Executive Summary

Net sales declined 69% year over year to $1.47M in Q1 2015, driven by wholesale strategy changes, product returns, and an ongoing shift from e‑cigarettes to vaporizers; net loss widened to $3.98M (loss per share $(0.18)) .
Management emphasized a strategic pivot to higher‑end vaporizers and retail expansion; 10 “The Vape Store” locations are operating, with plans for “20+” stores by year‑end 2015 and “at least an additional 10” openings in 2015 .
Liquidity is constrained: cash $1.91M, negative working capital ~$0.81M, going‑concern language added; Q1 operating cash outflow was $(2.15)M; a $3.5M equity private placement closed in March to bridge near‑term needs .
No Wall Street consensus estimates were available via S&P Global for Q1 2015; therefore, beat/miss analysis vs Street cannot be assessed (S&P Global consensus unavailable).

What Went Well and What Went Wrong

What Went Well
- Retail footprint growing: “Recently opened four new ‘The Vape Store’ retail locations… with plans to open at least an additional 10 locations by the end of 2015” and “poised to have a total of 20‑plus branded retail vape stores” in FY15 .
- Strategic focus shift: Company “continues to develop new technologies” and is pivoting to higher‑end vaporizers and dedicated retail channels aligned with market trends .
- CEO confidence: “While we are excited by the progress… expected operational and financial contributions of Vaporin… we look forward to demonstrating markedly improved operating and financial results” (Jeffrey Holman) .
What Went Wrong
- Sharp revenue contraction: Net sales fell to $1.47M from $4.79M YoY, largely due to wholesale strategy changes, product returns/liquidations, and timing of the Vaporin merger late in the quarter .
- Margin deterioration and losses: Gross margin turned negative (gross loss $(0.18)M) and operating loss reached $(3.53)M; interest expense rose to $0.38M on new debt; net loss widened to $(3.98)M .
- Liquidity stress: Negative working capital (~$0.81M), going‑concern disclosure, and reliance on external financing; Q1 operating cash burn $(2.15)M) .

Financial Results

YoY comparison

Metric	Q1 2014	Q1 2015
Revenue ($USD)	$4,792,544	$1,468,621
EPS (Basic & Diluted, $USD)	$(0.09)	$(0.18)
Gross Margin %	20.0%	-12.4% (computed from )
EBIT (Operating Income, $USD)	$(2,176,725)	$(3,530,855)
EBIT Margin %	-45.4% (computed from )	-240.4% (computed from )
Net Income ($USD)	$(1,452,759)	$(3,981,196)

Sequential trend (last available quarters)

Metric	Q2 2014	Q3 2014	Q1 2015
Revenue ($USD)	$6,081,322	$2,673,926	$1,468,621
EPS (Basic & Diluted, $USD)	$0.00	$0.02	$(0.18)
Gross Margin %	25.3%	24.2%	-12.4% (computed from )
EBIT (Operating Income, $USD)	$26,839	$393,284	$(3,530,855)
EBIT Margin %	0.4% (computed from )	14.7% (computed from )	-240.4% (computed from )

Segment breakdown

Not disclosed by segment in filings; operations described as wholesale, online, and company‑owned retail with increasing focus on vape stores .

KPIs

KPI	Q1 2015
“The Vape Store” locations (operating)	10 stores
New store openings in quarter	4 new vape stores
Kiosks closed (Mar–Apr 2015 subsequent events)	7 kiosks closed
Cash and Equivalents ($USD)	$1,911,199
Inventory ($USD)	$2,536,149
Working Capital ($USD)	$(811,970)
Cash used in operations ($USD)	$(2,149,505)
Interest expense ($USD)	$378,775
Advertising expense ($USD)	$105,177

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Retail store count (branded vape stores)	FY 2015	10 “The Vape Store” locations operating	“20+ branded retail vape stores” by YE 2015	Raised/Expanded
New locations to open	FY 2015	Not previously quantified	“At least an additional 10 locations” in 2015	Initiated
E‑commerce platform	2015	Not previously discussed	“Will soon launch a more robust e‑commerce platform”	Initiated

Earnings Call Themes & Trends

Note: No Q1 2015 earnings call transcript was found in our document catalog for HCMC; themes below reflect MD&A and press release commentary .

Topic	Previous Mentions (Q2 2014, Q3 2014)	Current Period (Q1 2015)	Trend
Product mix shift to vaporizers	Emphasis on vaporizers and USA e‑liquids; margins pressured by incentives and inventory provisions	Strategy to focus more resources on vaporizers aligned with market trends	Strengthening pivot
Retail expansion	Planned kiosks and one store; nine leases signed in Q3	10 vape stores operating; 4 newly opened; plan 20+ by YE	Accelerating retail focus (with kiosk rationalization)
Returns and inventory write‑downs	~$415k provision; incentives to move legacy e‑cig inventory	E‑cig product returns and liquidation below cost; write‑down $70,657 consignment	Normalizing per management, but still a headwind
Regulatory/legal	FDA rulemaking risk; patent litigation ongoing	Fontem cases consolidated; trial scheduled Nov 2015	Ongoing legal overhang
Liquidity/financing	Working capital decline; term loans; convertible notes	Negative WC (~$0.81M); going concern; $3.5M private placement	Heightened liquidity risk; active financing
Technology/health features	Product development highlighted in 10‑K (biometric lock, patents)	Press release mentions patent‑pending locking systems, fingerprint lock	Continued innovation focus

Management Commentary

CEO perspective on the merger and trajectory: “Since completing our acquisition of Vaporin in early March, we have worked diligently to strengthen our management team, streamline our supply chain, redefine our marketing strategies and fortify our brick‑and‑mortar retail presence… we look forward to demonstrating markedly improved operating and financial results” — Jeffrey Holman, CEO .
Strategic focus: “Focusing more of its resources on strategically growing sales for its lines of vaporizer products will be a key driver for growth” and expansion to “20‑plus branded retail vape stores” by year‑end to become “the first national vaporizer retailer” .
Returns/write‑downs context: Management believes “the majority of returns and write downs on ecig product have occurred,” enabling focus on future growth .
Liquidity and going concern: “Substantial doubt” disclosed; negative working capital and need for additional financing to maintain and expand operations .

Q&A Highlights

No public Q1 2015 earnings call transcript was available in our document catalog; guidance and strategy were communicated via press release and 10‑Q .

Estimates Context

Wall Street consensus estimates (EPS and revenue) via S&P Global were unavailable for HCMC in Q1 2015; as a result, we cannot assess a beat/miss vs Street for the quarter (S&P Global consensus unavailable).

Key Takeaways for Investors

Liquidity remains the primary risk: negative working capital (~$0.81M), going‑concern disclosure, and operating cash burn $(2.15)M) in Q1; near‑term execution depends on additional financing and cash discipline .
Retail expansion is the core growth lever: 10 stores operating with plans for 20+ by year‑end; accelerated store rollout could begin contributing in Q2/Q3 as integration and ramp timing normalizes .
Margin headwinds from product returns/liquidations weighed on Q1; management expects the worst of e‑cig write‑downs to be behind them, which should aid gross margin trajectory as mix moves to vaporizers .
Debt service and financing costs are material (interest expense $0.38M in Q1); equity dilution risk persists given recent private placement and covenant constraints cited in FY14/10‑Q disclosures .
Legal overhang (Fontem litigation) continues with trial scheduled for Nov 2015; monitor case developments and potential costs/reserves .
With no Street coverage available, trading may be more reactive to reported fundamentals and corporate events (store openings, financing, regulatory updates) than to consensus‑driven expectations (S&P Global consensus unavailable).

Sources: Company press release and Form 8‑K (May 15, 2015) ; Q1 2015 Form 10‑Q (May 15, 2015) ; Q3 2014 Form 10‑Q (Nov 14, 2014) ; Q2 2014 Form 10‑Q (Aug 14, 2014) ; Q1 2014 Form 10‑Q (May 15, 2014) ; FY2014 Form 10‑K (Mar 31, 2015) .

Healthier Choices Management Corp. (HCMC)·Q1 2015 Earnings Summary