Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 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.

HCWC Spin-Off

On September 13, 2024, HCMC completed the Spin-off of our Grocery business into an independent publicly traded company HCWC. As a result, the operating results for the HCWC through the date of the Spin-off are reported in Net Loss from Discontinued Operations in the Consolidated Statements of Operations for all periods presented. In addition, the related assets and liabilities are reported as Assets and Liabilities of Discontinued Operations on the Consolidated Balance Sheets.

Unless otherwise noted, all amounts, percentages and discussion reflect only the results of operations and financial condition from our continuing operations.

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.

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 September 30, 2025, the Company had cash and cash equivalent of approximately $1.1 million and negative working capital of $3.5 million. The Company's liquidity needs through September 30, 2025 have been satisfied through financing agreement with private lenders.

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.

The Company believes its cash on hand and its ability to draw on its $5 million line of credit 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 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, NET		$	199			$	52			$	147
COST OF SALES			-				15				(15	)
GROSS PROFIT			199				37				162
OPERATING EXPENSES			2,085,196				2,143,442				(58,246	)
LOSS FROM OPERATIONS			(2,084,997	)			(2,143,405	)			58,408
OTHER INCOME (EXPENSE)
Loss on investment			-				(343	)			343
Other income, net			-				260,000				(260,000	)
Interest income, net			8,884				15,105				(6,221	)
TOTAL OTHER INCOME (EXPENSE), NET			8,884				274,762				(265,878	)
NET LOSS		$	(2,076,113	)		$	(1,868,643	)		$	(207,470	)

Net sales and cost of sales were de minimis for the three months ended September 30, 2025 and 2024. 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 September 30, 2025 and 2024 continued to be significantly impacted by the inability to bring new products to market via distribution.

Total operating expenses of $2.1 million for the three months ended September 30, 2025 remained consistent with the same period in 2024.

Total other income (expense), net of $9,000 for the three months ended September 30, 2025 was mainly attributable to interest income of $9,000. Total other income (expense), net of $275,000 for the three months ended September 30, 2024 consisted of interest income of approximately $15,000 and $260,000 miscellaneous income related to professional fee write off.

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, NET		$	2,979			$	345			$	2,634
COST OF SALES			25,312				190				25,122
GROSS PROFIT			(22,333	)			155				(22,488	)
OPERATING EXPENSES			6,235,686				6,312,846				(77,160	)
LOSS FROM OPERATIONS			(6,258,019	)			(6,312,691	)			54,672
OTHER INCOME (EXPENSE)
Loss on investment			-				(1,336	)			1,336
Loss on disposal of asset			(22,809	)			-				(22,809	)
Other income, net			3,070				260,000				(256,930	)
Interest income, net			26,172				114,732				(88,560	)
TOTAL OTHER INCOME (EXPENSE), NET			6,433				373,396				(366,963	)
NET LOSS		$	(6,251,586	)		$	(5,939,295	)		$	(312,291	)

Net sales and cost of sales were de minimis for the nine months ended September 30, 2025 and 2024. 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 nine months ended September 30, 2025 and 2024 continued to be significantly impacted by the inability to bring new products to market via distribution.

Total operating expenses for the nine months ended September 30, 2025 and 2024 were $6.2 million and $6.3 million,, respectively, and the decrease was attributable to the decrease in professional fee.

Total other income (expense), net of $6,000 for the nine months ended September 30, 2025 consists of $23,000 loss on asset disposal offset by net interest income of $26,000 and other miscellaneous income of $3,000. Total other income (expense), net of $373,000 for the nine months ended September 30, 2024 primarily consists of interest income of $115,000, miscellaneous income of $260,000, and loss on investment of $1,000.

Liquidity and Capital Resources

The following table and the discussion present the Company's cash activities on continuing basis for nine months ended September 30, 2025 and 2024:

		Nine Months Ended September 30,
		2025				2024
Net cash (used in) provided by:
Operating activities		$	(3,058,181	)		$	1,042,919
Investing activities			-				(47,185	)
Financing activities			2,532,979				(2,120,260	)
Net decrease in cash from continuing operations		$	(525,202	)		$	(1,124,526	)
Net decrease in cash from discontinued operations			-				(1,422,580	)
Total net decrease in cash		$	(525,202	)		$	(2,547,106	)

Our net cash used in operating activities of approximately $3.1 million for the nine months ended September 30, 2025 resulted from a net loss of $6.3 million, offset by a non-cash adjustment of $3.4 million and a net cash change of $0.2 million from changes in operating assets and liabilities. Our net cash provided by operating activities of approximately $1.0 million for the nine months ended September 30, 2024 resulted from a net loss of $5.9 million, offset by a non-cash adjustment of $3.6 million and a net cash change of $3.3 million from changes in operating assets and liabilities.

There was no cash used in investing activities for the nine months ended September 30, 2025. The net cash used in investing activities of $47,000 for the nine months ended September 30, 2024 resulted from purchases of property and equipment.

The net cash provided by financing activities of $2.5 million for the nine months ended September 30, 2025 is primarily due to $3.0 million net transfers from HCWC and $0.5 million cash payment of the credit line. The net cash used in financing activities of $2.1 million for the nine months ended September 30, 2024 is primarily due to $4.1 million net transfer to HCWC related to Spin-Off and $2.0 million cash proceeds from 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 balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. 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 September 30, 2025 and December 31, 2024.

		September 30, 2025				December 31, 2024
Cash and cash equivalent		$	1,121,597			$	1,193,567
Total assets		$	1,525,134			$	2,220,449
Cash and cash equivalent as a percentage of total assets			73.5	%			53.8	%

The Company reported a net loss from continuing operation of $6.3 million for the nine months ended September 30, 2025. The Company also had negative working capital of $3.5 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.

There have been no material changes to the Company's critical accounting policies and estimates except allocation of corporate general expense 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. Allocation of corporate general expenses to HCWC in year 2024 was a result of recently completed spin-Off of HCWC, which led to a reevaluation of how corporate general expenses were allocated. The Company adopted a proportional cost allocation method to allocate parent expense to the carve-out entity.

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.