Wellness, LLC, The Vitamin Store, LLC, and Healthy U Wholesale, Inc. All intercompany accounts and transactions have been eliminated in consolidation. Company Overview Healthy Choice Wellness 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 subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC, Healthy Choice Markets 3, LLC, Healthy Choice Markets IV, LLC, Healthy Choice Markets V, LLC and Healthy Choice Markets VI, 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. ● 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, an organic and health food and vitamin store in New York's Hudson Valley, which has been in existence for over 40 years. ● Greens Natural Foods' eight stores in New York and New Jersey, offering a selection of 100% organic produce and all-natural, non-GMO groceries & bulk foods; a wide selection of local products; an organic juice and smoothie bar; a fresh foods department, which offers fresh and healthy "grab & go" foods; a full selection of vitamins & supplements; as well as health and beauty products. ● Ellwood Thompson's, an organic and natural health food and vitamin store located in Richmond, Virginia. ● GreenAcres Market, an organic and natural health food and vitamin chain with five store locations in Kansas and Oklahoma. GreenAcres Market is a chain of premier natural foods stores, offering organic and all natural products and vitamins from both top national brands as well as locally sourced specialty brands. Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company operates a Healthy Choice Wellness Center in Kingston, NY. Through its wholly owned subsidiary, Healthy U Wholesale Inc., the Company sells vitamins and supplements, as well as health, beauty and personal care products through The Vitamin Store, LLC on its website www.TheVitaminStore.com . 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 condensed 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 has reported cash inflows from operations this year. As of September 30, 2025, the Company had cash and cash equivalents of approximately $3.0 million and negative working capital of $0.3 million. 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 Florida, nine stores located in New York and New Jersey, one store located in Virginia, three stores in Kansas, and two stores in Oklahoma. 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 on our operating results in the future. Results of Operations The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended September 30, 2025 and 2024 that is used in the following discussions of our results of operations: Three Months Ended September 30, 2025 to 2024 2025 2024 Change $ SALES $ 19,039,927 $ 18,229,463 $ 810,464 COST OF SALES 11,648,298 11,227,644 420,654 GROSS PROFIT 7,391,629 7,001,819 389,810 OPERATING EXPENSES, NET 8,001,051 7,374,242 626,809 LOSS FROM OPERATIONS (609,422 ) (372,423 ) (236,999 ) OTHER INCOME (EXPENSE) Loss on debt extinguishment (375,500 ) (1,888,889 ) 1,513,389 Other income (expense), net 2,096 (486 ) 2,582 Interest expense, net (241,313 ) (396,709 ) 155,396 TOTAL OTHER EXPENSES, NET (614,717 ) (2,286,084 ) 1,671,367 NET LOSS $ (1,224,139 ) $ (2,658,507 ) $ 1,434,368 Net sales increased $0.8 million to $19.0 million for the three months ended September 30, 2025 as compared to $18.2 million for the same period in 2024. The increase in grocery sales of $0.6 million was primarily due to the acquisition of GreenAcres Market acquired in July 2024, and increase in same-store sales of $0.2 million. The increase in same-store sales was mainly attributable to the success of our new customer loyalty program and CO-OP program. Cost of goods sold for the three months ended September 30, 2025 and 2024 were $11.6 million and $11.2 million, respectively. The increase of $0.4 million is primarily due to the acquisition of GreenAcres Market. Gross profit was $7.4 million and $7.0 million for the three months ended September 30, 2025 and 2024, respectively. Gross margin as a percentage of sales increased approximately 0.4% as compared to the same period in prior year. Total operating expenses for the three months ended September 30, 2025 and 2024 were $8.0 million and $7.4 million, respectively. The total increase of $0.6 million consists of $0.3 million increase from the acquisition of GreenAcres Market and $0.3 million same-store increase in insurance expense, professional fee, and taxes, license and permit expenses. Total other expenses, net of $0.6 million for the three months ended September 30, 2025 consists of net interest expense of approximately $0.2 million, other miscellaneous income of approximately $2,000, and $0.4 million loss on debt extinguishment. Total other expense, net of $2.3 million for the three months ended September 30, 2024 consists of $1.9 million loss on warrant settlement, and net interest expense of $0.4 million. The following table sets forth our unaudited condensed consolidated Statements of Operations for the nine months ended September 30, 2025 and 2024 that is used in the following discussions of our results of operations: Nine Months Ended September 30, 2025 to 2024 2025 2024 Change $ SALES $ 59,499,512 $ 49,718,396 $ 9,781,116 COST OF SALES 36,162,598 30,765,744 5,396,854 GROSS PROFIT 23,336,914 18,952,652 4,384,262 OPERATING EXPENSES, NET 24,395,045 20,408,380 3,986,665 LOSS FROM OPERATIONS (1,058,131 ) (1,455,728 ) 397,597 OTHER INCOME (EXPENSE) Loss on debt extinguishment (410,418 ) (1,888,889 ) 1,478,471 Other income (expense), net 639 6,697 (6,058 ) Interest (expense) income, net (807,998 ) (617,758 ) (190,240 ) TOTAL OTHER EXPENSES, NET (1,217,777 ) (2,499,950 ) 1,282,173 NET LOSS $ (2,275,908 ) $ (3,955,678 ) $ 1,679,770 Net sales increased $9.8 million to $59.5 million for the nine months ended September 30, 2025 as compared to $49.7 million for the same period in 2024. The increase in grocery sales of $7.8 million was primarily due to the acquisition of GreenAcres Market acquired in July 2024, and increase in same-store sales of $2.0 million. The increase in same-store sales was mainly attributable to the success of our new customer loyalty program and CO-OP program. Cost of goods sold for the nine months ended September 30, 2025 and 2024 were $36.2 million and $30.8 million, respectively. The increase of $4.8 million is primarily due to the acquisition of GreenAcres Market, and an increase in same-store cost of goods sold of $0.6 million. Gross profit was $23.3 million and $19.0 million for the nine months ended September 30, 2025 and 2024, respectively. Gross margin as a percentage of sales increased approximately 1.1% as compared to the same period in prior year. Total operating expenses for the nine months ended September 30, 2025 and 2024 were $24.4 million and $20.4 million, respectively. The increase of $4.0 million consist of $3.0 million from the acquisition of GreenAcres Market and $1.0 million increase in professional fees, insurance, and tax, license and permit expenses. Total other expenses, net of $1.2 million for the nine months ended September 30, 2025 consists of net interest expense of $0.8 million, other miscellaneous income of approximately $1,000, and $0.4 million loss on debt extinguishment. Total other expenses, net of $2.5 million for the nine months ended September 30, 2024 consists of $1.9 million loss on warrant settlement, and net interest expense of $0.6 million, offset by $7,000 other miscellaneous income. Lease Commitments, Known Trends and Uncertainties As of September 30, 2025, the Company has operating lease obligations totaling $11.5 million. The weighted-average remaining lease term is 4 years, with a weighted-average discount rate of 5.27%. Rent expense for the three months ended September 30, 2025 was $1.0 million, compared to $1.2 million for the same period in 2024. Rent expense for the nine months ended September 30, 2025 was $2.9 million, compared to $3.0 million for the same period in 2024. The overall decrease is primarily attributable to a significant reduction in variable lease costs, which are primarily based on property taxes and are expensed as incurred. Looking forward, we expect overall rent expense to be influenced by two key factors: the expiration of certain leases and potential new commitments at market rates, and fluctuations in variable costs, primarily property taxes, which are inherently uncertain but have trended lower in the current year. Rising interest rates and inflation could increase the cost of future lease obligations. While the weighted-average discount rate increased marginally to 5.27% from 5.19% in 2024, a sustained rate hike environment may elevate borrowing costs for future lease liabilities. Liquidity and Capital Resources Nine Months Ended September 30, 2025 2024 Net cash provided by (used in) Operating activities $ 1,851,134 $ (3,964,320 ) Investing activities (248,567 ) (4,871,680 ) Financing activities (658,652 ) 9,200,127 $ 943,915 $ 364,127 Our net cash provided by operating activities of approximately $1.9 million for the nine months ended September 30, 2025 resulted from a net loss of $2.3 million, offset by a non-cash adjustment of $6.8 million and a net cash usage of $2.6 million from changes in operating assets and liabilities. Our net cash used in operating activities of approximately $4.0 million for the nine months ended September 30, 2024 resulted from resulted from a net loss of $4.0 million, offset by a non-cash adjustment of $7.5 million and a net cash usage of $7.5 million from changes in operating assets and liabilities. The net cash used in investing activities of $0.2 million for the nine months ended September 30, 2025 was due to purchases of property and equipment. The net cash used in investing activities of $4.9 million for the nine months ended September 30, 2024 consists of $5.5 million payment for GreenAcres Market acquisition, $0.1 million purchases of property and equipment, offset by $0.7 million proceeds from sale of Saugerties building. The net cash used in financing activities of $0.7 million for the nine months ended September 30, 2025 consists of net proceeds of $3.1 million from HCWC Preferred Stock offering, principal payment on loan payable of $0.8 million and $3.0 million cash advance to related party. The net cash provided by financing activities of $9.2 million for the nine months ended September 30, 2024 consists of cash proceeds of $1.7 million from Security Purchase Agreement ("SPA") signed on January 18, 2024, $7.5 million cash proceeds from Loan and Security Agreement signed on July 18, 2024, $2.6 million cash proceed from initial public offering, $1.7 million net parent investment from HCMC, $2,000 cash proceeds from warrant exercise, offset by principal payment on loan payable of $2.3 million and $2.0 million payment to related party. At September 30, 2025 and December 31, 2024, 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 and cash equivalents 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 two financial institutions. The portion of our balance held as cash deposits in these institutions is generally in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash or cash equivalents. The following table presents the Company's cash position as of September 30, 2025 and December 31, 2024. September 30, 2025 December 31, 2024 Cash and cash equivalents $ 3,000,387 $ 2,056,472 Total assets $ 33,731,345 $ 34,112,517 Cash as a percentage of total assets 8.89 % 6.03 % The Company reported a net loss of $2.3 million for the nine months ended September 30, 2025. The Company also had negative working capital of $0.3 million. The Company expects to continue incurring losses for the foreseeable future. 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 GAAP. The preparation of these unaudited 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. 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 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. Non-GAAP Financial Measures The following discussion and analysis contain 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 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. EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income. 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 and non-recurring charges that effect comparability between reporting periods. We define Adjusted EBITDA as net loss adjusted for non-cash charges for depreciation and amortization, impairment of goodwill, change in contingent consideration, also adjusted for non-recurring other expense (income), and interest income. 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 net loss 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. For The Three Months Ended September 30, For The Nine Months Ended September 30, 2025 2024 2025 2024 Reconciliation from net loss to adjusted EBITDA: Net loss $ (1,224,139 ) $ (2,658,507 ) $ (2,275,908 ) $ (3,955,678 ) Interest expense 241,313 396,709 807,998 617,758 Depreciation and amortization 432,287 423,200 1,297,234 1,148,158 EBITDA (550,539 ) (1,838,598 ) (170,676 ) (2,189,762 ) Loss on debt settlement 375,500 1,888,889 410,418 1,888,889 Gain on sale of Saugerties building - (205,146 ) - (205,146 ) Other (expenses) income, net (2,096 ) 486 (639 ) (6,697 ) Adjusted EBITDA $ (177,135 ) $ (154,369 ) $ 239,103 $ (512,716 ) 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 2024 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. Cybersecurity We recognize that cybersecurity is of critical importance to our success. We are committed to maintaining robust cybersecurity and data protection and continuously evaluating the impact of cybersecurity threats, considering both immediate and potential long-term effects of these threats on our business strategy, operations, and financial condition. Our board oversees cybersecurity risks through quarterly updates from the Chief Operating Officer. Cautionary Note Regarding Forward-Looking Statements This report includes forward-looking statements including statements regarding retail expansion, the future demand for our 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.

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