NOTES TO CONDENSED
CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED)
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 ten 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. and Paradise Health and
Nutrition, stores that offer 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 through its wholly owned subsidiary
Healthy Choice Markets 2, LLC. 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 a customer partially fills with either cannabis or CBD
concentrate (approximately 50mg) purchased from a third party. 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.
Liquidity
The accompanying condensed 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 $0.9 million for the three months ended March 31, 2019. As of March 31, 2019, cash and cash equivalents totaled
approximately $6.0 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 condensed 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.
Sourcing and Vendors
We source from multiple suppliers. These
suppliers range from small independent businesses to multinational conglomerates. For the three months ended March 31, 2019, we
purchased approximately 66% of the goods we sell from our top 20 suppliers and approximately 19% of our total purchases were from
one vendor.
Basis of Presentation and Principles of Consolidation
The Company’s unaudited condensed
consolidated financial statements are prepared in accordance with GAAP. The unaudited condensed 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 condensed consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries, Healthy Choice Markets, Inc., Healthy Choice Markets 2,
LLC (“Paradise Health and Nutrition”), The Vitamin Store, LLC, Healthy U Wholesale, Inc., The Vape Store, Inc. (“Vape
Store”), Vaporin, Inc. (“Vaporin”), Smoke Anywhere U.S.A., Inc. (“Smoke”), Emagine the Vape Store,
LLC (“Emagine”), IVGI Acquisition, Inc., Vapormax Franchising LLC, Vaporin LLC, and Vaporin Florida, Inc. All intercompany
accounts and transactions have been eliminated in consolidation.
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
Unaudited Interim Financial Information
The unaudited condensed 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, 2019. 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 condensed 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, 2018 included in the Company’s
Annual Report on Form 10-K for such year as filed with the SEC on March 27, 2019.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Use of Estimates in the Preparation of the Financial
Statements
The preparation of condensed 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 condensed 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 the assets and liabilities acquired in business combinations. Certain of management’s estimates could be
affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that
these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The
Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when
necessary.
Adopted 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 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. The Company adopted ASU No. 2016-02 on January 1, 2019 using the
cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting
the comparative periods presented. Adoption of this standard resulted in the recognition of operating lease right-of-use assets
of $4,988,000 and corresponding lease liabilities of $4,350,000 on the consolidated balance sheet as of January 1, 2019. An adjustment
to Ada’s favorable lease of $739,000 and prepaid rent of $2,000, resulted in a cumulative effect adjustment of $103,000.
The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty
of cash flows arising from leases are included in Note 11, Leases.
Note 3. CONCENTRATION OF RISK
Cash
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.
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
A summary of the financial institutions
that had a cash and cash equivalents in excess of FDIC limits of $250,000 at March 31, 2019 and December 31, 2018 is presented
below:
|
|
March
31,
2019
|
|
|
December 31,
2018
|
|
Total Cash in excess of FDIC limits of $250,000
|
|
$
|
4,776,000
|
|
|
$
|
6,039,000
|
|
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.
Accounts Receivable
Concentration of accounts receivable consist
of the following, all of which are greater than 10% of the total net accounts receivable balance:
|
|
March 31,
2019
|
|
|
December 31,
2018
|
|
Customers balances in excess of 10% of total accounts receivable
|
|
|
|
|
|
|
Customer A
|
|
|
13
|
%
|
|
|
55
|
%
|
Customer B
|
|
|
12
|
%
|
|
|
-
|
%
|
Note 4. 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
|
|
|
|
March
31,
2019
|
|
|
March 31,
2018
|
|
Vapor
|
|
$
|
1,224,042
|
|
|
$
|
1,308,895
|
|
Grocery
|
|
|
3,156,064
|
|
|
|
2,298,511
|
|
Total revenue
|
|
$
|
4,380,106
|
|
|
$
|
3,607,406
|
|
|
|
|
|
|
|
|
|
|
Retail Vapor
|
|
$
|
1,223,722
|
|
|
$
|
1,302,855
|
|
Retail Grocery
|
|
|
2,753,199
|
|
|
|
1,646,635
|
|
Food service/restaurant
|
|
|
347,651
|
|
|
|
397,564
|
|
Online/eCommerce
|
|
|
46,569
|
|
|
|
250,960
|
|
Wholesale Grocery
|
|
|
8,645
|
|
|
|
3,352
|
|
Wholesale Vapor
|
|
|
320
|
|
|
|
6,040
|
|
Total revenue
|
|
$
|
4,380,106
|
|
|
$
|
3,607,406
|
|
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note 5. INTANGIBLE ASSETS
Intangible assets, net are as follows:
March 31, 2019
|
|
Useful Lives
(Years)
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
Trade names
|
|
8-10 years
|
|
|
993,000
|
|
|
|
(277,796
|
)
|
|
|
715,204
|
|
Customer relationships
|
|
4-10 years
|
|
|
1,228,000
|
|
|
|
(104,073
|
)
|
|
|
1,123,927
|
|
Patents
|
|
10 years
|
|
|
245,250
|
|
|
|
(29,071
|
)
|
|
|
216,179
|
|
Non-compete
|
|
4 years
|
|
|
174,000
|
|
|
|
(12,688
|
)
|
|
|
161,312
|
|
Website
|
|
3 years
|
|
|
4,500
|
|
|
|
(4,250
|
)
|
|
|
250
|
|
Intangible assets, net
|
|
|
|
$
|
2,644,750
|
|
|
$
|
(427,878
|
)
|
|
$
|
2,216,872
|
|
December 31, 2018
|
|
Useful Life
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
Favorable lease
|
|
15 years
|
|
$
|
890,000
|
|
|
$
|
(150,580
|
)
|
|
$
|
739,420
|
|
Trade names
|
|
8-10 years
|
|
|
993,000
|
|
|
|
(252,329
|
)
|
|
|
740,671
|
|
Customer relationships
|
|
4-10 years
|
|
|
1,228,000
|
|
|
|
(41,010
|
)
|
|
|
1,186,990
|
|
Patents
|
|
10 years
|
|
|
245,250
|
|
|
|
(22,940
|
)
|
|
|
222,310
|
|
Non-compete
|
|
4 years
|
|
|
174,000
|
|
|
|
(1,812
|
)
|
|
|
172,188
|
|
Website
|
|
3 years
|
|
|
4,500
|
|
|
|
(3,875
|
)
|
|
|
625
|
|
Intangible assets, net
|
|
|
|
$
|
3,534,750
|
|
|
$
|
(472,546
|
)
|
|
$
|
3,062,204
|
|
Intangible assets are amortized on a straight-line
basis over their estimated useful lives. Amortization expense amounted to approximately $106,000 and $40,000 for the three months
ended March 31, 2019 and 2018, respectively. Due to adoption of ASU No. 2016-02 on January 1, 2019, the Company’s favorable
lease intangible asset associated with its Ada’s Natural Market location, with a net balance of $739,000 as of December
31, 2018, was reclassified to right-of-use asset in the Ada’s lease amortization schedule to correct the January 1, 2019
opening balance sheet. Future annual estimated amortization expense is as follows:
Years ending December 31,
|
|
|
|
2019 (remaining nine months)
|
|
$
|
316,862
|
|
2020
|
|
|
422,150
|
|
2021
|
|
|
415,150
|
|
2022
|
|
|
399,765
|
|
2023
|
|
|
159,465
|
|
Thereafter
|
|
|
503,480
|
|
Total
|
|
$
|
2,216,872
|
|
Note 6. INVESTMENT
As of March 31, 2019, the Company held
85,714 common stock shares at MJ Holdings Inc. (“MJNE”), and remeasured the fair value of the MJNE stock and recognized
a loss on investment of $26,000. The investment in MJNE stock is categorized as Level 1 asset and its fair value is based on quoted
prices in active markets.
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
A summary of the investment as of March
31, 2019 and December 31, 2018 are presented below:
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Market
|
|
|
Mark to
|
|
|
|
|
March 31, 2019
|
|
(Level 1)
|
|
|
Market
|
|
|
Final
|
|
MJ Holdings, Inc
|
|
$
|
150,000
|
|
|
$
|
(84,857
|
)
|
|
$
|
65,143
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Market
|
|
|
Mark to
|
|
|
|
|
December 31, 2018
|
|
(Level 1)
|
|
|
Market
|
|
|
Final
|
|
MJ Holdings, Inc
|
|
$
|
150,000
|
|
|
$
|
(59,143
|
)
|
|
$
|
90,857
|
|
Note 7. CONTRACT ASSETS AND CONTRACT
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. The contract assets balance as
of March 31, 2019 is approximately $18,000.
The Company’s deferred revenue consists
of 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 three months ended March 31, 2019 and 2018 is presented below:
|
|
March
31,
2019
|
|
|
March 31,
2018
|
|
Beginning balance as January1,
|
|
$
|
442,630
|
|
|
$
|
61,312
|
|
Issued
|
|
|
74,894
|
|
|
|
83,834
|
|
Redeemed
|
|
|
(74,387
|
)
|
|
|
(85,357
|
)
|
Breakage recognized
|
|
|
(648
|
)
|
|
|
(923
|
)
|
Customer deposits
|
|
|
(201,787
|
)
|
|
|
-
|
|
Ending balance as of March 31,
|
|
$
|
240,702
|
|
|
$
|
58,866
|
|
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note 8. STOCKHOLDERS’ EQUITY
Series A Warrants
A summary of warrant activity for the three months ended March
31, 2019 is presented below:
|
|
Exercise
Price
|
|
|
Warrant
Common
Stock
Equivalent
|
|
|
Remaining Contractual Term
|
|
Outstanding at January 1, 2019
|
|
$
|
0.0001
|
|
|
|
41,642,670,772
|
|
|
1.50
|
|
Warrants settlement
|
|
$
|
-
|
|
|
|
-
|
|
|
|
|
Cashless exercises for common stock
|
|
$
|
(0.0001
|
)
|
|
|
(10,872,544
|
)
|
|
|
|
Black Scholes Value adjustment
|
|
$
|
(0.0001
|
)
|
|
|
(52,882,261
|
)
|
|
|
|
Outstanding at March 31, 2019
|
|
$
|
0.0001
|
|
|
|
41,578,915,967
|
|
|
1.25
|
|
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 December 31, 2018 and March 31, 2019 is presented below:
|
|
March
31,
2019
|
|
|
December 31,
2018
|
|
Warrants
outstanding
(A)
|
|
|
2.7341
|
|
|
|
2.7348
|
|
Black
Scholes value
(B)
|
|
$
|
1,520,758
|
|
|
$
|
1,522,692
|
|
Subtotal
(C)=(A)
x (B)
|
|
|
4,157,904
|
|
|
|
4,164,258
|
|
Closing
bid stock price
(D)
|
|
$
|
0.0001
|
|
|
$
|
0.0001
|
|
Warrant
common stock equivalent
(C)/(D)
|
|
|
41,579,000,000
|
|
|
|
41,643,000,000
|
|
Stock Options
During the three months ended March 31,
2019 and 2018, the Company recognized stock-based compensation of approximately $0.1 million and $1.1 million, respectively, in
connection with the amortization of stock options, net of recovery of stock-based charges for forfeited unvested stock options.
Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated
statements of operations.
At March 31, 2019, the amount of unamortized
stock-based compensation expense associated with unvested stock options granted to employees, directors and consultants was approximately
$0.1 million, which will be amortized over a weighted average period of 1.3 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); (b) the conversion of Series A convertible preferred stock; (c) the
exercise of warrants (using the if-converted method); (d) the vesting of restricted stock units; and (e) the conversion of convertible
notes payable. Diluted income (loss) per share excludes the potential common shares, as their effect is antidilutive.
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
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:
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
201,501,142,000
|
|
|
|
-
|
|
Stock options
|
|
|
90,012,230,680
|
|
|
|
89,268,899,200
|
|
Warrants
|
|
|
41,578,915,967
|
|
|
|
505,888,354,828
|
|
Total
|
|
|
333,092,288,647
|
|
|
|
595,157,254,028
|
|
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.
|
Nonfinancial assets such as goodwill,
other intangible assets, and long-lived assets held and used are measured at fair value and tested for impairment annually, or
when there is an indicator of impairment between annual tests.
The following table summarizes the liabilities
measured at fair value on a recurring basis as of March 31, 2019:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities - warrants
|
|
$
|
-
|
|
|
$
|
1,722,478
|
|
|
$
|
-
|
|
|
$
|
1,722,478
|
|
Total derivative liabilities - warrants
|
|
$
|
-
|
|
|
$
|
1,722,478
|
|
|
$
|
-
|
|
|
$
|
1,722,478
|
|
The following table summarizes the liabilities
measured at fair value on a recurring basis as of December 31, 2018:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities – warrants
|
|
$
|
-
|
|
|
$
|
1,722,928
|
|
|
$
|
-
|
|
|
$
|
1,722,928
|
|
Total derivative liabilities – warrants
|
|
$
|
-
|
|
|
$
|
1,722,928
|
|
|
$
|
-
|
|
|
$
|
1,722,928
|
|
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLDIATED FINANCIAL
STATEMENTS
(UNAUDITED)
Note 10. COMMITMENTS AND CONTINGENCIES
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.
A subsidiary of the Company is a defendant
in a lawsuit that stems from a purported defect and negligence concerning electronic cigarette products it sold. The action was
filed on January 31, 2019 in Florida state court in Broward County, Florida. Plaintiff is seeking damages for his physical injuries
as well as his pain and suffering. Plaintiff claims that he was injured by a vape battery explosion that occurred in his pocket
on or about September 2017 and that he purchased the battery from a store operated by the Company’s subsidiary. While discovery
is at its infancy, the Company intends to vigorously dispute these claims that have been asserted against it.
Note 11. LEASE
The Company has various lease agreements
with terms up to 20 years, including leases of retail stores, headquarter and equipment. All the leases are classified as operating
leases. The Company adopted Accounting Standards Codification (“ASC”) 842, “Leases” (“ASC 842”)
effective January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard
at the effective date without adjusting the comparative periods presented. We elected not to reassess whether any expired or existing
contracts are or contain leases, reassess the lease classification for any expired or existing leases, nor reassess initial direct
costs for any existing leases.
The standard had an impact on the Company’s
condensed consolidated balance sheets, but did not have a material impact on the Company’s condensed consolidated statements
of operations or condensed consolidated statements of cash flows upon adoption. The most significant impact was the recognition
of right-of-use asset of $5.0 million and lease liability of $4.3 million for operating leases as of January 1, 2019.
The following table presents information
about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of March 31, 2019.
Maturity of Lease Liabilities By Fiscal Year
|
|
|
|
2019 (remaining)
|
|
$
|
552,492
|
|
2020
|
|
|
621,435
|
|
2021
|
|
|
495,154
|
|
2022
|
|
|
455,916
|
|
2023
|
|
|
441,262
|
|
Thereafter
|
|
|
2,888,699
|
|
Total undiscounted operating lease payments
|
|
$
|
5,454,958
|
|
Less: Imputed interest
|
|
|
(1,248,564
|
)
|
Present value of operating lease liabilities
|
|
$
|
4,206,394
|
|
|
|
|
|
|
Balance Sheet Classification
|
|
|
|
|
Operating lease liability, current
|
|
$
|
525,120
|
|
Operating lease liability, net of current
|
|
|
3,681,274
|
|
Total operating lease liabilities
|
|
$
|
4,206,394
|
|
|
|
|
|
|
Other Information
|
|
|
|
|
Weighted-average remaining lease term for operating leases
|
|
|
11 years
|
|
Weighted-average discount rate for operating leases
|
|
|
4.8
|
%
|
HEALTHIER CHOICES MANAGEMENT CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
Components of lease cost are as follows:
|
|
3/31/2019
|
|
Operating lease cost
|
|
$
|
127,144
|
|
Variable lease cost
|
|
|
75,405
|
|
Short-term lease cost
|
|
|
35,638
|
|
Total Rent Expense
|
|
$
|
238,187
|
|
Cash Flows
Cash paid for amounts included in the
present value of operating lease liabilities was $143,000 during first quarter 2019 and was included in operating cash flows.
The amortization of the right-of-use asset of $163,000 was included in operating cash flows.
Supplemental balance sheet information
related to our operating leases is as follows:
|
|
Balance Sheet Classification
|
|
1/1/2019
|
|
|
3/31/2019
|
|
Right of use asset
|
|
Other assets
|
|
$
|
4,988,227
|
|
|
$
|
4,825,446
|
|
Lease liability, current
|
|
Current liabilities
|
|
$
|
553,316
|
|
|
$
|
525,120
|
|
Lease liability, net of current
|
|
Other liabilities
|
|
$
|
3,796,312
|
|
|
$
|
3,681,274
|
|
Note 12. SUBSEQUENT EVENTS
On April 13, 2018, the Company agreed to a new revolving credit
line of $2 million and a money market account of $2 million (“blocked account”) with Professional Bank in Coral Gables,
Florida. On April 22, 2019, the Company reached agreement with Professional Bank to renew the credit line for one more year, and
the next annual review will occur on or before May 13, 2020. All terms, conditions and provisions of the Note and each of the
other loan documents, are ratified, confirmed and continue unchanged in full force and effect.