Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 13, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | VAPOR CORP. | |
Entity Central Index Key | 844,856 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,300,082 | |
Trading Symbol | VPCO | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
CURRENT ASSETS | ||
Cash | $ 30,570,113 | $ 471,194 |
Due from merchant credit card processor, net of reserve for chargebacks | 111,864 | 111,968 |
Accounts receivable, net allowance of $ 66,222 and $369,731, respectively | 273,659 | 239,652 |
Inventories | 1,867,377 | 2,048,883 |
Prepaid expenses and vendor deposits | $ 607,886 | 664,103 |
Loans receivable, net | 467,095 | |
Deferred financing costs, net | 122,209 | |
TOTAL CURRENT ASSETS | $ 33,430,899 | 4,125,104 |
Property and equipment, net of accumulated depreciation of $166,553 and $84,314, respectively | 440,660 | $ 712,019 |
Intangible assets, net of accumulated amortization of $ 155,237 and $0, respectively | 1,945,363 | |
Goodwill | 15,654,484 | |
Other assets | 169,375 | $ 91,360 |
TOTAL ASSETS | 52,232,774 | 4,928,483 |
CURRENT LIABILITIES: | ||
Accounts payable | 2,056,990 | 1,920,135 |
Accrued expenses | $ 2,391,095 | 975,112 |
Senior convertible notes payable - related parties, net of debt discount of $0 and $1,093,750, respectively | 156,250 | |
Current portion of capital lease | $ 52,595 | 52,015 |
Term loan | 750,000 | |
Customer deposits | $ 66,015 | 140,626 |
Income taxes payable | 3,092 | $ 3,092 |
Derivative liabilities | 3,679,336 | |
TOTAL CURRENT LIABILITIES | 40,475,759 | $ 3,997,230 |
Capital lease, net of current portion | 85,102 | 119,443 |
TOTAL LIABILITIES | $ 40,560,861 | $ 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, 8,455,506 and 3,352,382 shares issued and outstanding, respectively | $ 8,456 | $ 3,352 |
Additional paid-in capital | (14,351) | 16,040,361 |
Retained earnings (accumulated deficit) | 11,676,868 | (15,231,903) |
TOTAL STOCKHOLDERS' EQUITY | 11,671,913 | 811,810 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 52,232,774 | $ 4,928,483 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS’ EQUITY | ||
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued | $ 940 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Accounts receivable, Net of Allowance. | $ 66,222 | $ 369,731 |
Property and equipment, accumulated depreciation | 166,553 | 84,314 |
Intangible assets, accumulated amortization | 155,237 | 0 |
Senior convertible notes payable debt discount net- Related party | $ 0 | $ 1,093,750 |
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 | 8,455,505 | 3,352,382 |
Common stock, shares outstanding | 8,455,505 | 3,352,382 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 940,000 | 0 |
Preferred stock, shares outstanding | 940,000 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
SALES, NET: | ||||
Wholesale and online sales, net | $ 1,894,822 | $ 2,673,926 | $ 4,872,553 | $ 13,547,792 |
Retail sales, net | 984,323 | 2,486,516 | ||
Total Sales | 2,879,145 | $ 2,673,926 | 7,359,069 | $ 13,547,792 |
Cost of sales wholesale and online | 1,517,327 | $ 2,026,422 | 4,215,138 | $ 10,400,944 |
Cost of sales retail | 343,528 | 948,432 | ||
GROSS PROFIT | 1,018,290 | $ 647,504 | 2,195,499 | $ 3,146,848 |
EXPENSES: | ||||
Advertising | 101,088 | 671,817 | 273,663 | 1,815,450 |
Selling, general and administrative | 3,364,475 | $ 2,626,638 | 9,852,329 | $ 7,838,380 |
Retail kiosk closing cost | 430,334 | 719,972 | ||
Total operating expenses | 3,895,897 | $ 3,298,455 | 10,845,964 | $ 9,653,830 |
Operating loss | (2,877,607) | $ (2,650,951) | (8,650,465) | $ (6,506,982) |
OTHER INCOME (EXPENSES): | ||||
Costs associated with underwritten offering (see Note 7) | (5,279,003) | (5,279,003) | ||
Amortization of debt discounts | (67,797) | (833,035) | ||
Amortization of deferred financing costs | (32,857) | (144,903) | ||
Loss on debt extinguishment | (1,544,044) | (1,544,044) | ||
Non-cash change in fair value of derivatives | 45,209,758 | 47,405,025 | ||
Stock-based expense in connection with waiver agreements | (1,757,420) | (3,871,309) | ||
Interest income | 7,183 | 8,499 | ||
Interest expense | (23,244) | $ (8,107) | (101,449) | $ (65,723) |
Interest expense-related party | (10,212) | (80,545) | ||
Total other income (expense) | 36,502,364 | $ (8,107) | 35,559,236 | $ (65,723) |
Income (loss) before for income tax benefit | $ 33,624,757 | (2,659,058) | $ 26,908,771 | (6,572,705) |
Income tax expense | (2,177,057) | (767,333) | ||
NET INCOME (LOSS) | $ 33,624,757 | $ (4,836,115) | $ 26,908,771 | $ (7,340,038) |
Deemed dividend | (38,068,021) | (38,068,021) | ||
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS | $ (4,443,264) | $ (4,836,115) | $ (11,159,250) | $ (7,340,038) |
LOSS PER SHARE -BASIC AND DILUTED | $ (0.55) | $ (1.47) | $ (1.73) | $ (2.24) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 8,050,317 | 3,297,812 | 6,457,981 | 3,274,452 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) | Series A Convertible Preferred Stock [Member] | 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 | ||||
Balance at Dec. 31, 2014 | $ 3,352 | 16,040,361 | (15,231,903) | 811,810 | |
Balance, shares at Dec. 31, 2014 | 3,352,382 | ||||
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 | 446,634 | 447,321 | ||
Issuance of common stock and warrants in connection with private placement, net of offering costs, shares | 686,463 | ||||
Reclassification of conversion option from liability to equity | 13,300 | 13,300 | |||
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 | $ 292 | (292) | |||
Issuance of common stock in connection with delivery of restricted stock units, shares | 292,191 | ||||
Issuance of common stock in connection with waiver deferral agreements | $ 648 | 1,327,548 | $ 1,328,196 | ||
Issuance of common stock in connection with waiver deferral agreements, shares | 647,901 | ||||
Warrants issued as offering costs in connection with convertible note payable | 87,779 | 87,779 | |||
Issuance of 760,761 common stock in connection with waiver agreement | $ 761 | $ 592,633 | 593,394 | ||
Issuance of 760,761 common stock in connection with waiver agreement, shares | $ 760,761 | ||||
Issuance of Series A Units, Series A preferred stock and warrants in connection with underwritten offering | $ 940 | 940 | |||
Issuance of Series A Units, Series A preferred stock and warrants in connection with underwritten offering, shares | $ 940,414 | ||||
Issuance of unit purchase option to underwriter in connection with Series A Units, Series A preferred stock and warrants | $ 1,552,418 | 1,552,418 | |||
Stock-based compensation expense | 470,577 | 470,577 | |||
Deemed dividend on issuance of Series A Units, Series A preferred stock and warrants | $ (38,068,021) | (38,068,021) | |||
Net Income | $ 26,908,771 | 26,908,771 | |||
Balance at Sep. 30, 2015 | $ 940 | $ 8,456 | $ (14,351) | 11,676,868 | 11,671,913 |
Balance, shares at Sep. 30, 2015 | 940,414 | 8,455,505 | |||
Net Income | 33,624,757 | ||||
Balance at Sep. 30, 2015 | $ 940 | $ 8,456 | $ (14,351) | $ 11,676,868 | $ 11,671,913 |
Balance, shares at Sep. 30, 2015 | 940,414 | 8,455,505 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
OPERATING ACTIVITIES: | ||
Net income (loss) | $ 26,908,771 | $ (7,340,038) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Change in allowances | (130,916) | |
Depreciation and amortization | $ 349,301 | $ 15,163 |
Loss on disposal of assets | 478,729 | |
Loss on debt extinguishment | 1,544,044 | |
Amortization of debt discounts | 833,035 | |
Amortization of deferred financing cost | 144,903 | |
Write-down of obsolete and slow moving inventory | 125,855 | |
Stock-based compensation expense | 613,577 | $ 1,375,343 |
Stock-based expense in connection with waiver agreements (See Note 6) | $ 3,871,309 | |
Deferred income tax benefit | $ 766,498 | |
Non-cash change in fair value of derivative liabilities | $ (47,405,025) | |
Unit purchase options granted for underwriters' expense | 1,552,418 | |
Changes in operating assets and liabilities: | ||
Due from merchant credit card processors | 201,245 | $ 90,080 |
Accounts receivable | 47,249 | 1,109,238 |
Inventories | 1,081,209 | (813,624) |
Prepaid expenses and vendor deposits | 84,238 | (131,070) |
Other assets | (74,615) | (309,281) |
Accounts payable | (386,151) | 686,069 |
Accrued expenses | (516,642) | (86,503) |
Customer deposits | $ (74,611) | 72,934 |
Income taxes | (2,715) | |
NET CASH USED IN OPERATING ACTIVITIES | $ (10,621,161) | $ (4,698,822) |
INVESTING ACTIVITIES: | ||
Cash received in connection with Merger | 136,468 | |
Acquisition of retail stores | $ (454,393) | |
Loan receivable | $ (512,207) | |
Collection of loans receivable | $ 467,095 | |
Purchases of tradenames | (20,000) | |
Purchases of property and equipment | (194,766) | $ (101,071) |
NET CASH USED IN INVESTING ACTIVITIES: | (65,596) | $ (613,278) |
FINANCING ACTIVITIES: | ||
Proceeds from private placement of common stock and warrants, net of offering costs | $ 2,941,960 | |
Costs associated with underwritten offering (see Note 7) | $ (109,104) | |
Proceeds from Series A Units | $ 41,378,227 | |
Payment of offering costs in connection with convertible debenture | (196,250) | |
Proceeds from issuance of convertible debenture, net of discount | 1,662,500 | |
Principal payment of convertible debenture | (1,750,000) | |
Principal payments on senior convertible note payable to related parties | $ (1,250,000) | |
Proceeds from notes payable to related party | $ 1,000,000 | |
Principal Payment of notes payable to related party | $ (1,000,000) | |
Principal payment of convertible note payable | (567,000) | |
Principal payments on term loan payable | (750,000) | $ (478,847) |
Principal payments of capital lease obligations | (33,761) | |
Proceeds from loan payable from Vaporin, Inc. | $ 350,000 | |
Proceeds from exercise of stock options | $ 2,500 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ 40,785,676 | 414,549 |
INCREASE (DECREASE) IN CASH | 30,098,919 | (4,897,551) |
CASH - BEGINNING OF PERIOD | 471,194 | 6,570,215 |
CASH - END OF PERIOD | 30,570,113 | 1,672,664 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 251,920 | 76,615 |
Cash paid for income taxes | 2,791 | $ 3,550 |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Deemed dividend | $ 38,068,021 | |
Cashless exercise of common stock purchase warrants | $ 142 | |
Embedded conversion feature recorded as debt discount and derivative liability | $ 248,359 | |
Recognition of debt discount in connection with convertible note discount | 100,800 | |
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 | |
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 | |
Amount allocated to goodwill | (15,654,484) | |
Amount allocated to identifiable intangible assets | $ (2,080,600) | |
Remaining unallocated consideration | ||
Amount allocated to goodwill | $ 591,993 | |
Amount allocated to other assets | 3,400 | |
Amount allocated to Inventory | 44,000 | |
Purchase price | 639,393 | |
Hold back obligation | (185,000) | |
Cash used in retail store acquisitions | $ 454,393 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Cash Flows [Abstract] | ||
Debt discount | $ 54,623 | $ 54,623 |
Organization, Basis of Presenta
Organization, Basis of Presentation, and Recent Developments | 9 Months Ended |
Sep. 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 a distributor and retailer of vaporizers, e-liquids and electronic cigarettes. The Company United States of America Vaporin, Vapor offers e-liquids, vaporizers, e-cigarettes and related products through our vape stores, online, 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 throughout the United States. Basis of Presentation The Companys unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. The condensed consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date. The consolidated financial statements include the accounts of Vapor and 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. All intercompany accounts and transactions have been eliminated in consolidation. 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. Unaudited Interim Financial Information The unaudited condensed consolidated financial statements have been prepared by the Company and reflect all normal, recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the year ending December 31, 2015. Certain information and footnote disclosed normally included in financial statements prepared in accordance with GAAP have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (SEC). These unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2015 and 2014 and notes included herein should be read in conjunction with the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2014 included in the Companys Annual Report on Form 10-K for such year as filed with the SEC on March 31, 2015. Merger with Vaporin, Inc. As 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. Series A Units Offering On July 29, 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 7). |
Summary of Certain Significant
Summary of Certain Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Certain Significant Accounting Policies | Note 2. SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES Reclassifications Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current periods presentation. No changes to the Companys net loss were made as a result of such reclassifications. Liquidity The Company reported a net loss allocable to common shareholders of $11,159,250 for the nine months ended September 30, 2015. The Company had negative working capital of $7,044,860 as of September 30, 2015. The Company expects to continue incurring losses before the impact of changes in fair value of derivatives for the foreseeable future and may need to raise additional capital to pursue its retail store expansion, satisfy warrant obligations, and to continue as a going concern. The Company currently anticipates that its cash and cash equivalents will be sufficient to support operations for at least twelve months from the date of this filing. Management believes that the Company has access to capital resources through possible public or private equity offerings, debt financings, or other means. However, the Company s outstanding warrants sold as part of our July 29, 2015 public offering will separate from the Series A Units on January 23, 2015. Each warrant may be cashlessly exercised for the Black Scholes value defined in the warrant agreement. The number of shares common stock we issue in connection with the exercise of our warrants will be based on our common stock price as of the date of the exercise. The July 29, 2015 public offering underwriters required the Company to obtain shareholder approval to increase our authorized common shares to 500 million. The shareholders approved the increase in the Companys authorized shares on October 16, 2015. If all of the warrants were exercised simultaneously at a time when the trading price of the Companys common stock was below $0.17 per share, then the Company would not have sufficient authorized common stock to satisfy all the warrant exercises and it could be required to use cash to pay warrant holders. Since the Company cannot predict the future stock price and when the warrant holders will exercise warrants and sell the underlying common shares, the Management cannot predict if the Company will have sufficient cash resources to satisfy its obligation to the current warrant holders. Use of estimates in the preparation of the financial statements The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the valuation of the net assets acquired in the Merger and retail store acquisitions. 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 September 30, 2015 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance ($122,046 from Customer A). As to revenues in fiscal 2015, no customer accounted for sales in excess of 10% of the net sales for the three and nine months ended September 30, 2015. 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, one customers accounted for sales in excess of 10% of the net sales for the three months ended September 30, 2014, ($732,225 from Customer A) and two customers for the nine months ended September 30, 2014 ($2,187,797 from Customer A and $1,506,880, from Customer E), respectively. 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 September 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 and Note 4, 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 and retail store acquisitions. Accumulated amortization on the amortizable intangible assets amounted to $155,237 at September 30, 2015. Amortization expense for the three and nine months ended September 30, 2015 amounted to $66,530 and $155,237, respectively. The weighted-average remaining amortization period of the Companys amortizable intangible assets is approximately 6.08 years as of September 30, 2015. The estimated future amortization of the intangible assets is as follows: For the years ending December 31, Amount 2015 (remaining) $ 67,530 2016 270,120 2017 270,120 2018 270,120 2019 270,120 Thereafter 797,353 Total $ 1,945,363 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 complex instruments, we utilize custom Monte Carlo simulation models. For less complex instruments, such as free-standing warrants, the Company generally uses the 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 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 net 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 be bifurcated from their host instruments in accordance with ASC 815. The Company records discounts to convertible notes for the relative fair value of conversion options embedded in debt instruments. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method over a short-term period. 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. Additionally, in August 2015 the FASB issued guidance expanding the April 2015 update (ASU 2015-15). It states that, given the absence of authoritative guidance within the update, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset for revolving lines of credit and subsequently amortizing the deferred debt issuance costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the line of credit. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted for financial statements that have not been previously issued. Full retrospective application is required. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements when adopted. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern |
Merger with Vaporin, Inc
Merger with Vaporin, Inc | 9 Months Ended |
Sep. 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 September 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 third party appraisal commissioned by management. The fair value was based on a 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 September 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 September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Wholesale and online revenues $ 1,894,822 $ 3,232,557 $ 5,329,239 $ 14,708,586 Retail revenues $ 984,323 $ 278,574 $ 3,146,093 $ 278,574 Net loss $ (4,443,264 ) $ (6,194,501 ) $ (12,566,981 ) $ (11,276,342 ) Net loss per share $ (0.55 ) $ (1.39 ) $ (1.95 ) $ (2.90 ) Weighted Average number of shares outstanding 8,050,317 4,451,475 6,457,981 3,882,224 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. |
Retail Stores and Kiosks
Retail Stores and Kiosks | 9 Months Ended |
Sep. 30, 2015 | |
Retail Stores And Kiosks - Schedule Of Purchase Price Allocations Based On Managements Knowledge Of Retail Businesses Acquired Details | |
Retail Stores and Kiosks | Note 4. Retail Stores and Kiosks Retail Stores In the ordinary course of business the Company acquires the assets and business operations of established retail stores. The purchase prices are allocated to inventory, leasehold improvements, fixtures, security deposits, intangible assets, and goodwill. No liabilities are assumed from the seller and the Company has no obligation to retain existing employees. During the three months ended September 30, 2015, the Company acquired three stores resulting in an increase of approximately $592,000 of goodwill, $44,000 of inventory, and $3,400 of security deposits. Leasehold improvements and fixtures acquired were not considered material to these purchases. The Company holds back a portion of the sellers purchase price for three to six months during the operational transition period (the hold back period). If the stores gross minimum revenues during the hold back period do not reach an amount agreed upon by the buyer and seller at closing, then the hold back amount due to the seller is reduced in the final settlement. The hold back amount due to sellers of $185,000 was recorded in accrued liabilities at September 30, 2015. Commissions and ancillary store closing costs are expensed as incurred and reflected in selling general and administrative expenses. The Company entered into retail leases for purchased retail locations and the resulting lease obligation are included in the Companys commitments. (See Note 10) The purchase price allocations were based, on managements knowledge of the retail businesses acquired. Purchase Consideration Value of aggregate net consideration paid: $ 639,393 Inventory 44,000 Other Assets 3,400 Goodwill 591,993 Total allocation to tangible assets and goodwill $ 639,393 Retail Kiosks The Company opened eight mall retail kiosk for its vaping products in October and November 2014. The Companys management decided to close the kiosks after evaluating the short-term performance of the locations and to focus expansion efforts on retail stores. During 2015 the Company closed seven of its mall kiosks, with one location schedule to close in February 2016. In connection with the kiosk closings, for the nine months ended September 30, 2015, the Company incurred $478,729 of loss on disposal of computer equipment, fixtures, and furniture and $241,243 of exit costs for non-cancellable leases and license obligation of which $85,000 was included in accrued expenses at September 30, 2015. The Company incurred $189,091 of loss on disposal of computer equipment and furniture and $241,243 of exit costs for non-cancellable leases and license obligations for the three months ended September 30, 2015. |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Note 5. ACCRUED EXPENSES Accrued expenses are comprised of the following: September 30, 2015 December 31, 2014 Commissions payable $ 194,090 $ 179,000 Retirement plan contributions 66,931 80,000 Accrued severance 155,277 82,000 Accrued customer returns 348,620 360,000 Accrued payroll 25,193 - Accrued prepayment penalties 187,500 - Accrued equity - fair value 863,364 - Accrued exit costs 85,000 - Accrued legal 191,643 - Accrued hold back 185,000 - Other accrued liabilities 88,477 274,112 Total $ 2,391,095 $ 975,112 |
Notes Payable and Receivable
Notes Payable and Receivable | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable and Receivable | Note 6. 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. Between July 31, 2015 and August 5, 2015, the Vaporin Notes were repaid in full, including $567,000 in principal and $29,853 interest, and the Company recorded an extinguishment loss of $25,764. During the three and nine months ended September 30, 2015, the Company recorded $5,318 and $24,535 of interest expense. The Company amortized $8,050 and $28,859 of deferred debt discount, during the three and nine months ended September 30, 2015, respectively, both of which are included in amortization of deferred debt discount on the condensed consolidated statements of operations. $350,000 Convertible Notes Payable On January 29, 2015, the Company issued a $350,000 convertible promissory note (the Note) to Vaporin in consideration of 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. On August 3, 2015, the Secured Line of Credit Agreement was repaid in full, including $1,000,000 in principal and $80,548 interest. During the three and nine months ended September 30, 2015, the Company recorded $10,215 and $60,285 of interest expense, respectively. $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 were due and payable on November 14, 2015, the maturity date of the Notes. Between July 31, 2015 and August 3, 2015, the $1,250,000 Senior Convertible Notes were repaid in full, including $1,250,000 in principal and $62,549 of interest, and the Company recorded an extinguishment loss of $592,820. During the three and nine months ended September 30, 2015, the Company amortized $11,638 and $81,473 of deferred financing costs associated with the $1,250,000 Senior Convertible Notes. During the three and nine months ended September 30, 2015, the Company recorded $195,391 and $230,891 of interest expense (inclusive of prepayment premiums) and amortized $104,167 and $729,167 of deferred debt discount, respectively, both of which are included in amortization of debt discounts on the condensed consolidated statements of operations. $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 $19,542 was amortized using the effective interest method over the life of the Debentures during the three and nine months ended September 30, 2015, which is included in amortization of debt discounts on the condensed consolidated statements of operations. Principal and accrued interest on the Debentures were 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. Between July 31, 2015 and August 4, 2015, the Debentures were paid in full, including $1,750,000 in principal and $459,144 of interest and prepayment premiums, and the Company recorded a $923,275 extinguishment loss. 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 nine months ended September 30, 2015, the Company amortized $21,222 and $63,433, respectively, of deferred financing costs associated with the Debentures. Amounts of principal and accrued interest under the Debentures were 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 8). The aggregate fair value of the embedded conversion feature was $248,359, which 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 nine months ended September 30, 2015, the Company recorded $455,255 and $459,144 of interest expense (inclusive of prepayment premiums) and amortized $41,393 and $55,467 of the deferred debt discount, respectively, both of which are included in interest expense on the condensed consolidated statements of operations. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2015 | |
STOCKHOLDERS’ EQUITY | |
Stockholders' Equity | Note 7. 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 September 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 nine months ended September 30, 2015 and 2014, the Company recognized stock-based compensation expense in the amount of $322,067, and $1,266,058 respectively, which is included as part of selling, general and administrative expense in the accompanying condensed consolidated statements of operations. Compensatory Common Stock Summary During the three and nine months ended September 30, 2015, the Company recognized $156,000 and $299,000 of stock-based compensation associated with other common stock awards (exclusive of Knight Global). A summary of compensatory common stock activity during the nine months ended September 30, 2015 is presented below: Weighted Average Issuance Date Total Number of Fair Value Issuance Date Shares Per Share Fair Value Non-vested, December 31, 2014 50,000 $ 6.44 $ 322,067 Granted 465,545 5.24 2,439,736 Vested (485,545 ) 5.38 (2,605,803 ) Forfeited - - - Non-vested, September 30, 2015 30,000 $ 5.23 $ 156,000 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 shares of 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 five-year Warrants to purchasers of the shares to acquire an aggregate of 549,169 shares of the Companys Common Stock with an exercise price of $6.40 per share. The Warrants were deemed to be derivative liabilities due to a potential cash settlement provision which is not in the Companys control and as a result, the issuance date fair value of $2,494,639 was recorded as a derivative liability. 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 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 $1,086,353, respectively, and was recorded in other expenses on the condensed consolidated statement of operations for the nine months ended September 30, 2015. The warrants issued in connection with the Waivers were determined to be derivative instruments because (a) their exercise prices may be lowered if the Company issues securities at a lower price in the future; and (b) there is a potential cash settlement provision which is not in the Companys control (see Note 8). The aggregate fair value of the warrants was $1,086,353 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 issued shares of common stock, or securities convertible into common stock, at an effective price per share of less than $2.70, the Prior Investors were entitled to the issuance of additional shares (the Additional Shares), the exact amount of which depended on the effective price per share of such subsequent issuance. The Company could not issue any Additional Shares of common stock requiring shareholder approval under the Rules of the Nasdaq Stock Market without receipt of such approval. Subsequently the Company issued shares of common stock in connection with a registered public offering on July 29, 2015. This effectively triggered the need to issue Additional Shares that have been calculated by the Company as 2,559,437 common shares. Pursuant to the Rules of the Nasdaq Stock Market, the Company needed to seek shareholder approval before issuing 1,798,676 of these shares and such approval was obtained on October 16, 2015. On July 29, 2015, the trigger date value of the full issuance obligation of $2,559,437 was recorded as accrued expense and stock-based expense on the condensed consolidated statement of operations. On August 18, 2015, the Company issued 760,761 shares of common stock and recorded a gain of $167,367 when the accrual was trued up to the issuance date fair value of $593,394. On September 30, 2015, the Company recorded a gain of $935,312 when the accrual associated with the obligation to issue the remaining 1,798,676 shares of common stock was trued up to the reporting date fair value of $863,364. The charges and credits associated with the Additional Shares were recorded in accrued expenses on the condensed consolidated statement of operations for the nine months ended September 30, 2015. Series A Unit Public Offering On July 29, 2015, the Company closed a 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 and become convertible and exercisable, respectively, 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. The Series A preferred stock (a) ranks equal to the common stock on an as converted basis with regard to the payment of dividends or upon liquidation; (b) automatically converts into 40 shares of common stock upon the consummation of a Fundamental Transaction, as defined; (c) has no voting rights, except related to the amendment of the terms of the Series A preferred stock; and (d) has conversion limits whereby the holder may not beneficially own in excess of 4.99% of the common stock. The Series A warrants were determined to be derivative liabilities because there is a potential cash settlement provision which isnt under the Companys control (see Note 8). Utilizing a Monte Carlo valuation method, the issuance date value of the warrant liabilities was calculated to be $79.4 million. Because the value of the warrant liabilities exceeded the gross proceeds from the public offering, the Company recorded a $38.1 million deemed dividend on the preferred stock. Each warrant may be cashlessly exercised for the Black Scholes value defined in the warrant agreement. The number of shares common stock the Company will issue in connection with the exercise of our warrants will be based on the common stock price as of the date of the exercise. The Companys shareholders approved an increase to 500 million authorized common share on October 16, 2015. If all of the warrants were exercised simultaneously when the Companys common stock traded below a certain price per share the Company may not have sufficient authorized common stock and could be required to use cash to pay warrant holders. In connection with the closing of this offering, the Company incurred $4,779,003 of issuance costs, including cash underwriting fees of $2,722,687, other cash costs of approximately $503,898 and the issuance date value of $1,552,418 (utilizing the Black-Scholes-Merton valuation model) of the underwriters Series A unit purchase option, which gives the underwriter the option to purchase 188,083 units (5% of those sold in the public offering) at an exercise price of $13.75 per unit until the five-year anniversary of the closing of the public offering. All of the issuance costs were allocated to the Series A warrant liabilities because no carrying value was attributed to the Series A preferred stock and, as a result, the issuance costs were expensed immediately. 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. Warrants A summary of warrant activity for the nine months ended September 30, 2015 is presented below: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Term (Yrs.) Aggregate Intrinsic Value Outstanding at January 1, 2015 243,218 $ 10.06 Warrants granted 76,447,995 1.29 Warrants exercised - - Warrants assumed in Merger 49,594 26.22 Warrants forfeited or expired - - Outstanding at September 30, 2015 76,740,807 $ 1.33 4.8 $ - Exercisable at September 30, 2015 76,740,807 $ 1.33 4.8 $ - The following table presents additional information related to warrants as of September 30, 2015: Warrants Outstanding Warrants Exercisable Weighted Weighted Weighted Range of Average Outstanding Average Average Exercisable Exercise Exercise Number of Exercise Remaining Life Number of Price Price Warrants Price In Years Warrants $1.00 - $1.99 $ 1.24 75,251,835 $ 1.24 4.8 75,251,835 $2.00 - $4.99 2.52 677,733 2.52 4.7 677,733 $5.00 - $6.99 6.40 551,305 6.40 4.4 551,305 $7.00 - $16.99 10.05 240,265 10.05 4.1 240,265 $17.00 - $66.20 64.52 19,669 64.52 2.1 19,669 76,740,807 4.8 76,740,807 Stock-based Compensation Stock Option Plans On July 7, 2015, the shareholders approved the 2015 Equity Incentive Plan (the 2015 Plan), providing for the issuance of up to 1,000,000 shares of common stock. The 2015 Plan is a broad-based plan and awards granted may be restricted stock, restricted stock units, options and stock appreciation rights. The 2015 Plan had 1,000,000 shares of common stock available for grant September 30, 2015. Options outstanding at September 30, 2015 under the 2009 Equity Incentive plans are as follows: Plan Total Number of Options Outstanding under Plans Non Plan Grants -Equity compensation not approved by security holders (1) 180,000 2009 Equity Incentive Plan 39,206 219,206 (1) Represents options granted in October 2009, all of which expired subsequently on October 1, 2015. A summary of activity under the 2009 Equity Incentive Plan and Non Plan Grants at September 30, 2015 and changes during the nine months ended September 30, 2015: Number of Options Weighted Average Exercise Price Weighted- Average Remaining Term (Yrs.) Aggregate Intrinsic Value Outstanding at January 1, 2015 268,860 $ 3.64 - $ - Options granted 3,947 5.61 - - Options exercised - - - - Options forfeited or expired (53,600 ) 6.83 - - Outstanding at September 30, 2015 219,206 $ 2.22 1.1 $ - Exercisable at September 30, 2015 210,853 $ 2.20 0.9 $ - Available for grant at September 30, 2015 311,134 The following table presents additional information related to options as of September 30, 2015: Options Outstanding Options Exercisable Weighted Weighted Weighted Range of Average Outstanding Average Average Exercisable Exercise Exercise Number of Exercise Remaining Life Number of Price Price Options Price In Years Options $1.00 - $1.50 $ 1.06 21,540 $ 1.06 6.5 17,480 $1.51 - $1.99 1.58 8,440 1.58 5.6 8,106 $2.00 - $5.99 2.31 187,356 2.31 0.1 183,397 $6.00- $9.63 9.63 1,870 9.63 2.0 1,870 219,206 0.9 210,853 During the three months ended September 30, 2015 and 2014, the Company recognized stock-based compensation of an $80,688 credit, for the recovery of stock-based charges for forfeited stock options and a $54,360 charge, respectively, in connection with the amortization of stock option expense. During the nine months ended September 30, 2015 and 2014, the Company recognized stock-based compensation of a $7,491 credit, for the recovery of stock-based charges for forfeited stock options and a $109,286 charge, respectively, in connection with the amortization of stock option expense. 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 nine months 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 September 30, 2015 the amount of unamortized stock-based compensation expense on unvested stock options granted to employees, directors and consultants was $43,121 and will be amortized over 1.4 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 exercise of the Companys warrants (using the if-converted method). Diluted loss per share excludes the potential common shares, 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: September 30, 2015 2014 Restricted stock units 30,000 250,000 Stock options 219,206 1,352,800 Warrants 76,740,807 22,910 Total 76,990,013 1,625,710 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 8. 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 September 30, 2015: Level 1 Level 2 Level 3 Total LIABILITIES: Accrued equity $ 863,364 $ - $ - $ 863,364 Warrant liabilities - - 35,905,972 35,905,972 Total derivative liabilities $ 863,364 $ - $ 35,905,972 $ 36,769,336 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 liabilities $ - $ - $ - $ - Level 1 Accrued equity represents the Companys obligation to issue shares to certain investors under waivers. (See Note 7) 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 and the use of at least one significant unobservable input. 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. 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 to be derivative instruments if they (a) do not have fixed settlement provisions; or (b) have potential cash settlement provisions which are not within the Companys control. The embedded conversion feature within the Debentures (see Note 6) and the common stock purchase warrants (a) reissued by the Company in connection with the Merger; (b) issued in connection with the March 3, 2015 financing (see Note 7); (c) granted in connection with the Waivers (see Note 7); and (d) issued in connection with the underwritten offering (see Note 7); have all been deemed to be derivative liabilities. 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 Monte Carlo model and 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 unobservable inputs. The following tables summarizes the values of certain assumptions used by the Companys custom models to estimate the fair value of the embedded conversion options and warrant liabilities during the nine months ended September 30, 2015: 2015 July 31, July 29, June 25, March 3, Stock price $ 0.87 $ 1.00 $ 1.70 $ 5.50 Strike price $ 2.50 $ 1.24 $ 2.53 $ 6.40 Remaining term (years) 0.40 5.00 5.00 5.00 Volatility 107 % 107 % 108 % 115 % Risk-free rate 0.12 % 1.62 % 1.70 % 1.61 % Dividend yield 0.0 % 0.0 % 0.0 % 0.0 % 2015 September 30, June 30, March 31, Stock price $ 0.48 $ 1.60 $ 5.20 Strike price $1.24-$6.40 $2.53-$6.40 $ 6.40 Remaining term (years) 4.42-4.83 4.68-4.99 4.93 Volatility 110 % 108 % 124 % Risk-free rate 1.37 % 1.63 % 1.37 % Dividend yield 0.0 % 0.0 % 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 September 30, 2015 For the nine months ended September 30, 2015 Beginning balance $ 1,683,722 $ - Issuance of Series A warrant liabilities 79,445,308 79,445,308 Issuance of other warrant liabilities and conversion options - 3,878,989 Warrants issued in connection with the Waivers (13,300 ) (13,300 ) Change in fair value of derivative liabilities (45,209,758 ) (47,405,025 ) Ending balance $ 35,905,972 $ 35,905,972 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9. 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 2014 when it exercised the second of three successive one-year renewal options. The lease provides for annual rental payments of $144,000 per annum (including 45 days of total rent abatement) during the initial twenty-four month term and annual rental payments of $151,200, $158,760 and $174,636 during each of the three one-year renewal options. In October 2013, the Company amended the master lease to include an additional approximately 2,200 square feet for an additional annual rental payment of $18,000 subject to the same renewal options and other terms and conditions set forth in the master lease. 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, taxes and utilities. During nine months ended September 30, 2015, the Company closed the four kiosks located in Maryland and New Jersey. The Company settled the lease commitment with the 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 nine months ended September 30, 2015. During the nine months ended September 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 nine months ended September 30, 2015. 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) retail stores. Consistent with the Companys retail expansion, 3 additional retail store leases were acquired in the three months ended September 30, 2015. Future minimum lease payments under non-cancelable operating leases that have initial or remaining terms in excess of one year at September 30, 2015 are due as follows: The remaining minimum annual rents for the years ending December 31 are: 2015 (remainder) $ 141,839 2016 490,503 2017 380,113 2018 60,251 2019 31,952 2020 18,963 Total $ 1,123,621 Rent expense for the three months ended September 30, 2015 and 2014 was $109,239 and $46,841, respectively, and for the nine months ended September 30, 2015 and 2014 was $601,301 and $137,852, respectively, and is included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations. Changes in Officers and Officer Employment Agreements 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 September 30, 2015. Effective September 15, 2015, Vapor Corp. the Company appointed Gina Hicks as its Chief Financial Officer. On September 10, 2015, the Board of Directors approved the decision to replace Mr. James Martin, the Companys former Chief Financial Officer, with Ms. Hicks. In connection with her appointment, Ms. Hicks receives a base salary of $175,000 per year. Mr. Martin received severance compensation and accrued vacation in the total amount of $87,500, which is divided into equal weekly payments that end on March 11, 2016 and has been included in accrued liabilities as of September 30, 2015.As of September 30, 2015, $155,277 of accrued severances is included in accrued expenses on the condensed consolidated balance sheet. 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 earnings before interest, taxes depreciation and amortization (Adjusted EBITDA) performance milestones. Adjusted EBITDA is defined in the Employment Agreements as earnings (loss) from continuing operations before interest expense, income taxes, collateral valuation adjustment, bad debt expense, one-time expenses, depreciation and amortization and amortization of stock compensation or Adjusted EBITDA defined in any filing of the Company with the SEC subsequent to the date of the Employment Agreements. 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. 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. 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 preliminary settlement discussions with mediation and pre-trail dates upcoming. We have no further opinion on the outcome of these matters. 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 without warnings 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 engaged counsel and intend to vigorously defend the allegations. Discovery commenced in November 2015. The Company believes that all of the products sold by Vapor Corp. have always contained an appropriate warning or no warning was required. The Vape Store, Inc., operates vape stores located in the states of Florida and Georgia, and has not, to the best of its current knowledge, sold any products into the State of California. Purchase Commitments At September 30, 2015 and December 31, 2014, the Company has vendor deposits of $392,161 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 | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 10. 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 October 9, 2015 the Company acquired the assets of three established retail stores in Atlanta, Georgia. On November 6, 2015 the Company acquired the assets of three retail stores and a warehouse located in Atlanta, Georgia, Birmingham, Alabama, and Nashville, Tennessee. The Company incurred aggregate cost of $1,610,000 for the acquisitions. On October 1, 2015, the Companys shareholders authorized the Company to amend the Companys Certificate of Incorporation to increase the authorized shares of common stock from 150 million to 500 million. On October 30, 2015 the Company issued an aggregate 15,000 shares of common stock to two employees and a consultant as compensation for services rendered to the Company. On November 10, 2015, the Company issued 1,798,676 shares of common stock to certain investors in order to comply with its contractual obligations under waiver agreements (See Note 7) The Companys shareholder approved the issuance of the shares at the October 16, 2015 shareholder meeting. |
Revision of Interim Financial S
Revision of Interim Financial Statements | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Changes and Error Corrections [Abstract] | |
Revision of Interim Financial Statements | NOTE 11. REVISION OF INTERIM FINANCIAL STATEMENTS On March 3, 2015, the Company entered into a Securities Purchase Agreement with certain accredited investors and issued five-year Warrants to purchasers of the shares to acquire an aggregate of 549,169 shares of the Companys Common Stock with an exercise price of $6.40 per share. The Warrants were deemed to be derivative liabilities due to a potential cash settlement provision which isnt under the Companys control and as a result, the issuance date fair value of $2,494,639 should have been recorded as a derivative liability and a reduction of additional paid in capital at March 31, 2015. During the three months ended March 31, and June 30, 2015 the Company should have recorded the change in the fair value of the derivative liabilities resulting in gains of $288,791 and $1,744,430, respectively. The Company recorded the warrant derivative liability at September 30, 2015 and the net change in the fair value of the related derivative liability was recorded in the three months ended September 30, 2015 (See Note 8). Management has evaluated the effect of the errors and determined that they are qualitatively immaterial to the Companys condensed consolidated financial position and results of operations as of March 31, 2015 and for the three months then ended, and as of June 30, 2015 and for the three and six months then ended, and, therefore, amendments of the previously filed quarterly reports on Form 10-Q are not considered necessary. However, if the adjustments to correct the cumulative errors had been recorded in the first and second quarters of 2015, the Company believes the impact would have been significant to the first and second quarters of 2015 and would impact comparisons to prior periods. In accordance with guidelines issued in Staff Accounting Bulletin No. 108, the Company had recorded adjustments in the current quarters beginning additional paid in capital, current liabilities and accumulated deficit accounts to correct this error. We have also revised in this current Form 10-Q filing, and plan to revise in future filings of our Form 10-Q, the previously reported unaudited interim condensed consolidated financial statements for the first and second quarters of 2015 on Form 10-Q for these amounts. The following table sets forth the revised prior period balances reported in our comparative financial statements as if adjustments had been made: June 30, 2015 March 31, 2015 Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Balance Sheet: TOTAL CURRENT ASSETS $ 4,897,017 $ - $ 4,897,017 $ 5,613,832 $ - $ 5,613,832 TOTAL ASSETS $ 23,368,586 $ - $ 23,368,586 $ 24,052,575 $ - $ 24,052,575 TOTAL CURRENT LIABILITIES $ 8,909,594 $ 476,175 $ 9,385,769 $ 6,425,802 $ 2,205,848 $ 8,631,650 TOTAL LIABILITIES $ 9,012,599 $ 476,175 $ 9,488,774 $ 6,532,997 $ 2,205,848 $ 8,738,845 TOTAL STOCKHOLDERS EQUITY $ 14,355,987 $ (476,175 ) $ 13,879,812 $ 17,519,578 $ (2,205,848 ) $ 15,313,730 For the Six Months Ended June 30, 2015 For the Three Months Ended June 30, 2015 For the Three Months Ended March 31, 2015 Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Statements of Operations: Operating loss $ (5,772,859 ) $ - $ (5,772,859 ) $ (2,242,004 ) $ - $ (2,242,004 ) $ (3,530,855 ) $ - $ (3,530,855 ) Total other (expense) income (2,961,592 ) 2,018,464 (943,128 ) (2,511,251 ) 1,729,673 (781,578 ) (450,341 ) 288,791 (161,550 ) Loss before income tax benefit (8,734,451 ) 2,018,464 (6,715,987 ) (4,753,255 ) 1,729,673 (3,023,582 ) (3,981,196 ) 288,791 (3,692,405 ) Income tax benefit - - - - - - - - - NET INCOME (LOSS) $ (8,734,451 ) $ 2,018,464 $ (6,715,987 ) $ (4,753,255 ) $ 1,729,673 $ (3,023,582 ) $ (3,981,196 ) $ 288,791 $ (3,692,405 ) Deemed dividend - - - - - - - - - NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS $ (8,734,451 ) $ 2,018,464 $ (6,715,987 ) $ (4,753,255 ) $ 1,729,673 $ (3,023,582 ) $ (3,981,196 ) $ 288,791 $ (3,692,405 ) LOSS PER SHARE - BASIC AND DILUTED $ (1.55 ) $ (1.19 ) $ (0.69 ) $ (0.44 ) $ (0.89 ) $ (0.82 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED 5,648,617 5,648,617 6,901,868 6,901,868 4,494,855 4,494,855 For the Six Months Ended June 30, 2015 For the Three Months Ended March 31, 2015 Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Statements of Cash Flows: Cash flows from operating activities: NET INCOME (LOSS) $ (8,734,451 ) $ 476,175 $ (8,258,276 ) $ (3,981,196 ) $ 1,729,673 $ (2,251,523 ) Adjustments to reconcile net loss to net cash used in operating activities 3,922,257 (476,175 ) 3,446,082 1,200,468 (1,729,673 ) (529,205 ) NET CASH USED IN OPERATING ACTIVITIES $ (3,795,239 ) $ - $ (3,795,239 ) $ (2,149,505 ) $ - $ (2,149,505 ) NET CASH USED BY INVESTING ACTIVITIES: $ 448,344 $ - $ 448,344 $ 536,071 $ - $ 536,071 NET CASH PROVIDED BY FINANCING ACTIVITIES $ 4,245,791 $ - $ 4,245,791 $ 3,043,439 $ - $ 3,043,439 |
Summary of Certain Significan19
Summary of Certain Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Reclassifications | Reclassifications Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current periods presentation. No changes to the Companys net loss were made as a result of such reclassifications. |
Liquidity | Liquidity The Company reported a net loss allocable to common shareholders of $11,159,250 for the nine months ended September 30, 2015. The Company had negative working capital of $7,044,860 as of September 30, 2015. The Company expects to continue incurring losses before the impact of changes in fair value of derivatives for the foreseeable future and may need to raise additional capital to pursue its retail store expansion, satisfy warrant obligations, and to continue as a going concern. The Company currently anticipates that its cash and cash equivalents will be sufficient to support operations for at least twelve months from the date of this filing. Management believes that the Company has access to capital resources through possible public or private equity offerings, debt financings, or other means. However, the Company s outstanding warrants sold as part of our July 29, 2015 public offering will separate from the Series A Units on January 23, 2015. Each warrant may be cashlessly exercised for the Black Scholes value defined in the warrant agreement. The number of shares common stock we issue in connection with the exercise of our warrants will be based on our common stock price as of the date of the exercise. The July 29, 2015 public offering underwriters required the Company to obtain shareholder approval to increase our authorized common shares to 500 million. The shareholders approved the increase in the Companys authorized shares on October 16, 2015. If all of the warrants were exercised simultaneously at a time when the trading price of the Companys common stock was below $0.17 per share, then the Company would not have sufficient authorized common stock to satisfy all the warrant exercises and it could be required to use cash to pay warrant holders. Since the Company cannot predict the future stock price and when the warrant holders will exercise warrants and sell the underlying common shares, the Management cannot predict if the Company will have sufficient cash resources to satisfy its obligation to the current warrant holders. |
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 valuation of the net assets acquired in the Merger and retail store acquisitions. 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 September 30, 2015 accounts receivable balances included a concentration from one customer of an amount greater than 10% of the total net accounts receivable balance ($122,046 from Customer A). As to revenues in fiscal 2015, no customer accounted for sales in excess of 10% of the net sales for the three and nine months ended September 30, 2015. 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, one customers accounted for sales in excess of 10% of the net sales for the three months ended September 30, 2014, ($732,225 from Customer A) and two customers for the nine months ended September 30, 2014 ($2,187,797 from Customer A and $1,506,880, from Customer E), respectively. |
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 September 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 and Note 4, 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 and retail store acquisitions. Accumulated amortization on the amortizable intangible assets amounted to $155,237 at September 30, 2015. Amortization expense for the three and nine months ended September 30, 2015 amounted to $66,530 and $155,237, respectively. The weighted-average remaining amortization period of the Companys amortizable intangible assets is approximately 6.08 years as of September 30, 2015. The estimated future amortization of the intangible assets is as follows: For the years ending December 31, Amount 2015 (remaining) $ 67,530 2016 270,120 2017 270,120 2018 270,120 2019 270,120 Thereafter 797,353 Total $ 1,945,363 |
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 complex instruments, we utilize custom Monte Carlo simulation models. For less complex instruments, such as free-standing warrants, the Company generally uses the 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 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 net 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 be bifurcated from their host instruments in accordance with ASC 815. The Company records discounts to convertible notes for the relative fair value of conversion options embedded in debt instruments. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method over a short-term period. |
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. Additionally, in August 2015 the FASB issued guidance expanding the April 2015 update (ASU 2015-15). It states that, given the absence of authoritative guidance within the update, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset for revolving lines of credit and subsequently amortizing the deferred debt issuance costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on the line of credit. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, with early adoption permitted for financial statements that have not been previously issued. Full retrospective application is required. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements when adopted. In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Simplifying the Measurement of Inventory In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern |
Summary of Certain Significan20
Summary of Certain Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 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) $ 67,530 2016 270,120 2017 270,120 2018 270,120 2019 270,120 Thereafter 797,353 Total $ 1,945,363 |
Merger with Vaporin, Inc (Table
Merger with Vaporin, Inc (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Schedule of Business Considertion | The fair value was based on a 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 September 30, For the Nine Months Ended September 30, 2015 2014 2015 2014 Wholesale and online revenues $ 1,894,822 $ 3,232,557 $ 5,329,239 $ 14,708,586 Retail revenues $ 984,323 $ 278,574 $ 3,146,093 $ 278,574 Net loss $ (4,443,264 ) $ (6,194,501 ) $ (12,566,981 ) $ (11,276,342 ) Net loss per share $ (0.55 ) $ (1.39 ) $ (1.95 ) $ (2.90 ) Weighted Average number of shares outstanding 8,050,317 4,451,475 6,457,981 3,882,224 |
Retail Stores and Kiosks (Table
Retail Stores and Kiosks (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Retail Stores And Kiosks - Schedule Of Purchase Price Allocations Based On Managements Knowledge Of Retail Businesses Acquired Details | |
Schedule of Purchase Price Allocations Based on Management's Knowledge of Retail Businesses Acquired | The purchase price allocations were based, on managements knowledge of the retail businesses acquired. Purchase Consideration Value of aggregate net consideration paid: $ 639,393 Inventory 44,000 Other Assets 3,400 Goodwill 591,993 Total allocation to tangible assets and goodwill $ 639,393 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses are comprised of the following: September 30, 2015 December 31, 2014 Commissions payable $ 194,090 $ 179,000 Retirement plan contributions 66,931 80,000 Accrued severance 155,277 82,000 Accrued customer returns 348,620 360,000 Accrued payroll 25,193 - Accrued prepayment penalties 187,500 - Accrued equity - fair value 863,364 - Accrued exit costs 85,000 - Accrued legal 191,643 - Accrued hold back 185,000 - Other accrued liabilities 88,477 274,112 Total $ 2,391,095 $ 975,112 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Compensatory Common Stock Activity | Weighted Average Issuance Date Total Number of Fair Value Issuance Date Shares Per Share Fair Value Non-vested, December 31, 2014 50,000 $ 6.44 $ 322,067 Granted 465,545 5.24 2,439,736 Vested (485,545 ) 5.38 (2,605,803 ) Forfeited - - - Non-vested, September 30, 2015 30,000 $ 5.23 $ 156,000 |
Summary of Warrant Activity | A summary of warrant activity for the nine months ended September 30, 2015 is presented below: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Term (Yrs.) Aggregate Intrinsic Value Outstanding at January 1, 2015 243,218 $ 10.06 Warrants granted 76,447,995 1.29 Warrants exercised - - Warrants assumed in Merger 49,594 26.22 Warrants forfeited or expired - - Outstanding at September 30, 2015 76,740,807 $ 1.33 4.8 $ - Exercisable at September 30, 2015 76,740,807 $ 1.33 4.8 $ - |
Summary of Options Outstanding | Options outstanding at September 30, 2015 under the 2009 Equity Incentive plans are as follows: Plan Total Number of Options Outstanding under Plans Non Plan Grants -Equity compensation not approved by security holders (1) 180,000 2009 Equity Incentive Plan 39,206 219,206 (1) Represents options granted in October 2009, all of which expired subsequently on October 1, 2015. |
Summary of Stock Option Activity Under All Option Plans | A summary of activity under the 2009 Equity Incentive Plan and Non Plan Grants at September 30, 2015 and changes during the nine months ended September 30, 2015: Number of Options Weighted Average Exercise Price Weighted- Average Remaining Term (Yrs.) Aggregate Intrinsic Value Outstanding at January 1, 2015 268,860 $ 3.64 - $ - Options granted 3,947 5.61 - - Options exercised - - - - Options forfeited or expired (53,600 ) 6.83 - - Outstanding at September 30, 2015 219,206 $ 2.22 1.1 $ - Exercisable at September 30, 2015 210,853 $ 2.20 0.9 $ - Available for grant at September 30, 2015 311,134 |
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: September 30, 2015 2014 Restricted stock units 30,000 250,000 Stock options 219,206 1,352,800 Warrants 76,740,807 22,910 Total 76,990,013 1,625,710 |
Warrants [Member] | |
Schedule of Additional Information Related to Warrants and Options | The following table presents additional information related to warrants as of September 30, 2015: Warrants Outstanding Warrants Exercisable Weighted Weighted Weighted Range of Average Outstanding Average Average Exercisable Exercise Exercise Number of Exercise Remaining Life Number of Price Price Warrants Price In Years Warrants $1.00 - $1.99 $ 1.24 75,251,835 $ 1.24 4.8 75,251,835 $2.00 - $4.99 2.52 677,733 2.52 4.7 677,733 $5.00 - $6.99 6.40 551,305 6.40 4.4 551,305 $7.00 - $16.99 10.05 240,265 10.05 4.1 240,265 $17.00 - $66.20 64.52 19,669 64.52 2.1 19,669 76,740,807 4.8 76,740,807 |
Stock Options [Member] | |
Schedule of Additional Information Related to Warrants and Options | The following table presents additional information related to options as of September 30, 2015: Options Outstanding Options Exercisable Weighted Weighted Weighted Range of Average Outstanding Average Average Exercisable Exercise Exercise Number of Exercise Remaining Life Number of Price Price Options Price In Years Options $1.00 - $1.50 $ 1.06 21,540 $ 1.06 6.5 17,480 $1.51 - $1.99 1.58 8,440 1.58 5.6 8,106 $2.00 - $5.99 2.31 187,356 2.31 0.1 183,397 $6.00- $9.63 9.63 1,870 9.63 2.0 1,870 219,206 0.9 210,853 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 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 September 30, 2015: Level 1 Level 2 Level 3 Total LIABILITIES: Accrued equity $ 863,364 $ - $ - $ 863,364 Warrant liabilities - - 35,905,972 35,905,972 Total derivative liabilities $ 863,364 $ - $ 35,905,972 $ 36,769,336 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 liabilities $ - $ - $ - $ - |
Summary the Fair Value of Assumption of Warrant Liabilities | The following tables summarizes the values of certain assumptions used by the Companys custom models to estimate the fair value of the embedded conversion options and warrant liabilities during the nine months ended September 30, 2015: 2015 July 31, July 29, June 25, March 3, Stock price $ 0.87 $ 1.00 $ 1.70 $ 5.50 Strike price $ 2.50 $ 1.24 $ 2.53 $ 6.40 Remaining term (years) 0.40 5.00 5.00 5.00 Volatility 107 % 107 % 108 % 115 % Risk-free rate 0.12 % 1.62 % 1.70 % 1.61 % Dividend yield 0.0 % 0.0 % 0.0 % 0.0 % 2015 September 30, June 30, March 31, Stock price $ 0.48 $ 1.60 $ 5.20 Strike price $1.24-$6.40 $2.53-$6.40 $ 6.40 Remaining term (years) 4.42-4.83 4.68-4.99 4.93 Volatility 110 % 108 % 124 % Risk-free rate 1.37 % 1.63 % 1.37 % Dividend yield 0.0 % 0.0 % 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 September 30, 2015 For the nine months ended September 30, 2015 Beginning balance $ 1,683,722 $ Issuance of Series A warrant liabilities 79,445,308 79,445,308 Issuance of other warrant liabilities and conversion options - 3,878,989 Warrants issued in connection with the Waivers (13,300 ) (13,300 ) Change in fair value of derivative liabilities (45,209,758 ) (47,405,025 ) Ending balance $ 35,905,972 $ 35,905,972 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 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) $ 141,839 2016 490,503 2017 380,113 2018 60,251 2019 31,952 2020 18,963 Total $ 1,123,621 |
Revision of Interim Financial27
Revision of Interim Financial Statements (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Revision Of Interim Financial Statements Tables | |
Schedule of Condensed Financial Statements | The following table sets forth the revised prior period balances reported in our comparative financial statements as if adjustments had been made: June 30, 2015 March 31, 2015 Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Balance Sheet: TOTAL CURRENT ASSETS $ 4,897,017 $ - $ 4,897,017 $ 5,613,832 $ - $ 5,613,832 TOTAL ASSETS $ 23,368,586 $ - $ 23,368,586 $ 24,052,575 $ - $ 24,052,575 TOTAL CURRENT LIABILITIES $ 8,909,594 $ 476,175 $ 9,385,769 $ 6,425,802 $ 2,205,848 $ 8,631,650 TOTAL LIABILITIES $ 9,012,599 $ 476,175 $ 9,488,774 $ 6,532,997 $ 2,205,848 $ 8,738,845 TOTAL STOCKHOLDERS EQUITY $ 14,355,987 $ (476,175 ) $ 13,879,812 $ 17,519,578 $ (2,205,848 ) $ 15,313,730 For the Six Months Ended June 30, 2015 For the Three Months Ended June 30, 2015 For the Three Months Ended March 31, 2015 Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Statements of Operations: Operating loss $ (5,772,859 ) $ - $ (5,772,859 ) $ (2,242,004 ) $ - $ (2,242,004 ) $ (3,530,855 ) $ - $ (3,530,855 ) Total other (expense) income (2,961,592 ) 2,018,464 (943,128 ) (2,511,251 ) 1,729,673 (781,578 ) (450,341 ) 288,791 (161,550 ) Loss before income tax benefit (8,734,451 ) 2,018,464 (6,715,987 ) (4,753,255 ) 1,729,673 (3,023,582 ) (3,981,196 ) 288,791 (3,692,405 ) Income tax benefit - - - - - - - - - NET INCOME (LOSS) $ (8,734,451 ) $ 2,018,464 $ (6,715,987 ) $ (4,753,255 ) $ 1,729,673 $ (3,023,582 ) $ (3,981,196 ) $ 288,791 $ (3,692,405 ) Deemed dividend - - - - - - - - - NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS $ (8,734,451 ) $ 2,018,464 $ (6,715,987 ) $ (4,753,255 ) $ 1,729,673 $ (3,023,582 ) $ (3,981,196 ) $ 288,791 $ (3,692,405 ) LOSS PER SHARE - BASIC AND DILUTED $ (1.55 ) $ (1.19 ) $ (0.69 ) $ (0.44 ) $ (0.89 ) $ (0.82 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED 5,648,617 5,648,617 6,901,868 6,901,868 4,494,855 4,494,855 For the Six Months Ended June 30, 2015 For the Three Months Ended March 31, 2015 Amounts previously reported Adjustment As Revised Amounts previously reported Adjustment As Revised Statements of Cash Flows: Cash flows from operating activities: NET INCOME (LOSS) $ (8,734,451 ) $ 476,175 $ (8,258,276 ) $ (3,981,196 ) $ 1,729,673 $ (2,251,523 ) Adjustments to reconcile net loss to net cash used in operating activities 3,922,257 (476,175 ) 3,446,082 1,200,468 (1,729,673 ) (529,205 ) NET CASH USED IN OPERATING ACTIVITIES $ (3,795,239 ) $ - $ (3,795,239 ) $ (2,149,505 ) $ - $ (2,149,505 ) NET CASH USED BY INVESTING ACTIVITIES: $ 448,344 $ - $ 448,344 $ 536,071 $ - $ 536,071 NET CASH PROVIDED BY FINANCING ACTIVITIES $ 4,245,791 $ - $ 4,245,791 $ 3,043,439 $ - $ 3,043,439 |
Organization, Basis of Presen28
Organization, Basis of Presentation, and Recent Developments (Details Narrative) - USD ($) | Jul. 30, 2015 | Jul. 29, 2015 | Jul. 07, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 17, 2014 |
Excess of stock shares authorized | 500,000,000 | 150,000,000 | ||||
Reverse split stock | the 1 for 5 reverse split of the Companys common stock effectuated on July 8, 2015. | |||||
Reverse stock split amendment date | Jul. 8, 2015 | |||||
Percentage of ownership | 50.00% | |||||
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 | $ (109,104) | ||||
Series A Preferred Stock [Member] | ||||||
Conversion of stock description | Each Unit consisted of one-fourth of a share of Series A preferred stock and 20 Series A warrants | |||||
Series A Preferred Stock [Member] | Common Stock [Member] | ||||||
Stock convertible into shares | 10 | |||||
Series A Warrant [Member] | ||||||
Conversion of stock description | 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 | |||||
20 Series A Warrant [Member] | Common Stock [Member] | ||||||
Stock convertible into shares | 1 | |||||
Common stock exercise price per share | $ 1.24 |
Summary of Certain Significan29
Summary of Certain Significant Accounting Policies (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2015USD ($)Integre$ / shares | Sep. 30, 2014USD ($)Integre | Sep. 30, 2015USD ($)Bonifide$ / shares | Sep. 30, 2014USD ($)Integre | Dec. 31, 2014USD ($)Integre | Jul. 29, 2015shares | Jul. 07, 2015shares | |
Net loss allocable to common shareholders | $ 4,443,264 | $ 4,836,115 | $ 11,159,250 | $ 7,340,038 | |||
Negative working capital | $ 7,044,860 | $ 7,044,860 | |||||
Increase authorized common shares | shares | 500,000,000 | 150,000,000 | |||||
Common stock tradded price per share | $ / shares | $ 0.17 | $ 0.17 | |||||
Accumulated amortization on the amortizable intangible assets | $ 155,237 | $ 155,237 | $ 0 | ||||
Amortization expense | 66,530 | $ 155,237 | |||||
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 29 days | ||||||
Customer A [Member] | |||||||
Accounts receivable | $ 122,046 | $ 122,046 | |||||
Customer A [Member] | Revenues [Member] | |||||||
Percentage of accounts receivable | 10.00% | 10.00% | 10.00% | 10.00% | |||
Number of customer | 0 | 1 | 0 | 2 | |||
Revenue | $ 732,225 | $ 2,187,797 | |||||
Customer A [Member] | Accounts Receivable [Member] | |||||||
Accounts receivable | $ 172,684 | ||||||
Percentage of accounts receivable | 10.00% | 10.00% | |||||
Number of customer | 1 | 1 | |||||
Customer E [Member] | Revenues [Member] | |||||||
Revenue | $ 1,506,880 |
Summary of Certain Significan30
Summary of Certain Significant Accounting Policies - Estimated Future Amortization of Patents (Details) | Sep. 30, 2015USD ($) |
Accounting Policies [Abstract] | |
2015 (remaining) | $ 67,530 |
2,016 | 270,120 |
2,017 | 270,120 |
2,018 | 270,120 |
2,019 | 270,120 |
Thereafter | 797,353 |
Total | $ 1,945,363 |
Merger with Vaporin Inc (Detail
Merger with Vaporin Inc (Details Narrative) - USD ($) | Dec. 17, 2014 | Dec. 17, 2014 | Sep. 30, 2015 |
Percentage of ownership | 50.00% | 50.00% | |
Joint Venture [Member] | |||
Percentage of issued and outstanding common stock shares | 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% | ||
Merger closing date | Mar. 4, 2015 | ||
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 - Sche
Merger with Vaporin, Inc - Schedule of Business Considertion (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 - Sc33
Merger with Vaporin, Inc - Schedule of Business Considertion (Details) (Parenthetical) | Sep. 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 | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Business Combinations [Abstract] | ||||
Wholesale and online revenues | $ 1,894,822 | $ 3,232,557 | $ 5,329,239 | $ 14,708,586 |
Retail revenues | 984,323 | 278,574 | 3,146,093 | 278,574 |
Net loss | $ (4,443,264) | $ (6,194,501) | $ (12,566,981) | $ (11,276,342) |
Net loss per share | $ (0.55) | $ (1.39) | $ (1.95) | $ (2.90) |
Weighted Average number of shares outstanding | 8,050,317 | 8,050,317 | 6,457,981 | 3,882,224 |
Retail Stores and Kiosks (Deati
Retail Stores and Kiosks (Deatils Narrative) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015USD ($)Stores | Sep. 30, 2015USD ($)Stores | Sep. 30, 2014USD ($) | |
Retail Stores And Kiosks - Schedule Of Purchase Price Allocations Based On Managements Knowledge Of Retail Businesses Acquired Details | |||
Number of acquired stores | Stores | 3 | 3 | |
Amount allocated to goodwill | $ 592,000 | $ 591,993 | |
Amount allocated to security deposits | 3,400 | 3,400 | |
Amount allocated to inventory | 44,000 | 44,000 | |
Hold back obligation | 185,000 | (185,000) | |
Loss on disposal of assets | 189,091 | 478,729 | |
Exit costs for non-cancellable leases and license obligation | 241,243 | 241,243 | |
Accrued expenses | $ 85,000 | $ 85,000 |
Retail Stores and Kiosks - Sche
Retail Stores and Kiosks - Schedule of Purchase Price Allocations Based on Management's Knowledge of Retail Businesses Acquired (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | |
Retail Stores And Kiosks - Schedule Of Purchase Price Allocations Based On Managements Knowledge Of Retail Businesses Acquired Details | |||
Value of aggregate net consideration paid: | $ 639,393 | ||
Inventory | $ 44,000 | 44,000 | |
Other Assets | 3,400 | 3,400 | |
Goodwill | $ 592,000 | 591,993 | |
Total allocation to tangible assets and goodwill | $ 639,393 |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Payables and Accruals [Abstract] | ||
Commissions payable | $ 194,090 | $ 179,000 |
Retirement plan contributions | 66,931 | 80,000 |
Accrued severance | 155,277 | 82,000 |
Accrued customer returns | 348,620 | $ 360,000 |
Accrued payroll | 25,193 | |
Accrued prepayment penalties | 187,500 | |
Accrued equity - fair value | 863,364 | |
Accrued exit costs | 85,000 | |
Accrued legal | 191,643 | |
Accrued hold back | 185,000 | |
Other accrued liabilities | 88,477 | $ 274,112 |
Total | $ 2,391,095 | $ 975,112 |
Notes Payable and Receivable (D
Notes Payable and Receivable (Details Narrative) - USD ($) | Jun. 25, 2015 | Jun. 25, 2015 | Jan. 29, 2015 | Dec. 08, 2014 | Nov. 14, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Aug. 03, 2015 | Mar. 31, 2015 | Mar. 04, 2015 | Jan. 12, 2015 | Dec. 31, 2014 |
Amortized deferred debt discount | $ 67,797 | $ 833,035 | ||||||||||||
Extinguishment loss | (1,544,044) | (1,544,044) | ||||||||||||
Interest expense | (7,183) | (8,499) | ||||||||||||
Warrants exercise price | $ 6.40 | |||||||||||||
Amortization of deferred financing costs | $ 32,857 | $ 144,903 | ||||||||||||
Loan receivable | $ 467,095 | |||||||||||||
567,000 Convertible Notes Payable [Member] | January 20, 2015 and January 23, 2015 [Member] | ||||||||||||||
Accredited investors providing for sale | $ 567,000 | |||||||||||||
Debt discount amount | $ 54,623 | $ 54,623 | ||||||||||||
Debt instrument accrued interest rate | 10.00% | |||||||||||||
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] | ||||||||||||||
Amortized deferred debt discount | 8,050 | $ 28,859 | ||||||||||||
Repayment of debt | 567,000 | |||||||||||||
Notes payable interest | 29,853 | 29,853 | ||||||||||||
Extinguishment loss | 25,764 | |||||||||||||
Interest expense | 24,535 | 5,318 | ||||||||||||
$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 | $ 80,548 | |||||||||||||
Interest expense | 10,215 | 60,285 | ||||||||||||
Notes payable - related party | $ 3,000,000 | |||||||||||||
Notes maturity date | Mar. 31, 2016 | |||||||||||||
1,250,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||
Amortized deferred debt discount | 104,167 | 729,167 | ||||||||||||
Debt instrument accrued interest rate | 7.00% | |||||||||||||
Interest expense | 195,391 | 230,891 | ||||||||||||
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 | 11,638 | 81,473 | ||||||||||||
1,250,000 Senior Convertible Notes Payable to Related Parties [Member] | July 31, 2015 and August 3, 2015 [Member] | ||||||||||||||
Notes payable interest | $ 62,549 | |||||||||||||
Extinguishment loss | 592,820 | |||||||||||||
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 | 41,393 | 55,467 | |||||||||||
Debt instrument accrued interest rate | 10.00% | |||||||||||||
Interest expense | 455,255 | 459,144 | ||||||||||||
Convertible promissory note | $ 1,750,000 | $ 1,750,000 | ||||||||||||
Notes maturity date | Dec. 22, 2015 | |||||||||||||
Convertible into the common stock lower price per share | $ 2.50 | $ 2.50 | ||||||||||||
Amortization of deferred financing costs | $ 21,222 | $ 63,433 | ||||||||||||
Proceeds from sale of securities | $ 1,662,500 | |||||||||||||
Percentage of discount | 5.00% | |||||||||||||
Legal fees | $ 1,466,250 | |||||||||||||
Fair value of embedded conversion features | $ 248,359 | $ 248,359 | ||||||||||||
Percentage of cash for additional premium | 25.00% | |||||||||||||
Common stock price per share | $ 2.50 | $ 2.50 | ||||||||||||
Percentage of additional amounts of principal and interest outstanding | 130.00% | 130.00% | ||||||||||||
1,750,000 Convertible Debenture [Member] | Chardan Capital Management, LLC [Member] | ||||||||||||||
Debt instrument accrued interest rate | 10.00% | |||||||||||||
Convertible promissory note | $ 196,250 | $ 196,250 | ||||||||||||
Warrants exercise price | $ 2.50 | $ 2.50 | ||||||||||||
Amortization of deferred financing costs | $ 87,779 | |||||||||||||
Number of warrants issued | 70,000 | |||||||||||||
Warrants exercisable term | 5 years | |||||||||||||
1,750,000 Convertible Debenture [Member] | July 31, 2015 and August 4, 2015 [Member] | ||||||||||||||
Notes payable interest | $ 459,144 | $ 459,144 | ||||||||||||
Extinguishment loss | $ 923,275 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Jul. 30, 2015 | Jul. 29, 2015 | Jun. 19, 2015 | Mar. 03, 2015 | Feb. 03, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Nov. 14, 2015 | Jul. 09, 2015 | Jul. 07, 2015 | Jun. 30, 2015 | Jan. 24, 2015 | Dec. 31, 2014 |
Stock-based compensation expense | $ 613,577 | $ 1,375,343 | |||||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||
Proceeds from related parties | 1,000,000 | ||||||||||||||
Offering costs | $ 38,700,000 | (109,104) | |||||||||||||
Common stock outstanding | 8,455,505 | 8,455,505 | 3,352,382 | ||||||||||||
Common stock shares issued | 8,455,505 | 8,455,505 | 3,352,382 | ||||||||||||
Derivative liability | $ 79,400,000 | $ 3,679,336 | $ 3,679,336 | $ 1,683,722 | |||||||||||
Excess of stock authorized | 500,000,000 | 150,000,000 | |||||||||||||
Number of public offering units | $ 3,761,657 | ||||||||||||||
Public offering units per unit | $ 11 | ||||||||||||||
Gross proceeds of public offering | $ 41,400,000 | ||||||||||||||
October 16, 2015 [Member] | |||||||||||||||
Excess of stock authorized | 500,000,000 | 500,000,000 | |||||||||||||
Stock Option Activity [Member] | |||||||||||||||
Amortized stock option expense | $ (80,688) | $ 54,360 | $ (7,491) | 109,286 | |||||||||||
Share based compensation expense unvested stock options granted to employees and consultants | 43,121 | $ 43,121 | |||||||||||||
Stock option vested period | 1 year 4 months 24 days | ||||||||||||||
Waivers Agreements [Member] | |||||||||||||||
Exercise price per share | $ 2.525 | ||||||||||||||
Warrants issued to share acquire | 188,083 | ||||||||||||||
Offering costs | $ 4,779,003 | ||||||||||||||
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 | 1,086,353 | ||||||||||||||
Derivative liability | $ 1,086,353 | ||||||||||||||
Public offering units per unit | $ 13.75 | ||||||||||||||
Gross proceeds of public offering | $ 1,552,418 | ||||||||||||||
Underwriting fees | 2,722,687 | ||||||||||||||
Other cash cost | $ 503,898 | ||||||||||||||
Private Placement [Member] | Purchase Agreement [Member] | |||||||||||||||
Accredited investors providing for the sale | 684,463 | ||||||||||||||
Common stock, par value | $ 0.001 | ||||||||||||||
Sale of stock price per share | $ 5.10 | ||||||||||||||
Proceeds from related parties | $ 3,500,960 | ||||||||||||||
Exercise price per share | $ 6.40 | ||||||||||||||
Warrants issued to share acquire | 549,169 | ||||||||||||||
Offering costs | $ 559,000 | ||||||||||||||
Payment to private placement | $ 350,000 | ||||||||||||||
Percentage of liquidated damages in cash equal | 1.50% | ||||||||||||||
Cash payments | $ 52,500 | ||||||||||||||
Derivative liability | $ 2,494,639 | ||||||||||||||
Knight Global [Member] | |||||||||||||||
Stock-based compensation expense | 156,000 | $ 299,000 | |||||||||||||
General and Administrative Expense [Member] | |||||||||||||||
Stock-based compensation expense | $ 322,067 | $ 1,266,058 | |||||||||||||
Consulting Agreement [Member] | |||||||||||||||
Stock-based compensation expense | $ 0 | $ 336,875 | |||||||||||||
Series A Unit Public Offering [Member] | |||||||||||||||
Offering costs | $ 38,100,000 | ||||||||||||||
Number of public offering units | $ 3,761,657 | ||||||||||||||
Public offering units per unit | $ 11 | ||||||||||||||
Gross proceeds of public offering | $ 41,400,000 | ||||||||||||||
Common stock exercise price per share | $ 1.24 | ||||||||||||||
Mr. Kavanaugh [Member] | Consulting Agreement [Member] | |||||||||||||||
Shares issued to employees | 80,000 | ||||||||||||||
Shares vested and expected to vest | 10,000 | ||||||||||||||
Remaining shares converted into vested | 70,000 | ||||||||||||||
Agreement termination period | 2 years | ||||||||||||||
Post agreement termination period | 18 months | ||||||||||||||
Percentage of net sales | 6.00% | ||||||||||||||
Minimum number of shares vested during period | 10,000 | ||||||||||||||
Grant date fair value of common shares issued | $ 3,080,000 | ||||||||||||||
Share were cancelled during period | 30,000 | ||||||||||||||
Knight Global [Member] | Consulting Agreement [Member] | |||||||||||||||
Shares vested and expected to vest | 10,000 | ||||||||||||||
Prior Investors [Member] | |||||||||||||||
Excess of stock issued | 1,798,676 | ||||||||||||||
Prior Investors [Member] | Waivers Agreements [Member] | |||||||||||||||
Common stock outstanding | 465,720 | ||||||||||||||
Common stock to be issued | 1,000,000 | ||||||||||||||
Prior Investors [Member] | Waivers Agreements [Member] | Minimum [Member] | |||||||||||||||
Sale of stock price per share | $ 2.70 | ||||||||||||||
Excess of stock issued | 2,559,437 | ||||||||||||||
Number of remaining common stock shares issued | 760,761 | ||||||||||||||
Shareholder [Member] | Waivers Agreements [Member] | |||||||||||||||
Common stock to be issued | 1,000,000 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Compensatory Common Stock Activity (Details) | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
STOCKHOLDERS’ EQUITY | |
Number of Shares, Non-vested beginning balance | shares | 50,000 |
Number of Shares, Granted | shares | 465,545 |
Number of Shares, Vested | shares | (485,545) |
Number of Shares, Forfeited | shares | |
Number of Shares, Non-vested ending balance | shares | 30,000 |
Weighted Average Issuance Date Fair Value Per Share, Beginning balance | $ / shares | $ 6.44 |
Weighted Average Issuance Date Fair Value Per Share, Granted | $ / shares | 5.24 |
Weighted Average Issuance Date Fair Value Per Share, Vested | $ / shares | $ 5.38 |
Weighted Average Issuance Date Fair Value Per Share, Forfeited | $ / shares | |
Weighted Average Issuance Date Fair Value Per Share, Ending balance | $ / shares | $ 5.23 |
Issuance Date Fair Value, Non-vested beginning balance | $ 322,067 |
Issuance Date Fair Value, Granted | 2,439,736 |
Issuance Date Fair Value, Vested | $ (2,605,803) |
Issuance Date Fair Value, Forfeited | |
Issuance Date Fair Value, Non-vested ending balance | $ 156,000 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Warrant Activity (Details) - Warrants [Member] | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
Number of Warrants Outstanding, Beginning Balance | 243,218 |
Number of Warrants granted | 76,447,995 |
Number of Warrants exercised | |
Warrants Assumed in Merger | 49,594 |
Number of Warrants forfeited or expired | |
Number of Warrants outstanding, Ending Balance | 76,740,807 |
Number of Warrants Exercisable | 76,740,807 |
Weighted Average Exercise Price, Warrants Outstanding, Beginning Balance | $ / shares | $ 10.06 |
Weighted Average Exercise Price, Warrants granted | $ / shares | $ 1.29 |
Weighted Average Exercise Price, Warrants exercised | $ / shares | |
Weighted Average Exercise Price, Warrants assumed in merger | $ / shares | $ 26.22 |
Weighted Average Exercise Price, forfeited or expired | $ / shares | |
Weighted Average Exercise Price, Warrants outstanding, Ending Balance | $ / shares | $ 1.33 |
Weighted Average Exercise Price, Exercisable | $ / shares | $ 1.33 |
Weighted Average Remaining Contractual Terms (Years), Outstanding | 4 years 9 months 18 days |
Weighted Average Remaining Contractual Terms (Years), Exercisable | 4 years 2 months 12 days |
Aggregate Intrinsic Value, Outstanding | $ | |
Aggregate Intrinsic Value, Exercisable | $ |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Additional Information Related To Warrants and Options (Details) | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Options, Weighted Average Exercise Price | $ 2.20 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 1 year 1 month 6 days |
Number of Shares Exercisable | shares | 210,853 |
Warrants [Member] | |
Number of Shares Outstanding | shares | 76,740,807 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 4 years 9 months 18 days |
Number of Shares Exercisable | shares | 76,740,807 |
Warrants [Member] | Range of Exercise Price One [Member] | |
Range of Exercise Price Lower Limit | $ 1 |
Range of Exercise Price Upper limit | 1.99 |
Options, Weighted Average Exercise Price | $ 1.24 |
Number of Shares Outstanding | shares | 75,251,835 |
Exercisable, Weighted Average Exercise Price | $ 1.24 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 4 years 9 months 18 days |
Number of Shares Exercisable | shares | 75,251,835 |
Warrants [Member] | Range of Exercise Price Two [Member] | |
Range of Exercise Price Lower Limit | $ 2 |
Range of Exercise Price Upper limit | 4.99 |
Options, Weighted Average Exercise Price | $ 2.52 |
Number of Shares Outstanding | shares | 677,733 |
Exercisable, Weighted Average Exercise Price | $ 2.52 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 4 years 8 months 12 days |
Number of Shares Exercisable | shares | 677,733 |
Warrants [Member] | Range of Exercise Price Three [Member] | |
Range of Exercise Price Lower Limit | $ 5 |
Range of Exercise Price Upper limit | 6.99 |
Options, Weighted Average Exercise Price | $ 6.40 |
Number of Shares Outstanding | shares | 551,305 |
Exercisable, Weighted Average Exercise Price | $ 6.40 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 4 years 4 months 24 days |
Number of Shares Exercisable | shares | 551,305 |
Warrants [Member] | Range of Exercise Price Four [Member] | |
Range of Exercise Price Lower Limit | $ 7 |
Range of Exercise Price Upper limit | 16.99 |
Options, Weighted Average Exercise Price | $ 10.05 |
Number of Shares Outstanding | shares | 240,265 |
Exercisable, Weighted Average Exercise Price | $ 10.05 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 4 years 1 month 6 days |
Number of Shares Exercisable | shares | 240,265 |
Warrants [Member] | Range of Exercise Price Five [Member] | |
Range of Exercise Price Lower Limit | $ 17 |
Range of Exercise Price Upper limit | 66.20 |
Options, Weighted Average Exercise Price | $ 64.52 |
Number of Shares Outstanding | shares | 19,669 |
Exercisable, Weighted Average Exercise Price | $ 64.52 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 2 years 1 month 6 days |
Number of Shares Exercisable | shares | 19,669 |
Stock Options [Member] | |
Number of Shares Outstanding | shares | 219,206 |
Number of Shares Exercisable | shares | 210,853 |
Stock Options [Member] | Range of Exercise Price One [Member] | |
Range of Exercise Price Lower Limit | $ 1 |
Range of Exercise Price Upper limit | 1.50 |
Options, Weighted Average Exercise Price | $ 1.06 |
Number of Shares Outstanding | shares | 21,540 |
Exercisable, Weighted Average Exercise Price | $ 1.06 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 6 years 6 months |
Number of Shares Exercisable | shares | 17,480 |
Stock Options [Member] | Range of Exercise Price Two [Member] | |
Range of Exercise Price Lower Limit | $ 1.51 |
Range of Exercise Price Upper limit | 1.99 |
Options, Weighted Average Exercise Price | $ 1.58 |
Number of Shares Outstanding | shares | 8,440 |
Exercisable, Weighted Average Exercise Price | $ 1.58 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 5 years 7 months 6 days |
Number of Shares Exercisable | shares | 8,106 |
Stock Options [Member] | Range of Exercise Price Three [Member] | |
Range of Exercise Price Lower Limit | $ 2 |
Range of Exercise Price Upper limit | 5.99 |
Options, Weighted Average Exercise Price | $ 2.31 |
Number of Shares Outstanding | shares | 187,356 |
Exercisable, Weighted Average Exercise Price | $ 2.31 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 1 month 6 days |
Number of Shares Exercisable | shares | 183,397 |
Stock Options [Member] | Range of Exercise Price Four [Member] | |
Range of Exercise Price Lower Limit | $ 6 |
Range of Exercise Price Upper limit | 9.63 |
Options, Weighted Average Exercise Price | $ 9.63 |
Number of Shares Outstanding | shares | 1,870 |
Exercisable, Weighted Average Exercise Price | $ 9.63 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 2 years |
Number of Shares Exercisable | shares | 1,870 |
Stock Options [Member] | |
Exercisable, Weighted Average Remaining Contractual Life (years) | 10 months 24 days |
Stockholders' Equity - Summar43
Stockholders' Equity - Summary of Options Outstanding (Details) - shares | Sep. 30, 2015 | Dec. 31, 2014 | |
Number of shares, Outstanding | 219,206 | 268,860 | |
Equity Compensation Plans Not Approved By Security Holders [Member] | |||
Number of shares, Outstanding | [1] | 180,000 | |
Equity Incentive Plan [Member] | |||
Number of shares, Outstanding | 39,206 | ||
[1] | Represents options granted in October 2009, all of which expired subsequently on October 1, 2015. |
Stockholders' Equity - Summar44
Stockholders' Equity - Summary of Stock Option Activity Under All Option Plans (Details) | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
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 | (53,600) |
Number of shares, Outstanding, Ending balance | 219,206 |
Number of shares, Options Exercisable | 210,853 |
Options available for grants | 311,134 |
Weighted Avg. Exercise Price, Outstanding, Beginning balance | $ / shares | $ 3.64 |
Weighted Avg. Exercise Price, Options Granted | $ / shares | $ 5.61 |
Weighted Avg. Exercise Price, Options Exercised | $ / shares | |
Weighted Avg. Exercise Price, Options forfeited or expired | $ / shares | $ 6.83 |
Weighted Avg. Exercise Price, Outstanding, Ending balance | $ / shares | 2.22 |
Weighted Avg. Exercise Price, Exercisable Ending Balance | $ / shares | $ 2.20 |
Weighted Avg. Remaining Contractual Life, Options Outstanding | 1 year 1 month 6 days |
Weighted Avg. Remaining Contractual Life, Options Exercisable | 10 months 24 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 | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 76,990,013 | 1,625,710 |
Warrants [Member] | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 76,740,807 | 22,910 |
Restricted Stock Units [Member] | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 30,000 | 250,000 |
Stock Options [Member] | ||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 219,206 | 1,352,800 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Liabilities Measured Fair Value on Recurring Basis(Details) - USD ($) | Sep. 30, 2015 | Jun. 30, 2015 | Jun. 19, 2015 | Dec. 31, 2014 |
Accrued equity | $ 863,364 | |||
Warrant liabilities | 35,905,972 | |||
Total derivative liabilities | 3,679,336 | $ 1,683,722 | $ 79,400,000 | |
Fair Value, Inputs, Level 1 [Member] | ||||
Accrued equity | $ 863,364 | |||
Warrant liabilities | ||||
Total derivative liabilities | $ 863,364 | |||
Fair Value, Inputs, Level 2 [Member] | ||||
Accrued equity | ||||
Warrant liabilities | ||||
Total derivative liabilities | ||||
Fair Value, Inputs, Level 3 [Member] | ||||
Accrued equity | ||||
Warrant liabilities | $ 35,905,972 | |||
Total derivative liabilities | $ 35,905,972 |
Fair Value Measurements - Sum47
Fair Value Measurements - Summary the Fair Value of Assumption of Warrant Liabilities (Details) - $ / shares | Jul. 31, 2015 | Jul. 29, 2015 | Jul. 25, 2015 | Mar. 03, 2015 | Mar. 31, 2015 | Jun. 30, 2015 | Sep. 30, 2015 |
Stock price | $ 0.87 | $ 1 | $ 1.70 | $ 5.50 | $ 5.20 | $ 1.60 | $ 0.48 |
Strike price | $ 2.50 | $ 1.24 | $ 2.56 | $ 6.40 | $ 6.40 | ||
Remaining term (years) | 4 months 24 days | 5 years | 5 years | 5 years | 4 years 11 months 5 days | ||
Volatility | 107.00% | 107.00% | 108.00% | 115.00% | 124.00% | 108.00% | 110.00% |
Risk-free rate | 0.12% | 1.62% | 1.70% | 1.61% | 1.37% | 1.63% | 1.37% |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Minimum [Member] | |||||||
Strike price | $ 2.53 | $ 1.24 | |||||
Remaining term (years) | 4 years 8 months 5 days | 4 years 5 months 1 day | |||||
Maximum [Member] | |||||||
Strike price | $ 6.40 | $ 6.40 | |||||
Remaining term (years) | 4 years 11 months 27 days | 4 years 5 months 23 days |
Fair Value Measurements - Sum48
Fair Value Measurements - Summary of Changes the Fair Value of Level 3 Financial Liabilities Measured Fair Value On Recurring Basis (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2015 | Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | ||
Beginning balance | $ 1,683,722 | |
Issuance of Series A warrant liabilities | $ 79,445,308 | $ 79,445,308 |
Issuance of other warrant liabilities and conversion options | 3,878,989 | |
Warrants issued in connection with the Waivers | $ (13,300) | (13,300) |
Change in fair value of derivative liabilities | (45,209,758) | (47,405,025) |
Ending balance | $ 3,679,336 | $ 3,679,336 |
Commitments and Contingencies49
Commitments and Contingencies (Details Narrative) | Sep. 15, 2015USD ($) | Aug. 13, 2015USD ($) | Aug. 10, 2015USD ($) | Jun. 22, 2015USD ($) | Oct. 31, 2013USD ($)ft² | Sep. 30, 2015USD ($)Stores | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)Stores | Sep. 30, 2014USD ($) | Mar. 04, 2015Bonifide | Dec. 31, 2014USD ($)Bonifide |
Annual rental payments | $ 109,239 | $ 46,841 | $ 601,301 | $ 137,852 | |||||||
Number of stores | Stores | 3 | 3 | |||||||||
Accrued severance expenses | $ 155,277 | $ 155,277 | |||||||||
Vendor deposits | 392,161 | 392,161 | $ 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 | |||||||||
Ms. Hicks [Member] | |||||||||||
Annual base salary | $ 175,000 | ||||||||||
Mr. Martin [Member] | |||||||||||
Compensation and accrued vacation | $ 87,500 | ||||||||||
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 | 3 | 3 | 11 | ||||||||
Three Year Employment Agreements [Member] | |||||||||||
Annual base salary | $ 300,000 | ||||||||||
Bonus received | $ 100,000 | ||||||||||
Three Year Employment Agreements [Member] | Minimum [Member] | |||||||||||
Percentage of targeted bonus | 20.00% | ||||||||||
Three Year Employment Agreements [Member] | Maximum [Member] | |||||||||||
Percentage of targeted bonus | 200.00% | ||||||||||
Consulting Agreements [Member] | |||||||||||
Consulting fee payable | $ 50,000 | ||||||||||
Additional consulting fee payable | $ 20,000 | ||||||||||
Lease Agreement [Member] | |||||||||||
Annual rental payments | $ 18,000 | $ 144,000 | |||||||||
Lease renewal period | 1 year | ||||||||||
Area of square feet | ft² | 2,200 | ||||||||||
Lease term | 24 months | ||||||||||
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] | Sep. 30, 2015USD ($) |
2015 (remainder) | $ 141,839 |
2,016 | 490,503 |
2,017 | 380,113 |
2,018 | 60,251 |
2,019 | 31,952 |
2,020 | 18,963 |
Total | $ 1,123,621 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | Nov. 10, 2015shares | Oct. 30, 2015shares | Oct. 09, 2015USD ($)Stores | Sep. 30, 2015USD ($)Storesshares | Oct. 01, 2015shares | Dec. 31, 2014shares |
Number of stores | Stores | 3 | |||||
Acquisitions cost | $ | $ 17,735,084 | |||||
Common stock, shares authorized | 150,000,000 | 50,000,000 | ||||
Subsequent Event [Member] | ||||||
Number of stores | Stores | 3 | |||||
Acquisitions cost | $ | $ 1,610,000 | |||||
Number of common stock shares issued for services | 1,798,676 | 15,000 | ||||
Subsequent Event [Member] | Minimum [Member] | ||||||
Common stock, shares authorized | 150,000,000 | |||||
Subsequent Event [Member] | Maximum [Member] | ||||||
Common stock, shares authorized | 500,000,000 |
Revision of Interim Financial52
Revision of Interim Financial Statements - Condensed Financial Statements (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2015 | Mar. 31, 2015 | |
Accounting Changes and Error Corrections [Abstract] | ||
Warrants term | 5 years | |
Warrants to purchase of common stock | 549,169 | |
Warrants exercise price | $ 6.40 | |
Derivative liability | $ 2,494,639 | |
Derivative liabilities of gain | $ 1,744,430 | $ 288,791 |
Revision of Interim Financial53
Revision of Interim Financial Statements - Schedule of Condensed Financial Statements (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||||
Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2014 | Jun. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
TOTAL CURRENT ASSETS | $ 33,430,899 | $ 33,430,899 | $ 4,125,104 | |||||
TOTAL ASSETS | 52,232,774 | 52,232,774 | 4,928,483 | |||||
TOTAL CURRENT LIABILITIES | 40,475,759 | 40,475,759 | 3,997,230 | |||||
TOTAL LIABILITIES | 40,560,861 | 40,560,861 | 4,116,673 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 11,671,913 | 11,671,913 | $ 811,810 | |||||
Operating loss | (2,877,607) | $ (2,650,951) | (8,650,465) | $ (6,506,982) | ||||
Total other (expense) income | 36,502,364 | (8,107) | 35,559,236 | (65,723) | ||||
Loss before income tax benefit | $ 33,624,757 | (2,659,058) | $ 26,908,771 | (6,572,705) | ||||
Income tax benefit | 2,177,057 | 767,333 | ||||||
NET INCOME (LOSS) | $ 33,624,757 | $ (4,836,115) | $ 26,908,771 | $ (7,340,038) | ||||
Deemed Dividend | (38,068,021) | (38,068,021) | ||||||
NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS | $ (4,443,264) | $ (4,836,115) | $ (11,159,250) | $ (7,340,038) | ||||
LOSS PER SHARE - BASIC AND DILUTED | $ (0.55) | $ (1.47) | $ (1.73) | $ (2.24) | ||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 8,050,317 | 3,297,812 | 6,457,981 | 3,274,452 | ||||
NET CASH USED IN OPERATING ACTIVITIES | $ (10,621,161) | $ (4,698,822) | ||||||
NET CASH USED BY INVESTING ACTIVITIES: | (65,596) | (613,278) | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ 40,785,676 | $ 414,549 | ||||||
Amount Previously Reported [Member] | ||||||||
TOTAL CURRENT ASSETS | $ 4,897,017 | $ 5,613,832 | $ 4,897,017 | |||||
TOTAL ASSETS | 23,368,586 | 24,052,575 | 23,368,586 | |||||
TOTAL CURRENT LIABILITIES | 8,909,594 | 6,425,802 | 8,909,594 | |||||
TOTAL LIABILITIES | 9,012,599 | 6,532,997 | 9,012,599 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 14,355,987 | 17,519,578 | 14,355,987 | |||||
Operating loss | (2,242,004) | (3,530,855) | (5,772,859) | |||||
Total other (expense) income | (2,511,251) | (450,341) | (2,961,592) | |||||
Loss before income tax benefit | $ (3,981,196) | $ (3,981,196) | $ (8,734,451) | |||||
Income tax benefit | ||||||||
NET INCOME (LOSS) | $ (4,753,255) | $ (4,753,255) | $ (8,734,451) | |||||
Deemed Dividend | ||||||||
NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS | $ (4,753,255) | $ (3,981,196) | $ (8,734,451) | |||||
LOSS PER SHARE - BASIC AND DILUTED | $ (0.69) | $ (0.89) | $ (1.55) | |||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 6,901,868 | 4,494,855 | 5,648,617 | |||||
Adjustments to reconcile net loss to net cash used in operating activities | $ 1,200,468 | $ 3,922,257 | ||||||
NET CASH USED IN OPERATING ACTIVITIES | (2,149,505) | (3,795,239) | ||||||
NET CASH USED BY INVESTING ACTIVITIES: | 536,071 | 448,344 | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ 3,043,439 | $ 4,245,791 | ||||||
Adjustment [Member] | ||||||||
TOTAL CURRENT ASSETS | ||||||||
TOTAL ASSETS | ||||||||
TOTAL CURRENT LIABILITIES | $ 476,175 | $ 2,205,848 | $ 476,175 | |||||
TOTAL LIABILITIES | 476,175 | 2,205,848 | 476,175 | |||||
TOTAL STOCKHOLDERS’ EQUITY | $ (476,175) | $ (2,205,848) | (476,175) | |||||
Operating loss | ||||||||
Total other (expense) income | $ 1,729,673 | $ 288,791 | 2,018,464 | |||||
Loss before income tax benefit | $ 1,729,673 | $ 288,791 | $ 2,018,464 | |||||
Income tax benefit | ||||||||
NET INCOME (LOSS) | $ 1,729,673 | $ 1,729,673 | $ 2,018,464 | |||||
Deemed Dividend | ||||||||
NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS | $ 1,729,673 | $ 288,791 | $ 2,018,464 | |||||
LOSS PER SHARE - BASIC AND DILUTED | ||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | ||||||||
Adjustments to reconcile net loss to net cash used in operating activities | $ (1,729,673) | $ (476,175) | ||||||
NET CASH USED IN OPERATING ACTIVITIES | ||||||||
NET CASH USED BY INVESTING ACTIVITIES: | ||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
As Revised [Member] | ||||||||
TOTAL CURRENT ASSETS | $ 4,897,017 | $ 5,613,832 | $ 4,897,017 | |||||
TOTAL ASSETS | 23,368,586 | 24,052,575 | 23,368,586 | |||||
TOTAL CURRENT LIABILITIES | 9,385,769 | 8,631,650 | 9,385,769 | |||||
TOTAL LIABILITIES | 9,488,774 | 8,738,845 | 9,488,774 | |||||
TOTAL STOCKHOLDERS’ EQUITY | 13,879,812 | 15,313,730 | 13,879,812 | |||||
Operating loss | (2,242,004) | (3,530,855) | (5,772,859) | |||||
Total other (expense) income | (781,578) | (161,550) | (943,128) | |||||
Loss before income tax benefit | $ (2,251,523) | $ (3,692,405) | $ (6,715,987) | |||||
Income tax benefit | ||||||||
NET INCOME (LOSS) | $ (3,023,582) | $ 3,023,582 | $ (6,715,987) | |||||
Deemed Dividend | ||||||||
NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS | $ (3,023,582) | $ (3,692,405) | $ (6,715,987) | |||||
LOSS PER SHARE - BASIC AND DILUTED | $ (0.44) | $ (0.82) | $ (1.19) | |||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 6,901,868 | 4,494,855 | 5,648,617 | |||||
Adjustments to reconcile net loss to net cash used in operating activities | $ (529,205) | $ 3,446,082 | ||||||
NET CASH USED IN OPERATING ACTIVITIES | (2,149,505) | (3,795,239) | ||||||
NET CASH USED BY INVESTING ACTIVITIES: | 536,071 | 448,344 | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ 3,043,439 | $ 4,245,791 |