The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements. The terms "we," "us," "our," and the "Company" refer to Healthier Choices Management Corp. and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2, LLC ("Paradise Health and Nutrition"), Healthy Choice Markets 3, LLC ("Mother Earth's Storehouse"), Healthy Choices Markets 3 Real Estate LLC, Healthy Choice Markets IV, LLC ("Green's Natural Foods"), HCMC Intellectual Property Holdings, LLC, Healthy Choice Wellness, LLC, The Vitamin Store, LLC, Healthy U Wholesale, Inc., and The Vape Store, Inc. ("Vape Store"). All intercompany accounts and transactions have been eliminated in consolidation.

Company Overview

Healthier Choices Management Corp. is a holding company focused on providing
consumers with healthier daily choices with respect to nutrition and other
lifestyle alternatives.
Through its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC,
the Company manages and intends to expand on its intellectual property
portfolio.
Through its wholly owned subsidiaries, Healthy Choice Markets, Inc., Healthy
Choice Markets 2, LLC, and Healthy Choice Markets 3, LLC, and Healthy Choice
Markets IV, LLC respectively, the Company operates:
• Ada's Natural Market, a natural and organic grocery store offering fresh
  produce, bulk foods, vitamins and supplements, packaged groceries, meat and
  seafood, deli, baked goods, dairy products, frozen foods, health & beauty
  products and natural household items.

• Paradise Health & Nutrition's three stores that likewise offer fresh produce,


  bulk foods, vitamins and supplements, packaged groceries, meat and seafood,
  deli, baked goods, dairy products, frozen foods, health & beauty products and
  natural household items.

• Mother Earth's Storehouse, a two store organic and health food and vitamin

chain in New York's Hudson Valley, which has been in existence for over 40

years.

• Green's Natural Foods' eight stores in New York and New Jersey, offering a


  selection of 100% organic produce and all-natural, non-GMO groceries & bulk
  foods; a wide selection of local products; an organic juice and smoothie bar; a
  fresh foods department, which offers fresh and healthy "grab & go" foods; a
  full selection of vitamins & supplements; as well as health and beauty products
  (www.Greensnaturalfoods.com).

Through its wholly owned subsidiary, Healthy Choice Wellness, LLC, the Company has licensing agreements for Healthy Choice Wellness Centers at the Casbah Spa and Salon in Fort Lauderdale, FL, and Boston Direct Health in Boston, MA. These centers offer multiple IV drip "cocktails" for clients to choose from that are designed to help boost immunity, fight fatigue and stress, reduce inflammation, enhance weight loss, and efficiently deliver antioxidants and anti-aging mixes. Additionally, there are cocktails for health, beauty, and re-hydration. (www.HealthyChoiceWellness.com).

Through its wholly owned subsidiary, Healthy U Wholesale Inc., the Company sells vitamins and supplements, as well as health, beauty and personal care products on its website www.TheVitaminStore.com. Additionally, the Company markets its patented Q-Unit™ and Q-Cup® technology. Information on these products and the technology is available on the Company's website at www.theQcup.com.



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Liquidity

The unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q have been prepared in conformity with 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. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The Company incurred a loss from operations of approximately $2.0 million for the three months ended March 31, 2023. As of March 31, 2023, cash totaled approximately $19.8 million. The Company expects to continue incurring losses for the foreseeable future but we anticipate that our current cash and additional cash to be generated from operations will be sufficient to cover our projected operating expenses for the foreseeable future. Management does not believe there are any substantial doubts about the Company's ability to continue as a going concern within a year and a day from the issuance of these unaudited consolidated financial statements.

Factors Affecting Our Performance

We believe the following factors affect our performance:

Retail: We believe the operating performance of our retail stores will affect our revenue and financial performance. The Company has four natural and organic groceries and dietary supplement stores located in Florida, as well as ten located in New York and New Jersey. The Company has closed retail vape stores, as management has shifted its retail sales focus to the wholesale and online channel. The adverse industry trends and increasing federal and state regulations that, if implemented, may negatively impact future wholesale and online operations in vapor segment.

Increased Competition: Food retail is a large and competitive industry. Our competition varies and includes national, regional, and local conventional supermarkets, national superstores, alternative food retailers, natural foods stores, smaller specialty stores, and farmers' markets. In addition, we compete with restaurants and other dining options in the food-at-home and food-away-from-home markets. The opening and closing of competitive stores, as well as restaurants and other dining options, in regions where we operate will affect our results. In addition, changing consumer preferences with respect to food choices and to dining out or at home can impact us. We also expect increased product supply and downward pressure on prices to continue and impact our operating results in the future.



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Results of Operations

The following table sets forth our unaudited condensed consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 that is used in the following discussions of our results of operations:



                                      Three Months Ended March 31,      2023 to 2022
                                          2023             2022           Change $
SALES
Vapor sales, net                    $             38   $     249,563   $    (249,525)
Grocery sales, net                        13,559,706       4,798,990        8,760,716
TOTAL SALES, NET                          13,559,744       5,048,553        8,511,191

Cost of sales vapor                              653         111,684        (111,031)
Cost of sales grocery                      8,644,700       2,964,355        5,680,345
GROSS PROFIT                               4,914,391       1,972,514        2,941,877

OPERATING EXPENSES
Selling, general and administrative        6,897,438       3,327,420        3,570,018
LOSS FROM OPERATIONS                     (1,983,047)     (1,354,906)        (628,141)

OTHER INCOME (EXPENSE)
(Loss) gain on investment                    (4,457)           3,514          (7,971)
Other (expense) income, net                 (17,450)          16,874         (34,324)
Interest income                               97,653          16,603           81,050
Total other income (expense), net             75,746          36,991           38,755

NET LOSS                            $    (1,907,301)   $ (1,317,915)   $    (589,386)


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Net vapor sales decreased approximately $0.2 million to $0.0 thousand for the three months ended March 31, 2023 as compared to $0.2 million for the same period in 2022. The decrease in sales is primarily due to closing all retail vape store, as management has shifted its retail sales focus to the wholesale and online channel. The sales for the three months ended March 31, 2023, were significantly impacted by technical issues associated with the processing of credit card payments. Management is continuing to work with the third-party provider to address the matter.

Net grocery sales increased $8.8 million to $13.6 million for the three months ended March 31, 2023 as compared to $4.8 million for the same period in 2022. The $8.8 million increase in grocery sales was primarily due to the acquisition of Mother Earth's Storehouse and Green's Natural Foods.

Vapor cost of goods sold for the three months ended March 31, 2023 and 2022 were $1.0 thousand and $0.1 million, respectively, a decrease of $0.1 million. The decrease is primarily due to closing retail vape stores, as management has shifted its retail sales focus to the wholesale and online channel. Gross (loss) profit was $(0.6) thousand and $0.1 million for three months ended March 31, 2023 and 2022, respectively.

Grocery cost of goods sold for the three months ended March 31, 2023 and 2022 were $8.6 million and $3.0 million, respectively. The increase of $5.6 million is primarily due to the acquisition of Mother Earth's Storehouse and Green's Natural Foods stores. Gross profit was $4.9 million and $1.8 million for the three months ended March 31, 2023 and 2022, respectively. Gross margin as a percentage of sales decreased approximately 2.0% as compared to the same period in prior year as a result of increased inventory shrink and inventory reserve.

Total operating expenses increased $3.6 million to $6.9 million for the three months ended March 31, 2023 compared to $3.3 million for the same period in 2022. The increase is due to the acquisition of Mother Earth's Storehouse and Green's Natural Foods stores, and increases in professional fees of $0.1 million, and stock compensation expense of $0.05 million.

Total net other income increased $39,000 to $76,000 for the three months ended March 31, 2023 compared to $37,000 for the same period in 2022. The increase in net other income is mainly attributable to increase in interest income as a result of an increase in interest rates, offset by increase in remeasurement on contingent liability.

Liquidity and Capital Resources



                                 Three Months Ended March 31,
                                     2023             2022

Net cash (used in) provided by


 Operating activities          $    (2,344,310)   $   (679,629)
 Investing activities                 (109,931)     (5,263,503)
Financing activities                  (742,164)          34,558
                               $    (3,196,405)   $ (5,908,574)


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Our net cash used in operating activities of approximately $2.3 million for the three months ended March 31, 2023 resulted from a net loss of $1.9 million, offset by a non-cash adjustment of $1.7 million and a net cash usage of $2.1 million from changes in operating assets and liabilities. Our net cash used in operating activities of $0.7 million for the three months ended March 31, 2022 resulted from a net loss of $1.3 million and a net cash provided by operation of $0.2 million from changes in operating assets and liabilities, offset by a non-cash adjustment of $0.5 million.

The net cash used in investing activities of $0.1 million for the three months ended March 31, 2023 resulted from collection on a note receivable and purchases of property and equipment. The net cash used in investing activities of $5,264,000 for the three months ended March 31, 2022 resulted from the acquisition of Mother Earth's Storehouse, collection of a note receivable, and purchases of property and equipment.

The net cash used in financing activities of $742,000 for the three months ended March 31, 2023 is due to Series E Preferred Stock redemption and exercise and principle payment on loan payable. The net cash provided by financing activities of $35,000 for the three months ended March 31, 2022 is due to proceeds received from the line of credit.

At March 31, 2023 and December 31, 2022, we did not have any material financial guarantees or other contractual commitments with vendors that are reasonably likely to have an adverse effect on liquidity.

Our cash balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. Most of our cash is concentrated in several financial institutions and is generally in excess of the FDIC insurance limit. The Company has not experienced any losses on its cash. The following table presents the Company's cash position as of March 31, 2023 and December 31, 2022.



                             March 31, 2023     December 31, 2022
Cash                       $     19,765,487   $        22,911,892
Total assets               $     52,358,773   $        55,255,030
Percentage of total assets           37.75%                41.47%

The Company reported a net loss of $1.9 million for the three months ended March 31, 2023. The Company also had positive working capital of $18.3 million. The Company expects to continue incurring losses for the foreseeable future, but we do not believe there are any substantial doubts about the Company's ability to continue as a going concern. The Company's current cash and cash generated from operations will be sufficient to meet the projected operating expenses for the foreseeable future through at least the next twelve months from the issuance of these unaudited condensed consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.



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Critical Accounting Policies and Estimates

Our management's discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements.

We base our estimates on our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our products, the regulatory environment, and in certain cases, the results of outside appraisals. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

There have been no material changes to the Company's critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 2022 Annual Report, which we believe are the most critical to our business and the understanding of our results of operations and affect the more significant judgments and estimates that we use in the preparation of our condensed consolidated financial statements.

Seasonality

We do not consider our business to be seasonal.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements including statements regarding retail expansion, the future demand for our products, the transition to vaporizer and other products, competition, the adequacy of our cash resources and our authorized Common Stock, and our continued ability to raise capital.

The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include our future common stock price, the timing of future Series D preferred stock exercises and stock sales, customer acceptance of our products, and proposed federal and state regulation. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.




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