RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2025

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 11. RELATED PARTY TRANSACTIONS

Prior to the Spin-Off, HCWC was a subsidiary of HCMC. After Spin-Off, HCWC operated as a separate, stand-alone company, accordingly has had various relationships with HCMC whereby HCMC provided services to HCWC as noted below. Related party transactions include allocation of general corporate expenses and cash advances between HCMC and HCWC.

Allocation of General Corporate Expenses

The Company provided human resources, accounting, payroll processing, legal and other managerial services to HCWC prior to the Spin-Off. The accompanying condensed consolidated financial statements for three and six months ended June 30, 2024 include allocations of these expenses. Following the Spin-Off, HCWC and HCMC entered into a Transition Services Agreement (“TSA”), under which both companies agreed to provide certain transitional services to one another to ensure smooth separation. These services are provided on a transitional basis and will continue for a period of up to one year following the Spin-Off.

Management adopted a proportional cost allocation method to allocate the shared expenses to HCWC. The allocation method calculates the appropriate share of overhead costs to HCWC based on management’s estimate that the sum of management time and resources spent managing HCWC is approximately equal to the amount of time and resources spent managing HCMC and its subsidiaries. As a result, 50% of HCMC overhead on a weighted average basis was allocated to HCWC based on the fact that management spent an equal amount of time managing both companies. The Company believes the allocation methodology used is reasonable and has been consistently applied, and results in an appropriate allocation of costs incurred. However, these allocations may not be indicative of the cost had HCWC been a stand-alone entity or of future services. For the six months ended June 30, 2025, HCWC established its independent payroll system but continues to share certain staff with HCMC. HCMC and HCWC continue providing human resources, accounting, payroll processing, and other managerial services to each other based on the TSA. Management continued using 50% proportional cost allocation method to split the shared cost. HCWC directly funds its 50% share and records its 50% share as Operating Expenses in its financial statements.

Investment in Subsidiary

For the three and six months ended June 30, 2024, the net operating expenses of $0.6 million and $1.3 million incurred by HCMC on behalf of HCWC were included in the Investment in Subsidiary. Upon Spin-Off, the Company wrote off the net investment in subsidiary balance to retained earnings.

Due to Related Party

Prior to the Spin-Off, there was no intercompany agreement between the Company and HCWC. Management has determined those intercompany receivables and payables will be settled within twelve months after the balance sheet date. As a result, the Company’s intercompany balances are reflected as “due to” or “due from” accounts in the consolidated balance sheets. At the time of Spin-off, the Company had a net receivable balance from HCWC in the amount of $1.2 million, and HCWC paid the balance in full to settle on the Spin-Off date of September 13, 2024. The Company had a net Due to Related Party balance of $2.1 million and $0.2 million as of June 30, 2025 and December 31, 2024, respectively. The increase in the Due to Related Party balance was a result of continued funding from HCWC to HCMC to support HCMC’s operations during the transition period, as compliant with the agreements with HCWC. HCWC’s cash advances to HCMC are transitional, short-term, and repayable within 12 months.

Agreements with HCWC

The Company entered into several agreements with HCWC that, among other things, affect the separation and govern the relationship of the parties following the Spin-Off. These agreements include:

● a Separation Agreement that will set forth HCMC’s and HCWC’s agreements regarding the principal actions that both parties will take in connection with the Spin-Off and aspects of our relationship following the Spin-Off;

● a Transition Services Agreement pursuant to which HCMC and HCWC will provide each other specified services on a transitional basis to help ensure an orderly transition following the Spin-Off.

● a Tax Matters Agreement (“TMA”) that will govern the respective rights, responsibilities and obligations of HCMC and HCWC after the Spin-Off with respect to all tax matters and will include restrictions to preserve the tax-free status of the Spin-Off; and

● an Employee Matters Agreement (“EMA”) that will address employment, compensation and benefits matters, including the allocation and treatment of assets and liabilities arising out of employee compensation and benefits programs in which our employees participated prior to the Spin-Off.

Under the terms of the transition services agreement, the HCMC will provide to HCWC, on a transitional basis, certain services or functions, including information technology, accounting, human resources, and payroll functions. Generally, these services will be provided for a period of up to one year following the Spin-Off. Consideration and costs for the transition services will be determined using several billing methodologies as described in the agreements, including customary billing and pass-through billing. Costs for transition services provided by the former parent are recorded within the Consolidated Statements of Operations based on the nature of the services.