HEALTHY CHOICE WELLNESS CORP.
For the period ended Jun 30, 2026. Filed Aug 14, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 14, 2026
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ITEM 4. Controls and Procedures
We are required to report under Section 404(a) of Sarbanes-Oxley regarding the effectiveness of our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Our management, including our Principal Executive Officer and Principal Financial Officer, carried out an evaluation on internal controls as of June 30, 2026 in regard to the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. Based on the evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was ineffective as of June 30, 2026 and noted the material weaknesses as follows:
| ● | Management does not evidence independent preparer and reviewer of journal entries, to demonstrate adequate segregation of duties, and the precision of the review of journal entries. |
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| ● | Ineffective design and implementation over Information Technology General Controls (“ITGCs”): |
| (a) | Multiple individuals in the accounting software system have virtually unlimited access to the accounting application and to the inventory point of sale applications. As such, such individuals can post journal entries and change pricing, which poses a risk that duties amongst employees with incompatible roles are not adequately segregated. |
| (b) | Ineffective design, implementation and operation of controls over logical user access, physical security, change management, cyber security, and vendor management. The Company should have had controls for: |
| (i) | Periodic review of access rights for networks and applications on a defined periodic basis, at least once per year; |
| (ii) | Ensuring adequate physical safeguards and environmental controls over the Company’s servers at all Company locations, including stores; |
| (iii) | Performing a cybersecurity assessment, training all personnel, performing phishing exercises, obtaining cybersecurity insurance; and performing third party audits when appropriate; |
| (iv) | IT program and data changes affecting the Company’s financial IT applications and underlying accounting records, should be identified, tested, authorized and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate. |
| (v) | Obtaining and reviewing third party service provider SOC reports, and; |
| (vi) | Review of Service-Level Agreements (SLAs) for all IT service relationships across the Company to ensure active SLAs are in place and enforced. |
| ● | Lack of Formal Related Party Transaction Policy: The Company did not maintain a formal written policy and related controls for the timely identification, evaluation, and accounting treatment of transactions with related parties. |
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| ● | Ineffective Controls over Statement of Cash Flows Preparation: Controls over the preparation and review of the statement of cash flows were ineffective, resulting in the misclassification of cash flows related to advances made to a related party. |
| ● | Ineffective effective controls over the accounting for stock-based compensation, specifically related to the timing of the accelerated vesting recognition for Restricted Stock Awards (RSAs) as it pertains to the contemplated merger transaction. |
Our management concluded that considering internal control deficiencies that, in the aggregate, rise to the level of material weaknesses, we did not maintain effective internal control over financial reporting as of June 30, 2026 based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Planned Remediation
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, management identified material weaknesses in our internal control over financial reporting and initiated an action plan to remediate these deficiencies. During the six months ended June 30, 2026, we continued to execute on this plan. Progress during the quarter included the following:
| ● | Segregation of Duties and Journal Entry Review: During the second quarter of 2026, the Company implemented a new cloud-based accounting and financial management system, Sage Intacct. The Sage Intacct system includes enhanced user access controls, role-based permissions, and segregation of duties functionality designed to prevent any single individual from having the ability to create, approve, and post journal entries without independent review. The Company is in the process of configuring user roles and permissions within the Sage Intacct system to align with the Company’s segregation of duties requirements. Once fully configured and operational, management believes the Sage Intacct system will significantly enhance the Company’s control environment and address the segregation of duties material weakness. However, because the system implementation is ongoing and the related controls have not yet been operating for a sufficient period of time, this material weakness has not yet been fully remediated. The Company expects to complete the configuration and testing of user roles and permissions during the third quarter of 2026. |
| ● | Information Technology General Controls: The Company continued to develop its comprehensive IT control framework. Periodic access rights reviews for networks and applications are underway. Enhanced physical security and environmental controls over servers at all locations have been deployed. The formal cybersecurity assessment is progressing, with mandatory training and phishing exercises being conducted, and cybersecurity insurance has been obtained. Work continues on establishing controls for IT program and data changes affecting financial applications, as well as procedures for reviewing third-party service provider SOC reports and enforcing Service-Level Agreements. |
| ● | Related Party Transactions: The Company is finalizing a formal written policy for the identification, evaluation, approval, and accounting treatment of related party transactions. Implementation of this policy is expected during the third quarter of 2026. |
| ● | Statement of Cash Flows Preparation and Review: Enhanced procedures for the preparation and review of the statement of cash flows, including specific review protocols for related party transactions and other non-routine items, continue to be refined and applied. The Company continues to engage external consultants, as needed, to assist with complex accounting matters and provide independent review of significant transactions. |
We are currently working to improve and simplify our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Controls over Financial Reporting
During the three months ended June 30, 2026, the Company implemented a new Sage accounting system. The Sage system replaced the Company’s prior accounting system and includes enhanced user access controls, role-based permissions, and segregation of duties functionality. As a result of the Sage system implementation, the Company implemented new or modified certain pre-existing internal controls, processes, and procedures. While the Sage system is intended to ultimately improve and enhance business processes and the internal control environment, its implementation is ongoing and related controls are in the process of being configured and tested. Other than these changes and the ongoing remedial efforts described above, there have been no other changes in the Company’s internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting
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