ACQUISITION

6 Months Ended

12 Months Ended

Jun. 30, 2024

Dec. 31, 2023

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

ACQUISITION

NOTE 7. ACQUISITION

Ellwood Thompson’s

On October 1, 2023, the Company through its wholly owned subsidiary, Healthy Choice Markets V, LLC, entered into an Asset Purchase Agreement with (i) ET Holding, Inc., d/b/a Ellwood Thompson’s Local Market, a Virginia corporation, (ii) Ellwood Thompson’s Natural Market, L.C., a Virginia limited liability company, and (iii) Richard T. Hood, an individual resident of the Commonwealth of Virginia. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities related to Ellwood Thompson’s grocery stores in Richmond, Virginia. The Company intends to continue to operate the grocery stores under their existing name.

The purchase price under the Asset Purchase Agreement was $750,000 in cash and a promissory note provided to the seller of $750,000 with a fair value of $718,000. The Company expensed the discount associated with the promissory note and recognized interest expense of approximately $32,000 for the year ended December 31, 2023. In addition, the Company entered into a new lease agreement with the landlord and entered into an employment agreement with the store manager.

The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:

	October 1, 2023
Purchase Consideration
Cash consideration paid	$	750,000
Promissory note		718,000
Total Purchase Consideration	$	1,468,000
Purchase price allocation
Inventory	$	851,000
Intangible assets		291,000
Right of use asset - Operating lease		1,325,000
Other liabilities		(31,000	)
Operating lease liability		(1,325,000	)
Goodwill		357,000
Net assets acquired	$	1,468,000
Finite-lived intangible assets
Trade Names (8 years)	$	291,000
Total intangible assets	$	291,000

The acquisition is structured as an asset purchase in a business combination, and goodwill is tax-deductible, and amortizable over 15 years for tax purposes.

Revenue and Earnings

The following unaudited pro forma summary presents consolidated information of the Company, including Ellwood Thompson’s, as if the business combinations had occurred on January 1, 2023, the earliest period presented herein:

	For Three Months Ended			For Six Months Ended
	June 30, 2023			June 30, 2023
Sales	$	17,133,109		$	33,725,111
Net loss	$	(473,448	)	$	(1,481,877	)

The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible. The proforma data gives effects to actual operating results prior to the acquisition. These proforma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred as of the beginning of each period presented or that may be obtained in future periods.

NOTE 7. ACQUISITION

Mother Earth’s Storehouse

On February 9, 2022, the Company through its wholly owned subsidiary, Healthy Choice Markets 3, LLC, entered into an Asset Purchase Agreement with Mother Earth’s Storehouse Inc. (“HCM3”) and its shareholders. Pursuant to the Purchase Agreement, HCM3 acquired certain assets and assumed certain liabilities related to Mother Earth’s grocery stores in Kingston and Saugerties, New York. The Company intends to continue to operate the grocery stores under their existing name. The cash purchase price under the Asset Purchase Agreement was $4,472,500, with an additional $677,500 paid for inventory at closing. In addition, the Company assumed a lease obligation for the Kingston, NY store and entered into an employment agreement with the store manager.

The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:

Purchase Consideration
Cash consideration paid	$	5,150,000
Purchase price allocation
Inventory		805,000
Property, plant, and equipment		1,278,000
Intangible assets		1,609,000
Right of use asset - operating lease		1,797,000
Other liabilities		(283,000	)
Operating lease liability		(1,797,000	)
Goodwill		1,741,000
Net assets acquired	$	5,150,000
Finite-lived intangible assets
Trade Names (8 years)	$	513,000
Customer Relationships (6 years)		683,000
Non-Compete Agreement (5 years)		413,000
Total intangible assets	$	1,609,000

The acquisition is structured as asset purchase in a business combination, and goodwill is tax-deductible, and amortizable over 15 years for tax purposes.

The results of operations of Mother’s Earth have been included in the consolidated carve-out statements of operations as of the effective date of operations.

Revenue and net income for Year ended December 31, 2022 were $11.9 million and $0.30 million, respectively. Acquisition-related expenses are expensed as incurred, and are recorded in selling, general and administrative expenses in the consolidated carve-out statements of operations and were $157,000 for the year ended December 31, 2022. They primarily related to legal and other professional fees.

Green’s Natural Foods

On October 14, 2022, the Company through its wholly owned subsidiary, Healthy Choice Markets IV, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) 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 Asset Purchase Agreement was $5,142,000, with an additional $3,000,000 seller financing in the form of a promissory note. In addition, the seller is entitled to a contingent earn-out based on a certain revenue threshold within the one-year period of the closing.

The Company recorded $1,108,000 of contingent consideration based on the estimated financial performance for the one year following closing. The contingent consideration was discounted at an interest rate of 3.8%, which represents the Company’s weighted average discount rate. Contingent consideration related to the acquisition is recorded at fair value (level 3) with changes in fair value recorded in other expense (income), net.

The following table summarizes the change in fair value of contingent consideration from acquisition date to December 31, 2023:

	Fair Market Value - Level 3
Balance as of October 14, 2022	$	1,108,000
Remeasurement		(333,100
Balance as of December 31, 2022	$	774,900
Remeasurement		(774,900	)
Balance as of December 31, 2023	$	-

The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:

Purchase Consideration
Cash consideration paid	$	5,142,000
Promissory note		3,000,000
Contingent consideration issued to Green’s Natural seller		1,108,000
Total Purchase Consideration	$	9,250,000
Purchase price allocation
Inventory	$	1,642,000
Property and equipment		1,478,000
Intangible assets		3,251,000
Right of use asset - Operating lease		6,427,000
Other liabilities		(211,000	)
Operating lease liability		(6,427,000	)
Goodwill		3,090,000
Net assets acquired	$	9,250,000
Finite-lived intangible assets
Trade Names (8 years)	$	1,133,000
Customer Relationships (6 years)		1,103,000
Non-Compete Agreement (5 years)		1,015,000
Total intangible assets	$	3,251,000

The acquisition is structured as asset purchase in a business combination, and goodwill is tax-deductible, and amortizable over 15 years for tax purpose.

Revenue and net income for year ended December 31, 2022 were $6.3 million and $0.05 million, respectively, from the date of acquisition through December 31, 2022. Acquisition-related expenses of $906,000 were expensed as incurred and recorded in selling, general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2022. The expenses primarily related to legal and other professional fees.

Ellwood Thompson’s

On October 1, 2023, the Company through its wholly owned subsidiary, Healthy Choice Markets V, LLC, entered into an Asset Purchase Agreement with (i) ET Holding, Inc., d/b/a Ellwood Thompson’s Local Market, a Virginia corporation, (ii) Ellwood Thompson’s Natural Market, L.C., a Virginia limited liability company, and (iii) Richard T. Hood, an individual resident of the Commonwealth of Virginia. Pursuant to the Purchase Agreement, the Company acquired certain assets and assumed certain liabilities related to Ellwood Thompson’s grocery stores in Richmond, Virginia. The Company intends to continue to operate the grocery stores under their existing name.

The purchase price under the Asset Purchase Agreement was $750,000 and a promissory note, provided to the seller, of $750,000 with a fair value of $718,000. The Company expensed the discount associated with the promissory note and recognized interest expense of approximately $32,000 during the year ended December 31, 2023. In addition, the Company entered into a new lease agreement with the landlord and entered into an employment agreement with the store manager.

The following table summarizes the purchase price allocation based on fair values of the net assets acquired at the acquisition date:

	October 1, 2023
Purchase Consideration
Cash consideration paid	$	750,000
Promissory note		718,000
Total Purchase Consideration	$	1,468,000
Purchase price allocation
Inventory	$	851,000
Intangible assets		291,000
Right of use asset - Operating lease		1,325,000
Other liabilities		(31,000	)
Operating lease liability		(1,325,000	)
Goodwill		357,000
Net assets acquired	$	1,468,000
Finite-lived intangible assets
Trade Names (8 years)	$	291,000
Total intangible assets	$	291,000

The acquisition is structured as an asset purchase in a business combination, and goodwill is tax-deductible, and amortizable over 15 years for tax purposes.

Revenue and net loss for year ended December 31, 2023 were $3.1 million and $0.3 million, respectively, from the date of acquisition through December 31, 2023. Acquisition-related expenses of $131,000 were expensed as incurred and recorded in selling, general and administrative expenses in the consolidated carve-out statements of operations for the year ended December 31, 2023. The expenses primarily related to legal and other professional fees.

Revenue and Earnings

The following unaudited pro forma summary presents consolidated information of the Company, including Mother Earth’s Storehouse, Green’s Natural Foods, and Ellwood Thompson’s, as if the business combinations had occurred on January 1, 2022, the earliest period presented herein:

	December 31,
	2023			2022
Sales	$	65,262,166		$	68,529,035
Net loss		(10,119,851	)		(276,797	)
Adjusted EBITDA		(3,115,188	)		(482,477	)

The pro forma financial information includes adjustments that are directly attributable to the business combinations and are factually supportable. The pro forma adjustments include incremental amortization of intangible and remove non-recurring transaction costs directly associated with the acquisitions, such as legal and other professional service fees. The proforma data gives effects to actual operating results prior to the acquisition. These proforma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred as of the beginning of each period presented or that may be obtained in future periods. For the year ended December 31, 2022, the pro forma financial information excludes $1,063,000 of non-recurring acquisition-related expenses. For the year ended December 31, 2023, the pro forma financial information excludes $131,000 of non-recurring acquisition-related expenses.