Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision makers, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company operates as a single reportable segment, as the Chief Operating Decision Maker (“CODM”) reviews financial performance and makes decisions on a consolidated basis.

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Healthy Choice Markets, Inc. (“Ada’s Natural Market”), Healthy Choice Markets 2, LLC (“Paradise Health and Nutrition”), Healthy Choice Markets 3, LLC (“Mother Earth’s Storehouse”), 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, and Healthy U Wholesale, Inc. (“The Vitamin Store, LLC”). All intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

Revenue Recognition

Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, and return allowances, are recorded when products are delivered, title passes to customers and collection is likely to occur. Title passes to customers at the point of sale for retail and upon delivery of products for wholesale. Return allowances, which reduce revenue, are estimated using historical experience.

The Company promotes its products with trade incentives and promotions. These programs include sales discounts, rebates, coupons, volume-based incentives, refunds, and returns, which represent variable considerations. The estimation of variable consideration involves judgment and is constrained to avoid overstatement of revenue. The Company applies the expected value method or the most likely amount method, depending on which better predicts the consideration to which it will be entitled. Management evaluates these estimates on a quarterly basis. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions.

The Company recognizes revenue in accordance with the following five-step model:

	●	identify arrangements with customers;
	●	identify performance obligations;
	●	determine transaction price;
	●	allocate transaction price to the separate performance obligations in the arrangement, if more than one exists; and
	●	recognize revenue as performance obligations are satisfied.

The Company does not have significant revenue recognized over time due to the nature of retail store operations. The Company recognizes revenue at a point in time when control of goods or services transfers to the customer.

The Company generates co-op advertising revenue by billing vendors for advertising their products in the Company’s sales channels. Revenue is recognized at the point in time when the advertising is delivered in the Company’s sales channels, which is when the performance obligation is satisfied.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less, when purchased, to be cash and cash equivalents. Our cash equivalents are comprised of money market funds held in brokerage account. The Company’s cash is deposited with major financial institutions, and at times, account balances may exceed federally insured limits. The Company has not experienced any losses on its cash accounts and believes it is not exposed to any significant credit risk on its cash. The Company’s money market funds are not insured by the Federal Deposit Insurance Corporation (“FDIC”). This account is protected by the Securities Investor Protection Corporation (“SIPC”), which protects against the loss of cash and securities in the event of a brokerage failure, subject to certain limitations. SIPC protection does not cover market losses on investments.

Other Current Assets

Other Current Assets

Other current assets are the non-trade related assets that the Company owns, benefits from, or uses to generate income that can be converted into cash within one business cycle. Included in “Other current assets” on our condensed consolidated balance sheets are amounts primarily related to other receivables or non-trade receivable from other companies. These financial assets are subject to the Current Expected Credit Loss (“CECL”) model under ASC 326, Financial Instruments-Credit Losses. Management has determined that no allowance for credit losses is required as of March 31, 2026 and December 31, 2025, due to the short-term nature of these receivables, the creditworthiness of the counterparties, and historical collection experience indicating no credit losses. The Company will continue to monitor credit risk and adjust the allowance if conditions change.

Inventories

Inventories

Inventories are measured at the lower of cost and net realizable value using the average cost method. If the cost of the inventories exceeds their net realizable value, adjustments are recorded to write down excess carrying value to their net realizable value. The Company’s inventories consist primarily of merchandise available for resale, such as fresh produce, perishable grocery items and non-perishable consumable goods. Slow-moving inventory is rotated out and obsolete inventory is removed (expensed) on a monthly basis.

Identifiable Intangible Assets

Identifiable Intangible Assets

Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable finite-lived intangible assets are amortized over 4 to 13 years. Similar to tangible property, plant and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Impairment of Long-Lived Assets and Goodwill

Impairment of Long-Lived Assets and Goodwill

Our long-lived assets include property and equipment, finite-lived intangible assets (such as trade names, customer relationships, and non-compete agreements), and goodwill. Long-lived assets, other than goodwill, are depreciated or amortized over their estimated useful lives. The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the dates of acquisition. Goodwill represents the excess of purchase price over the fair values assigned to the underlying identifiable net assets of acquired businesses.

Long-lived assets, such as property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is measured by comparing the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount over the asset’s or asset group’s estimated fair value. Fair value is determined based on quoted market prices, discounted cash flows, or appraisals, as appropriate. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.

Goodwill is reviewed annually for impairment unless circumstances dictate the need for more frequent assessment. We perform our annual goodwill impairment testing as of September 30 of each year. The accounting guidance provides entities an option of performing a qualitative assessment (the “Step-zero” test) before performing a quantitative analysis. If the entity determines, on the basis of certain qualitative factors, that it is more-likely-than-not that the goodwill is not impaired, the entity would not need to proceed to the quantitative goodwill impairment testing process. For our single reporting unit’s annual testing, we performed a qualitative assessment and considered various macroeconomic, industry, and company-specific factors. Based on this assessment, management concluded that

there is less than a 50% chance that the reporting unit’s fair value is below its carrying amount. Therefore, no goodwill impairment exists.

During the three months ended March 31, 2026, the Company performed a qualitative assessment and identified no triggering events. Based on this assessment, management concluded that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. Therefore, no quantitative impairment test was required, and no goodwill impairment was recognized for the period. For further information regarding goodwill and the quantitative impairment test performed during the year ended December 31, 2025, see Note 10 - Goodwill.

The goodwill impairment test requires judgment, including identifying reporting units, assigning assets and liabilities to reporting units, and determining the fair value of the reporting unit. Significant judgments required to estimate the fair value of our reporting unit include estimating future cash flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions. We use discounted cash flow models to estimate fair value. These cash flow estimates are derived from historical experience, third-party market data and a market approach, and future long-term business plans and include assumptions of future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate.

Debt

Debt

The Company accounts for debt in accordance with ASC 470, Debt and records specific incremental costs paid to third parties in connection with the issuance of long-term debt are deferred as a direct deduction from the carrying value of the associated debt liability on its condensed consolidated balance sheet. The deferred financing costs are amortized as interest expense over the term of the related debt using the effective interest method.

For convertible debt instruments, the Company evaluates embedded features within convertible debt that will be settled in shares upon conversion under ASC 815, Derivatives and Hedging (“ASC 815”) to determine whether the embedded feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If an embedded derivative is bifurcated from share-settled convertible debt, then the Company records the debt component at cost less a debt discount equal to the bifurcated derivative’s fair value. The Company amortizes the debt discount over the life of the debt instrument as additional non-cash interest expense utilizing the effective interest method. The convertible debt and the derivative liability are presented in aggregate on the Condensed Consolidated Balance Sheets. The derivative liability is remeasured at each reporting period with changes in fair value recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income within other income (expense), net.

401(k) retirement savings plan

401(k) retirement savings plan

The Company’s employees are offered a 401(k)-retirement savings plan with discretionary contribution matching opportunities. 401(k) employer expense amounted to $54,000 and $48,000 for the three months ended March 31, 2026 and 2025, respectively.

Income Taxes

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2026 and December 31, 2025. The Company had no uncertain tax positions as of March 31, 2026 and December 31, 2025.

Fair Value Measurements

Fair Value Measurements

The fair value framework under FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows:

	●	Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities;

	●	Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

	●	Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

Recurring Fair Value Measurements

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and borrowings. Management believes that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, and borrowings are representative of their respective fair values.

Nonrecurring Fair Value Measurements

The Company’s assets measured at fair value on a nonrecurring basis include long-lived assets, indefinite-lived intangible assets, goodwill and equity method investment. The Company reviews the carrying amounts of such assets at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurement of the assets are considered to be Level 3 measurements.

Business Combination

Business Combination

The Company applies the provisions of Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing identifiable assets and liabilities, including intangible assets of acquired businesses at their fair value at the date of acquisition. When the Company acquires control of a business, any previously held equity interest also is remeasured to fair value. The excess of the purchase consideration and any previously held equity interest over the fair value of identifiable net assets acquired is goodwill. If the fair value of identifiable net assets acquired exceeds the purchase consideration and any previously held equity interest, the difference is recognized in the condensed consolidated statements of operations immediately as a gain or loss on acquisition. Acquisition-related expenses are expensed as incurred and are recorded in operating expenses in the condensed consolidated statements of operations.

Related Party Transactions and Nonmonetary Exchanges

Transactions involving related parties, as defined by ASC 850, Related Party Disclosures, are recorded based on the substance of the transaction rather than merely its legal form. Related party transactions cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist.

When the Company exchanges a monetary asset for a nonmonetary asset (such as equity securities) in a transaction with a related party, if the fair value of the asset received cannot be determined within reasonable limits in an arm’s-length context, and the transaction is with a related party, it is appropriate to default to the recorded amount of the asset surrendered. Gains are not recognized on such transactions when the substance is a capital contribution or conversion of intercompany funding rather than an income-generating event.

Reclassification

Reclassification

During the three months ended March 31, 2025, the Company previously classified cash advances to its former parent HCMC, as financing activities on the condensed consolidated statement of cash flows. Upon further review, management has determined that such advances represent lending activities and should be classified as investing activities. Accordingly, the Company has reclassified the $966,584 cash outflow to HCMC for the three months ended March 31, 2025 from financing activities to investing activities to conform to the current period presentation. This reclassification had no effect on the Company’s net decrease in cash and cash equivalents, net loss, or any other line items within the condensed consolidated financial statements for the period presented.