Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 22, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Healthier Choices Management Corp. | |
Entity Central Index Key | 844,856 | |
Trading Symbol | HCMC | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 29,348,867,108 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 8,231,314 | $ 13,366,272 |
Due from merchant credit card processors, net of reserves | 28,410 | 30,272 |
Accounts receivable, net of allowance of $10,734 and $33,367, respectively | 74,937 | 25,798 |
Inventories | 937,383 | 748,551 |
Prepaid expenses and vendor deposits | 91,460 | 93,229 |
Current assets from discontinued operations | 52,903 | |
TOTAL CURRENT ASSETS | 9,363,504 | 14,317,025 |
Property and equipment, net of accumulated depreciation of $345,211 and $293,398, respectively | 611,096 | 638,926 |
Intangible assets, net | 1,599,871 | 1,669,329 |
Goodwill | 481,314 | 481,314 |
Other assets | 119,285 | 128,157 |
TOTAL ASSETS | 12,175,070 | 17,234,751 |
CURRENT LIABILITIES | ||
Accounts payable | 541,710 | 520,586 |
Accrued expenses | 579,353 | 779,676 |
Current portion of capital lease | 53,054 | |
Current portion of loan payable | 2,083 | |
Derivative liabilities - non-consenting warrants | 398,952 | 955,173 |
Derivative liabilities - consenting warrants | 9,832,745 | 11,912,906 |
Current liabilities from discontinued operations | 555,810 | |
TOTAL CURRENT LIABILITIES | 11,354,843 | 14,777,205 |
Loan payable, net of current portion | 10,997 | |
TOTAL LIABILITIES | 11,365,840 | 14,777,205 |
COMMITMENTS AND CONTINGENCIES (SEE NOTE 10) | ||
STOCKHOLDERS' EQUITY | ||
Common Stock, $.0001 par value per share, 750,000,000,000 shares authorized; 29,348,867,108 and 14,213,861,174 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | 2,934,887 | 1,421,386 |
Additional paid-in capital | 7,921,897 | 3,782,818 |
Accumulated deficit | (10,047,554) | (2,746,658) |
TOTAL STOCKHOLDERS' EQUITY | 809,230 | 2,457,546 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 12,175,070 | $ 17,234,751 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net allowance | $ 10,734 | $ 33,367 |
Property and equipment, net of accumulated depreciation | $ 345,211 | $ 293,398 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 750,000,000,000 | 750,000,000,000 |
Common stock, shares issued | 29,348,867,108 | 14,213,861,174 |
Common stock, shares outstanding | 29,348,867,108 | 14,213,861,174 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
SALES | ||||
Vapor sales, net | $ 1,410,003 | $ 1,474,581 | $ 4,398,942 | $ 5,313,849 |
Grocery sales, net | 1,447,040 | 1,575,037 | 5,349,800 | 2,085,293 |
TOTAL SALES, NET | 2,857,043 | 3,049,618 | 9,748,742 | 7,399,142 |
Cost of sales vapor | 709,445 | 655,856 | 1,877,686 | 2,441,715 |
Cost of sales grocery | 893,838 | 939,606 | 3,118,563 | 1,251,872 |
GROSS PROFIT | 1,253,760 | 1,454,156 | 4,752,493 | 3,705,555 |
OPERATING EXPENSES | ||||
Advertising | 16,243 | 36,008 | 74,902 | 58,110 |
Selling, general and administrative | 4,256,080 | 2,456,313 | 12,208,030 | 7,064,511 |
Impairment of goodwill and intangible assets | 1,977,829 | |||
Retail store and kiosk closing costs | 9,243 | 342,503 | ||
Total operating expenses | 4,272,323 | 2,501,564 | 12,282,932 | 9,442,953 |
LOSS FROM OPERATIONS | (3,018,563) | (1,047,408) | (7,530,439) | (5,737,398) |
OTHER INCOME (EXPENSE) | ||||
Gain (loss) on repurchase of Series A warrants | (20,160) | 3,437,221 | (94,955) | 5,189,484 |
Change in fair value of derivative liabilities | (4,812,510) | (18,489,507) | ||
Other income | 9,665 | 20,126 | ||
Interest income | 4,463 | 21,845 | 26,441 | 38,418 |
Interest expense | (419) | (3,162) | (3,552) | (12,854) |
Total other expense, net | (6,451) | (1,356,606) | (51,940) | (13,274,459) |
Net loss from continuing operations | (3,025,014) | (2,404,014) | (7,582,379) | (19,011,857) |
Net income (loss) from discontinued operations | 204,507 | (8,915) | 281,483 | (777,119) |
NET LOSS | $ (2,820,507) | $ (2,412,929) | $ (7,300,896) | $ (19,788,976) |
NET LOSS PER SHARE-BASIC AND DILUTED | ||||
Continuing operations | $ 0 | $ 0 | $ 0 | $ (0.01) |
Discontinued operations | 0 | 0 | 0 | 0 |
NET LOSS PER SHARE-BASIC AND DILUTED | $ 0 | $ 0 | $ 0 | $ (0.01) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 29,327,284,303 | 5,428,877,583 | 25,138,693,169 | 1,966,720,262 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($) | Total | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Beginning balance at Dec. 31, 2016 | $ 2,457,546 | $ 1,421,386 | $ 3,782,818 | $ (2,746,658) |
Beginning balance, shares at Dec. 31, 2016 | 14,213,861,174 | |||
Issuance of common stock in connection with cashless exercise of Series A warrants | 304,072 | $ 1,512,501 | (1,208,429) | |
Issuance of common stock in connection with cashless exercise of Series A warrants, shares | 15,125,005,934 | |||
Issuance of stock options in connection with professional services | 9,000 | 9,000 | ||
Stock options exercised | 1,000 | $ 1,000 | ||
Stock options exercised, shares | 10,000,000 | |||
Stock-based compensation expense | 5,338,508 | 5,338,508 | ||
Net loss | (7,300,896) | 7,300,896 | (7,505,403) | |
Ending balance at Sep. 30, 2017 | $ 809,230 | $ 2,934,887 | $ 7,921,897 | $ (10,252,061) |
Ending balance, shares at Sep. 30, 2017 | 29,348,867,108 | 10,047,554 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
OPERATING ACTIVITIES | ||
Net loss | $ (7,300,896) | $ (19,788,976) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
(Income) loss from discontinued operations | (281,483) | 777,119 |
Change in allowances for bad debt | (22,633) | 52,684 |
Depreciation and amortization | 261,456 | 223,772 |
Loss on disposal of property and equipment | 103,312 | |
Accretion of discounts on notes receivable from related party | (7,242) | |
Accrued interest on notes receivable from related party | (8,773) | |
(Gain) loss on repurchase of Series A warrants | 94,955 | (5,189,484) |
Write-down of obsolete and slow moving inventory | 290,574 | 295,940 |
Stock-based compensation expense | 5,338,508 | 61,794 |
Stock-based expense in connection with professional services | 9,002 | |
Impairment of goodwill and intangible assets | 1,977,829 | |
Change in fair value of derivative liabilities | 18,489,507 | |
Net cash used in discontinued operations | (221,424) | (2,996,504) |
Changes in operating assets and liabilities: | ||
Due from merchant credit card processors | 1,862 | (20,708) |
Accounts receivable | (26,506) | (319,407) |
Inventories | (479,406) | (438,509) |
Prepaid expenses and vendor deposits | 1,769 | 410 |
Other assets | 8,872 | (2,573) |
Accounts payable | 21,124 | 165,777 |
Accrued expenses | (200,323) | (344,579) |
Customer deposits | 17,997 | |
NET CASH USED IN OPERATING ACTIVITIES | (2,504,549) | (6,950,614) |
INVESTING ACTIVITIES | ||
Acquisition of grocery store business | (2,910,612) | |
Proceeds received from sale of tradename | 100,000 | |
Issuance of note receivable to related party in conjunction with sale of wholesale business | (500,000) | |
Collection of loans receivable | 139,765 | |
Purchases of patent | (50,000) | |
Purchases of property and equipment | (114,168) | (29,763) |
NET CASH USED IN INVESTING ACTIVITIES | (164,168) | (3,200,610) |
FINANCING ACTIVITIES | ||
Proceeds from loan payable | 13,977 | |
Principal payments on loan payable | (897) | |
Payments for repurchase of Series A warrants | (2,427,267) | (3,278,827) |
Principal payments of capital lease obligations | (53,054) | (50,050) |
Proceeds from exercise of stock options | 1,000 | |
NET CASH USED IN FINANCING ACTIVITIES | (2,466,241) | (3,328,877) |
DECREASE IN CASH | (5,134,958) | (13,480,101) |
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 13,366,272 | 27,214,991 |
CASH AND CASH EQUIVALENTS - END OF PERIOD | 8,231,314 | 13,734,890 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 3,552 | 12,854 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Recognition of discounts in connection with notes receivables to related party | (46,850) | |
Issuance of common stock in connection with cashless exercise of Series A warrants | 304,072 | 4,498,048 |
Cancellation of treasury stock | 140,591 | |
Preliminary Purchase Price Allocation in connection with the grocery store acquisition: | ||
Amount allocated to goodwill | 481,314 | |
Property and equipment | 500,225 | |
Intangible assets - favorable lease | 890,000 | |
Intangible assets - customer relationships | 60,000 | |
Intangible assets - tradenames and technology | 824,500 | |
Inventory | 253,524 | |
Accrued expenses | (98,951) | |
Cash used in the grocery store acquisition | 2,910,612 | |
Sale of Vape Wholesale Inventory and Business Consideration received: | ||
Note receivable from related party, net of discount | 356,895 | |
Note receivable from related party, net of discount | 470,485 | |
Treasury stock | 140,591 | |
Total consideration | 967,971 | |
Assets and liabilities transferred: | ||
Inventory | (258,743) | |
Accounts receivable, net | (244,735) | |
Vendor deposits | (40,949) | |
Accrued expenses | (35,273) | |
Customer deposits | 17,850 | |
Loss on repurchase of treasury stock | 61,850 | |
Cash used in the sale of wholesale business | $ (500,000) |
Organization, Going Concern, an
Organization, Going Concern, and Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Going Concern, and Basis of Presentation [Abstract] | |
ORGANIZATION, GOING CONCERN, AND BASIS OF PRESENTATION | Note 1. ORGANIZATION, GOING CONCERN, AND BASIS OF PRESENTATION Organization Healthier Choices Management Corp. (the “Company”) is a holding company focused on providing consumers with healthier daily choices with respect to nutrition and other lifestyle alternatives. The Company operates thirteen vape retail stores in the Southeast region of the United States of America. The Company offers e-liquids vaporizers and related products through its vape retail stores. The Company sold its wholesale business on July 31, 2016. The sale of the wholesale business was not contemplated prior to July 1, 2016. The sale of the wholesale business qualifies as a discontinued operation and, accordingly, the Company has excluded results for the wholesale business operations from the Company’s continuing operations in the unaudited consolidated Statements of Operations for all periods presented. On June 1, 2016, the Company acquired the business assets of Ada’s Whole Food Market LLC, a natural and organic grocery store, through its wholly owned subsidiary Healthy Choice Markets, Inc. The grocery store has been a leader in the natural grocery market in Fort Myers, Florida for the past 40 years, offering fresh, natural and organic products and specializing in facilitating a healthy, well balanced lifestyle. In addition to a comprehensive selection of vitamins and health & beauty products, the grocery store provides a fresh café and an organic juice bar. In September 2017, Hurricane Irma struck Florida and caused major power outages to several of the Company’s operating facilities. Due to the loss of electricity, which lasted approximately one week, the Company suffered lost sales and inventory spoilage. The Company intends to submit insurance claims to recover the cost of lost sales and inventory spoilage, however, such claims have not, and may not, be accepted by our insurance carrier. Going Concern and Liquidity The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and realization of assets and satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of any uncertainties related to our going concern assessment. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The Company incurred a loss from operations of approximately $7.5 million for the nine months ended September 30, 2017. As of September 30, 2017, cash and cash equivalents totaled approximately $8.2 million. While we anticipate that our current cash, cash equivalents, and cash to be generated from operations will be sufficient to meet our projected operating plans for the foreseeable future through a year and a day from the issuance of these unaudited consolidated financial statements, should we require additional funds (either through equity or debt financings, collaborative agreements or from other sources) we have no commitments to obtain such additional financing, and we may not be able to obtain any such additional financing on terms favorable to us, or at all. If adequate financing is not available, the Company will further delay, postpone or terminate product and service expansion and curtail certain selling, general and administrative operations. The inability to raise additional financing may have a material adverse effect on the future performance of the Company. Sourcing and Vendors We source from multiple suppliers. These suppliers range from small independent businesses to multinational conglomerates. For the nine months ended September 30, 2017, we purchased approximately 75% of the goods we sell from our top 20 suppliers and approximately 40% of our total purchases were from one vendor. Basis of Presentation and Principles of Consolidation The Company’s unaudited consolidated financial statements are prepared in accordance with GAAP. The unaudited consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date. T Unaudited Interim Financial Information The unaudited consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending December 31, 2017. Certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been omitted under the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). These unaudited consolidated financial statements and notes included herein should be read in conjunction with the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for such year as filed with the SEC on March 27, 2017. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reclassifications Certain prior period amounts in the unaudited consolidated financial statements related to stock splits and the sale of discontinued operations have been reclassified to conform to the current period’s presentation. No changes to the Company’s net loss were made as a result of such reclassifications. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision makers, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s decision-making group is the senior executive management team. The Company and the decision-making group views the Company’s operations and manage its business as two operating segments. All long-lived assets of the Company reside in the U.S. Use of Estimates in the Preparation of the Financial Statements The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the valuation of assets and liabilities acquired in business combinations. Certain of management’s estimates could be affected by external conditions, including those unique to the Company’s industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from those estimates. The Company re-evaluates all accounting estimates at least quarterly based on these conditions and records adjustments when necessary. Shipping and Handling Shipping charges billed to customers are included in net sales and the related shipping and handling costs are included in cost of sales. For the nine months ended September 30, 2017 and 2016 shipping and handling costs of approximately $80,000 and $173,000, respectively, were included in cost of sales. Concentration of Risk O At September 30, 2017, accounts receivable balances included a concentration from three customers with receivable balances ranging from approximately $15,000 to $17,000, all of which are greater than 10% of the total net accounts receivable balance. At December 31, 2016, accounts receivable balances included a concentration from three customers with receivable balances ranging from approximately $9,000 to $24,000, all of which are greater than 10% of the total net accounts receivable balance. For the nine months ended September 30, 2017 and 2016, the Company did not have any customers with sales in excess of 10% of total sales. Inventories Inventories are stated at average cost. If the cost of the inventories exceeds their net realizable value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale, such as fresh produce, perishable grocery items and non-perishable consumable goods. Identifiable Intangible Assets and Goodwill Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets are amortized over 3 and 15 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indefinite-lived intangible assets, such as goodwill are not amortized. The Company assesses the carrying amounts of goodwill for recoverability on at least an annual basis or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value based test. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, and the useful life over which cash flows will occur. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for the Company. During the third quarter of 2017, we changed the date of our annual impairment test from December 31st to September 30th. We believe the change in accounting principle related to changing our annual impairment testing date did not delay, accelerate, or avoid an impairment charge. We have determined that this change in accounting principle is preferable under the circumstances and does not result in adjustments to our financial statements when applied retrospectively. Our 2017 annual impairment test resulted in no impairment being recorded for the nine months ended September 30, 2017. Adopted Accounting Pronouncements In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 did not have a significant impact on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The adoption of ASU 2016-09 did not have a significant impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in ASU 2017-01 are to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The adoption of ASU 2017-01 did not have a significant impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 along with amending other parts of the goodwill impairment test. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. At adoption, this update will require a prospective approach. The adoption of ASU 2017-04 did not have a significant impact on the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which was subsequently modified in August 2015 by ASU No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date”. As a result, the ASU No. 2014-09 is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20). The Company will adopt the standard on January 1, 2018, but is still considering whether to use the retrospective or modified retrospective transition method. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and annual and interim periods thereafter, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15 (Topic 230), “Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments”. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures. In July 2017, the FASB issued a two-part ASU No. 2017-11, I “Accounting for Certain Financial Instruments With Down Round Features” and II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception”. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. |
Discontinued Operations
Discontinued Operations | 9 Months Ended |
Sep. 30, 2017 | |
Discontinued Operations [Abstract] | |
DISCONTINUED OPERATIONS | Note 3. DISCONTINUED OPERATIONS Effective July 31, 2016, the Company sold its wholesale inventory and the related business operations (collectively, “Wholesale Business Assets”). The sale of the wholesale business qualifies as discontinued operations, and accordingly, the Company has excluded results for the wholesale business operations from the Company’s continuing operations in the unaudited consolidated Statements of Operations for all periods presented. The following table shows the results of the Company’s wholesale operations included in the loss from discontinued operations. Sales shown in the following table are the elimination of sales returns reserves for which customers did not return products. Three Months Ended Nine Months Ended 2017 2016 2017 2016 Wholesale vapor sales, net $ 204,507 $ 281,398 $ 288,965 $ 3,125,736 Cost of sales – vapor wholesale - 203,482 - 2,832,564 Expenses – advertising selling, general and administrative - 86,831 7,482 1,070,291 Total - 290,313 7,482 3,902,855 Net income (1oss) from discontinued operations attributable to the wholesale business $ 204,507 $ (8,915 ) $ 281,483 $ (777,119 ) The major classes of assets and liabilities of discontinued operations on the balance sheet are as follow: September 30, December 31, 2016 Assets Accounts receivable $ - $ 39,493 Due from merchant credit card processor, net - 13,410 Total current assets from discontinued operations $ - $ 52,903 Liabilities Accrued expenses - 555,810 Total current liabilities from discontinued operations $ - $ 555,810 |
Acquisition of Ada's Whole Food
Acquisition of Ada's Whole Food Market | 9 Months Ended |
Sep. 30, 2017 | |
Acquisition of Ada's Whole Food Market [Abstract] | |
ACQUISITION OF ADA'S WHOLE FOOD MARKET | Note 4. ACQUISITION OF ADA’S WHOLE FOOD MARKET On April 1, 2016, the Company’s wholly owned subsidiary Healthy Choice Markets Inc., entered into a Business Sale Agreement with Ada’s Whole Food Market LLC (the “Seller”) to purchase certain operating assets and assumed certain payables and a store lease obligation that constituted the business of Ada’s Natural Market grocery store (the “Grocery Acquisition”). The Grocery Acquisition was consummated on June 1, 2016 and the Company operates the grocery store under the same name, location, and management. At the closing of these transactions, the Company also entered into an employment agreement with the store manager. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2017 | |
Segment Information [Abstract] | |
SEGMENT INFORMATION | Note 5. SEGMENT INFORMATION Prior to the second quarter of 2016, the Company had a single reportable business segment, as it was a distributor and retailer of vapor products including vaporizers, e-liquids and electronic cigarettes. On June 1, 2016, the Company completed the Grocery Acquisition (see Note 4) and added a reportable segment. On July 31, 2016, the Company sold its wholesale inventory and related operations. The Company has excluded the results for the wholesale business, as discontinued operations, from the Company’s continuing operations for all periods presented. Management determines the reportable segments based on the internal reporting used by our Chief Operating Decision Makers to evaluate performance and to assess where to allocate resources. The Company evaluates segment performance based on the segment gross profit before corporate expenses. Summarized below are the total net sales and segment operating loss for each reporting segment: Three Months Ended Net Sales Segment Gross Profit September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Vapor sales, net $ 1,410,003 $ 1,474,581 $ 700,558 $ 818,725 Grocery sales, net 1,447,040 1,575,037 553,202 635,431 Total sales $ 2,857,043 $ 3,049,618 1,253,760 1,454,156 Operating expenses 4,272,323 2,501,564 Operating loss (3,018,563 ) (1,047,408 ) Other expense, net (6,451 ) (1,356,606 ) Net loss from continuing operations (3,025,014 ) (2,404,014 ) Net income (loss) from discontinued operations 204,507 (8,915 ) Net loss $ (2,820,507 ) $ (2,412,929 ) F Nine Months Ended Net Sales Segment Gross Profit September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Vapor sales, net $ 4,398,942 $ 5,313,849 $ 2,521,256 $ 2,872,134 Grocery sales, net 5,349,800 2,085,293 2,231,237 833,421 Total sales $ 9,748,742 $ 7,399,142 4,752,493 3,705,555 Operating expenses 12,282,932 9,442,953 Operating loss (7,530,439 ) (5,737,398 ) Other expense, net (51,940 ) (13,274,459 ) Net loss from continuing operations (7,582,379 ) (19,011,857 ) Net income (loss) from discontinued operations 281 ,483 (777,119 ) Net loss $ (7,300,896 ) $ (19,788,976 ) For the nine months ended September 30, 2017, depreciation and amortization was $50,270 and $197,985 for Vapor and Grocery, respectively. For the nine months ended September 30, 2016, depreciation and amortization was $58,239 and $70,757 for Vapor and Grocery, respectively. |
Notes Receivable from Related P
Notes Receivable from Related Party | 9 Months Ended |
Sep. 30, 2017 | |
Notes Receivable from Related Party [Abstract] | |
NOTES RECEIVABLE FROM RELATED PARTY | Note 6. NOTES RECEIVABLE FROM RELATED PARTY In connection with the sale of its wholesale business, the Company entered into two notes receivable with a related party. As consideration for the sale of wholesale inventory and business the Company received a secured, one-year promissory note in the principal amount of $370,000 (the “Acquisition Note”) bearing an interest rate of 4.5%, which payments thereunder are $10,000 monthly, with such payments commencing on October 28, 2016, with a balloon payment of the remainder of principal and interest due on July 29, 2017. As of September 30, 2017, the balloon payment had not been received. The buyer and the Company entered into a secured, 36-month promissory note in the principal amount of $500,000 (the “Promissory Note”) bearing an interest rate of prime plus 2%, resetting annually on July 29 th th |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets [Abstract] | |
INTANGIBLE ASSETS | Note 7. INTANGIBLE ASSETS Intangible assets, net are as follows: September 30, 2017 Useful Lives (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Favorable lease 15 years $ 890,000 $ (77,629 ) $ 812,371 Trade names 10 years 820,000 (149,000 ) 671,000 Customer relationships 5 years 60,000 (16,000 ) 44,000 Technology 10 years 75,000 (5,000 ) 70,000 Website 3 years 4,500 (2,000 ) 2,500 Intangible assets, net $ 1,849,500 $ (249,629 ) $ 1,599,871 December 31, 2016 Useful Lives (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Favorable lease 15 years $ 890,000 $ (33,859 ) $ 856,141 Trade names 10 years 820,000 (87,500 ) 732,500 Customer relationships 5 years 60,000 (7,000 ) 53,000 Technology 10 years 25,000 (937 ) 24,063 Website 3 years 4,500 (875 ) 3,625 Intangible assets, net $ 1,799,500 $ (130,171 ) $ 1,669,329 I Years ending December 31, 2017 (remaining three months) $ 40,340 2018 161,361 2019 160,486 2020 159,861 2021 152,861 Thereafter 924,962 Total $ 1,599,871 |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity [Abstract] | |
STOCKHOLDERS' EQUITY | Note 8. STOCKHOLDERS’ EQUITY Reverse Splits On June 1, 2016, the Company’s Board of Directors effected a reverse stock split of the common stock at a ratio of 1-for-20,000. All share and per share amounts have been retroactively adjusted to reflect the reverse stock splits. Compensatory Common Stock Summary During the nine months ended September 30, 2017 and 2016, the Company recognized stock-based compensation expense related to compensatory Common Stock in the amount of $0 and $52,000, respectively. Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. As of September 30, 2017, there was no unamortized expense remaining related to stock awards because the remaining non-vested shares vested on April 1, 2016. Series A Warrants Through September 30, 2017, 1 Series A warrant has been exercised through the cashless exercise provision, resulting in the issuance of 15,125,005,934 shares of the Company’s common stock. A summary of warrant activity for the nine months ended September 30, 2017 is presented below: Exercise Price Warrant Common Stock Equivalent Remaining Contractual Term Outstanding at January 1, 2017 $ 0.0001 634,754,364,551 3.60 Warrants repurchased $ (0.000021 ) (114,796,220,280 ) Cashless exercises for common stock $ (0.0001 ) (15,125,005,934 ) Black Scholes Value adjustment $ (0.0001 ) (198,093,264 ) Outstanding at September 30, 2017 $ 0.0001 504,635,045,073 2.85 Pursuant to the Series A warrant agreement, the Black Scholes value is calculated by a third-party and utilized in calculating the warrant common stock equivalents at the point of cashless exercise. As such, the value is computed at the end of each reporting period to determine the amount of warrant common stock equivalents outstanding using the formula below: (Series A warrants exercised * Black Scholes Value) / closing common stock bid price as of two trading days prior. A summary of the outstanding warrant common stock equivalents at January 1, 2017 and September 30, 2017 is presented below: September 30, January 1, Warrants outstanding 33 42 Black Scholes value 1,519,079 1,519,297 Closing bid stock price $ 0.0001 $ 0.0001 Warrant common stock equivalent 504,635,045,073 634,754,364,551 Stock Options D A Loss per Share Basic loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed using the weighted average number of shares of common stock outstanding and, if dilutive, potential shares of common stock outstanding during the period. Potential common shares consist of incremental shares of common stock issuable upon (a) the exercise of stock options (using the treasury stock method); (b) the exercise of warrants (using the if-converted method). For the nine months ended September 30, 2017 and 2016, diluted loss per share excludes the potential shares of common stock, as their effect is antidilutive. The following table summarizes the Company’s securities, in common share equivalents, that have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive: September 30, 2017 September 30, 2016 Stock options 86,911,261,360 11,360 Warrants 504,635,045,073 655,691,759,993 Total 591,546,306,433 655,691,771,353 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Measurements [Abstract] | |
FAIR VALUE MEASUREMENTS | Note 9. FAIR VALUE MEASUREMENTS The fair value framework under FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows: ● Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; ● Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and ● Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. N The following table summarizes the liabilities measured at fair value on a recurring basis as of September 30, 2017: Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities– non-consenting warrants $ - $ 398,952 $ - $ 398,952 Derivative liabilities – consenting warrants - 9,832,745 - 9,832,745 Total derivative liabilities $ - $ 10,231,697 $ - $ 10,231,697 The following table summarizes the liabilities measured at fair value on a recurring basis as of December 31, 2016: Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – non-consenting warrants $ - $ 955,173 $ - $ 955,173 Derivative liabilities – consenting warrants - 11,912,906 - 11,912,906 Total derivative liabilities $ - $ 12,868,079 $ - $ 12,868,079 The Company determined that its offer to purchase its Series A warrants for $0.000021 per warrant was the best indicator of the fair value of the derivative liabilities as of September 30, 2017 and December 31, 2016. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Note 10. COMMITMENTS AND CONTINGENCIES Employment and Consulting and Other Related Party Agreements On April 8, 2016, Gregory Brauser informed the Board of his decision to resign from the Board and as President of the Company. Mr. Brauser’s resignation was not due to any disagreement with the Company on any matters relating to the Company’s operations, policies or practices. Through GAB Management Group, Inc., Mr. Brauser serves as a consultant to the Company pursuant to an Executive Services Consulting Agreement dated as of April 11, 2016 (the “Consulting Agreement”), the term of which is two years. Under the Consulting Agreement, GAB Management Group, Inc., will receive the following benefits in connection with consulting services that its principal, Mr. Brauser, provides to the Company: (1) an engagement fee of $50,000 payable at the time the Consulting Agreement is executed, and (2) thereafter monthly installments of $10,000 for 24 months. Legal Proceedings F Purchase Commitments At September 30, 2017 and December 31, 2016, the Company had vendor deposits of approximately $3,000 and $7,000, respectively, which are included as a component of prepaid expenses and vendor deposits in the consolidated balance sheets. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Reclassifications | Reclassifications Certain prior period amounts in the unaudited consolidated financial statements related to stock splits and the sale of discontinued operations have been reclassified to conform to the current period’s presentation. No changes to the Company’s net loss were made as a result of such reclassifications. |
Segment Reporting | Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the operating decision makers, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s decision-making group is the senior executive management team. The Company and the decision-making group views the Company’s operations and manage its business as two operating segments. All long-lived assets of the Company reside in the U.S. |
Use of Estimates in the Preparation of the Financial Statements | Use of Estimates in the Preparation of the Financial Statements The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the valuation of assets and liabilities acquired in business combinations. Certain of management’s estimates could be affected by external conditions, including those unique to the Company’s industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from those estimates. The Company re-evaluates all accounting estimates at least quarterly based on these conditions and records adjustments when necessary. |
Shipping and Handling | Shipping and Handling Shipping charges billed to customers are included in net sales and the related shipping and handling costs are included in cost of sales. For the nine months ended September 30, 2017 and 2016 shipping and handling costs of approximately $80,000 and $173,000, respectively, were included in cost of sales. |
Concentration of Risk | Concentration of Risk O At September 30, 2017, accounts receivable balances included a concentration from three customers with receivable balances ranging from approximately $15,000 to $17,000, all of which are greater than 10% of the total net accounts receivable balance. At December 31, 2016, accounts receivable balances included a concentration from three customers with receivable balances ranging from approximately $9,000 to $24,000, all of which are greater than 10% of the total net accounts receivable balance. For the nine months ended September 30, 2017 and 2016, the Company did not have any customers with sales in excess of 10% of total sales. |
Inventories | Inventories Inventories are stated at average cost. If the cost of the inventories exceeds their net realizable value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale, such as fresh produce, perishable grocery items and non-perishable consumable goods. |
Identifiable Intangible Assets and Goodwill | Identifiable Intangible Assets and Goodwill Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets are amortized over 3 and 15 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indefinite-lived intangible assets, such as goodwill are not amortized. The Company assesses the carrying amounts of goodwill for recoverability on at least an annual basis or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value based test. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, and the useful life over which cash flows will occur. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for the Company. During the third quarter of 2017, we changed the date of our annual impairment test from December 31st to September 30th. We believe the change in accounting principle related to changing our annual impairment testing date did not delay, accelerate, or avoid an impairment charge. We have determined that this change in accounting principle is preferable under the circumstances and does not result in adjustments to our financial statements when applied retrospectively. Our 2017 annual impairment test resulted in no impairment being recorded for the nine months ended September 30, 2017. |
Adopted Accounting Pronouncements | Adopted Accounting Pronouncements In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11 requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 did not have a significant impact on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”). ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The adoption of ASU 2016-09 did not have a significant impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in ASU 2017-01 are to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods, with early adoption permitted. The adoption of ASU 2017-01 did not have a significant impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 eliminates Step 2 along with amending other parts of the goodwill impairment test. Under ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, and interim periods therein with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. At adoption, this update will require a prospective approach. The adoption of ASU 2017-04 did not have a significant impact on the Company’s consolidated financial statements. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which was subsequently modified in August 2015 by ASU No. 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date”. As a result, the ASU No. 2014-09 is effective retrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20). The Company will adopt the standard on January 1, 2018, but is still considering whether to use the retrospective or modified retrospective transition method. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and annual and interim periods thereafter, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15 (Topic 230), “Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments”. The new standard will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017. The Company will require adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated cash flows and related disclosures. In July 2017, the FASB issued a two-part ASU No. 2017-11, I “Accounting for Certain Financial Instruments With Down Round Features” and II “Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception”. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this new standard will have on its consolidated financial statements. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Discontinued Operations [Abstract] | |
Schedule of income (loss) from discontinued operations | Three Months Ended Nine Months Ended 2017 2016 2017 2016 Wholesale vapor sales, net $ 204,507 $ 281,398 $ 288,965 $ 3,125,736 Cost of sales – vapor wholesale - 203,482 - 2,832,564 Expenses – advertising selling, general and administrative - 86,831 7,482 1,070,291 Total - 290,313 7,482 3,902,855 Net income (1oss) from discontinued operations attributable to the wholesale business $ 204,507 $ (8,915 ) $ 281,483 $ (777,119 ) |
Schedule of assets and liabilities of discontinued operations | September 30, December 31, 2016 Assets Accounts receivable $ - $ 39,493 Due from merchant credit card processor, net - 13,410 Total current assets from discontinued operations $ - $ 52,903 Liabilities Accrued expenses - 555,810 Total current liabilities from discontinued operations $ - $ 555,810 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Information [Abstract] | |
Schedule of net sales and segment operating loss | Three Months Ended Net Sales Segment Gross Profit September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Vapor sales, net $ 1,410,003 $ 1,474,581 $ 700,558 $ 818,725 Grocery sales, net 1,447,040 1,575,037 553,202 635,431 Total sales $ 2,857,043 $ 3,049,618 1,253,760 1,454,156 Operating expenses 4,272,323 2,501,564 Operating loss (3,018,563 ) (1,047,408 ) Other expense, net (6,451 ) (1,356,606 ) Net loss from continuing operations (3,025,014 ) (2,404,014 ) Net income (loss) from discontinued operations 204,507 (8,915 ) Net loss $ (2,820,507 ) $ (2,412,929 ) Nine Months Ended Net Sales Segment Gross Profit September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 Vapor sales, net $ 4,398,942 $ 5,313,849 $ 2,521,256 $ 2,872,134 Grocery sales, net 5,349,800 2,085,293 2,231,237 833,421 Total sales $ 9,748,742 $ 7,399,142 4,752,493 3,705,555 Operating expenses 12,282,932 9,442,953 Operating loss (7,530,439 ) (5,737,398 ) Other expense, net (51,940 ) (13,274,459 ) Net loss from continuing operations (7,582,379 ) (19,011,857 ) Net income (loss) from discontinued operations 281 ,483 (777,119 ) Net loss $ (7,300,896 ) $ (19,788,976 ) |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Intangible Assets [Abstract] | |
Schedule of intangible assets, net | September 30, 2017 Useful Lives (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Favorable lease 15 years $ 890,000 $ (77,629 ) $ 812,371 Trade names 10 years 820,000 (149,000 ) 671,000 Customer relationships 5 years 60,000 (16,000 ) 44,000 Technology 10 years 75,000 (5,000 ) 70,000 Website 3 years 4,500 (2,000 ) 2,500 Intangible assets, net $ 1,849,500 $ (249,629 ) $ 1,599,871 December 31, 2016 Useful Lives (Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Favorable lease 15 years $ 890,000 $ (33,859 ) $ 856,141 Trade names 10 years 820,000 (87,500 ) 732,500 Customer relationships 5 years 60,000 (7,000 ) 53,000 Technology 10 years 25,000 (937 ) 24,063 Website 3 years 4,500 (875 ) 3,625 Intangible assets, net $ 1,799,500 $ (130,171 ) $ 1,669,329 |
Schedule of future annual estimated amortization expense | Years ending December 31, 2017 (remaining three months) $ 40,340 2018 161,361 2019 160,486 2020 159,861 2021 152,861 Thereafter 924,962 Total $ 1,599,871 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Stockholders' Equity [Abstract] | |
Summary of warrant activity | Exercise Price Warrant Common Stock Equivalent Remaining Contractual Term Outstanding at January 1, 2017 $ 0.0001 634,754,364,551 3.60 Warrants repurchased $ (0.000021 ) (114,796,220,280 ) Cashless exercises for common stock $ (0.0001 ) (15,125,005,934 ) Black Scholes Value adjustment $ (0.0001 ) (198,093,264 ) Outstanding at September 30, 2017 $ 0.0001 504,635,045,073 2.85 |
Summary of the outstanding warrant common stock equivalents | September 30, January 1, Warrants outstanding 33 42 Black Scholes value 1,519,079 1,519,297 Closing bid stock price $ 0.0001 $ 0.0001 Warrant common stock equivalent 504,635,045,073 634,754,364,551 |
Summary of anti-dilutive activities excluded from basic and dilutive loss per share | September 30, 2017 September 30, 2016 Stock options 86,911,261,360 11,360 Warrants 504,635,045,073 655,691,759,993 Total 591,546,306,433 655,691,771,353 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Measurements [Abstract] | |
Schedule of liabilities measured at fair value on recurring basis | The following table summarizes the liabilities measured at fair value on a recurring basis as of September 30, 2017: Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – non-consenting warrants $ - $ 398,952 $ - $ 398,952 Derivative liabilities – consenting warrants - 9,832,745 - 9,832,745 Total derivative liabilities $ - $ 10,231,697 $ - $ 10,231,697 The following table summarizes the liabilities measured at fair value on a recurring basis as of December 31, 2016: Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – non-consenting warrants $ - $ 955,173 $ - $ 955,173 Derivative liabilities – consenting warrants - 11,912,906 - 11,912,906 Total derivative liabilities $ - $ 12,868,079 $ - $ 12,868,079 |
Organization, Going Concern, 23
Organization, Going Concern, and Basis of Presentation (Details) | 9 Months Ended | |||
Sep. 30, 2017USD ($)VendorSupplier | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2015USD ($) | |
Organization, Going Concern, and Basis of Presentation (Textual) | ||||
Loss from operations | $ 7,500,000 | |||
Cash and cash equivalents | $ 8,231,314 | $ 13,366,272 | $ 13,734,890 | $ 27,214,991 |
Suppliers [Member] | ||||
Organization, Going Concern, and Basis of Presentation (Textual) | ||||
Concentration risk, percentage | 75.00% | |||
Number of suppliers | Supplier | 20 | |||
Vendor [Member] | ||||
Organization, Going Concern, and Basis of Presentation (Textual) | ||||
Concentration risk, percentage | 40.00% | |||
Number of vendor | Vendor | 1 |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Summary of Significant Accounting Policies (Textual) | |||
Shipping and handling costs | $ 80,000 | $ 173,000 | |
Accounts receivable | $ 74,937 | $ 25,798 | |
Concentration customers | Three | Three | |
Sales [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Concentration risk, percentage | 10.00% | 10.00% | |
Minimum [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Accounts receivable | $ 15,000 | $ 9,000 | |
Intangible assets amortized term | 3 years | ||
Maximum [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Accounts receivable | $ 17,000 | $ 24,000 | |
Intangible assets amortized term | 15 years |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Discontinued Operations [Abstract] | ||||
Wholesale vapor sales, net | $ 204,507 | $ 281,398 | $ 288,965 | $ 3,125,736 |
Cost of sales - vapor wholesale | 203,482 | 2,832,564 | ||
Expenses - advertising selling, general and administrative | 86,831 | 7,482 | 1,070,291 | |
Total | 290,313 | 7,482 | 3,902,855 | |
Net income (loss) from discontinued operations attributable to the wholesale business | $ 204,507 | $ (8,915) | $ 281,483 | $ (777,119) |
Discontinued Operations (Deta26
Discontinued Operations (Details 1) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Accounts receivable | $ 39,493 | |
Due from merchant credit card processor, net | 13,410 | |
Total current assets from discontinued operations | 52,903 | |
Liabilities | ||
Accrued expenses | 555,810 | |
Total current liabilities from discontinued operations | $ 555,810 |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Net Sales | $ 2,857,043 | $ 3,049,618 | $ 9,748,742 | $ 7,399,142 |
Segment Gross Profit | 1,253,760 | 1,454,156 | 4,752,493 | 3,705,555 |
Operating expenses | 4,272,323 | 2,501,564 | 12,282,932 | 9,442,953 |
Operating loss | (3,018,563) | (1,047,408) | (7,530,439) | (5,737,398) |
Other expense, net | (6,451) | (1,356,606) | (51,940) | (13,274,459) |
Net income (loss) from discontinued operations | 204,507 | (8,915) | 281,483 | (777,119) |
Net loss | (2,820,507) | (2,412,929) | (7,300,896) | (19,788,976) |
Operating segment [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Operating expenses | 4,272,323 | 2,501,564 | 12,282,932 | 9,442,953 |
Operating loss | (3,018,563) | (1,047,408) | (7,530,439) | (5,737,398) |
Other expense, net | (6,451) | (1,356,606) | (51,940) | (13,274,459) |
Net loss from continuing operations | (3,025,014) | (2,404,014) | (7,582,379) | (19,011,857) |
Net income (loss) from discontinued operations | 204,507 | (8,915) | 281,483 | (777,119) |
Net loss | (2,820,507) | (2,412,929) | (7,300,896) | (19,788,976) |
Vapor [Member] | Operating segment [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net Sales | 1,410,003 | 1,474,581 | 4,398,942 | 5,313,849 |
Segment Gross Profit | 700,558 | 818,725 | 2,521,256 | 2,872,134 |
Grocery [Member] | Operating segment [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net Sales | 1,447,040 | 1,575,037 | 5,349,800 | 2,085,293 |
Segment Gross Profit | $ 553,202 | $ 635,431 | $ 2,231,237 | $ 833,421 |
Segment Information (Details Te
Segment Information (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Vapor [Member] | ||||
Segment Information (Textual) | ||||
Depreciation and amortization | $ 17,011 | $ 16,991 | $ 50,270 | $ 58,239 |
Grocery [Member] | ||||
Segment Information (Textual) | ||||
Depreciation and amortization | $ 68,125 | $ 53,305 | $ 197,985 | $ 70,757 |
Notes Receivable from Related29
Notes Receivable from Related Party (Details) | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Acquisition Note [Member] | |
Notes Receivable from Related Party (Textual) | |
Promissory note terms | 1 year |
Principal amount | $ 370,000 |
Interest rate | 4.50% |
Monthly payment of promissory note | $ 10,000 |
Promissory note payments commencing date | Oct. 28, 2016 |
Promissory note due date | Jul. 29, 2017 |
Promissory Note [Member] | |
Notes Receivable from Related Party (Textual) | |
Promissory note terms | 36 months |
Principal amount | $ 500,000 |
Interest rate | 2.00% |
Monthly payment of promissory note | $ 14,000 |
Promissory note payments commencing date | Jan. 26, 2017 |
Promissory note due date | Jul. 29, 2019 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 1,849,500 | $ 1,799,500 |
Accumulated Amortization | (249,629) | (130,171) |
Net Carrying Amount | $ 1,599,871 | $ 1,669,329 |
Favorable lease [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 15 years | 15 years |
Gross Carrying Amount | $ 890,000 | $ 890,000 |
Accumulated Amortization | (77,629) | (33,859) |
Net Carrying Amount | $ 812,371 | $ 856,141 |
Trade names [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 10 years | 10 years |
Gross Carrying Amount | $ 820,000 | $ 820,000 |
Accumulated Amortization | (149,000) | (87,500) |
Net Carrying Amount | $ 671,000 | $ 732,500 |
Website [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 3 years | 3 years |
Gross Carrying Amount | $ 4,500 | $ 4,500 |
Accumulated Amortization | (2,000) | (875) |
Net Carrying Amount | $ 2,500 | $ 3,625 |
Customer relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 5 years | 5 years |
Gross Carrying Amount | $ 60,000 | $ 60,000 |
Accumulated Amortization | (16,000) | (7,000) |
Net Carrying Amount | $ 44,000 | $ 53,000 |
Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 10 years | 10 years |
Gross Carrying Amount | $ 75,000 | $ 25,000 |
Accumulated Amortization | (5,000) | (937) |
Net Carrying Amount | $ 70,000 | $ 24,063 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Intangible Assets [Abstract] | ||
2017 (remaining three months) | $ 40,340 | |
2,018 | 161,361 | |
2,019 | 160,486 | |
2,020 | 159,861 | |
2,021 | 152,861 | |
Thereafter | 924,962 | |
Total | $ 1,599,871 | $ 1,669,329 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Intangible Assets (Textual) | ||
Amortization expense | $ 119,458 | $ 51,155 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Warrant Common Stock Equivalent | ||
Outstanding at January 1, 2017 | 634,754,364,551 | |
Outstanding at September 30, 2017 | 504,635,045,073 | 634,754,364,551 |
Warrant [Member] | ||
Exercise Price | ||
Outstanding at January 1, 2017 | $ 0.0001 | |
Warrants repurchased | (0.000021) | |
Cashless exercises for common stock | (0.0001) | |
Black Scholes Value adjustment | (0.0001) | |
Outstanding at September 30, 2017 | $ 0.0001 | $ 0.0001 |
Warrant Common Stock Equivalent | ||
Outstanding at January 1, 2017 | 634,754,364,551 | |
Warrants repurchased | (114,796,220,280) | |
Cashless exercises for common stock | (15,125,005,934) | |
Black Scholes Value adjustment | (198,093,264) | |
Outstanding at September 30, 2017 | 504,635,045,073 | 634,754,364,551 |
Remaining Contractual Term | ||
Warrant activity remaining contractual term | 2 years 10 months 6 days | 3 years 7 months 6 days |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Stockholders' Equity [Abstract] | ||
Warrants outstanding | 33 | 42 |
Black Scholes value | 1,519,079 | 1,519,297 |
Closing bid stock price | $ 0.0001 | $ 0.0001 |
Warrant common stock equivalent | 504,635,045,073 | 634,754,364,551 |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) - shares | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 591,546,306,433 | 655,691,771,353 |
Stock options [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 86,911,261,360 | 11,360 |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 504,635,045,073 | 655,691,759,993 |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jun. 01, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Stockholders' Equity (Textual) | ||||||
Reverse stock split ratio, description | A reverse stock split of the common stock at a ratio of 1-for-20,000. | |||||
Stock Options [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Stock-based compensation expense | $ 2,038,000 | $ 2,000 | $ 5,339,000 | $ 10,000 | ||
Unamortized stock based compensation expense on unvested stock options | $ 3,300,000 | $ 3,300,000 | $ 500,000 | |||
Amortized over a weighted average period | 7 months 6 days | 1 year 8 months 12 days | ||||
Series A Warrants [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Common stock exercised cashless exercise provision | 1 | |||||
Issuance of shares of common stock | 15,125,005,934 | 15,125,005,934 | ||||
Common Stock [Member] | ||||||
Stockholders' Equity (Textual) | ||||||
Stock-based compensation expense | $ 0 | $ 52,000 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
LIABILITIES | ||
Derivative liabilities - non-consenting warrants | $ 398,952 | $ 955,173 |
Derivative liabilities - consenting warrants | 9,832,745 | 11,912,906 |
Total derivative liabilities | 10,231,697 | 12,868,079 |
Recurring basis [Member] | Level 1 [Member] | ||
LIABILITIES | ||
Derivative liabilities - non-consenting warrants | ||
Derivative liabilities - consenting warrants | ||
Total derivative liabilities | ||
Recurring basis [Member] | Level 2 [Member] | ||
LIABILITIES | ||
Derivative liabilities - non-consenting warrants | 398,952 | 955,173 |
Derivative liabilities - consenting warrants | 9,832,745 | 11,912,906 |
Total derivative liabilities | 10,231,697 | 12,868,079 |
Recurring basis [Member] | Level 3 [Member] | ||
LIABILITIES | ||
Derivative liabilities - non-consenting warrants | ||
Derivative liabilities - consenting warrants | ||
Total derivative liabilities |
Fair Value Measurements (Deta38
Fair Value Measurements (Details Textual) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Fair Value Measurements (Textual) | ||
Exercise price per Series A Warrants | $ 0.000021 | $ 0.000021 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | Apr. 11, 2016 | Sep. 30, 2017 | Dec. 31, 2016 |
Commitments and Contingencies (Textual) | |||
Vendor deposits | $ 3,000 | $ 7,000 | |
Consulting Agreement [Member] | Gregory Brauser [Member] | |||
Commitments and Contingencies (Textual) | |||
Engagement fee payable | $ 50,000 | ||
Monthly installments | $ 10,000 | ||
Term of consulting agreement | 2 years | ||
Consulting agreement, description | Under the Consulting Agreement, GAB Management Group, Inc., will receive the following benefits in connection with consulting services that its principal, Mr. Brauser, provides to the Company: (1) an engagement fee of $50,000 payable at the time the Consulting Agreement is executed, and (2) thereafter monthly installments of $10,000 for 24 months. | ||
Consulting agreement dated | Apr. 11, 2016 |