STOCKHOLDERS' EQUITY |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS' EQUITY [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS' EQUITY |
Note 12. STOCKHOLDERS’ EQUITY
Rights Offering
On June 18, 2021, the Company issued 27,046,800,310 shares of common stock in connection with the Rights Offering at a subscription price of $0.0010 per share, generating gross proceeds of $27.0 million. The Company incurred
direct financing related costs of $2.7 million in connection with the offering resulting in net proceeds to the Company of $24.3 million.
Exchange Agreement
On March 29, 2021, the Company entered into exchange agreements with the holders of indebtedness pursuant to the $2.7 million Loan and Security Agreement (the "Credit Agreement"). Pursuant to the Credit Agreement with the holders of the Company’s indebtedness (the “Notes”) in an aggregate amount of $1.3 million exchanged the Notes for 1,172,964,218
shares at a conversion price of $0.0011 (the "Exchange"). The Notes were issued pursuant to the Credit Agreement dated as of August 18, 2020, among The Vape Store, Inc., the Company, Healthy Choice Markets, Inc., Sabby Healthcare Master Fund, Ltd., and Sabby Volatility Warrant
Master Fund, Ltd. In connection with the Exchange, the Credit Agreement and all related loan documents was terminated and the Holder’s on the assets of the Company and its subsidiaries was cancelled. The Company recognized a loss on debt
extinguishment of $0.1 million.
Restricted Stock
On January 14, 2021, the Compensation
Committee of the Board of Directors of the Company approved an issuance of restricted stock to the Officers and a Director of the Company, in consideration for agreeing to a new vesting schedule for the existing awarded restricted stock. Each
individual was granted a 10% increase from the original award agreement
for a total of 2.3 billion shares of restricted common stock, which will
vest quarterly and equal amounts until December 31, 2022, provided that the grantee remains an employee of the Company through the vesting date.
On March 30, 2021 and June 29, 2021, the Company and the Officers and a Director of the Company agreed to forfeit a total of 6.18 billion of restricted shares of common stock that were due to vest on March 31, 2021 and June 30, 2021. The expense related to such was fully recognized in the fiscal year ended December
31, 2021, as such no additional compensation expense related with restricted stock has been reflected during the current fiscal year.
Series E Convertible Preferred Stock
On August 18, 2022, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold and issued 14,722 shares of its Series E Convertible Preferred Stock to institutional investors for $1,000 per share or an aggregate subscription of $13.25 million. The number of shares
issued to each participant is based on subscription amount multiplied by conversion rate of 1.1111. The Company also incurred offering costs of
approximately $410,000, which covers legal and consulting fee.
The Company is planning to spin off its grocery segment and wellness business into a new publicly traded company (hereinafter referred to as “NewCo”). NewCo will continue the path of growth in the health verticals started by HCMC and explore other growth
opportunities that comport with HCMC’s healthier lifestyle mission. HCMC will retain its entire patent suite, the Q-Cup® brand, and continue to develop its patent suite through R&D as well as continuing its path of enforcing its patent rights
against infringers and attempting to monetize said patents through licensing deals. At the time of the Spin-Off, HCMC will distribute all the outstanding shares of
Common Stock held by it on a pro rata basis to holders of HCMC’s common stock (the “Spinoff”).
Pursuant to the Securities Purchase Agreement, purchasers will also be required to purchase Series A Convertible Preferred Stock (“NewCo Series A Stock”)
of a newly created public company (“NewCo”) resulting from spin off of HCMC’s grocery and wellness businesses in the same subscription amounts that the Purchasers paid for the HCMC Preferred Stock (the “Spinoff”).
The HCMC Preferred Stock shall have voting rights on as converted basis at the Company’s
next stockholders’ meeting. However, as long as any shares of HCMC Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the HCMC Preferred Stock, (a)
alter or change adversely the powers, preferences or rights given to the HCMC Preferred Stock or alter or amend the Certificate of Designation, (b) increase the number of authorized shares of HCMC Preferred Stock, or (c) enter into any agreement with
respect to any of the foregoing. Each share of Preferred Stock shall be convertible, at any time and from time to time at the option of the Holder thereof, into that number of shares of Common Stock (subject to the beneficial ownership
limitations). The conversion price for the HCMC Preferred Stock shall equal $0.0001.
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary that is not a Fundamental Transaction (as defined in the
Certificate of Designation), the holders of HCMC Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to $1,000 per share of HCMC Preferred Stock.
Unless earlier converted or extended as set forth below, a holder may require the redemption of all or a portion of the stated value of the HCMC Preferred Stock either (1)
six months after closing or (2) the time at which the balance is due and payable upon an event of default.
Stock Options
During the three months ended September 30, 2022 and 2021, no
stock options of the Company were exercised into common stock. During the nine months ended September 30, 2022, no stock options of the Company were exercised
into common stock; in comparison to the nine months ended September 30, 2021, where 2,275,000,000 stock
options of the Company were exercised into common stock.
During the three months ended September 30, 2022 and 2021, the Company recognized stock-based compensation of $0 and $0, respectively. . During the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation of $0 and $34,375, respectively.
Stock based compensation is included as part of selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of
operations.
Income (Loss) Per Share
The following table summarizes the Company’s securities, in common share equivalents, which have been excluded
from the calculation of dilutive loss per share as their effect would be anti-dilutive:
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