HEALTHY CHOICE WELLNESS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

Organization

Healthy Choice Wellness Corp. (the “Company” or “HCWC” or “we” or “our” or “us”) is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives. The Company was spun off from its former parent, Healthier Choices Management Corp. (“Former Parent” or “HCMC”), on September 13, 2024.

Through its wholly owned subsidiaries, the Company operates:

Through its wholly owned subsidiary, Healthy U Wholesale, the Company sells vitamins and supplements, as well as health, beauty, and personal care products on its websitewww.TheVitaminStore.com.

Sourcing and Vendors

We source from multiple suppliers. These suppliers range from small independent businesses to multinational conglomerates. A supplier is considered a concentration if it accounts for 10% or more of total purchases in a period. For the three months ended June 30, 2026, approximately 38% of our total purchases were from Kehe Distributors, LLC (“KeHe”), and 23% from Four Seasons Produce. For the three months ended June 30, 2025, approximately 32% of our total purchases were from KeHe and 19% of purchases were from Four Seasons Produce. For the six months ended June 30, 2026, approximately 36% of our total purchases were from KeHe, and 21% of purchases were from Four Seasons Produce. For the six months ended June 30, 2025, approximately 29% of our total purchases were from KeHe,17% from Four Seasons Produce, and 11% of our total purchases were from UNFI.

NOTE 2. GOING CONCERN

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“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.

Conditions Giving Rise to Substantial Doubt

As of June 30, 2026, the Company had cash and cash equivalents of approximately $0.9 million and negative working capital of $6.6 million. For the six months ended June 30, 2026, the Company incurred net losses of approximately $6.7 million and cash used in operating activities of approximately $1.2 million. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.

Management’s Plans to Alleviate Substantial Doubt

Management has developed and initiated several operational and financing plans to mitigate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern.

Operationally, the Company has identified cost-saving opportunities, of which many have been implemented. These cost-saving measures are expected to reduce selling, general and administrative expenses and improve net income, thereby positively impacting operating cash flows. Management is also evaluating the performance of existing stores and rightsizing operations as necessary to improve store-level profitability and reduce cash burn. Additionally, the Company is pursuing strategic acquisitions to expand its store base and achieve economies of scale, which management believes will enhance profitability and generate positive operating cash flows over the long term.

On the financing front, the Company has secured binding commitments from institutional investors to purchase $13.25 million of its Series A Convertible Preferred Stock. As of June 30, 2026, the Company has received $5.25 million of this committed financing, with the remaining $8.0 million commitment extended to April 1, 2027 pursuant to the Ninth Amendment to the Healthier Choices Management Corp. (“HCMC”) Series E Securities Purchase Agreement (see Note 16- Stockholders’ Equity).

Subsequent to June 30, 2026, on August 7, 2026, the Company further reduced its debt obligations when holders converted $692,672 of outstanding principal under the Loan and Security Agreement into 2,565,450 shares of Class A common stock (see Note 18- Subsequent Events).

Subsequent to June 30, 2026, on August 11, 2026, the Company entered into a Sales Agreement with Cantor Fitzgerald & Co., pursuant to which the Company may offer and sell from time to time shares of its Class A common stock in “at the market” offerings. The Sales Agreement will become effective upon the satisfaction of customary closing conditions. Management considers this additional financing flexibility as part of its overall plan to mitigate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern.

Management believes that the combination of these operational initiatives and committed equity financing will enable the Company to meet its obligations and capital requirements for at least twelve months from the date these financial statements are issued.

Conclusion

Based on the above, management has concluded that its plans, including the operational cost-saving initiatives and the financing arrangements described above, alleviate the substantial doubt raised by the Company’s historical operating results and financial condition. The Company believes that its cash on hand, the remaining $8.0 million commitment under the Series A Preferred Stock offering, the reduction of debt obligations from the August 7, 2026 debt conversion, and the prospective of the “at the market” offering program with Cantor Fitzgerald & Co. will collectively 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.

NOTE 3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation.

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.

Unaudited Interim Condensed Consolidated Financial Statements

The interim condensed consolidated balance sheet as of June 30, 2026, the interim condensed consolidated statements of operations and the interim condensed consolidated statements of changes in stockholders’ equity for the three and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 2026 and 2025 are unaudited. The financial data and the other financial information disclosed in the notes to these condensed consolidated financial statements relating to the three and six month periods are also unaudited, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2026. The condensed consolidated balance sheet as of December 31, 2025 was derived from the Company’s audited 2025 financial statements contained in the above referenced Form 10-K. Results of the three and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full year ending December 31, 2026.

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, Healthy Choice Wellness II Corp., and Healthy U Wholesale, Inc. (“The Vitamin Store, LLC”). All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of the Financial Statements

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include promotional discounts, manufacturer coupons and rebates, return allowances that are netted against revenue, useful lives and impairment of long-lived assets, goodwill and impairment, equity method investment, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, stock-based compensation, and the valuation of the assets and liabilities acquired in business combinations. Certain management’s estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all its accounting estimates at least quarterly based on these conditions and records adjustments when necessary.

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:

The Company does not have significant revenue recognized over time due to the nature of retail store operation. 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.

Shipping and Handling

Shipping charges billed to customers are included in net sales and the related shipping and handling costs are included in the cost of sales. The Company incurred shipping and handling costs of approximately $53,000 and $27,000 for the three months ended June 30, 2026 and 2025, and approximately $80,000 and $53,000 for the six months ended June 30, 2026 and 2025, respectively.

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.

Accounts Receivable, Contract Assets and Contract Liabilities

Accounts receivables are claims to consideration which are unconditional; meaning no performance obligations remain for the Company and only the passage of time is necessary before collection. Contract assets represent consideration for goods or services transferred to customers for which the Company’s right to payment is subject to conditions other than the passage of time. By nature of the Company’s operations, contract assets are typically not recognized. Contract liabilities are recorded when customers transfer consideration in advance of delivery of products or services, which the Company records for gift cards and loyalty reward programs. When one party to an arrangement performs before the other(s), the Company records an account receivable, contract asset or contract liability.

The majority of arrangements with customers contain one performance obligation: to provide a distinct set of products or services. Most performance obligations are satisfied simultaneously as the Company exchanges products or services for customer payment. Exceptions include gift cards and loyalty rewards, for which the Company has a performance obligation to deliver products or services at a future date. As gift cards are purchased and loyalty points earned, contract liabilities are recorded until the performance obligations are satisfied through delivery of products or services or breakage based on gift card and loyalty reward program term limits. As of June 30, 2026, December 31, 2025, and January 1, 2025, the contract liability balances were approximately $35,000, $28,000 and $80,000, respectively.

The Company’s breakage policy is twenty-four months for gift cards. As such, all contract liabilities are expected to be recognized within a twenty-four-month period.

In August 2024, the Company transitioned its customer loyalty program from a points-based system to a VIP membership structure. Under the prior loyalty program, customers earned redeemable loyalty points based on qualifying purchases, which have been discontinued. Existing unredeemed loyalty points all expired on January 31, 2025. The existing VIP program provides members with immediate discounts on qualifying purchases, replacing the accrual of future points. The elimination of future loyalty point accruals reduces the Company’s ongoing contract liability obligations, as discounts under the VIP program are recognized as reductions to revenue at the time of sale.

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 June 30, 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.

Deferred Offering Costs

The Company capitalizes certain legal, accounting, underwriting, and other costs directly associated with in-process equity financings, including costs related to shelf registration statements, until such time as the financing is completed. Upon completion of an equity offering, these costs are reclassified to additional paid-in capital as a reduction of the gross proceeds received. Should a financing be abandoned, the deferred offering costs are expensed immediately in the condensed consolidated statements of operations. Costs associated with shelf registration statements are evaluated based on their nature and relationship to specific securities offerings, and qualifying offering costs are allocated to the applicable offerings as appropriate.

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.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful life of the respective asset, after the asset is placed in service. Revenue earning property, plant, and equipment includes signage, furniture and fixtures, building, computer hardware, appliance, cooler, and displays have useful lives ranging from two toseven years. Leasehold improvements are amortized over the shorter of the life of the improvement or the term of the lease.

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 intangible assets are amortized over 4 to 13 years. Similar to tangible personal property 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.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations. As of June 30, 2026, the Company had goodwill of $2,212,000, all of which resulted from the acquisition of GreenAcres Market in July 2024. The Company operates as a single reporting unit for purposes of goodwill impairment testing. Goodwill is tested for impairment annually on September 30, or more frequently if events or changes in circumstances indicate that the fair value of the reporting unit may be less than its carrying amount, using a fair value-based test.

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 it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. Therefore, no goodwill impairment exists.

During the three months ended June 30, 2026, management performed a qualitative assessment under ASC 350-20-35-3C and concluded that no triggering event occurred that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Although no triggering event was identified, management elected to voluntarily perform a quantitative impairment test for goodwill, which confirmed that the fair value of the reporting unit exceeds its carrying amount. For finite-lived intangible assets, management completed Step 1 of the impairment assessment under ASC 360-10-35-17 and identified no triggering events; therefore, no recoverability test was required. Accordingly, no impairment losses were recognized for goodwill or finite-lived intangible assets 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.

Equity Method Investment

The Company accounts for investments in entities over which it has the ability to exercise significant influence, but not control, using the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures. Significant influence is presumed when ownership exceeds 20%, but is also evaluated based on qualitative factors as outlined in ASC 323-10-15-6, including representation on the investee’s board of directors, participation in policy-making processes, material intra-entity transactions, and interchange of managerial personnel. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to recognize the Company’s proportionate share of the investee’s net income or loss, which is recognized in the condensed consolidated statements of operations.

The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that a decrease in the value of the investment has occurred that is other-than-temporary. If an impairment is identified, the Company measures the fair value of the investment using a multi-method approach under Accounting Standards Codification Topic 820, Fair Value Measurement (“ASC 820”), incorporating observable market inputs and unobservable inputs as appropriate. An impairment loss is recognized in the condensed consolidated statements of operations to the extent that the carrying amount exceeds the estimated fair value. Impairment losses are not subsequently reversed. See Note 11- Investment In Other Entity-Related Party for additional information regarding the Company’s equity method investment and related impairment recognized during the three months ended March 31, 2026.

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 as a direct deduction from the carrying value of the associated debt liability and are recorded as deferred financing costs 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 within other income (expense), net.

Advertising

Advertising expense is classified as selling, general and administrative expense on the condensed consolidated statements of operations. The Company expenses its advertising costs as incurred. The Company incurred advertising expenses of approximately $62,000 and $91,000 for the three months ended June 30, 2026 and 2025, and approximately $123,000 and $248,000 for the six months ended June 30, 2026 and 2025, respectively.

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 $64,000 and $37,000 for the three months ended June 30, 2026 and 2025, and $118,000 and $85,000 for the six months ended June 30, 2026 and 2025, respectively.

Loss Per Common Share

Basic loss per common share is computed as loss applicable to common stockholders divided by the weighted-average number of common shares outstanding for the period. Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common stock. For the three and six months ended June 30, 2026 and 2025, all potential common shares were excluded from the diluted loss per share calculation because their effect would be anti-dilutive.

A reconciliation of basic to diluted weighted average shares used in the loss per share calculation is as follows:

The following table represents common stock equivalents that were excluded from the computation of diluted loss per share for the three and six months ended June 30, 2026 and 2025, because the effect of their inclusion would be anti-dilutive:

Income Taxes

The Company’s income taxes are included in HCMC’s consolidated return through the Spin-Off date. For the purposes of the condensed consolidated financial statements, the income taxes for the Company have been presented on a separate return basis, under which a new stand-alone set of deferred tax assets and liabilities is created based on the financial statements.

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. There wereno unrecognized tax benefits andno amounts accrued for interest and penalties as of June 30, 2026 and December 31, 2025. The Company had no uncertain tax positions as of June 30, 2026 and December 31, 2025.

Leases

The Company leases retail stores, warehouse space, and office facilities under non-cancellable operating leases. Additionally, the Company has a finance lease for data center equipment.

Operating lease liabilities are recognized at the lease commencement date based on the present value of the fixed lease payments using the Company’s incremental borrowing rates. Related lease Right-of-use (“ROU”) assets are recognized based on the initial present value of the fixed lease payments, reduced by contributions from landlords, plus any prepaid rent and direct costs from executing the leases.

At the adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”), the Company elected the following practical expedients, which continue to be applied as part of its accounting policies:

Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease cost primarily represents the difference between the actual property tax obligations for the period and the initial estimates included in the Company’s lease liability. The Company’s lease liability includes an estimate for future property tax payments over the lease term. Variable lease payments are recognized as lease expense as they are incurred.

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:

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.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.

Business Combination

The Company applies the provisions of ASC 805 in the accounting for acquisitions of businesses. ASC 805, Business Combinations, 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 the expenses are recorded in operating expenses in the condensed consolidated statements of operations.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Compensation cost for restricted stock awards and other equity instruments granted to employees and directors is measured based on the grant-date fair value of the award. The fair value of restricted stock is determined based on the closing market price of the Company’s common stock on the grant date. Compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period (ranging from one to three years). The Company accounts for forfeitures as they occur; therefore, compensation expense is recognized only for awards that ultimately vest, and no estimation of future forfeitures is made. For awards granted to non-employees, the Company follows ASC 505-50, Equity—Equity-Based Payments to Non-Employees, and measures the awards at fair value on the measurement date.

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.

Recent Accounting Pronouncements

Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including FASB and the SEC.

In November 2024, the FASB issued ASU 2024-03 (“ASU 2024-03”), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The prescribed categories include purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. This authoritative guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this Update provide (1) guidance on measuring expected credit losses using a probabilistic method and (2) a practical expedient for all entities that simplifies the estimation of expected credit losses for current trade accounts receivable and contract assets arising from revenue transactions. The Update is effective for public business entities for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this ASU effective for the fiscal year beginning January 1, 2025. The Company adopted this ASU prospectively, applying the amendments from the adoption date forward without restatement of prior periods. The Company has elected the practical expedient provided therein. Accordingly, the Company’s estimate of expected credit losses on its trade accounts receivable is now based solely on historical loss experience and current asset-specific conditions. This change has been applied retrospectively as of the beginning of the annual period of adoption. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this Update clarify and expand the existing guidance on capitalizing implementation costs for cloud computing arrangements that are service contracts. The Update is effective for public business entities for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted for any interim period. The Company is currently evaluating the impact of this guidance on its accounting for cloud-based software arrangements.

In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The update (i) adds a scope exception from derivative accounting for contracts with underlying based on a party’s own operations or activities and (ii) clarifies that share-based payments received from a customer are initially accounted for under Topic 606 rather than as derivatives or equity securities. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The update clarifies the applicability of Topic 270, improves the navigability of interim disclosure requirements, and establishes a principle that an entity must disclose events or changes since the last annual reporting period that have a material impact on the entity. The guidance is effective for interim periods within fiscal years beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its interim financial statement disclosures.

Reclassification

During the six months ended June 30, 2025, the Company previously classified cash advances to its Former Parent, 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 $1,918,688 cash outflow to HCMC for the six months ended June 30, 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.

During the six months ended June 30, 2026, the Company reclassified $152,157 from prepaid expenses and vendor deposits to deferred offering costs within current assets on the condensed consolidated balance sheet as of December 31, 2025, to conform to the current period presentation. This reclassification had no effect on total current assets, total assets, net loss, or cash flows for any period presented.

NOTE 4. CONCENTRATIONS

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. The majority of the Company’s cash is concentrated in one large financial institution. As of June 30, 2026, the Company’s cash balances did not exceed the FDIC insurance limit of $250,000. The Company has not experienced any losses in such accounts.

A summary of the financial institution that had cash in excess of SIPC limits of $500,000 on June 30, 2026 and December 31, 2025 is presented below:

Our investments in money market funds are recorded at fair value, and funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The following table summarizes cash equivalents that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:

The following table provides a reconciliation of cash and cash equivalents to amounts shown in the statements of cash flow:

Sourcing and Vendors

We source from approximately 1,000 suppliers and offer well over 4,000 brands. These suppliers range from small independent businesses to multi-national conglomerates. We purchased approximately 83% and 74% of the goods we sell from our top 20 suppliers for the three months ended June 30, 2026 and 2025, respectively. For the three months ended June 30, 2026, approximately 38% of our total purchases were from KeHe, and 23% of our total purchases were from Four Seasons Produce. For the three months ended June 30, 2025, approximately 32% of our total purchases were from KeHe and 19% from Four Seasons Produce. We purchased approximately 81% and 72% of the goods we sell from our top 20 suppliers for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026, approximately 36% of our total purchases were from KeHe, and 21% of our total purchases were from Four Seasons Produce. For the six months ended June 30, 2025, approximately 29% of our total purchases were from KeHe,17% of our total purchases were from Four Seasons Produce, and 11% of our total purchases were from UNFI. No other supplier exceeded 10% of total purchases in either periods. We maintain good relations with all our suppliers and believe we have adequate alternative supply methods, including self-distribution.

As mentioned, KeHe replaced UNFI and becomes our primary supplier of dry grocery and frozen food products starting from January 2025. Our customer distribution agreement with KeHe commenced from March 1, 2024 and has an initial term through February 28, 2027. Either party may terminate the agreement for defaults by the other party of certain provisions of the agreement. We are obligated to purchase a minimum annual volume of products from KeHe, except in certain defined circumstances when such purchasing obligation is excused. Pricing under our agreement with KeHe is on a “cost plus” basis. We believe KeHe has sufficient warehouse capacity and distribution technology to service our existing stores’ distribution needs for natural foods and products. Unlike certain other key suppliers, our relationship with Four Seasons Produce is not governed by a long-term contractual agreement, and purchases are made on a purchase-order basis.

We have longstanding relationships with our suppliers, and we require disclosure from them regarding quality, freshness, potency and safety data information. Our bulk food private label products are packaged by us in pre-packed sealed bags to help prevent contamination while in transit and in our stores. Unlike most of our competitors, most of our private label nuts, trail mix, and flours are refrigerated in our warehouse and stores to maintain freshness.

NOTE 5. ACCOUNTS RECEIVABLE, NET

Accounts receivable is mainly related to CO-OP billing. HCWC bills its vendors for advertising vendors’ products in our sales channels. Advertising revenue is included in sales revenue in the condensed consolidated statement of operations. The Company recorded advertising revenue of approximately $467,000 and $734,000 for the three months ended June 30, 2026 and 2025, and approximately $1,002,000 and $1,062,000 for the six months ended June 30, 2026 and 2025, respectively. The Company’s accounts receivable amounted to approximately $253,000, $364,000 and $510,000 at June 30, 2026, December 31, 2025 and January 1, 2025, respectively.

The Company’s credit loss is attributable to accounts receivable, and the Company determines the required allowance for expected credit losses using information such as customer credit history and current conditions. Amounts are recorded to the allowance when it is determined that expected credit losses may occur. The Company reserved approximately $45,000 and $10,000 in credit loss as of June 30, 2026 and December 31, 2025, respectively.

NOTE 6. 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 market value, adjustments are recorded to write down excess inventory to its net realizable value. The Company recorded the write down of inventories amounting to approximately $470,000 and $549,000 for the three months ended June 30, 2026 and 2025, and approximately $966,000 and $1,146,000 for the six months ended June 30, 2026 and 2025, respectively. The Company’s inventories consist primarily of merchandise available for resale.

NOTE 7. SEGMENT INFORMATION AND DISAGGREGATION OF REVENUES

The Company operates intwo operating segments: Grocery and Wellness. In accordance with ASC 280,Segment Reporting, these segments have been aggregated into a single reportable segment because they share similar economic characteristics and meet all aggregation criteria, including similar nature of products sold, product acquisition process, customer base, distribution methods, and regulatory environment.

The Company’s CODM reviews financial results and allocates resources at the consolidated level, as the aggregated segments operate as one integrated business unit. No segment-specific financial metrics are used by the CODM to assess performance.

The following table summarizes the significant segment expenses:

The following tables summarize the reconciliations of reportable segment profit or loss and assets to the Company’s consolidated totals:

When the Company prepares its internal management reporting to evaluate business performance, we disaggregate revenue into the following categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors, including the nature of products sold, product acquisition processes, customer types, distribution methods, and regulatory environments.

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. Revenue is recognized as follows:

NOTE 8. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following as of June 30, 2026 and December 31, 2025:

The Company incurred approximately $100,000 and $138,000 of depreciation expense for the three months ended June 30, 2026 and 2025, and approximately $204,000 and $272,000 of depreciation expense for the six months ended June 30, 2026 and 2025, respectively.

NOTE 9. INTANGIBLE ASSETS

Intangible assets, net consist of the following as of June 30, 2026 and December 31, 2025:

Intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was approximately $277,000 and $297,000 for the three months ended June 30, 2026 and 2025, and approximately $554,000 and $593,000 for the six months ended June 30, 2026 and 2025, respectively. Future annual estimated amortization expense is as follows:

NOTE 10. GOODWILL

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations. As of June 30, 2026, the Company had goodwill of $2,212,000, all of which resulted from the acquisition of GreenAcres Market in July 2024.

The Company tests goodwill for impairment annually on September 30 or more frequently if there are indicators that the carrying amount of goodwill exceeds its estimated fair value.

Goodwill Impairment Assessment — Three Months Ended June 30, 2026

During the second quarter of 2026, the Company performed a qualitative assessment under ASC 350-20-35-3C to determine whether any events or circumstances occurred that would make it more likely than not that the fair value of the Company’s single reporting unit is less than its carrying amount. Management considered various factors, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, entity-specific events, and share price performance.

Based on this assessment, management concluded that no triggering event occurred during the period that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Although no triggering event was identified, management elected to voluntarily perform a quantitative impairment test for goodwill as of June 30, 2026. The quantitative analysis, which used a combination of an income approach and a market approach, confirmed that the fair value of the reporting unit exceeded its carrying amount. Accordingly, no goodwill impairment was recognized for the three and six months ended June 30, 2026.

Goodwill Impairment Assessment — Year Ended December 31, 2025

During the fourth quarter of 2025, the Company’s stock price traded below its book value per share for a sustained period. As a decline in market capitalization below book value is a potential indicator of impairment, management concluded that a triggering event had occurred, necessitating an interim quantitative impairment test as of December 31, 2025. For this interim test, the fair value of the single reporting unit was estimated using a combination of an income approach and a market approach, consistent with the methodology used in the annual test. The Company used significant judgment to estimate the fair value of this single reporting unit including estimating future cash flows, determining appropriate discount rates and other assumptions, including assumptions about secular economic and market conditions, future sales growth, gross margin, operating margin, terminal growth rate, and the application of an appropriate discount rate. As of December 31, 2025, the estimated fair value of the Company’s single reporting unit exceeded its carrying value. The income approach and market approach yielded consistent fair value estimates, providing a sufficient margin of safety despite the recent decline in the Company’s stock price. Accordingly, no goodwill impairment was recognized for the year ended December 31, 2025.

The changes in the carrying amount of goodwill as of June 30, 2026 and December 31, 2025 are as follows:

NOTE 11. INVESTMENT IN OTHER ENTITY-RELATED PARTY

The Company accounts for its investments in other entities under the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the entity. Equity method investments are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable.

The Company entered into a Stock Purchase and Satisfaction of Debt Agreement with its Former Parent. Pursuant to this agreement, which was effective as of December 31, 2025, the Company settled an intercompany receivable due from HCMC with a carrying value of approximately $4.0 million by accepting 43,889,786,222 shares of HCMC common stock in full satisfaction of the receivable.

Initial Measurement

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. Accordingly, the Company measured the investment at the carrying amount of the receivable surrendered. This treatment is consistent with the principle that when fair value cannot be determined within reasonable limits in a related party context, defaulting to the recorded amount of the asset relinquished is appropriate. The substance of this transaction is a conversion of intercompany funding to equity, not an income-generating event; therefore, no gain was recognized.

Ownership Changes During the Period

As of December 31, 2025, HCMC had approximately 525.2 billion shares of common stock outstanding. The Company held 43,889,786,222 shares, representing approximately 8.4% of HCMC’s outstanding common stock.

On February 1, 2026, HCMC entered into a Stock Purchase and Satisfaction of Debt Agreement with a vendor, issuing 2,000,000,000 shares of common stock to settle $200,000 of outstanding accounts payable. As a result of this issuance, HCMC’s total outstanding common stock increased to approximately 527.2 billion shares. The Company’s ownership percentage was diluted to approximately 8.3% as of February 1, 2026, and remained at that level as of June 30, 2026, assuming no other changes to HCMC’s share count.

Equity Method Assessment

Although the Company’s ownership interest in HCMC remains below the 20% presumptive threshold for significant influence, a member of the Company’s senior management serves as Chairman of the Board of HCMC. As of June 30, 2026, HCMC’s board consists of three members, and the Company continues to hold disproportionate board representation relative to its ownership percentage. This representation provides the Company with the ability to exercise significant influence over HCMC’s operating and financial policies. As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, the Company and HCMC have committed to separate their boards and management teams. As of June 30, 2026, this separation had not yet been completed. Accordingly, the investment continues to be accounted for using the equity method during the three and six months ended June 30, 2026.

Equity Method Loss Recognition

For the three months ended June 30, 2026, HCMC reported net loss of approximately $0.2 million. The Company recognized its proportionate share of this net loss based on its weighted-average ownership percentage during the period, which resulted in equity method loss of approximately $18,000 for the three months ended June 30, 2026. For the six months ended June 30, 2026, the Company recognized a net equity method loss of approximately $83,000.

Summarized Financial Information of Equity Method Investee (HCMC)

In accordance with Regulation S-X, Rule 8-03(b)(3), the Company evaluates the significance of its equity method investees using the investment, asset, and income tests described in Rule 1-02(w). As a Smaller Reporting Company, the Company is required to provide summarized income statement information for equity method investees only if any of the tests exceed 20% significance individually or in the aggregate.

The Company holds an equity method investment in HCMC. As of June 30, 2026, the carrying value of this investment was approximately $2.2 million. Based onthe Company’s evaluation of the significance tests under Rule 1-02(w), the equity method investee does not exceed the 20% significance threshold under Rule 8-03(b)(3). However, out of an abundance of caution, the Company has elected to include the following summarized financial information for HCMC as of and for the three and six months ended June 30, 2026. This summarized financial information is derived from HCMC’s preliminary, unaudited financial statements for the period. These amounts are subject to adjustment upon the finalization of HCMC’s financial statements and its filing of Form 10-Q with the SEC.

Impairment Assessment

The Company evaluates equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To assess recoverability as of June 30, 2026, the Company performed an internal valuation of the investment. The internal valuation was based on the third-party valuation obtained as of December 31, 2025, adjusted for subsequent changes in the investee’s financial position, share issuances, and observable market prices as of June 30, 2026.

During the three months ended March 31, 2026, the Company recorded an impairment loss of $1,623,922 on its equity method investment due to an adverse PTAB IPR ruling that materially reduced the fair value of the investee. As of June 30, 2026, the Company performed an updated impairment assessment and determined that no additional impairment was required. The Company continues to monitor the investee’s litigation developments and financial performance for potential future impairment indicators. The impairment loss is included in other income (expense) in the condensed consolidated statement of operations.

Related Party Considerations

HCMC is a related party as the Company’s Former Parent prior to the Spin-Off completed on September 13, 2024. Prior to the Spin-Off, the Company and HCMC were under common control and had significant intercompany relationships. Following the Spin-Off, the Company and HCMC continue to have common board representation and management overlap as described above. The terms of the settlement were negotiated and approved by the Company’s Board of Directors, which has a majority of independent directors.

Variable Interest Entities (Unconsolidated)

The Company has evaluated its investment in its Former Parent, under ASC 810, Consolidation, and has determined that HCMC meets the definition of a VIE. HCMC is considered a VIE primarily due to its negative equity position, which indicates that the equity at risk is insufficient to permit the entity to finance its activities without additional subordinated financial support.

The Company holds a variable interest in HCMC through its ownership of approximately 8.3% of HCMC’s outstanding common stock as of June 30, 2026. The Company is not the primary beneficiary of HCMC because it does not have the power to direct the activities that most significantly impact HCMC’s economic performance. Such power resides with HCMC’s Board of Directors, of which the Company holds one of three seats, with independent directors holding the majority vote. Accordingly, the Company does not consolidate HCMC. We will continue to absorb portions of HCMC’s expected losses or gains commensurate with our 8.3% equity interest in HCMC, until we conclude we no longer hold a significant influence over HCMC, at which point we will consider whether the investment should be accounted for at fair value.

The Company’s maximum exposure to loss as a result of its involvement with this unconsolidated VIE is limited to its equity investment.

The carrying value of the investment as of June 30, 2026, reflects (i) the initial carrying value of $3.95 million, (ii) the net equity method loss of approximately $83,000 for the six months ended June 30, 2026, (iii) an impairment loss of $1.6 million recognized during the first quarter of 2026, resulting in a carrying value of approximately $2.2 million as of June 30, 2026. The Company does not have any future funding commitments, guarantees, or other arrangements that could require it to provide additional financial support to HCMC. Any losses or gains attributable to the Company’s interest in HCMC will be recognized commensurate with its equity ownership percentage in accordance with the equity method of accounting.

NOTE 12. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

At June 30, 2026 and December 31, 2025, accounts payable and accrued expenses consisted of:

NOTE 13. DEBT

A breakdown of the Company’s debt as of June 30, 2026 and December 31, 2025 is presented below:

Promissory Notes

In connection with the Green’s Natural Foods acquisition, on October 14, 2022, the Company issued a secured promissory note (the “Greens Note”) in the principal amount of $3,000,000 as a portion of the purchase price. The Greens Note has afive-year term, an interest rate of 6.0% per annum and is secured by the assets of the Green’s Natural Foods. The outstanding balance was approximately $890,000 and $1,205,000 as of June 30, 2026 and December 31, 2025, respectively. The Company incurred approximately $15,000 and $24,000 interest expense for the three months ended June 30, 2026 and 2025, and approximately $32,000 and $51,000 interest expense for the six months ended June 30, 2026 and 2025, respectively.

In connection with the Ellwood Thompson’s acquisition, on October 1, 2023, the Company issued a secured promissory note (the “Ellwood Note”) in the principal amount of $750,000, and discounted present value of $718,000 as a portion of the purchase price. The Ellwood Note has afive-year term, an interest rate of 6.0% per annum. The outstanding balance of the Ellwood Note was approximately $378,000 and $452,000 in principal amount as of June 30, 2026 and December 31, 2025, respectively. The Company recognized interest expense of approximately $6,000 and $8,000 for the three months ended June 30, 2026, and 2025, and approximately $13,000 and $17,000 for the six months ended June 30, 2026, and 2025, respectively.

In connection with the GreenAcres Market acquisition, on August 23, 2024, the Company issued a secured promissory note (the “GreenAcres Note”) in the principal amount of $1,825,000 as a portion of the purchase price. The GreenAcres Note has afive-year term, an interest rate of 6.0% per annum and is secured by the assets of the GreenAcres Market. The outstanding balance was approximately $1,218,000 and $1,390,000 as of June 30, 2026 and December 31, 2025, respectively. The Company incurred approximately $19,000 and $24,000 interest expense for the three months ended June 30, 2026 and 2025, and approximately $40,000 and $50,000 interest expense for the six months ended June 30, 2026 and 2025, respectively.

Acquisition Loan

On July 18, 2024 (the “Loan Effective Date”), the Company entered into a loan and security agreement with a private lender for a $7,500,000 loan (the “Acquisition Loan”). A portion of the Acquisition Loan proceeds were used to acquire GreenAcres Markets. The loan is guaranteed by all of the subsidiaries of the Company (the “Guarantors”) and secured by all of the assets of the Company and the Guarantors. The Acquisition Loan has a term of three years and interest accrues at a rate of 12% on amounts borrowed. The Acquisition Loan may be prepaid at any time at a premium in the amount of ten percent (10%) of the principal amount of the Acquisition Loan outstanding prior to such prepayment. Payments on the Acquisition Loan are required to be made as follows: $1,125,000 on first anniversary of the Loan Effective Date, $1,875,000 on the second anniversary of the Loan Effective Date, and the remaining outstanding principal balance of principal and accrued interest on the third anniversary of the Loan Effective Date.

Throughout the year ended December 31, 2025 and six months ended June 30, 2026, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with the holders of the Acquisition Loan (the “Noteholders”), who are unrelated third parties, to convert portions of the outstanding principal and accrued interest into shares of the Company’s Class A common stock. These conversions were accounted for as debt extinguishments. The difference between the carrying amount of the extinguished debt and the fair value of the common stock issued was recognized as a loss on debt extinguishment.

In summary, as a result of these exchange agreements during the first and second quarters of 2026, the Company exchanged approximately $2.0 million of outstanding principal of the Acquisition Loan in exchange for 7,410,075 shares of the Company’s Class A common stock.

The following table summarizes the conversion activity during the six months ended June 30, 2026, and during the year ended December 31, 2025:

As a result of these debt conversions, the Company recorded approximately $259,000 net loss on extinguishment of debt and $14,000 net gain on extinguishment of debt in the Condensed Consolidated Statement of Operations for the three months ended June 30, 2026 and 2025, and $364,000 net loss on extinguishment of debt and $6,000 net gain on extinguishment of debt for the six months ended June 30, 2026 and 2025, respectively. Following these transactions, $2,424,014 in principal remains outstanding under the Acquisition Loan as of June 30, 2026.

As of June 30, 2026, all conversions under the February 10, 2026 exchange agreement have been fully fulfilled, with the maximum authorized shares of 4,000,000 having been issued to settle the outstanding principal balance of $1,106,602. Accordingly, no further conversion rights or derivative liabilities remain outstanding under that agreement.

As of June 30, 2026, the Company had converted $742,500 of principal under the May 2026 Agreement into 2,750,000 shares of common stock. The remaining principal balance under this agreement as of June 30, 2026 is $692,671, which is convertible by the holders into 2,565,450 additional shares of common stock, subject to the 9.99% beneficial ownership limitation contained in the agreement. The conversion feature embedded in the May 2026 Agreement represents a fixed-for-fixed conversion option that is indexed to the Company’s own common stock and meets the criteria for equity classification under ASC 815-40. Accordingly, it does not meet the definition of a derivative and is not required to be bifurcated. Furthermore, as the conversion price approximated the fair value of the common stock on the commitment date, no beneficial conversion feature was recognized. The remaining outstanding balance of $692,671 is included in the outstanding principal balance of the Acquisition Loan as of June 30, 2026.

Future Principal Payments

The Company may, at its option, at any time or from time to time prepay the outstanding principal amount or any accrued but unpaid interest, in each case in whole or in part, without penalty or premium, provided that any such prepayment of any outstanding amount of principal shall be accompanied by the payment of all accrued but unpaid interest on the amount of principal being prepaid, plus any costs and fees incurred.

The following table summarizes thefive-year repayment schedule:

NOTE 14. LEASES

The Company has various lease agreements with terms of up to 20 years, including operating leases of retail stores, headquarters, and a finance lease for data center equipment.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating and finance leases as of June 30, 2026.

In January 2026, the Company, through its wholly-owned subsidiary Healthy Choice Markets 2, LLC, renewed the lease for its store located in West Melbourne, Florida for a five-year term commencing January 1, 2026 through December 31, 2030. All other material terms of the original lease, including the Company’s obligation to pay its pro-rata share of real estate taxes, common area maintenance, insurance, and other operating expenses, remain in effect. The renewal was accounted for as a remeasurement of the existing lease liability and right-of-use asset as of January 1, 2026 using the Company’s incremental borrowing rate at that date.

The following table summarizes the Company’s operating and finance leases:

The amortization of the right-of-use assets of approximately $1,925,000 and $1,846,000 for the six months ended June 30, 2026 and 2025, respectively, were included in operating cash flows.

The following table provides a summary of other information related to the leases at June 30, 2026 and December 31, 2025:

Rent expense for the three months ended June 30, 2026 and 2025 was approximately $972,000 and $974,000, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was approximately $1,948,000 and $1,951,000, respectively. It is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The components of lease expenses for the three and six months ended June 30, 2026 and 2025 were as follows:

The aggregate cash payments under the leasing arrangement were approximately $1,881,000 and $1,767,000 for the six months ended June 30, 2026 and 2025, respectively, included in operating cash flows.

NOTE 15. RELATED PARTY TRANSACTIONS

The Company was spun off from Former Parent on September 13, 2024. Prior to the Spin-Off, the Company did not operate as a stand-alone entity. Following the Spin-Off, the Company and the Former Parent operate as separate, publicly traded companies, though they remain related parties due to common ownership history and ongoing agreements.

Allocation of General Corporate Expenses

HCMC provided human resources, accounting, payroll processing, legal and other managerial services to the Company prior to the Spin-Off. Following the Spin-Off, HCWC and HCMC entered into a TSA, under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services were provided on a transitional basis and were expected to continue for a period of up to one year following the Spin-Off.

Management adopted a proportional cost allocation method to allocate HCMC expenses to the Company. The allocation method calculated the appropriate share of overhead costs to the Company based on management’s estimate that the sum of management time and resources spent managing the Company was approximately equal to the amount of time and resources spent managing HCMC and its subsidiaries. As a result, 50% of HCMC overhead on a weighted average basis was allocated to the Company based on the fact that management spent an equal amount of time managing HCMC and the Company. The Company believed the allocation methodology used was reasonable and had been consistently applied, and resulted in an appropriate allocation of costs incurred. However, these allocations were not necessarily indicative of the cost had the Company been a stand-alone entity or of future services.

Settlement of Related Party Receivable

On December 31, 2025, the Company entered into a Stock Purchase and Satisfaction of Debt Agreement with HCMC, pursuant to which the Company settled an outstanding $4.0 million intercompany receivable by accepting 43,889,786,222 shares of HCMC common stock. Upon settlement, the related party receivable was derecognized and the Company recorded an investment in HCMC accounted for under the equity method (see Note 11 - Investment In Other Entity-Related Party). As of December 31, 2025, the due from related party balance was $0.

Subsequent Activity – Due from Related Party

As of June 30, 2026, the Company had a due from related party balance of approximately $0.2 million, representing temporary advances to HCMC for transition purposes under the Transition Services Agreement. On August 10, 2026, in connection with the termination of the TSA effective January 1, 2026, this balance will be settled in the normal course of business.

Agreements with HCMC

The Company entered into several agreements with the Former Parent that, among other things, effect the separation and govern the relationship of the parties following the Spin-Off. These agreements include:

Under the terms of the Transition Services Agreement, HCMC provided to the Company, on a transitional basis, certain services or functions, including information technology, accounting, human resources, and payroll functions. On August 10, 2026, the TSA was terminated with an effective date of January 1, 2026. Consideration and costs for the transition services were determined using several billing methodologies as described in the agreements, including customary billing and pass-through billing. Costs for transition services provided by the former parent are recorded within the Condensed Consolidated Statements of Operations based on the nature of the services.

Termination of Transition Services Agreement

On August 10, 2026, the Company and HCMC entered into a Termination Agreement, which formally terminated the TSA effective as of January 1, 2026. The Termination Agreement provides for a mutual release of any liability or obligation under the TSA from and after the effective date. As a result, no further services will be provided by HCMC to the Company under the TSA, and all outstanding balances thereunder will be settled in the normal course of business.

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 six months ended June 30, 2026, the Company converted approximately $5,075,986 of outstanding principal and $187,726 of accrued interest under its July 18, 2024 Loan and Security Agreement into approximately 14,985,076 shares of Class A common stock pursuant to several exchange agreements. As of June 30, 2026, approximately $2,424,014 in principal remains outstanding under the Loan and Security Agreement. See Note 13 – Debt 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 June 30, 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 June 30, 2026, no HCWC Preferred Stock had been 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.

For the three months ended June 30, 2026 and 2025, approximately $301,000 and $0 of stock-based compensation expense related to these awards were recognized in the accompanying condensed consolidated financial statements. For the six months ended June 30, 2026 and 2025, approximately $537,000 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 stock from January 1, 2025 through June 30, 2026:

As of June 30, 2026, there was approximately $1.8 million of total unrecognized compensation cost related to unvested restricted stock awards granted under the 2024 Equity Incentive Plan.

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 June 30, 2026,29,892,378 shares of class A common stock and 5,250 shares of Series A Convertible Preferred Stock were outstanding.

NOTE 17. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

On July 31, 2024, one of the Company’s subsidiaries, Healthy Choice Markets IV, LLC, was served with a lawsuit filed by a former employee alleging violations of state and federal wage and hour laws. The Company successfully resolved the complaint for a $5,000 settlement fee in September 2025. The Company recognized $5,000 in litigation settlement expense in the Condensed Consolidated Statements of Operations.

From time to time the Company is involved in legal proceedings arising in the ordinary course of our business. We believe that there is no other litigation pending that is likely to have, individually or in the aggregate, a material adverse effect on our financial condition or results of operations as of June 30, 2026. With respect to legal costs, we record such costs as incurred.

Merger Agreement

On May 26, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Host Digital Infrastructure LLC (“Host Digital”) and its wholly owned subsidiary, Healthy Choice Wellness II Corp., pursuant to which Healthy Choice Wellness II Corp. will merge with and into Host Digital, with Host Digital surviving as a wholly owned subsidiary of the Company (the “Merger”). The Merger is subject to the satisfaction or waiver of customary closing conditions, including approval by the Company’s stockholders. As of the date of these financial statements, the Merger had not yet been completed. See Note 18 – Subsequent Events for additional information.

NOTE 18. SUBSEQUENT EVENTS

In accordance with FASB ASC 855-10, Subsequent Events—Overall, the Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were available to be issued. Based upon this review, the Company identified the following material subsequent events.

On May 26, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Healthy Choice Wellness II Corp., a wholly owned subsidiary of HCWC (“Merger Sub”), and Host Digital Infrastructure LLC (“Host Digital”). The Merger Agreement provides for the merger of Merger Sub with and into Host Digital, with Host Digital surviving as a wholly owned subsidiary of HCWC (the “Merger”). On July 27, 2026, the SEC informed the Company that it had completed its review of the Company’s preliminary proxy statement filed in connection with the Merger and had no comments. On August 6, 2026, the Company filed its definitive proxy statement with the SEC in connection with the special meeting of stockholders to vote on the Merger. The special meeting of stockholders is expected to be held in the third quarter of 2026.

On July 24, 2026, the Board of Directors approved the First Amendment to the Second Amended and Restated Certificate of Designations of the Company’s Series A Convertible Preferred Stock (“Series A Stock”), which increased the number of authorized Series A Preferred Shares from 5,250 to 7,000. The amendment was filed with the Secretary of State of the State of Delawareon July 31, 2026.

On August 6, 2026, the Company entered into the First Amendment to the Amended and Restated Securities Purchase Agreement (the “SPA Amendment”) with four investors, pursuant to which the Company agreed to issue 1,313 shares of its Series A Convertible Preferred Stock in exchange for the waiver by the investors of certain rights to participate in future equity offerings of the Company. The Shares are convertible into 951,087 shares of the Company’s Class A Common Stock at a conversion price of $1.38 per share. The issuance of the Shares and the shares of Class A Common Stock issuable upon conversion thereof were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D thereunder.

On August 7, 2026, holders of the Company’s outstanding promissory note under the Loan and Security Agreement dated July 18, 2024 elected to convert $692,671 of outstanding principal into 2,565,450 shares of the Company’s Class A common stock, pursuant to the Exchange Agreement dated May 28, 2026. The conversion was effected at a contractual conversion price of approximately $0.27 per share. Upon this conversion, all remaining conversion rights under the May 28, 2026 Exchange Agreement have been fully satisfied, and no further shares remain issuable thereunder. Following this transaction, approximately $2.1 million in principal and accrued interests remains outstanding under the Loan and Security Agreement.

On August 7, 2026, subsequent to June 30, 2026, Host Digital Infrastructure LLC (“Host Digital”), which is expected to become a wholly owned subsidiary of the Company upon completion of the Merger described above, entered into a 15-year lease with one of the world’s largest privately held cloud infrastructure companies. Under the lease, Host Digital will provide 43 megawatts (“MW”) of critical information technology load capacity at its existing data center facility in northeast Oklahoma. The lease is structured on a take-or-pay basis and includes renewal options and annual rent escalators.

On August 10, 2026, the Company and HCMC entered into a Termination Agreement, which formally terminated the Transition Services Agreement effective as of January 1, 2026. The Termination Agreement provides for a mutual release of any liability or obligation under the TSA from and after the effective date. As a result, no further services will be provided by HCMC to the Company under the TSA, and all outstanding balances thereunder will be settled in the normal course of business. See Note 15 – Related Party Transactions for additional information.

On August 11, 2026, the Company entered into a Sales Agreement (the ‘Sales Agreement’) with Cantor Fitzgerald & Co. (‘Cantor’), pursuant to which the Company may offer and sell from time to time shares of its Class A common stock through its At-The-Market (ATM) offering program. The Sales Agreement will become effective upon the satisfaction of customary closing conditions. As of the date of this filing, these conditions have not yet been satisfied, and no shares have been sold under the Sales Agreement.