Healthier Choices Management Corp. (Form: 8-K/A, Received: 12/28/2022 17:10:22)

GREEN’S NATURAL FOODS, INC., DEAN’S NATURAL FOOD MARKET, INC., DEAN’S NATURAL FOOD MARKET OF SHREWSBURY, INC., DEAN’S NATURAL FOOD MARKET OF BASKING RIDGE, LLC, DEAN’S NATURAL FOOD MARKET OF CHESTER, LLC, AND DEAN’S NATURAL HOLDINGS, LLC

AUDITED COMBINED FINANCIAL STATEMENTS

As of and for the year ended December 31, 2021

TABLE OF CONTENTS

	Page
INDEPENDENT AUDITOR’S REPORT	1
FINANCIAL STATEMENTS
Combined Balance Sheet	4
Combined Statement of Income	5
Combined Statement of Changes in Shareholder’s/Member’s Equity	6
Combined Statement of Cash Flows	7
Notes to the Combined Financial Statements	8

INDEPENDENT AUDITOR’S REPORT

To the Shareholders and Members of:

Green’s Natural Foods, Inc.

Dean’s Natural Food Market, Inc.

Dean’s Natural Food Market of Shrewsbury, Inc.

Dean’s Natural Food Market of Basking Ridge, LLC

Dean’s Natural Food Market of Chester, LLC

Dean’s Natural Holdings, LLC

Report on the Audit of the Combined Financial Statements

Qualified Opinion

We have audited the combined financial statements of Green’s Natural Foods, Inc. (an S-Corporation and a wholly owned subsidiary of Hudson Equity Partners, LLC), Dean’s Natural Food Market, Inc. (a C-Corporation and a wholly owned subsidiary of Red Oak Equity Partners, LLC), Dean’s Natural Food Market of Shrewsbury, Inc., (an S-Corporation and a wholly owned subsidiary of Red Oak Equity Partners, LLC), Dean’s Natural Food Market of Basking Ridge, LLC (a single-member LLC and a wholly owned subsidiary of Red Oak Equity Partners, LLC), Dean’s Natural Food Market of Chester, LLC (a single-member LLC and a wholly owned subsidiary of Red Oak Equity Partners, LLC) and Dean’s Natural Holdings, LLC (a single-member LLC and a wholly owned subsidiary of Red Oak Equity Partners, LLC) (collectively, the “Company”), which comprise the combined balance sheet as of December 31, 2021, and the related combined statements of income, changes in shareholder’s/member’s equity, and cash flows for the year then ended, and the related notes to the combined financial statements.

In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion section of our report, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Qualified Opinion

During 2020, Green’s Natural Foods, Inc. wrote off its remaining intangible assets balance of $298,482. We were unable to obtain sufficient appropriate audit evidence to substantiate the carrying amount of these intangible assets immediately prior to their write off because management could not locate the necessary records to support these intangible assets. Consequently, we were unable to substantiate the assets or the write off.

In addition, as discussed in Note 2, these combined financial statements include the operations of the New Jersey stores for the year ended December 31, 2021, even though they were not acquired by the owners of Red Oak Equity Partners, LLC until August 16, 2021, to satisfy the requirements of the U.S. Securities and Exchange Commission as they relate to a significant acquisition by a public company (Healthier Choices Management Corp.). As a result, the New Jersey stores were not under common control for the entire year ended December 31, 2021. Therefore, in our opinion, activity related to the New Jersey stores would not be reported and combined in these combined financial statements for the period through August 16, 2021, in accordance with Accounting Principles Generally Accepted in the United States of America. If this activity was excluded, the income statement and cash flows would be adjusted accordingly.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Subsequent Event

As discussed in Note 1 to the combined financial statements, on October 14, 2022, the Company sold all of its operations by way of an Asset Purchase Agreement to Healthy Choice Markets IV, LLC.

Responsibilities of Management for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the combined financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company ability to continue as a going concern for one year after the date the combined financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Combined Financial Statements

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than from one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.

In performing an audit in accordance with GAAS, we:

•	Exercise professional judgment and maintain professional skepticism throughout the audit.

•

Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements.

•	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

•	Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements.

•	Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ UHY LLP

Hudson, New York
December 28, 2022

COMBINED BALANCE SHEET
December 31, 2021

COMBINED STATEMENT OF INCOME
For the year ended December 31, 2021

COMBINED STATEMENT OF CHANGES IN SHAREHOLDER’S/MEMBER’S EQUITY (LOSS)
For the year ended December 31, 2021

COMBINED STATEMENT OF CASH FLOWS
For the year ended December 31, 2021

NOTE 1 – ORGANIZATION

Organization

Green’s Natural Foods, Inc., Dean’s Natural Food Market, Inc., Dean’s Natural Food Market of Shrewsbury, Inc., Dean’s Natural Food Market of Basking Ridge, LLC, Dean’s Natural Food Market of Chester, LLC, and Dean’s Natural Holdings, LLC (collectively the “Company”) operate organic and all-natural food grocery stores. The Company has eight grocery store locations in Mount Kisco, Eastchester, Briarcliff, and Somers, New York as well as Basking Ridge, Chester, Shrewsbury, and Ocean, New Jersey.

Green’s Natural Foods, Inc, (the “New York locations”) was acquired in the form of a stock sale by Hudson Equity Partners, LLC on December 30, 2020.

Dean’s Natural Food Market, Inc., Dean’s Natural Food Market of Shrewsbury, Inc., Dean’s Natural Food Market of Basking Ridge, LLC, Dean’s Natural Food Market of Chester, LLC, and Dean’s Natural Holdings, LLC (the “New Jersey locations”) were owned by Dean Nelson until acquired in the form of a stock sale by Red Oak Equity Partners, LLC on August 16, 2021.

The same two individuals own 100% of Hudson Equity Partners, LLC and Red Oak Equity Partners, LLC. The New York stores were managed the entire year by these owners and beginning August 16, 2021, the New Jersey stores were managed by these owners.

On October 14, 2022, the Company’s assets were acquired by Healthy Choice Market IV, LLC, a wholly owned subsidiary of Healthier Choices Management Corp.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Combination

The Company’s combined financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The combined financial statements include the accounts of all the entities under common control. All intercompany accounts have been eliminated in combination.

These combined financial statements are presented as if the New Jersey entities were owned by Red Oak Equity Partners, LLC as of January 1, 2021, and reflect the results of operations and cash flows for the year ended December 31, 2021. This presentation is to satisfy the requirements of the U.S. Securities and Exchange Commission as they relate to a significant acquisition by a public company (Healthier Choices Management Corp.).

Push Down Accounting

The Company has chosen not to apply “push down” accounting in accordance with ASC 805-50-25-4 for the business combinations by Hudson Equity Partners, LLC and Red Oak Equity Partners, LLC of the New York and New Jersey entities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all short-term investment securities purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents include monies held by the Company’s credit card processors. The funds are held by the merchant credit card processors pending satisfaction of their hold requirements and expiration of charge backs/refunds circumstances.

Revenue Recognition

Revenues from product sales, net of promotional discounts, manufacturer coupons and rebates, return allowances, and sales and consumption taxes, 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 all retail purchases. Return allowances, which reduce revenue, are estimated using historical experience.

Accounts Receivable, Contract Assets and Contract Liabilities

Accounts receivable 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 are distinguished from accounts receivable as performance obligations remain before claims to consideration become unconditional. Contract liabilities are recorded when customers transfer consideration in advance of delivery of products, which the Company records for all 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. Most performance obligations are satisfied simultaneously as the Company exchanges products for customer payment. Exceptions include gift cards and loyalty rewards, for which the Company has a performance obligation to deliver products 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 breakage based on gift card and loyalty reward program term limits.

The Company’s breakage policy is twelve months for gift cards and twelve months for loyalty rewards. Loyalty rewards are earned at 1% on qualifying purchases and the reward functions as an allocation of transaction price from the period earned by the customer to the period the performance obligation is satisfied by the Company. As such, all contract liabilities are expected to be recognized within a twenty-four-month period.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable, Contract Assets and Contract Liabilities (Continued)

A summary of the contract liabilities activity for the year ended December 31, 2021 is presented below:

Income Taxes

S-Corporation

Dean’s Natural Food Market of Shrewsbury, Inc. has elected to be treated as an S Corporation for federal and state income tax purposes.

Green’s Natural Foods, Inc. was treated as an S Corporation until December 30, 2020, when it was purchased and became a Qualified Subsidiary under Hudson Equity Partners, LLC.

No provision has been made for federal income taxes since S Corporations are not taxable entities. Individual partners/shareholders report their share of taxable income or loss in their personal tax returns.

C-Corporation

Dean’s Natural Food Market, Inc. is a C Corporation for federal income tax purposes.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax bases, and tax operating loss and credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in 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 income in the period that includes the enactment date. Deferred tax assets are subject to valuation allowances if, based on all available evidence, management determines that it is more likely than not that some position or all of the deferred tax assets and liabilities will not be realized. The financial impact of Dean’s Natural Food Market, Inc. deferred and current income taxes is immaterial as of and for the year ended December 31, 2021.

Limited Liability Companies

Dean’s Natural Food Market of Basking Ridge, LLC, Dean’s Natural Food Market of Chester, LLC, and Dean’s Natural Holdings, LLC have elected to be treated as single-member limited liability companies for federal and state income tax purposes with all income tax liabilities and/or benefits of the entities being passed through to its members. As such, there is no recognition of federal or state income taxes for each of these entities. Any uncertain tax position taken by the member is not an uncertain position of the entities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes (Continued)

In accordance with the LLC agreements, the term of the Company is indefinite with termination determined by the Member. The LLC agreements indicate that the Member shall not have any liability for obligations of the Company, except to the extent expressly mandated by law.

The Company has evaluated any uncertain tax positions and related income tax contingencies and determined uncertain positions, if any, are not material to the financial statements, according to FASB ASC 740. Penalties and interest assessed by income taxing authorities are included in operating expenses, if incurred. None of the Company’s current returns are under examination.

Inventories

Inventories are stated at average cost. If the cost of inventories exceeds their net realizable value, adjustments are recorded to write down excess inventory value to 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.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets. Expenditures for maintenance and repairs and minor renewals are charged to expense; betterments and major renewals are capitalized. Leasehold improvements are amortized over the lesser of the lease terms or the assets’ useful lives. Upon retirement or sale of assets, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to income.

Advertising Costs

The Company expenses advertising costs as they are incurred. They are presented as a component of store operating expenses. Advertising costs were $68,923 for the year ended December 31, 2021.

Retirement Plan

The Company maintains two 401(k) plans. Under the terms of the 401(k) Plan, the employer may make up to 4% matching contributions. The plan will follow the Safe Harbor Cash or Deferred Arrangement (CODA) in which a minimum contribution plan of 4% of salaries must be made by the Company each pay period. Plan contributions were $30,560 for the year ended December 31, 2021.

Presentation of Sales Tax

The States of New York and New Jersey impose sales taxes on all of the Company’s sales to nonexempt customers. The Company collects sales taxes from customers and remits the amounts to the states. The Company’s accounting policy is to exclude the tax collected and remitted to the State from revenues and expenses with the exception of excise taxes paid on purchases.

Subsequent Events

Subsequent events have been evaluated through December 28, 2022, which is the date the financial statements were available to be issued.

NOTE 3 – CONCENTRATION OF CREDIT AND MARKET RISK

Financial instruments that potentially expose the Company to concentration of credit and market risk consist primarily of cash equivalents and receivables. Cash is maintained at Federal Deposit Insurance Corporation insured financial institutions and credit exposure is limited to any one institution. As of December 31, 2021, cash and cash equivalents were in excess of FDIC insurance coverage by approximately $219,600.

The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its receivables and establishes an allowance for doubtful accounts, based on a history of past write-offs, collections, and current credit conditions. Accounts are written off as uncollectible at the time management determines that collections are unlikely. Accounts receivable are un-collateralized.

The Company has a concentration with two of its vendors, UNFI and Albert’s Organics, related to the purchase of inventory. Approximately 48% and 37% of purchases respectively were made with these vendors during the year ended December 31, 2021.

Accounts payable consists of balances due to vendors for inventory the Company sells in its stores as well as services rendered to the Company on or before the year-end which have not been paid as of the year-end. At December 31, 2021, vendor Albert’s Organics represented 10.5% and vendor UNFI represented 24.2% of accounts payable.

NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment is comprised of the following at December 31, 2021, and estimated useful lives of the related assets are as follows:

Depreciation expense amounted to $430,083 for the year ended December 31, 2021.

NOTE 5 – DEBT

During 2021, the Company applied for and received a loan from its bank in the amount of $817,927 through the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”). In November 2021, the loan, including principal and interest was forgiven and considered repaid in full. The balance has been recorded as forgiveness of paycheck protection program loan for the year ended December 31, 2021.

NOTE 5 – DEBT (Continued)

According to the rules of the SBA, the Company is required to retain PPP loan documentation for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request.

Should the SBA conduct such a review and reject all or some of the Company’s judgements pertaining to satisfying PPP loan eligibility or forgiveness conditions, the Company may be required to adjust previously reported amounts and disclosures in the financial statements.

As of December 31, 2020, the Company had two bank notes payable for $36,773 and $50,593, respectively. These notes were paid off in full during the year ended December 31, 2021.

As of December 31, 2020, the Company owed $200,000 to a bank under two lines of Credit. During 2021, these lines were paid in full, matured, and were not renewed.

The $109,108 note payable as of December 31, 2021 relates to the financing of leasehold improvements at the store in Somers, New Jersey and matures as follows:

NOTE 6 – LEASES

The Company leased four retail locations in the State of New Jersey (NJ) and four in the State of New York (NY). The leases were as follows:

•

Dean’s Natural Food Market, Inc. leased retail space in Ocean, NJ which runs from August 16, 2021 through August 2031. The minimum monthly payments are $17,460 for the first 5 years of the lease and $18,333 for the second 5 years. The lease is a triple net lease where the Company is responsible for all operating costs for the space.

•	Dean’s Natural Food Market of Shrewsbury, Inc. leased retail space in Shrewsbury, NJ originally dated May 28, 2003 through April 2018. The lease was renewed for five years on March 30, 2018.

•

Dean’s Natural Food Market of Basking Ridge, LLC leased retail space in Basking Ridge, NJ from May 2012 through April 2018. The lease was renewed for another five-year term through April 2023 and an option to renew for two additional five-year terms. The Company may also be required to make additional rent payments related to utilities, common area charges, real estate taxes, and other governmental charges.

NOTE 6 – LEASES (Continued)

•

Dean’s Natural Food Market of Chester, LLC leased retail space in Chester, NJ from February 2016 through January 2026, with the option for 2 five-year renewal terms. The Company may also be required to make additional rent payments related to utilities, common area charges, real estate taxes, and other governmental charges. The landlord agreed to pay an “improvement allowance” of up to $203,359. Such allowance reduced the cost of leasehold improvements paid by the Company. Under ASC 840-20-25-6, the lease incentive should be recognized as reductions to rental expense on a straight-line basis over the term of the lease. As of December 31, 2021, the remaining unamortized incentive was $128,794.

•	The lease for the Eastchester, NY location, originally dated February 1994 through November 2003 was renewed through November 2009 and again through November 2014. In August 2014, the lease was renewed for an additional ten-year term through November 2024.

•	The lease for the Briarcliff Manor, NY location, originally dated August 20, 2003, expired September 30, 2018. The lease was renewed through September 30, 2023. The Company may be required to pay additional rent and is responsible for all general operating costs.

•	The lease for the Mount Kisco, NY location, originally dated January 30, 1997, expired October 2007 and was renewed through July 31, 2022 and again through July 31, 2027. The Company may be required to pay additional rent and is responsible for all general operating costs.

•	The lease for the Somers, NY location, dated September 20, 2018 expires five years after the Term Commencement Date, with the option to renew for an additional five years. Monthly rent payments are $10,300 for the first three years and increase 3% every other year through expiration.

•	The Ocean Store was owned by Dean Nelson prior to its acquisition by Red Oak Equity Partners, LLC in August 2021. There was no formal lease agreement because of the related party relationship.

Future minimum payments under these leases are as follows:

Lease expense was $1,830,802 for the year ended December 31, 2021.

NOTE 7 – NEW JERSEY ACQUISITION

On August 16, 2021, Red Oak Equity Partners, LLC purchased all issued and outstanding capital stock and membership interest, as applicable, of Dean’s Natural Food Market, Inc., Dean’s Natural Food Market of Shrewsbury, Inc., Dean’s Natural Food Market of Basking Ridge, LLC, Dean’s Natural Food Market of Chester, LLC, and Dean’s Natural Holdings, LLC for a total of $2,500,000. The purchase price included cash consideration of $2,250,000 and a promissory note of $250,000 payable to the seller at a fixed interest rate of 5% and equal monthly payments through February 2026.

NOTE 8 – RELATED PARTY TRANSACTIONS

As of December 31, 2020, the Company had two notes payable to its officers for $543,750 and $56,250, respectively. During the year ended December 31, 2021, the loans were paid in full.

Rent expense of $114,750 was paid to Dean Nelson prior to August 16, 2021.

During the year ended December 31, 2021, the Company paid $216,792 in consulting fees to another company owned by a related party.

NOTE 9 – STOCK/UNITS

The Company has authorized and issued 2,200 shares of common stock. Of these shares, 2,000 are at $.001 par value with the remaining at no par. The limited liability companies are single member limited liability companies with no units issued and outstanding.

NOTE 10 – Commitments

The Company has an agreement with a food distributor that runs from November 24, 2021 to March 11, 2025 where 90% of the products sold at the New York Stores must be purchased from that distributor.

HEALTHIER CHOICES MANAGEMENT CORP. ("HCMC”) UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The accompanying unaudited pro forma condensed combined financial statements give effect to events that are (1) directly attributable to the following acquisition: (2) factually supportable, and with respect to the pro forma condensed combined statements of operations, (3) expected to have a continuing impact on the combined results following the business acquisition. The unaudited pro forma financial information considers the aggregation of financial statement impacts for the following transactions, referred to in this document as "the acquisition transaction".

Healthier Choices Management Corp. ("HCMC”), through its wholly owned subsidiary, Healthy Choice Markets IV, LLC (the "Company”), entered into an Asset Purchase Agreement (the "Purchase Agreement”), effective as of October 12, 2022, with Dean’s Natural Food Market of Shrewsbury, Inc., a New Jersey corporation, Green’s Natural Foods, Inc., a Delaware corporation, Dean’s Natural Food Market of Chester, LLC, a New Jersey limited liability company, Dean’s Natural Food Market of Basking Ridge, LLC, a New Jersey limited liability company, and Dean’s Natural Food Market, Inc., a New Jersey corporation (collectively, the "Sellers”), and shareholders of the Sellers. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities of an organic and natural health food and vitamin chain with eight store locations in New York and northern and central New Jersey (the "Stores”). The cash paid under the Purchase Agreement is approximately $5,000,000, with an additional $142,000 cash paid for inventory at closing. In addition, the Company accepts $3,000,000 financing from sellers, and will assume all lease obligations for the Stores. The Purchase Agreement contains customary representations, warranties, and covenants of the Sellers and the Company. The Purchase Agreement also includes restrictive covenants from the Sellers for the benefit of the Company. The transaction closed on October 14, 2022. There is no material relationship between the Company, on the one hand, and Sellers, on the other hand, other than in respect of the Purchase Agreement. A copy of the Purchase Agreement is filed as Exhibit 2.1 to this Current Report on Form8-K and is incorporated herein by reference. The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the full text of such Purchase Agreement.

The business combinations of the Company and of the Sellers and Stores (taken together “Green’s Natural Foods”) were accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer for accounting purposes, HCMC estimated the fair value of the Green’s Natural Foods assets acquired and liabilities assumed and conformed the accounting policies to its own accounting policies.

The unaudited pro forma condensed combined balance sheet as of December 31, 2021, gives effect only to the acquisition of certain net business assets of Green’s Natural Foods and is included in HCMC’s consolidated Balance Sheet as of that date. The unaudited pro forma condensed combined statements of operations for the year-ended December 31, 2021, give effect to the acquisition of certain net business assets of Green’s Natural Foods.

The unaudited pro forma condensed combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisitions occurred on the dates indicated. They also do not reflect the realization of any expected cost savings from the acquisition transactions or planned cost savings initiatives following the completion of the transaction and may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

HEALTHIER CHOICES MANAGEMENT CORP.

PROFORMA CONDENSED COMBINED BALANCESHEET DECEMBER 31, 2021

(UNAUDITED)

	December 31, 2021
	HCMC		Green's Natural Foods		Pro-Forma Adjustments		Pro-Forma HCMC
TOTAL CURRENT ASSETS	$	28,773,539	$	2,700,044	$	(919,703)	$	30,553,880

TOTAL ASSETS		34,443,487		4,684,120		11,341,770		50,469,377

TOTAL CURRENT LIABILITIES		2,523,994		2,612,815		1,152,912		6,289,721

TOTAL LIABILITIES		5,209,830		2,694,406		8,051,682		15,955,918

Stockholder's Equity		29,233,657		1,989,714		3,290,088		34,513,459
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	34,443,487	$	4,684,120	$	11,341,770	$	50,469,377

See accompanying notes to the Unaudited Condensed Combined Financial Statements.

HEALTHIER CHOICES MANAGEMENT CORP.

PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

(UNAUDITED)

	HCMC		Green's Natural Foods		Pro-Forma Adjustments		Pro-Forma HCMC
SALES:
Vapor sales, net	$	2,084,813	$	-	$	-	$	2,084,813
Grocery sales, net		11,235,041		35,246,103				46,481,144
Total Sales		13,319,854		35,246,103		-		48,565,957
Cost of sales vapor		839,599		-				839,599
Cost of sales grocery		7,187,701		21,163,894		-		28,351,595
GROSS PROFIT		5,292,554		14,082,209		-		19,374,763

Total operating expenses		10,033,048		13,838,220		788,618		24,659,886
Operating loss		(4,740,494)		243,989		(788,618)		(5,285,123)

OTHER INCOME (EXPENSES):
Gain on debt settlements		767,930		817,927		-		1,585,857
Other income (expenses), net		(26)		418,147		-		418,121
Interest expense, net		(65,281)		(19,425)		-		(84,706)
Gain (loss) on investment		412		-		-		412
Total other income (expense), net		703,035		1,216,649		-		1,919,684

NET INCOME (LOSS)	$	(4,037,459)	$	1,460,638	$	(788,618)	$	(3,365,439)

See accompanying notes to the Unaudited Condensed Combined Financial Statements.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Basis of Presentation

The following is a brief description of the amounts presented in each of the column headings for each of the unaudited pro forma condensed combined balance sheets and statements of operations, which should be read in conjunction with the Healthier Choices Management Corp. historical consolidated financial statements and accompanying notes included in HCMC's Annual Report on Form 10-K for the year ended December 31, 2021.

Healthier Choices Management Corp.

The columns reflect the audited balance sheet of HCMC as of December 31, 2021, and historical audited operating results of HCMC for the year ended December 31, 2021.

Green’s Natural Foods Acquisition

The columns reflect the audited balance sheet of Green’s Natural Foods as of December 31, 2021, and historical audited operating results of Green’s Natural Foods for the pre-acquisition periods January 1, 2021, to December 31, 2021, which were derived from the audited financial statements of Green’s Natural Foods presented in Exhibit 99.1.

Pro Forma Adjustments

This column on the pro forma statements of operations reflects an estimate of the incremental impact for the year ended December 31, 2021.

The pro forma adjustments column on the combined balance sheet as of December 31, 2021, include the estimated fair values of the assets acquired and liabilities assumed from Green’s Natural Foods as of the date of the acquisition. The pro forma adjustments column on the statement of operation includes transaction cost, such as acquisition related legal and professional fees.

2. Acquisition of Green’s Natural Foods

Healthier Choices Management Corp. ("HCMC”), through its wholly owned subsidiary, Healthy Choice Markets IV, LLC (the "Company”), entered into an Asset Purchase Agreement (the "Purchase Agreement”),effective as of October 12, 2022, with Dean’s Natural Food Market of Shrewsbury, Inc., a New Jersey corporation, Green’s Natural Foods, Inc., a Delaware corporation, Dean’s Natural Food Market of Chester, LLC, a New Jersey limited liability company, Dean’s Natural Food Market of Basking Ridge, LLC, a New Jersey limited liability company, and Dean’s Natural Food Market, Inc., a New Jersey corporation (collectively, the "Sellers”), and shareholders of the Sellers. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities of an organic and natural health food and vitamin chain with eight store locations in New York and northern and central New Jersey (the "Stores”). The cash purchase price under the Purchase Agreement is approximately $5,000,000, with an additional $142,000 paid for inventory at closing. In addition, the Company accepts $3,000,000 financing from sellers, and will assume all lease obligations for the Stores. The Purchase Agreement contains customary representations, warranties, and covenants of the Sellers and the Company. The Purchase Agreement also includes restrictive covenants from the Sellers for the benefit of the Company. The transaction closed on October 14, 2022. There is no material relationship between the Company, on the one hand, and Sellers, on the other hand, other than in respect of the Purchase Agreement.

The Purchase Agreement contains customary representations, warranties, and covenants of the Sellers and the Company. The Purchase Agreement also includes restrictive covenants from the Sellers for the benefit of the Company. The transaction closed on October 14, 2022. There is no material relationship between the Company, on the one hand, and Sellers, on the other hand, other than in respect of the Purchase Agreement.

The acquisition of Green’s Natural Foods is a considered significant as defined under Rule 3-05 of Regulation S-X. The audited financial statements of Green’s Natural Foods for the year ended December 31, 2021, are included in this Amended Form 8-K.

The purchase consideration paid to the Seller was allocated to the preliminary fair value of the net tangible assets acquired, with the remainder recorded as goodwill on a preliminary basis. Goodwill recognized from the transaction mainly represented the expected operational synergies upon acquisition of the combined entity and intangibles not qualifying for separate recognition. Goodwill is not expected to be deductible for income tax purposes in the tax jurisdiction of the acquired business. The preliminary purchase price allocation was based, in part, on management’s knowledge of Green’s Natural Foods business and the results of a third-party appraisal commissioned by management. The Company also incurred $788,618 of transaction costs in the purchase of Green’s Natural Foods, which are not presented in the accompanying audited condensed combined financial statements as these costs do not have a continuing impact on the Company’s operating results.

Preliminary Purchase Price Allocation Based On Estimated Fair Values Of The Net Assets Acquired
	October 14, 2022
Purchase Consideration
Cash Consideration paid	$ 5,142,000
Promissory note for Green's Natural Foods transaction financing	3,000,000
Contingent consideration issued to Green's Natural Foods seller	1,108,000
Total Purchase Consideration	$ 9,250,000

Purchase price allocation
Inventory	$ 1,643,000
Property and equipment	1,375,000
Intangible assets	3,759,000
Right of use asset - Operating lease	6,427,366
Other liabilities	(211,000)
Operating lease liability	(6,427,366)
Goodwill	2,684,000
Net assets acquired	$ 9,250,000

Finite-lived intangible assets
Trade Names/Trademarks	$ 1,133,000
Customer Relationships	1,611,000
Non-Compete Agreement	1,015,000
Total intangible assets	$ 3,759,000

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the accompanying pro forma balance sheets and statements of operations. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in fair values of long-lived assets, (2) changes in the allocation of purchase consideration in excess of fair value to separately identifiable intangible assets and (3) other changes to assets and liabilities.

Delaware		001-36469		84-1070932
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	HCMC	OTC Pink Marketplace

Exhibit Number		Description
99.1		Audited Financial Statements of the Acquired Businesses as of December 31, 2021.
99.2		Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet of HCMC as of December 31, 2021, and the Unaudited Pro Forma Combined Condensed Consolidated Statements of Income of HCMC for the year ended December 31, 2021.

	HEALTHIER CHOICES MANAGEMENT CORP.

Date: December 28, 2022	By:	/s/ Jeffrey E. Holman
		Jeffrey E. Holman
		Chief Executive Officer