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Friday, June 18, 2021

Healthier Choices Management Corp. (OTCMKTS: HCMC) PMI Patent Infringement Lawsuit Q1 Results Bull in Waiting

Healthier Choices Management Corp. (OTCMKTS: HCMC) is easily among the most exciting stocks in small caps that continues to be the most talked about stocks in small caps with well over 400,000 shareholders of record. The stock is under heavy accumulation and rarely trades less than $5 million per day in dollar volume. Shareholders are looking for HCMC to blaze a path along the likes of Enzolytics or Tesoro and break out into a whole new dimension; a break over $0.0065 and its blue skies ahead. Microcapdaily first reported on HCMC in January 2021, not too long ago but the price was in the low triple zeroes at the time, a fraction of current levels. 

The big story is HCMC patent infringement lawsuit against billion-dollar conglomerate Philip Morris USA, Inc. and Philip Morris Products S.A. A settlement or licensing deal could drive HCMC into a whole new stratosphere with no limit to how high HCMC could go. The patent infringement lawsuit against Philip Morris USA, Inc. is moving forward and gaining steam. Representing HCMC is Cozen O’Connor ranked among the top 100 law firms in the country and employing more than 775 attorneys in 29 cities across two continents. The firm’s diverse client list includes global Fortune 500 companies, middle-market firms poised for growth, high-profile individuals and HCMC who must have a seriously solid case against PMI with outstanding chances. HCMC is already a revenue powerhouse doing well over $1 million per month in sales in 2020; Last week HCMC announced its financial results for the three-month period ended March 31, 2021. Net sales from operations amounted to approximately $3.5 million, down 14% from the same period last year; a significant portion of the decline related to last March’s COVID-19 sales surge in the grocery segment. Total operating expenses were $2 million and the Company reported a small net loss. Adjusted EBITDA loss amounted to $394,000, an improvement of approximately 9% when compared to the same period last year. 

Healthier Choices Management Corp. (OTCMKTS: HCMC) is a U.S based Company providing consumers with healthier alternatives to everyday lifestyle choices. Operating under its wholly owned subsidiaries, Healthy Choice Markets and Healthy Choice Markets 2, the Company owns both Ada’s Natural Market, a 18,000 sq. ft. full-service grocery store serving the Fort Myers, FL, and three (3) Paradise Health & Nutrition locations in the greater Melbourne, FL area. HCMC also operates 8 vape stores across the southeast United States offering smokers an alternative to traditional cigarettes. Operating regionally, through its Vape Store brands, including The Vape Store, Vapor Max, Vulcan Vape, and The Grab Bag locations, the Company’s Vape Stores provide an endless selection of industry best vaping hardware and e-liquids, giving its consumers a way to get their nicotine without the smoke, tar, ash or carbon monoxide found in traditional cigarettes.  

The Company is already a revenue powerhouse doing over $1 million per month in sales in 2020; Last week HCMC announced its financial results for the three-month period ended March 31, 2021. Net sales from operations amounted to approximately $3.5 million, down 14% from the same period last year; a significant portion of the decline related to last March’s COVID-19 sales surge in the grocery segment. Total operating expenses were $2 million and the Company reported a small net loss. Adjusted EBITDA loss amounted to $394,000, an improvement of approximately 9% when compared to the same period last year. 

Healthier Choices Management Corp. is being led by a powerhouse management team; the CEO Jeffrey Holman is a seasoned executive and corporate lawyer who also serves as President of Jeffrey E. Holman & Associates, P.A., a South Florida Based law firm. Mr. Hofman was also a partner at Holman, Cohen & Valencia. Christopher Santi, HCMC COO and President is sales executive who served as President of Santi Management Corporation before joining the Company. John Ollet the CFO previously served as Executive Vice President-Finance for Systemax, Inc. (NYSE:SYX) North America Technology Division for 10 years. SYX currently trades at $43 per share on the NYSE and does over a billion dollars in annual revenues.  

The Company owns a valuable patent portfolio related to both vape technology and also manufacturing processes and procedures for an imitation nicotine product. HCMC’s patented Q-Cup™ technology is based on a small, quartz cup called the Q-Cup™, which a customer can purchase already filled by a third party in some regions, or can partially fill themselves with either cannabis or CBD concentrate (approximately 50mg), also purchased from a third party.  The Q-Cup™ can then be inserted into the patented Q-Unit™, which heats the cup from the outside without coming in direct contact with the solid concentrate.  This Q-Cup™ and Q-Unit™ technology provides significantly more efficiency and an “on the go” solution for consumers who prefer to vape concentrates either medicinally or recreationally.  The Q-Cup™ can also be used in other devices as a convenient micro-dosing system. Most recently, the company formed a wholly owned subsidiary, HCMC Intellectual Property Holdings, LLC, to hold and market its intellectual property assets. This subsidiary will own all of the patents, trademarks and other intellectual property of HCMC and will be utilized in the company’s attempt to monetize its intellectual property.    

The big story on HCMC is its patent infringement lawsuit against Philip Morris USA, Inc. and Philip Morris Products S.A. in connection with their product known and marketed as “IQOS®.” The lawsuit was filed in the United States District Court for the Northern District of Georgia. The international law firm Cozen O’Connor has been engaged to represent HCMC in this matter. HCMC’s lawsuit includes claims that Phillip Morris is infringing HCMC’s patent rights in connection with IQOS®, an alternative tobacco product marketed and sold by Phillip Morris. Philip Morris claims that it is currently approaching 14 million users of its IQOS® product and has reportedly invested over $3 billion in their smokeless tobacco products. Philip Morris has been very open about their ongoing transition from traditional fully combustible cigarettes to their modified risk tobacco products, including IQOS®. The Philip Morris IQOS® product is currently the subject of two other patent infringement proceedings filed by RJ Reynolds Tobacco Company. One proceeding is before the International Trade Commission and seeks to stop the importation of the IQOS® product into the United States; the other is a patent infringement action currently pending in the Eastern District of Virginia. RJ Reynolds’ patents are unrelated and not affiliated with the patents asserted in the HCMC case.   

In its patent infringement lawsuit against Philip Morris, Cozen O’Connor is representing HCMC; Cozen O’Connor is ranked among the top 100 law firms in the country and employs more than 775 attorneys in 29 cities across two continents. Cozen O’Connor is a full-service firm with nationally recognized practices in litigation, business law, and government relations, and its attorneys have experience operating in all sectors of the economy. The firm’s diverse client list includes global Fortune 500 companies, middle-market firms poised for growth, high-profile individuals and ambitious upstarts like HCMC. Cozen O’Connor has been awarded as the #1 law firm of the year several times, amongst dozens of other awards and would not take on a giant such as Philip Morris unless they knew for sure they have a very strong case and excellent chances. 

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HCMC

Cozen O’Connor has been busy at court on behalf of HCMC; Upcoming events through beginning of May 2021:  

(1) HCMC’s Opposition to PM’s MTD (March 11, 2021): Absent an extension of time to respond, HCMC’s opposition to PM’s MTD is due on or before March 11, 2021. I would expect some form of opposition that includes arguments that (a) dismissal is not warranted because discovery has not happened yet and discovery is needed in order to determine whether combustion is a process that occurs in the accused devices, (b) dismissal is not warranted without a claim construction that construes, amongst other terms, the term “combustion”, and (c) testimony, by way of a declaration, explaining that it is not dispositive, based on the documentary evidence presented by PM’s MTD, that there is no combustion. A well written opposition brief hitting those points will likely result in denial of the MTD. I would also expect that there be a request by HCMC to correct any defects in their complaint, should the court deem there to be any defects. That request is granted liberally and would overcome the MTD for the time being.  

(2) Rule 26(f) Meet and Confer (March 15, 2021): This is held in private between lead counsel for all parties. The parties are required to confer in person in an effort to settle the case, discuss discovery, limit issues, and discuss other matters.  

(3) PM’s Reply to HCMC’s Opposition (March 25, 2021): Absent an extension of time, PM will have the opportunity to reply to HCMC’s opposition brief regarding the MTD.  

(4) Joint Preliminary Report and Discovery Plan (April 12, 2021). Absent an extension of time, the parties will file this report and plan that results from the parties’ Rule 26(f) meeting and conference and sets forth numerous details including, amongst other things, the progress of settlement discussions, a proposed schedule of the case for fact discovery, motion practice, expert discovery, and trial.  

(5) Infringement Contentions (May 12, 2021): HCMC is due to serve contentions showing infringement where HCMC will identify (these are usually exchanged between the parties and not made public or filed publicly with sensitive information redacted): (a) Each claim of each patent in suit that is allegedly infringed by each opposing party; (b) Separately for each asserted claim, each accused apparatus, method, composition or other instrumentality (“Accused Instrumentality”) of each accused party of which the claiming party is aware.

On May 5 HCMC provided an informational update to stockholders regarding its proposed rights offering and the expected key dates and terms relative to the offering. Stockholders of record on May 18, 2021 (the “Record Date”) will be entitled to participate in the rights offering. Prospective stockholders who wish to participate in the rights offering are advised to ensure that they complete their open market purchases of HCMC’s common stock by May 14, 2021 to be considered a stockholder of record on the Record Date. 

Under the proposed rights offering, HCMC will distribute one non-transferable subscription right for each four shares of common stock held by a Stockholder on the record date of May 18, 2021. Each subscription right will entitle the holder to purchase one share of HCMC common stock at a subscription price equal to 75% of the volume-weighted average of the trading prices (VWAP) of our common stock on the OTC Pink Sheets for the five consecutive trading days ending on the expiration date of this rights offering (which equates to a 25% discount to the VWAP calculation). The subscription rights will be non-transferable and may only be exercised during the anticipated subscription period of May 19, 2021 through 5:00 PM ET on June 3, 2021, unless extended by HCMC. 

Last week HCMC announced its financial results for the three-month period ended March 31, 2021. Net sales from operations amounted to approximately $3.5 million, down 14% from the same period last year; a significant portion of the decline related to last March’s COVID-19 sales surge in the grocery segment. Total operating expenses were $2 million and the Company reported a small net loss. Adjusted EBITDA loss amounted to $394,000, an improvement of approximately 9% when compared to the same period last year. 

Jeffrey Holman CEO stated “We are pleased with our first quarter results which reflect the normalizing of sales and the increasingly improving momentum of our operating cost reductions. We continue with our commitment to better the fundamentals of our operations. The progress made is largely attributable to simplifying our structure and sharpening our focus, and we believe that our businesses are well poised to continue delivering operational improvement.” 

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HCMC is easily among the most exciting stocks in small caps that continues to be the most talked about stocks in small caps with well over 400,000 shareholders of record. The stock is under heavy accumulation and rarely trades less than $5 million per day in dollar volume. Shareholders are looking for HCMC to blaze a path along the likes of Enzolytics or Tesoro and break out into a whole new dimension; a break over $0.0065 and its blue skies ahead. Microcapdaily first reported on HCMC in January 2021, not too long ago but the price was in the low triple zeroes at the time, a fraction of current levels.  The big story is HCMC patent infringement lawsuit against billion-dollar conglomerate Philip Morris USA, Inc. and Philip Morris Products S.A. A settlement or licensing deal could drive HCMC into a whole new stratosphere with no limit to how high HCMC could go. The patent infringement lawsuit against Philip Morris USA, Inc. is moving forward and gaining steam. Representing HCMC is Cozen O’Connor ranked among the top 100 law firms in the country and employing more than 775 attorneys in 29 cities across two continents. The firm’s diverse client list includes global Fortune 500 companies, middle-market firms poised for growth, high-profile individuals and HCMC who must have a seriously solid case against PMI with outstanding chances. HCMC is already a revenue powerhouse doing well over $1 million per month in sales in 2020; Last week HCMC announced its financial results for the three-month period ended March 31, 2021. Net sales from operations amounted to approximately $3.5 million, down 14% from the same period last year; a significant portion of the decline related to last March’s COVID-19 sales surge in the grocery segment. Total operating expenses were $2 million and the Company reported a small net loss. Adjusted EBITDA loss amounted to $394,000, an improvement of approximately 9% when compared to the same period last year. Microcapdaily first reported on HCMC on January 27 as the stock was moving up in the low triple zeroes. We will be updating on HCMC when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with HCMC.

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Disclosure: we hold no position in HCMC either long or short and we have not been compensated for this article.

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2 COMMENTS

  1. I’m not selling my 1 million shares for a few pennies. I’ll sell a few at sing digit dollars but I’m waiting on the double digit dollars. I passed up netflix, and amazon. I’m in this one for the win.

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