OTC: HCMC

On
September 13, 2024 (the “Spin-Off Date”), after the New York Stock Exchange American (“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 commenced trading on the NYSEAM under the stock symbol “HCWC.”

HCWC
distributed all the outstanding shares of Common Stock held by it on a pro rata basis to holders of HCMC’s common stock (the “Distribution”).
For each 208,632 shares of HCMC common stock held as of 5:00 p.m., Eastern Daylight Time (EDT), on September 9, 2024, the record date
for the Spin-Off (the “Record Date”), a HCMC stockholder was entitled to receive one share of Class A common stock and three
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.

As
a result of the Spin-Off, the operating results for the HCWC business through the date of the Spin-Off are reported in Net Loss from
Discontinued Operations in the Consolidated Statements of Operations for all periods presented. Unless otherwise noted, all amounts and
disclosures included in the Notes to Consolidated Financial Statements reflect only the Company’s continuing operations. For additional
information, see Note 2, “Discontinued Operations” of the consolidated financial statements.

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VAPORIZER
BUSINESS

Through
its wholly owned subsidiary HCMC Intellectual Property Holdings, LLC, HCMC manages, and intends to expand, its intellectual property
portfolio. Additionally, HCMC markets its patented Q-Unit™ and Q-Cup® technology through its wholly owned subsidiary The Vape
Store, Inc. Information on these products and the technology is available on the Company’s website at www.theQcup.com.

Our
Improvements and Product Development on Intellectual Property

We
have developed, trademarked and are preparing to commercialize additional products. We include product development expenses as part of
our operating expenses. In October 2018, we announced the granting of three US patents related to our Q-Cup™ technology. This Q-Cup™
technology provides microdosing potentially more efficiency depending on the vaping method and an “on the go” solution for
consumers who prefer to vape concentrates either medicinally or recreationally. In addition, we have a suite of patent applications pending
in the United States. There is no assurance that we will be awarded patents for of any of these pending patent applications. From 2019
through December 31, 2025, the Company was granted 9 new patents related to electronic vaporizers.

Business
Strategy

The
Company has implemented a comprehensive strategy to maximize the value of its intellectual property assets. Central to this strategy
is the formation of HCMC Intellectual Property Holdings, LLC, a wholly owned subsidiary dedicated to managing and marketing the Company’s
intellectual property. This subsidiary ensures focused efforts on monetization, holding all patents, trademarks, and other intellectual
property. The Company actively pursues licensing agreements, both exclusive and non-exclusive, to generate revenue while fostering innovation
across various industries. These agreements are tailored to meet the needs of different partners, ensuring flexibility and maximizing
the reach of the Company’s patents. Additionally, the Company seeks strategic partnerships with entities that can benefit from
its patented technologies, resulting in joint ventures, co-development agreements, and shared research and development efforts. These
collaborations enhance the value of the Company’s intellectual property through shared expertise and resources, contributing to
increased revenue and market presence.

The
Company is committed to protecting its intellectual property through active patent enforcement, which involves monitoring the market
for potential infringements and taking legal action when necessary. Successful enforcement efforts can lead to settlements, licensing
fees, and increased recognition of the Company’s intellectual property. Furthermore, the Company leverages its patents to develop
new products and improve existing ones, such as the Q-CUP® brand vape material containers and related hardware components, which
are based on patented technology. Continued innovation in product development enhances market competitiveness and drives sales.

The
Company is focused on expanding its patent coverage internationally by filing for patents in key global markets, thereby broadening its
protection and opening up new opportunities for monetization. International expansion allows the Company to tap into diverse markets
and establish a strong global presence. Investing in continuous innovation and research and development is essential for maintaining
a robust patent portfolio. Ongoing research ensures that the Company’s patents remain relevant and valuable, enhancing existing
patents and leading to the creation of new ones, driving long-term growth. Effective marketing and awareness campaigns are undertaken
to showcase the benefits of the Company’s patented technologies, including promotion at industry conferences, through publications,
and via digital channels. These efforts raise awareness and attract potential partners and licensees, highlighting the practical applications
and value of the Company’s patents.

By
implementing these strategies, the Company aims to maximize the commercial and economic value of its patent assets, driving growth and
sustainability.

Competition

Competition
in the vaporizer and e-liquid industry is intense. We compete with other sellers, most notably Altria Group, Inc., JT International,
Imperial Tobacco, and Reynolds American, Inc., which are big tobacco companies that have businesses that compete in the segment. The
nature of our competitors is varied as the market is highly fragmented and the barriers to entry into the business are low.

As
discussed above, we compete against “big tobacco”, U.S. cigarette manufacturers of both conventional tobacco cigarettes and
electronic cigarettes like Altria Group, Inc., JT International, Imperial Tobacco, and Reynolds American, Inc. We believe that “big
tobacco” is devoting more attention and resources to developing, acquiring technology patents, and offering electronic cigarettes,
vaporizers and e-liquids as these markets grow. Because of their well-established sales and distribution channels, marketing expertise
and significant resources, “big tobacco” is better positioned than small competitors like us to capture a larger share of
the electronic cigarette market. We also compete against numerous other smaller manufacturers or importers. There can be no assurance
that we will be able to compete successfully against any of our competitors, some of whom have far greater resources, capital, experience,
market penetration, sales and distribution channels than us.

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Manufacturing

We
have no manufacturing capabilities and do not intend to develop any manufacturing capabilities. Third party manufacturers make our products
to meet our design specifications. Our customers associate certain characteristics of our products including the weight, feel, draw,
unique flavor, packaging and other attributes of our products to the brands we market, distribute and sell. Any interruption in supply
and or consistency of our products may harm our relationships and reputation with customers, and have a material adverse effect on our
business, results of operations and financial condition. In order to minimize the risk of supply interruption, we currently utilize several
third-party manufacturers to manufacture our products to our specifications. We contract with our manufacturers on a purchase order basis.
We do not have any output or requirements contracts with any of our manufacturers. Our manufacturers provide us with finished products,
which we hold in inventory for distribution, sale and use.

Patent
Litigation

Third
party patent lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights have and could force
us to do one or more of the following:

●
stop
selling products or using technology that contains the allegedly infringing intellectual property;

●
incur
significant legal expenses;

●
pay
substantial damages to the party whose intellectual property rights we may be found to be infringing;

●
redesign
those products that contain the allegedly infringing intellectual property; or

●
attempt
to obtain a license to the relevant intellectual property from third parties, which may not be available to us on reasonable terms
or at all.

Future
third party lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights could have a material
adverse effect on our business, results of operations and financial condition.

We
are required to obtain licenses to patents or proprietary rights of others and may be required to obtain more in the future and as the
product continues to evolve. We cannot assure you that any future licenses required under any such patents or proprietary rights would
be made available on terms acceptable to us or at all. If we do not obtain such licenses, we could encounter delays in product market
introductions while we attempt to design around such patents, or could find that the development, manufacture, or sale of products requiring
such licenses could be foreclosed. Litigation may be necessary to defend against claims of infringement asserted against us by others,
or assert claims of infringement to enforce patents issued to us or exclusively licensed to us, to protect trade secrets or know-how
possessed by us, or to determine the scope and validity of the proprietary rights of others. In addition, we may become involved in oppositions
in foreign jurisdictions, reexamination declared by the United States Patent and Trademark Office, or interference proceedings declared
by the United States Patent and Trademark Office to determine the priority of inventions with respect to our patent applications or those
of our licensors. Litigation, opposition, reexamination or interference proceedings could result in substantial costs to and diversion
of effort by us, and may have a material adverse impact on us. In addition, we cannot assure you that our efforts to maintain or defend
our patents will be successful.

Patent
Enforcement

On
November 30, 2020, the Company filed a patent infringement lawsuit against Philip Morris USA, Inc. and Philip Morris Products S.A. in
the U.S. District Court (“District Court”) for the Northern District of Georgia (the “Complaint”). The lawsuit
alleged infringement on HCMC-owned patent(s) by the Philip Morris product known and marketed as “IQOS™.”

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On
September 26, 2023, HCMC filed a patent infringement lawsuit against R.J. Reynolds Vapor Company (“RJR”) in the U.S. District
Court for the Middle District of North Carolina in connection with HCMC’s assertions that RJR’s Vuse electronic cigarette
infringes one of HCMC’s patents (the “HCMC RJR Patent”). RJR has sought an inter-parties review by the Board of the
HCMC RJR Patent.

On
November 22, 2024, HCMC received a ruling from the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”)
denying an appeal of HCMC of a decision of the United States Patent and Trademark Office Patent Trial and Appeal Board (the “Board”)
relating to the inter partes review of an HCMC patent. The Board had ruled that the previously granted HCMC patent that served as the
basis of HCMC’s patent infringement action against Philip Morris USA, Inc. and Philip Morris Products S.A. was not patentable and
denied of HCMC’s request to amend the claims if invalidity of the patent was affirmed. Consequently, this lawsuit was dismissed
on December 31, 2024.

Regulations

Since
a 2010 U.S. Court of Appeals decision, the Food and Drug Administration (“FDA”) is permitted to regulate electronic cigarettes
as “tobacco products” under the Family Smoking Prevention and the Tobacco Control Act. Under this decision, the FDA is not
permitted to regulate electronic cigarettes as “drugs” or “devices” or a “combination product” under
the Federal Food, Drug and Cosmetic Act unless they are marketed for therapeutic purposes. This is contrary to anti-smoking devices like
nicotine patches, which undergo more extensive FDA regulation. Because the Company does not market its electronic cigarettes for therapeutic
purposes, the Company’s electronic cigarettes are subject to being classified as “tobacco products” under the Tobacco
Control Act. The Tobacco Control Act grants the FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products,
although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction
of nicotine yields of a tobacco product to zero.

On
September 9, 2020 the FDA began enforcing rules that extended its regulatory authority to electronic cigarettes and certain other tobacco
products under the Tobacco Control Act. The rules required that electronic cigarette and e-liquid manufacturers (i) register with the
FDA and report electronic cigarette products and ingredient listings; (ii) market new electronic cigarette products only after FDA review;
(iii) only make direct and implied claims of reduced risk if the FDA confirms that scientific evidence supports the claim and that marketing
the electronic cigarette product will benefit public health as a whole; (iv) not distribute free samples; (v) implement minimum age and
identification restrictions to prevent sales to individuals under age 21; (vi) include a health warning; and (vii) not sell electronic
cigarettes in vending machines, unless in a facility that never admits youth. It is not known how long finalizing and implementing this
regulatory process may take. Accordingly, the Company has responded by beginning to take the necessary steps to ensure compliance.

In
this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed
by the FDA under the Tobacco Control Act. Costs, however, could be substantial and could have a material adverse effect on the Company’s
business, results of operations and financial condition. In addition, failure to comply with the Tobacco Control Act and with FDA regulatory
requirements could result in significant financial penalties and could have a material adverse effect on the Company’s business,
financial condition and results of operations and ability to market and sell the Company’s products. At present, it is difficult
to predict whether the Tobacco Control Act will impact the Company to a greater degree than competitors in the industry, thus affecting
the Company’s competitive position.

State
and local governments currently legislate and regulate tobacco products, including what is considered a tobacco product, how tobacco
taxes are calculated and collected, to whom and by whom tobacco products can be sold and where tobacco products may or may not be smoked.
State and local regulation of the e-cigarette market and the usage of e-cigarettes is beginning to accelerate.

At
present, neither the Prevent All Cigarette Trafficking Act (which prohibits the use of the U.S. Postal Service to mail most tobacco products,
which would require individuals and businesses that make interstate sales of cigarettes or smokeless tobacco to comply with state tax
laws) nor the Federal Cigarette Labeling and Advertising Act (which governs how cigarettes can be advertised and marketed) apply to electronic
cigarettes. The application of either or both of these federal laws to vaporizers and electronic cigarettes would have a material adverse
effect on the Company’s business, results of operations and financial condition.

On
July 1, 2015, the FDA published a document entitled “Advanced notice of proposed rulemaking” or the Advance. Through the
Advance, the FDA solicited public comments on whether it should issue rules with respect to nicotine exposure warning and child-resistant
packaging for e-liquids containing nicotine. Following public comment, the FDA may issue proposed rules in furtherance of the purposes
outlined in the Advance and ultimately pass the rules as proposed or in modified form. We cannot predict whether rules will be passed
or if they will have a material adverse effect on our future results of operations and financial conditions.

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The
Company expects that the tobacco industry will experience significant regulatory developments over the next few years, driven principally
by the World Health Organization’s FCTC. The FCTC is the first international public health treaty on tobacco, and its objective
is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation.
Regulatory initiatives that have been proposed, introduced or enacted include:

●
the
levying of substantial and increasing tax and duty charges;

●
restrictions
or bans on advertising, marketing and sponsorship;

●
the
display of larger health warnings, graphic health warnings and other labelling requirements;

●
restrictions
on packaging design, including the use of colors and generic packaging;

●
restrictions
or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

●
requirements
regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents’ levels;

●
requirements
regarding testing, disclosure and use of tobacco product ingredients;

●
increased
restrictions on smoking in public and work places and, in some instances, in private places and outdoors;

●
elimination
of duty free allowances for travelers; and

●
encouraging
litigation against tobacco companies.

If
vaporizers, and electronic cigarettes, are subject to one or more significant regulatory initiates enacted under the FCTC, the Company’s
business, results of operations and financial condition could be materially and adversely affected.

Seasonality

Our
business is active throughout the calendar year and does not experience significant fluctuation caused by seasonal changes in consumer
purchasing.

Insurance
and Risk Management

We
use a combination of insurance and self-insurance to cover workers’ compensation, general liability, product liability, director
and officers’ liability, employment practices liability, associate healthcare benefits and other casualty and property risks. Changes
in legal trends and interpretations, variability in inflation rates, changes in the nature and method of claims settlement, benefit level
changes due to changes in applicable laws, insolvency of insurance carriers and changes in discount rates could all affect ultimate settlements
of claims. We evaluate our insurance requirements and providers on an ongoing basis.

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Segment
Information

The
Company operates as a single segment that includes all of its continuing operations. The Company previously had two reportable segments:
Grocery and Vape. The Grocery segment was spun-off on September 13, 2024 and is now reported as discontinued operations for all periods
through that date.

Going
Concern and Management’s Plan

The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (“GAAP”), which contemplate the continuation of the Company as a going concern for the next twelve
months from the issuance of this Form 10-K 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 consolidated financial statements do not necessarily purport to represent
realizable or settlement values.

The
Company currently and historically has reported net losses and cash outflows from operations. As of December 31, 2025, cash totaled approximately
$1.1 million and negative working capital of $0.3 million. A significant improvement to the Company’s financial position occurred
on December 31, 2025, when the Company settled $4.0 million of intercompany debt through the issuance of 43,889,786,222 shares of common
stock to Healthy Choice Wellness Corp. (“HCWC”), a related party. This strategic debt-for-equity transaction eliminated a
substantial current liability and significantly strengthened the Company’s balance sheet.

On
November 7, 2024, the Company entered into a commitment letter with an investor establishing a $5 million revolving credit facility (the
“Facility”). On April 11, 2025, the Company and the lender amended the agreement to extend the maturity date from April 30,
2026 to December 31, 2026. As of December 31, 2025, the Company had not drawn on this facility, leaving the full $5 million available
for working capital purposes. The interest rate on any amount borrowed is 12% per annum.

Management
has implemented and continues to pursue the following initiatives to address liquidity needs and support ongoing operations:

●
Debt
Restructuring Success: The settlement of $4.0 million in debt through equity issuance has materially improved the Company’s financial
position by eliminating a significant liability while preserving cash resources.

●
Credit Facility Availability: The undrawn $5 million credit facility provides immediate liquidity access through December 31, 2026,
with funds available for working capital needs.

●

Revenue Initiatives: The Company is actively pursuing commercialization opportunities, including licensing negotiation, marketing
and distribution with third party, and exploration of additional strategic partnerships for existing product lines.

●
Cost Management: Implementation of expense reduction measures, including optimization of consulting expenditures and operational
efficiencies following the spin-off of HCWC.

●
Strategic Financing: Continued evaluation of additional financing alternatives, including potential equity offerings or strategic
investments, to support growth initiatives and working capital requirements.

Based
on the successful completion of the $4.0 million debt settlement, the availability of the $5 million credit facility, and management’s
ongoing initiatives to commercialize products and manage expenses, the Company believes its existing cash resources and available credit
will enable it to meet its obligations and capital requirements for at least the twelve months from the date these financial statements
are issued. The success of these plans is dependent upon various factors, foremost being the ability to reduce outside consulting expenses
and the ability to secure additional capital from outside investors. There can be no assurance that such plans will be successful.