Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Mar. 31, 2015 | |
Document And Entity Information | |
Entity Registrant Name | VAPOR CORP. |
Entity Central Index Key | 844856 |
Document Type | S-1 |
Document Period End Date | 31-Mar-15 |
Amendment Flag | FALSE |
Current Fiscal Year End Date | -19 |
Entity Filer Category | Smaller Reporting Company |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS: | |||
Cash | $1,911,199 | $471,194 | $6,570,215 |
Due from merchant credit card processors, net of reserve for charge-backs of $2,500 and $2,500, respectively | 348,192 | 111,968 | 205,974 |
Accounts receivable, net of allowance of $228,856, $369,731 and $256,833, respectively | 203,793 | 239,652 | 1,802,781 |
Inventories | 2,536,149 | 2,048,883 | 3,321,898 |
Prepaid expenses and vendor deposits | 527,207 | 664,103 | 1,201,040 |
Loans receivable, net | 467,095 | ||
Deferred financing costs, net | 87,292 | 122,209 | |
Deferred tax asset, net | 766,498 | ||
TOTAL CURRENT ASSETS | 5,613,832 | 4,125,104 | 13,868,406 |
Property and equipment, net of accumulated depreciation of $158,238 $84,314 and $27,879, respectively | 633,705 | 712,019 | 28,685 |
Intangible assets, net of accumulated amortization of $22,177 and $0, respectively | 2,058,423 | ||
Goodwill | 15,654,484 | ||
Other assets | 92,131 | 91,360 | 65,284 |
TOTAL ASSETS | 24,052,575 | 4,928,483 | 13,962,375 |
CURRENT LIABILITIES: | |||
Accounts payable | 2,303,051 | 1,920,135 | 1,123,508 |
Accrued expenses | 1,419,241 | 975,112 | 420,363 |
Senior convertible notes payable - related parties, net of debt discount of $781,250, $1,093,750 and $0, respectively | 468,750 | 156,250 | |
Convertible notes, net of debt discount of $49,421 and $0 , respectively | 517,579 | ||
Notes payable - related party | 1,000,000 | ||
Current portion of capital lease | 52,015 | 52,015 | |
Term loan | 523,727 | 750,000 | 478,847 |
Customer deposits | 50,744 | 140,626 | 182,266 |
Income taxes payable | 3,092 | 3,092 | 5,807 |
Derivative liabilities | 87,603 | ||
TOTAL CURRENT LIABILITIES | 6,425,802 | 3,997,230 | 2,210,791 |
Capital lease, net of current portion | 107,195 | 119,443 | |
TOTAL LIABILITIES | 6,532,997 | 4,116,673 | 2,210,791 |
COMMITMENTS AND CONTINGENCIES | |||
STOCKHOLDERS' EQUITY: | |||
Preferred stock, $.001 par value, $1,000,000 shares authorized, none issued or outstanding | |||
Common stock, $.001 par value, 50,000,000 shares authorized 33,635,758, 16,761,911 and 16,214,528 shares issued and 16,761,911 and 16,214,528 shares outstanding, respectively | 33,636 | 16,762 | 16,214 |
Additional paid-in capital | 36,699,041 | 16,026,951 | 13,115,024 |
Accumulated deficit | -19,213,099 | -15,231,903 | -1,379,654 |
TOTAL STOCKHOLDERS' EQUITY | 17,519,578 | 811,810 | 11,751,584 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $24,052,575 | $4,928,483 | $13,962,375 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | |||
Due from merchant credit card processor, reserve for charge-backs | $41,355 | $2,500 | $2,500 |
Accounts receivable, allowance for doubtful accounts | 228,856 | 369,731 | 256,833 |
Property and equipment, accumulated depreciation | 158,238 | 84,314 | 27,879 |
Intangible assets, accumulated amortization | 22,177 | 0 | |
Senior convertible notes payable debt discount net | 781,250 | 1,093,750 | 0 |
Convertible Notes, debt discount | $49,421 | $0 | |
Preferred stock, par value | $0.00 | $0.00 | $0.00 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | |||
Preferred stock, shares outstanding | |||
Common stock, par value | $0.00 | $0.00 | $0.00 |
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 |
Common stock, shares issued | 33,635,758 | 16,761,911 | 16,214,528 |
Common stock, shares outstanding | 33,635,758 | 16,761,911 | 16,214,528 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||||
SALES, NET | $1,468,621 | $4,792,544 | $15,279,859 | $25,990,228 |
Cost of goods sold | 1,651,110 | 3,831,928 | 14,497,254 | 16,300,333 |
GROSS (LOSS) PROFIT | -182,489 | 960,616 | 782,605 | 9,689,895 |
EXPENSES: | ||||
Selling, general and administrative | 3,243,189 | 2,769,726 | 11,126,759 | 6,464,969 |
Advertising | 105,177 | 367,615 | 2,374,329 | 2,264,807 |
Total operating expenses | 3,348,366 | 3,137,341 | 13,501,088 | 8,729,776 |
Operating (loss) income | -3,530,855 | -2,176,725 | -12,718,483 | 960,119 |
Other (expense) income: | ||||
Induced conversion expense | 299,577 | |||
Amortization of deferred financing costs | -34,917 | 17,458 | ||
Change in fair value of derivative liabilities | -37,965 | |||
Interest expense | -378,775 | -28,434 | 348,975 | 383,981 |
Interest Income | 1,316 | |||
Total other expense | -450,341 | -28,434 | 366,433 | 683,558 |
(LOSS) INCOME BEFORE INCOME TAX (EXPENSE) BENEFIT | -3,981,196 | -2,205,159 | -13,084,916 | 276,561 |
Income tax (expense) benefit | 752,400 | -767,333 | 524,791 | |
NET (LOSS) INCOME | ($3,981,196) | ($1,452,759) | ($13,852,249) | $801,352 |
BASIC (LOSS) EARNINGS PER COMMON SHARE | ($0.84) | $0.06 | ||
DILUTED (LOSS) EARNINGS PER COMMON SHARE | ($0.84) | $0.06 | ||
LOSS PER COMMON SHARE - BASIC AND DILUTED | ($0.18) | ($0.09) | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC | 16,415,152 | 12,818,487 | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED | 16,415,152 | 13,186,365 | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 22,474,273 | 16,267,750 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes In Stockholders' Equity (USD $) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2012 | $12,038 | $1,685,524 | ($2,181,006) | ($483,444) |
Balance, shares at Dec. 31, 2012 | 12,038,163 | |||
Issuance of common stock for services | 20 | 86,980 | 87,000 | |
Issuance of common stock for services, shares | 20,000 | |||
Issuance of common stock in connection with exercise of stock options | 43 | 70,257 | 70,300 | |
Issuance of common stock in connection with exercise of stock options, shares | 43,300 | -43,000 | ||
Stock-based compensation expense | 48,239 | 48,239 | ||
Discount on convertible notes to related parties | 98,970 | 98,970 | ||
Issuance of common stock for cash, net of offering costs | 3,333 | 9,121,770 | 9,125,103 | |
Issuance of common stock for cash, net of offering costs, shares | 3,333,338 | |||
Issuance of common stock upon conversion of debt | 780 | 1,703,707 | 1,704,487 | |
Issuance of common stock upon conversion of debt, shares | 779,727 | |||
Induced conversion expense | 299,577 | -299,577 | ||
Net income | 801,352 | 801,352 | ||
Balance at Dec. 31, 2013 | 16,214 | 13,115,024 | -1,379,654 | 11,751,584 |
Balance, shares at Dec. 31, 2013 | 16,214,528 | |||
Issuance of common stock for services | 400 | 1,602,533 | 1,602,933 | |
Issuance of common stock for services, shares | 400,000 | |||
Issuance of common stock in connection with exercise of stock options | 5 | 4,995 | 5,000 | |
Issuance of common stock in connection with exercise of stock options, shares | 5,000 | -5,000 | ||
Stock-based compensation expense | 163,646 | 163,646 | ||
Induced conversion expense | ||||
Offering costs incurred in 2014 pertaining to December 2013 offering | -190,104 | -190,104 | ||
Issuance of common stock in connection with cashless exercise of warrants | 143 | -143 | ||
Issuance of common stock in connection with cashless exercise of warrants, shares | 142,383 | |||
Discount on senior convertible notes | 1,250,000 | 1,250,000 | ||
Net income | -13,852,249 | -13,852,249 | ||
Balance at Dec. 31, 2014 | 16,762 | 16,026,951 | -15,231,903 | 811,810 |
Balance, shares at Dec. 31, 2014 | 16,761,911 | |||
Issuance of common stock in connection with exercise of stock options, shares | ||||
Issuance of common stock in connection with the Merger (See Note 4) | 13,592 | 17,014,807 | 17,014,807 | |
Issuance of common stock in connection with the Merger (See Note 4), shares | 13,591,533 | |||
Issuance of common stock and warrants in connection with private placement | 3,432 | 2,938,528 | 2,941,960 | |
Issuance of common stock and warrants in connection with private placement, shares | 3,432,314 | |||
Contribution of note and interest payable to Vaporin to capital in connection with the Merger | 354,029 | 354,029 | ||
Cancellation of common stock as a result of early termination of consulting agreement | -150 | 150 | ||
Cancellation of common stock as a result of early termination of consulting agreement, shares | -150,000 | |||
Stock-based compensation expense | 364,576 | 364,576 | ||
Net income | -3,981,196 | -3,981,196 | ||
Balance at Mar. 31, 2015 | $33,636 | $36,699,041 | ($19,213,099) | $17,519,578 |
Balance, shares at Mar. 31, 2015 | 33,635,758 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
OPERATING ACTIVITIES: | ||||
Net income (loss) | ($3,981,196) | ($1,452,759) | ($13,852,249) | $801,352 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||
Provision for doubtful accounts | -86,314 | 112,898 | 183,333 | |
Depreciation and amortization | 85,013 | 3,888 | 56,435 | 11,284 |
Loss on disposal of assets | 289,638 | |||
Amortization of deferred debt discount | 317,702 | 156,250 | 102,500 | |
Amortization of deferred financing costs | 34,917 | -17,458 | ||
Induced conversion expense | -299,577 | |||
Write down of loan receivable to realizable value | 50,000 | |||
Write down of obsolete and slow moving inventory | 70,657 | 1,834,619 | ||
Stock-based compensation | 364,576 | 610,414 | 1,766,579 | 135,239 |
Deferred income tax benefit | -754,249 | -4,800,332 | 236,709 | |
Change in fair value of derivative expense | 37,965 | |||
Utilization of net operating loss carryforward | -346,783 | |||
Changes in operating assets and liabilities: | ||||
Due from merchant credit card processors | -35,083 | 85,694 | 94,006 | 838,002 |
Accounts receivable | 117,115 | 22,443 | 1,450,231 | -1,250,034 |
Prepaid expenses and vendor deposits | 164,917 | -40,945 | 536,937 | -735,180 |
Inventories | 423,635 | -924,169 | -561,604 | -1,651,891 |
Other assets | -771 | -25,000 | -26,076 | -53,284 |
Accounts payable | -140,092 | 293,700 | 796,627 | -2,085,087 |
Accrued expenses | 191,384 | 131,280 | 554,749 | 70,212 |
Customer deposits | -89,882 | -27,396 | -41,640 | -295,429 |
Income taxes | -1,701 | -2,715 | 53,622 | |
NET CASH USED IN OPERATING ACTIVITIES | -2,149,505 | -2,165,114 | -6,290,997 | -4,120,152 |
INVESTING ACTIVITIES: | ||||
Cash received in connection with the Merger | 136,468 | |||
Loan receivable | 467,095 | -517,095 | ||
Purchases of property and equipment | -67,492 | -4,795 | -560,410 | -14,779 |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: | 536,071 | -4,795 | -1,077,505 | -14,779 |
FINANCING ACTIVITIES | ||||
Proceeds from private placement of common stock and warrants, net of offering costs | 2,941,960 | -109,104 | ||
Proceeds from sale of common stock, net of offering costs | -109,104 | 9,125,103 | ||
Proceeds from senior convertible notes payable to related parties | 1,250,000 | 425,000 | ||
Proceeds from senior convertible notes payable | 500,000 | |||
Deferred financing costs | -139,667 | |||
Principal repayments of senior note payable to stockholder | -70,513 | |||
Proceeds from term loans payable | 350,000 | 1,000,000 | 750,000 | |
Principal repayments of term loans payable | -226,273 | -181,731 | -728,847 | -271,153 |
Principal repayments of capital lease obligations | -12,248 | -7,901 | ||
Proceeds from factoring facility | 0 | 407,888 | ||
Principal repayments of factoring facility | -407,888 | |||
Proceeds from exercise of stock options | 5,000 | 70,300 | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 3,043,439 | -290,835 | 1,269,481 | 10,528,737 |
INCREASE (DECREASE) IN CASH | 1,440,005 | -2,460,744 | -6,009,021 | 6,393,806 |
CASH - BEGINNING OF YEAR | 471,194 | 6,570,215 | 6,570,215 | 176,409 |
CASH - END OF YEAR | 1,911,199 | 4,109,471 | 471,194 | 6,570,215 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||
Cash paid for interest | 30,351 | 29,077 | 103,068 | 297,508 |
Cash paid for income taxes | 2,791 | 3,550 | 3,550 | 13,770 |
Purchase Price Allocation in connection with the Merger: | ||||
Cash | 136,468 | |||
Accounts receivable | 81,256 | |||
Merchant credit card processor receivable | 201,141 | |||
Prepaid expense and other current assets | 28,021 | |||
Inventory | 981,558 | |||
Property and equipment | 206,668 | |||
Accounts payable and accrued expenses | -779,782 | |||
Derivative liabilities | -49,638 | |||
Notes payable, net of debt discount of 54,623 | -512,377 | |||
Notes payable - related party | -1,000,000 | |||
Net assets acquired | -706,685 | |||
Value of common stock issued | 17,028,399 | |||
Excess liabilities over assets assumed | 706,685 | |||
Total consideration | 17,735,084 | |||
Total excess consideration over net assets acquired | 17,735,084 | |||
Amount allocated to goodwill | 15,654,484 | |||
Amount allocated to identifiable intangible assets | 2,080,600 | |||
Remaining unallocated consideration | ||||
Issuance of common stock in connection with conversion of notes payable | 1,704,487 | |||
Cashless exercise of common stock purchase warrants | 143 | |||
Recognition of deferred debt discount on convertible notes payable | 1,250,000 | 98,970 | ||
Purchase of equipment through capital lease obligation | $179,359 |
Consolidated_Statements_of_Cas1
Consolidated Statements of Cash Flows (Parenthetical) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Statement of Cash Flows [Abstract] | ||
Debt discount | $54,623 | $54,623 |
Organization_Going_Concern_and
Organization, Going Concern and Management Plans, and Basis of Presentation | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Organization, Going Concern and Management Plans, and Basis of Presentation | Note 1. ORGANIZATION, GOING CONCERN AND MANAGEMENT PLANS, AND BASIS OF PRESENTATION | Note 1. ORGANIZATION, BASIS OF PRESENTATION AND RECENT DEVELOPMENTS |
Organization | Organization | |
Vapor Corp. (the “Company” or “Vapor”) is the holding company for its wholly owned subsidiaries The Vape Store, Inc. (“Vape Store”), Smoke Anywhere U.S.A., Inc. (“Smoke”), Emagine the Vape Store, LLC (“Emagine”) and IVGI Acquisition, Inc. The company operates 10-Florida based vape stores and a website where it sells vaporizers, liquids for vaporizers and electronic cigarettes. The Company designs, markets and distributes vaporizers, e-liquids, electronic cigarettes and accessories under the Vaporin, emagine vapor™, Krave®, VaporX®, Hookah Stix®, Fifty-One® (also known as Smoke 51) and Alternacig® EZ Smoker®, Green Puffer®, Americig®, Vaporin, FumaréTM, and Smoke Star® brands. “Vaporizers”, “Electronic cigarettes” or “e-cigarettes,” are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash, or carbon monoxide. | Vapor Corp. (the “Company”) is the holding company for its wholly owned subsidiaries Smoke Anywhere U.S.A., Inc. (“Smoke”) and IVGI Acquisition, Inc. The Company designs, markets and distributes vaporizers, e-liquids, electronic cigarettes and accessories under the emagine vapor™, Krave®, VaporX®, Hookah Stix®, Fifty-One® (also known as Smoke 51) and Alternacig® brands. “Vaporizers”, “Electronic cigarettes” or “e-cigarettes,” are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash, or carbon monoxide. | |
Going Concern and Management Plans | The Company was originally incorporated as Consolidated Mining International, Inc. in 1985 as a Nevada corporation, and the Company changed its name in 1987 to Miller Diversified Corporation whereupon the Company operated in the commercial cattle feeding business until October 31, 2003 when the Company sold substantially all of its assets and became a discontinued operation. On November 5, 2009, the Company acquired Smoke Anywhere USA, Inc., a distributor of electronic cigarettes, in a reverse triangular merger. As a result of the merger, Smoke Anywhere USA, Inc. became the sole operating business. On January 7, 2010, the Company changed its name to Vapor Corp. The Company reincorporated to the State of Delaware from the State of Nevada effective on December 31, 2013. | |
The Company’s condensed consolidated financial statements for the quarter ended March 31, 2015 indicate there is substantial doubt about its ability to continue as a going concern as the Company requires additional equity and/or debt financing to continue its operations. The Company must ultimately generate sufficient cash flow to meet its obligations on a timely basis, attain profitability in its business operations, and be able to fund its long term business development and growth plans. The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer-term business plan. The Company’s liquidity and capital resources have decreased as a result of the $3.98 million net loss that it incurred during the quarter ended March 31, 2015. At March 31, 2015, the Company’s accumulated deficit amounted to $19.21 million. At March 31, 2015, the Company had a working capital deficiency of $811,970 compared to a positive working capital of $127,874 at December 31, 2014, a decrease of $939,844. | Basis of Presentation and Reverse Stock Split | |
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. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. | The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). | |
The Company’s existing liquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital deficiency and other financing requirements for the foreseeable future. The Company believes it will need to raise additional debt or equity financing to maintain and expand the business. Any equity financing or the issuance of equity equivalents could be dilutive to its shareholders. If either such additional capital is not available on terms acceptable to the Company or at all then the Company may need to curtail its operations and/or take additional measures to conserve and manage its liquidity and capital resources, any of which would have a material adverse effect on our business, results of operations and financial condition. | Effective on December 27, 2013, the Company effected a reverse stock split of its common stock at a ratio of 1-for-5. No fractional shares of common stock were issued, and no cash or other consideration were paid as a result of the reverse stock split. Instead, the Company issued one whole share of post-reverse stock split common stock in lieu of each fractional share of common stock. As a result of the reverse stock split, the Company’s share capital was reduced to 51,000,000 shares from 251,000,000 shares, of which 50,000,000 shares are common stock and 1,000,000 shares are “blank check” preferred stock. | |
Basis of Presentation | All references in these notes and in the related consolidated financial statements to number of shares, price per share and weighted average number of shares outstanding of common stock prior to the reverse stock split (including the share capital decrease) have been adjusted to reflect the reverse stock split (including the share capital decrease) on a retroactive basis, unless otherwise noted. | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, these condensed consolidated financial statements do not include all of the information and footnotes required for audited annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the condensed consolidated financial statements not misleading have been included. The condensed consolidated balance sheet at December 31, 2014 has been derived from the Company’s audited consolidated financial statements as of that date. | Merger with Vaporin, Inc. | |
These unaudited condensed consolidated financial statements for the three months ended March 31, 2015 and 2014 should be read in conjunction with the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2014 included elsewhere herein this filing. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2015. | As fully-disclosed in Note 4 to these consolidated financial statements, on December 17, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vaporin, Inc., a Delaware corporation (“Vaporin”) pursuant to which Vaporin was to merge with and into the Company with the Company being the surviving entity. On the same date, the Company also entered into a joint venture with Vaporin (the “Joint Venture”) through the execution of an operating agreement (the “Operating Agreement”) of Emagine the Vape Store, LLC, a Delaware limited liability company (“Emagine”), pursuant to which the Company and Vaporin were 50% members of Emagine. | |
Merger with Vaporin, Inc. | On March 4, 2015, the acquisition of Vaporin by the Company (the “Merger”) was completed pursuant to the terms of the Merger Agreement. In connection with the Merger, Emagine became a wholly-owned subsidiary of the Company. | |
As fully-disclosed in Note 3 to these condensed consolidated financial statements, on December 17, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vaporin, Inc., a Delaware corporation (“Vaporin”) pursuant to which Vaporin was to merge with and into the Company with the Company being the surviving entity. On the same date, the Company also entered into a joint venture with Vaporin (the “Joint Venture”) through the execution of an operating agreement (the “Operating Agreement”) of Emagine, pursuant to which the Company and Vaporin were 50% members of Emagine. | ||
On March 4, 2015, the acquisition of Vaporin by the Company (the “Merger”) was completed pursuant to the terms of the Merger Agreement. In connection with the Merger, Vape Store and Emagine became wholly-owned subsidiaries of the Company. |
Going_Concern_and_Management_P
Going Concern and Management Plans | 12 Months Ended |
Dec. 31, 2014 | |
Liquidity And Financial Condition [Abstract] | |
Going Concern and Management Plans | Note 2. GOING CONCERN AND MANAGEMENT PLANS |
The Company’s financial statements for the year ended December 31, 2014 indicate there is substantial doubt about its ability to continue as a going concern as the Company requires additional equity and/or debt financing to continue its operations. The Company must ultimately generate sufficient cash flow to met its obligations on a timely basis, attain profitability in its business operations, and be able to fund its long term business development and growth plans. The Company’s business will require significant amounts of capital to sustain operations and make the investments it needs to execute its longer-term business plan. The Company’s liquidity and capital resources have decreased as a result of the net loss of $13,852,249 that it incurred during the year ended December 31, 2014. At December 31, 2014, the Company’s accumulated deficit amounted to $15,231,903. At December 31, 2014, the Company had working capital of $127,874 compared to $11,657,615 at December 31, 2013, a decrease of $11,529,741. As described in Note 12 (Subsequent Events), on March 4, 2015, the Company and institutional and individual accredited investors entered in a securities purchase agreement pursuant to which the Company issued and sold, in a $3.5 million private placement ($2.9 million in net proceeds), 3,432,314 shares of common stock and warrants to purchase up to 2,735,132 shares of the Company’s common stock. The Company will use the net proceeds from the private placement for working capital. In addition, the Merger with Vaporin also provides an additional financing transaction to occur subsequent to the closing of the Merger for up to $25 million in exchange for common stock and warrants of the Company subject to the Company complying with certain financial covenants and performance-based metrics still to be negotiated. | |
The accompanying 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. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |
The Company’s existing liquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirements for the foreseeable future. We believe we will need to raise additional debt or equity financing to maintain and expand the business. Any equity financing or the issuance of equity equivalents including convertible debt could be dilutive to our shareholders. If either such additional capital is not available on terms acceptable to the Company or at all then the Company may need to curtail its operations and/or take additional measures to conserve and manage its liquidity and capital resources, any of which would have a material adverse effect on our business, results of operations and financial condition. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Dec. 31, 2014 | |||
Accounting Policies [Abstract] | ||||
Summary of Significant Accounting Policies | Note 2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES | Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Principles of consolidation | Principles of consolidation | |||
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. | The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, Smoke Anywhere USA, Inc., and its 50% joint venture interest in Emagine the Vape Store, LLC. All significant intercompany transactions and balances were eliminated. | |||
Use of estimates in the preparation of the financial statements | Use of estimates in the preparation of 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 preliminary valuation of the net assets acquired in the Merger. Certain of our 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. | The preparation of 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 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 preliminary valuation of the net assets acquired subsequent to December 31, 2014 in the Merger. Certain of our 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. | |||
Revenue recognition | Revenue recognition | |||
The Company recognizes revenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. | The Company recognizes revenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. | |||
Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passes to customers and collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company’s delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. | Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passes to customers and collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company’s delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. | |||
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducement offers on its condensed consolidated statements of operations. | The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducement offers on its consolidated statements of operations. | |||
Accounts Receivable | Shipping and Handling Costs | |||
Accounts receivable, net is stated at the amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. | The Company policy is to provide free standard shipping and handling for most orders shipped during the year. Shipping and handling costs incurred are recognized in selling, general and administrative expenses. Such amounts aggregated $661,583 and $658,586 for the years ended December 31, 2014 and 2013 respectively. | |||
At March 31, 2015 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance. The amount was $54,993. At December 31, 2014 accounts receivable balances included concentrations from seven customers that had balances of an amount greater than 10%. The amounts ranged from $27,729 to $177,200. As to revenues, no customers accounted for revenues in excess of 10% of the net sales for the three-month periods ended March 31, 2015 and 2014. | In certain circumstances, shipping and handling costs are charged to the customer and recognized in sales, net. The amounts recognized for the years ended December 31, 2014 and 2013 were $71,225 and $129,761, respectively. | |||
Identifiable Intangible Assets and Goodwill | Cash and Cash Equivalents | |||
Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets are amortized over 5 and 10 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No impairment existed at March 31, 2015. | The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. For financial statement purposes, investments in money market funds are considered a cash equivalent and are included in cash and cash equivalents. The Company maintains its cash and cash equivalents at high credit quality federally insured financial institutions, with balances, at times, in excess of the Federal Deposit Insurance Corporation’s insurance coverage limit of $250,000 per federally insured financial institution. Management believes that the financial institutions that hold the Company’s deposits are financially sound and, therefore, pose a minimum credit risk. The Company has not experienced any losses in such accounts. At December 31, 2014 and 2013, the Company did not hold cash equivalents. | |||
Indefinite-lived intangible assets, such as goodwill are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis at December 31st or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value based test. | Accounts Receivable | |||
Inventories | Accounts receivable, net is stated at the amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. | |||
Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. If the cost of the inventories exceeds their market value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale. | Due From Merchant Credit Card Processor | |||
Warranty liability | Due from merchant credit card processor represents monies held by the Company’s credit card processors. The funds are being held by the merchant credit card processors pending satisfaction of their hold requirements and expiration of charge backs/refunds from customers. | |||
The Company’s limited lifetime warranty policy generally allows its end users and retailers to return defective purchased rechargeable products in exchange for new products. The Company estimates a reserve for warranty liability and records that reserve amount as a reduction of revenues and as an accrued expense on the accompanying condensed consolidated balance sheets. The warranty claims and expense was not deemed material for the years ended December 31, 2014 and three months ended March 31, 2015. | Inventories | |||
Fair value measurements | Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. If the cost of the inventories exceeds their market value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale. | |||
The Company applies the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” (“ASC 820”). The Company’s short term financial instruments include cash, due from merchant credit card processors, accounts receivable, accounts payable and accrued expenses, each of which approximate their fair values based upon their short term nature. The Company’s other financial instruments include notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. | Property and equipment | |||
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active market or inputs that are observable; and Level 3 – inputs that are unobservable. | Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful life of the respective asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment: | |||
Stock-Based Compensation | Description | Useful Lives | ||
Warehouse fixtures | 2 years | |||
The Company accounts for stock-based compensation under ASC Topic No. 718, “Compensation-Stock Compensation” (“ASC 718”). These standards define a fair value based method of accounting for stock-based compensation. In accordance with ASC 718, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair value of the award as determined by the valuation model at the grant date or other measurement date. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. | Warehouse equipment | 5 years | ||
Furniture and fixtures | 5 years | |||
Derivative Instruments | Computer hardware | 3 years | ||
The Company accounts for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic No. 815, “Derivative Instruments and Hedging Activities,” (“ASC 815”) as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. | Impairment of Long-Lived Assets | |||
The Company estimates fair values of derivative instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton valuation model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income. | The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In connection with this review, the Company also reevaluates the depreciable lives for these assets. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset may not be recoverable, it measures any impairment based on the projected future discounted cash flows as compared to the asset’s carrying value. Through December 31, 2014, the Company has not recorded any impairment charges on its long-lived assets. | |||
Convertible Debt Instruments | Advertising | |||
The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method. The Company records, when necessary, induced conversion expense, at the time of conversion for the difference between the reduced conversion price per share and the original conversion price per share. | The Company expenses advertising cost as incurred. | |||
Lease Accounting | Warranty liability | |||
The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. The Company determines the straight-line rent impact of an operating lease upon inception of the lease. | The Company’s limited lifetime warranty policy generally allows its end users and retailers to return defective purchased rechargeable products in exchange for new products. The Company estimates a reserve for warranty liability and records that reserve amount as a reduction of revenues and as an accrued expense on the accompanying consolidated balance sheets. The warranty claims and expense was not deemed material for the years ended December 31, 2014 and 2013. | |||
Income taxes | ||||
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740.”) Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. | ||||
Product Development | ||||
The Company includes product development expenses relating to the commercialization of new products which are expensed as incurred as part of operating expenses. Product development expenses for the years ended December 31, 2014 and 2013 were approximately $312,000 and $174,000, respectively. | ||||
Fair value measurements | ||||
The Company applies the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). The Company’s short term financial instruments include cash, due from merchant credit card processors, accounts receivable, accounts payable and accrued expenses, each of which approximate their fair values based upon their short term nature. The Company’s other financial instruments include notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. | ||||
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active market or inputs that are observable; and Level 3 – inputs that are unobservable. | ||||
Stock-Based Compensation | ||||
The Company accounts for stock-based compensation under ASC 718, “Compensation-Stock Compensation” (“ASC 718”). These standards define a fair value based method of accounting for stock-based compensation. In accordance with ASC Topic 718, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair value of the award as determined by the valuation model at the grant date or other measurement date. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. | ||||
Derivative Instruments | ||||
The Company accounts for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic No. 815, “Accounting for Derivative Instruments and Hedging Activities,” (“ASC 815”) as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. | ||||
The Company estimates fair values of derivative instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton valuation model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income. | ||||
Convertible Debt Instruments | ||||
The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method. The Company records, when necessary, induced conversion expense, at the time of conversion for the difference between the reduced conversion price per share and the original conversion price per share. | ||||
Lease Accounting | ||||
The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. The Company determines the straight-line rent impact of an operating lease upon inception of the lease. | ||||
Recent Accounting Pronouncements | ||||
The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. | ||||
The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company is currently evaluating the potential impact, if any, the adoption of this standard will have on the Company’s consolidated financial position and results of operations. | ||||
The FASB has issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance, which is effective for annual reporting periods ending after December 15, 2016, extends the responsibility for performing the going-concern assessment to management and contains guidance on how to perform a going-concern assessment and when going-concern disclosures would be required under U.S. GAAP. The Company has elected to early adopt the provisions of ASU 2014-15 in connection with the issuance of these consolidated financial statements. Information regarding the substantial doubt relating to the Company’s ability to continue as a going concern has been disclosed in Note 2. |
Merger_With_Vaporin_Inc
Merger With Vaporin, Inc. | 3 Months Ended | 12 Months Ended | ||||||||||||||||
Mar. 31, 2015 | Dec. 31, 2014 | |||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||
Merger With Vaporin, Inc. | Note 3. MERGER WITH VAPORIN, INC. | Note 4. MERGER WITH VAPORIN, INC. | ||||||||||||||||
Merger with Vaporin, Inc. | Merger with Vaporin, Inc. | |||||||||||||||||
On December 17, 2014, the Company entered into the Merger Agreement with Vaporin pursuant to which Vaporin was to merge with and into the Company with Vapor being the surviving and controlling entity (as a result of the current stockholders of the Company maintaining more than 50% ownership in the Company’s outstanding shares of common stock and the current Vapor directors comprising the majority of the board). The Merger closed on March 4, 2015 and the purchase price consideration paid by the Company consisted of the following: | On December 17, 2014, the Company entered into the Merger Agreement with Vaporin pursuant to which Vaporin was to merge with and into the Company with Vapor being the surviving entity. The Merger closed on March 4, 2015 whereby 100% of the issued and outstanding shares of Vaporin common stock (including shares of common stock issued upon conversion of Vaporin preferred stock immediately prior to the consummation of the merger in accordance with the Merger Agreement) were converted into, and became 13,591,533 shares of the Company’s common stock such that the former Vaporin stockholders collectively hold approximately 45% of the issued and outstanding shares of the Company’s common stock following consummation of the Merger. The options and warrants to acquire Vaporin common stock that were issued and outstanding as of the effective time of the Merger, as well as 910,000 restricted stock units which were exchangeable for Vaporin common stock, were assumed by the Company in the merger and the number of shares issued under such securities were adjusted to give effect to the Per Share Merger Consideration (as defined in the Merger Agreement). | |||||||||||||||||
1 | 100% of the issued and outstanding shares of Vaporin common stock (including shares of common stock issued upon conversion of Vaporin preferred stock immediately prior to the consummation of the merger in accordance with the Merger Agreement) were converted into, and became 13,591,533 shares of the Company’s common stock such that the former Vaporin stockholders collectively hold approximately 45% of the issued and outstanding shares of the Company’s common stock following consummation of the Merger. The aggregate value of these shares issued was $14,949,328, or approximately $1.10 per share, and was based on the closing price of the Company’s common stock on March 4, 2015. | Pursuant to the terms of the Merger Agreement, the Company completed actions to cause its board of directors immediately following the consummation of the merger to be comprised of (x) three directors chosen by the Company’s Board of Directors (at least two of whom shall be independent for purposes of the Nasdaq listing rules) and (y) two directors chosen by the Vaporin Board or Directors (at least one of whom shall be independent for purposes of the Nasdaq listing rules), each to serve for a term expiring on the earlier of his or her death, resignation, removal or the Company’s next annual meeting of stockholders and, despite the expiration of his or her term, until his or her successor has been elected and qualified or there is a decrease in the size of the Company’s Board of Directors. If at any time prior to the effective time of the merger, any such board designee becomes unable or unwilling to serve as a director of the Company following consummation of the merger, then the party that designated such individual shall designate another individual to serve in such individual’s place. | ||||||||||||||||
2 | 100% of the issued shares of Vaporin restricted stock units were converted into the right to receive 1,890,237 shares of the Company’s common stock. The restricted stock units became fully-vested in connection with the Merger and as a result, were included as a part of the Company’s purchase price as no further services from the holders is required to be provided to the Company. The 1,890,237 restricted stock units remain outstanding as of March 31, 2015. The aggregate value of these shares issued was $2,079,071, or approximately $1.10 per share, and was based on the closing price of the Company’s common stock on March 4, 2015. Based on the terms of the Merger Agreement, the Company has agreed to issue these in twelve equal monthly instalments, with the first delivery date being the date of the closing of the Merger, however, all shares of common stock to be delivered on March 15, 2016 to the extent they are not previously delivered. | The Merger Agreement contained customary representations and warranties of the Company and Vaporin relating to their respective businesses. The Company and Vaporin have agreed to use commercially reasonable efforts to preserve intact its business organization and that of its significant subsidiaries, as well as maintain its rights, franchises and existing relations with customers, suppliers and employees. The Merger Agreement also contains covenants by each party to furnish current information to the other party. | ||||||||||||||||
The Merger Agreement contained customary conditions that were satisfied prior to the closing of the merger, including the requirement for the Company to receive gross proceeds from a $3.5 million equity offering (See Note 5). | The Company has also agreed that, for a period of six years following the closing date of the merger, it will indemnify, defend and hold harmless each officer and director of Vaporin and its subsidiaries against losses arising from such person’s status as an officer or director of Vaporin or any of its subsidiaries prior to the effective time of the merger. The Company has also agreed to cover such directors and officers with its existing directors’ and officers’ insurance policy or obtain a six-year “tail” policy, in each case with coverages not less advantageous as Vaporin’s existing policy, provided, however, that the Company will not be required to pay more than 200% of Vaporin’s current premium for such insurance. | |||||||||||||||||
Additionally, as required by the Merger Agreement the Company received non-binding commitments from certain third parties for financing of up to $25 million to be used for the construction of retail stores and which is contingent on the achievement of certain performance metrics by the Company. | The Merger Agreement contained customary conditions that were satisfied prior to the closing of the merger, including the requirement for the Company to receive gross proceeds from a $3.5 million equity offering disclosed in Note 13. Additionally, the Company must have received commitments from certain third parties for financing of up to $25 million to be used for the construction of retail stores and which is contingent on the achievement of certain performance metrics by the Company. | |||||||||||||||||
The fair value of the purchase consideration issued to the sellers of Vaporin was allocated to fair value of the net tangible assets acquired, with the resulting excess allocated to separately identifiable intangibles, and the remainder recorded as goodwill. Goodwill recognized from the transactions mainly represented the expected operational synergies upon acquisition of the combined entity and intangibles not qualifying for separate recognition. Goodwill is not expected to be deductible for income tax purposes in the tax jurisdiction of the acquired business. The purchase price allocation was based, in part, on management’s knowledge of Vaporin’s business and the results of a preliminary third party appraisal commissioned by management. The fair value was based on a preliminary valuation. | The fair value of the purchase consideration issued to the sellers of Vaporin was allocated to fair value of the net tangible assets acquired, with the resulting excess allocated to separately identifiable intangibles, and the remainder recorded as goodwill. Goodwill recognized from the transactions mainly represented the expected operational synergies upon acquisition of the combined entity and intangibles not qualifying for separate recognition. Goodwill is not expected to be deductible for income tax purposes in the tax jurisdiction of the acquired business. | |||||||||||||||||
Purchase Consideration | The Company has not completed its evaluation of the purchase price allocation as it is currently conducting a thorough analysis to identify the intangible assets acquired, including whether or not any goodwill is to be recorded, in the Merger and determine the proper allocation of the fair value of such assets with the assistance of a third-party appraiser. | |||||||||||||||||
Value of consideration paid: | $ | 17,735,084 | ||||||||||||||||
The following table presents the unaudited pro-forma financial results, as if the acquisition of Vaporin had been completed as of January 1, 2013 and 2014: | ||||||||||||||||||
Tangible assets acquired and liabilities assumed at fair value | ||||||||||||||||||
Cash | $ | 136,468 | For the Years Ended | |||||||||||||||
Due from merchant credit card processor | 201,141 | December 31, | ||||||||||||||||
Accounts receivable | 81,256 | 2014 | 2013 | |||||||||||||||
Inventories | 981,558 | Revenues | $ | 20,253,052 | $ | 28,259,309 | ||||||||||||
Property and Equipment | 206,668 | Net (loss) income | $ | (19,595,702 | ) | $ | 415,316 | |||||||||||
Other Assets | 28,021 | Loss per share - basic and diluted | $ | (0.59 | ) | $ | 0.01 | |||||||||||
Notes payable, net of debt discount of $54,623 | (512,377 | ) | ||||||||||||||||
Notes payable – related party | (1,000,000 | ) | The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2013 or to project potential operating results as of any future date or for any future periods. | |||||||||||||||
Accounts Payable and accrued expenses | (775,753 | ) | ||||||||||||||||
Derivative Liabilities | (49,638 | ) | The Joint Venture | |||||||||||||||
Excess liabilities over assets assumed | $ | (706,685 | ) | |||||||||||||||
On December 17, 2014, the Company and Vaporin agreed to enter into the Joint Venture through Emagine, a Delaware limited liability company of which the Company and Vaporin are 50% members. The Operating Agreement provides that Vaporin will serve as the initial manager of Emagine and will manage the day-to-day operations of Emagine, subject to certain customary limitations on managerial actions that require the unanimous consent of the Company and Vaporin, including but not limited to making or guaranteeing loans, distributing cash or other property to the members of Emagine, entering into affiliate transactions, amending or modifying limited liability company organizational documents, and redeeming or repurchasing membership interests from any of the members. | ||||||||||||||||||
Consideration: | ||||||||||||||||||
Value of common stock issued | 17,028,399 | The purpose of the Joint Venture was to obtain and build-out retail stores for the sale of the Company and Vaporin’s products under the “Emagine Vapor” name or “The Vape Store, Inc.” name or other brands of the respective parties. The parties originally planned to finance the retail stores through third party loan financing secured by a blanket lien on the assets of Emagine. In connection with the Joint Venture, Emagine entered into a Secured Line of Credit Agreement, pursuant to which certain third parties have agreed to provide debt financing of up to $3 million to Emagine to finance the Joint Venture. The Company has accounted for the joint venture under the equity method of accounting for investments. For the year ended December 31, 2014, the operations of the joint-venture were immaterial. | ||||||||||||||||
Excess liabilities over assets assumed | 706,685 | |||||||||||||||||
Total purchase price | $ | 17,735,084 | In connection with the completion of the Merger on March 4, 2015, Emagine became a wholly-owned subsidiary of the Company. | |||||||||||||||
Identifiable intangible assets | ||||||||||||||||||
Trade names and technology | 1,500,000 | |||||||||||||||||
Customer relationships | 488,274 | |||||||||||||||||
Assembled workforce | 92,326 | |||||||||||||||||
Total Identifiable Intangible Assets | 2,080,600 | |||||||||||||||||
Goodwill | 15,654,484 | |||||||||||||||||
Total allocation to identifiable intangible assets and goodwill | $ | 17,735,084 | ||||||||||||||||
In addition, in connection with the Merger, an aggregate $354,029 of a note and interest payable by the Company to Vaporin was forgiven. | ||||||||||||||||||
In connection with the Merger Agreement, the Company also issued 247,962 warrants to purchase the Company’s common stock to certain warrant holders of Vaporin as replacement for warrants issued in connection with previous Vaporin note payable issuances. In addition, the Company also issued 19,733 options to purchase common stock to certain holders of Vaporin as replacement for options issued for services. The Company determined that based on the remaining term of the warrants and options as well as the nature of the remaining services to be provided by the holders that the value of the warrants and options at the date of the Merger was not material. | ||||||||||||||||||
The Company was unable to report the financial results of Vaporin for the period from the date the Merger closed on March 4, 2015 through March 31, 2015. The accounting and reporting operations of Vaporin were fully integrated into the Company at Merger and it is impracticable to separate. The following presents the unaudited pro-forma combined results of operations of the Company with Vaporin as if the acquisition occurred on January 1, 2014. | ||||||||||||||||||
For the three months Ended | ||||||||||||||||||
March 31, | ||||||||||||||||||
2015 | 2014 | |||||||||||||||||
Revenues | $ | 2,584,884 | $ | 4,975,337 | ||||||||||||||
Net Loss | $ | (5,378,927 | ) | $ | (2,590,724 | ) | ||||||||||||
Net Loss per share | $ | (0.17 | ) | $ | (0.08 | ) | ||||||||||||
Weighted Average number of shares outstanding | 31,260,183 | 30,766,022 | ||||||||||||||||
The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2014 or to project potential operating results as of any future date or for any future periods. | ||||||||||||||||||
In connection with the acquisition of Vaporin, the Company acquired net deferred tax assets consisting of net operating loss carryforwards offset by the difference between the book and tax basis of intangible assets acquired. At the acquisition date, this net deferred tax asset has been completely offset by a valuation allowance. | ||||||||||||||||||
The Joint Venture | ||||||||||||||||||
On December 17, 2014, the Company and Vaporin agreed to enter into the Joint Venture through Emagine, a Delaware limited liability company of which the Company and Vaporin are 50% members. The Operating Agreement provides that Vaporin will serve as the initial manager of Emagine and will manage the day-to-day operations of Emagine, subject to certain customary limitations on managerial actions that require the unanimous consent of the Company and Vaporin, including but not limited to making or guaranteeing loans, distributing cash or other property to the members of Emagine, entering into affiliate transactions, amending or modifying limited liability company organizational documents, and redeeming or repurchasing membership interests from any of the members. The results of operations of Emagine from January 1, 2015 through the date of the Merger were not material. | ||||||||||||||||||
In connection with the completion of the Merger on March 4, 2015, Emagine became a wholly-owned subsidiary of the Company. |
Accrued_Expenses
Accrued Expenses | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Payables and Accruals [Abstract] | |||||||||
Accrued Expenses | Note 4. Accrued Expenses | ||||||||
Accrued expenses are comprised of the following: | |||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Commissions payable | $ | 179,000 | $ | 179,000 | |||||
Retirement plan contributions | 101,000 | 80,000 | |||||||
Accrued severance | 160,000 | 82,000 | |||||||
Accrued customer returns | 648,000 | 360,000 | |||||||
Other accrued liabilities | 331,241 | 274,112 | |||||||
Total | $ | 1,419,241 | $ | 975,112 |
Property_and_Equipment
Property and Equipment | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Property and Equipment | Note 5. PROPERTY AND EQUIPMENT | ||||||||
Property and equipment consists of the following: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Computer hardware | $ | 389,373 | $ | 12,471 | |||||
Furniture and fixtures | 347,612 | 19,821 | |||||||
Warehouse fixtures | 7,564 | 7,564 | |||||||
Warehouse equipment | 16,708 | 16,708 | |||||||
Leasehold improvements | 35,076 | - | |||||||
796,333 | 56,564 | ||||||||
Less: accumulated depreciation and amortization | (84,314 | ) | (27,879 | ) | |||||
$ | 712,019 | $ | 28,685 | ||||||
During the year ended December 31, 2014 and 2013, the Company incurred $56,435 and $11,284, respectively, of depreciation expense. |
Notes_Payable_and_Receivable
Notes Payable and Receivable | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Dec. 31, 2014 | |||
Debt Disclosure [Abstract] | ||||
Notes Payable and Receivable | Note 5. Notes Payable and Receivable | Note 6. NOTES PAYABLE | ||
$567,000 Convertible Notes Payable | $1,250,000 Senior Convertible Notes Payable to Related Parties | |||
Between January 20, 2015 and January 23, 2015, Vaporin entered into a Securities Purchase Agreement with certain accredited investors providing for the sale of $567,000 of Vaporin’s Convertible Notes (the “Vaporin Notes”) and calculated a debt discount on the date of the Merger at $54,623. The Vaporin Notes accrue interest on the outstanding principal at an annual rate of 10%. The principal and accrued interest on the Notes is due and payable between January 20, 2016 and January 23, 2016. The Notes are convertible into the Company common stock at the lower of (i) $1.08 or (ii) a 15% discount to a 20-trading day VWAP following the closing of the merger, which was calculated at $0.95. Investors were provided with standard piggyback registration rights which were conditioned on the March 4, 2015 merger closing. | On November 14, 2014, the Company entered into securities purchase agreements with certain accredited investors who are also stockholders of Vaporin providing for the sale of $1,250,000 in aggregate principal amount of the Company’s senior convertible notes (the “$1,250,000 Senior Convertible Notes”) and common stock purchase warrants to purchase up to an aggregate of 1,136,364 shares of the Company’s common stock, $0.001 par value per share with an exercise price of $2.00 per share. The $1,250,000 Senior Convertible Notes accrue interest on the outstanding principal at an annual rate of 7% per annum. The principal and accrued interest on the Notes are due and payable on November 14, 2015, the maturity date of the Notes. The terms of the $1,250,000 Senior Convertible Notes included customary anti-dilution protection and also included “piggy-back” registration rights with respect to the shares of common stock underlying the $1,250,000 Senior Convertible Notes and warrants. The terms of the Notes provide that the Company may prepay the outstanding principal amount of the Notes, in whole or in part, by paying to the holders thereof an amount in cash equal to 115% of the principal amount to be redeemed, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to such holders through the date of such redemption payment. In connection with the completion of the securities purchase agreement for the $1,250,000 Senior Convertible Notes, the Company incurred financing costs of $139,667, which are being amortized on a straight-line basis, which approximates the interest rate method, over the one-year maturity period of the $1,250,000 Senior Convertible Notes. The Company incurred $17,458 in amortization expense of the deferred financing costs during the year ended December 31, 2014. | |||
$350,000 Convertible Notes Payable | The Notes are convertible into shares of the Company’s Common Stock at any time, in whole or in part, at the option of the holder thereof at a conversion price of $1.10 per share (the “Conversion Price”). The Conversion Price is subject to customary adjustment upon the occurrence of certain events, including but not limited to stock dividends, stock splits, subsequent rights offerings of the Company, pro rata distributions of the Company, and in connection with a “Fundamental Transaction” (as such term is defined in the securities purchase agreement, which includes, without limitation, mergers, consolidations, a sale of all or substantially all of the assets of the Company, transactions effecting a change in control of the Company and other similar transactions). | |||
On January 29, 2015, the Company issued a $350,000 convertible promissory note (the “Note”) to Vaporin in consideration for a loan of $350,000 made by Vaporin to the Company. The Note accrued interest on the outstanding principal at an annual rate of 12%. In connection with the completion of the Merger on March 4, 2015, the $350,000 Note along with accrued interest of $4,029 was extinguished. | In connection with the sale and issuance of the $1,250,000 Senior Convertible Notes, the Company also issued warrants to acquire an aggregate of 1,136,364 shares of the Company’s common stock. The Warrants are exercisable after 180 days from the date of issuance, or May 14, 2015, until the fifth anniversary of such date of issuance at an exercise price of $2.00 per share (subject to certain customary adjustments upon the occurrence of certain events, including but not limited to stock dividends, stock splits, subsequent rights offerings of the Company, pro rata distributions of the Company, and in connection with a Fundamental Transaction. Palladium Capital Advisors, LLC acted as the exclusive placement agent for the $1,250,000 Senior Convertible Notes and, as compensation therefor, the Company paid Palladium Capital Advisors, LLC a placement agent fee of $62,500, included as part of financing fees described above, and issued to them a common stock warrant to purchase up to 56,818 shares of our common stock at an initial exercise price of $2.00 per share. The warrant is immediately exercisable and expires on November 14, 2019. The exercise price and number of shares of common stock issuable under the warrant are subject to customary anti-dilutive adjustments for stock splits, stock dividends, recapitalizations and similar transactions. At any time the warrant may be exercised by means of a “cashless exercise” and the Company will not receive any proceeds at such time. | |||
$1,000,000 Notes Payable Related Party | On the date of the issuance of the $1,250,000 Senior Convertible Notes, the Company recorded a debt discount of $1,250,000, of which $701,250 was allocated on a relative fair value basis to the warrants issued and the remaining $548,750 was allocated on a relative fair value basis to the conversion feature embedded within the $1,250,000 Senior Convertible Notes. The debt discount will be amortized using the effective interest method over the life of the $1,250,000 Senior Convertible Note, as applicable, or until such time that the $1,250,000 Senior Convertible Notes are converted, in full or in part, into shares of common stock of the Company with any unamortized debt discount continuing to be amortized in the event of any partial conversion thereof and any unamortized debt discount being expensed at such time of full conversion thereof. During the year ended December 31, 2014, the Company recorded an aggregate $156,250 in non-cash interest expense related to the amortization of the debt discount, which is included in interest expense in the accompanying consolidated statement of operations. | |||
On December 8, 2014, Emagine entered into a Secured Line of Credit Agreement (the “Agreement”), effective as of December 1, 2014, with one affiliated shareholder of the Company and two unaffiliated investors (the “Lenders”). Under the Agreement, the Lenders agreed to advance up to $3,000,000 in three equal tranches in exchange for secured promissory notes which mature on March 31, 2016, bear interest at 12% per annum, and are secured by a first lien on the assets of Emagine. The Company drew on a first tranche of funding under the Agreement was on December 1, 2014. | $300,000 Senior Convertible Notes Payable to Related Parties | |||
The funds were used to purchase and/or open Vape Stores similar to those operated by the Company. In connection with the completion of the Merger on March 4, 2015, Emagine became a wholly-owned subsidiary of the Company, and the debt was assumed by the Company. | On June 19, 2012, the Company entered into securities purchase agreements with Kevin Frija, its former Chief Executive Officer, Harlan Press, its former Chief Financial Officer, and Doron Ziv, a then greater than 10% stockholder of the Company, pursuant to which Messrs. Frija, Press and Ziv purchased from the Company (i) $300,000 aggregate principal amount of the Company’s senior convertible notes (the “$300,000 Senior Convertible Notes”) and (ii) common stock purchase warrants to purchase up to an aggregate of 9,303 shares of the Company’s common stock. | |||
$467,095 Notes Receivable | The Company incurred interest expense of $48,674 during 2013 on the $300,000 Senior Convertible Notes until they were converted in full into 281,691 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. | |||
On January 12, 2015, the Company entered into an agreement with International Vapor Group, Inc. (“IVG”) whereby the Company agreed to reduce the $500,000 principal amount of the loan receivable by $50,000 if IVG were to remit payment of all principal and interest accrued on the loan receivable within one day. The Company included the write-down of the loan receivable in selling, general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2014. On January 13, 2015, IVG paid the Company in full. | $50,000 Senior Convertible Notes Payable to Related Parties | |||
On September 28, 2012, the Company entered into a securities purchase agreement with Kevin Frija, its former Chief Executive Officer, pursuant to which Mr. Frija purchased from the Company (i) a $50,000 principal amount senior convertible note of the Company (the “$50,000 Senior Convertible Note”) and (ii) common stock purchase warrants to purchase up to an aggregate of 1,374 shares of the Company’s common stock. | ||||
The Company incurred interest expense of $8,113 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 41,667 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. During the year ended December 31, 2013, the Company recorded $3,530 in amortization expense related to the debt discount, which is included in interest expense in the accompanying consolidated statements of operations. | ||||
$350,000 Senior Convertible Notes Payable to Related Parties | ||||
On July 9, 2013, the Company entered into securities purchase agreements with Ralph Frija, the father of the Company’s former Chief Executive Officer Kevin Frija and a less than 5% stockholder of the Company, Philip Holman, the father of the Company’s Chief Executive Officer Jeffrey Holman and a less than 5% stockholder of the Company, and Angela Vaccaro, the Company’s Controller, pursuant to which Messrs. Frija and Holman and Ms. Vaccaro (each, a “Purchaser”) purchased from the Company (i) $350,000 aggregate principal amount of the Company’s senior convertible notes (the “$350,000 Senior Convertible Notes”) and (ii) common stock purchase warrants to purchase up to an aggregate of 3,373 shares of the Company’s common stock (the “Warrants”) allocable among such Purchasers as follows: | ||||
● | Ralph Frija purchased a Convertible Note in the principal amount of $200,000 and a Warrant to purchase up to 1,927 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $10,000 (5% of the $200,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)); | |||
● | Philip Holman purchased a Convertible Note in the principal amount of $100,000 and a Warrant to purchase up to 964 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $5,000 (5% of the $100,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)); and | |||
● | Ms. Vaccaro purchased a Convertible Note in the principal amount of $50,000 and a Warrant to purchase up to 482 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $2,500 (5% of the $50,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)). | |||
The Convertible Notes issued on July 9, 2013 bear interest at 18% per annum, provide for cash interest payments on a monthly basis, mature on July 8, 2016, are redeemable at the option of the holders at any time after July 8, 2014, subject to certain limitations, are convertible into shares of the Company’s common stock at the option of the holders at an initial conversion price of $5.71 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July, 9, 2013) subject to certain anti-dilution protection and are senior unsecured obligations of the Company. | ||||
The Company incurred interest expense of $16,126 during 2013 on the $350,000 Senior Convertible Notes. In conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013, the conversion price was reduced to $3.00 per share inducing the holders of $350,000 Senior Convertible Notes to fully convert all of these senior convertible notes into 116,668 shares of our common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. During the year ended December 31, 2013, the Company recorded $246,375 in induced conversion expense related to the reduction in the conversion price for the $350,000 Senior Convertible Notes. The induced conversion expense is included in other expense in the accompanying consolidated statements of operations. | ||||
The Company recorded $4,550 as debt discount on the principal amount of the $350,000 Senior Convertible Notes issued on July 9, 2013 due to the valuation of the Warrants issued in conjunction therewith. Additionally, as a result of issuing the Warrants with the $350,000 Senior Convertible Notes, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $3,937, at the time of issuance provided to the holders of the Notes. The debt discounts applicable to the $350,000 Senior Convertible Notes was amortized, using the straight-line method, over the life of the $350,000 Senior Convertible Notes, until October 29, 2013 when the $350,000 Senior Convertible Notes were converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $4,550 and $3,937 in amortization expense related to the debt discounts and the beneficial conversion option, respectively. The amortization expense related to the debt discounts and the beneficial conversion option is included in interest expense in the accompanying consolidated statements of operations. | ||||
The Warrants issued on July 9, 2013 are exercisable at initial exercise prices of $5.71 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013) subject to certain anti-dilution protection and may be exercised at the option of the holders for cash or on a cashless basis until July 8, 2018. | ||||
$75,000 Senior Convertible Notes Payable to Related Parties | ||||
On July 11, 2013, the Company and Ms. Vaccaro entered into another Securities Purchase Agreement pursuant to which she purchased (i) a Convertible Note in the principal amount of $75,000 (the “$75,000 Senior Convertible Note”) and (ii) a Warrant to purchase up to 718 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $3,750 (5% of the $75,000 principal amount of the Convertible Note) by (y) $5.227 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 11, 2013)). | ||||
The Convertible Note issued on July 11, 2013 is the same as the Convertible Notes issued on July 9, 2013 except that it matures on July 10, 2016, it is redeemable on July 10, 2014 and its initial conversion price is $5.75 per share. The Warrant issued on July 11, 2013 is the same as the Warrants issued on July 9, 2013 except that its initial exercise price is $5.75 per share and it is exercisable until July 10, 2018. | ||||
The Company incurred interest expense of $3,957 during 2013 on the $75,000 Senior Convertible Notes. In conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013, the conversion price was reduced to $3.00 per share inducing the holder of the $75,000 Senior Convertible Note to fully convert all of these senior convertible notes into 25,000 shares of our common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. During the year ended December 31, 2013, the Company recorded $53,202 in induced conversion expense related to the reduction in the conversion price for the $75,000 Senior Convertible Note. The induced conversion expense is included in other expense in the accompanying consolidated statements of operations. | ||||
The Company recorded $825 as debt discount on the principal amount of the $75,000 Senior Convertible Note issued on July 11, 2013 due to the valuation of the Warrant issued in conjunction therewith. The debt discount applicable to the $75,000 Senior Convertible Note was amortized, using the straight-line method, over the life of the $75,000 Senior Convertible Note, until October 29, 2013 when the $75,000 Senior Convertible Note was converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $825 in amortization expense related to the debt discount, and is included in interest expense in the accompanying consolidated statements of operations. | ||||
The $300,000 Senior Convertible Notes, as amended, the $50,000 Senior Convertible Note, as amended, the $350,000 Senior Convertible Notes, and the $75,000 Senior Convertible Note did not restrict the Company’s ability to incur future indebtedness. | ||||
$500,000 Senior Convertible Note Payable to Stockholder | ||||
On July 9, 2012, the Company borrowed $500,000 from Ralph Frija, the father of the Company’s former Chief Executive Officer Kevin Frija and a less than 5% stockholder of the Company, pursuant to a senior note (the “Senior Note”). The Senior Note, as amended (as described below), bears interest at 24% per annum, provides for cash principal and interest payments on a monthly basis, is a senior unsecured obligation of the Company, matures on April 22, 2016, is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $2.577 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding April 30, 2013) subject to certain anti-dilution protection and is a senior unsecured obligation of the Company. | ||||
Initially, this Senior Note provided for only cash interest payments on a monthly basis, matured at the discretion of the Company on the earlier of (x) the date on which the Company consummated a single or series of related financings from which it received net proceeds in excess of 125% of the initial principal amount of the Senior Note or (y) January 8, 2013 and was not convertible at the option of the holder into shares of the Company’s common stock. On November 13, 2012, the Company and the above named holder of the $500,000 Senior Note amended the Note to extend its maturity date for payment from January 8, 2013 to January 8, 2014. On April 30, 2013, the Company and the above named holder of the Senior Note further amended the Note to provide for cash principal and interest payments on a weekly basis, extend the maturity date for payment to April 22, 2016 and make the Note convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $2.577 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding April 30, 2013) subject to certain anti-dilution protection. | ||||
The Company incurred interest expense of $93,267 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 166,662 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. | ||||
$500,000 Senior Convertible Note Payable | ||||
On January 29, 2013, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Robert John Sali, pursuant to which Mr. Sali purchased from the Company (i) a $500,000 principal amount senior convertible note of the Company (the “2013 Convertible Note”) and (ii) common stock purchase warrants to purchase up to an aggregate of 8,142 shares of the Company’s common stock (the “Warrant”) (which number of shares represents the quotient obtained by dividing (x) $25,000 (5% of the $500,000 principal amount of the 2013 Convertible Note) by (y) $3.07 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013)). The Company generated aggregate proceeds of $500,000 from the sale of these securities pursuant to the Securities Purchase Agreement. | ||||
The 2013 Convertible Note bears interest at 18% per annum, provides for cash interest payments on a monthly basis, matures on January 28, 2016, is redeemable at the option of the holder at any time after January 28, 2014 subject to certain limitations, is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $3.3775 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013) subject to certain anti-dilution protection and is a senior unsecured obligation of the Company. The 2013 Convertible Note does not restrict the Company’s ability to incur future indebtedness. | ||||
The Company incurred interest expense of $66,329 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 148,039 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. | ||||
The Warrant is exercisable at initial exercise price of $3.3775 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013) subject to certain anti-dilution protection and may be exercised at the option of the holder for cash or on a cashless basis until January 28, 2018. | ||||
The Company recorded $10,131 as debt discount on the principal amount of the 2013 Senior Convertible Note issued on January 29, 2013 due to the valuation of the Warrant issued in conjunction therewith. Additionally, as a result of issuing the Warrant with the 2013 Senior Convertible Note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $79,527, at the time of issuance provided to the holder of the Note. The debt discounts applicable to the 2013 Convertible Note was amortized, using the straight-line method, over the life of the 2013 Convertible Note, until October 29, 2013 when the 2013 Convertible Note was converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $10,131 and $79,527 in amortization expense related to the debt discounts and the beneficial conversion option, respectively. The amortization expense related to the debt discounts and the beneficial conversion option is included in interest expense in the accompanying consolidated statements of operations. |
Factoring_Facility_and_Term_Lo
Factoring Facility and Term Loan Payable | 12 Months Ended |
Dec. 31, 2014 | |
Factoring Facility And Term Loan Payable | |
Factoring Facility and Term Loan Payable | Note 7. FACTORING FACILITY AND TERM LOAN PAYABLE |
Factoring Facility | |
On August 8, 2013, the Company and Smoke entered into an accounts receivable factoring facility (the “Factoring Facility”) with Entrepreneur Growth Capital, LLC (the “Lender”) pursuant to an Invoice Purchase and Sale Agreement, dated August 8, 2013, by and among them (the “Factoring Agreement”). | |
The Factoring Facility has an initial term of one year and automatically renews from month to month thereafter subject to the Company terminating it earlier upon at least 15 business days’ advance written notice provided that all obligations are paid (including a termination fee, if applicable, as specified in the Factoring Agreement). The Factoring Facility is secured by a security interest in substantially all of the Company’s assets. Under the terms of the Factoring Agreement, the Lender may, at its sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, the Lender will advance to the Company up to 50% of the face amount of the account receivable. Each account receivable purchased by the Lender will be subject to a factoring fee of 1% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. The Lender will generally have full recourse against the Company in the event of nonpayment of any such purchased account. | |
The Factoring Agreement contains covenants and provisions relating to events of default that are customary for agreements of this type. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the termination of the Factoring Facility and/or the acceleration of the repayment obligations of the Company. | |
During the year ended December 31, 2013 gross borrowings under the Factoring Facility were $407,888, all of which were repaid as of September 30, 2013. There were no borrowings during the year ended December 31, 2014. | |
2013 Term Loan | |
On August 16, 2013, the Company and Smoke entered into a $750,000 term loan (the “2013 Term Loan”) with the Lender pursuant to a Credit Card Receivables Advance Agreement, dated August 16, 2013, by and among them (the “Term Agreement”). | |
The Term Loan matured on August 15, 2014, was payable from the Company’s and Smoke’s merchant credit card receivables at the annual rate of 16% subject to the Lender retaining a daily fixed amount of $3,346 from the daily collection of the merchant credit card receivables and is secured by a security interest in substantially all of the Company’s assets. The Company used the proceeds of the Term Loan for general working capital purposes. | |
At December 31, 2013 the Company had $478,847 of borrowings outstanding under the 2013 Term Loan. During the year ended December 31, 2014 and 2013, the Company recorded $76,617 and $44,769, respectively, in interest expense for the 2013 Term Loan and this amount is included in interest expense in the accompanying consolidated statements of operations. The 2013 Term Loan was repaid in full during the year ended December 31, 2014. | |
2014 Term Loan | |
On September 23, 2014, the Company and Smoke entered into a $1,000,000 term loan (the “2014 Term Loan”) with the Lender pursuant to a secured promissory note entered into by the Company and Smoke in favor of the Lender (the “Secured Note”). Under the Secured Note, the 2014 Term Loan bears interest at 14% per annum and is secured by a security interest in substantially all of the Company’s assets. Under the Secured Note, the principal amount of the 2014 Term Loan is payable in twelve (12) successive monthly installments of $83,333 with the last payment due in September 2015. Interest on the 2014 Term Loan is payable in arrears. The Company used the proceeds of the 2014 Term Loan for general working capital purposes. | |
The Term Agreement contains covenants that are customary for agreements of this type. The failure to satisfy covenants under the Term Agreement or the occurrence of other specified events that constitute an event of default could result in the termination of the Term Agreement (as well as the Factoring Agreement) and/or the acceleration of the repayment of the Term Loan and the other obligations of the Company (including the Factoring Facility). The Term Agreement contains provisions relating to events of default that are customary for agreements of this type. | |
At December 31, 2014, the Company had $750,000 of borrowings outstanding under the 2014 Term Loan. During the year ended December 31, 2014, the Company recorded $24,086 in interest expense for the 2014 Term Loan and this amount is included in interest expense in the accompanying consolidated statements of operations. | |
The Company’s Chief Executive Officer and Former Chief Financial Officer have personally guaranteed performance of certain of the Company’s obligations under the Factoring Agreement and the Term Agreement. In consideration of the Company’s Former Chief Financial Officer providing the personal guarantee, the Company has agreed to amend his employment agreement as described in Note 9. |
Capital_Lease_Obligations
Capital Lease Obligations | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Leases [Abstract] | |||||
Capital Lease Obligations | Note 8. CAPITAL LEASE OBLIGATIONS | ||||
On October 1, 2014, the Company entered into a capital lease obligation in connection with the acquisition of equipment for its retail locations in the principal amount of $179,359. Annual interest on the capital lease obligation is 15.8% and borrowings are to be repaid over 36 months maturing on October 17, 2017. During the year ended December 31, 2014, the Company incurred interest expense associated with the capital lease obligation of $4,679. Depreciation expense incurred during the year ended December 31, 2014 for equipment held under capital lease obligations was $9,964. The net book value of equipment held under capital lease obligations at December 31, 2014 is $169,395. | |||||
Future minimum lease payments under non-cancelable capital leases that have initial or remaining terms in excess of one year at December 31, 2014 are due as follows: | |||||
Capital | |||||
Lease | |||||
2015 | $ | 75,485 | |||
2016 | 75,485 | ||||
2017 | 62,904 | ||||
Total | 213,874 | ||||
Amounts representing interest payments | (42,416 | ) | |||
Present value of future minimum payments | 171,458 | ||||
Current portion of capital lease obligations | (52,015 | ) | |||
Capital lease obligations, long term | $ | 119,443 |
Stockholders_Equity
Stockholders' Equity | 3 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||
Mar. 31, 2015 | Dec. 31, 2014 | |||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY: | ||||||||||||||||||||||||||||||||||
Stockholders' Equity | Note 6. STOCKHOLDERS’ EQUITY | Note 9. STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||
Issuance of Common Stock | Preferred Stock | |||||||||||||||||||||||||||||||||
On February 3, 2014, the Company entered into a consulting agreement (the “Consulting Agreement”) with Knight Global Services, LLC (“Knight Global”) pursuant to which the Company retained Knight Global to assist the Company with increasing awareness of its electronic cigarette brands as well as assisting the Company to expand and diversify its relationships with large retailers and national chains. Knight Global is a wholly owned subsidiary of Knight Global, LLC of which Ryan Kavanaugh is an investor and principal. Effective March 5, 2014, the Board of Directors of the Company elected Mr. Kavanaugh as a member of the Board of Directors in accordance with the Consulting Agreement. Knight Global serves as the family office for Mr. Kavanaugh. | The Company’s amended and restated articles of incorporation authorizes the Company’s Board of Directors to issue up to 1,000,000 shares of “blank check” preferred stock, having a $0.001 par value, in one or more series without stockholder approval. Each such series of preferred stock may have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as determined by the Company’s Board of Directors. At December 31, 2014 and 2013, no shares of preferred stock were issued or outstanding. | |||||||||||||||||||||||||||||||||
Under the terms of the Consulting Agreement, the Company issued to Mr. Kavanaugh 400,000 shares of its common stock, of which 50,000 shares vested immediately while the remaining 350,000 shares vest in installments of 50,000 shares per quarterly period beginning on the 90th day following February 3, 2014 and each ensuing quarterly period thereafter so long as the Consulting Agreement has not been terminated and during each quarterly period Knight Global has presented the Company with a minimum of six (6) bona fide opportunities for activities specified in the Consulting Agreement that are intended to increase awareness of the Company’s electronic cigarettes. In addition, during the term of the Consulting Agreement, which is 2 years, and during an 18-month post-termination period, the Company has agreed to pay Knight Global commissions payable in cash equal to 6% of “net sales” (as defined in the Consulting Agreement) of its products to retailers introduced by Knight Global and to retailers with which the Company has existing relationships and with which Knight Global is able, based on its verifiable efforts, to increase net sales of the Company’s products. | Common Stock | |||||||||||||||||||||||||||||||||
The grant date fair value of the common shares issued on February 3, 2014 was $3,080,000 based on closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, on February 3, 2014. On January 24, 2015, the Company and Knight Global mutually agreed to terminate the Consulting Agreement as it was in the best interests of both parties to do so. As a result of such termination, the Company issued 50,000 shares of its common stock to Knight Global pursuant to the early termination provisions of the Consulting Agreement. The Company cancelled 150,000 shares that were not vested that had been previously issued to Mr. Kavanaugh. In addition, on January 24, 2015, the Company received notice from Ryan Kavanaugh, a director of the Company that he had resigned from the Company’s board of directors, effective immediately. | The Company’s amended and restated articles of incorporation authorizes the Company’s Board of Directors to issue up to 50,000,000 shares of common stock having a par value of $0.001 per share. Each share entitles the holder to one vote. | |||||||||||||||||||||||||||||||||
During the three months ended March 31, 2015 and 2014, the Company recognized stock-based compensation expense, for the Consulting Agreement, in the amount of $322,067 and $592,300, which is included as part of selling, general and administrative expense in the accompanying condensed consolidated statements of operations. | Common Stock Issued for Services | |||||||||||||||||||||||||||||||||
Private Placement of Common Stock | On March 15 and June 15, 2013, the Company issued a total of 20,000 shares of common stock, pursuant to a consultancy agreement dated March 4, 2013. The Company terminated this consultancy agreement effective June 2013. Prior to termination of the agreement, the Company had agreed to issue on a quarterly basis common stock as compensation for services provided thereunder. The Company determined that the fair value of the common stock issued was more readily determinable than the fair value of the services provided. Accordingly, the Company recorded the fair market value of the stock as compensation expense. The Company valued the shares issued on March 15 and June 15, 2013 shares at $29,500 and $57,500, respectively, based on closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, on March 15 and June 15, 2013, respectively. During the year ended December 31, 2013, the Company recognized stock-based compensation expense in the amount of $87,000, which is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. | |||||||||||||||||||||||||||||||||
In connection with the Merger, on March 3, 2015, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors providing for the sale of $3,500,960 in shares of the Company’s Common Stock, par value $0.001 per share, at a price of $1.02 per share. The Company also issued Warrants to purchasers of the shares to acquire an aggregate of 2,735,132 shares of the Company’s Common Stock with an exercise price of $1.28 per share. The shares and Warrants were issued and sold through an exempt private securities offering to certain accredited investors. The Company incurred aggregate offering costs of $559,000 in connection with the private placement, of which $350,000 was paid to Palladium Capital Advisors, the Company’s placement agent. | On February 3, 2014, the Company entered into a consulting agreement (the “Consulting Agreement”) with Knight Global Services, LLC (“Knight Global”) pursuant to which the Company retained Knight Global to assist the Company with increasing awareness of its electronic cigarette brands as well as assisting the Company to expand and diversify its relationships with large retailers and national chains. Knight Global is a wholly owned subsidiary of Knight Global, LLC of which Ryan Kavanaugh is an investor and principal. Effective March 5, 2014, the Board of Directors of the Company elected Mr. Kavanaugh as a member of the Board of Directors in accordance with the Consulting Agreement. Knight Global serves as the family office for Mr. Kavanaugh. Mr. Kavanaugh is the Founder and Chief Executive Officer of Relativity, a next-generation media company engaged in multiple aspects of entertainment, including film production; financing and distribution; television; sports management; music publishing; and digital media. | |||||||||||||||||||||||||||||||||
Under the Purchase Agreement, the Company made certain customary representations and warranties to the purchasers concerning the Company and its operations. The Company has also agreed to register the Common Stock and the Warrants for resale pursuant to an effective registration statement which must be filed within 45 days of March 3, 2015 and must be effective by the later of (i) the 90th day following March 3, 2015 (if no SEC review) or (ii) the 120th day following March 3, 2015 (if subject to SEC review). If the Form S-3 Registration Statement is not effective for resales for more than 10 consecutive days or more than 15 days in any 12 month period during the registration period (i.e., the earlier of the date on which the shares have been sold or are eligible for sale under SEC Rule 144 without restriction), the Company is required to pay the investors (other than its participating officers and directors) liquidated damages in cash equal to 1.5% of the aggregate purchase price paid by the investors for the shares for every 30 days or portion thereof until the default is cured. Such cash payments could be as much as $52,500 for every 30 days. The initial Form S-3 was filed on April 17, 2015. | Under the terms of the Consulting Agreement, the Company has issued to Mr. Kavanaugh 400,000 shares of its common stock, of which 50,000 shares vested immediately upon execution of the Consulting Agreement, 50,000 shares vested on May 3, 2014, 50,000 shares vested on August 3, 2014, 50,000 shares vested on November 3, 2014 and 50,000 shares will vest in installments of 50,000 shares each quarterly period beginning on the 90th day following November 3, 2014 and each ensuing quarterly period thereafter so long as the Consulting Agreement has not been terminated and during each quarterly period Knight Global has presented the Company with a minimum of six (6) bona fide opportunities for activities specified in the Consulting Agreement that are intended to increase awareness of the Company’s electronic cigarettes. In addition, during the term of the Consulting Agreement, which is 2 years, and during an 18-month post-termination period, the Company has agreed to pay Knight Global commissions payable in cash equal to 6% of “net sales” (as defined in the Consulting Agreement) of its products to retailers introduced by Knight Global and to retailers with which the Company has existing relationships and with which Knight Global is able, based on its verifiable efforts, to increase net sales of the Company’s products. No commissions were paid under the consulting agreement during the year ended December 31, 2014. | |||||||||||||||||||||||||||||||||
Warrants | The grant date fair value of the common shares issued on February 3, 2014 was $3,080,000 based on closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, on February 3, 2014. During the year ended December 31, 2014, the Company recognized stock-based compensation expense relating to the Consulting Agreement, in the amount of $1,602,933, which is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. | |||||||||||||||||||||||||||||||||
A summary of warrant activity for the three months ended March 31, 2015 is presented below: | On January 24, 2015, the Company and Knight Global mutually agreed to terminate the Consulting Agreement as it was in the best interests of both parties to do so. As a result of such termination, the Company issued 50,000 shares of its common stock to Knight Global pursuant to the early termination provisions of the Consulting Agreement. The Company will incur $322,067 in connection with this final issuance during the first quarter of 2015. In addition, on January 24, 2015, the Company received notice from Ryan Kavanaugh, a director of the Company that he had resigned from the Company’s board of directors, effective immediately. | |||||||||||||||||||||||||||||||||
Number of | Weighted- | Weighted- | Aggregate | Private Placement of Common Stock | ||||||||||||||||||||||||||||||
Warrants | Average | Average | Intrinsic | |||||||||||||||||||||||||||||||
Exercise Price | Contractual Term | Value | On October 22, 2013, the Company entered into a purchase agreement (the “Purchase Agreement”) with various institutional and individual accredited investors and certain of its officers and directors to raise gross proceeds of $10 million in a private placement of 3,333,338 shares of its common stock at a per share price of $3.00 (the “Private Placement”). On October 29, 2013, the Company completed the Private Placement. The Company received net proceeds from the Private Placement of approximately $9.0 million, after paying placement agent fees and estimated offering expenses, which the Company used to fund its growth initiatives and for working capital purposes. Of the approximate $1 million in offering costs, approximately $110,000 were incurred during the year ended December 31, 2014. | |||||||||||||||||||||||||||||||
Outstanding at January 1, 2015 | 1,216,091 | $ | 2.01 | |||||||||||||||||||||||||||||||
Warrants granted | 2,993,815 | 1.64 | Pursuant to the Purchase Agreement, concomitantly with completion of the Private Placement, the Company entered into a registration rights agreement with the investors (other than its participating officers and directors), pursuant to which the Company filed with the SEC an initial registration statement to register for resale the 3,216,171 shares of the Company’s common stock purchased by the investors (other than the Company’s participating officers and directors). The initial registration statement was declared effective by the SEC on January 27, 2014. On March 5, 2014, the Company filed a post-effective amendment to the initial registration statement. The post-effective amendment to the initial registration statement was declared effective by the SEC on March 11, 2014. On June 20, 2014, the Company filed a second post-effective amendment to the initial registration statement. The second post-effective amendment to the initial registration statement was declared effective by the SEC on June 27, 2014. If the second post-effective amendment to the initial registration statement after being declared effective by the SEC is not effective for resales for more than 20 consecutive days or more than 45 days in any 12 month period during the registration period (i.e., the earlier of the date on which the shares have been sold or are eligible for sale under SEC Rule 144 without restriction), the Company is required to pay the investors (other than the Company’s participating officers and directors) liquidated damages in cash equal to 1.5% of the aggregate purchase price paid by the investors for the shares for every 30 days or portion thereof until the default is cured. These cash payments could be as much as $81,489 for every 30 days. | |||||||||||||||||||||||||||||||
Warrants exercised | — | — | ||||||||||||||||||||||||||||||||
Warrants forfeited or expired | — | — | Under the terms of the Purchase Agreement, the Company: | |||||||||||||||||||||||||||||||
Outstanding at March 31, 2015 | 4,209,906 | $ | 1.75 | 5 | $ | - | ● | Amended its existing equity incentive plan on November 20, 2013 to reduce the number of shares of its common stock reserved and available for issuance under the plan to 1.8 million from 8 million. | ||||||||||||||||||||||||||
Exercisable at March 31, 2015 | 3,016,725 | $ | 1.65 | 5 | $ | - | ● | Effectuated a reverse stock split of its common stock at a ratio of 1-for-5, which became effective in the marketplace at the opening of business December 27, 2013 (as disclosed in Note 1 above). | ||||||||||||||||||||||||||
Stock-based Compensation | ● | Reincorporated to the State of Delaware effective on December 31, 2013 (as disclosed in Note 1). | ||||||||||||||||||||||||||||||||
During the three months ended March 31, 2015 and 2014, the Company recognized stock-based compensation expense in connection with the amortization of stock option expense of $364,576 and $18,106, respectively, which is included as part of selling, general and administrative expense in the accompanying condensed consolidated statements of operations. No employee stock options were granted during the first quarter of 2015, with the exception of the 19,734 options granted in connection with the Merger, for which the grant date fair value was determined to be immaterial. | ● | Reconstituted its board of directors effective April 25, 2014 so that the board of directors consists of five members, a majority of whom each qualify as an “independent director” as defined in NASDAQ Marketplace Rule 5605(a)(2) and the related NASDAQ interpretative guidance; and | ||||||||||||||||||||||||||||||||
Stock option activity | ● | Listed its common stock on The NASDAQ Capital Market effective May 30, 2014. | ||||||||||||||||||||||||||||||||
Options outstanding at March 31, 2015 under the various plans are as follows: | In conjunction with completion of the Private Placement, on October 29, 2013, the holders of the Company’s approximately $1.7 million of outstanding senior convertible notes, some of whom were officers and directors of the Company, converted in full all of these senior convertible notes into approximately 780,000 shares of the Company’s common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. See Note 6. | |||||||||||||||||||||||||||||||||
Plan | Total | All of the warrants issued in conjunction with the convertible notes described in Note 6 and the Private Placement were evaluated in accordance with ASC 815 and were determined to be equity instruments. The Company estimated the fair value of these Warrants using the Black-Scholes-Merton valuation model. The significant assumptions which the Company used to measure their respective fair values included stock prices ranging from $1.00 to $3.50 per share, expected terms of 5 years, volatility ranging from 30.3% to 51.4%, risk free interest rates ranging from 0.71% to 0.90%, and a dividend yield of 0.0%. | ||||||||||||||||||||||||||||||||
Number of Options Outstanding | ||||||||||||||||||||||||||||||||||
under Plans | Warrants | |||||||||||||||||||||||||||||||||
Equity compensation plans not approved by security holders | 900,000 | |||||||||||||||||||||||||||||||||
Equity Incentive Plan | 342,834 | A summary of warrant activity for the years ended December 31, 2014 and 2013 is presented below: | ||||||||||||||||||||||||||||||||
1,242,834 | ||||||||||||||||||||||||||||||||||
Number of | Weighted- | Weighted- | Aggregate | |||||||||||||||||||||||||||||||
A summary of activity under all option Plans at March 31, 2015 and changes during the three months ended March 31, 2015: | Warrants | Average | Average | Intrinsic | ||||||||||||||||||||||||||||||
Exercise Price | Contractual | Value | ||||||||||||||||||||||||||||||||
Number of | Weighted- | Weighted- | Aggregate | Term | ||||||||||||||||||||||||||||||
Shares | Average | Average | Intrinsic | Outstanding at January 1, 2013 | 10,677 | $ | 1.08 | |||||||||||||||||||||||||||
Exercise Price | Contractual Term | Value | Warrants granted | 205,203 | 3.34 | |||||||||||||||||||||||||||||
Outstanding at January 1, 2015 | 1,344,300 | $ | 3.08 | 6.53 | $ | - | Warrants exercised | — | — | |||||||||||||||||||||||||
Options granted | 19,734 | 5.61 | - | - | Warrants forfeited or expired | — | — | |||||||||||||||||||||||||||
Options exercised | - | - | - | - | Outstanding at December 31, 2013 | 215,880 | $ | 3.23 | ||||||||||||||||||||||||||
Options forfeited or expired | (121,200 | ) | 7.32 | - | - | Warrants granted | 1,193,181 | 2 | ||||||||||||||||||||||||||
Outstanding at March 31, 2015 | 1,242,834 | $ | 2.71 | 6.17 | $ | - | Warrants exercised | (192,970 | ) | 3.3 | ||||||||||||||||||||||||
Exercisable at March 31, 2015 | 1,049,233 | $ | 2.26 | 6.52 | $ | - | Warrants forfeited or expired | — | — | |||||||||||||||||||||||||
Options available for grant at March 31, 2015 | 1,408,866 | Outstanding at December 31, 2014 | 1,216,091 | $ | 2.01 | 5 | $ | — | ||||||||||||||||||||||||||
Exercisable at December 31, 2014 | 215,620 | $ | 3.23 | 5 | $ | — | ||||||||||||||||||||||||||||
At March 31, 2015 the amount of unamortized stock-based compensation expense on unvested stock options granted to employees and consultants was $338,105 and will vest over 1.6 years. | ||||||||||||||||||||||||||||||||||
During the year ended December 31, 2014, 192,970 warrants were exercised in a cashless manner into 142,383 shares of common stock. | ||||||||||||||||||||||||||||||||||
Loss per share | ||||||||||||||||||||||||||||||||||
Equity Incentive Plan | ||||||||||||||||||||||||||||||||||
Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s convertible debt and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the exercise of stock options from the calculation of net loss per share, as their effect is antidilutive. The following table summarizes the Company’s securities that have been excluded from the calculation of basic and dilutive loss per share as their effect would be anti-dilutive: | ||||||||||||||||||||||||||||||||||
There are 1,800,000 shares of common stock reserved for issuance under the Company’s Equity Incentive Plan (after giving effect to the reduction of the number of shares reserved and available for issuance thereunder and the 1-for-5 reverse stock split, each as implemented in accordance with the Purchase Agreement governing the Private Placement), which was duly adopted by the stockholders on November 24, 2009. The Plan provides for the granting of incentive stock options to employees, the granting of non-qualified stock options to employees, non-employee directors and consultants, and the granting of restricted stock to employees, non-employee directors and consultants in connection with their retention and/or continued employment by the Company. Options issued under the Plan generally have a ten-year term and generally become exercisable over a four-year period. Shares subject to awards that expire unexercised or are forfeited or terminated will again become available for issuance under the Plan. No participant in the Equity Incentive Plan can receive option grants and/or restricted shares for more than 20% of the total shares subject to the Plan. | ||||||||||||||||||||||||||||||||||
March 31, | ||||||||||||||||||||||||||||||||||
2015 | 2014 | Stock-Based Compensation | ||||||||||||||||||||||||||||||||
Convertible debt | 1,793,409 | - | On March 6, 2014, the Board granted to Ryan Kavanaugh a non-qualified Director’s stock option award under the Company’s Equity Incentive Plan to purchase up to 60,000 shares of the Company’s common stock at an exercise price per share equal to $8.30 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date). On April 25, 2014, the Board granted to each of the three (3) other New Directors a non-qualified stock option award under the Company’s Equity Incentive Plan to purchase up to 60,000 shares of the Company’s common stock at an exercise price per share equal to $6.48 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date). Each of the New Director’s stock options expire on the fifth anniversary of the grant date, vest in equal annual installments over a three-year period from the grant date subject to he/she serving as a member of the Board on each such vesting date and is to be evidenced by a non-qualified stock option agreement customarily utilized under the Equity Incentive Plan. The weighted average grant date fair value of the March 6 and April 25, 2014 awards were $149,160 and $315,720, respectively. | |||||||||||||||||||||||||||||||
Stock options | 1,223,100 | 1,174,500 | ||||||||||||||||||||||||||||||||
Warrants | 4,209,906 | 215,880 | In addition, during the year ended December 31, 2014, the Company issued non-qualified stock option awards under the Company’s Equity Incentive Plan to purchase up to 12,000 shares of the Company’s common stock at an exercise price equal to $8.30 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date). The options vest in 3 annual installments and had an aggregate grant date fair value of $29,832. | |||||||||||||||||||||||||||||||
Total | 7,226,415 | 1,390,380 | ||||||||||||||||||||||||||||||||
During the year ended December 31, 2013, the Company issued non-qualified stock option awards under the Company’s Equity Incentive Plan to purchase up to 10,000 shares of the Company’s common stock at an exercise price equal to $4.35 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date) that vest in 3 annual installments and had an aggregate grant date fair value of $25,900 and up to 31,200 shares of the Company’s common stock at an exercise price equal to $4.35 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date) that vest in 4 annual installments and had an aggregate grant date fair value of $80,808. | ||||||||||||||||||||||||||||||||||
The fair value of employee stock options was estimated using the following weighted-average assumptions: | ||||||||||||||||||||||||||||||||||
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||||||||||
Expected term | 5 - 7 years | 6.3 - 10 years | ||||||||||||||||||||||||||||||||
Risk Free interest rate | 1.57% - 1.72 | % | 2.62 | % | ||||||||||||||||||||||||||||||
Dividend yield | 0 | % | 0 | % | ||||||||||||||||||||||||||||||
Volatility | 27% - 31 | % | 46.3 | % | ||||||||||||||||||||||||||||||
Stock option activity | ||||||||||||||||||||||||||||||||||
Options outstanding at December 31, 2014 under the various plans are as follows (in thousands): | ||||||||||||||||||||||||||||||||||
Plan | Total | |||||||||||||||||||||||||||||||||
Number of | ||||||||||||||||||||||||||||||||||
Options | ||||||||||||||||||||||||||||||||||
Outstanding | ||||||||||||||||||||||||||||||||||
in Plans | ||||||||||||||||||||||||||||||||||
Equity compensation plans not approved by security holders | 900 | |||||||||||||||||||||||||||||||||
Equity Incentive Plan | 444 | |||||||||||||||||||||||||||||||||
1,344 | ||||||||||||||||||||||||||||||||||
A summary of activity under all option Plans for the years ended December 31, 2014 and 2013 is presented below (in thousands, except per share data): | ||||||||||||||||||||||||||||||||||
Number of | Weighted- | Weighted- | Aggregate | |||||||||||||||||||||||||||||||
Shares | Average | Average | Intrinsic | |||||||||||||||||||||||||||||||
Exercise Price | Contractual Term | Value | ||||||||||||||||||||||||||||||||
Outstanding at January 1, 2013 | 1,132 | $ | 2.06 | |||||||||||||||||||||||||||||||
Options granted | 41 | 4.35 | ||||||||||||||||||||||||||||||||
Options exercised | (43 | ) | 1.57 | |||||||||||||||||||||||||||||||
Options forfeited or expired | (11 | ) | 1.27 | |||||||||||||||||||||||||||||||
Outstanding at December 31, 2013 | 1,119 | 2.17 | ||||||||||||||||||||||||||||||||
Options granted | 252 | 7 | ||||||||||||||||||||||||||||||||
Options exercised | (5 | ) | 1 | |||||||||||||||||||||||||||||||
Options forfeited or expired | (22 | ) | 1.47 | |||||||||||||||||||||||||||||||
Outstanding at December 31, 2014 | 1,344 | $ | 3.08 | 6.53 | $ | - | ||||||||||||||||||||||||||||
Exercisable at December 31, 2014 | 1,013 | $ | 2.17 | 6.45 | $ | - | ||||||||||||||||||||||||||||
Options available for grants at December 31, 2014 | 1,301 | |||||||||||||||||||||||||||||||||
For the years ended December 31, 2014 and 2013, the Company’s estimated forfeiture rate utilized ranged from 0.01% to 0.02%. | ||||||||||||||||||||||||||||||||||
During the years ended December 31, 2014 and 2013, the Company recognized stock-based compensation expense, for the vesting of stock options, of $163,646 and $48,239, respectively. Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. | ||||||||||||||||||||||||||||||||||
As of December 31, 2014, 1,012,745 common stock options that were granted had vested and 331,555 common stock options were unvested. At December 31, 2014 and 2013, the amount of unamortized stock-based compensation expense on unvested stock options granted to employees and consultants was and $476,828 and $150,037, respectively. The unamortized amounts will be amortized over the remaining vesting period through September 30, 2016. | ||||||||||||||||||||||||||||||||||
The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. Compensation expense includes the impact of an estimate for forfeitures for all stock options. The Company estimated the fair value of employee stock options using the Black-Scholes-Merton option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The expected term of such stock options represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by SAB 107 for “plain vanilla” options. Through September 30, 2014, the expected stock price volatility for the Company’s stock options was determined by using an average of the historical volatilities of the Company and industry peers. Beginning in the fourth quarter of 2014, the Company began estimating its expected volatility using the weekly trading prices of its own common stock as the Company felt this was a more appropriate measure. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. | ||||||||||||||||||||||||||||||||||
(Loss) Earnings Per Share | ||||||||||||||||||||||||||||||||||
The Company utilizes ASC 260, “Earnings per Share,” (“ASC 260”) to calculate earnings or loss per share. Basic earnings or loss per share is computed by dividing the net income or loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s convertible debt and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the exercise of stock options, convertible notes and common stock purchase warrants from the calculation of net loss per share, as their effect is antidilutive. | ||||||||||||||||||||||||||||||||||
The following table reconciles the numerator and denominator for the calculation: | ||||||||||||||||||||||||||||||||||
For the years ended | ||||||||||||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||||||||||
Net (loss) income - basic | $ | (13,852,249 | ) | $ | 801,352 | |||||||||||||||||||||||||||||
Denominator – basic: | ||||||||||||||||||||||||||||||||||
Weighted average number of common shares outstanding | 16,415,152 | 12,818,487 | ||||||||||||||||||||||||||||||||
Basic (loss) earnings per common share | $ | (0.84 | ) | $ | 0.06 | |||||||||||||||||||||||||||||
Net (loss) earnings - diluted | $ | (13,852,249 | ) | $ | 801,352 | |||||||||||||||||||||||||||||
Denominator – diluted: | ||||||||||||||||||||||||||||||||||
Basic weighted average number of common shares outstanding | 16,415,152 | 12,818,487 | ||||||||||||||||||||||||||||||||
Weighted average effect of dilutive securities: | ||||||||||||||||||||||||||||||||||
Common share equivalents of outstanding stock options | - | 349,428 | ||||||||||||||||||||||||||||||||
Common share equivalents of convertible debt | - | - | ||||||||||||||||||||||||||||||||
Common share equivalents of outstanding warrants | - | 18,450 | ||||||||||||||||||||||||||||||||
Diluted weighted average number of common shares outstanding | 16,415,152 | 13,186,365 | ||||||||||||||||||||||||||||||||
Diluted (loss) earnings per common share | $ | (0.84 | ) | $ | 0.06 | |||||||||||||||||||||||||||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | ||||||||||||||||||||||||||||||||||
Convertible debt | 1,136,364 | — | ||||||||||||||||||||||||||||||||
Stock options | 1,344,300 | 6,434 | ||||||||||||||||||||||||||||||||
Warrants | 1,216,091 | 4,089 |
Income_Taxes
Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Income Taxes | Note 10. INCOME TAXES | ||||||||
The income tax provision (benefit) consists of the following: | |||||||||
For the Years ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Current: | |||||||||
Federal | $ | - | $ | 337,016 | |||||
State and local | - | 29,344 | |||||||
Utilization of net operating loss carryforward | - | (346,783 | ) | ||||||
- | 19,577 | ||||||||
Deferred: | |||||||||
Federal | (4,337,272 | ) | 202,531 | ||||||
State and local | (463,060 | ) | 34,178 | ||||||
(4,800,332 | ) | 236,709 | |||||||
Change in valuation allowance | 5,567,665 | (781,077 | ) | ||||||
767,333 | (544,368 | ) | |||||||
Income tax provision (benefit) | $ | 767,333 | $ | (524,791 | ) | ||||
The following is a reconciliation of the expected tax expense (benefit) on the U.S. statutory rate to the actual tax expense (benefit) reflected in the accompanying statement of operations: | |||||||||
For the Years Ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
U.S. federal statutory rate | (34.00 | )% | 34 | % | |||||
State and local taxes, net of federal benefit | (2.98 | )% | 3.63 | % | |||||
Amortization of debt discount | — | 13.95 | % | ||||||
Debt conversion inducement | — | 40.76 | % | ||||||
Net operating loss tax adjustment | — | (9.65 | )% | ||||||
Other permanent differences | 0.29 | % | 3 | % | |||||
Alternative minimum tax | — | 6.97 | % | ||||||
Change in valuation allowance | 42.55 | % | (282.42 | )% | |||||
Income tax provision (benefit) | 5.86 | % | (189.76 | )% | |||||
As of December 31, 2014 and 2013, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following: | |||||||||
Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current deferred tax assets: | |||||||||
Net operating loss carryforwards | $ | 4,556,515 | $ | 169,404 | |||||
Stock-based compensation expense | 507,864 | 442,813 | |||||||
Alternative minimum tax credit carryforwards | 15,336 | 19,283 | |||||||
Reserves and allowances | 263,609 | 97,587 | |||||||
Inventory | 269,865 | 59,320 | |||||||
Accrued expenses and deferred income | 53,442 | 8,824 | |||||||
Severance | 27,555 | — | |||||||
Charitable contributions | 1,260 | 1,317 | |||||||
Total current deferred tax assets | 5,695,446 | 798,548 | |||||||
Current deferred tax liabilities: | |||||||||
Section 481 (a) adjustment | — | (24,450 | ) | ||||||
Property and equipment | — | (7,600 | ) | ||||||
Total current deferred tax liabilities | — | (32,050 | ) | ||||||
Net current deferred tax assets | 5,695,446 | 766,498 | |||||||
Valuation allowance | (5,695,446 | ) | — | ||||||
Net deferred tax assets | $ | — | $ | 766,498 | |||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the positive and negative evidence available, management has determined that a valuation allowance of $5,695,446 and $0 are required at December 31, 2014 and 2013, respectively, to reduce the deferred tax assets to amounts that are more likely than not to be realized. Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax assets may be necessary. | |||||||||
At December 31, 2014 the Company had U.S. federal and state net operating loss carryforwards (“NOLS”) of $12,214,479 and $12,812,444, respectively. At December 31, 2013 the Company had U.S. federal and state NOLS of $251,269 and $1,526,482, respectively. These NOLs expire beginning in 2032. Utilization of our NOLS may be subject to an annual limitation under section 382 and similar state provisions of the Internal Revenue Code due to changes of ownership that may have occurred or that could occur in the future, as defined under the regulations. | |||||||||
As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of NOL or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. | |||||||||
If applicable, interest costs and penalties related to unrecognized tax benefits are required to be calculated and would be classified as interest and penalties in general and administrative expense in the statement of operations. As of December 31, 2014 and 2013, no liability for unrecognized tax benefit was required to be reported. No interest or penalties were recorded during the years ended December 31, 2014 and 2013. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. The Company files U.S. federal and Florida, Maryland, Texas, New Jersey and Wisconsin state income tax returns. As of December 31, 2014, the Company’s U.S. and state tax returns remain subject to examination by tax authorities beginning with the tax year ended December 31, 2011. |
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||
Fair Value Measurements | Note 7. FAIR VALUE MEASUREMENTS | ||||||||||||||||
The fair value framework under the Financial Accounting Standards Board’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. | ||||||||||||||||
The following table summarizes the liabilities measured at fair value on a recurring basis as of March 31, 2015: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
LIABILITIES: | |||||||||||||||||
Warrant liability | $ | 87,603 | $ | 87,603 | |||||||||||||
Total derivative liabilities | $ | - | $ | - | $ | 87,603 | $ | 87,603 | |||||||||
The following table summarizes the liabilities measured at fair value on a recurring basis as of December 31, 2014: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
LIABILITIES: | |||||||||||||||||
Warrant liability | $ | - | $ | - | $ | - | $ | - | |||||||||
Total derivative liability | $ | - | $ | - | $ | - | $ | - | |||||||||
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting and finance department, who report to the Chief Financial Officer, determine its valuation policies and procedures. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting and finance department and are approved by the Chief Financial Officer. | |||||||||||||||||
Level 3 Valuation Techniques | |||||||||||||||||
Level 3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. | |||||||||||||||||
The Company deems financial instruments which do not have fixed settlement provisions to be derivative instruments. The common stock purchase warrants reissued by the Company in connection with the Merger do not have fixed settlement provisions because their exercise prices may be lowered if the Company issues securities at lower prices in the future. In accordance with Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the fair value of these warrants is classified as a liability on the Company’s Condensed Consolidated Balance Sheets because, according to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant holders. Corresponding changes in the fair value of the derivative liabilities are recognized in earnings on the Company’s Condensed Consolidated Statement of Operations in each subsequent period. | |||||||||||||||||
The Company’s warrant liabilities are carried at fair value and were classified as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs. Although the Company determined the warrants include an implied downside protection feature, it performed a Monte-Carlo simulation and concluded that the value of the feature is de minimus and the use of the Black-Scholes valuation model is considered to be a reasonable method to value the warrants. | |||||||||||||||||
The following table summarizes the values of certain assumptions used by the Company’s custom model to estimate the fair value of the warrant liabilities as of March 31, 2015: | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Stock price | $ | 1.04 | |||||||||||||||
Weighted average strike price | $ | 0.24 | |||||||||||||||
Remaining contractual term (years) | 3.7 | ||||||||||||||||
Volatility | 124 | % | |||||||||||||||
Risk-free rate | 1.37 | % | |||||||||||||||
Dividend yield | 0 | % | |||||||||||||||
The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis: | |||||||||||||||||
For the three | |||||||||||||||||
months ended | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Beginning balance | $ | — | |||||||||||||||
Fair value of warrant liabilities reissued in connection with the Merger | 49,638 | ||||||||||||||||
Change in fair value of derivative liabilities | 37,965 | ||||||||||||||||
Ending balance | $ | 87,603 |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2015 | Dec. 31, 2014 | ||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||
Commitments and Contingencies | Note 8. COMMITMENTS AND CONTINGENCIES | Note 11. COMMITMENTS AND CONTINGENCIES | |||||||||
Lease Commitments | Employment Agreements | ||||||||||
The Company leases its Florida office and warehouse facilities under a twenty-four month lease agreement with an initial term through April 30, 2013 that the Company extended in March 2015 when it exercised the second of three successive one-year renewal options. The lease provides for annual rental payments of $144,000 per annum (including 45 days of total rent abatement) during the initial twenty-four month term and annual rental payments of $151,200, $158,760 and $174,636 during each of the three one-year renewal options. In October 2013, the Company amended the master lease to include an additional approximately 2,200 square feet for an additional annual rental payment of $18,000 subject to the same renewal options and other terms and conditions set forth in the master lease. During the year ended December 31, 2014, the Company entered into nine (9) real estate leases for eight (8) new retail kiosks and one (1) new retail store. The kiosks opened during the fourth quarter of 2014 and the store is scheduled to open during 2015. The kiosks are located in malls in Florida, Maryland, New Jersey and Texas. The retail store is located in Ft. Lauderdale, FL. Under these leases, the initial lease terms range from one to five years, the Company is required to pay base and percentage rents and the Company is required to pay for common area and maintenance charges and utilities. In addition through the merger which occurred on March 4, 2015 the Company acquired additional lease commitments which included one (1) Florida office space and ten (10) new retail stores. Future minimum lease payments under non-cancelable operating that have initial or remaining terms in excess of one year at March 31, 2015 are due as follows: | On February 19, 2013, the Company entered into an employment agreement with Mr. Jeffrey Holman pursuant to which Mr. Holman will be employed as President of the Company for a term that shall begin on February 19, 2013, and, unless sooner terminated as provided therein, shall end on December 31, 2015; provided that such term of employment shall automatically extend for successive one-year periods unless either party gives at least six months’ advance written notice of its intention not to extend the term of employment. Mr. Holman will receive a base salary of $182,000 for the first two years of the employment agreement. Mr. Holman shall be eligible to participate in the Company’s annual performance based bonus program, as the same may be established from time to time by the Company’s Board of Directors in consultation with Mr. Holman for executive officers of the Company. | ||||||||||
The remaining minimum annual rents for the years ending December 31 are: | Resignation of Chief Executive Officer and Appointment of New Chief Executive Officer | ||||||||||
2015 | $ | 630,256 | Effective April 25, 2014, Kevin Frija resigned as the Company’s Chief Executive Officer and the Company’s Board of Directors appointed the Company’s President and incumbent member of the Board, Jeffrey Holman, as the Company’s new Chief Executive Officer. In connection with Mr. Frija’s resignation as Chief Executive Officer, the Board approved severance payments to Mr. Frija in an aggregate amount equal to one year of base salary at the rate of $159,000 per annum payable in installments in accordance with the Company’s normal payroll schedule conditioned upon his execution and delivery of a general release to the Company, which has become irrevocable in accordance with its terms and applicable law, and his compliance with the non-solicitation, confidentiality and non-competition covenants of his Employment Agreement dated February 27, 2012 with the Company until April 24, 2015 in certain respects and indefinitely in other respects. During the year ended December 31, 2014 the Company accrued severance expense in the amount of $167,003, which is included as part of the selling, general and administrative expenses in accompanying consolidated statements of operations in connection with Mr. Frija’s resignation. During the year ended December 31, 2014 $89,925 was paid and $77,028 is included in accrued expenses in accompanying consolidated balance sheets. | ||||||||
2016 | 539,990 | ||||||||||
2017 | 429,628 | Termination of Asset Purchase Agreement With International Vapor Group, Inc. | |||||||||
2018 | 201,853 | ||||||||||
2019 | 153,386 | On May 14, 2014, the Company and the Company’s wholly-owned subsidiary IVGI Acquisition, Inc., a Delaware corporation (the “Buyer”) entered into the Asset Purchase Agreement with International Vapor Group, Inc. (“IVG”) pursuant to which the Company was to purchase the business of IVG by acquiring substantially all of the assets and assuming certain of the liabilities of IVG in an asset purchase transaction. On July 25, 2014, the Company, the Buyer and the Owners David Epstein, David Herrera and Nicolas Molina, in their capacities as the representatives of the Sellers and Owners, entered into a First Amendment to Asset Purchase Agreement (the “First Amendment”). In connection with the First Amendment, the Company entered into a Secured Promissory Note whereby it loaned IVG $500,000 for working capital purposes. The secured promissory note accrued interest at a rate of 8% per year and was due at the earlier of (a) six months after the date of the termination of the Asset Purchase Agreement or the date the asset purchase closed. During the year ended December 31, 2014, the Company recognized interest income of $17,095 relating to this loan receivable. | |||||||||
2020 | 18,961 | ||||||||||
Total | $ | 1,974,074 | On August 26, 2014, the Company, the Buyer, and the Sellers and David Epstein, David Herrera and Nicolas Molina, in their capacities as the representatives of the Sellers and the owners of International Vapor Group, Inc., entered into a Termination Letter, pursuant to which the parties mutually terminated their previously announced Asset Purchase Agreement entered into on May 14, 2014 and amended on July 25, 2014. The Company and the Sellers mutually terminated the Asset Purchase Agreement because the parties could not agree upon certain operational and financial matters pertaining to the post-closing integration of the Sellers’ business operations. There are no current disputes or disagreements between the Company and the Sellers and neither party is liable for any breakup fees or reimbursement of costs to the other party as a result of the termination of the Asset Purchase Agreement. | ||||||||
Rent expense for the three months ended March 31, 2015 and 2014 was $215,087 and $44,838, respectively, and is included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. | On January 12, 2015, the Company entered into an agreement with IVG whereby the Company agreed to reduce the principal amount of the loan receivable by $50,000 if IVG were to remit payment of all principal and interest accrued on the loan receivable within one day. The Company included the write-down of the loan receivable in selling, general and administrative expenses on the consolidated statement of operations for the year ended December 31, 2014. On January 13, 2015, IVG paid the Company in full. | ||||||||||
Resignation of Chief Financial Officer | Lease Commitments | ||||||||||
On March 27, 2015, Harlan Press notified the Company of his intention to resign from the Company, effective April 10, 2015. Mr. Press previously served as Chief Financial Officer of the Company. In connection with the Company’s previously disclosed merger with Vaporin, Inc. in March 2015, Mr. Press was appointed Vice-President of Finance of the Company. Mr. Press received severance compensation and accrued vacation in accordance with his employment agreement in the total amount of $159,810, which is divided into equal weekly payments that end on January 29, 2016 and has been included in accrued liabilities as of March 31, 2015. | The Company leases its Florida office and warehouse facilities under a twenty-four month lease agreement with an initial term through April 30, 2013 that the Company extended in March 2014 when it exercised the second of three successive one-year renewal options. The lease provides for annual rental payments of $144,000 per annum (including 45 days of total rent abatement) during the initial twenty-four month term and annual rental payments of $151,200, $158,760 and $174,636 during each of the three one-year renewal options. In October 2013, the Company amended the master lease to include an additional approximately 2,200 square feet for an additional annual rental payment of $18,000 subject to the same renewal options and other terms and conditions set forth in the master lease. | ||||||||||
Legal Proceedings | During the year ended December 31, 2014, the Company entered into nine (9) real estate leases for eight (8) new retail kiosks and one (1) new retail store. The kiosks opened during the fourth quarter of 2014 and the store is scheduled to open during 2015. The kiosks are located in malls in Florida, Maryland, New Jersey and Texas. The retail store is located in Ft. Lauderdale, FL. Under these leases, the initial lease terms range from one to five years, the Company is required to pay base and percentage rents and the Company is required to pay for common area and maintenance charges and utilities. | ||||||||||
From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of our business. There were no pending material claims or legal matters as of the date of this report other than two of the three following matters. | Future minimum lease payments under non-cancelable operating that have initial or remaining terms in excess of one year at December 31, 2014 are due as follows: | ||||||||||
On June 22, 2012, Ruyan Investment (Holdings) Limited (“Ruyan”) filed a lawsuit against the Company alleging infringement of U.S. Patent No. 8,156,944 (the ‘944 Patent). Ruyan also filed separate cases for patent infringement against nine other defendants asserting infringement of the 944 Patent. Ruyan’s lawsuit against the Company known as Ruyan Investment (Holdings) Limited vs. Vapor Corp. CV-12-5466 is pending in the United States District Court for the Central District of California. All of these lawsuits have been consolidated for discovery and pre-trial purposes. The Company intends to vigorously defend against this lawsuit. | Operating | ||||||||||
Leases | |||||||||||
On February 25, 2013, Ruyan’s second patent infringement lawsuit against the Company as well as all of the other consolidated lawsuits were stayed as a result of the Court granting a stay in one of the consolidated lawsuits. The Court granted the motion to stay Ruyan’s separate lawsuits against the Company and the other defendants based on the filing of a request for inter partes reexamination of the ‘944 Patent at the United States Patent and Trademark Office. | 2015 | $ | 572,798 | ||||||||
2016 | 307,488 | ||||||||||
All reexamination proceedings of the ‘944 Patent have been stayed by the United States Patent and Trademark Office Patent Trial and Appeal Board pending its approval of one or more of them. | 2017 | 300,279 | |||||||||
2018 | 253,841 | ||||||||||
On March 5, 2014, Fontem Ventures, B.V. and Fontem Holdings 1 B.V. (the successors to Ruyan) filed a complaint against the Company alleging infringement of U.S. Patent No. 8,365,742, entitled “Aerosol Electronic Cigarette”, U.S. Patent No. 8,375,957, entitled “Electronic Cigarette”, U.S. Patent No. 8,393,331, entitled “Aerosol Electronic Cigarette” and U.S. Patent No. 8,490,628, entitled “Electronic Atomization Cigarette. On April 8, 2014, plaintiffs amended their complaint to add U.S. Patent No. 8,689,805, entitled “Electronic Cigarette.” The products accused of infringement by the plaintiff are various Krave, Fifty-one and Hookah Stix products and parts. Eight other companies were also sued in separate lawsuits alleging infringement of one or more of the patents listed above. The Company filed its Answer and Counterclaims on May 1, 2014. The Company intends to vigorously defend against this lawsuit. | 2019 | 203,964 | |||||||||
Total | $ | 1,638,370 | |||||||||
On October 21, 2014, Fontem Ventures B.V. and Fontem Holdings 1 B.V. filed a complaint against the Company in the U.S. District Court for the Central District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-8155. The complaint alleges infringement of United States Patent No. 8,863,752, entitled “Electronic Cigarette”. The products accused of infringement by plaintiffs are various Krave and Fifty-One products and parts On January 15, 2015, the Company filed its Answer and Counterclaims. The Company will vigorously defend itself against such allegations. | |||||||||||
Rent expense for the years ended December 31, 2014 and 2013 was $307,110 and $162,498, respectively. | |||||||||||
On December 2, 2014, Fontem Ventures B.V. and Fontem Holdings 1 B.V. filed a complaint against the Company in the U.S. District Court for the Central District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-09267. The Complaint alleges infringement by the plaintiffs against the Company relating to various Krave, Vapor X and Fifty-One products and parts. Fontem amended its compliant on December 16, 2014, to allege infringement of United States Patent No. 8,910,641, entitled “Electronic Cigarette” against the same products. On January 15, 2015, the Company filed its Answer and Counterclaims. The Company will vigorously defend itself against such allegations. | |||||||||||
Legal Proceedings | |||||||||||
All of the above referenced cases filed by Fontem have been consolidated and are currently scheduled for trial in November 2015. The parties are currently in active fact discovery and claim construction. | |||||||||||
From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of our business. | |||||||||||
Purchase Commitments | |||||||||||
On May 15, 2011, the Company became aware that Ruyan Investment (Holdings) Limited (“Ruyan”) had named the Company, along with three other sellers of electronic cigarettes in a lawsuit filed in the U.S. District Court for the Central District of California alleging infringement of U.S. Patent No. 7,832,410, entitled “Electronic Atomization Cigarette” against the Company’s Fifty-One Trio products. In that lawsuit, which was initially filed on January 12, 2011, Ruyan was unsuccessful in bringing suit against the Company due to procedural rules of the court. Subsequent thereto, on July 29, 2011, Ruyan filed a new lawsuit in which it named the Company, along with seven other sellers of electronic cigarettes, alleging infringement of the same patent. On March 1, 2013, the Company and Ruyan settled this multi-defendant federal patent infringement lawsuit as to them pursuant to a settlement agreement by and between them. Under the terms of the settlement agreement: | |||||||||||
At March 31, 2015 and December 31, 2014, the Company has vendor deposits of $298,320 and $319,563, respectively, and vendor deposits are included as a component of prepaid expenses and vendor deposits on the condensed consolidated balance sheets included herewith. | |||||||||||
● | The Company acknowledged the validity of Ruyan’s U.S. Patent No. 7,832,410 for “Electronic Atomization Cigarette” (the “410 Patent”), which had been the subject of Ruyan’s patent infringement claim against the Company; | ||||||||||
● | The Company paid Ruyan a lump sum payment of $12,000 for the Company’s previous sales of electronic cigarettes based on the 410 Patent; and | ||||||||||
● | On March 1, 2013, in conjunction with releasing one another (including their respective predecessors, successors, officers, directors and employees, among others) from claims related to the 410 Patent, the Company and Ruyan filed a Stipulated Judgment and Permanent Injunction with the above Court dismissing with prejudice all claims which have been or could have been asserted by them in the lawsuit. | ||||||||||
On June 22, 2012, Ruyan filed a second lawsuit against the Company alleging infringement of U.S. Patent No. 8,156,944, entitled “Aerosol Electronic Cigarette” (the “944 Patent”). Ruyan also filed separate cases for patent infringement against nine other defendants asserting infringement of the ‘944 Patent. Ruyan’s second lawsuit against the Company known as Ruyan Investment (Holdings) Limited v. Vapor Corp., No. 12-cv-5466, is pending in the United States District Court for the Central District of California. All of these lawsuits have been consolidated for discovery and pre-trial purposes. The Company intends to vigorously defend against this lawsuit. | |||||||||||
On February 25, 2013, Ruyan’s second patent infringement lawsuit against the Company as well as all of the other consolidated lawsuits were stayed as a result of the Court granting a stay in one of the consolidated lawsuits. The Court granted the motion to stay Ruyan’s separate lawsuits against the Company and the other defendants based on the filing of a request for inter partes reexamination of the 944 Patent at the U.S. Patent and Trademark Office. As a result of the stay, all of the consolidated lawsuits involving the 944 Patent have been stayed until the reexamination is completed. As a condition to granting the stay of all the lawsuits, the Court required any other defendant who desires to seek reexamination of the 944 Patent and potentially seek another stay (or an extension of the existing stay) based on any such reexamination to seek such reexamination no later than July 1, 2013. Two other defendants sought reexamination of the 944 Patent before expiration of such Court-imposed deadline of July 1, 2013. All reexamination proceedings of the 944 Patent have been stayed by the United States Patent and Trademark Office Patent Trial and Appeal Board pending its approval of one or more of them. On December 24, 2014, the Patent Trial and Appeal Board issued its ruling that all of the challenged claims in the reexamination proceedings of the ‘944 patent were invalid except for one claim. To the extent claim 11 is asserted against the Company, the Company will vigorously defend itself against such allegations. Currently, the case remains stayed. | |||||||||||
On March 5, 2014, Fontem Ventures, B.V. and Fontem Holdings 1 B.V. (the successors to Ruyan) filed a complaint against the Company in the U.S. District Court for the Central District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-1650. The complaint alleges infringement of U.S. Patent No. 8,365,742, entitled “Aerosol Electronic Cigarette”, U.S. Patent No. 8,375,957, entitled “Electronic Cigarette” (the “957 Patent”), U.S. Patent No. 8,393,331, entitled “Aerosol Electronic Cigarette” (the “331 Patent”) and U.S. Patent No. 8,490,628, entitled “Electronic Atomization Cigarette” (the “628 Patent”). On April 8, 2014, plaintiffs amended their complaint to add U.S. Patent No. 8,689,805, entitled “Electronic Cigarette” (the “805 Patent”). The products accused of infringement by plaintiffs are various Krave, Fifty-One and Hookah Stix products and parts. Nine other companies were also sued in separate lawsuits alleging infringement of one or more of the patents listed above. The Company filed its Answer and Counterclaims on May 1, 2014 and believes the claims are without merit. Other defendants have filed petitions for inter partes reexamination of the 331, 628 and 805 Patents at the U.S. Patent and Trademark Office, which petitions are pending. | |||||||||||
On October 21, 2014, Fontem Ventures B.V. and Fontem Holdings 1 B.V. filed a complaint against the Company in the U.S. District Court for the Central District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-8155. The complaint alleges infringement of United States Patent No. 8,863,752, entitled “Electronic Cigarette”. The products accused of infringement by plaintiffs are various Krave and Fifty-One products and parts. On January 15, 2015, the Company filed its Answer and Counterclaims. The Company will vigorously defend itself against such allegations. | |||||||||||
On December 2, 2014, Fontem Ventures B.V. and Fontem Holdings 1 B.V. filed a complaint against the Company in the U.S. District Court for the Central District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-09267. The Compliant alleges infringement by plaintiffs are various Krave, Vapor X and Fifty-One products and parts. Fontem amended its compliant on December 16, 2014, to allege infringement of United States Patent No. 8,910,641, entitled “Electronic Cigarette” against the same products. On January 15, 2015, the Company filed its Answer and Counterclaims. The Company will vigorously defend itself against such allegations. | |||||||||||
All of the above referenced cases filed by Fontem have been consolidated and are currently scheduled for trail in November 2014. The parties are currently in active fact discovery and claim construction. | |||||||||||
Purchase Commitments | |||||||||||
At December 31, 2014 and 2013, the Company has vendor deposits of $319,563 and $782,363, respectively, and vendor deposits are included as a component of prepaid expenses and vendor deposits on the consolidated balance sheets included herewith. |
Concentration_of_Credit_Risk
Concentration of Credit Risk | 12 Months Ended |
Dec. 31, 2014 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | Note 12. CONCENTRATION OF CREDIT RISK |
At December 31, 2014 accounts receivable balances included concentrations from seven customers that had balances of an amount greater than 10%. The amounts ranged from $27,729 to $177,200. At December 31 2013, accounts receivable balances included a concentration from one customer in the amount of $268,768, which was an amount greater than 10% of the total net accounts receivable balance. | |
Beginning the first quarter of 2012, the Company began selling electronic cigarettes in the country of Canada exclusively through a Canadian distributor. For the years ended December 31, 2014 and 2013, the Company had sales in excess of 10% to this Canadian distributor of $2,912,525 and $3,847,310, respectively. For the year ended December 31, 2014 one other customer accounted for sales in excess of 10% with sales of $1,536,050. No other customer accounted for sales of 10% for the year ended December 31, 2013. |
Subsequent_Events
Subsequent Events | 3 Months Ended | 12 Months Ended |
Mar. 31, 2015 | Dec. 31, 2014 | |
Subsequent Events [Abstract] | ||
Subsequent Events | NOTE 9. SUBSEQUENT EVENTS | Note 13. SUBSEQUENT EVENTS |
The Company evaluates events that have occurred after the balance sheet date but before the condensed consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the accompanying condensed consolidated financial statements, except for the following: | The Company evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements other disclosed. | |
During March and April 2015 the Company closed seven of their retail Kiosk locations. This comprised of three in Maryland, two in Texas one in New Jersey and one in Florida. In addition, the Company decided not to proceed with opening the retail store located in Ft, Lauderdale Florida. This was primarily due to the Company’s refocus of resources on management and expansion of the acquired Vape Store brand retail locations. The Company is negotiating early terminations of the lease commitments. | The merger closed on March 4, 2015. Prior to the closing of the Merger, Vapor and Vaporin entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) with certain accredited investors providing for the sale of $350,000 of Vaporin’s Convertible Notes (the “Notes”). On January 29, 2015, the Company issued the notes. The Note accrues interest on the outstanding principal at an annual rate of 12%. The principal and accrued interest on the Note is due and payable on January 29, 2016 (the “Maturity Date”) The Note will not be convertible until such time as the Nasdaq Stock Market (“Nasdaq”) approves the listing of the shares to be issued upon conversion of the Note. In no event will the number of shares of the Company’s common stock issuable upon conversion of the Note exceed 19.99% of the Company’s issued and outstanding common stock, regardless of the conversion price. | |
Effective as of May 7, 2015, the Company entered an Engagement Agreement with Dawson James Securities (“Dawson”). In accordance with the Engagement Agreement, Dawson has agreed to act as the lead or managing underwriter on a best-efforts basis in connection with a proposed offering of approximately $24 million of the Company’s equity securities. The Engagement Agreement provides for an underwriting discount of 8% and a $25,000 advance fee which has been paid to Dawson. The actual size of the offering and the offering price will be subject to negotiation and the Company can provide no assurance that any such offering will be successful. | In connection with the Merger, on March 3, 2015, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors providing for the sale of $3,500,960 in shares of the Company’s Common Stock, par value $0.001 per share at a price of $1.02 per share. The Company also issued Warrants to purchasers of the shares to acquire an aggregate of 2,735,132 shares of the Company’s Common Stock with an exercise price of $1.28 per share. The shares and Warrants were issued and sold through an exempt private securities offering to certain accredited investors. | |
On May 19, 2015, the Company received a deficiency letter from the Nasdaq Listing Qualifications department (the “Staff”) notifying the Company that for the last 30 consecutive business days the Company’s common stock had closed below the minimum $1.00 per share bid price requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided an initial period of 180 calendar days, or until November 16, 2015, to regain compliance with the bid price requirement. If, at any time before November 16, 2015, the closing bid price for the Company’s common stock is $1.00 or more for a minimum of 10 consecutive business days, the Staff will provide written notification to the Company that it has regained compliance with the bid price requirement. If the Company does not regain compliance with the bid price requirement by November 16, 2015, the Company may be eligible for an additional 180 calendar day compliance period provided that it meets the continued listing requirement for the market value of publicly held shares and all other initial listing standards, with the exception of the bid price requirement, and provides the Staff with written notice of its intention to cure the deficiency. If the Company does not regain compliance by November 16, 2015 or the termination of any subsequent compliance period, if applicable, the Staff will provide written notification to the Company that its common stock may be delisted. In anticipation of receiving the Staff’s notice, on May 12, 2015, the Company filed a preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission, followed by a definitive proxy statement filed May 22, 2015, in connection with the Company’s 2015 Annual Meeting of shareholders that included a proposal to approve an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split. The Company’s Annual Meeting is scheduled for July 7, 2015. There can be no assurance that the Company’s shareholders will approve the amendment, or that a reverse stock split will prevent the Company’s stock price from falling below the bid price requirement in the future. | Under the Purchase Agreement, the Company made certain customary representations and warranties to the purchasers concerning the Company and its operations. The Company has also agreed to register the Common Stock and the Warrants for resale pursuant to an effective registration statement which must be filed within 45 days of March 3, 2015 and must be effective by the later of (i) the 90th day following March 3, 2015 (if no SEC review) or (ii) the 120th day following March 3, 2015 (if subject to SEC review). If the Form S-3 Registration Statement is not effective for resales for more than 10 consecutive days or more than 15 days in any 12 month period during the registration period (i.e., the earlier of the date on which the shares have been sold or are eligible for sale under SEC Rule 144 without restriction), we are required to pay the investors (other than our participating officers and directors) liquidated damages in cash equal to 1.5% of the aggregate purchase price paid by the investors for the shares for every 30 days or portion thereof until the default is cured. Such cash payments could be as much as $52,500 for every 30 days. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Dec. 31, 2014 | |||
Accounting Policies [Abstract] | ||||
Principles of consolidation | Principles of consolidation | Principles of consolidation | ||
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. | The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, Smoke Anywhere USA, Inc., and its 50% joint venture interest in Emagine the Vape Store, LLC. All significant intercompany transactions and balances were eliminated. | |||
Use of estimates in the preparation of the financial statements | Use of estimates in the preparation of the financial statements | Use of estimates in the preparation of 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 preliminary valuation of the net assets acquired in the Merger. Certain of our 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. | The preparation of 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 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 preliminary valuation of the net assets acquired subsequent to December 31, 2014 in the Merger. Certain of our 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. | |||
Revenue recognition | Revenue recognition | Revenue recognition | ||
The Company recognizes revenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. | The Company recognizes revenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. | |||
Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passes to customers and collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company’s delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. | Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passes to customers and collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company’s delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. | |||
The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducement offers on its condensed consolidated statements of operations. | The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducement offers on its consolidated statements of operations. | |||
Shipping and Handling Costs | Shipping and Handling Costs | |||
The Company policy is to provide free standard shipping and handling for most orders shipped during the year. Shipping and handling costs incurred are recognized in selling, general and administrative expenses. Such amounts aggregated $661,583 and $658,586 for the years ended December 31, 2014 and 2013 respectively. | ||||
In certain circumstances, shipping and handling costs are charged to the customer and recognized in sales, net. The amounts recognized for the years ended December 31, 2014 and 2013 were $71,225 and $129,761, respectively. | ||||
Cash and Cash Equivalents | Cash and Cash Equivalents | |||
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. For financial statement purposes, investments in money market funds are considered a cash equivalent and are included in cash and cash equivalents. The Company maintains its cash and cash equivalents at high credit quality federally insured financial institutions, with balances, at times, in excess of the Federal Deposit Insurance Corporation’s insurance coverage limit of $250,000 per federally insured financial institution. Management believes that the financial institutions that hold the Company’s deposits are financially sound and, therefore, pose a minimum credit risk. The Company has not experienced any losses in such accounts. At December 31, 2014 and 2013, the Company did not hold cash equivalents. | ||||
Accounts Receivable | Accounts Receivable | Accounts Receivable | ||
Accounts receivable, net is stated at the amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. | Accounts receivable, net is stated at the amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. | |||
At March 31, 2015 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance. The amount was $54,993. At December 31, 2014 accounts receivable balances included concentrations from seven customers that had balances of an amount greater than 10%. The amounts ranged from $27,729 to $177,200. As to revenues, no customers accounted for revenues in excess of 10% of the net sales for the three-month periods ended March 31, 2015 and 2014. | ||||
Due From Merchant Credit Card Processor | Due From Merchant Credit Card Processor | |||
Due from merchant credit card processor represents monies held by the Company’s credit card processors. The funds are being held by the merchant credit card processors pending satisfaction of their hold requirements and expiration of charge backs/refunds from customers. | ||||
Identifiable Intangible Assets and Goodwill | Identifiable Intangible Assets and Goodwill | |||
Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets are amortized over 5 and 10 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. No impairment existed at March 31, 2015. | ||||
Indefinite-lived intangible assets, such as goodwill are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis at December 31st or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value based test. | ||||
Inventories | Inventories | Inventories | ||
Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. If the cost of the inventories exceeds their market value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale. | Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. If the cost of the inventories exceeds their market value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale. | |||
Property and Equipment | Property and equipment | |||
Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful life of the respective asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment: | ||||
Description | Useful Lives | |||
Warehouse fixtures | 2 years | |||
Warehouse equipment | 5 years | |||
Furniture and fixtures | 5 years | |||
Computer hardware | 3 years | |||
Impairment of Long Lived Assets | Impairment of Long-Lived Assets | |||
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In connection with this review, the Company also reevaluates the depreciable lives for these assets. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset may not be recoverable, it measures any impairment based on the projected future discounted cash flows as compared to the asset’s carrying value. Through December 31, 2014, the Company has not recorded any impairment charges on its long-lived assets. | ||||
Advertising | Advertising | |||
The Company expenses advertising cost as incurred. | ||||
Warranty liability | Warranty liability | Warranty liability | ||
The Company’s limited lifetime warranty policy generally allows its end users and retailers to return defective purchased rechargeable products in exchange for new products. The Company estimates a reserve for warranty liability and records that reserve amount as a reduction of revenues and as an accrued expense on the accompanying condensed consolidated balance sheets. The warranty claims and expense was not deemed material for the years ended December 31, 2014 and three months ended March 31, 2015. | The Company’s limited lifetime warranty policy generally allows its end users and retailers to return defective purchased rechargeable products in exchange for new products. The Company estimates a reserve for warranty liability and records that reserve amount as a reduction of revenues and as an accrued expense on the accompanying consolidated balance sheets. The warranty claims and expense was not deemed material for the years ended December 31, 2014 and 2013. | |||
Income Taxes | Income taxes | |||
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740.”) Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. | ||||
Product Development | Product Development | |||
The Company includes product development expenses relating to the commercialization of new products which are expensed as incurred as part of operating expenses. Product development expenses for the years ended December 31, 2014 and 2013 were approximately $312,000 and $174,000, respectively. | ||||
Fair value measurements | Fair value measurements | Fair value measurements | ||
The Company applies the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements” (“ASC 820”). The Company’s short term financial instruments include cash, due from merchant credit card processors, accounts receivable, accounts payable and accrued expenses, each of which approximate their fair values based upon their short term nature. The Company’s other financial instruments include notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. | The Company applies the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). The Company’s short term financial instruments include cash, due from merchant credit card processors, accounts receivable, accounts payable and accrued expenses, each of which approximate their fair values based upon their short term nature. The Company’s other financial instruments include notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. | |||
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active market or inputs that are observable; and Level 3 – inputs that are unobservable. | ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active market or inputs that are observable; and Level 3 – inputs that are unobservable. | |||
Stock-Based Compensation | Stock-Based Compensation | Stock-Based Compensation | ||
The Company accounts for stock-based compensation under ASC Topic No. 718, “Compensation-Stock Compensation” (“ASC 718”). These standards define a fair value based method of accounting for stock-based compensation. In accordance with ASC 718, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair value of the award as determined by the valuation model at the grant date or other measurement date. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. | The Company accounts for stock-based compensation under ASC 718, “Compensation-Stock Compensation” (“ASC 718”). These standards define a fair value based method of accounting for stock-based compensation. In accordance with ASC Topic 718, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair value of the award as determined by the valuation model at the grant date or other measurement date. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. | |||
Derivative Instruments | Derivative Instruments | Derivative Instruments | ||
The Company accounts for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic No. 815, “Derivative Instruments and Hedging Activities,” (“ASC 815”) as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. | The Company accounts for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic No. 815, “Accounting for Derivative Instruments and Hedging Activities,” (“ASC 815”) as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. | |||
The Company estimates fair values of derivative instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton valuation model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income. | The Company estimates fair values of derivative instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton valuation model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income. | |||
Convertible Debt Instruments | Convertible Debt Instruments | Convertible Debt Instruments | ||
The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method. The Company records, when necessary, induced conversion expense, at the time of conversion for the difference between the reduced conversion price per share and the original conversion price per share. | The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method. The Company records, when necessary, induced conversion expense, at the time of conversion for the difference between the reduced conversion price per share and the original conversion price per share. | |||
Lease Accounting | Lease Accounting | Lease Accounting | ||
The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. The Company determines the straight-line rent impact of an operating lease upon inception of the lease. | The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. The Company determines the straight-line rent impact of an operating lease upon inception of the lease. | |||
Recent Accounting Pronouncements | Recent Accounting Pronouncements | |||
The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. | ||||
The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company is currently evaluating the potential impact, if any, the adoption of this standard will have on the Company’s consolidated financial position and results of operations. | ||||
The FASB has issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance, which is effective for annual reporting periods ending after December 15, 2016, extends the responsibility for performing the going-concern assessment to management and contains guidance on how to perform a going-concern assessment and when going-concern disclosures would be required under U.S. GAAP. The Company has elected to early adopt the provisions of ASU 2014-15 in connection with the issuance of these consolidated financial statements. Information regarding the substantial doubt relating to the Company’s ability to continue as a going concern has been disclosed in Note 2. |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||
Dec. 31, 2014 | |||
Accounting Policies [Abstract] | |||
Schedule of Property and Equipment | The Company generally uses the following depreciable lives for its major classifications of property and equipment: | ||
Description | Useful Lives | ||
Warehouse fixtures | 2 years | ||
Warehouse equipment | 5 years | ||
Furniture and fixtures | 5 years | ||
Computer hardware | 3 years |
Merger_With_Vaporin_Inc_Tables
Merger With Vaporin, Inc. (Tables) | 3 Months Ended | 12 Months Ended | ||||||||||||||||
Mar. 31, 2015 | Dec. 31, 2014 | |||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||
Schedule of Business Consideration | The fair value was based on a preliminary valuation. | |||||||||||||||||
Purchase Consideration | ||||||||||||||||||
Value of consideration paid: | $ | 17,735,084 | ||||||||||||||||
Tangible assets acquired and liabilities assumed at fair value | ||||||||||||||||||
Cash | $ | 136,468 | ||||||||||||||||
Due from merchant credit card processor | 201,141 | |||||||||||||||||
Accounts receivable | 81,256 | |||||||||||||||||
Inventories | 981,558 | |||||||||||||||||
Property and Equipment | 206,668 | |||||||||||||||||
Other Assets | 28,021 | |||||||||||||||||
Notes payable, net of debt discount of $54,623 | (512,377 | ) | ||||||||||||||||
Notes payable – related party | (1,000,000 | ) | ||||||||||||||||
Accounts Payable and accrued expenses | (775,753 | ) | ||||||||||||||||
Derivative Liabilities | (49,638 | ) | ||||||||||||||||
Excess liabilities over assets assumed | $ | (706,685 | ) | |||||||||||||||
Consideration: | ||||||||||||||||||
Value of common stock issued | 17,028,399 | |||||||||||||||||
Excess liabilities over assets assumed | 706,685 | |||||||||||||||||
Total purchase price | $ | 17,735,084 | ||||||||||||||||
Identifiable intangible assets | ||||||||||||||||||
Trade names and technology | 1,500,000 | |||||||||||||||||
Customer relationships | 488,274 | |||||||||||||||||
Assembled workforce | 92,326 | |||||||||||||||||
Total Identifiable Intangible Assets | 2,080,600 | |||||||||||||||||
Goodwill | 15,654,484 | |||||||||||||||||
Total allocation to identifiable intangible assets and goodwill | $ | 17,735,084 | ||||||||||||||||
Schedule of Pro Forma Consolidated Results of Operations | The following presents the unaudited pro-forma combined results of operations of the Company with Vaporin as if the acquisition occurred on January 1, 2014. | The following table presents the unaudited pro-forma financial results, as if the acquisition of Vaporin had been completed as of January 1, 2013 and 2014: | ||||||||||||||||
For the three months Ended | For the Years Ended | |||||||||||||||||
March 31, | December 31, | |||||||||||||||||
2015 | 2014 | 2014 | 2013 | |||||||||||||||
Revenues | $ | 20,253,052 | $ | 28,259,309 | ||||||||||||||
Revenues | $ | 2,584,884 | $ | 4,975,337 | Net (loss) income | $ | (19,595,702 | ) | $ | 415,316 | ||||||||
Net Loss | $ | (5,378,927 | ) | $ | (2,590,724 | ) | Loss per share - basic and diluted | $ | (0.59 | ) | $ | 0.01 | ||||||
Net Loss per share | $ | (0.17 | ) | $ | (0.08 | ) | ||||||||||||
Weighted Average number of shares outstanding | 31,260,183 | 30,766,022 |
Accrued_Expenses_Tables
Accrued Expenses (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Payables and Accruals [Abstract] | |||||||||
Schedule of Accrued Expenses | Accrued expenses are comprised of the following: | ||||||||
31-Mar-15 | 31-Dec-14 | ||||||||
Commissions payable | $ | 179,000 | $ | 179,000 | |||||
Retirement plan contributions | 101,000 | 80,000 | |||||||
Accrued severance | 160,000 | 82,000 | |||||||
Accrued customer returns | 648,000 | 360,000 | |||||||
Other accrued liabilities | 331,241 | 274,112 | |||||||
Total | $ | 1,419,241 | $ | 975,112 |
Property_and_Equipment_Tables
Property and Equipment (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Schedule of Property and Equipment | Property and equipment consists of the following: | ||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Computer hardware | $ | 389,373 | $ | 12,471 | |||||
Furniture and fixtures | 347,612 | 19,821 | |||||||
Warehouse fixtures | 7,564 | 7,564 | |||||||
Warehouse equipment | 16,708 | 16,708 | |||||||
Leasehold improvements | 35,076 | - | |||||||
796,333 | 56,564 | ||||||||
Less: accumulated depreciation and amortization | (84,314 | ) | (27,879 | ) | |||||
$ | 712,019 | $ | 28,685 |
Capital_Lease_Obligations_Tabl
Capital Lease Obligations (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Leases [Abstract] | |||||
Future Minimum Lease Payments Under Non-cancelable Capital Leases | Future minimum lease payments under non-cancelable capital leases that have initial or remaining terms in excess of one year at December 31, 2014 are due as follows: | ||||
Capital | |||||
Lease | |||||
2015 | $ | 75,485 | |||
2016 | 75,485 | ||||
2017 | 62,904 | ||||
Total | 213,874 | ||||
Amounts representing interest payments | (42,416 | ) | |||
Present value of future minimum payments | 171,458 | ||||
Current portion of capital lease obligations | (52,015 | ) | |||
Capital lease obligations, long term | $ | 119,443 |
Stockholders_Equity_Tables
Stockholders' Equity (Tables) | 3 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||
Mar. 31, 2015 | Dec. 31, 2014 | |||||||||||||||||||||||||||||||||
STOCKHOLDERS' EQUITY: | ||||||||||||||||||||||||||||||||||
Summary of Warrant Activity | A summary of warrant activity for the three months ended March 31, 2015 is presented below: | A summary of warrant activity for the years ended December 31, 2014 and 2013 is presented below: | ||||||||||||||||||||||||||||||||
Number of | Weighted- | Weighted- | Aggregate | Number of | Weighted- | Weighted- | Aggregate | |||||||||||||||||||||||||||
Warrants | Average | Average | Intrinsic | Warrants | Average | Average | Intrinsic | |||||||||||||||||||||||||||
Exercise Price | Contractual Term | Value | Exercise Price | Contractual | Value | |||||||||||||||||||||||||||||
Outstanding at January 1, 2015 | 1,216,091 | $ | 2.01 | Term | ||||||||||||||||||||||||||||||
Warrants granted | 2,993,815 | 1.64 | Outstanding at January 1, 2013 | 10,677 | $ | 1.08 | ||||||||||||||||||||||||||||
Warrants exercised | — | — | Warrants granted | 205,203 | 3.34 | |||||||||||||||||||||||||||||
Warrants forfeited or expired | — | — | Warrants exercised | — | — | |||||||||||||||||||||||||||||
Warrants forfeited or expired | — | — | ||||||||||||||||||||||||||||||||
Outstanding at March 31, 2015 | 4,209,906 | $ | 1.75 | 5 | $ | - | Outstanding at December 31, 2013 | 215,880 | $ | 3.23 | ||||||||||||||||||||||||
Warrants granted | 1,193,181 | 2 | ||||||||||||||||||||||||||||||||
Exercisable at March 31, 2015 | 3,016,725 | $ | 1.65 | 5 | $ | - | Warrants exercised | (192,970 | ) | 3.3 | ||||||||||||||||||||||||
Warrants forfeited or expired | — | — | ||||||||||||||||||||||||||||||||
Outstanding at December 31, 2014 | 1,216,091 | $ | 2.01 | 5 | $ | — | ||||||||||||||||||||||||||||
Exercisable at December 31, 2014 | 215,620 | $ | 3.23 | 5 | $ | — | ||||||||||||||||||||||||||||
Fair Value of Employee Stock Options Estimated Using Weighted-Average Assumptions | The fair value of employee stock options was estimated using the following weighted-average assumptions: | |||||||||||||||||||||||||||||||||
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||||||||||
Expected term | 5 - 7 years | 6.3 - 10 years | ||||||||||||||||||||||||||||||||
Risk Free interest rate | 1.57% - 1.72 | % | 2.62 | % | ||||||||||||||||||||||||||||||
Dividend yield | 0 | % | 0 | % | ||||||||||||||||||||||||||||||
Volatility | 27% - 31 | % | 46.3 | % | ||||||||||||||||||||||||||||||
Summary of Stock Option Outstanding under Various Plans | Options outstanding at March 31, 2015 under the various plans are as follows: | Options outstanding at December 31, 2014 under the various plans are as follows (in thousands): | ||||||||||||||||||||||||||||||||
Plan | Total | Plan | Total | |||||||||||||||||||||||||||||||
Number of Options Outstanding | Number of | |||||||||||||||||||||||||||||||||
under Plans | Options | |||||||||||||||||||||||||||||||||
Equity compensation plans not approved by security holders | 900,000 | Outstanding | ||||||||||||||||||||||||||||||||
Equity Incentive Plan | 342,834 | in Plans | ||||||||||||||||||||||||||||||||
1,242,834 | Equity compensation plans not approved by security holders | 900 | ||||||||||||||||||||||||||||||||
Equity Incentive Plan | 444 | |||||||||||||||||||||||||||||||||
1,344 | ||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity Under All Option Plans | A summary of activity under all option Plans at March 31, 2015 and changes during the three months ended March 31, 2015: | A summary of activity under all option Plans for the years ended December 31, 2014 and 2013 is presented below (in thousands, except per share data): | ||||||||||||||||||||||||||||||||
Number of | Weighted- | Weighted- | Aggregate | Number of | Weighted- | Weighted- | Aggregate | |||||||||||||||||||||||||||
Shares | Average | Average | Intrinsic | Shares | Average | Average | Intrinsic | |||||||||||||||||||||||||||
Exercise Price | Contractual Term | Value | Exercise Price | Contractual Term | Value | |||||||||||||||||||||||||||||
Outstanding at January 1, 2015 | 1,344,300 | $ | 3.08 | 6.53 | $ | - | Outstanding at January 1, 2013 | 1,132 | $ | 2.06 | ||||||||||||||||||||||||
Options granted | 19,734 | 5.61 | - | - | Options granted | 41 | 4.35 | |||||||||||||||||||||||||||
Options exercised | - | - | - | - | Options exercised | (43 | ) | 1.57 | ||||||||||||||||||||||||||
Options forfeited or expired | (121,200 | ) | 7.32 | - | - | Options forfeited or expired | (11 | ) | 1.27 | |||||||||||||||||||||||||
Outstanding at March 31, 2015 | 1,242,834 | $ | 2.71 | 6.17 | $ | - | Outstanding at December 31, 2013 | 1,119 | 2.17 | |||||||||||||||||||||||||
Exercisable at March 31, 2015 | 1,049,233 | $ | 2.26 | 6.52 | $ | - | Options granted | 252 | 7 | |||||||||||||||||||||||||
Options available for grant at March 31, 2015 | 1,408,866 | Options exercised | (5 | ) | 1 | |||||||||||||||||||||||||||||
Options forfeited or expired | (22 | ) | 1.47 | |||||||||||||||||||||||||||||||
Outstanding at December 31, 2014 | 1,344 | $ | 3.08 | 6.53 | $ | - | ||||||||||||||||||||||||||||
Exercisable at December 31, 2014 | 1,013 | $ | 2.17 | 6.45 | $ | - | ||||||||||||||||||||||||||||
Options available for grants at December 31, 2014 | 1,301 | |||||||||||||||||||||||||||||||||
Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share | The following table summarizes the Company’s securities that have been excluded from the calculation of basic and dilutive loss per share as their effect would be anti-dilutive: | The following table reconciles the numerator and denominator for the calculation: | ||||||||||||||||||||||||||||||||
March 31, | For the years ended | |||||||||||||||||||||||||||||||||
2015 | 2014 | December 31, | ||||||||||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||||||||||
Convertible debt | 1,793,409 | - | Net (loss) income - basic | $ | (13,852,249 | ) | $ | 801,352 | ||||||||||||||||||||||||||
Stock options | 1,223,100 | 1,174,500 | Denominator – basic: | |||||||||||||||||||||||||||||||
Warrants | 4,209,906 | 215,880 | Weighted average number of common shares outstanding | 16,415,152 | 12,818,487 | |||||||||||||||||||||||||||||
Total | 7,226,415 | 1,390,380 | Basic (loss) earnings per common share | $ | (0.84 | ) | $ | 0.06 | ||||||||||||||||||||||||||
Net (loss) earnings - diluted | $ | (13,852,249 | ) | $ | 801,352 | |||||||||||||||||||||||||||||
Denominator – diluted: | ||||||||||||||||||||||||||||||||||
Basic weighted average number of common shares outstanding | 16,415,152 | 12,818,487 | ||||||||||||||||||||||||||||||||
Weighted average effect of dilutive securities: | ||||||||||||||||||||||||||||||||||
Common share equivalents of outstanding stock options | - | 349,428 | ||||||||||||||||||||||||||||||||
Common share equivalents of convertible debt | - | - | ||||||||||||||||||||||||||||||||
Common share equivalents of outstanding warrants | - | 18,450 | ||||||||||||||||||||||||||||||||
Diluted weighted average number of common shares outstanding | 16,415,152 | 13,186,365 | ||||||||||||||||||||||||||||||||
Diluted (loss) earnings per common share | $ | (0.84 | ) | $ | 0.06 | |||||||||||||||||||||||||||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | ||||||||||||||||||||||||||||||||||
Convertible debt | 1,136,364 | — | ||||||||||||||||||||||||||||||||
Stock options | 1,344,300 | 6,434 | ||||||||||||||||||||||||||||||||
Warrants | 1,216,091 | 4,089 |
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||
Summary of Liabilities Measured Fair Value on Recurring Basis | The following table summarizes the liabilities measured at fair value on a recurring basis as of March 31, 2015: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
LIABILITIES: | |||||||||||||||||
Warrant liability | $ | 87,603 | $ | 87,603 | |||||||||||||
Total derivative liabilities | $ | - | $ | - | $ | 87,603 | $ | 87,603 | |||||||||
The following table summarizes the liabilities measured at fair value on a recurring basis as of December 31, 2014: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
LIABILITIES: | |||||||||||||||||
Warrant liability | $ | - | $ | - | $ | - | $ | - | |||||||||
Total derivative liability | $ | - | $ | - | $ | - | $ | - | |||||||||
Summary the Fair Value of Assumption of Warrant Liabilities | The following table summarizes the values of certain assumptions used by the Company’s custom model to estimate the fair value of the warrant liabilities as of March 31, 2015: | ||||||||||||||||
31-Mar-15 | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Stock price | $ | 1.04 | |||||||||||||||
Weighted average strike price | $ | 0.24 | |||||||||||||||
Remaining contractual term (years) | 3.7 | ||||||||||||||||
Volatility | 124 | % | |||||||||||||||
Risk-free rate | 1.37 | % | |||||||||||||||
Dividend yield | 0 | % | |||||||||||||||
Summary of Changes the Fair Value of Level 3 Financial Liabilities Measured Fair Value On Recurring Basis | The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis: | ||||||||||||||||
For the three | |||||||||||||||||
months ended | |||||||||||||||||
31-Mar-15 | |||||||||||||||||
Beginning balance | $ | — | |||||||||||||||
Fair value of warrant liabilities reissued in connection with the Merger | 49,638 | ||||||||||||||||
Change in fair value of derivative liabilities | 37,965 | ||||||||||||||||
Ending balance | $ | 87,603 |
Income_Taxes_Tables
Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Schedule of Components of Income Tax Provision | The income tax provision (benefit) consists of the following: | ||||||||
For the Years ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Current: | |||||||||
Federal | $ | - | $ | 337,016 | |||||
State and local | - | 29,344 | |||||||
Utilization of net operating loss carryforward | - | (346,783 | ) | ||||||
- | 19,577 | ||||||||
Deferred: | |||||||||
Federal | (4,337,272 | ) | 202,531 | ||||||
State and local | (463,060 | ) | 34,178 | ||||||
(4,800,332 | ) | 236,709 | |||||||
Change in valuation allowance | 5,567,665 | (781,077 | ) | ||||||
767,333 | (544,368 | ) | |||||||
Income tax provision (benefit) | $ | 767,333 | $ | (524,791 | ) | ||||
Schedule of Effective Income Tax Rate Reconciliation | The following is a reconciliation of the expected tax expense (benefit) on the U.S. statutory rate to the actual tax expense (benefit) reflected in the accompanying statement of operations: | ||||||||
For the Years Ended | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
U.S. federal statutory rate | (34.00 | )% | 34 | % | |||||
State and local taxes, net of federal benefit | (2.98 | )% | 3.63 | % | |||||
Amortization of debt discount | — | 13.95 | % | ||||||
Debt conversion inducement | — | 40.76 | % | ||||||
Net operating loss tax adjustment | — | (9.65 | )% | ||||||
Other permanent differences | 0.29 | % | 3 | % | |||||
Alternative minimum tax | — | 6.97 | % | ||||||
Change in valuation allowance | 42.55 | % | (282.42 | )% | |||||
Income tax provision (benefit) | 5.86 | % | (189.76 | )% | |||||
Schedule of Deferred Tax Assets and Liabilities | As of December 31, 2014 and 2013, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following: | ||||||||
Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
Current deferred tax assets: | |||||||||
Net operating loss carryforwards | $ | 4,556,515 | $ | 169,404 | |||||
Stock-based compensation expense | 507,864 | 442,813 | |||||||
Alternative minimum tax credit carryforwards | 15,336 | 19,283 | |||||||
Reserves and allowances | 263,609 | 97,587 | |||||||
Inventory | 269,865 | 59,320 | |||||||
Accrued expenses and deferred income | 53,442 | 8,824 | |||||||
Severance | 27,555 | — | |||||||
Charitable contributions | 1,260 | 1,317 | |||||||
Total current deferred tax assets | 5,695,446 | 798,548 | |||||||
Current deferred tax liabilities: | |||||||||
Section 481 (a) adjustment | — | (24,450 | ) | ||||||
Property and equipment | — | (7,600 | ) | ||||||
Total current deferred tax liabilities | — | (32,050 | ) | ||||||
Net current deferred tax assets | 5,695,446 | 766,498 | |||||||
Valuation allowance | (5,695,446 | ) | — | ||||||
Net deferred tax assets | $ | — | $ | 766,498 |
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | 12 Months Ended | |||||||||
Mar. 31, 2015 | Dec. 31, 2014 | ||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||
Future Minimum Lease Payments Under Non-cancelable Operating | The remaining minimum annual rents for the years ending December 31 are: | Future minimum lease payments under non-cancelable operating that have initial or remaining terms in excess of one year at December 31, 2014 are due as follows: | |||||||||
2015 | $ | 630,256 | Operating | ||||||||
2016 | 539,990 | Leases | |||||||||
2017 | 429,628 | 2015 | $ | 572,798 | |||||||
2018 | 201,853 | 2016 | 307,488 | ||||||||
2019 | 153,386 | 2017 | 300,279 | ||||||||
2020 | 18,961 | 2018 | 253,841 | ||||||||
Total | $ | 1,974,074 | 2019 | 203,964 | |||||||
Total | $ | 1,638,370 |
Organization_Going_Concern_and1
Organization, Going Concern and Management Plans, and Basis of Presentation (Detail Narrative) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Dec. 27, 2013 | Dec. 27, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 17, 2014 | Dec. 29, 2013 | |
Reverse stock split ratio | ratio of 1-for-5 | 1-for-5 | ||||||
Share capital, shares authorized | 51,000,000 | 51,000,000 | 251,000,000 | |||||
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | |||
Blank check preferred stock | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | |||
Percentage of ownership | 50.00% | 50.00% | 50.00% | 50.00% | ||||
Net income | ($3,981,196) | ($1,452,759) | ($13,852,249) | $801,352 | ||||
Accumulated deficit | -19,213,099 | -15,231,903 | -1,379,654 | |||||
Working capital | 811,970 | 127,874 | 11,657,615 | |||||
Decrease in working capital | $939,844 | $11,529,741 | ||||||
Merger Agreement [Member] | ||||||||
Percentage of ownership | 50.00% |
Going_Concern_and_Management_P1
Going Concern and Management Plans (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | ||
Oct. 29, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Net income | ($3,981,196) | ($1,452,759) | ($13,852,249) | $801,352 | |
Accumulated deficit | -19,213,099 | -15,231,903 | -1,379,654 | ||
Working capital | 811,970 | 127,874 | 11,657,615 | ||
Decrease in working capital | 939,844 | 11,529,741 | |||
Process from private placement | 9,000,000 | 2,941,960 | -109,104 | ||
Vaporin [Member] | |||||
Company issued and sold value | 14,949,328 | 25,000,000 | |||
March 4, 2015 [Member] | |||||
Company issued and sold value | 3,500,000 | ||||
Process from private placement | $2,900,000 | ||||
Issued common stock during period | 3,432,314 | ||||
Number of warrants to purchase shares | 2,735,132 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 17, 2014 | Dec. 27, 2013 | |
Percentage of ownership | 50.00% | 50.00% | 50.00% | |||
Shipping and handling costs | $661,583 | $658,586 | ||||
Shipping and handling revenues | 71,225 | 129,761 | ||||
Cash balance insured by FDIC per financial institution | 250,000 | |||||
Product development expenses | 312,000 | 174,000 | ||||
Percentage of revenues excess of sale | 10.00% | 10.00% | ||||
Minimum [Member] | ||||||
Revenue | 27,729 | |||||
Identifiable intangible assets amortized period | 5 years | |||||
Maximum [Member] | ||||||
Revenue | 177,200 | |||||
Identifiable intangible assets amortized period | 10 years | |||||
Customer A [Member] | ||||||
Percentage of accounts receivable | 10.00% | |||||
Proceeds from accounts receivable | $54,993 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies - Schedule of Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Warehouse Fixtures [Member] | |
Significant Accounting Policies [Line Items] | |
Useful lives | 2 years |
Warehouse Equipment Member] | |
Significant Accounting Policies [Line Items] | |
Useful lives | 5 years |
Furniture and Fixtures [Member] | |
Significant Accounting Policies [Line Items] | |
Useful lives | 5 years |
Computer Hardware [Member] | |
Significant Accounting Policies [Line Items] | |
Useful lives | 3 years |
Merger_With_Vaporin_Inc_Detail
Merger With Vaporin Inc (Details Narrative) (USD $) | 0 Months Ended | 12 Months Ended | 0 Months Ended | 3 Months Ended | ||
Dec. 17, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 17, 2014 | Mar. 31, 2015 | Dec. 27, 2013 | |
Merger closing date | 4-Mar-15 | |||||
Percentage of receive merger consideration to shareholders | 45.00% | |||||
Maximum percentage of current premium require to be paid | 200.00% | |||||
Percentage of ownership | 50.00% | 50.00% | 50.00% | 50.00% | ||
Third party financing cost | $139,667 | |||||
Joint Venture [Member] | ||||||
Percentage of receive merger consideration to shareholders | 50.00% | |||||
Proceeds from secured line of credit | 3,000,000 | |||||
Vaporin [Member] | ||||||
Number of shares issued for merger | 13,591,533 | 13,591,533 | ||||
Percentage of receive merger consideration to shareholders | 45.00% | |||||
Company issued and sold shares value | 25,000,000 | 14,949,328 | ||||
Common stock price per share | $1.10 | |||||
Vaporin [Member] | Restricted Stock [Member] | ||||||
Number of shares issued for merger | 910,000 | 1,890,237 | ||||
Company issued and sold shares value | 2,079,071 | |||||
Common stock price per share | $1.10 | |||||
Percentage of issued and outstanding common stock shares | 100.00% | |||||
Third party financing cost | 25,000,000 | |||||
Forgiveness of note and interest payable | 354,029 | |||||
Issuance of warrant to purchase of common stock shares | 247,962 | |||||
Issuance of stock option to purchase of common stock, shares | 19,733 | |||||
Restricted stock units | 1,890,237 | |||||
March 4, 2015 [Member] | ||||||
Company issued and sold shares value | $3,500,000 |
Merger_With_Vaporin_Inc_Schedu
Merger With Vaporin, Inc. - Schedule of Business Considertion (Details) (USD $) | Mar. 31, 2015 |
Business Combinations [Abstract] | |
Value of common shares issued to seller | $17,735,084 |
Cash | 136,468 |
Due from Merchant credit card processor, net reserve | 201,141 |
Accounts receivable | 81,256 |
Inventories | 981,558 |
Property and Equipment | 206,668 |
Other Assets | 28,021 |
Notes payable, net of debt discount of $54,623 | -512,377 |
Notes payable b related party | -1,000,000 |
Accounts Payable and accrued expenses | -775,753 |
Derivative Liabilities | -49,638 |
Excess liabilities over assets assumed | -352,656 |
Value of common stock issued | 17,028,399 |
Excess liabilities over assets assumed | 706,685 |
Total purchase price | 17,735,084 |
Trade names and technology | 1,500,000 |
Customer relationships | 488,274 |
Assembled workforce | 92,326 |
Total Identifiable Intangible Assets | 2,080,600 |
Goodwill | 15,654,484 |
Total allocation to identifiable intangible assets and goodwill | $17,735,084 |
Merger_With_Vaporin_Inc_Schedu1
Merger With Vaporin, Inc. - Schedule of Business Considertion (Details) (Parenthetical) (USD $) | Mar. 31, 2015 |
Business Combinations [Abstract] | |
Debt discount | $54,623 |
Merger_With_Vaporin_Inc_Schedu2
Merger With Vaporin Inc - Schedule of Pro Forma Consolidated Results of Operations (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Weighted Average number of shares outstanding | 22,474,273 | 16,267,750 | ||
Pro Forma [Member] | ||||
Revenues | $2,584,884 | $4,975,337 | $20,253,052 | $28,259,309 |
Net (loss) income | ($5,378,927) | ($2,590,724) | ($19,595,702) | $415,316 |
Loss per share - basic and diluted | ($0.17) | ($0.08) | ($0.59) | $0.01 |
Weighted Average number of shares outstanding | 31,260,183 | 30,766,022 |
Accrued_Expenses_Schedule_of_A
Accrued Expenses - Schedule of Accrued Expenses (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Payables and Accruals [Abstract] | |||
Commissions payable | $179,000 | $179,000 | |
Retirement plan contributions | 101,000 | 80,000 | |
Accrued severance | 160,000 | 82,000 | |
Accrued customer returns | 648,000 | 360,000 | |
Other accrued liabilities | 331,241 | 274,112 | |
Total | $1,419,241 | $975,112 | $420,363 |
Property_and_Equipment_Details
Property and Equipment (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $85,013 | $3,888 | $56,435 | $11,284 |
Property_and_Equipment_Schedul
Property and Equipment - Schedule of Property and Equipment (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $796,333 | $56,564 | |
Less: accumulated depreciation and amortization | -158,238 | -84,314 | -27,879 |
Property and equipment, net | 633,705 | 712,019 | 28,685 |
Computer Hardware [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 389,373 | 12,471 | |
Furniture and Fixtures [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 347,612 | 19,821 | |
Warehouse Fixtures [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 7,564 | 7,564 | |
Warehouse Equipment Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 16,708 | 16,708 | |
Leasehold Improvements Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $35,076 |
Notes_Payable_and_Receivable_D
Notes Payable and Receivable (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 0 Months Ended | |||||||||||||||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Nov. 14, 2014 | Oct. 29, 2013 | Jun. 19, 2012 | Sep. 28, 2012 | Jul. 09, 2013 | Jul. 11, 2013 | Apr. 30, 2013 | Nov. 13, 2012 | Jul. 09, 2012 | Jan. 29, 2013 | Jan. 29, 2015 | Dec. 08, 2014 | Mar. 04, 2015 | Jan. 12, 2015 | |
Common stock, par value | $0.00 | $0.00 | $0.00 | |||||||||||||||
Exercise price per share | $1.28 | |||||||||||||||||
Deferred financing costs | $139,667 | |||||||||||||||||
Amortization of deferred financing costs | 34,917 | -17,458 | ||||||||||||||||
Senior convertible notes payable, debt discounts | 49,421 | 0 | ||||||||||||||||
Amortization of deferred debt discount | 317,702 | 156,250 | 102,500 | |||||||||||||||
Induced conversion expense | -299,577 | |||||||||||||||||
Incremental conversion option intrinsic value benefit | ||||||||||||||||||
Exercisable at initial exercise prices | $2.26 | $2.17 | ||||||||||||||||
Proceeds from convertible debt | 500,000 | |||||||||||||||||
Accredited investors providing for the sale | 3,500,960 | |||||||||||||||||
Notes payable - related party | 1,000,000 | |||||||||||||||||
Loan receivable | 467,095 | |||||||||||||||||
$1,250,000 Senior Convertible Notes Payable To Related Parties [Member] | ||||||||||||||||||
Debt instrument, face amount | 1,250,000 | |||||||||||||||||
Convertible promissory note | 1,250,000 | |||||||||||||||||
Number of shares called by warrants | 1,136,364 | |||||||||||||||||
Common stock, par value | $0.00 | |||||||||||||||||
Exercise price per share | $2 | |||||||||||||||||
Interest expense, debt | 1,250,000 | |||||||||||||||||
Percentage of outstanding principal annual rate | 7.00% | |||||||||||||||||
Notes payable, due date | 14-Nov-15 | |||||||||||||||||
Terms of senior convertible notes customary antidilution description | The terms of the $1,250,000 Senior Convertible Notes included customary anti-dilution protection and also included “piggy-back” registration rights with respect to the shares of common stock underlying the $1,250,000 Senior Convertible Notes and warrants. | |||||||||||||||||
Percentage of cash equal of principal amount | 115.00% | |||||||||||||||||
Deferred financing costs | 139,667 | |||||||||||||||||
Amortization of deferred financing costs | 17,458 | |||||||||||||||||
Senior convertible notes payable, debt discounts | 1,250,000 | |||||||||||||||||
Fair value of basis warrants issued | 701,250 | |||||||||||||||||
Fair value of conversion feature issuance | 548,750 | |||||||||||||||||
Amortization of deferred debt discount | 156,250 | |||||||||||||||||
$1,250,000 Senior Convertible Notes Payable To Related Parties [Member] | Palladium Capital Advisors, LLC [Member] | ||||||||||||||||||
Number of shares called by warrants | 56,818 | |||||||||||||||||
Exercise price per share | $2 | |||||||||||||||||
Notes payable, due date | 14-Nov-19 | |||||||||||||||||
Placement agent fee | 62,500 | |||||||||||||||||
300,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||||
Debt instrument, face amount | 300,000 | |||||||||||||||||
Interest expense, debt | 48,674 | |||||||||||||||||
Debt converted into stock | 281,691 | |||||||||||||||||
300,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Harlan Press And Doron Ziv [Member] | ||||||||||||||||||
Convertible promissory note | 300,000 | |||||||||||||||||
Percentage of stockholders's grater than officers | 10.00% | |||||||||||||||||
Issuance of warrants to purchase of common stock | 9,303 | |||||||||||||||||
50,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||||||
Amortization of deferred debt discount | 3,530 | |||||||||||||||||
50,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||||
Debt instrument, face amount | 50,000 | |||||||||||||||||
Debt converted into stock | 41,667 | |||||||||||||||||
50,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Mr. Frija [Member] | ||||||||||||||||||
Convertible promissory note | 500,000 | |||||||||||||||||
Interest expense, debt | 8,113 | |||||||||||||||||
Issuance of warrants to purchase of common stock | 1,374 | |||||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||||||
Convertible promissory note | 350,000 | |||||||||||||||||
Percentage of outstanding principal annual rate | 18.00% | |||||||||||||||||
Notes payable, due date | 8-Jul-16 | |||||||||||||||||
Fair value of conversion feature issuance | 3,937 | 350,000 | ||||||||||||||||
Amortization of deferred debt discount | 4,550 | |||||||||||||||||
Debt converted into stock | 350,000 | |||||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||||
Incremental conversion option intrinsic value benefit | 3,937 | |||||||||||||||||
Debt discount | 350,000 | 4,550 | ||||||||||||||||
Exercisable at initial exercise prices | $5.71 | |||||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Warrant [Member] | ||||||||||||||||||
Conversion price per share | $5.71 | |||||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||||
Convertible promissory note | 350,000 | |||||||||||||||||
Interest expense, debt | 16,126 | |||||||||||||||||
Conversion price per share | $3 | |||||||||||||||||
Debt converted into stock | 116,668 | |||||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||||
Debt conversion converted instrument amount | 350,000 | |||||||||||||||||
Induced conversion expense | 246,375 | |||||||||||||||||
Conversion price amount | 350,000 | |||||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Ralph Frija [Member] | ||||||||||||||||||
Convertible promissory note | 200,000 | |||||||||||||||||
Common stock purchase of warrants | 3,373 | |||||||||||||||||
Amortization of deferred debt discount | 10,000 | |||||||||||||||||
Percentage of stockholders's grater than officers | 5.00% | |||||||||||||||||
Issuance of warrants to purchase of common stock | 1,927 | |||||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||||
Weighted average closing price per share | $5.19 | |||||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Holman [Member] | ||||||||||||||||||
Convertible promissory note | 100,000 | |||||||||||||||||
Amortization of deferred debt discount | 5,000 | |||||||||||||||||
Percentage of stockholders's grater than officers | 5.00% | |||||||||||||||||
Issuance of warrants to purchase of common stock | 964 | |||||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||||
Weighted average closing price per share | $5.19 | |||||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Vaccaro [Member] | ||||||||||||||||||
Convertible promissory note | 50,000 | |||||||||||||||||
Amortization of deferred debt discount | 2,500 | |||||||||||||||||
Issuance of warrants to purchase of common stock | 482 | |||||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||||
Weighted average closing price per share | $5.19 | |||||||||||||||||
75,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||||||
Convertible promissory note | 75,000 | |||||||||||||||||
Interest expense, debt | 3,957 | |||||||||||||||||
Fair value of conversion feature issuance | 75,000 | |||||||||||||||||
Amortization of deferred debt discount | 825 | 75,000 | ||||||||||||||||
Debt conversion converted instrument amount | 75,000 | |||||||||||||||||
Induced conversion expense | 53,202 | |||||||||||||||||
Debt discount | 825 | |||||||||||||||||
Number of stock shares issued during period | 75,000 | |||||||||||||||||
Number convertible debt amended | 300,000 | |||||||||||||||||
Number convertible debt amended 1 | 50,000 | |||||||||||||||||
75,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||||
Conversion price per share | $3 | |||||||||||||||||
Debt converted into stock | 25,000 | |||||||||||||||||
Debt conversion converted instrument amount | 75,000 | |||||||||||||||||
75,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Vaccaro [Member] | ||||||||||||||||||
Convertible promissory note | 75,000 | |||||||||||||||||
Notes payable, due date | 10-Jul-16 | |||||||||||||||||
Amortization of deferred debt discount | 3,750 | |||||||||||||||||
Issuance of warrants to purchase of common stock | 718 | |||||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||||
Weighted average closing price per share | $5.23 | |||||||||||||||||
Exercisable at initial exercise prices | $5.75 | |||||||||||||||||
Option excercisable date | 10-Jul-18 | |||||||||||||||||
500,000 Senior Convertible Note Payable to Stockholder [Member] | ||||||||||||||||||
Notes payable, due date | 22-Apr-16 | 8-Jan-14 | ||||||||||||||||
Conversion price per share | $2.58 | |||||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||||
Number convertible debt amended | 500,000 | |||||||||||||||||
500,000 Senior Convertible Note Payable to Stockholder [Member] | Ralph Frija [Member] | ||||||||||||||||||
Notes payable, due date | 22-Apr-16 | |||||||||||||||||
Conversion price per share | $2.58 | |||||||||||||||||
Percentage of stockholders's grater than officers | 5.00% | |||||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||||
Proceeds from convertible debt | 500,000 | |||||||||||||||||
Percentage of proceeds excess of initial principal amount | 125.00% | |||||||||||||||||
500,000 Senior Convertible Note Payable [Member] | ||||||||||||||||||
Percentage of outstanding principal annual rate | 18.00% | |||||||||||||||||
Notes payable, due date | 28-Jan-16 | |||||||||||||||||
Conversion price per share | $3.38 | |||||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||||
Incremental conversion option intrinsic value benefit | 79,527 | |||||||||||||||||
500,000 Senior Convertible Note Payable [Member] | Warrant [Member] | ||||||||||||||||||
Exercisable at initial exercise prices | $3.38 | |||||||||||||||||
500,000 Senior Convertible Note Payable [Member] | Securities Purchase Agreements [Member] | Robert John Sali [Member] | ||||||||||||||||||
Convertible promissory note | 500,000 | |||||||||||||||||
Amortization of deferred debt discount | 25,000 | |||||||||||||||||
Issuance of warrants to purchase of common stock | 8,142 | |||||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||||
Weighted average closing price per share | $3.07 | |||||||||||||||||
Proceeds from sale of securities | 500,000 | |||||||||||||||||
500,000 Senior Convertible Note Payable [Member] | Private Placement [Member] | ||||||||||||||||||
Convertible promissory note | 50,000 | |||||||||||||||||
Interest expense, debt | 93,267 | |||||||||||||||||
Debt converted into stock | 166,662 | |||||||||||||||||
50,000 Senior Convertible Note Payable [Member] | ||||||||||||||||||
Fair value of conversion feature issuance | 79,527 | |||||||||||||||||
Amortization of deferred debt discount | 10,131 | |||||||||||||||||
50,000 Senior Convertible Note Payable [Member] | Private Placement [Member] | ||||||||||||||||||
Convertible promissory note | 50,000 | |||||||||||||||||
Interest expense, debt | 66,329 | |||||||||||||||||
Debt converted into stock | 148,039 | |||||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||||
567,000 Convertible Notes Payable [Member] | January 20, 2015 and January 23, 2015 [Member] | ||||||||||||||||||
Conversion price per share | $1.08 | |||||||||||||||||
Senior convertible notes payable, debt discounts | 54,623 | |||||||||||||||||
Debt instrument accrued interest rate | 10.00% | |||||||||||||||||
Accredited investors providing for the sale | 567,000 | |||||||||||||||||
Percentage of discount | 15.00% | |||||||||||||||||
Notes due and payable | January 20, 2016 and January 23, 2016. | |||||||||||||||||
$350,000 Convertible Notes Payable [Member] | ||||||||||||||||||
Convertible promissory note | 350,000 | |||||||||||||||||
Notes payable, due date | 4-Mar-15 | |||||||||||||||||
Proceeds from sale of securities | 350,000 | |||||||||||||||||
Debt instrument accrued interest rate | 12.00% | |||||||||||||||||
$350,000 Convertible Notes Payable [Member] | Securities Purchase Agreement [Member] | ||||||||||||||||||
Convertible promissory note | 350,000 | |||||||||||||||||
Accrued interest | 4,029 | |||||||||||||||||
1,000,000 Notes Payable Related Party [Member] | ||||||||||||||||||
Notes payable, due date | 31-Mar-16 | |||||||||||||||||
Debt instrument accrued interest rate | 12.00% | |||||||||||||||||
Notes payable - related party | 3,000,000 | |||||||||||||||||
467,095 Notes Receivable [Member] | ||||||||||||||||||
Debt instrument, face amount | 500,000 | |||||||||||||||||
Loan receivable | $50,000 |
Factoring_Facility_and_Term_Lo1
Factoring Facility and Term Loan Payable (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 0 Months Ended | ||||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Aug. 16, 2013 | Sep. 23, 2014 | Aug. 08, 2013 | |
Acquisition of account receivable, percentage of face amount advanced by lender | 50.00% | ||||||
Factoring fee, percentage of gross face amount of purchased account receivable | 1.00% | ||||||
Gross borrowings under Factoring Facility | $0 | $407,888 | |||||
Borrowings outstanding under the Factoring Facility | 0 | 0 | |||||
Term loan | 523,727 | 750,000 | 478,847 | ||||
Interest expense | 378,775 | 28,434 | -348,975 | -383,981 | |||
2013 Term Loan [Member] | |||||||
Term loan | 750,000 | ||||||
Term loan, maturity date | 15-Aug-14 | ||||||
Term loan, annual rate | 16.00% | ||||||
Retention of daily fixed amount from daily collection of merchant credit card receivables | 3,346 | ||||||
Interest expense | 76,617 | 44,769 | |||||
2014 Term Loan [Member] | |||||||
Term loan | 750,000 | 1,000,000 | |||||
Term loan, maturity date | 30-Sep-15 | ||||||
Term loan, annual rate | 14.00% | ||||||
Interest expense | 24,086 | ||||||
Term loan, periodic payment, principal | $83,333 |
Capital_Lease_Obligations_Deta
Capital Lease Obligations (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 0 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Oct. 01, 2014 | |
Interest expense associated with capital lease obligation | $4,679 | ||||
Depreciation expense for equipment held under capital lease obligations | 85,013 | 3,888 | 56,435 | 11,284 | |
Equipment [Member] | |||||
Capital lease obligation | 179,359 | ||||
Annual interest on the capital lease obligation | 15.80% | ||||
Capital lease obligation, repayment terms | 36 months maturing on October 17, 2017 | ||||
Depreciation expense for equipment held under capital lease obligations | 9,964 | ||||
Net book value of equipment held under capital lease obligations | $169,395 |
Capital_Lease_Obligations_Futu
Capital Lease Obligations - Future Minimum Lease Payments Under Non-cancelable Capital Leases (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Leases [Abstract] | |||
2015 | $75,485 | ||
2016 | 75,485 | ||
2017 | 62,904 | ||
Total | 213,874 | ||
Amounts representing interest payments | -42,416 | ||
Present value of future minimum payments | 171,458 | ||
Current portion of capital lease obligations | -52,015 | -52,015 | |
Capital lease obligations, long term | $107,195 | $119,443 |
Stockholders_Equity_Details_Na
Stockholders' Equity (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | 0 Months Ended | |||||||||||
Dec. 27, 2013 | Dec. 27, 2013 | Oct. 29, 2013 | Jun. 15, 2013 | Mar. 15, 2013 | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Mar. 06, 2014 | Apr. 25, 2014 | Feb. 03, 2014 | Oct. 22, 2013 | Nov. 20, 2013 | Jan. 24, 2015 | |
Preferred stock, par value | $0.00 | $0.00 | $0.00 | ||||||||||||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||||
Preferred stock, shares issued | |||||||||||||||
Preferred stock, shares outstanding | |||||||||||||||
Common stock, par value | $0.00 | $0.00 | $0.00 | ||||||||||||
Common stock, shares authorized | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | ||||||||||
Common stock, voting rights | Each share entitles the holder to one vote | ||||||||||||||
Shares issued for services | 57,500 | 29,500 | |||||||||||||
Grant date fair value of common shares issued | $19,734 | $163,646 | $48,239 | ||||||||||||
Proceeds from private placements | 9,000,000 | 2,941,960 | -109,104 | ||||||||||||
Offering cost | 1,000,000 | ||||||||||||||
Offering cost incurred | 110,000 | ||||||||||||||
Number of register for resale | 3,216,171 | ||||||||||||||
Percentage of liquidated damages in cash equal | 1.50% | 1.50% | |||||||||||||
Cash payments | 81,489 | 52,500 | 910,000 | ||||||||||||
Common stock reserved and available for issuance | 1,800,000 | ||||||||||||||
Reverse stock split | ratio of 1-for-5 | 1-for-5 | |||||||||||||
Fair value of stock price | $1.04 | ||||||||||||||
Volatility, minimum | 27.00% | ||||||||||||||
Volatility, maximum | 31.00% | ||||||||||||||
Risk-free interest rate, minimum | 1.57% | ||||||||||||||
Risk-free interest rate, maximum | 1.72% | ||||||||||||||
Dividend yield | 0.00% | 0.00% | |||||||||||||
Common stock exercise price per share | $5.61 | $7 | $4.35 | ||||||||||||
Stock options granted | 1,012,745 | 331,555 | |||||||||||||
Nonvested stock option | 476,828 | 150,037 | |||||||||||||
Accredited investors providing for the sale | 3,500,960 | ||||||||||||||
Per share price | $1.02 | ||||||||||||||
Warrants issued to share acquire | 2,735,132 | ||||||||||||||
Exercise price per share | $1.28 | ||||||||||||||
Amortized stock option expense | 364,576 | 18,106 | |||||||||||||
Share based compensation expense unvested stock options granted to employees and consultants | 338,105 | ||||||||||||||
Offering costs | 559,000 | ||||||||||||||
Payment to private placement | 350,000 | ||||||||||||||
Stock option vested period | 1 year 7 months 6 days | ||||||||||||||
Equity Incentive Plan [Member] | |||||||||||||||
Common stock reserved and available for issuance | 1,800,000 | ||||||||||||||
Reverse stock split | 1-for-5 reverse stock split. | ||||||||||||||
Percentage of option grants and/or restricted shares for more than shares subject to Plan | 20.00% | ||||||||||||||
Nonqualified Directors [Member] | |||||||||||||||
Number of shares issued during period | 60,000 | ||||||||||||||
Common stock exercise price per share | $8.30 | ||||||||||||||
Weighted average grant date fair value | 149,160 | ||||||||||||||
Other Nonqualified Directors [Member] | |||||||||||||||
Number of shares issued during period | 60,000 | ||||||||||||||
Common stock exercise price per share | $6.48 | ||||||||||||||
Weighted average grant date fair value | 315,720 | ||||||||||||||
Nonqualified Stock Option [Member] | |||||||||||||||
Number of shares issued during period | 10,000 | ||||||||||||||
Common stock exercise price per share | $4.35 | ||||||||||||||
Weighted average grant date fair value | 29,832 | 25,900 | |||||||||||||
Minimum [Member] | |||||||||||||||
Expected term | 5 years | 6 years 3 months 18 days | |||||||||||||
Estimated forfeiture rate | 0.02% | ||||||||||||||
Maximum [Member] | |||||||||||||||
Expected term | 7 years | 10 years | |||||||||||||
Estimated forfeiture rate | 0.01% | ||||||||||||||
Maximum [Member] | Nonqualified Stock Option [Member] | |||||||||||||||
Number of shares issued during period | 31,200 | ||||||||||||||
Common stock exercise price per share | $4.35 | ||||||||||||||
Weighted average grant date fair value | 80,808 | ||||||||||||||
Warrant [Member] | |||||||||||||||
Expected term | 5 years | ||||||||||||||
Volatility, minimum | 30.30% | ||||||||||||||
Volatility, maximum | 51.40% | ||||||||||||||
Risk-free interest rate, minimum | 0.71% | ||||||||||||||
Risk-free interest rate, maximum | 0.90% | ||||||||||||||
Dividend yield | 0.00% | ||||||||||||||
Number of warrants exercised | -192,970 | ||||||||||||||
Number of cashless common stock shares | 142,383 | ||||||||||||||
Warrant [Member] | Minimum [Member] | |||||||||||||||
Fair value of stock price | $1 | ||||||||||||||
Warrant [Member] | Maximum [Member] | |||||||||||||||
Fair value of stock price | $3.50 | ||||||||||||||
Senior Convertible Notes [Member] | |||||||||||||||
Convertible promissory note | 1,700,000 | ||||||||||||||
Debt converted into stock | 780,000 | ||||||||||||||
Mr. Kavanaugh [Member] | |||||||||||||||
Shares issued to employees | 322,067 | 592,300 | 400,000 | ||||||||||||
Grant date fair value of common shares issued | 3,080,000 | ||||||||||||||
Mr. Kavanaugh [Member] | Award Vested Immediately Upon Execution of Consulting Agreement [Member] | |||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Mr. Kavanaugh [Member] | Award Vested On May 3, 2014 [Member] | |||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Mr. Kavanaugh [Member] | Award Vested On August 3, 2014 [Member] | |||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Mr. Kavanaugh [Member] | Award Vested On November 3, 2014 [Member] | |||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Mr. Kavanaugh [Member] | Award Vested In Quarterly Installment From November 3, 2014 [Member] | |||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Knight Global [Member] | |||||||||||||||
Number of bona fide opportunities | 6 | ||||||||||||||
Consulting Agreement, term | 2 years | ||||||||||||||
Commissions payable in cash, percentage of "net sales" | 6.00% | ||||||||||||||
Knight Global [Member] | Termination of Consulting Agreement [Member] | |||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Knight Global [Member] | Termination of Consulting Agreement [Member] | January 24, 2015 [Member] | |||||||||||||||
Stock-based compensation expense | 322,067 | ||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||
Officers And Directors [Member] | |||||||||||||||
Proceeds from private placements | 10,000,000 | ||||||||||||||
Number of shares issued for private placements | 3,333,338 | ||||||||||||||
Equity issuance price per share | $3 | ||||||||||||||
Nonqualified Stock Option [Member] | |||||||||||||||
Number of shares issued during period | 12,000 | ||||||||||||||
Common stock exercise price per share | $8.30 | ||||||||||||||
Selling, General and Administrative Expenses [Member] | |||||||||||||||
Stock-based compensation expense | 87,000 | ||||||||||||||
Selling, General and Administrative Expenses [Member] | Knight Global [Member] | |||||||||||||||
Stock-based compensation expense | $1,602,933 |
Stockholders_Equity_Summary_of
Stockholders' Equity - Summary of Warrant Activity (Details) (Warrant [Member], USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Warrant [Member] | |||
Number of Warrants Outstanding, Beginning Balance | 1,216,091 | 215,880 | 10,677 |
Number of Warrants granted | 2,993,815 | 1,193,181 | 205,203 |
Number of Warrants exercised | -192,970 | ||
Number of Warrants forfeited Or Expired | |||
Number of Warrants outstanding, Ending Balance | 4,209,906 | 1,216,091 | 215,880 |
Number of Warrants Exercisable | 3,016,725 | 215,620 | |
Weighted Average Exercise Price, Warrants Outstanding, Beginning Balance | $2.01 | $3.23 | $1.08 |
Weighted Average Exercise Price, Warrants granted | $1.64 | $2 | $3.34 |
Weighted Average Exercise Price, Warrants exercised | $3.30 | ||
Weighted Average Exercise Price, forfeited Or Expired | |||
Weighted Average Exercise Price, Warrants outstanding, Ending Balance | $1.75 | $2.01 | $3.23 |
Weighted Average Exercise Price, Exercisable | $1.65 | $3.23 | |
Weighted Average Remaining Contractual Terms (Years), Outstanding | 5 years | 5 years | |
Weighted Average Remaining Contractual Terms (Years), Exercisable | 5 years | 5 years | |
Aggregate Intrinsic Value, Outstanding | |||
Aggregate Intrinsic Value, Exercisable |
Stockholders_Equity_Fair_Value
Stockholders' Equity - Fair Value of Employee Stock Options Estimated Using Weighted-Average Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Risk-free interest rate, minimum | 1.57% | |
Risk-free interest rate, maximum | 1.72% | |
Risk-free interest rate | 2.62% | |
Dividend yield | 0.00% | 0.00% |
Volatility | 46.30% | |
Volatility, minimum | 27.00% | |
Volatility, maximum | 31.00% | |
Minimum [Member] | ||
Expected term | 5 years | 6 years 3 months 18 days |
Maximum [Member] | ||
Expected term | 7 years | 10 years |
Stockholders_Equity_Summary_of1
Stockholders' Equity - Summary of Stock Option Outstanding Under Various Plans (Details) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Number of Options Outstanding in Plans | 1,242,834 | 1,344,000 | 1,119,000 | 1,132,000 |
Equity Compensation Plans Not Approved By Security Holders [Member] | ||||
Number of Options Outstanding in Plans | 900,000 | 900,000 | ||
Equity Incentive Plan [Member] | ||||
Number of Options Outstanding in Plans | 342,834 | 444,000 |
Stockholders_Equity_Summary_of2
Stockholders' Equity - Summary of Stock Option Activity Under All Option Plans (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
STOCKHOLDERS' EQUITY: | |||
Number of shares, Outstanding, Beginning balance | 1,344,000 | 1,119,000 | 1,132,000 |
Number of shares, Options Granted | 19,734,000 | 252,000 | 41,000 |
Number of shares, Options Exercised | -5,000 | -43,000 | |
Number of shares, Options Forfeited/expired | -121,200 | -22,000 | -11,000 |
Number of shares, Outstanding, Ending balance | 1,242,834 | 1,344,000 | 1,119,000 |
Number of shares, Options Exercisable | 1,049,233 | 1,013,000 | |
Options available for grants | 1,408,866 | 1,301,000 | |
Weighted Avg. Exercise Price, Outstanding, Beginning balance | $3.08 | $2.17 | $2.06 |
Weighted Avg. Exercise Price, Options Granted | $5.61 | $7 | $4.35 |
Weighted Avg. Exercise Price, Options Exercised | $1 | $1.57 | |
Weighted Avg. Exercise Price, Options Forfeited/expired | $7.32 | $1.47 | $1.27 |
Weighted Avg. Exercise Price, Outstanding, Ending balance | $2.71 | $3.08 | $2.17 |
Weighted Avg. Exercise Price, Exercisable Ending Balance | $2.26 | $2.17 | |
Weighted Avg. Remaining Contractual Life, Options Outstanding | 6 years 2 months 1 day | 6 years 6 months 11 days | |
Weighted Avg. Remaining Contractual Life, Options Exercisable | 6 years 6 months 7 days | 6 years 5 months 12 days | |
Aggregate Intrinsic Value, Options Outstanding | |||
Aggregate Intrinsic Value, Options Exercisable |
Stockholders_Equity_Reconcilia
Stockholders' Equity - Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Net (loss) income - basic | ($3,981,196) | ($1,452,759) | ($13,852,249) | $801,352 |
Weighted average number of common shares outstanding | 16,415,152 | 12,818,487 | ||
Basic (loss) earnings per common share | ($0.84) | $0.06 | ||
Net (loss) earnings - diluted | ($13,852,249) | $801,352 | ||
Basic weighted average number of common shares outstanding | 16,415,152 | 12,818,487 | ||
Common share equivalents of outstanding stock options | 349,428 | |||
Common share equivalents of convertible debt | ||||
Common share equivalents of outstanding warrants | 18,450 | |||
Diluted weighted average number of common shares outstanding | 16,415,152 | 13,186,365 | ||
Diluted (loss) earnings per common share | ($0.84) | $0.06 | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 7,226,415 | 1,390,380 | ||
Warrant [Member] | ||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 4,209,906 | 215,880 | 1,216,091 | 4,089 |
Convertible Debt Securities [Member] | ||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 1,793,409 | 1,136,364 | ||
Stock Options [Member] | ||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 1,223,100 | 1,174,500 | 1,344,300 | 6,434 |
Income_Taxes_Details_Narrative
Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Valuation allowance | $5,695,446 | $0 |
Net operating loss carry forwards expiration date | expire beginning in 2032. | |
United State [Member] | ||
Net operating loss carryforwards | 12,214,479 | 251,269 |
Federal And State [Member] | ||
Net operating loss carryforwards | $12,812,444 | $1,526,482 |
Income_Taxes_Schedule_of_Defer
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||||
Federal | $337,016 | |||
State and local | 29,344 | |||
Utilization of net operating loss carryforward | -346,783 | |||
Current (benefit) provision | 19,577 | |||
Federal | -4,337,272 | 202,531 | ||
State and local | -463,060 | 34,178 | ||
Deferred (benefit) provision | -754,249 | -4,800,332 | 236,709 | |
Change in valuation allowance | 5,567,665 | -781,077 | ||
Deferred Tax Asset Net Durational | 767,333 | -544,368 | ||
Income tax provision (benefit) | ($752,400) | $767,333 | ($524,791) |
Income_Taxes_Schedule_of_Compo
Income Taxes - Schedule of Components of Income Tax Provision (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||
U.S. federal statutory rate | -34.00% | 34.00% |
State and local taxes net of federal benefit | -2.98% | 3.63% |
Amortization of debt discount | 0.00% | 13.95% |
Debt conversion inducement | 0.00% | 40.76% |
Net operating loss tax adjustment | 0.00% | -9.65% |
Other permanent differences | 0.29% | 3.00% |
Alternative minimum tax | 0.00% | 6.97% |
Change in valuation allowance | 42.55% | -282.42% |
Income tax provision (benefit) | 5.86% | -189.76% |
Income_Taxes_Schedule_of_Effec
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $4,556,515 | $169,404 |
Stock-based compensation expense | 507,864 | 442,813 |
Alternative minimum tax credit carryforwards | 15,336 | 19,283 |
Reserves and allowances | 263,609 | 97,587 |
Inventory | 269,865 | 59,320 |
Accrued expenses and deferred income | 53,442 | 8,824 |
Severance | 27,555 | |
Charitable contributions | 1,260 | 1,317 |
Total current deferred tax assets | 5,695,446 | 798,548 |
Section 481 (a) adjustment | -24,450 | |
Property and equipment | -7,600 | |
Total deferred tax liabilities | -32,050 | |
Net current deferred tax assets | 5,695,446 | 766,498 |
Valuation allowance | -5,695,446 | |
Net deferred tax assets | $766,498 |
Fair_Value_Measurements_Summar
Fair Value Measurements - Summary of Liabilities Measured Fair Value on Recurring Basis (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Warrant Liability | $87,603 | |
Total derivative liabilities | 87,603 | |
Fair Value, Inputs, Level 1 [Member] | ||
Warrant Liability | ||
Total derivative liabilities | ||
Fair Value, Inputs, Level 2 [Member] | ||
Warrant Liability | ||
Total derivative liabilities | ||
Fair Value, Inputs, Level 3 [Member] | ||
Warrant Liability | 87,603 | |
Total derivative liabilities | $87,603 |
Fair_Value_Measurements_Summar1
Fair Value Measurements - Summary the Fair Value of Assumption of Warrant Liabilities (Details) (USD $) | 3 Months Ended |
Mar. 31, 2015 | |
Fair Value Disclosures [Abstract] | |
Stock price | $1.04 |
Weighted average strike price | $0.24 |
Remaining contractual term (years) | 3 years 8 months 12 days |
Volatility | 124.00% |
Risk-free rate | 1.37% |
Dividend yield | 0.00% |
Fair_Value_Measurements_Summar2
Fair Value Measurements - Summary of Changes the Fair Value of Level 3 Financial Liabilities Measured Fair Value On Recurring Basis (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Fair Value Disclosures [Abstract] | ||||
Beginning balance | ||||
Fair value of warrant liabilities reissued in connection with the Merger | 49,638 | |||
Change in fair value of derivative liabilities | 37,965 | |||
Ending balance | $87,603 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 1 Months Ended | 0 Months Ended | |||||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Oct. 31, 2013 | Apr. 25, 2014 | Feb. 19, 2013 | Jul. 25, 2014 | |
Lease | sqft | ||||||||
Selling, general and administrative expenses | $3,243,189 | $2,769,726 | $11,126,759 | $6,464,969 | |||||
Accrued expenses | 1,419,241 | 975,112 | 420,363 | ||||||
Annual rental payments | 215,087 | 44,838 | |||||||
Number of real estate leases | 9 | ||||||||
Number of new retail store | 1 | ||||||||
Rent expense | 307,110 | 162,498 | |||||||
Payment to patent | 12,000 | ||||||||
Vendor deposits | 319,563 | 782,363 | |||||||
Mr. Press [Member] | |||||||||
Compensation and accrued vacation | 159,810 | ||||||||
Minimum [Member] | |||||||||
Initial lease term | 1 year | ||||||||
Maximum [Member] | |||||||||
Initial lease term | 5 years | ||||||||
Lease Agreement [Member] | |||||||||
Lease agreement term | 24 months | 24 months | |||||||
Lease expiration date | 30-Apr-13 | ||||||||
Lease extended month year | 2014-03 | ||||||||
Lease renewal options | 1 year | 1 year | |||||||
Annual rental payments | 144,000 | 144,000 | 18,000 | ||||||
Area of square feet | 2,200 | ||||||||
Kevin Frija [Member] | |||||||||
Base salary | 159,000 | ||||||||
Selling, general and administrative expenses | 167,003 | ||||||||
Salary paid | 89,925 | ||||||||
Accrued expenses | 77,028 | ||||||||
Employment Agreements [Member] | Mr. Jeffrey Holman [Member] | |||||||||
Base salary | 182,000 | ||||||||
Employment agreement term | 2 years | ||||||||
Asset Purchase Agreement [Member] | International Vapor Group, Inc [Member] | |||||||||
Secured promissory note | 500,000 | ||||||||
Debt interest rate | 8.00% | ||||||||
Debt due date | 6 months | ||||||||
Interest income relating to loan receivable | 17,095 | ||||||||
Asset Purchase Agreement [Member] | International Vapor Group, Inc [Member] | January 12, 2015 [Member] | |||||||||
Repayment of debt | 50,000 | ||||||||
Lease Agreement [Member] | |||||||||
Annual rental payments current | 151,200 | 151,200 | 151,200 | ||||||
Annual rental payments two | 158,760 | 158,760 | 158,760 | ||||||
Annual rental payments three | $174,636 | $174,636 | $174,636 |
Commitments_and_Contingencies_2
Commitments and Contingencies - Future Minimum Lease Payments Under Non-cancelable Operating (Details) (Operating Leases [Member], USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
Operating Leases [Member] | ||
2015 | $630,256 | $572,798 |
2016 | 539,990 | 307,488 |
2017 | 429,628 | 300,279 |
2018 | 201,853 | 253,841 |
2019 | 153,386 | 203,964 |
2020 | 18,961 | |
Total | $1,974,074 | $1,638,370 |
Concentration_of_Credit_Risk_D
Concentration of Credit Risk (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Accounts receivable | $203,793 | $239,652 | $1,802,781 | |
Sales | 1,468,621 | 4,792,544 | 15,279,859 | 25,990,228 |
Accounts Receivable [Member] | ||||
Concentration customers | seven customers | one customer | ||
Accounts receivable | 268,768 | |||
Accounts Receivable [Member] | Maximum [Member] | ||||
Concentration risk percentage | 10.00% | 10.00% | ||
Accounts receivable | 177,200 | |||
Accounts Receivable [Member] | Minimum [Member] | ||||
Accounts receivable | 27,729 | |||
Sales Revenue, Net [Member] | ||||
Concentration customers | one other customer | No other customer | ||
Concentration risk percentage | 10.00% | |||
Sales | 1,536,050 | |||
Sales Revenue, Net [Member] | Canadian Distributor [Member] | ||||
Concentration country | Canada | |||
Sales | $2,912,525 | $3,847,310 | ||
Sales Revenue, Net [Member] | Maximum [Member] | ||||
Concentration risk percentage | 10.00% | |||
Sales Revenue, Net [Member] | Maximum [Member] | Canadian Distributor [Member] | ||||
Concentration risk percentage | 10.00% |
Subsequent_Events_10Q_Details_
Subsequent Events (10Q) (Details Narrative) (USD $) | Mar. 31, 2015 | 19-May-15 | 7-May-15 |
Minimum bid price, per share | $1.02 | ||
Subsequent Event [Member] | |||
Minimum bid price, per share | $1 | ||
Subsequent Event [Member] | Dawson James [Member] | |||
Proposed offering amount in Company's equity securities | $24,000,000 | ||
Percentage of underwriting discount | 8.00% | ||
Advance fee amount | $25,000 |
Subsequent_Events_10K_Details_
Subsequent Events (10K) (Details Narrative) (USD $) | 0 Months Ended | |||||
Mar. 03, 2015 | Mar. 04, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | 19-May-15 | |
Common stock par value | $0.00 | $0.00 | $0.00 | |||
Common stock price per share | $1.02 | |||||
Warrant exercise price per share | $1.28 | |||||
Subsequent Event [Member] | ||||||
Common stock price per share | $1 | |||||
Subsequent Event [Member] | Nasdaq [Member] | ||||||
Percentage of conversion of note exceed | 19.99% | |||||
Subsequent Event [Member] | Securities Purchase Agreement [Member] | ||||||
Convertible notes | $350,000 | |||||
Debt instrument accrued interest rate | 12.00% | |||||
Notes payable maturity date | 29-Jan-16 | |||||
Sale of common stock | 3,500,960 | |||||
Common stock par value | $0.00 | |||||
Common stock price per share | $1.02 | |||||
Issuance of warrant to purchases of common stock, shares | 2,735,132 | |||||
Warrant exercise price per share | $1.28 | |||||
Percentage of purchase price | 1.50% | |||||
Cash payment | $52,500 |