HOST 10-K & 10-Q changes, risk factors and insider trading

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, nine located in New York and New Jersey, one store in Virgina, Virginia, as well as five stores in Kansas and Oklahoma.

Sales increased $13.7$8.8 million to $69.4$78.2 million for the year ended December 31, 20242025 as compared to $55.7$69.4 million for the same period in 2023.2024. The $8.7increase was primarily due to a full year of operations from the GreenAcres Market acquisition (acquired in July 2024), which contributed approximately $7.8 million, and a $1.0 million increase in sales was primarily a result of a full year operations for the year ended December 31, 2024 of Ellwood Thompson’s acquired in October 2023, $6.8 million increase in sales was a result of GreenAcres Market acquisition acquired in July 2024, offset by a decrease in same-store sales of $1.7 million.sales.

Cost of goods sold for the years ended December 31, 20242025 and 20232024 were $42.3$47.5 million and $35.3$42.3 million, respectively, an increase of $5.4$4.8 million was primarily a result of full year operations in 2024 of Ellwood Thompson’s acquired in October 2023, an increase of $3.8 million was a result2025 of GreenAcres Market acquisition acquired in July 2024, offsetand by$0.4 a decreasemillion increase in same-store cost of goods sold of $2.3 million.sold.

Total operating expenses decreasedincreased $2.0$4.3 million from $30.9$28.8 million for the year ended December 31, 20232024 to $28.8$33.1 million for the year ended December 31, 2024.2025. The increase of $2.6$3.0 million was a result of full year operations for the year ended December 31, 2024 of Ellwood Thompson’s acquired in October 2023, the increase of $2.4 million was a result2025 of GreenAcres Market acquisition acquired in July 2024, $1.2 million increase in professional fee, taxes, license and thepermit, and $0.1 million increase of $0.2 million was due to gain on sale on Saugerties building, The increases were offset by $6.1 million decrease in goodwillstock-based impairmentcompensation charge, $0.4 million decrease in HCMC corporate overhead allocation, and $0.2 million in same-store expense reduction.expense.

TheOur net cash provided by operating activities of $1.0 million for the year ended December 31, 2025 resulted from our net loss of $3.9 million and a net cash usage of $3.8 million from changes in operating assets and liabilities, offset by a non-cash adjustments of $8.7 million. Our net cash used in investingoperating activities of $5.0$3.1 million for the year ended December 31, 2024 consistsresulted from our net loss of $5.5$4.5 million and a net cash usage of $7.6 million paymentfrom forchanges GreenAcres Marketin acquisition,operating $0.2 million purchases of propertyassets and equipment,liabilities, offset by $0.7a millionnon-cash proceeds from saleadjustments of Saugerties$9.0 building. The net cash used in investing activities of $0.9 million for the year ended December 31, 2023 resulted from $0.7 million payment for Ellwood Thompson’s acquisition and $0.2 million payment for purchase of property and equipment.million.

The net cash provided by financing activities of $4.1 million for the year ended December 31, 2025 consists of net cash proceeds of $5.1 million from HCWC Series A Preferred Stock offering and principal payment on loan payable of $1.0 million. The net cash provided by financing activities of $8.7 million for the year ended December 31, 2024 consists of cash proceeds of $1.7 million from Security Purchase Agreement (“SPA”) signed on January 18, 2024, $7.5 million cash proceeds from Loan and Security Agreement signed on July 18, 2024, $2.6 million cash proceedproceeds from initial public offering, $1.7 million net parent investment from HCMC, $2,000 cash proceed proceeds from warrant exercise, offset by principal payment on loan payable of $2.5 million and $2.3 million payment to related party. HCMC.

Our cash and cash equivalents balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. The majority Most of our cash and cash equivalents are concentrated in one largetwo financial institutioninstitutions. andThe areportion of our balance held as cash deposits in these institutions is generally in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company has not experienced any losses on its cash and cash equivalents. The following table presents the Company’s cash position as of December 31, 2024 and December 31, 2023.

As of December 31, 2024,2025, the Company had cash and cash equivalents of $2.1$3.0 million and negative working capital of $2.2$2.7 million. TheWhile the Company may continue to report net losses in the near term due to non-cash charges such as depreciation, amortization, and stock-based compensation, the Company expectsgenerated to continuepositive incurringcash lossesflow from operations of $1.0 million for the foreseeableyear future.ended December 31, 2025, reflecting improved operating performance. The Company’s liquidity needs through December 31, 20242025 have been satisfied through initial public offering and financing agreementagreements with private lenders.lenders and investors. Also, the Company is formulating plans to raise capital from outside investors and from equity offerings, as it has done in the past, to fund operating losses and also provide capital for further business acquisitions. TheBased Company believeson its cash on handhand, positive cash flow from operations, and planned security offerings, management believes the plan to raise capital through its security offeringCompany will enablebe the Companyable to meet its obligations and capital requirements for at least the twelve months from the date these consolidated financial statements are issued.

The preparation of financial statements in conformity with accounting principles generally accepted in the GAAP requires us to make estimates estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The consolidated financial statements include estimates based on currently available information and our judgment as to the outcome of future conditions and circumstances. 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,goodwill and impairment, equity method investments, allowance for credit losses, inventory provisions, deferred taxes and related valuation allowances, allocation of corporate general expenses, and the valuation of the assets and liabilities acquired in business combinations. Changes in the status of certain facts or circumstances could result in material changes to the estimates used in the preparation of the consolidated financial statements and actual results could differ from the estimates and assumptions.

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (FASB) AccountingASC Standards Codification (ASC) 606, Revenue from Contracts with Customers (“ASC 606”).Customers. The core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. ToRevenues achievefrom thisproduct coresales principle,and fiveservices rendered, basicnet criteriaof mustpromotional bediscounts, metmanufacturer beforecoupons and rebates, return allowances, and sales and consumption taxes, are recorded revenuewhen canproducts beare recognized: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.

We account for income taxes pursuant to the asset and liability method of accounting for income taxes pursuant to FASB ASC740,ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for taxable temporary differences and operating loss carry forwards. Temporary differences are the differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company currently and historically has reported net losses and has reported cash outflows from operations this quarter. As of MarchJune 31,30, 2026, the Company had cash and cash equivalents of approximately $2.3$0.9 million and negative working capital of $4.1$6.6 million.

The following table sets forth our unaudited Condensedcondensed Consolidatedconsolidated Statements of Operations for the three months ended MarchJune 31,30, 2026 and 2025 that is used in the following discussions of our results of operations:

Cost of goods sold for the three months ended MarchJune 31,30, 2026 and 2025 were $11.3$10.2 million and $12.4$12.1 million, respectively. The decrease was drivenprimarily bydue ato $2.2lower sales volume from the same-store sales decline. Gross profit was $6.4 million reductionand in$8.1 netmillion sales,for whichthe directlythree loweredmonths ended variableJune cost30, of2026 goodsand sold.2025, respectively. Gross margin as a percentage of sales decreased 0.8approximately percentage points1.5% as compared to 38.0%the from 38.8%same period in the prior year period,year, primarily due to unfavorablethe reduced sales volume and continued inflationary pressure on product mix.costs.

Total operating expenses for the three months ended June March 31,30, 2026 and 2025 were $8.5$9.0 million and $8.3$8.1 million, respectively.respectively, representing an increase of approximately $0.9 million. The $0.2 millionincrease increase was primarily attributabledriven toby a $0.8 million increase in payroll and benefits and professional fees, and a $0.3 million increase in non-cash stock-based compensation expense, whichpartially wasoffset notby incurred$0.2 million decrease in theinsurance, priorbank yearservice period.charges and merchant account fees, and depreciation and amortization expense.

Total other expenses, net was $0.4 million for the three months ended MarchJune 31,30, 2026 were $2.1 million,2026, consisting of net interest expense of approximately $0.2$151,000, a million,$259,000 loss on debt extinguishmentextinguishment, ofa approximately $0.2 million, equity method loss of approximately $0.1 million, and impairment$18,000 loss on equity methodinvestment investmentin HCMC, offset by other miscellaneous income of $1.6approximately million.$1,000. Total other (expenses) income,expenses, net of $0.3 million for the three months ended MarchJune 31,30, 2025 consists of net interest expense of $0.3approximately million,$269,000, other miscellaneous income expense of approximately $2,000,$4,000, offsetand by $8,000$27,000 loss on debt extinguishment.

As of MarchJune 31,30, 2026, the Company holds an equity method investment in its formerFormer parentParent HCMC, with a carrying value of approximately $2.3 $2.2 million. 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. No additional impairment was recognized during the three months ended June 30, 2026. The fair value was estimated using a multi-method approach under ASC 820, incorporating observable transaction prices and a probability-weighted litigation model. Key assumptions used in the valuation included the probability of successful outcomes in the investee’s pending litigation, the timing and amount of future cash flows, and the discount rate applied. The impairment loss is included in other income (expense) in the condensed consolidated statement of operations. Future adverse developments in the investee’s litigation, continued operating losses, further dilution of the Company’s ownership percentage, or a sustained decline in the investee’s market value could result in additional material impairment charges in future periods.

Our net cash used in operating activities of approximately $0.2$1.2 million for the threesix months ended MarchJune 31,30, 2026 resulted from a net loss of $6.7 $3.7million, offset by a non-cash adjustment of $6.3 million and a net cash usage of $0.4$0.8 million from changes in operating assets and liabilities, offset by a non-cash adjustment of $3.9 million.liabilities. Our net cash provided by operating activities of approximately $1.1$2.2 million for the threesix months ended MarchJune 31,30, 2025 resulted from a net loss of $0.7 $1.1 million, offset by a non-cash adjustment of $2.0$4.1 million and a net cash usage of $0.2$0.8 million from changes in operating assets and liabilities.

The net cash used in investing activities of $0.2$0.3 million for the threesix months ended MarchJune 31,30, 2026 consists of $0.1 million net cash advance to related party and $0.1$0.2 million purchases of property and equipment. The net cash used in investing activities of $1.1$2.1 million for the threesix months ended MarchJune 31,30, 2025 consists of $1.0$1.9 million payment to related party and $0.1$0.2 million purchases of property and equipment.

At MarchJune 31,30, 2026 and December 31, 2025, 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.

The Company has not experienced any losses on its cash or cash equivalents. The following table presents the Company’s cash position as of MarchJune 31,30, 2026 and December 31, 2025.

The Company reported a net loss of $3.7$6.7 million for the threesix months ended MarchJune 31,30, 2026. The Company also had negative working capital of of $4.1$6.6 million. The Company expects to continue incurring losses for the foreseeable future.

The following discussion and analysis contain a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as an alternative to, net income, operating income, and cash flow from operating activities, liquidity, or any other financial measures. Non-GAAP financial measures may not be indicative of the historical operating results of the Company, nor are they intended to be predictive of potential future financial results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income. Management believes Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of significant non-cash and non-recurring charges that effect comparability between reporting periods. We define Adjusted EBITDA as net loss adjusted for non-cashinterest chargesexpense, for depreciation and amortization, loss on debt settlement, equity method (gain) loss, impairment loss on equity method investment, stock compensation, loss on disposal of goodwill,asset, change in contingent consideration, also adjusted for non-recurring and other income (expense (income), and interest income.net. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items.

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 2025 Annual Report, except for the addition of policies related to equity method investments, derivative accounting, variable interest entities, and stock-based compensation, 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 usedescribed in Note 3 to the preparationcondensed of our condensed consolidated financial statements.