S-1/A: Healthy Choice Wellness Corp. Files Amendment No. 5 to Form S-1 for Spin-Off and Public Offering

Healthy Choice Wellness Corp. updates its registration statement for a planned spin-off from Healthier Choices Management Corp. and a concurrent public offering.

Summary

• Healthy Choice Wellness Corp. (HCWC) has filed Amendment No. 5 to its Form S-1 registration statement.
• The filing relates to a planned spin-off of HCWC from Healthier Choices Management Corp. (HCMC).
• HCWC will own HCMC's retail stores, including Adas Natural Market, Paradise Health and Nutrition, Mother Earths Storehouse, Greens Natural Foods, Ellwood Thompsons, and GreenAcres Markets, as well as Healthy Choice Wellness Centers and the online entity thevitaminstore.com.
• HCMC is expected to be capitalized with approximately $4 million raised through a public offering (Offering), and has commitments for an additional $13.25 million upon the sale of HCWCs Series A Convertible Preferred Stock.
• The Offering is to be completed concurrently with the Distribution.
• HCWC has applied to have its Class A common stock be listed on the NYSE American exchange under the symbol HCWC and the approval for such listing is a condition to the Distribution occurring.
• The NYSE American exchange has conditioned the listing of the Class A common stock on, in addition to its standard listing requirements, the completion of the Offering.
• Holders of record of HCMCs common stock as of the record date will receive shares of HCWC Class A and shares of Class B common stock for every shares of HCMCs common stock held.
• The Class B common stock will be identical in all respects to the Class A common stock, except that Class B Common Stock will be subject to a 90-day transfer restriction (the Lock Up Period) following the Spin Off and will automatically convert into freely tradeable Class A common stock on the expiration of the Lock Up Period.
• The document details the terms of the spin-off, including the distribution ratio, conditions, and agreements between HCWC and HCMC.

Sentiment

Score: 6

Explanation: The document is primarily factual, outlining the details of the spin-off and public offering. While there are positive aspects highlighted, the risks and uncertainties temper the overall sentiment.

Positives

• The spin-off will allow HCWC to focus on and grow its business independently.
• HCWC will have its own balance sheet and direct access to capital sources.
• The separation will facilitate incentive compensation arrangements for employees more directly tied to the performance of each companys business.
• The spin-off will provide investors with two distinct, targeted investment opportunities.

Negatives

• The trading price of shares of HCMC common stock immediately following the Spin-Off will likely be lower than immediately prior to the Spin-Off because the trading price will no longer reflect the value of HCWC and our subsidiaries.
• It is possible that after the Spin-Off, the combined equity value of HCMC and the Company will be less than HCMCs equity value before the Spin-Off.

Risks

• The spin-off could result in significant tax liability to HCMC and its stockholders.
• HCWC may be unable to achieve some or all of the benefits that it expects to achieve from the spin-off.
• HCWC has no operating history as an independent publicly-traded company, and its historical financial information may not be a reliable indicator of its future results.
• An active trading market for HCWC's Class A common stock may not develop or be sustained after the spin-off.
• Substantial sales of the Class A common stock may occur in connection with the Spin-Off, which could cause our stock price to decline.

Future Outlook

HCWC intends to expand its store base through acquisitions, increase sales from existing customers, grow its customer base, and improve operating margins.

Management Comments

• I am pleased to report that the previously announced spin-off (the Distribution) by Healthier Choices Management Corp., which we refer to as HCMC, of all of the outstanding shares of common stock of its Healthy Choice Wellness Corp. subsidiary is expected to become effective on , 2024.
• Healthy Choice Wellness Corp., a Delaware corporation, which we refer to as HCWC, will become a publicly-traded company on that date.
• I suggest that you read it carefully.
• If you have any questions regarding the Distribution, please contact John Ollet, Chief Financial Officer, at jollet@hcmc1.com.

Industry Context

The document notes that the markets for natural and organic groceries and dietary supplements are large, fragmented, and highly competitive, with few barriers to entry.

Comparison to Industry Standards

• In determining its valuation of HCMC, Newbridge Securities Corporation compared the Company to other publicly traded companies including Costco Wholesale Corporation (annual revenue for fiscal year ended September 3, 2023 of approximately $242 billion and market capitalization as of July 22, 2024 of approximately $375.7 billion), Sysco Corporation (annual sales for fiscal year ended July 1, 2023 of approximately $76 billion and market capitalization as of July 22, 2024 approximately $36.7 billion) and Caseys General Stores, Inc. (annual revenue for fiscal year ended April 30, 2024 of approximately $15 billion and market capitalization as of July 22, 2024 of approximately $14.1 billion).
• Conversely, we had approximately $55.7 million of sales for our fiscal year ended December 31, 2023.
• Additionally, each of Costco Wholesale Corporation, Sysco Corporation and Caseys General Stores, Inc. have much broader industry focuses as they are not focused solely on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives, and sell significantly more goods, in significantly more locations.

Related Party Transactions

• HCMC will pay approximately $2,000,000 in offering costs, including underwriter commissions, legal, accounting, printing and other offering related costs.
• HCWC will issue 200,000 shares of common stock at an assumed offering price of $10.00 per share to HCMC in exchange payment of these offering costs by HCMC on behalf of HCWC, with such shares being distributed to the HCMC stockholders in connection with the Spin Off.

Stakeholder Impact

• HCMC stockholders will receive shares of HCWC Class A and Class B common stock.
• HCWC employees will have new incentive compensation arrangements.
• Investors will have two distinct, targeted investment opportunities.

Next Steps

• Completion of the $4 million public offering of Class A common stock.
• Approval of Class A common stock for listing on the NYSE American exchange.
• Distribution of HCWC common stock to HCMC stockholders.
• Sale and issuance of 13,250 shares of Series A Convertible Preferred Stock.

Key Dates

Keywords

spin-off, HCWC, HCMC, distribution, offering, Class A common stock, Class B common stock, NYSE American, wellness, grocery, Securities Act, registration statement