Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Oct. 30, 2018 | |
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, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 65,506,264,170 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 8,271,376 | $ 7,883,191 |
Accounts receivable, net of allowance of approximately $26,000 and $19,000, respectively | 47,671 | 75,568 |
Inventories | 1,006,543 | 861,650 |
Prepaid expenses and vendor deposits | 422,027 | 133,401 |
Investment | 161,999 | |
Contract assets | 180,000 | |
TOTAL CURRENT ASSETS | 10,089,616 | 8,953,810 |
Property and equipment, net of accumulated depreciation of $541,334 and $393,771, respectively | 484,463 | 589,506 |
Intangible assets, net of accumulated amortization of $412,136 and $289,969, respectively | 1,474,864 | 1,559,531 |
Goodwill | 481,314 | 481,314 |
Note receivable | 572,176 | |
Other assets | 116,978 | 117,244 |
TOTAL ASSETS | 13,219,411 | 11,701,405 |
CURRENT LIABILITIES | ||
Accounts payable | 475,743 | 512,395 |
Accrued expenses | 326,790 | 439,133 |
Contract liabilities | 2,029,994 | 61,312 |
Current portion of loan payable | 502,195 | 2,111 |
Derivative liabilities - warrants | 1,833,158 | 10,231,697 |
TOTAL CURRENT LIABILITIES | 5,167,880 | 11,246,648 |
Loan payable, net of current portion | 8,801 | 10,459 |
TOTAL LIABILITIES | 5,176,681 | 11,257,107 |
COMMITMENTS AND CONTINGENCIES (SEE NOTE 13) | ||
STOCKHOLDERS' EQUITY | ||
Series B convertible preferred stock, $1,000 par value per share, 30,000 shares authorized; 20,150 shares issued and outstanding as of September 30, 2018; aggregate liquidation preference of $20,150,116 | 20,150,116 | |
Common Stock, $0.0001 par value per share, 750,000,000,000 shares authorized; 63,945,666,332 and 29,348,867,108 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 6,394,567 | 2,934,887 |
Additional paid-in capital | 7,092,395 | 10,080,238 |
Accumulated deficit | (25,594,348) | (12,570,827) |
TOTAL STOCKHOLDERS' EQUITY | 8,042,730 | 444,298 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 13,219,411 | $ 11,701,405 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net allowance | $ 26,000 | $ 19,000 |
Property and equipment, net of accumulated depreciation | 541,334 | 393,771 |
Intangible assets, net of accumulated amortization | $ 412,136 | $ 289,969 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 750,000,000,000 | 750,000,000,000 |
Common stock, shares issued | 63,945,666,332 | 29,348,867,108 |
Common stock, shares outstanding | 63,945,666,332 | 29,348,867,108 |
Preferred stock, par value | $ 1,000 | $ 1,000 |
Preferred stock, shares authorized | 30,000 | 30,000 |
Preferred stock, shares issued | 20,150 | 20,150 |
Preferred stock, shares outstanding | 20,150 | 20,150 |
Preferred stock aggregate liquidation preference | $ 20,150,116 | $ 20,150,116 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
SALES | ||||
Vapor sales, net | $ 1,106,596 | $ 1,453,725 | $ 3,556,130 | $ 4,440,657 |
Grocery sales, net | 1,923,878 | 1,428,482 | 6,359,671 | 5,320,364 |
TOTAL SALES, NET | 3,030,474 | 2,882,207 | 9,915,801 | 9,761,021 |
Cost of sales vapor | 460,648 | 709,445 | 1,602,363 | 1,877,686 |
Cost of sales grocery | 1,183,033 | 893,838 | 3,850,998 | 3,118,563 |
GROSS PROFIT | 1,386,793 | 1,278,924 | 4,462,440 | 4,764,772 |
OPERATING EXPENSES | ||||
Advertising | 56,021 | 16,243 | 137,485 | 74,902 |
Selling, general and administrative | 2,123,471 | 4,256,080 | 7,196,680 | 12,208,030 |
Total operating expenses | 2,179,492 | 4,272,323 | 7,334,165 | 12,282,932 |
LOSS FROM OPERATIONS | (792,699) | (2,993,399) | (2,871,725) | (7,518,160) |
OTHER INCOME (EXPENSE) | ||||
Change in fair value of Series A Warrants | (10,696,774) | (20,160) | (10,696,774) | (94,955) |
Other income | 164,259 | 9,665 | 481,759 | 20,126 |
Interest income | 30,458 | 4,044 | 63,219 | 22,889 |
Total other income (expense), net | (10,502,057) | (6,451) | (10,151,796) | (51,940) |
Net loss from continuing operations | (11,294,756) | (2,999,850) | (13,023,521) | (7,570,100) |
Net income from discontinued operations | 204,507 | 281,483 | ||
NET LOSS | $ (11,294,756) | $ (2,795,343) | $ (13,023,521) | $ (7,288,617) |
NET LOSS PER SHARE-BASIC AND DILUTED | ||||
Continuing operations | $ 0 | $ 0 | $ 0 | $ 0 |
Discontinued operations | 0 | 0 | 0 | 0 |
NET LOSS PER SHARE -BASIC AND DILUTED | $ 0 | $ 0 | $ 0 | $ 0 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 45,821,526,888 | 29,327,284,303 | 34,900,093,115 | 25,138,693,169 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2018 - USD ($) | Total | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit |
Beginning balance at Dec. 31, 2017 | $ 444,298 | $ 2,934,887 | $ 10,080,238 | $ (12,570,827) | |
Beginning balance, Shares at Dec. 31, 2017 | 29,348,867,108 | ||||
Issuance of common stock in connection with cashless exercise of Series A warrants | 66,317 | $ 160,274 | (93,958) | ||
Issuance of common stock in connection with cashless exercise of Series A warrants, Shares | 1,602,741,446 | ||||
Stock options exercised | 77,778 | $ 77,778 | |||
Stock options exercised, Shares | 777,777,778 | ||||
Issuance of Series B Convertible Preferred Stock | 19,028,997 | $ 20,721,744 | (1,692,747) | ||
Issuance of Series B Convertible Preferred Stock, Shares | 20,722 | ||||
Modification of share-based payment awards to officers | $ 1,900,000 | (1,900,000) | |||
Modification of share-based payment awards to officers, Shares | 19,000,000,000 | ||||
Issuance of awarded restricted stock to officer | $ 300,000 | (300,000) | |||
Issuance of awarded restricted stock to officer, Shares | 3,000,000,000 | ||||
Issuance of awarded common stock for professional services | $ 300,000 | (300,000) | |||
Issuance of awarded common stock for professional services, Shares | 3,000,000,000 | ||||
Preferred stock converted | $ (571,628) | $ 571,628 | |||
Preferred stock converted, Shares | (572) | 5,716,280,000 | |||
Investment in MJ Holdings, Inc. - Share exchange | 150,000 | $ 150,000 | |||
Investment in MJ Holdings, Inc. - Share exchange, Shares | 1,500,000,000 | ||||
Stock-based compensation expense | 1,298,862 | 1,298,862 | |||
Net loss | (13,023,521) | (13,023,521) | |||
Ending balance at Sep. 30, 2018 | $ 8,042,730 | $ 20,150,116 | $ 6,394,567 | $ 7,092,395 | $ (25,594,348) |
Ending balance, Shares at Sep. 30, 2018 | 20,150 | 63,945,666,332 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
OPERATING ACTIVITIES | ||
Net loss | $ (13,023,521) | $ (7,288,617) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Income from discontinued operations | (281,483) | |
Change in allowances for bad debt | (75,399) | (22,633) |
Depreciation and amortization | 269,729 | 261,456 |
Change in fair value of Series A Warrants | 10,696,774 | 94,955 |
Write-down of obsolete and slow-moving inventory | 227,960 | 290,574 |
Stock-based compensation expense | 1,298,862 | 5,338,508 |
Stock-based expense in connection with professional services | 9,002 | |
Net cash used in discontinued operations | (221,424) | |
Changes in operating assets and liabilities: | ||
Due from merchant credit card processors | 15,615 | 1,862 |
Accounts receivable | 21,036 | (26,506) |
Inventories | (372,853) | (479,406) |
Prepaid expenses and vendor deposits | (303,974) | 10,641 |
Contract assets | (180,000) | |
Accounts payable | (36,652) | 21,124 |
Accrued expenses | (112,343) | (212,998) |
Contract liabilities | 1,968,682 | 396 |
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | 393,916 | (2,504,549) |
INVESTING ACTIVITIES | ||
Issuance of note receivable | (500,000) | |
Collection of note receivable | 10,083 | |
Gain on investment | (11,999) | |
Purchases of patent | (37,500) | (50,000) |
Purchases of property and equipment | (42,520) | (114,168) |
NET CASH USED IN INVESTING ACTIVITIES | (581,936) | (164,168) |
FINANCING ACTIVITIES | ||
Proceeds from line of credit | 500,000 | 13,977 |
Principal payments on loan payable | (1,573) | (897) |
Payments for repurchase of Series A warrants | (2,427,267) | |
Principal payments of capital lease obligations | (53,054) | |
Proceeds from exercise of stock options | 77,778 | 1,000 |
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | 576,205 | (2,466,241) |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 388,185 | (5,134,958) |
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 7,883,191 | 13,366,272 |
CASH AND CASH EQUIVALENTS - END OF PERIOD | 8,271,376 | 8,231,314 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 1,750 | 3,552 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Issuance of common stock in connection with cashless exercise of Series A warrants | $ 66,317 | $ 304,072 |
Organization, Going Concern, an
Organization, Going Concern, and Basis of Presentation | 9 Months Ended |
Sep. 30, 2018 | |
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 currently operates twelve retail vape stores in the Southeast region of the United States, through which it offers e-liquids, vaporizers and related products. The Company also operates Ada’s Natural Market, a natural and organic grocery store, through its wholly owned subsidiary Healthy Choice Markets, Inc. Ada’s Natural Market offers fresh produce, bulk foods, vitamins and supplements, packaged groceries, meat and seafood, deli, baked goods, dairy products, frozen foods, health & beauty products and natural household items. The Company also sells vitamins and supplements on the Amazon.com marketplace through its wholly owned subsidiary Healthy U Wholesale, Inc. The Company markets the Q-Cup™ technology under the vape segment; this patented technology is based on a small, quartz cup called the Q-Cup™, which is partially filled with either cannabis or CBD concentrate (approximately 50mg). The Q-Cup™ is then inserted into the Q-Cup™ Tank or Globe, that heats the cup from the outside without coming in direct contact with the solid concentrate. This Q-Cup™ technology provides significantly more efficiency and an “on the go” solution for consumers who prefer to vape concentrates either medicinally or recreationally. 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 currently and historically has reported net losses and cash outflows from operations. As of September 30, 2018, cash and cash equivalents totaled approximately $8.3 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. During the second quarter of 2018, the Company entered into a $2.0 million line of credit agreement with a financial institution that is subject to annual renewal with a variable interest rate that it is based on a rate of 1% over what is earned on the collateral amount. The collateral amount established in the arrangement with the financial institution is $2.0 million. In the third quarter of 2018, the Company used $0.5 million from the $2.0 million the line of credit at a variable interest rate, to issue a note receivable to VPR Brands LLC. The ability to raise additional financing may have a positive effect on the future performance of the Company. 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. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The terms “we,” “us,” “our,” and the “Company” refer to Healthier Choices Management Corp. and its wholly-owned subsidiaries, Vaporin, Inc., The Vape Store, Inc. (“Vape Store”), Smoke Anywhere U.S.A., Inc. (“Smoke”), Emagine the Vape Store, LLC (“Emagine”), IVGI Acquisition, Inc., Vapormax Franchising LLC, Vaporin LLC, Vaporin Florida, Inc., Healthy U Wholesale, Inc. and Healthy Choice Markets, Inc. All intercompany accounts and transactions have been eliminated in consolidation. 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, 2018. 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, 2017 included in the Company’s Annual Report on Form 10-K for such year as filed with the SEC on March 15, 2018. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. The following table provides a summary of the shipping and handling costs: Three months ended Nine months ended 2018 2017 2018 2017 Shipping and handling $ 18,109 14,582 $ 45,437 80,388 Concentration of Risk Our cash balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. The majority of the Company’s cash and cash equivalents are concentrated in one large financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage. A summary of the financial institutions that had a cash and cash equivalents in excess of FDIC limits of $250,000 at September 30, 2018 and December 31, 2017 is presented below: September 30, December 31, Total Cash in excess of FDC limits of $250,000 $ 7,793,076 $ 7,119,573 The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests, as deposits are held in excess of federally insured limits. The Company has not experienced any losses in such accounts. 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 inventories to their 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. Revenue Recognition Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, return allowances, and sales and consumption taxes, are recorded when products are delivered, title passes to customers and collection is likely to occur. Title passes to customers at the point of sale for retail and upon delivery of products for wholesale. Return allowances, which reduce revenue, are estimated using historical experience. The Company recognizes revenue in accordance with the following five-step model: ● identify arrangements with customers; ● identify performance obligations; ● determine transaction price; ● allocate transaction price to the separate performance obligations in the arrangement, if more than one exists; and ● recognize revenue as performance obligations are satisfied. Accounting Standards Update (“ASU”) No. 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted the standard on January 1, 2018 using the retrospective transition method, which requires reporting entities to apply the standard as of the earliest period presented in their financial statements. The adoption of the new standard resulted in an immaterial impact to the consolidated statements of operations for reclassifying $12,951 to net loss and an immaterial impact to the consolidated balance sheets for reclassifying $61,312 of contract liabilities from accrued expenses as of December 31, 2017. Contract liabilities consist of gift card and loyalty point program liabilities. See “Accounts Receivable, Contract Assets, and Deferred Revenue” significant accounting policy. Adoption of ASU 2014-09 impacted the previously reported results for the three and nine months ended September 30, 2017 as follows: Three months ended Nine months ended As reported ASU Impact After adoption As reported ASU Impact After adoption Vapor sales, net $ 1,410,003 $ 43,722 $ 1,453,725 $ 4,398,941 $ 41,716 $ 4,440,657 Grocery sales, net $ 1,447,040 $ (18,558 ) $ 1,428,482 $ 5,349,801 $ (29,437 ) $ 5,320,364 Gross profit $ 1,253,760 $ 25,164 $ 1,278,924 $ 4,752,493 $ 12,279 $ 4,764,772 Net loss $ (2,820,507 ) $ 25,164 $ (2,795,343 ) $ (7,300,896 ) $ 12,279 $ (7,288,617 ) Adoption of ASU 2014-09 impacted the previously reported balance sheet as of December 31, 2017 as follows: As reported December 31, ASU 2014-09 Impact After adoption Accrued expenses $ 538,204 $ (99,071 ) $ 439,133 Contract liabilities $ - $ 61,312 $ 61,312 Total current liabilities $ 11,284,407 $ (37,759 ) $ 11,246,648 Accumulated deficit $ (12,608,586 ) $ 37,759 $ (12,570,827 ) Total stockholders’ equity $ 406,539 $ 37,759 $ 444,298 Accounts Receivable, Contract Assets, and Contract Liabilities Accounts receivable are claims to consideration which are unconditional; meaning no performance obligations remain for the Company and only the passage of time is necessary before collection. Contract assets are distinguished from accounts receivable as performance obligations remain before claims to consideration become unconditional. By nature of the Company’s operations, contract assets are typically not recognized. Contract liabilities are recorded when customers transfer consideration in advance of delivery of products or services, which the Company records for gift cards and loyalty reward programs. When one party to an arrangement performs before the other(s), the Company records an account receivable, contract asset or contract liability. The majority of arrangements with customers contain one performance obligation: to provide a distinct set of products or services. Most performance obligations are satisfied simultaneously as the Company exchanges products or services for customer payment. Exceptions include gift cards and loyalty rewards, for which the Company has a performance obligation to deliver products or services at a future date. As gift cards are purchased and loyalty points earned, contract liabilities are recorded until the performance obligations are satisfied through delivery of products or services or breakage based on gift card and loyalty reward program term limits. The Company’s breakage policy is twenty-four months for gift cards, twelve months for Grocery loyalty rewards, and six months for Vapor loyalty rewards. Loyalty rewards are earned at five percent on qualifying purchases and the reward functions as an allocation of transaction price from the period earned by the customer to the period the performance obligation is satisfied by the Company. As such, all contract liabilities are expected to be recognized within a twenty-four month period. Recently Issued Accounting Pronouncements 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 on 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 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. |
Disaggregation of Revenues
Disaggregation of Revenues | 9 Months Ended |
Sep. 30, 2018 | |
Disaggregation of Revenues [Abstract] | |
DISAGGREGATION OF REVENUES | Note 3. DISAGGREGATION OF REVENUES The Company reports the following segments in accordance with management guidance: Vapor and Grocery. When the Company prepares its internal management reporting to evaluate business performance, we disaggregate revenue into the following categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, Vapor sales, net $ 1,106,596 $ 1,453,725 $ 3,556,130 $ 4,440,657 Grocery sales, net 1,923,878 1,428,482 6,359,671 5,320,364 Total revenue $ 3,030,474 $ 2,882,207 $ 9,915,801 $ 9,761,021 Retail Vapor $ 1,106,228 $ 1,386,851 $ 3,548,704 $ 4,170,393 Retail Grocery 1,407,776 1,102,665 4,581,001 5,055,226 Food service/restaurant 370,609 314,642 1,167,006 253,963 Online/eCommerce 135,483 11,175 593,347 11,175 Wholesale Grocery 10,010 - 18,317 - Wholesale Vapor 368 66,874 7,426 270,264 Total revenue $ 3,030,474 $ 2,882,207 $ 9,915,801 $ 9,761,021 |
Prepaid Expenses and Vendor Dep
Prepaid Expenses and Vendor Deposits | 9 Months Ended |
Sep. 30, 2018 | |
Prepaid Expenses and Vendor Deposits [Abstract] | |
PREPAID EXPENSES AND VENDOR DEPOSITS | Note 4. PREPAID EXPENSES AND VENDOR DEPOSITS September 30, December 31, Vendor deposits (1) $ 293,098 $ 5,533 Technology 43,300 - Insurance policy 37,497 47,105 Patent 25,000 - Other 13,436 28,410 Rent 9,696 9,695 Insurance claim - 41,183 Software licenses - 1,475 Total $ 422,027 $ 133,401 (1) Vendor deposits related to the sales contract with MJNE for the Q-Cups. |
Investment
Investment | 9 Months Ended |
Sep. 30, 2018 | |
Investment [Abstract] | |
INVESTMENT | Note 5. INVESTMENT During the third quarter of 2018, the Company invested $150,000 in 85,714 common stock shares at MJ Holdings, Inc.(“MJNE”), a publicly traded company. The investment was made based on the assumption of an increase in MJNE stock due to the sales agreement with the Company. The stock will be held indefinitely with the intention of producing a capital gain upon the sale at a future date. The Company recorded the investment in MJNE at fair value with changes in the fair value reported through the income statement as the stock is traded on the OTC market. As of the September 30, 2018, the Company remeasured the fair value of the MJNE stock and recognized a gain on investment of $11,999. |
Notes Receivable and Other Inco
Notes Receivable and Other Income | 9 Months Ended |
Sep. 30, 2018 | |
Notes Receivable and Other Income [Abstract] | |
NOTES RECEIVABLE AND OTHER INCOME | Note 6. NOTES RECEIVABLE AND OTHER INCOME The Company entered into a secured, 36-month promissory note with VPR Brands L.P. for $582,260 on September 6, 2018. The note is composed of a principal amount of $500,000 (the “Promissory Note”) and an outstanding balance from prior secured notes of $82,260 (the “Note”). The Note bears an interest rate of 7%, which payments thereunder are $4,141 weekly, with such payments commencing as of September 14, 2018. The Company records all proceeds related to the interest of the Note as interest income as proceeds are received. A summary of the Note as of September 30, 2018 is presented below: Description Due Date Interest Rate Loan Amount Proceeds Remaining Balance Promissory Note 9/6/2021 7.0 % $ 582,260 $ 12,422 $ 572,176 For the three months ended September 30, 2018, the Company had a benefit of $82,260 related to the reversal of the outstanding valuation allowance reserve from prior notes receivable, recorded to other income in the Consolidated Statement of Operations. For the nine months ended September 30, 2018, the company had a reversal of the valuation allowance reverse and notes receivable collections of $469,760 recorded to other income in the Consolidated Statement of Operations. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2018 | |
Intangible Assets [Abstract] | |
INTANGIBLE ASSETS | Note 7. INTANGIBLE ASSETS Intangible assets, net are as follows: September 30, 2018 Useful Lives Gross Accumulated Net Favorable lease 15 years $ 890,000 $ (135,990 ) $ 754,010 Trade names 10 years 820,000 (231,000 ) 589,000 Customer relationships 5 years 60,000 (28,000 ) 32,000 Patents 10 years 112,500 (13,646 ) 98,854 Website 3 years 4,500 (3,500 ) 1,000 Intangible assets, net $ 1,887,000 $ (412,136 ) $ 1,474,864 December 31, 2017 Useful Lives Gross Accumulated Amortization Net Favorable lease 15 years $ 890,000 $ (92,219 ) $ 797,781 Trade names 10 years 820,000 (169,500 ) 650,500 Customer relationships 5 years 60,000 (19,000 ) 41,000 Patents 10 years 75,000 (6,875 ) 68,125 Website 3 years 4,500 (2,375 ) 2,125 Intangible assets, net $ 1,849,500 $ (289,969 ) $ 1,559,531 Intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense amounted to $122,166 and $119,458 for the nine months ended September 30, 2018 and 2017, respectively. Future annual estimated amortization expense is as follows: Years ending December 31, 2018 (remaining three months) $ 41,278 2019 164,236 2020 163,611 2021 156,611 2022 151,611 Thereafter 797,517 Total $ 1,474,864 |
Contract Assets and Liabilities
Contract Assets and Liabilities | 9 Months Ended |
Sep. 30, 2018 | |
Contract Assets and Liabilities [Abstract] | |
CONTRACT ASSETS AND LIABILITIES | Note 8. CONTRACT ASSETS AND LIABILITIES The company’s contract assets consist of sales commissions to third parties that support and facilitate the completion of complex transactions, for which the Company has a performance obligation to pay due to the fact that the sales agreement was fully executed. During the three months ended September 30, 2018, the Company paid sales commissions of $180,000 related to the initial sale of the Q-Cup. As such, all contract assets are expected to be recognized as the order is being deliver to the customers. The Company’s contract liabilities consist of customer deposits, gift cards and loyalty rewards, for which the Company has a performance obligation to deliver products when customers redeem balances or terms expire through breakage. Our breakage policy is twenty-four months for gift cards, twelve months for Grocery loyalty rewards, and six months for Vapor loyalty rewards. As such, all contract liabilities are expected to be recognized within a twenty-four month period. A summary of the contract liabilities activity for the nine months ended September 30, 2018 and 2017 is presented below: Nine month ended 2018 2017 Beginning balance as January1, $ 61,312 $ 34,564 Issued 81,720 96,029 Redeemed (113,954 ) (99,067 ) Breakage recognized 916 3,434 Customer deposits (1) 2,000,000 - Ending balance as of September 30, $ 2,029,994 $ 34,960 (1) See Note 13. “Commitments and Contingencies” for additional information. |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2018 | |
Accrued Expenses [Abstract] | |
ACCRUED EXPENSES | Note 9. ACCRUED EXPENSES September 30, December 31, Sales return from Wholesale business $ 168,693 $ 168,693 Salaries and wages 58,641 72,522 Franchise taxes 36,750 36,000 Professional fees 22,247 125,783 Credit card fees 15,383 - Royalty fees 14,126 18,150 Property taxes 9,750 - Other 1,200 17,985 Total $ 326,790 $ 439,133 |
Line of Credit
Line of Credit | 9 Months Ended |
Sep. 30, 2018 | |
Line of Credit [Abstract] | |
LINE OF CREDIT | Note 10. LINE OF CREDIT The Company entered into a $2.0 million line of credit agreement with a financial institution that is subject to annual renewal with a variable interest rate that it is based on a rate of 1% over what is earned on the collateral amount. The collateral amount established in the arrangement with the financial institution is $2.0 million. On September 10, 2018, the Company withdrew $0.5 million from line of credit and the interest for the period was $126. As of September 30, 2018, the Company has not made any payments towards the principal amount borrowed from the credit line. The maturity date for the line of credit is April 13, 2019. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity [Abstract] | |
STOCKHOLDERS' EQUITY | Note 11. STOCKHOLDERS’ EQUITY Modification of share-based payment awards to officers On August 13, 2018, the Compensation Committee of the Board of Directors of the Company approved a modification of share-based payment awards to the Chief Executive Officer and Chief Operating Officer of the Company. As part of the share modification, the Chief Executive Officer and Chief Operating Officer were granted 11 billion and 8 billion shares of restricted common stock on the condition that same numbers of shares from their options to purchase Company common stock are forfeited. This restricted stock will vest one year following the date of issuance provided that the grantee remains an employee of the Company through each applicable vesting date. The share modification will not have an impact on the Consolidated Statements of Operations because both of the officers’ options plans have been fully amortized as of the first quarter of 2018. Restricted Stock On August 13, 2018, the Compensation Committee of the Board of Directors of the Company approved an issuance of awarded restricted stock to the Chief Financial Officer of the Company. The Chief Financial Officer was granted 3 billion shares of restricted common stock. This restricted stock will vest one year following the date of issuance provided that the grantee remains an employee of the Company through each applicable vesting date. The issuance of the restricted stock will have an impact on the Consolidated Statements of Operations because the awarded restricted common stock will be amortized on a straight-line basis over a period of twelve months. During the three months ended September 30, 2018, the Company recognized stock-based compensation expense of $50,000 from the awarded shares to the Chief Financial Officer. Series B Convertible Preferred Stock On August 16, 2018, the Company entered into agreements with certain holders of its Series A Warrants to exchange the Company’s Series B Convertible Preferred Stock for Series A Warrants. A total of 20,722 shares of Series B Stock were exchanged for 46,048,318 Series A Warrants (including those warrants issuable pursuant to a unit purchase option). Each share of Series B Stock “Series B Stock” has a stated value equal to $1,000 and is convertible into Common Stock on a fixed basis at a conversion price of $0.0001 per share. Series A Warrants A summary of warrant activity for the nine months ended September 30, 2018 is presented below: Exercise Price Warrant Common Stock Equivalent Remaining Outstanding at January 1, 2018 $ 0.0001 505,246,312,541 2.60 Warrants settlement $ (0.00004 ) (501,137,085,559 ) Cashless exercises for common stock $ (0.0001 ) (1,602,741,446 ) Black Scholes Value adjustment $ 0.0001 41,862,390,886 Outstanding at September 30, 2018 $ 0.0001 44,368,876,422 1.85 Pursuant to the Series A Warrant agreements, 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 number of warrant common stock equivalents outstanding are computed at the end of each reporting period 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, 2018 and September 30, 2018, is presented below: September 30, January 1, Warrants outstanding 3 33 Black Scholes value 1,524,822 1,520,919 Closing bid stock price $ 0.0001 $ 0.0001 Warrant common stock equivalent 44,368,876,422 505,246,312,541 Stock Options During the three months ended September 30, 2018 and 2017, the Company recognized stock-based compensation of $0.1 million and $2.0 million, respectively, in connection with the amortization of stock options, net of recovery of stock-based charges for forfeited unvested stock options. During the nine months ended September 30, 2018 and 2017, the Company recognized stock-based compensation of $1.3 million and $5.3 million, respectively. Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. At September 30, 2018, the amount of unamortized stock-based compensation expense associated with the unvested stock options granted to employees, directors and consultants was approximately $0.1 million, which will be amortized over a weighted average period of 0.21 years. At December 31, 2017, the amount of unamortized stock-based compensation expense associated with unvested stock options granted to employees, directors and consultants was approximately $1.3 million, which will be amortized over a weighted average period of 0.43 years. 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), and (b) the exercise of warrants (using the if-converted method). For the three and nine months ended September 30, 2018 and 2017, 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, September 30, Preferred stock 201,501,142,000 - Stock options and restricted stock 90,012,230,680 86,911,261,360 Warrants 44,368,876,422 504,635,045,073 Total 335,882,249,102 591,546,306,433 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Measurements [Abstract] | |
FAIR VALUE MEASUREMENTS | Note 12. 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. Nonfinancial assets such as goodwill, other intangible assets, and long-lived assets held and used are measured at fair value when there is an indicator of impairment and recorded at fair value when impairment is recognized or for a business combination. The following table summarizes the liabilities measured at fair value on a recurring basis as of September 30, 2018: Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – warrants $ - $ 1,833,158 $ - $ 1,833,158 Total derivative liabilities – warrants $ - $ 1,833,158 $ - $ 1,833,158 The following table summarizes the liabilities measured at fair value on a recurring basis as of December 31, 2017: Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – warrants $ - $ 10,231,697 $ - $ 10,231,697 Total derivative liabilities – warrants $ - $ 10,231,697 $ - $ 10,231,697 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Note 13. COMMITMENTS AND CONTINGENCIES Fontem License Agreement The Company has a non-exclusive license to certain products with Fontem Ventures B.V. “Fontem”. The Company will make quarterly license and royalty payments in perpetuity to Fontem based on the sale of qualifying products as defined in the license agreement at a royalty rate of 5.25%. A summary of the royalty expenses as of September 30, 2018 and 2017 is presented below: Three Months Ended Nine Months Ended 2018 2017 2018 2017 Royalty expenses $ 11,818 $ 19,464 $ 45,825 $ 4,814 Legal Proceedings From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of our business. With respect to legal costs, we record such costs as incurred. Employment Agreements Jeffrey Holman On August 13, 2018, the Company amended and restated its existing employment agreement with Jeffrey Holman, the Company’s Chief Executive Officer. The employment agreement is for an additional three year term and provides for an annual base salary of $450,000 and a target bonus for 2018 only in an amount ranging from 20% to 200% of his base salaries subject to the Company meeting certain earnings before interest, taxes depreciation and amortization performance milestones. Mr. Holman is entitled to receive severance payments, including two years of his then base salary and other benefits in the event of a change of control, termination by the Company without cause, termination for good reason by the executive or non-renewal by the Company. Mr. Holman was also granted 11 billion shares of restricted common stock on the condition that 11 billion of his options to purchase Company common stock are forfeited. This restricted stock will vest one year following the date of issuance provided that the grantee remains an employee of the Company through each applicable vesting date. John Ollet Effective as of August 13, 2018, the Company entered into an amendment to the existing employment agreement with the Company’s Chief Financial Officer, John Ollet. Mr. Ollet will continue to be employed as the Company’s Chief Financial Officer for an additional one year extension period through December 12, 2020. Mr. Ollet will receive a base salary of $250,000 for this additional year. Mr. Ollet was also granted 3 billion shares of restricted common stock. This restricted stock will vest one year following the date of issuance provided that the grantee remains an employee of the Company through each applicable vesting date. Christopher Santi Effective as of August 13, 2018, the Company entered into an amendment to the existing employment agreement with the Company’s President and Chief Operating Officer, Christopher Santi. Mr. Santi will continue to be employed as the Company’s President and Chief Operating Officer for an additional one year extension period through January 29, 2021. Mr. Santi will receive a base salary of $330,000 for this additional year. The severance pay period for termination without cause was increased to up to 18 months based on time of service. Mr. Santi was also granted 8 billion shares of restricted common stock on the condition that 8 billion of his options to purchase Company common stock are forfeited. This restricted stock will vest one year following the date of issuance provided that the grantee remains an employee of the Company through each applicable vesting date. Exclusive Distribution Agreement On August 17, 2018, the Company entered into an Exclusive Distribution Agreement with MJ Holdings, Inc. (“MJNE”). The Agreement grants MJNE the right to exclusively sell and distribute the Company’s cannabis and CBD patented and patent pending quartz ‘Q-Cup’ technology (the “Q-cups”) in the Nevada territory. Pursuant to the terms of the Agreement, MJNE agreed to purchased $2,000,000 in Q-Cups from the Company and MJNE has delivered the full purchase price in advance. The initial term of the Agreement is for one year with additional successive one-year renewals, subject to certain standard termination provisions. The Company has the option to terminate the Agreement on 30 days’ written notice if MJNE fails to purchase a sufficient minimum quantity of Q-cups from the Company. For each renewal term, MJNE’s minimum purchase obligation for the Q-cups is currently $6 million in required increments of at least $500,000 per month, subject to mutually agreed upon adjustments based upon the first year sales. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2018 | |
Segment Information [Abstract] | |
SEGMENT INFORMATION | Note 14. SEGMENT INFORMATION Management determines the reportable segments based on the internal reporting used by our executives 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 Change 2018 2017 2018/2017 Net Sales Vapor sales, net $ 1,106,596 $ 1,453,725 (24 )% Grocery sales, net 1,923,878 1,428,482 35 % Total Net Sales $ 3,030,474 $ 2,882,207 5 % Segment Gross Profit Vapor $ 645,947 $ 744,280 (13 )% Grocery 740,846 534,644 39 % Total Gross Profit 1,386,793 1,278,924 8 % Operating expenses 2,179,492 4,272,323 (49 )% Operating loss (792,699 ) (2,993,399 ) (74 )% Other income (expense), net (10,502,057 ) (6,451 ) NM Net loss from continuing operations (11,294,756 ) (2,999,850 ) 277 % Net income from discontinued operations - 204,507 (100 )% Net loss $ (11,294,756 ) $ (2,795,343 ) 304 % For the three months ended September 30, 2018, depreciation and amortization was $19,317 and $69,685 for Vapor and Grocery, respectively. For the three months ended September 30, 2017, depreciation and amortization was $17,011 and $68,125 for Vapor and Grocery, respectively. Nine months ended Change 2018 2017 2018/2017 Net Sales Vapor sales, net $ 3,556,130 $ 4,440,657 (19 )% Grocery sales, net 6,359,671 5,320,364 19 % Total $ 9,915,801 $ 9,761,021 2 % Segment Gross Profit Vapor $ 1,953,767 $ 2,562,971 (24 )% Grocery 2,508,673 2,201,801 14 % Total Gross Profit 4,462,440 4,764,772 (6 )% Operating expenses 7,334,165 12,282,932 (40 )% Operating loss (2,871,725 ) (7,518,160 ) (62 )% Other income (expense), net (10,151,796 ) (51,940 ) NM Net loss from continuing operations (13,023,521 ) (7,570,100 ) 72 % Net income from discontinued operations - 281,483 (100 )% Net loss $ (13,023,521 ) $ (7,288,617 ) 79 % For the nine months ended September 30, 2018, depreciation and amortization was $52,872 and $208,471 for Vapor and Grocery, respectively. For the nine months ended September 30, 2017, depreciation and amortization was $50,270 and $197,985 for Vapor and Grocery, respectively. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
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. The following table provides a summary of the shipping and handling costs: Three months ended Nine months ended 2018 2017 2018 2017 Shipping and handling $ 18,109 14,582 $ 45,437 80,388 |
Concentration of Risk | Concentration of Risk Our cash balances are kept liquid to support our growing acquisition and infrastructure needs for operational expansion. The majority of the Company’s cash and cash equivalents are concentrated in one large financial institution, which is in excess of Federal Deposit Insurance Corporation (FDIC) coverage. A summary of the financial institutions that had a cash and cash equivalents in excess of FDIC limits of $250,000 at September 30, 2018 and December 31, 2017 is presented below: September 30, December 31, Total Cash in excess of FDC limits of $250,000 $ 7,793,076 $ 7,119,573 The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests, as deposits are held in excess of federally insured limits. The Company has not experienced any losses in such accounts. |
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 inventories to their 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. |
Revenue Recognition | Revenue Recognition Revenues from product sales and services rendered, net of promotional discounts, manufacturer coupons and rebates, return allowances, and sales and consumption taxes, are recorded when products are delivered, title passes to customers and collection is likely to occur. Title passes to customers at the point of sale for retail and upon delivery of products for wholesale. Return allowances, which reduce revenue, are estimated using historical experience. The Company recognizes revenue in accordance with the following five-step model: ● identify arrangements with customers; ● identify performance obligations; ● determine transaction price; ● allocate transaction price to the separate performance obligations in the arrangement, if more than one exists; and ● recognize revenue as performance obligations are satisfied. Accounting Standards Update (“ASU”) No. 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”), is a comprehensive revenue recognition standard that superseded nearly all existing revenue recognition guidance. The Company adopted the standard on January 1, 2018 using the retrospective transition method, which requires reporting entities to apply the standard as of the earliest period presented in their financial statements. The adoption of the new standard resulted in an immaterial impact to the consolidated statements of operations for reclassifying $12,951 to net loss and an immaterial impact to the consolidated balance sheets for reclassifying $61,312 of contract liabilities from accrued expenses as of December 31, 2017. Contract liabilities consist of gift card and loyalty point program liabilities. See “Accounts Receivable, Contract Assets, and Deferred Revenue” significant accounting policy. Adoption of ASU 2014-09 impacted the previously reported results for the three and nine months ended September 30, 2017 as follows: Three months ended Nine months ended As reported ASU Impact After adoption As reported ASU Impact After adoption Vapor sales, net $ 1,410,003 $ 43,722 $ 1,453,725 $ 4,398,941 $ 41,716 $ 4,440,657 Grocery sales, net $ 1,447,040 $ (18,558 ) $ 1,428,482 $ 5,349,801 $ (29,437 ) $ 5,320,364 Gross profit $ 1,253,760 $ 25,164 $ 1,278,924 $ 4,752,493 $ 12,279 $ 4,764,772 Net loss $ (2,820,507 ) $ 25,164 $ (2,795,343 ) $ (7,300,896 ) $ 12,279 $ (7,288,617 ) Adoption of ASU 2014-09 impacted the previously reported balance sheet as of December 31, 2017 as follows: As reported December 31, ASU 2014-09 Impact After adoption Accrued expenses $ 538,204 $ (99,071 ) $ 439,133 Contract liabilities $ - $ 61,312 $ 61,312 Total current liabilities $ 11,284,407 $ (37,759 ) $ 11,246,648 Accumulated deficit $ (12,608,586 ) $ 37,759 $ (12,570,827 ) Total stockholders’ equity $ 406,539 $ 37,759 $ 444,298 |
Accounts Receivable, Contract Assets, and Contract Liabilities | Accounts Receivable, Contract Assets, and Contract Liabilities Accounts receivable are claims to consideration which are unconditional; meaning no performance obligations remain for the Company and only the passage of time is necessary before collection. Contract assets are distinguished from accounts receivable as performance obligations remain before claims to consideration become unconditional. By nature of the Company’s operations, contract assets are typically not recognized. Contract liabilities are recorded when customers transfer consideration in advance of delivery of products or services, which the Company records for gift cards and loyalty reward programs. When one party to an arrangement performs before the other(s), the Company records an account receivable, contract asset or contract liability. The majority of arrangements with customers contain one performance obligation: to provide a distinct set of products or services. Most performance obligations are satisfied simultaneously as the Company exchanges products or services for customer payment. Exceptions include gift cards and loyalty rewards, for which the Company has a performance obligation to deliver products or services at a future date. As gift cards are purchased and loyalty points earned, contract liabilities are recorded until the performance obligations are satisfied through delivery of products or services or breakage based on gift card and loyalty reward program term limits. The Company’s breakage policy is twenty-four months for gift cards, twelve months for Grocery loyalty rewards, and six months for Vapor loyalty rewards. Loyalty rewards are earned at five percent on qualifying purchases and the reward functions as an allocation of transaction price from the period earned by the customer to the period the performance obligation is satisfied by the Company. As such, all contract liabilities are expected to be recognized within a twenty-four month period. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements 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 on 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 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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of shipping and handling costs | Three months ended Nine months ended 2018 2017 2018 2017 Shipping and handling $ 18,109 14,582 $ 45,437 80,388 |
Schedule of the financial institutions that had a cash and cash equivalents in excess of FDIC limits | September 30, December 31, Total Cash in excess of FDC limits of $250,000 $ 7,793,076 $ 7,119,573 |
Schedule of previously reported results | Three months ended September 30, 2017 Nine months ended September 30, 2017 As reported ASU Impact After adoption As reported ASU Impact After adoption Vapor sales, net $ 1,410,003 $ 43,722 $ 1,453,725 $ 4,398,941 $ 41,716 $ 4,440,657 Grocery sales, net $ 1,447,040 $ (18,558 ) $ 1,428,482 $ 5,349,801 $ (29,437 ) $ 5,320,364 Gross profit $ 1,253,760 $ 25,164 $ 1,278,924 $ 4,752,493 $ 12,279 $ 4,764,772 Net loss $ (2,820,507 ) $ 25,164 $ (2,795,343 ) $ (7,300,896 ) $ 12,279 $ (7,288,617 ) As reported December 31, 2017 ASU 2014-09 Impact After adoption December 31, 2017 Accrued expenses $ 538,204 $ (99,071 ) $ 439,133 Contract liabilities $ - $ 61,312 $ 61,312 Total current liabilities $ 11,284,407 $ (37,759 ) $ 11,246,648 Accumulated deficit $ (12,608,586 ) $ 37,759 $ (12,570,827 ) Total stockholders’ equity $ 406,539 $ 37,759 $ 444,298 |
Disaggregation of Revenues (Tab
Disaggregation of Revenues (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disaggregation of Revenues [Abstract] | |
Schedule of disaggregate revenue | Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, Vapor sales, net $ 1,106,596 $ 1,453,725 $ 3,556,130 $ 4,440,657 Grocery sales, net 1,923,878 1,428,482 6,359,671 5,320,364 Total revenue $ 3,030,474 $ 2,882,207 $ 9,915,801 $ 9,761,021 Retail Vapor $ 1,106,228 $ 1,386,851 $ 3,548,704 $ 4,170,393 Retail Grocery 1,407,776 1,102,665 4,581,001 5,055,226 Food service/restaurant 370,609 314,642 1,167,006 253,963 Online/eCommerce 135,483 11,175 593,347 11,175 Wholesale Grocery 10,010 - 18,317 - Wholesale Vapor 368 66,874 7,426 270,264 Total revenue $ 3,030,474 $ 2,882,207 $ 9,915,801 $ 9,761,021 |
Prepaid Expenses and Vendor D_2
Prepaid Expenses and Vendor Deposits (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Prepaid Expenses and Vendor Deposits [Abstract] | |
Schedule of prepaid expenses and vendor deposits | September 30, December 31, Vendor deposits (1) $ 293,098 $ 5,533 Technology 43,300 - Insurance policy 37,497 47,105 Patent 25,000 - Other 13,436 28,410 Rent 9,696 9,695 Insurance claim - 41,183 Software licenses - 1,475 Total $ 422,027 $ 133,401 (1) Vendor deposits related to the sales contract with MJNE for the Q-Cups. |
Notes Receivable and Other In_2
Notes Receivable and Other Income (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Notes Receivable and Other Income [Abstract] | |
Schedule of notes receivable | Description Due Date Interest Rate Loan Amount Proceeds Remaining Balance Promissory Note 9/6/2021 7.0 % $ 582,260 $ 12,422 $ 572,176 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Intangible Assets [Abstract] | |
Schedule of intangible assets, net | September 30, 2018 Useful Lives Gross Accumulated Net Favorable lease 15 years $ 890,000 $ (135,990 ) $ 754,010 Trade names 10 years 820,000 (231,000 ) 589,000 Customer relationships 5 years 60,000 (28,000 ) 32,000 Patents 10 years 112,500 (13,646 ) 98,854 Website 3 years 4,500 (3,500 ) 1,000 Intangible assets, net $ 1,887,000 $ (412,136 ) $ 1,474,864 December 31, 2017 Useful Lives Gross Accumulated Amortization Net Favorable lease 15 years $ 890,000 $ (92,219 ) $ 797,781 Trade names 10 years 820,000 (169,500 ) 650,500 Customer relationships 5 years 60,000 (19,000 ) 41,000 Patents 10 years 75,000 (6,875 ) 68,125 Website 3 years 4,500 (2,375 ) 2,125 Intangible assets, net $ 1,849,500 $ (289,969 ) $ 1,559,531 |
Schedule of future annual estimated amortization expense | Years ending December 31, 2018 (remaining three months) $ 41,278 2019 164,236 2020 163,611 2021 156,611 2022 151,611 Thereafter 797,517 Total $ 1,474,864 |
Contract Assets and Liabiliti_2
Contract Assets and Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Contract Assets and Liabilities [Abstract] | |
Schedule of contract liabilities | Nine month ended 2018 2017 Beginning balance as January1, $ 61,312 $ 34,564 Issued 81,720 96,029 Redeemed (113,954 ) (99,067 ) Breakage recognized 916 3,434 Customer deposits (1) 2,000,000 - Ending balance as of September 30, $ 2,029,994 $ 34,960 (1) See Note 13. “Commitments and Contingencies” for additional information. |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accrued Expenses [Abstract] | |
Schedule of accrued expenses | September 30, December 31, Sales return from Wholesale business $ 168,693 $ 168,693 Salaries and wages 58,641 72,522 Franchise taxes 36,750 36,000 Professional fees 22,247 125,783 Credit card fees 15,383 - Royalty fees 14,126 18,150 Property taxes 9,750 - Other 1,200 17,985 Total $ 326,790 $ 439,133 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity [Abstract] | |
Summary of warrant activity | Exercise Price Warrant Common Stock Equivalent Remaining Outstanding at January 1, 2018 $ 0.0001 505,246,312,541 2.60 Warrants settlement $ (0.00004 ) (501,137,085,559 ) Cashless exercises for common stock $ (0.0001 ) (1,602,741,446 ) Black Scholes Value adjustment $ 0.0001 41,862,390,886 Outstanding at September 30, 2018 $ 0.0001 44,368,876,422 1.85 |
Summary of the outstanding warrant common stock equivalents | September 30, January 1, Warrants outstanding 3 33 Black Scholes value 1,524,822 1,520,919 Closing bid stock price $ 0.0001 $ 0.0001 Warrant common stock equivalent 44,368,876,422 505,246,312,541 |
Summary of anti-dilutive activities excluded from basic and dilutive loss per share | September 30, September 30, Preferred stock 201,501,142,000 - Stock options and restricted stock 90,012,230,680 86,911,261,360 Warrants 44,368,876,422 504,635,045,073 Total 335,882,249,102 591,546,306,433 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Measurements [Abstract] | |
Schedule of liabilities measured at fair value on a recurring basis | Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – warrants $ - $ 1,833,158 $ - $ 1,833,158 Total derivative liabilities – warrants $ - $ 1,833,158 $ - $ 1,833,158 Level 1 Level 2 Level 3 Total LIABILITIES Derivative liabilities – warrants $ - $ 10,231,697 $ - $ 10,231,697 Total derivative liabilities – warrants $ - $ 10,231,697 $ - $ 10,231,697 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies [Abstract] | |
Summary of royalty expenses | Three Months Ended Nine Months Ended 2018 2017 2018 2017 Royalty expenses $ 11,818 $ 19,464 $ 45,825 $ 4,814 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Information [Abstract] | |
Schedule of net sales and segment operating loss | Nine months ended Change 2018 2017 2018/2017 Net Sales Vapor sales, net $ 3,556,130 $ 4,440,657 (19 )% Grocery sales, net 6,359,671 5,320,364 19 % Total $ 9,915,801 $ 9,761,021 2 % Segment Gross Profit Vapor $ 1,953,767 $ 2,562,971 (24 )% Grocery 2,508,673 2,201,801 14 % Total Gross Profit 4,462,440 4,764,772 (6 )% Operating expenses 7,334,165 12,282,932 (40 )% Operating loss (2,871,725 ) (7,518,160 ) (62 )% Other income (expense), net (10,151,796 ) (51,940 ) NM Net loss from continuing operations (13,023,521 ) (7,570,100 ) 72 % Net income from discontinued operations - 281,483 (100 )% Net loss $ (13,023,521 ) $ (7,288,617 ) 79 % |
Organization, Going Concern, _2
Organization, Going Concern, and Basis of Presentation (Details) - USD ($) | 9 Months Ended | ||||
Sep. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Organization, Going Concern, and Basis of Presentation (Textual) | |||||
Cash and cash equivalents | $ 8,271,376 | $ 7,883,191 | $ 8,231,314 | $ 13,366,272 | |
Line of credit agreement | $ 2,000,000 | $ 2,000,000 | |||
Variable interest rate | 1.00% | ||||
Line of credit collateral amount | $ 2,000,000 | ||||
Description of line of credit and variable interest rate | Variable interest rate that it is based on a rate of 1% over what is earned on the collateral amount. The collateral amount established in the arrangement with the financial institution is $2.0 million. In the third quarter of 2018, the Company used $0.5 million from the $2.0 million the line of credit at a variable interest rate, to issue a note receivable to VPR Brands LLC. |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Summary of Significant Accounting Policies [Abstract] | ||||
Shipping and handling | $ 18,109 | $ 14,582 | $ 45,437 | $ 80,388 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Summary of Significant Accounting Policies [Abstract] | ||
Total Cash in excess of FDC limits of $250,000 | $ 7,793,076 | $ 7,119,573 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Vapor sales, net | $ 1,106,596 | $ 1,453,725 | $ 3,556,130 | $ 4,440,657 |
Grocery sales, net | 1,923,878 | 1,428,482 | 6,359,671 | 5,320,364 |
Gross profit | 1,386,793 | 1,278,924 | 4,462,440 | 4,764,772 |
Net loss | $ (11,294,756) | (2,795,343) | $ (13,023,521) | (7,288,617) |
ASU Impact [Member] | ||||
Vapor sales, net | 43,722 | 41,716 | ||
Grocery sales, net | (18,558) | (29,437) | ||
Gross profit | 25,164 | 12,279 | ||
Net loss | 25,164 | 12,279 | ||
As reported [Member] | ||||
Vapor sales, net | 1,410,003 | 4,398,941 | ||
Grocery sales, net | 1,447,040 | 5,349,801 | ||
Gross profit | 1,253,760 | 4,752,493 | ||
Net loss | $ (2,820,507) | $ (7,300,896) |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details 3) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Accrued expenses | $ 326,790 | $ 439,133 | ||
Contract liabilities | 2,029,994 | 61,312 | $ 34,960 | $ 34,564 |
Total current liabilities | 5,167,880 | 11,246,648 | ||
Accumulated deficit | (25,594,348) | (12,570,827) | ||
Total stockholders' equity | $ 8,042,730 | 444,298 | ||
ASU Impact [Member] | ||||
Accrued expenses | (99,071) | |||
Contract liabilities | 61,312 | |||
Total current liabilities | (37,759) | |||
Accumulated deficit | 37,759 | |||
Total stockholders' equity | 37,759 | |||
As reported [Member] | ||||
Accrued expenses | 538,204 | |||
Contract liabilities | ||||
Total current liabilities | 11,284,407 | |||
Accumulated deficit | (12,608,586) | |||
Total stockholders' equity | $ 406,539 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Sep. 30, 2018 | |
Summary of Significant Accounting Policies (Textual) | ||
Cash in excess of financial institution | $ 250,000 | $ 250,000 |
Contract liabilities from accrued expenses | 61,312 | |
Net loss and an immaterial impact | $ 12,951 |
Disaggregation of Revenues (Det
Disaggregation of Revenues (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 3,030,474 | $ 2,882,207 | $ 9,915,801 | $ 9,761,021 |
Vapor sales, net [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 1,106,596 | 1,453,725 | 3,556,130 | 4,440,657 |
Grocery sales, net [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 1,923,878 | 1,428,482 | 6,359,671 | 5,320,364 |
Retail Vapor [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 1,106,228 | 1,386,851 | 3,548,704 | 4,170,393 |
Retail Grocery [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 1,407,776 | 1,102,665 | 4,581,001 | 5,055,226 |
Food service/restaurant [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 370,609 | 314,642 | 1,167,006 | 253,963 |
Online/eCommerce [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 135,483 | 11,175 | 593,347 | 11,175 |
Wholesale Grocery [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 10,010 | 18,317 | ||
Wholesale Vapor [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 368 | $ 66,874 | $ 7,426 | $ 270,264 |
Prepaid Expenses and Vendor D_3
Prepaid Expenses and Vendor Deposits (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | |
Prepaid Expenses and Vendor Deposits [Abstract] | |||
Vendor deposits | [1] | $ 293,098 | $ 5,533 |
Technology | 43,300 | ||
Insurance policy | 37,497 | 47,105 | |
Patent | 25,000 | ||
Rent | 9,696 | 9,695 | |
Other | 13,436 | 28,410 | |
Insurance claim | 41,183 | ||
Software licenses | 1,475 | ||
Total | $ 422,027 | $ 133,401 | |
[1] | Vendor deposits related to the sales contract with MJNE for the Q-Cups. |
Investment (Details)
Investment (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Investment (Textual) | ||
Invested amount | $ 150,000 | |
Gain on Investments | $ 11,999 | |
Investments on common stock shares | 85,714 |
Notes Receivable and Other In_3
Notes Receivable and Other Income (Details) - Promissory Note [Member] | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Short-term Debt [Line Items] | |
Due Date | 9/6/2021 |
Interest Rate | 7.00% |
Loan Amount | $ 582,260 |
Proceeds | 12,422 |
Remaining Balance | $ 572,176 |
Notes Receivable and Other In_4
Notes Receivable and Other Income (Details Textual) - USD ($) | Sep. 06, 2018 | Sep. 30, 2018 | Sep. 30, 2018 |
Notes Receivable and Other Income (Textual) | |||
Other income | $ 82,260 | $ 469,760 | |
Promissory Note [Member] | |||
Notes Receivable and Other Income (Textual) | |||
Promissory note term | 36 months | ||
Secured amount | $ 582,260 | ||
Principal amount | 500,000 | 500,000 | |
Secured notes | $ 82,260 | 82,260 | |
Debt payments | $ 4,141 | ||
Bears interest rate | 7.00% | 7.00% |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 1,887,000 | $ 1,849,500 |
Accumulated Amortization | (412,136) | (289,969) |
Net Carrying Amount | $ 1,474,864 | $ 1,559,531 |
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 | (135,990) | (92,219) |
Net Carrying Amount | $ 754,010 | $ 797,781 |
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 | (231,000) | (169,500) |
Net Carrying Amount | $ 589,000 | $ 650,500 |
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 | (28,000) | (19,000) |
Net Carrying Amount | $ 32,000 | $ 41,000 |
Patents [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 10 years | 10 years |
Gross Carrying Amount | $ 112,500 | $ 75,000 |
Accumulated Amortization | (13,646) | (6,875) |
Net Carrying Amount | $ 98,854 | $ 68,125 |
Website [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives (Years) | 3 years | 3 years |
Gross Carrying Amount | $ 4,500 | $ 4,500 |
Accumulated Amortization | (3,500) | (2,375) |
Net Carrying Amount | $ 1,000 | $ 2,125 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Intangible Assets [Abstract] | ||
2018 (remaining three months) | $ 41,278 | |
2,019 | 164,236 | |
2,020 | 163,611 | |
2,021 | 156,611 | |
2,022 | 151,611 | |
Thereafter | 797,517 | |
Total | $ 1,474,864 | $ 1,559,531 |
Intangible Assets (Details Text
Intangible Assets (Details Textual) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Intangible Assets (Textual) | ||
Amortization expense | $ 122,166 | $ 119,458 |
Contract Assets and Liabiliti_3
Contract Assets and Liabilities (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | ||
Contract Assets and Liabilities [Abstract] | |||
Beginning balance as January 1, | $ 61,312 | $ 34,564 | |
Issued | 81,720 | 96,029 | |
Redeemed | (113,954) | (99,067) | |
Breakage recognized | 916 | 3,434 | |
Customer deposits | [1] | 2,000,000 | |
Ending balance as of September 30, | $ 2,029,994 | $ 34,960 | |
[1] | See Note 13. "Commitments and Contingencies" for additional information. |
Contract Assets and Liabiliti_4
Contract Assets and Liabilities (Details Textual) | 3 Months Ended |
Sep. 30, 2018USD ($) | |
Contract Assets and Liabilities (Textual) | |
Sales of paid commissions amount | $ 180,000 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Accrued Expenses [Abstract] | ||
Sales return from Wholesale business | $ 168,693 | $ 168,693 |
Salaries and wages | 58,641 | 72,522 |
Franchise taxes | 36,750 | 36,000 |
Professional fees | 22,247 | 125,783 |
Credit card fees | 15,383 | |
Royalty fees | 14,126 | 18,150 |
Property taxes | 9,750 | |
Other | 1,200 | 17,985 |
Total | $ 326,790 | $ 439,133 |
Line of Credit (Details)
Line of Credit (Details) - USD ($) $ in Millions | Sep. 10, 2018 | Sep. 30, 2018 | Jun. 30, 2018 |
Line of Credit (Textual) | |||
Line of credit agreement | $ 2 | $ 2 | |
Variable interest rate | 1.00% | ||
Line of credit collateral amount | $ 2 | ||
Description of line of credit and interest | The Company withdrew $0.5 million from line of credit and the interest for the period was $126. As of September 30, 2018, the Company has not made any payments towards the principal amount borrowed from the credit line. |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Exercise Price | ||
Outstanding at January 1, 2018 | $ 0.0001 | |
Warrants settlement | (0.00004) | |
Cashless exercises for common stock | (0.0001) | |
Black Scholes Value adjustment | 0.0001 | |
Outstanding at September 30, 2018 | $ 0.0001 | $ 0.0001 |
Warrant Common Stock Equivalent | ||
Warrant Common Stock Equivalent, Outstanding at January 1, 2018 | 505,246,312,541 | |
Warrants settlement | (501,137,085,559) | |
Cashless exercises for common stock | (1,602,741,446) | |
Black Scholes Value adjustment | 41,862,390,886 | |
Warrant Common Stock Equivalent, Outstanding at September 30, 2018 | 44,368,876,422 | 505,246,312,541 |
Remaining Contractual Term | ||
Outstanding | 2 years 7 months 6 days | 1 year 10 months 6 days |
Stockholders' Equity (Detail 1)
Stockholders' Equity (Detail 1) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Stockholders' Equity [Abstract] | ||
Warrants outstanding | 3 | 33 |
Black Scholes value | 1,524,822 | 1,520,919 |
Closing bid stock price | $ 0.0001 | $ 0.0001 |
Warrant common stock equivalent | 44,368,876,422 | 505,246,312,541 |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) - shares | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 335,882,249,102 | 591,546,306,433 |
Preferred stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 201,501,142,000 | |
Warrants [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 44,368,876,422 | 504,635,045,073 |
Stock options and restricted stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Securities excluded from calculation of dilutive loss per share | 90,012,230,680 | 86,911,261,360 |
Stockholders' Equity (Details T
Stockholders' Equity (Details Textual) - USD ($) shares in Billions | Aug. 13, 2018 | Aug. 16, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 |
Stockholders' Equity (Textual) | |||||||
Description of convertible preferred stock | The Company entered into agreements with certain holders of its Series A Warrants to exchange the Company's Series B Convertible Preferred Stock for Series A Warrants. A total of 20,722 shares of Series B Stock were exchanged for 46,048,318 Series A Warrants (including those warrants issuable pursuant to a unit purchase option). Each share of Series B Stock "Series B Stock" has a stated value equal to $1,000 and is convertible into Common Stock on a fixed basis at a conversion price of $0.0001 per share. | ||||||
Stock Options [Member] | |||||||
Stockholders' Equity (Textual) | |||||||
Stock-based compensation expense | $ 100,000 | $ 2,000,000 | $ 1,300,000 | $ 5,300,000 | |||
Unamortized stock based compensation expense on unvested stock options | 100,000 | $ 100,000 | $ 1,300,000 | ||||
Amortized over a weighted average period | 2 months 16 days | 5 months 5 days | |||||
Chief Executive Officer [Member] | |||||||
Stockholders' Equity (Textual) | |||||||
Restricted common stock, shares | 11 | ||||||
Chief Operating Officer [Member] | |||||||
Stockholders' Equity (Textual) | |||||||
Restricted common stock, shares | 8 | ||||||
Chief Financial Officer [Member] | |||||||
Stockholders' Equity (Textual) | |||||||
Stock-based compensation expense | $ 50,000 | ||||||
Restricted common stock, shares | 3 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
LIABILITIES | ||
Derivative liabilities - warrants | $ 1,833,158 | $ 10,231,697 |
Total derivative liabilities - warrants | 1,833,158 | 10,231,697 |
Recurring Basis [Member] | Level 1 [Member] | ||
LIABILITIES | ||
Derivative liabilities - warrants | ||
Total derivative liabilities - warrants | ||
Recurring Basis [Member] | Level 2 [Member] | ||
LIABILITIES | ||
Derivative liabilities - warrants | 1,833,158 | 10,231,697 |
Total derivative liabilities - warrants | 1,833,158 | 10,231,697 |
Recurring Basis [Member] | Level 3 [Member] | ||
LIABILITIES | ||
Derivative liabilities - warrants | ||
Total derivative liabilities - warrants |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Commitments and Contingencies [Abstract] | ||||
Royalty expenses | $ 11,818 | $ 19,464 | $ 45,825 | $ 4,814 |
Commitments and Contingencies_3
Commitments and Contingencies (Details Textual) | Aug. 13, 2018 | Aug. 17, 2018 | Sep. 30, 2018 |
Commitments and Contingencies (Textual) | |||
Royalty rate, percentage | 5.25% | ||
Description of exclusive distribution agreement | The Agreement, MJNE agreed to purchased $2,000,000   in Q-Cups from the Company and MJNE has delivered the full purchase price in advance. The initial term of the Agreement is for one year with additional successive one-year renewals, subject to certain standard termination provisions. The Company has the option to terminate the Agreement on 30 days’ written notice if MJNE fails to purchase a sufficient minimum quantity of Q-cups from the Company. For each renewal term, MJNE’s minimum purchase obligation for the Q-cups is currently $6 million in required increments of at least $500,000 per month, subject to mutually agreed upon adjustments based upon the first year sales. | ||
President and Chief Operating Officer [Member] | |||
Commitments and Contingencies (Textual) | |||
Description of employment agreement | The Company entered into an amendment to the existing employment agreement with the Company's President and Chief Operating Officer, Christopher Santi. Mr. Santi will continue to be employed as the Company's President and Chief Operating Officer for an additional one year extension period through January 29, 2021. Mr. Santi will receive a base salary of $330,000 for this additional year. The severance pay period for termination without cause was increased to up to 18 months based on time of service. Mr. Santi was also granted 8 billion shares of restricted common stock on the condition that 8 billion of his options to purchase Company common stock are forfeited. | ||
Chief Financial Officer [Member] | |||
Commitments and Contingencies (Textual) | |||
Description of employment agreement | The Company entered into an amendment to the existing employment agreement with the Company's Chief Financial Officer, John Ollet. Mr. Ollet will continue to be employed as the Company's Chief Financial Officer for an additional one year extension period through December 12, 2020. Mr. Ollet will receive a base salary of $250,000 for this additional year. Mr. Ollet was also granted 3 billion shares of restricted common stock. | ||
Chief Executive Officer [Member] | |||
Commitments and Contingencies (Textual) | |||
Description of employment agreement | The Company amended and restated its existing employment agreement with Jeffrey Holman, the Company's Chief Executive Officer. The employment agreement is for an additional three year term and provides for an annual base salary of?$450,000 and a target bonus for 2018 only in an amount ranging from 20% to 200% of his base salaries subject to the Company meeting certain earnings before interest, taxes depreciation and amortization performance milestones. Mr. Holman is entitled to receive severance payments, including two years of his then base salary and other benefits in the event of a change of control, termination by the Company without cause, termination for good reason by the executive or non-renewal by the Company. Mr. Holman was also granted 11 billion shares of restricted common stock on the condition that 11 billion of his options to purchase Company common stock are forfeited. |
Segment Information (Details)
Segment Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Net Sales | ||||
Vapor sales, net | $ 1,106,596 | $ 1,453,725 | $ 3,556,130 | $ 4,440,657 |
Change in vapor sales, net, percentage | (24.00%) | (24.00%) | (19.00%) | (19.00%) |
Grocery sales, net | $ 1,923,878 | $ 1,428,482 | $ 6,359,671 | $ 5,320,364 |
Change in grocery sales net, percentage | 35.00% | 35.00% | 19.00% | 19.00% |
Total Net Sales | $ 3,030,474 | $ 2,882,207 | $ 9,915,801 | $ 9,761,021 |
Change in total net sales, percentage | 5.00% | 5.00% | 2.00% | 2.00% |
Segment Gross Profit | ||||
Total Gross Profit | $ 1,386,793 | $ 1,278,924 | $ 4,462,440 | $ 4,764,772 |
Change in total gross profit, percentage | 8.00% | 8.00% | (6.00%) | (6.00%) |
Operating expenses | $ 2,179,492 | $ 4,272,323 | $ 7,334,165 | $ 12,282,932 |
Change in operating expenses, percentage | (49.00%) | (49.00%) | (40.00%) | (40.00%) |
Operating loss | $ (792,699) | $ (2,993,399) | $ (2,871,725) | $ (7,518,160) |
Change In Operating Loss Percentage | (74.00%) | (74.00%) | (62.00%) | (62.00%) |
Other income (expense), net | $ (10,502,057) | $ (6,451) | $ (10,151,796) | $ (51,940) |
Change in other income expense net, percentage | ||||
Net loss from continuing operations | $ (11,294,756) | $ (2,999,850) | $ (13,023,521) | $ (7,570,100) |
Change in net loss from continuing operations, percentage | 277.00% | 277.00% | 72.00% | 72.00% |
Net income from discontinued operations | $ 204,507 | $ 281,483 | ||
Change in net income from discontinued operations, percentage | (100.00%) | (100.00%) | (100.00%) | (100.00%) |
Net loss | $ (11,294,756) | $ (2,795,343) | $ (13,023,521) | $ (7,288,617) |
Change in net loss, percentage | 304.00% | 304.00% | (79.00%) | (79.00%) |
Vapor [Member] | ||||
Net Sales | ||||
Total Net Sales | $ 1,106,596 | $ 1,453,725 | $ 3,556,130 | $ 4,440,657 |
Vapor [Member] | Operating segment [Member] | ||||
Segment Gross Profit | ||||
Total Gross Profit | $ 645,947 | $ 744,280 | $ 1,953,767 | $ 2,562,971 |
Change in total gross profit, percentage | (13.00%) | (13.00%) | (24.00%) | (24.00%) |
Grocery [Member] | ||||
Net Sales | ||||
Total Net Sales | $ 1,923,878 | $ 1,428,482 | $ 6,359,671 | $ 5,320,364 |
Grocery [Member] | Operating segment [Member] | ||||
Segment Gross Profit | ||||
Total Gross Profit | $ 740,846 | $ 534,644 | $ 2,508,673 | $ 2,201,801 |
Change in total gross profit, percentage | 39.00% | 39.00% | 14.00% | 14.00% |
Segment Information (Details Te
Segment Information (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Vapor [Member] | ||||
Segment Information (Textual) | ||||
Depreciation and amortization | $ 19,317 | $ 17,011 | $ 52,872 | $ 50,270 |
Grocery [Member] | ||||
Segment Information (Textual) | ||||
Depreciation and amortization | $ 69,685 | $ 68,125 | $ 208,471 | $ 197,985 |