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STOCKHOLDERS’ EQUITY
 3 Months Ended
Mar. 31, 2026
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 16. STOCKHOLDERS’ EQUITY

 

Spin-Off

 

HCMC announced on August 22, 2022 that its Board of Directors approved separation of the Grocery business, including wellness business, into an independent, publicly traded company (the “Spin-Off”). Prior to the Spin-Off, HCWC was a subsidiary under HCMC, which operated the Ada’s Natural Market, Paradise Health & Nutrition, Mother Earth’s Storehouse, Green’s Natural Foods, Ellwood Thompson’s, and GreenAcres Market retail brands, as well as licensed wellness centers and Healthy U Wholesale.

 

On the Spin-Off Date, after the NYSEAM market closing, the Spin-Off of the HCWC business was completed. On September 14, 2024, HCWC became an independent, publicly traded company, and on September 16, 2024, the stock was traded on the NYSEAM under the stock symbol “HCWC.”

 

HCMC distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock. For each 208,632 shares of HCMC common stock held as of 5:00 p.m., New York City time, on September 9, 2024, the record date for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one (1) share of Class A common stock and three (3) shares of Class B common stock. The Distribution was made in book-entry form by a distribution agent as soon as practicable after the date of the Distribution.

 

Debt Conversion

 

During 2025 and the three months ended March 31, 2026, the Company converted approximately $3,806,031 of outstanding principal and $187,726 of accrued interest under its July 18, 2024 Loan and Security Agreement into approximately 10,410,076 shares of Class A common stock pursuant to several exchange agreements. As of March 31, 2026, approximately $3,693,969 in principal remains outstanding under the Loan and Security Agreement. See Note 13 for further discussion.

 

Series A Convertible Preferred Stock

 

The Company is authorized to issue 40,000,000 shares of preferred stock with par value of $0.001.

 

On August 18, 2022, HCMC entered into a Securities Purchase Agreement (“HCMC Preferred Stock”) pursuant to which HCMC sold and issued 14,722 shares of its Series E Convertible Preferred Stock to institutional investors for $1,000 per share or an aggregate subscription of $13.25 million. This same group of investors committed to invest $13.25 million in HCWC after the Spin-Off and IPO transactions were completed. As such, HCWC entered into an agreement to sell shares of its Series A Convertible Preferred Stock (the “Series A Preferred Stock”), with the gross proceeds from such offering expected to be $13.25 million. The institutional investors that acquired HCMC Series E Preferred Stock are contractually required to purchase the Series A Preferred Stock in the same dollar amounts as they invested in the HCMC Series E Preferred Stock (regardless of whether or not such HCMC Series E Preferred Stock has been converted into HCMC common stock).

 

On May 12, 2025, the Company entered into a Securities Purchase Agreement to issue 3,250 shares of Series A Convertible Preferred Stock (the “HCWC Preferred Stock”) with a stated value of $1,000 per share and par value of $0.001 per share. On June 20, 2025, HCWC entered into an Amended and Restated Securities Purchase Agreement (the “SPA”), pursuant to which the Company sold 3,250 shares (the ‘Shares”) of the HCWC Preferred Stock to three investors (the “Purchasers”) for an aggregate subscription price of $3,250,000 (the “Offering”). The proceeds the Company received were used for general corporate purposes and acquisitions. The HCWC Preferred Stock is convertible into shares of the Company’s Class A Common Stock at a conversion price of $1.38 per share, subject to adjustment as set forth in the Certificate of Designation.

 

On November 11, 2025, the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to sell 2,000 shares of the HCWC Preferred Stock to investors for an aggregate subscription price of $2,000,000. The HCWC Preferred Stock is convertible into shares of the Company’s Class A Common Stock at a conversion price of $1.38 per share, subject to adjustment as set forth in the Certificate of Designation.

 

As of March 31, 2026, the Company has sold $5.25 million of HCWC Preferred Stock, with binding commitments to purchase an additional $8.0 million in Preferred Stock from the same investors who purchased HCMC Series E Preferred Stock. As of March 31, 2026, no preferred stock was converted into common stock.

 

Restricted Stock

 

On August 19, 2025, the Compensation Committee of the Company’s Board of Directors approved the grant of an aggregate of 2.6 million shares of restricted Class A common stock to certain employees, directors, and service providers of the Company, pursuant to the Company’s 2024 Equity Incentive Plan. The restricted stock awards, which are subject to the execution of individual Restricted Stock Award Agreements, are generally scheduled to vest in eight equal quarterly installments over a two-year period, commencing three months from the issuance date. The awards also contain an accelerated vesting provision in connection with a material transaction of the Company.

 

On February 24, 2026, the Compensation Committee of the Board of Directors approved the grant of an aggregate of 2,545,719 shares of restricted Class A common stock to certain executive officers, directors, and employees under the Company’s 2024 Equity Incentive Plan. The restricted stock vests in eight equal quarterly installments over a two-year period, with full acceleration upon a Change of Control or a Major Financing resulting in net proceeds to the Company in excess of $10 million. Additionally, the Compensation Committee approved amendments to the vesting schedules of all outstanding 2025 restricted stock awards to accelerate vesting upon the occurrence of a Major Financing or Change of Control. The Compensation Committee, pursuant to Section 3.1(a) of the 2024 Equity Incentive Plan increased the number of shares available for grant by 1.4 million shares to a total of up to 2,545,719 shares of Class A common stock.

 

As of March 31, 2026, 5.1 million shares of restricted Class A common stock were issued, and 325,000 shares were vested. For the three months ended March 31, 2026 and 2025, approximately $236,000 and $0 of stock-based compensation expense related to these awards were recognized in the accompanying condensed consolidated financial statements.

 

 

The following table reflects the activity for all unvested restricted stocks during the three months ended March 31, 2026:

 

   Shares  

Weighted

Average

Grant Date

Fair Value

 
Unvested at January 1, 2025   -   $- 
Granted   2,600,000    1,560,000 
Vested   -    - 
Forfeited   -    - 
Unvested at December 31, 2025   2,600,000   $1,560,000 
Granted   2,545,719    878,273 
Vested   (325,000)   (195,000)
Forfeited   -    - 
Unvested at March 31, 2026   4,820,719    2,243,273 

 

As of March 31, 2026, there was approximately $2,105,000 of total unrecognized compensation cost related to unvested restricted stock awards granted under the 2024 Equity Incentive Plan. This cost is expected to be recognized over a weighted-average period of approximately 1.0 years.

 

The Company accounts for forfeitures of restricted stock awards in accordance with ASC 718, Compensation—Stock Compensation. The Company has elected to account for forfeitures as they occur. Under this policy, compensation cost is recognized only for awards that ultimately vest. Shares that are forfeited due to an employee’s failure to satisfy a service condition (such as termination of employment prior to vesting) become available for future grant under the 2024 Equity Incentive Plan, consistent with the terms of the plan.

 

As of March 31, 2026, 25,371,544 shares of class A common stock and 5,250 shares of Series A Convertible Preferred Stock were outstanding.