Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 11, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | VAPOR CORP. | |
Entity Central Index Key | 844,856 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 8,470,505 | |
Trading Symbol | VPCO | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
CURRENT ASSETS: | ||
Cash | $ 1,370,090 | $ 471,194 |
Due from merchant credit card processor, net of reserve for chargebacks of $17,668 and $2,500, respectively | 267,350 | 111,968 |
Accounts receivable, net of allowance of $101,529 and $369,731, respectively | 281,207 | 239,652 |
Inventories | 2,166,545 | 2,048,883 |
Prepaid expenses and vendor deposits | $ 517,633 | 664,103 |
Loans receivable, net | 467,095 | |
Deferred financing costs, net | $ 294,192 | 122,209 |
TOTAL CURRENT ASSETS | 4,897,017 | 4,125,104 |
Property and equipment, net of accumulated depreciation of $216,024 and $84,314, respectively | 663,645 | $ 712,019 |
Intangible assets, net of accumulated amortization of $88,707 and $0, respectively | 1,991,893 | |
Goodwill | 15,654,484 | |
Other assets | 161,547 | $ 91,360 |
TOTAL ASSETS | 23,368,586 | 4,928,483 |
CURRENT LIABILITIES: | ||
Accounts payable | 2,176,229 | 1,920,135 |
Accrued expenses | 1,576,202 | 975,112 |
Senior convertible notes payable - related parties, net of debt discount of $468,750 and $1,093,750, respectively | 781,250 | $ 156,250 |
Senior convertible notes payable -net of debt discount of $216,431 and $0, respectively | 1,533,569 | |
Convertible notes, net of debt discount of $33,814 and $0, respectively | 533,186 | |
Notes payable - related party | 1,000,000 | |
Current portion of capital lease | 52,015 | $ 52,015 |
Term loan | 254,019 | 750,000 |
Customer deposits | 93,147 | 140,626 |
Income taxes payable | 3,092 | $ 3,092 |
Derivative liabilities | 906,885 | |
TOTAL CURRENT LIABILITIES | 8,909,594 | $ 3,997,230 |
Capital Lease, net of current portion | 103,005 | 119,443 |
TOTAL LIABILITIES | $ 9,012,599 | $ 4,116,673 |
STOCKHOLDERS' EQUITY: | ||
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued | ||
Common stock, $.001 par value, 150,000,000 and 50,000,000 shares authorized, respectively, 7,694,744 and 3,352,382 shares issued and outstanding, respectively | $ 7,695 | $ 3,352 |
Additional paid-in capital | 38,314,646 | 16,040,361 |
Accumulated deficit | (23,966,354) | (15,231,903) |
TOTAL STOCKHOLDERS' EQUITY | 14,355,987 | 811,810 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 23,368,586 | $ 4,928,483 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Due from merchant credit card processor, reserve for charge-backs | $ 17,668 | $ 2,500 |
Accounts receivable, Net of Allowance. | 101,529 | 369,731 |
Property and equipment, accumulated depreciation | 216,024 | 84,314 |
Intangible assets, accumulated amortization | 88,707 | 0 |
Senior convertible notes payable debt discount net- Related party | 468,750 | 1,093,750 |
Senior convertible notes payable -net of debt discount | 216,431 | 0 |
Convertible Notes, debt discount | $ 33,814 | $ 0 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000,000 | 50,000,000 |
Common stock, shares issued | 7,694,744 | 3,352,382 |
Common stock, shares outstanding | 7,694,744 | 3,352,382 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement [Abstract] | ||||
SALES, NET | $ 3,011,303 | $ 6,081,322 | $ 4,479,924 | $ 10,873,866 |
Cost of goods sold | 1,651,605 | 4,542,594 | 3,302,715 | 8,374,522 |
GROSS (LOSS) PROFIT | 1,359,698 | 1,538,728 | 1,177,209 | 2,499,344 |
EXPENSES: | ||||
Selling, general and administrative | 3,534,304 | 2,442,018 | 6,777,493 | 5,211,742 |
Advertising | 67,398 | 776,017 | 172,575 | 1,143,633 |
Total operating expenses | 3,601,702 | 3,218,035 | 6,950,068 | 6,355,375 |
Operating loss | (2,242,004) | $ (1,679,307) | (5,772,859) | $ (3,856,031) |
Other (expense) income: | ||||
Amortization of deferred financing cost | (77,129) | (112,046) | ||
Change in fair value of derivative liabilities | 214,768 | 176,803 | ||
Stock-based expense in connection with waiver agreements (See Note 6) | (2,113,889) | (2,113,889) | ||
Interest expense | (504,668) | $ (29,182) | (843,443) | $ (57,616) |
Interest expense- Related Party | $ (30,333) | (70,333) | ||
Interest Income | 1,316 | |||
Total other expense | $ (2,511,251) | $ (29,182) | (2,961,592) | $ (57,616) |
LOSS BEFORE INCOME TAX BENEFIT | $ (4,753,255) | (1,708,489) | $ (8,734,451) | (3,913,647) |
Income tax benefit | 657,324 | 1,409,724 | ||
NET LOSS | $ (4,753,255) | $ (1,051,165) | $ (8,734,451) | $ (2,503,923) |
LOSS PER COMMON SHARE - BASIC AND DILUTED | $ (0.69) | $ (0.32) | $ (1.55) | $ (0.77) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | 6,901,868 | 3,275,535 | 5,648,617 | 3,262,513 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes In Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2015 - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2014 | $ 3,352 | $ 16,040,361 | $ (15,231,903) | $ 811,810 |
Balance, shares at Dec. 31, 2014 | 3,352,382 | |||
Issuance of common stock in connection with the Merger (See Note 3) | $ 2,718 | 17,025,681 | 17,028,399 | |
Issuance of common stock in connection with the Merger (See Note 3), shares | 2,718,307 | |||
Issuance of common stock and warrants in connection with private placement, net of offering costs | $ 687 | 2,941,273 | 2,941,960 | |
Issuance of common stock and warrants in connection with private placement, net of offering costs, shares | 686,463 | |||
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 | $ (30) | 30 | ||
Cancellation of common stock as a result of early termination of consulting agreement, shares | (30,000) | |||
Issuance of common stock in connection with consulting services | $ 28 | 142,972 | $ 143,000 | |
Issuance of common stock in connection with consulting services, shares | 27,500 | |||
Issuance of common stock in connection with delivery of restricted stock units (See Note 3) | $ 292 | (292) | ||
Issuance of common stock in connection with delivery of restricted stock units (See Note 3), shares | 292,191 | |||
Issuance of common stock in connection with waiver deferral agreements (See Note 6) | $ 648 | 1,327,548 | $ 1,328,196 | |
Issuance of common stock in connection with waiver deferral agreements (See Note 6), shares | 647,901 | |||
Warrants issued as offering costs in connection with convertible note payable | 87,779 | 87,779 | ||
Stock-based compensation expense | $ 395,265 | 395,265 | ||
Net Loss | $ (8,734,451) | (8,734,451) | ||
Balance at Jun. 30, 2015 | $ 7,695 | $ 38,314,646 | $ (23,966,354) | $ 14,355,987 |
Balance, shares at Jun. 30, 2015 | 7,694,744 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (8,734,451) | $ (2,503,923) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Change in allowances | 95,041 | |
Depreciation | $ 209,330 | $ 8,224 |
Loss on disposal of assets | 289,638 | |
Amortization of debt discount | 765,237 | |
Amortization of deferred financing cost | 112,046 | |
Write down of obsolete and slow moving inventory | 70,657 | |
Stock-based compensation expense | 538,263 | $ 984,109 |
Stock-based expense in connection with waiver agreements (See Note 6) | $ 2,113,889 | |
Deferred income tax benefit | $ (1,410,559) | |
Change in fair value of derivative liabilities | $ (176,803) | |
Changes in operating assets and liabilities: | ||
Due from merchant credit card processors | 45,759 | $ 91,227 |
Accounts receivable | 39,701 | 279,137 |
Inventories | 793,239 | (250,902) |
Prepaid expenses and vendor deposits | 174,491 | 22,526 |
Other assets | (70,187) | (32,659) |
Accounts payable | (266,914) | 106,121 |
Accrued expenses | 348,345 | (3,631) |
Customer deposits | $ (47,479) | (138,584) |
Income taxes | (2,715) | |
NET CASH USED IN OPERATING ACTIVITIES | $ (3,795,239) | $ (2,756,588) |
INVESTING ACTIVITIES: | ||
Cash received in connection with Merger | 136,468 | |
Collection of Loans Receivable | 467,095 | |
Purchases of property and equipment | (155,219) | $ (5,846) |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES: | 448,344 | $ (5,846) |
FINANCING ACTIVITIES | ||
Proceeds from private placement of common stock and warrants, net of offering costs | 2,941,960 | |
Payment of offering costs in connection with convertible notes payable | (196,250) | $ (109,104) |
Proceeds from issuance of senior convertible notes payable | 1,662,500 | |
Principal payments on term loan payable | (495,981) | $ (369,230) |
Principal repayments of capital lease obligations | (16,438) | |
Proceeds from loan payable to Vaporin, Inc. | 350,000 | |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 4,245,791 | $ (478,334) |
NET INCREASE (DECREASE) IN CASH | 898,896 | (3,240,768) |
CASH - BEGINNING OF PERIOD | 471,194 | 6,570,215 |
CASH - END OF PERIOD | 1,370,090 | 3,329,447 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 43,626 | $ 59,077 |
Cash paid for income taxes | $ 2,791 | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Cashless exercise of common stock purchase warrants | $ 143 | |
Embedded conversion feature recorded as debt discount and derivative liability | $ 248,359 | |
Recognition of debt discount in connection with convertible note discount | 87,500 | |
Warrants issued as offering costs | 87,779 | |
Contribution of note and interest payable to Vaporin to capital in connection with the Merger | 354,029 | |
Cancellation of common stock for early termination of consulting agreement | 30 | |
Issuance of common stock in connection with delivery of restricted stock units | 292 | |
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 liabilities assumed | (706,685) | |
Consideration: | ||
Value of common stock issued | 17,028,399 | |
Excess of 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 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Statement of Cash Flows [Abstract] | ||
Debt discount | $ 54,623 | $ 54,623 |
Organization, Basis Of Presenta
Organization, Basis Of Presentation, and Recent Developments | 6 Months Ended |
Jun. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Basis Of Presentation, And Recent Developments | Note 1. ORGANIZATION, BASIS OF PRESENTATION, AND RECENT DEVELOPMENTS 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. Vapor operates eleven Florida-based vape stores and is focusing on expanding the number of Company operated stores as well as launching a franchise program. Vapor also designs, market, and distribute vaporizers, e-liquids, electronic cigarettes and accessories under the emagine vaporTM, Krave®, Fifty-One® (also known as Smoke 51), Vapor X®, Hookah Stix® and Alternacig® brands. Vapor also designs and develops private label brands for distribution customers. Third party manufacturers manufacture Vapors products to meet their design specifications. Vapor markets their products as alternatives to traditional tobacco cigarettes and cigars. In 2014, as a response to market product demand changes, Vapor began to shift its primary focus from electronic cigarettes to vaporizers. Vaporizers and electronic cigarettes, or e-cigarettes, are battery-powered products that enable users to inhale nicotine vapor without smoke, tar, ash, or carbon monoxide. Vapor offers vaporizers and e-cigarettes and related products through our vape stores, online, to retail channels through our direct sales force, and through third party wholesalers, retailers and value-added resellers. Retailers of our products include small-box discount retailers, big-box retailers, gas stations, drug stores, convenience stores, and tobacco shops and kiosk locations in shopping malls throughout the United States. Vapor leverages its ability to design, market and develop multiple vaporizer and e-cigarette brands and to bring those brands to market through its multiple distribution channels including the vape stores, online and through retail operations operated by third parties. The Companys business strategy is currently focused on a multi-pronged approach to diversify our revenue streams to include the Vape Store brick-and-mortar retail locations which Vaporin had successfully deployed. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (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 Companys audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements for the three and six months ended June 30, 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 in the Companys Annual Report on Form 10-K for such year as filed with the SEC on March 31, 2015. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2015. On July 7, 2015, the Company filed an amendment to its Certificate of Incorporation to effectuate a one-for-five reverse stock split to its common stock and to increase its authorized common stock to 150,000,000 shares. The amendments were effective on July 8, 2015. All warrant, option, common stock shares and per share information included in these condensed consolidated financial statements gives effect to the 1 for 5 reverse split of the Companys common stock effectuated on July 8, 2015. Merger with Vaporin, Inc. 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. Subsequent Underwritten Offering On July 30, 2015, the Company closed a registered public offering of 3,761,657 Units at $11.00 per Unit for gross proceeds of approximately $41.4 million and net proceeds of approximately $38.7 million. Each Unit consisted of one-fourth of a share of Series A preferred stock and 20 Series A warrants. Each one-fourth of a share of Series A preferred stock is convertible into 10 shares of common stock and each Series A warrant is exercisable into one share of common stock at an exercise price of $1.24 per share (See Note 9). |
Summary of Certain Significant
Summary of Certain Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Certain Significant Accounting Policies | Note 2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES 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. Use of estimates in the preparation of the financial statements The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the 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. 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. 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 Companys 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 Companys 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 Companys 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. 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 Companys estimate of the provision for allowances will change. At June 30, 2015 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance ($33,856 from Customer A). As to revenues in fiscal 2015, only one customers accounted for sales in excess of 10% of the net sales for the three and six months ended June 30, 2015 ($212,981 and $289,920, respectively from Customer A) At December 31, 2014 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance ($172,684 from Customer A). As to revenues in fiscal 2014, two customers accounted for sales in excess of 10% of the net sales for the three and six months ended June 30, 2014 ($1,226,320 and $1,506,880, respectively from Customer A) and $1,082,475 and $1,455,593 from Customer B). 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 June 30, 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. As more fully disclosed in Note 3, the Companys amortizable intangible assets consist of the customer relations, trade names and technology, and assembled workforce that were capitalized in connection with the completion of the Merger. Accumulated amortization on the amortizable intangible assets amounted to $88,707 at June 30, 2015. Amortization expense for the three and six months ended June 30, 2015 amounted to $66,530 and $88,707, respectively. The weighted-average remaining amortization period of the Companys amortizable intangible assets is approximately 6.34 years as of June 30, 2015. The estimated future amortization of the intangible assets is as follows: For the years ending December 31, Amount 2015 (remaining) $ 133,060 2016 266,120 2017 266,120 2018 266,120 2019 266,120 Thereafter 794,353 Total $ 1,991,893 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 Companys inventories consist primarily of merchandise available for resale. Fair value measurements The Company applies the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, (ASC 820). The Companys 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 Companys 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 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. 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 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 Simple Binomial Lattice 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 Simple Binomial Lattice model or the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Companys common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Companys income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Companys 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 Companys 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. Recently Issued Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03 (ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This standard amends the existing guidance to require that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. ASU 2015-03 is effective on a retrospective basis for annual and interim reporting periods beginning after December 15, 2015, earlier adoption is permitted. The Company is currently evaluating the potential impact, if any, the early adoption of this standard will have on the Companys consolidated financial position. |
Merger With Vaporin, Inc.
Merger With Vaporin, Inc. | 6 Months Ended |
Jun. 30, 2015 | |
Business Combinations [Abstract] | |
Merger With Vaporin, Inc. | Note 3. 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 Companys 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: 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 2,718,307 shares of the Companys common stock such that the former Vaporin stockholders collectively hold approximately 45% of the issued and outstanding shares of the Companys common stock following consummation of the Merger. The aggregate value of these shares issued was $14,949,328, or approximately $5.50 per share, and was based on the closing price of the Companys common stock on March 4, 2015. 2. 100% of the issued shares of Vaporin restricted stock units were converted into the right to receive 378,047 shares of the Companys 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 Companys purchase price as no further services from the holders were required to be provided to the Company. The aggregate value of these shares issued was $2,079,071, or approximately $5.50 per share, and was based on the closing price of the Companys 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 by March 15, 2016 to the extent they were not previously delivered. Of the total number of shares to be issued, the Company has issued 292,191 through June 30, 2015. 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 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 managements knowledge of Vaporins business and the results of a preliminary third party appraisal commissioned by management. 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 (779,782 ) Derivative Liabilities (49,638 ) Excess of liabilities over assets assumed $ (706,685 ) Consideration: Value of common stock issued 17,028,399 Excess of 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 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 49,594 warrants to purchase the Companys 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 3,947 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 June 30, 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 June 30, For the six months Ended June 30, 2015 2014 2015 2014 Revenues $ 3,011,303 $ 4,975,337 $ 5,596,187 $ 11,476,029 Net Loss $ (4,753,255 ) $ (2,590,724 ) $ (10,132,182 ) $ (5,081,840 ) Net Loss per share $ (0.69 ) $ (0.59 ) $ (1.54 ) $ (1.15 ) Weighted Average number of shares outstanding 6,901,868 4,407,214 6,579,749 4,416,176 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 Companys net operating loss carryovers may be subject to limitation under Internal Revenue Code section 382 should there be a greater than 50% ownership change as determined under the regulations. The Company has not performed a detailed analysis to determine whether an ownership change under Section 382 of the Internal Revenue Code has occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards (NOLs) attributable to periods before the changes. Any limitations may result in expiration of a portion of the NOLs before utilization. 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 | 6 Months Ended |
Jun. 30, 2015 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Note 4. ACCRUED EXPENSES Accrued expenses are comprised of the following: June 30, 2015 December 31, 2014 Commissions payable $ 170,000 $ 179,000 Retirement plan contributions 42,000 80,000 Accrued severance 119,000 82,000 Accrued customer returns 342,000 360,000 Accrued payroll 133,000 - Accrued interest 153,000 - Accrued legal 380,917 - Other accrued liabilities 236,285 274,112 Total $ 1,576,202 $ 975,112 |
Notes Payable and Receivable
Notes Payable and Receivable | 6 Months Ended |
Jun. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable and Receivable | Note 5. NOTES PAYABLE AND RECEIVABLE $567,000 Convertible Notes Payable 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 Vaporins 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 were due and payable between January 20, 2016 and January 23, 2016. During the three and six months ended June 30, 2015, the Company amortized $15,607 and $20,809 of deferred debt discount, respectively, which is included in interest expense on the condensed consolidated statements of operations. Subsequently, between July 31, 2015 and August 5, 2015, the Vaporin Notes were repaid in full including $567,000 in principal and $29,853 interest. $350,000 Convertible Notes Payable 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 forgiven. $1,000,000 Note Payable to a Related Party 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 on December 1, 2014. 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. Subsequently on August 3, 2015, the Secured Line of Credit Agreement was repaid in full including $1,000,000 in principal and $80,548 interest. Interest of $70,333 was incurred and accrued as of June 30, 2015 and included in accrued expenses on the condensed consolidated balance sheet. $1,250,000 Senior Convertible Notes Payable to Related Parties 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 Companys senior convertible notes (the $1,250,000 Senior Convertible Notes) and common stock purchase warrants to purchase up to an aggregate of 227,273 shares of the Companys common stock, $0.001 par value per share with an exercise price of $10.00 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. Interest of $54,658 and $11,267 was incurred an accrued through June 30, 2015 and December 31, 2014, respectively, and is included in accrued expenses on the condensed consolidated balance sheets. During the three and six months ended June 30, 2015, the Company amortized $34,917 and $69,835 of deferred financing costs associated with the $1,250,000 Senior Convertible Notes. During the three and six months ended June 30, 2015, the Company amortized $312,500 and $625,000 of deferred debt discount, respectively, which is included in interest expense on the condensed consolidated statements of operations. Subsequently, between July 31, 2015 and August 3, 2015, the $1,250,000 Senior Convertible Notes were paid $1,250,000 in principal and $459,100 interest. The Company is presently evaluating whether additional prepayment premiums are owed to holders of the convertible notes due November 2015. $467,095 Notes Receivable 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 repaid the Company in full. $1,750,000 Convertible Debenture On June 25, 2015, the Company received gross proceeds of $1,662,500 in connection with entering into a Securities Purchase Agreement, dated as of June 22, 2015, with certain purchasers in exchange for the issuance of convertible notes with a face value of $1,750,000 (the Debentures). The $87,500 (or 5%) original issue discount was recorded as a debt discount by the Company on the date the Debentures were issued and is being amortized using the effective interest method over the life of the Debentures. The Company incurred aggregate cash offering costs associated with the issuance of the Debentures of $196,250. Net proceeds to the Company from sale of the Debentures, after payment of commissions and legal fees of the lead investor, were $1,466,250. The Debentures mature on December 22, 2015, and accrue interest at 10% per year. For acting as placement agent in the offering of the Debentures, the Company paid Chardan Capital Management, LLC (the Placement Agent) a fee equal to 10% of the gross proceeds from the sale of the Debentures, and issued the Placement Agent 70,000 five-year warrants exercisable at $2.50 per share. The value of the warrants granted to the placement agent of $87,779 was recorded as deferred financing costs on the Companys condensed consolidated balance sheet that will be amortized over the term of the Debentures. During the three and six months ended June 30, 2015, the Company amortized $42,211 of deferred financing costs associated with the Debentures. Amounts of principal and accrued interest under the Debentures are convertible into common stock of the Company at a price per share of $2.50. The conversion feature embedded within the Debentures was determined to be a derivative instrument as the exercise price may be lowered if the Company issues securities at a lower price in the future (See Note 7). The aggregate fair value of the embedded conversion features was $248,359 and was recorded as a derivative liability and a debt discount on the condensed consolidated balance sheet on the date the Debentures were issued. The Company is amortizing the debt discount using the effective interest method over the life of the Debentures. During the three and six months ended June 30, 2015, the Company amortized $119,428 of the deferred debt discount, which is included in interest expense on the condensed consolidated statements of operations. Principal and accrued interest on the Debentures are payable in three approximately equal installments on September 22, 2015, October 22, 2015 and December 22, 2015, at the election of the holders of the Debentures, (i) in cash for an additional 25% premium, or (ii) in common stock of the Company at a price per share of $2.50. As lead investor under the Securities Purchase Agreement, Redwood Management, LLC received a right of first refusal to purchase up to 100% of the securities offered by the Company in future private placement offerings through December 22, 2015. The Companys obligations under the Debentures can be accelerated in the event the Company undergoes a change in control and other customary events of default. In the event of default and acceleration of the Companys obligations, the Company would be required to pay 130% of amounts of principal and interest then outstanding under the Debentures. The Companys obligations under the Debentures are secured under a Security Agreement, under which Redwood Management, LLC acts as Collateral Agent, by a second lien on substantially all of the Companys assets, including all of the Companys interests in its consolidated subsidiaries. Subsequently, between July 31, 2015 and August 4, 2015, the Debentures were paid in full including $1,750,000 in principal and $459,100 of interest and payment premium. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2015 | |
STOCKHOLDERS' EQUITY: | |
Stockholders' Equity | Note 6. STOCKHOLDERS EQUITY Issuance of Common 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. Under the terms of the Consulting Agreement, the Company issued to Mr. Kavanaugh 80,000 shares of its common stock, of which 10,000 shares vested immediately while the remaining 70,000 shares vest in installments of 10,000 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 Companys 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 Companys products. 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 Companys 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 10,000 shares of its common stock to Knight Global pursuant to the early termination provisions of the Consulting Agreement. The Company cancelled 30,000 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 Companys board of directors, effective immediately. During the three months ended June 30, 2015 and 2014, the Company recognized stock-based compensation expense, for the Consulting Agreement, in the amount of $0 and $336,875, respectively, and during the six months ended June 30, 2015 and 2014, stock-based compensation expense in the amount of $322,067, and $929,183, respectively, which is included as part of selling, general and administrative expense in the accompanying condensed consolidated statements of operations Private Placement of Common Stock 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 686,463 the Companys Common Stock, par value $0.001 per share, at a price of $5.10 per share, for aggregate gross proceeds of $3,500,960. The Company also issued Warrants to purchasers of the shares to acquire an aggregate of 547,029 shares of the Companys Common Stock with an exercise price of $6.40 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 Companys placement agent. 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 90 th th Shares Issued in Connection with Waiver Agreements On June 19, 2015, the Company entered into agreements (the Waivers), with certain investors in each of its private placement offerings under the Securities Purchase Agreement dated March 3, 2015 (the 2015 Agreement) and the Securities Purchase Agreement dated November 14, 2014 (the 2014 Agreement, and with the 2015 Agreement, the Agreements). Under the terms of the Waivers, the signatories thereto (the Prior Investors) agreed to amend the Agreements and waive or modify certain terms thereunder, including certain restrictions on the completion of subsequent securities offerings by the Company. In exchange, the Company agreed to issue the Prior Investors a total of 647,901 shares of common stock (including 142,000 shares issued to the lead investor under each of the Agreements in its capacity as lead investor) and 595,685 five-year warrants exercisable at $2.525 per share. The grant date fair value of the common stock and warrants issued with the Waivers was $1,328,196 and $785,691, respectively, and was recorded in other expenses on the condensed consolidated statement of operations for the six months ended June 30, 2015. The warrants issued in connection with the Waivers were determined to be derivative instruments as their exercise prices may be lowered if the Company issues securities at a lower price in the future (See Note 7). The aggregate fair value of the warrants was $785,691 and was recorded as a derivative liability on the condensed consolidated balance sheet on the date the warrants were issued. In the event that, prior to November 14, 2015, the Company issues shares of common stock, or securities convertible into common stock, at an effective price per share of less than $2.70, the Prior Investors will be entitled to the issuance of additional shares (the Additional Shares), the exact amount of which will depend on the effective price per share of such subsequent issuance, but which will not exceed a total of 465,720 shares. The Company will not issue any shares of common stock requiring shareholder approval under the Rules of the Nasdaq Stock Market without receipt of such approval. The Company will not issue any of the Additional Shares unless the 647,901 shares of common stock, the shares issuable upon conversion of the Debentures and the Additional Shares are either within the 19.9% Nasdaq limitation or the issuance is approved by shareholders. The Company agreed to file a registration statement with the Securities and Exchange Commission (SEC) registering the shares and warrant shares issued to the Prior Investors under the Waivers. The registration statement was filed on August 3, 2015 and as of the date of this filing it has not been declared effective by the SEC Subsequently the Company issued shares of common stock in connection with a registered public offering on July 30, 2015. This effectively triggered the Additional Shares that have been calculated by the Company as approximately 2.6 million common shares to be issued. Pursuant to the Rules of the Nasdaq Stock Market, the company must seek shareholder approval before issuing approximately 1.8 million of these shares. Warrants A summary of warrant activity for the six months ended June 30, 2015 is presented below: Number of Warrants Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2015 243,218 $ 10.06 5.0 - Warrants granted 1,214,855 4.35 5.0 - Warrants exercised - - - - Warrants Assumed in Merger 49,594 26.22 3.1 - Warrants forfeited or expired - - - - Outstanding at June 30, 2015 1,507,667 $ 5.99 4.2 $ - Exercisable at June 30, 2015 1,507,667 $ 5.99 4.2 $ - Stock-based Compensation Stock option activity Options outstanding at June 30, 2015 under the various plans are as follows: Plan Total Number of Options Outstanding under Plans Equity compensation plans not approved by security holders 180,000 Equity Incentive Plan 49,633 229,633 A summary of activity under all option Plans at June 30, 2015 and changes during the six months ended June 30, 2015: Number of Shares Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2015 268,860 $ 3.64 - $ - Options granted 3,947 28.07 - - Options exercised - - - - Options forfeited or expired 43,173 4.11 - - Outstanding at June 30, 2015 229,633 $ 3.98 6.07 $ - Exercisable at June 30, 2015 218,727 $ 11.49 6.46 $ - Options available for grant at June 30, 2015 300,707 During the three months ended June 30, 2015 and 2014, the Company recognized stock-based compensation expense in connection with the amortization of stock options expense of $30,688 and $36,820, respectively. During the six months ended June 30, 2015 and 2014, the Company recognized stock-based compensation expense in connection with the amortization of stock option expense of $73,197 and $54,926, respectively. Stock-based compensation expense 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 half of 2015, with the exception of the 3,947 options granted in connection with the Merger, for which the grant date fair value was determined to be immaterial. At June 30, 2015 the amount of unamortized stock-based compensation expense on unvested stock options granted to employees, directors and consultants was $239,502 and will be amortized over 2.0 years. Loss per share 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 Companys 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 Companys securities that have been excluded from the calculation of basic and dilutive loss per share as there effect would be anti-dilutive: June 30, 2015 2014 Convertible debt 1,144,487 - Stock options 229,633 242,376 Warrants 1,507,667 4,582 Total 2,881,787 246,958 |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 7. FAIR VALUE MEASUREMENTS The fair value framework under the Financial Accounting Standards Boards 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 Companys own assumptions regarding the applicable asset or liability. The following table summarizes the liabilities measured at fair value on a recurring basis as of June 30, 2015: Level 1 Level 2 Level 3 Total LIABILITIES: Embedded conversion feature $ - $ - $ 175,808 $ 175,808 Warrant liabilities - - 731,077 731,077 Total derivative liabilities $ - $ - $ 906,885 $ 906,885 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 liabilities $ - $ - $ - $ - 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 Companys 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 Companys 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, common stock purchase warrants granted in connection with the Waivers (see Note 6) as well as the embedded conversion feature within the Debentures (see Note 5) 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 FASB ASC Topic No. 815-40, Derivatives and Hedging - Contracts in an Entitys Own Stock, the embedded conversion options and the warrants were accounted for as derivative liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. In accordance with ASC 815, the Company has bifurcated the conversion feature of the convertible Debentures and warrant derivative instruments and recorded derivative liabilities on their issuance date. The Company used a Binomial Lattice model to value the derivative liabilities. These derivative liabilities are then revalued on each reporting date. The Companys derivative 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 Simple Binomial Lattice model and concluded that the value of the feature is de minimus. The following table summarizes the values of certain assumptions used by the Companys custom model to estimate the fair value of the warrant liabilities as of June 30, 2015: June 30, 2015 (Unaudited) Stock price $ 1.61 Weighted average strike price $ 1.20 2.50 Remaining contractual term (years) 0.50 to 5 years Volatility 108.0 % Risk-free rate 0.03 to 2.82 % Dividend yield 0.0 % 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 June 30, 2015 For the six months ended June 30, 2015 Beginning balance $ 87,603 $ Fair value of warrant liabilities reissued in connection with the Merger 49,638 Conversion features embedded within the Debentures 248,359 248,359 Warrants issued in connection with the Waivers 785,691 785,691 Change in fair value of derivative liabilities (214,768 ) (176,803 ) Ending balance $ 906,885 $ 906,885 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8. COMMITMENTS AND CONTINGENCIES Lease Commitments 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 eleven (11) new retail stores. During three months ended June 30, 2015, the Company closed the four kiosks located in Maryland and New Jersey. The Company settled the lease commitment with landlord on all four leases with two payments of $18,812 each for a total of $37,624. The landlord also kept the deposits on these leases in the amount of $18,500. These amounts were expensed for a total amount of $56,124 during the three months ended June 30, 2015. Also during the three months ended June 30, 2015, the Company settled the lease commitment with the landlord of the retail store located in Ft. Lauderdale, FL. with a single payment of $45,000. The landlord also kept the deposit on this leases in the amount of $8,309. Therefore, the Company incurred expense in the total amount of $53,309 during the three months ended June 30, 2015. Future minimum lease payments under non-cancelable operating that have initial or remaining terms in excess of one year at June 30, 2015 are due as follows: The remaining minimum annual rents for the years ending December 31 are: 2015 (remainder) $ 286,253 2016 503,601 2017 477,309 2018 255,941 2019 153,386 2020 18,961 Total $ 1,695,451 Rent expense for the three months ended June 30, 2015 and 2014 was $276,975 and $46,174, respectively, and for the six months ended June 30, 2015 and 2014 was $492,062 and $91,012, respectively, and is included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. Resignation of Chief Financial Officer 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 Companys 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 June 30, 2015. As of June 30, 2015, $116,433 of accrued severances is included in accrued expenses on the condensed consolidated balance sheet. Legal Proceedings From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of our business. There were no pending material claims or legal matters as of the date of this report other than two of the three following matters. On June 22, 2012, Ruyan Investment (Holding) Limited Ruyan Investment (Holdings) Limited vs. Vapor Corp. CV-12-5466 On February 25, 2013, Ruyans 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 Ruyans 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. 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 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. 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 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. Fontem, by way of its expert, has stated it is currently seeking $1,982,504 in monetary damages for alleged past infringement. Fontem is also seeking to enjoin sales of Vapors accused products. On August 10, 2015, the Court issued an Order modifying certain deadlines and asking the parties to submit proposed changes to the current case schedule that will most-likely extend the current November 2015 date for trial. The parties are currently in active expert discovery and briefing motions for summary judgement and to preclude the use of certain evidence. We have no further opinion on the outcome of these matters. 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 trial in November 2015. The parties are currently in active fact discovery and claim construction. On June 22, 2015, the Center for Environment Health, as plaintiff, filed suit against a number of defendants including Vapor Corp., its wholly-owned subsidiary, the Vape Store, Inc., Vaporin and another wholly-owned subsidiary, Vaporin Florida, Inc. The lawsuit was filed in the Superior Court of the State of California, County of Alameda. The suit seeks relief under California Proposition 65 which makes it unlawful for businesses to knowingly and intentionally expose individuals in California to chemicals known to cause birth defects or other harm without providing clear and reasonable warnings. All of the defendants are alleged to have sold products containing significant quantities of nicotine in violation of Proposition 65. The plaintiff is seeking a civil penalty against these defendants in the amount of $2,500 per day for each violation of Proposition 65, together with attorneys fees and costs. The Company and its subsidiaries are in the process of hiring counsel and intend to defend the allegations. The Company believes that all of the products sold by Vapor Corp. have always contained an appropriate warning. The Vape Store, Inc., operates vape stores located only in the State of Florida and has not, to the best of its knowledge, sold any products into the State of California. Purchase Commitments At June 30, 2015 and December 31, 2014, the Company has vendor deposits of $317,154 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. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 9. 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 other than those set forth below. On July 29, 2015, pursuant to the waiver agreements and in connection with the closing of the Companys registered public offering the Company became obligated to issue prior investors a total of 2,559,437 additional shares of common stock. However, under Nasdaq Marketplace Rule 5635(d), which the Company is required to obtain shareholder approval before issuing 1,798,676 of these additional shares of common stock. Therefore, the Company will be seeking shareholder approval to permit the issuance of these 1,798,676 shares of common stock in order to be able to comply with both the Companys contractual obligations to its past investors and the requirements of the Nasdaq Capital Market. The remaining 760,761 shares of common stock have been issued to the prior investors. On July 30, 2015, the Company closed its public offering of 3,761,657 Units at $11.00 per Unit for gross proceeds of approximately $41.4 million and net proceeds of approximately $38.7 million. Each Unit consists of one-fourth of a share of Series A preferred stock and 20 Series A warrants. Each one-fourth of a share of Series A preferred stock will be convertible into 10 shares of common stock and each Series A warrant will be exercisable into one share of common stock at an exercise price of $1.24 per share. The Units will automatically separate into the Series A preferred stock and Series A warrants on January 23, 2016, provided that the Units will separate earlier if at any time after August 24, 2015, the closing price of Vapors common stock is greater than $2.48 per share for 10 consecutive trading days, the Units are delisted, or the Series A warrants are exercised for cash (solely with respect to the Units that included the exercised Series A warrants). In connection with the closing of this offering, on August 3, 2015, the Company paid Chardan Capital Markets, LLC (Chardan) $500,000 in satisfaction of an agreement between Chardan and the Company pursuant to which Chardan waived certain rights to participate in the public offering that were granted to Chardan under its previous agreements with the Company. Between July 31, 2015 and August 5, 2015, the Company repaid a total of $4,567,000 in original principal amount of outstanding notes and debentures in addition to approximately $632,094 in accrued interest and premiums, for a total payment of $5,199,094. The amounts repaid included amounts outstanding under the Companys $1,250,000 convertible notes due November 2015, the Companys $567,000 convertible notes due January 2016, the Companys $1,000,000 secured promissory notes due March 2016, and the Companys $1,750,000 convertible debentures due between September 2015 and December 2015. The Company is presently evaluating whether additional prepayment premiums are owed to holders of the convertible notes due November 2015. Other than these potential payments owed to the November 2015 note holders, none of the foregoing obligations remain outstanding as a result of the repayments described herein. On August 10, 2015, the Company entered into three-year Employment Agreements with Jeffrey Holman, the Companys Chief Executive Officer, and Gregory Brauser, the Companys President. Each of the Employment Agreements provide for an annual base salary of $300,000 and a target bonus in an amount ranging from 20% to 200% of their base salaries subject to the Company meeting certain Adjusted EBITDA performance milestones. Additionally, the Company approved a bonus of $100,000 to each of Mr. Holman and Mr. Brauser. Messrs. Holman and Brauser are also entitled to receive severance payments, including 2 years of their then base salary and other benefits in the event of a change of control, termination by the Company without cause, termination for good reason by the executive or non-renewal by the Company. On August 13, 2015, the Company entered into consulting agreements with each of GRQ Consultants, Inc. and Grander Holdings, Inc. GRQ Consultants, Inc. will primarily focus on investor relations and presenting the Company and its business plans, strategy and personnel to the financial community. Grander Holdings, Inc. will primarily assist the Company in further developing and executing its acquisitions strategy, focusing on the Companys The Vape Store properties. Michael Brauser, the Chief Executive Officer of Grander Holdings, Inc., is the father of Gregory Brauser, the Companys President. Pursuant to the agreements, each consultant will receive an initial fee of $50,000, payable immediately, and an additional $20,000 monthly throughout the 12-month term of each agreement. Subsequent to June 30, 2015, the Company issued an aggregate 15,000 shares of common stock to three consultants as payment for services rendered to the Company. |
Summary of Certain Significan17
Summary of Certain Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
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. |
Use of Estimates in the Preparation of the Financial Statements | Use of estimates in the preparation of the financial statements The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the 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. |
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. 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 Companys 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 Companys 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 Companys 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. |
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 Companys estimate of the provision for allowances will change. At June 30, 2015 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance ($33,856 from Customer A). As to revenues in fiscal 2015, only one customers accounted for sales in excess of 10% of the net sales for the three and six months ended June 30, 2015 ($212,981 and $289,920, respectively from Customer A) At December 31, 2014 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance ($172,684 from Customer A). As to revenues in fiscal 2014, two customers accounted for sales in excess of 10% of the net sales for the three and six months ended June 30, 2014 ($1,226,320 and $1,506,880, respectively from Customer A) and $1,082,475 and $1,455,593 from Customer B). |
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 June 30, 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. As more fully disclosed in Note 3, the Companys amortizable intangible assets consist of the customer relations, trade names and technology, and assembled workforce that were capitalized in connection with the completion of the Merger. Accumulated amortization on the amortizable intangible assets amounted to $88,707 at June 30, 2015. Amortization expense for the three and six months ended June 30, 2015 amounted to $66,530 and $88,707, respectively. The weighted-average remaining amortization period of the Companys amortizable intangible assets is approximately 6.34 years as of June 30, 2015. The estimated future amortization of the intangible assets is as follows: For the years ending December 31, Amount 2015 (remaining) $ 133,060 2016 266,120 2017 266,120 2018 266,120 2019 266,120 Thereafter 794,353 Total $ 1,991,893 |
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 Companys inventories consist primarily of merchandise available for resale. |
Fair Value Measurements | Fair value measurements The Company applies the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, (ASC 820). The Companys 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 Companys 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 | 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. |
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 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 Simple Binomial Lattice 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 Simple Binomial Lattice model or the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Companys common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Companys income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Companys 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 Companys 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 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. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-03 (ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This standard amends the existing guidance to require that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. ASU 2015-03 is effective on a retrospective basis for annual and interim reporting periods beginning after December 15, 2015, earlier adoption is permitted. The Company is currently evaluating the potential impact, if any, the early adoption of this standard will have on the Companys consolidated financial position. |
Summary Of Certain Significan18
Summary Of Certain Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Estimated Future Amortization of Patents | The estimated future amortization of the intangible assets is as follows: For the years ending December 31, Amount 2015 (remaining) $ 133,060 2016 266,120 2017 266,120 2018 266,120 2019 266,120 Thereafter 794,353 Total $ 1,991,893 |
Merger With Vaporin, Inc. (Tabl
Merger With Vaporin, Inc. (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Business Combinations [Abstract] | |
Schedule of Business Considertion | . The purchase price allocation was based, in part, on managements knowledge of Vaporins business and the results of a preliminary third party appraisal commissioned by management. 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 (779,782 ) Derivative Liabilities (49,638 ) Excess of liabilities over assets assumed $ (706,685 ) Consideration: Value of common stock issued 17,028,399 Excess of 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. For the three months Ended June 30, For the six months Ended June 30, 2015 2014 2015 2014 Revenues $ 3,011,303 $ 4,975,337 $ 5,596,187 $ 11,476,029 Net Loss $ (4,753,255 ) $ (2,590,724 ) $ (10,132,182 ) $ (5,081,840 ) Net Loss per share $ (0.69 ) $ (0.59 ) $ (1.54 ) $ (1.15 ) Weighted Average number of shares outstanding 6,901,868 4,407,214 6,579,749 4,416,176 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses are comprised of the following: June 30, 2015 December 31, 2014 Commissions payable $ 170,000 $ 179,000 Retirement plan contributions 42,000 80,000 Accrued severance 119,000 82,000 Accrued customer returns 342,000 360,000 Accrued payroll 133,000 - Accrued interest 153,000 - Accrued legal 380,917 - Other accrued liabilities 236,285 274,112 Total $ 1,576,202 $ 975,112 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
STOCKHOLDERS' EQUITY: | |
Summary of Warrant Activity | A summary of warrant activity for the six months ended June 30, 2015 is presented below: Number of Warrants Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2015 243,218 $ 10.06 5.0 - Warrants granted 1,214,855 4.35 5.0 - Warrants exercised - - - - Warrants Assumed in Merger 49,594 26.22 3.1 - Warrants forfeited or expired - - - - Outstanding at June 30, 2015 1,507,667 $ 5.99 4.2 $ - Exercisable at June 30, 2015 1,507,667 $ 5.99 4.2 $ - |
Summary of Options Outstanding | Options outstanding at June 30, 2015 under the various plans are as follows: Plan Total Number of Options Outstanding under Plans Equity compensation plans not approved by security holders 180,000 Equity Incentive Plan 49,633 229,633 |
Summary of Stock Option Activity Under All Option Plans | A summary of activity under all option Plans at June 30, 2015 and changes during the six months ended June 30, 2015: Number of Shares Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2015 268,860 $ 3.64 - $ - Options granted 3,947 28.07 - - Options exercised - - - - Options forfeited or expired 43,173 4.11 - - Outstanding at June 30, 2015 229,633 $ 3.98 6.07 $ - Exercisable at June 30, 2015 218,727 $ 11.49 6.46 $ - Options available for grant at June 30, 2015 300,707 |
Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share | The following table summarizes the Companys securities that have been excluded from the calculation of basic and dilutive loss per share as there effect would be anti-dilutive: June 30, 2015 2014 Convertible debt 1,144,487 - Stock options 229,633 242,376 Warrants 1,507,667 4,582 Total 2,881,787 246,958 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 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 June 30, 2015: Level 1 Level 2 Level 3 Total LIABILITIES: Embedded conversion feature $ - $ - $ 175,808 $ 175,808 Warrant liabilities - - 731,077 731,077 Total derivative liabilities $ - $ - $ 906,885 $ 906,885 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 liabilities $ - $ - $ - $ - Total derivative liability $ - $ - $ - $ - |
Summary the Fair Value of Assumption of Warrant Liabilities | The following table summarizes the values of certain assumptions used by the Companys custom model to estimate the fair value of the warrant liabilities as of June 30, 2015: June 30, 2015 (Unaudited) Stock price $ 1.61 Weighted average strike price $ 1.20 2.50 Remaining contractual term (years) 0.50 to 5 years Volatility 108.0 % Risk-free rate 0.03 to 2.82 % Dividend yield 0.0 % |
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 June 30, 2015 For the six months ended June 30, 2015 Beginning balance $ 87,603 $ Fair value of warrant liabilities reissued in connection with the Merger 49,638 Conversion features embedded within the Debentures 248,359 248,359 Warrants issued in connection with the Waivers 785,691 785,691 Change in fair value of derivative liabilities (214,768 ) (176,803 ) Ending balance $ 906,885 $ 906,885 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
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: 2015 (remainder) $ 286,253 2016 503,601 2017 477,309 2018 255,941 2019 153,386 2020 18,961 Total $ 1,695,451 |
Organization, Basis of Presen24
Organization, Basis of Presentation, and Recent Developments (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Dec. 17, 2014 | |
Percentage of ownership | 50.00% | |
Net proceeds of public offering | $ 559,000 | |
July 7, 2015 [Member] | ||
Excess of stock shares authorized | 150,000,000 | |
Reverse stock split description | 1 for 5 reverse split of the Companys common stock effectuated on July 8, 2015 | |
Reverse stock split amendment date | Jul. 8, 2015 | |
July 30, 2015 [Member] | ||
Number of public offering units | $ 3,761,657 | |
Public offering units per unit | $ 11 | |
Gross proceeds of public offering | $ 41,400,000 | |
Net proceeds of public offering | $ 38,700,000 | |
July 30, 2015 [Member] | Series A Preferred Stock [Member] | ||
Conversion of stock description | Each Unit consisted of one-fourth of a share | |
July 30, 2015 [Member] | Series A Preferred Stock [Member] | Common Stock [Member] | ||
Stock convertible into shares | 10 | |
July 30, 2015 [Member] | 20 Series A Warrant [Member] | ||
Conversion of stock description | Each Unit consisted of one-fourth of a share | |
July 30, 2015 [Member] | 20 Series A Warrant [Member] | Common Stock [Member] | ||
Stock convertible into shares | 1 | |
Common stock exercise price per share | $ 1.24 |
Summary of Certain Significan25
Summary of Certain Significant Accounting Policies (Details Narrative) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015USD ($)Integre | Jun. 30, 2014USD ($)Integre | Jun. 30, 2015USD ($)Bonifide | Jun. 30, 2014USD ($)Integre | Dec. 31, 2014USD ($) | |
Impairment existed | $ 0 | $ 0 | |||
Accumulated amortization on the amortizable intangible assets | $ 88,707 | 88,707 | $ 0 | ||
Amortization expense | 66,530 | $ 88,707 | |||
Minimum [Member] | |||||
Identifiable intangible assets amortized period | 5 years | ||||
Maximum [Member] | |||||
Identifiable intangible assets amortized period | 10 years | ||||
Weighted-Average [Member] | |||||
Identifiable intangible assets amortized period | 6 years 4 months 2 days | ||||
Customer A [Member] | |||||
Accounts receivable | $ 33,856 | $ 33,856 | |||
Customer A [Member] | Revenues [Member] | |||||
Percentage of accounts receivable | 10.00% | 10.00% | 10.00% | 10.00% | |
Number of customer | 1 | 2 | 1 | 2 | |
Revenue | $ 289,920 | $ 1,506,880 | $ 212,981 | $ 1,226,320 | |
Customer A [Member] | Accounts Receivable [Member] | |||||
Percentage of accounts receivable | 10.00% | 10.00% | |||
Number of customer | 1 | 1 | |||
Revenue | $ 172,684 | ||||
Customer B [Member] | Revenues [Member] | |||||
Percentage of accounts receivable | 10.00% | 10.00% | |||
Number of customer | Integre | 2 | 2 | |||
Revenue | $ 1,082,475 | $ 1,455,593 |
Summary of Certain Significan26
Summary of Certain Significant Accounting Policies - Estimated Future Amortization of Patents (Details) | Jun. 30, 2015USD ($) |
Accounting Policies [Abstract] | |
2015 (remaining) | $ 133,060 |
2,016 | 266,120 |
2,017 | 266,120 |
2,018 | 266,120 |
2,019 | 266,120 |
Thereafter | 794,353 |
Total | $ 1,991,893 |
Merger With Vaporin Inc (Detail
Merger With Vaporin Inc (Details Narrative) - USD ($) | Dec. 17, 2014 | Dec. 17, 2014 | Jun. 30, 2015 |
Percentage of ownership | 50.00% | 50.00% | |
Joint Venture [Member] | |||
Percentage of receive merger consideration to shareholders | 50.00% | ||
Common Stock [Member] | |||
Number of shares issued for merger | 2,718,307 | ||
Vaporin [Member] | |||
Percentage of ownership | 50.00% | 50.00% | |
Forgiveness of note and interest payable | $ 354,029 | ||
Issuance of warrant to purchase of common stock shares | 49,594 | ||
Issuance of stock option to purchase of common stock, shares | 3,947 | ||
Vaporin [Member] | Common Stock [Member] | |||
Percentage of issued and outstanding common stock shares | 100.00% | ||
Merger closing date | Mar. 4, 2015 | ||
Number of shares issued for merger | 2,718,307 | ||
Percentage of receive merger consideration to shareholders | 45.00% | ||
Company issued and sold shares value | $ 14,949,328 | ||
Maximum percentage of current premium require to be paid | 550.00% | ||
Vaporin [Member] | Restricted Stock [Member] | |||
Percentage of issued and outstanding common stock shares | 100.00% | ||
Number of shares issued for merger | 378,047 | ||
Company issued and sold shares value | $ 2,079,071 | ||
Maximum percentage of current premium require to be paid | 550.00% | ||
Merger agreement period results | 12 months | ||
Stock issued during merger period | 292,191 | ||
Receive gross proceeds from equity offering | $ 3,500,000 |
Merger With Vaporin, Inc. - Sch
Merger With Vaporin, Inc. - Schedule of Business Considertion (Details) | Jun. 30, 2015USD ($) |
Business Combinations [Abstract] | |
Value of consideration paid | $ 17,735,084 |
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 | (779,782) |
Derivative Liabilities | (49,638) |
Excess of liabilities over assets assumed | (706,685) |
Value of common stock issued | 17,028,399 |
Excess of 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. - S29
Merger With Vaporin, Inc. - Schedule of Business Considertion (Details) (Parenthetical) | Jun. 30, 2015USD ($) |
Business Combinations [Abstract] | |
Debt discount | $ 54,623 |
Merger With Vaporin Inc - Sched
Merger With Vaporin Inc - Schedule of Pro Forma Consolidated Results of Operations (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Business Combinations [Abstract] | ||||
Revenues | $ 3,011,303 | $ 4,975,337 | $ 5,596,187 | $ 11,476,029 |
Net Loss | $ (4,753,255) | $ (2,590,724) | $ (10,132,182) | $ (5,081,840) |
Net Loss per share | $ (0.69) | $ (0.59) | $ (1.54) | $ (1.15) |
Weighted Average number of shares outstanding | 6,901,868 | 4,407,214 | 6,579,749 | 4,416,176 |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Payables and Accruals [Abstract] | ||
Commissions payable | $ 170,000 | $ 179,000 |
Retirement plan contributions | 42,000 | 80,000 |
Accrued severance | 119,000 | 82,000 |
Accrued customer returns | 342,000 | $ 360,000 |
Accrued payroll | 133,000 | |
Accrued interest | 380,917 | |
Other accrued liabilities | 236,285 | $ 274,112 |
Total | $ 1,576,202 | $ 975,112 |
Notes Payable and Receivable (D
Notes Payable and Receivable (Details Narrative) - Range Member - USD ($) | Jun. 25, 2015 | Jan. 29, 2015 | Dec. 08, 2014 | Nov. 14, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Mar. 04, 2015 | Jan. 12, 2015 | Dec. 31, 2014 |
Debt discount amount | $ 33,814 | $ 33,814 | $ 0 | ||||||||
Amortized deferred debt discount | 765,237 | ||||||||||
Notes payable - related party | 1,000,000 | 1,000,000 | |||||||||
Amortization of deferred financing costs | $ 77,129 | 112,046 | |||||||||
Issuance of debentures | $ 1,662,500 | ||||||||||
Loan receivable | $ 467,095 | ||||||||||
Common stock price per share | $ 5.10 | $ 5.10 | |||||||||
567,000 Convertible Notes Payable [Member] | January 20, 2015 and January 23, 2015 [Member] | |||||||||||
Accredited investors providing for the sale | $ 567,000 | ||||||||||
Debt discount amount | $ 54,623 | 54,623 | |||||||||
Amortized deferred debt discount | $ 15,607 | $ 20,809 | |||||||||
Debt instrument accrued interest rate | 10.00% | ||||||||||
Convertible into the common stock lower price per share | $ 1.08 | $ 1.08 | |||||||||
Percentage of discount | 15.00% | ||||||||||
Notes due and payable | January 20, 2016 and January 23, 2016. | ||||||||||
567,000 Convertible Notes Payable [Member] | July 31, 2015 and August 5, 2015 [Member] | |||||||||||
Repayment of debt | $ 567,000 | ||||||||||
Notes payable interest | $ 29,853 | 29,853 | |||||||||
$350,000 Convertible Notes Payable [Member] | |||||||||||
Debt instrument accrued interest rate | 12.00% | ||||||||||
Convertible promissory note | $ 350,000 | ||||||||||
Notes maturity date | Mar. 4, 2015 | ||||||||||
Proceeds from sale of securities | $ 350,000 | ||||||||||
$350,000 Convertible Notes Payable [Member] | Securities Purchase Agreement [Member] | |||||||||||
Notes payable interest | $ 4,029 | ||||||||||
Convertible promissory note | $ 350,000 | ||||||||||
1,000,000 Notes Payable Related to a Party [Member] | |||||||||||
Debt instrument accrued interest rate | 12.00% | ||||||||||
Notes payable interest | 70,333 | 70,333 | |||||||||
Notes payable - related party | $ 3,000,000 | ||||||||||
Notes maturity date | Mar. 31, 2016 | ||||||||||
1,000,000 Notes Payable Related to a Party [Member] | August 3, 2015 [Member] | |||||||||||
Notes payable interest | $ 80,548 | ||||||||||
1,250,000 Senior Convertible Notes Payable to Related Parties [Member] | |||||||||||
Amortized deferred debt discount | 312,500 | 625,000 | |||||||||
Debt instrument accrued interest rate | 7.00% | ||||||||||
Notes payable interest | 54,658 | 54,658 | $ 11,267 | ||||||||
Convertible promissory note | $ 1,250,000 | ||||||||||
Notes maturity date | Nov. 14, 2015 | ||||||||||
Issuance of warrant to purchases of common stock, shares | 227,273 | ||||||||||
Convertible into the common stock lower price per share | $ 0.001 | ||||||||||
Warrants exercise price | $ 10 | ||||||||||
Amortization of deferred financing costs | 34,917 | 69,835 | |||||||||
1,250,000 Senior Convertible Notes Payable to Related Parties [Member] | July 31, 2015 and August 3, 2015 [Member] | |||||||||||
Notes payable interest | $ 459,100 | ||||||||||
Convertible promissory note | $ 1,250,000 | ||||||||||
Notes maturity date | Nov. 30, 2015 | ||||||||||
467,095 Notes Receivable [Member] | |||||||||||
Debt principal amount | $ 500,000 | ||||||||||
Loan receivable | $ 50,000 | ||||||||||
1,750,000 Convertible Debenture [Member] | |||||||||||
Amortized deferred debt discount | $ 87,500 | 119,428 | 119,428 | ||||||||
Debt instrument accrued interest rate | 10.00% | ||||||||||
Convertible promissory note | $ 1,750,000 | ||||||||||
Notes maturity date | Dec. 22, 2015 | ||||||||||
Convertible into the common stock lower price per share | $ 2.50 | ||||||||||
Amortization of deferred financing costs | $ 42,211 | $ 42,211 | |||||||||
Proceeds from sale of securities | $ 1,662,500 | ||||||||||
Percentage of discount | 5.00% | ||||||||||
Issuance of debentures | $ 196,250 | ||||||||||
Legal fees | 1,466,250 | ||||||||||
Fair value of embedded conversion features | $ 248,359 | ||||||||||
Percentage of cash for additional premium | 25.00% | ||||||||||
Common stock price per share | $ 2.50 | ||||||||||
Percentage of additional amounts of principal and interest outstanding | 130.00% | ||||||||||
1,750,000 Convertible Debenture [Member] | Chardan Capital Management, LLC [Member] | |||||||||||
Debt instrument accrued interest rate | 10.00% | ||||||||||
Warrants exercise price | $ 2.50 | ||||||||||
Amortization of deferred financing costs | $ 87,779 | ||||||||||
Issuance of debentures | $ 70,000 | ||||||||||
Warrants exercisable term | 5 years | ||||||||||
1,750,000 Convertible Debenture [Member] | July 31, 2015 and August 4, 2015 [Member] | |||||||||||
Notes payable interest | $ 459,100 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) | Jun. 19, 2015USD ($)$ / sharesshares | Feb. 03, 2014USD ($)Bonifideshares | Jun. 30, 2015USD ($)$ / sharesshares | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($)$ / sharesshares | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($)$ / sharesshares | Nov. 14, 2015$ / sharesshares | Mar. 31, 2015USD ($) | Jan. 24, 2015shares |
Stock-based compensation expense | $ | $ 538,263 | $ 984,109 | ||||||||
Accredited investors providing for the sale | 684,463 | |||||||||
Common stock, par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||||||
Per share price | $ / shares | 5.10 | $ 5.10 | ||||||||
Proceeds from related parties | $ | $ 3,500,960 | |||||||||
Exercise price per share | $ / shares | $ 6.40 | $ 6.40 | ||||||||
Warrants issued to share acquire | 547,029 | |||||||||
Offering costs | $ | $ 559,000 | |||||||||
Payment to private placement | $ | $ 350,000 | |||||||||
Percentage of liquidated damages in cash equal | 1.50% | |||||||||
Cash payments | $ | $ 52,500 | |||||||||
Common stock outstanding | 7,694,744 | 7,694,744 | 3,352,382 | |||||||
Common stock shares issued | 7,694,744 | 7,694,744 | 3,352,382 | |||||||
Derivative liability | $ | $ 906,885 | $ 906,885 | $ 87,603 | |||||||
Grant date fair value of common shares issued | $ | 3,947 | |||||||||
Amortized stock option expense | $ | 30,688 | $ 36,820 | 73,197 | $ 54,926 | ||||||
Share based compensation expense unvested stock options granted to employees and consultants | $ | 239,502 | $ 239,502 | ||||||||
Stock option vested period | 2 years | |||||||||
Waivers Agreements [Member] | ||||||||||
Exercise price per share | $ / shares | $ 2.525 | |||||||||
Common stock outstanding | 647,901 | |||||||||
Common stock shares issued | 142,000 | |||||||||
Warrants outstanding | 595,685 | |||||||||
Warrants exercisable term | 5 years | |||||||||
Grant date fair value of common stock issued | $ | $ 1,328,196 | |||||||||
Grant date fair value of warrants issued | $ | 785,691 | |||||||||
Derivative liability | $ | $ 785,691 | |||||||||
General and Administrative Expense [Member] | ||||||||||
Stock-based compensation expense | $ | $ 322,067 | $ 929,183 | ||||||||
Consulting Agreement [Member] | ||||||||||
Stock-based compensation expense | $ | $ 0 | $ 336,875 | ||||||||
Mr. Kavanaugh [Member] | ||||||||||
Shares issued to employees | 80,000 | |||||||||
Number of shares will vest in installments basis, per quarter | 10,000 | |||||||||
Share were cancelled during period | 30,000 | |||||||||
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 | 10,000 | |||||||||
Number of shares vested while the remaining share will installmetns | 70,000 | |||||||||
Knight Global [Member] | ||||||||||
Number of bona fide opportunities | Bonifide | 6 | |||||||||
Consulting Agreement, term | 2 years | |||||||||
Commissions payable in cash, percentage of "net sales" | 6.00% | |||||||||
Knight Global [Member] | Termination of Consulting Agreement [Member] | January 24, 2015 [Member] | ||||||||||
Shares vested and expected to vest | 10,000 | |||||||||
Prior Investors [Member] | Waivers Agreements [Member] | ||||||||||
Common stock outstanding | 465,720 | |||||||||
Percentage of additional shares | 19.90% | |||||||||
Common stock to be issued | 2,600,000 | |||||||||
Prior Investors [Member] | Waivers Agreements [Member] | Minimum [Member] | ||||||||||
Per share price | $ / shares | $ 2.70 | |||||||||
Shareholder [Member] | Waivers Agreements [Member] | ||||||||||
Common stock to be issued | 1,800,000 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Warrant Activity (Details) - USD ($) None in scaling factor is -9223372036854775296 | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Weighted Average Remaining Contractual Terms (Years), Outstanding | 5 years | |
Warrant [Member] | ||
Number of Warrants Outstanding, Beginning Balance | 243,218 | |
Number of Warrants granted | 1,214,855 | |
Number of Warrants exercised | ||
Warrants Assumed in Merger | 49,594 | |
Number of Warrants forfeited or expired | ||
Number of Warrants outstanding, Ending Balance | 1,507,667 | 243,218 |
Number of Warrants Exercisable | 1,507,667 | |
Weighted Average Exercise Price, Warrants Outstanding, Beginning Balance | $ 10.06 | |
Weighted Average Exercise Price, Warrants granted | $ 4.35 | |
Weighted Average Exercise Price, Warrants exercised | ||
Weighted Average Exercise Price, Warrants assumed in merger | $ 26.22 | |
Weighted Average Exercise Price, forfeited or expired | ||
Weighted Average Exercise Price, Warrants outstanding, Ending Balance | $ 5.99 | $ 10.06 |
Weighted Average Exercise Price, Exercisable | $ 5.99 | |
Weighted Average Remaining Contractual Terms (Years), Outstanding | 4 years 2 months 12 days | |
Weighted Average Remaining Contractual Terms (Years), Granted | 5 years | |
Weighted Average Remaining Contractual Terms (Years), Warrants Assumed in Merger | 3 years 1 month 6 days | |
Weighted Average Remaining Contractual Terms (Years), Exercisable | 4 years 2 months 12 days | |
Aggregate Intrinsic Value, Outstanding | ||
Aggregate Intrinsic Value, Exercisable |
Stockholders' Equity - Summar35
Stockholders' Equity - Summary of Options Outstanding (Details) | Jun. 30, 2015shares |
Number of shares, Outstanding, Ending balance | 229,633 |
Equity Compensation Plans Not Approved By Security Holders [Member] | |
Number of shares, Outstanding, Ending balance | 180,000 |
Equity Incentive Plan [Member] | |
Number of shares, Outstanding, Ending balance | 49,633 |
Stockholders' Equity - Summar36
Stockholders' Equity - Summary of Stock Option Activity Under All Option Plans (Details) - 6 months ended Jun. 30, 2015 - USD ($) None in scaling factor is -9223372036854775296 | Total |
STOCKHOLDERS' EQUITY: | |
Number of shares, Outstanding, Beginning balance | 268,860 |
Number of shares, Options Granted | 3,947 |
Number of shares, Options Exercised | |
Number of shares, Options forfeited or expired | 43,173 |
Number of shares, Outstanding, Ending balance | 229,633 |
Number of shares, Options Exercisable | 218,727 |
Options available for grants | 300,707 |
Weighted Avg. Exercise Price, Outstanding, Beginning balance | $ 3.64 |
Weighted Avg. Exercise Price, Options Granted | $ 28.07 |
Weighted Avg. Exercise Price, Options Exercised | |
Weighted Avg. Exercise Price, Options forfeited or expired | $ 4.11 |
Weighted Avg. Exercise Price, Outstanding, Ending balance | 3.98 |
Weighted Avg. Exercise Price, Exercisable Ending Balance | $ 11.49 |
Weighted Avg. Remaining Contractual Life, Options Outstanding | 6 years 26 days |
Weighted Avg. Remaining Contractual Life, Options Exercisable | 6 years 5 months 16 days |
Aggregate Intrinsic Value, Options Outstanding | |
Aggregate Intrinsic Value, Options Exercisable |
Stockholders' Equity - Reconcil
Stockholders' Equity - Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share (Details) - shares | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 2,881,787 | 246,958 |
Warrant [Member] | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 1,507,667 | 4,582 |
Convertible Debt [Member] | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 1,144,487 | |
Stock Options [Member] | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 229,633 | 242,376 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Liabilities Measured Fair Value on Recurring Basis(Details) - USD ($) | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 |
Embedded conversion feature | $ 175,808 | ||
Warrant Liability | 731,077 | ||
Total derivative liabilities | $ 906,885 | $ 87,603 | |
Fair Value, Inputs, Level 1 [Member] | |||
Embedded conversion feature | |||
Warrant Liability | |||
Total derivative liabilities | |||
Fair Value, Inputs, Level 2 [Member] | |||
Embedded conversion feature | |||
Warrant Liability | |||
Total derivative liabilities | |||
Fair Value, Inputs, Level 3 [Member] | |||
Embedded conversion feature | $ 175,808 | ||
Warrant Liability | 731,077 | ||
Total derivative liabilities | $ 906,885 |
Fair Value Measurements - Sum39
Fair Value Measurements - Summary the Fair Value of Assumption of Warrant Liabilities (Details) - Jun. 30, 2015 - $ / shares | Total |
Stock price | $ 1.61 |
Volatility | 108.00% |
Dividend yield | 0.00% |
Minimum [Member] | |
Weighted average strike price | $ 1.20 |
Remaining contractual term (years) | 6 months |
Risk-free rate | 0.03% |
Maximum [Member] | |
Weighted average strike price | $ 2.50 |
Remaining contractual term (years) | 5 years |
Risk-free rate | 2.82% |
Fair Value Measurements - Sum40
Fair Value Measurements - Summary of Changes the Fair Value of Level 3 Financial Liabilities Measured Fair Value On Recurring Basis (Details) - Jun. 30, 2015 - USD ($) | Total | Total |
Fair Value Disclosures [Abstract] | ||
Beginning balance | $ 87,603 | |
Fair value of warrant liabilities reissued in connection with the Merger | $ 49,638 | |
Conversion features embedded within the Debentures | $ 248,359 | 248,359 |
Warrants issued in connection with the Waivers | 785,691 | 785,691 |
Change in fair value of derivative liabilities | (214,768) | (176,803) |
Ending balance | $ 906,885 | $ 906,885 |
Commitments and Contingencies41
Commitments and Contingencies (Details Narrative) | Jun. 22, 2015USD ($) | Oct. 31, 2013USD ($)ft² | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($)Bonifide |
Annual rental payments | $ 276,975 | $ 46,174 | $ 492,062 | $ 91,012 | |||
Accrued severance expenses | 116,433 | 116,433 | |||||
Vendor deposits | 317,154 | 317,154 | $ 319,563 | ||||
Civil penalty against defendants | $ 2,500 | ||||||
Seeking monetary damages | 1,982,504 | ||||||
Mr. Press [Member] | |||||||
Compensation and accrued vacation | 159,810 | 159,810 | |||||
Maryland and New Jersey [Member] | |||||||
Amount deposited for lease | 18,500 | 18,500 | |||||
Total lease expensed | 56,124 | ||||||
Ft. Lauderdale, FL [Member] | |||||||
Lease payment | 45,000 | 45,000 | |||||
Amount deposited for lease | 8,309 | 8,309 | |||||
Total lease expensed | 53,309 | ||||||
Lease Agreement [Member] | |||||||
Annual rental payments current | 151,200 | 151,200 | |||||
Annual rental payments two | 158,760 | 158,760 | |||||
Annual rental payments three | 174,636 | 174,636 | |||||
Number of real estate properties | Bonifide | 9 | ||||||
Lease Agreement [Member] | New Retail Kiosks [Member] | |||||||
Number of real estate properties | Bonifide | 8 | ||||||
Lease Agreement [Member] | New Retail Store [Member] | |||||||
Number of real estate properties | Bonifide | 1 | ||||||
Number of stores | Bonifide | 11 | ||||||
Lease Agreement [Member] | |||||||
Annual rental payments | $ 18,000 | $ 144,000 | |||||
Lease term | 24 months | ||||||
Lease renewal period | 1 year | ||||||
Area of square feet | ft² | 2,200 | ||||||
Lease Payment One [Member] | Maryland and New Jersey [Member] | |||||||
Lease payment | 18,812 | $ 18,812 | |||||
Lease Payment Two [Member] | Maryland and New Jersey [Member] | |||||||
Lease payment | $ 37,624 | $ 37,624 |
Commitments and Contingencies -
Commitments and Contingencies - Future Minimum Lease Payments Under Non-cancelable Operating (Details) - Operating Leases [Member] | Jun. 30, 2015USD ($) |
2015 (remainder) | $ 286,253 |
2,016 | 503,601 |
2,017 | 477,309 |
2,018 | 255,941 |
2,019 | 153,386 |
2,020 | 18,961 |
Total | $ 1,695,451 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Aug. 10, 2015 | Aug. 05, 2015 | Aug. 03, 2015 | Jul. 30, 2015 | Jul. 30, 2015 | Jun. 30, 2015 | Aug. 13, 2015 | Jul. 09, 2015 |
Net proceeds of public offering | $ 559,000 | |||||||
Common Stock [Member] | ||||||||
Number of common stock shares issued for services | 27,500 | |||||||
Subsequent Event [Member] | ||||||||
Number of public offering units | $ 3,761,657 | |||||||
Public offering units per unit | $ 11 | |||||||
Gross proceeds of public offering | $ 41,400,000 | |||||||
Net proceeds of public offering | $ 38,700,000 | |||||||
Notes payable | $ 5,199,094 | |||||||
Payment of principal amount | $ 4,567,000 | |||||||
Number of common stock shares issued for services | 15,000 | |||||||
Subsequent Event [Member] | Jeffrey Holman [Member] | ||||||||
Annual base salary | $ 300,000 | |||||||
Subsequent Event [Member] | Mr. Holman And Mr. Brauser [Member] | ||||||||
Bonus received | $ 100,000 | |||||||
Subsequent Event [Member] | Chardan Capital Markets LLC [Member] | ||||||||
Payment to public offering | $ 500,000 | |||||||
Subsequent Event [Member] | Gro Consultants Inc [Member] | ||||||||
Consulting fee payable | $ 50,000 | |||||||
Additional consulting fee payable | $ 20,000 | |||||||
Subsequent Event [Member] | Maximum [Member] | Jeffrey Holman [Member] | ||||||||
Percentage of targeted bonus | 200.00% | |||||||
Subsequent Event [Member] | Minimum [Member] | Jeffrey Holman [Member] | ||||||||
Percentage of targeted bonus | 20.00% | |||||||
Subsequent Event [Member] | July 31, 2015 and August 5, 2015 [Member] | ||||||||
Notes payable | $ 4,567,000 | |||||||
Notes payable interest | 632,094 | |||||||
Subsequent Event [Member] | Due November 2015 [Member] | ||||||||
Convertible debt | 1,250,000 | |||||||
Subsequent Event [Member] | Due January 2016 [Member] | ||||||||
Convertible debt | 567,000 | |||||||
Subsequent Event [Member] | Due March 2016 [Member] | ||||||||
Convertible debt | 1,000,000 | |||||||
Subsequent Event [Member] | Due Between September 2015 And December 2015 [Member] | ||||||||
Convertible debt | $ 1,750,000 | |||||||
Subsequent Event [Member] | Series A Preferred Stock [Member] | ||||||||
Conversion of stock description | Each Unit consisted of one-fourth of a shares | |||||||
Subsequent Event [Member] | Series A Preferred Stock [Member] | Common Stock [Member] | ||||||||
Stock convertible into shares | 10 | |||||||
Subsequent Event [Member] | 20 Series A Warrant [Member] | ||||||||
Conversion of stock description | Each Unit consisted of one-fourth of a share | |||||||
Subsequent Event [Member] | 20 Series A Warrant [Member] | Common Stock [Member] | ||||||||
Stock convertible into shares | 1 | |||||||
Common stock exercise price per share | $ 1.24 | |||||||
Subsequent Event [Member] | 20 Series A Warrant [Member] | Common Stock [Member] | August 24, 2015 [Member] | Maximum [Member] | ||||||||
Common stock exercise price per share | $ 2.48 | |||||||
Prior Investors [Member] | Subsequent Event [Member] | ||||||||
Excess of stock issued | 2,559,437 | |||||||
Number of remaining common stock shares issued | 7,607 | |||||||
Past Investors [Member] | Subsequent Event [Member] | ||||||||
Excess of stock issued | 1,798,676 |