Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2015 | |
Document And Entity Information | |
Entity Registrant Name | VAPOR CORP. |
Entity Central Index Key | 844,856 |
Document Type | S4 |
Document Period End Date | Sep. 30, 2015 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Smaller Reporting Company |
Trading Symbol | vpco |
Document Fiscal Year Focus | 2,015 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS: | |||
Cash | $ 30,570,113 | $ 471,194 | $ 6,570,215 |
Due from merchant credit card processors, net of reserve for charge-backs of $2,500 for Dec 2014 and $2,500 for Dec 2013, respectively | 111,864 | 111,968 | 205,974 |
Accounts receivable, net allowance of $66,222 for Sep 2015, $369,731 for Dec 2014 and $256,833 for Dec 2013, respectively | 273,659 | 239,652 | 1,802,781 |
Inventories | 1,867,377 | 2,048,883 | 3,321,898 |
Prepaid expenses and vendor deposits | $ 607,886 | 664,103 | $ 1,201,040 |
Loans receivable, net | 467,095 | ||
Deferred financing costs, net | $ 122,209 | ||
Deferred tax asset, net | $ 766,498 | ||
TOTAL CURRENT ASSETS | $ 33,430,899 | $ 4,125,104 | 13,868,406 |
Property and equipment, net of accumulated depreciation of $166,553 for Sep 2015, $84,314 for Dec 2014 and $27,879 for Dec 2013, respectively | 440,660 | $ 712,019 | 28,685 |
Intangible assets, net of accumulated amortization of $ 155,237 for Sep 2015 and $0 for Dec 2014, respectively | 1,945,363 | ||
Goodwill | 16,246,477 | ||
Other assets | 169,375 | $ 91,360 | 65,284 |
TOTAL ASSETS | 52,232,774 | 4,928,483 | 13,962,375 |
CURRENT LIABILITIES: | |||
Accounts payable | 2,056,990 | 1,920,135 | 1,123,508 |
Accrued expenses | $ 2,391,095 | 975,112 | $ 420,363 |
Senior convertible notes payable - related parties, net of debt discount of $0 for Sep 2015, $1,093,750 for Dec 2014 and $0 for Dec 2013, respectively | 156,250 | ||
Current portion of capital lease | $ 52,595 | 52,015 | |
Term loan | 750,000 | $ 478,847 | |
Customer deposits | $ 66,015 | 140,626 | 182,266 |
Income taxes payable | 3,092 | $ 3,092 | 5,807 |
Derivative liabilities | 35,905,972 | ||
TOTAL CURRENT LIABILITIES | 40,475,759 | $ 3,997,230 | $ 2,210,791 |
Capital lease, net of current portion | 85,102 | 119,443 | |
TOTAL LIABILITIES | $ 40,560,861 | $ 4,116,673 | $ 2,210,791 |
COMMITMENTS AND CONTINGENCIES | |||
STOCKHOLDERS' EQUITY: | |||
Preferred stock, value | |||
Common stock, value | $ 8,456 | $ 3,352 | $ 3,243 |
Additional paid-in capital | (14,351) | 16,040,361 | 13,127,995 |
Retained earnings (accumulated deficit) | 11,676,868 | (15,231,903) | (1,379,654) |
TOTAL STOCKHOLDERS' EQUITY | 11,671,913 | 811,810 | 11,751,584 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 52,232,774 | $ 4,928,483 | $ 13,962,375 |
Series A Preferred Stock | |||
STOCKHOLDERS' EQUITY: | |||
Preferred stock, value | $ 940 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Due from merchant credit card processor, reserve for charge-backs | $ 2,500 | $ 2,500 | |
Accounts receivable, Net of Allowance. | $ 66,222 | 369,731 | 256,833 |
Property and equipment, accumulated depreciation | 166,553 | 84,314 | 27,879 |
Intangible assets, accumulated amortization | 155,237 | 0 | |
Senior convertible notes payable debt discount net- Related party | $ 0 | $ 1,093,750 | $ 0 |
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 | |
Preferred stock, shares outstanding | 0 | 0 | |
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 50,000,000 | 50,000,000 |
Common stock, shares issued | 8,455,505 | 3,352,382 | 3,242,906 |
Common stock, shares outstanding | 8,455,505 | 3,352,382 | 3,242,906 |
Series A Preferred Stock | |||
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 | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
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 | $ 15,279,859 | $ 25,990,228 |
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 | ||||
Cost of goods sold | 14,497,254 | 16,300,333 | ||||
GROSS PROFIT | 1,018,290 | $ 647,504 | 2,195,499 | $ 3,146,848 | 782,605 | 9,689,895 |
EXPENSES: | ||||||
Advertising | 101,088 | 671,817 | 273,663 | 1,815,450 | 2,374,329 | 2,264,807 |
Selling, general and administrative | 3,364,475 | $ 2,626,638 | 9,852,329 | $ 7,838,380 | 11,126,759 | 6,464,969 |
Retail kiosk closing cost | 430,334 | 719,972 | ||||
Total operating expenses | 3,895,897 | $ 3,298,455 | 10,845,964 | $ 9,653,830 | 13,501,088 | 8,729,776 |
Operating (loss) income | (2,877,607) | $ (2,650,951) | (8,650,465) | $ (6,506,982) | $ (12,718,483) | 960,119 |
Other expense: | ||||||
Induced conversion expense | 299,577 | |||||
Costs associated with underwritten offering (see Note 7) | (5,279,003) | (5,279,003) | ||||
Amortization of debt discounts | (67,797) | (833,035) | $ (156,250) | $ (102,500) | ||
Amortization of deferred financing costs | (32,857) | (144,903) | (17,458) | |||
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 | (348,975) | $ (383,981) | ||
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) | (366,433) | (683,558) |
Income (loss) before for income tax benefit | $ 33,624,757 | (2,659,058) | $ 26,908,771 | (6,572,705) | (13,084,916) | 276,561 |
Income tax expense | (2,177,057) | (767,333) | (767,333) | 524,791 | ||
NET INCOME (LOSS) | $ 33,624,757 | $ (4,836,115) | $ 26,908,771 | $ (7,340,038) | $ (13,852,249) | $ 801,352 |
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) | ||
BASIC (LOSS) EARNINGS PER COMMON SHARE | $ (4.22) | $ 0.31 | ||||
DILUTED (LOSS) EARNINGS PER COMMON SHARE | $ (4.22) | $ 0.30 | ||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-BASIC AND DILUTED | 8,050,317 | 3,297,812 | 6,457,981 | 3,274,452 | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC | 3,283,030 | 2,563,697 | ||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED | 3,283,030 | 2,637,273 |
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, 2012 | $ 2,407 | $ 1,695,155 | $ (2,181,006) | $ (483,444) | |
Balance, shares at Dec. 31, 2012 | 2,407,633 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Contribution of note and interest payable to Vaporin to capital in connection with the Merger | 98,970 | 98,970 | |||
Issuance of common stock in connection with consulting services | $ 4 | 86,996 | 87,000 | ||
Issuance of common stock in connection with consulting services, shares | 4,000 | ||||
Issuance of common stock in connection with exercise of stock options | $ 9 | 70,291 | $ 70,300 | ||
Issuance of common stock in connection with exercise of stock options, shares | 8,660 | (8,000) | |||
Issuance of common stock for cash, net of offering costs | $ 667 | 9,124,436 | $ 9,125,103 | ||
Issuance of common stock for cash, net of offering costs, shares | 666,668 | ||||
Issuance of common stock upon conversion of debt | $ 156 | 1,704,487 | 1,704,487 | ||
Issuance of common stock upon conversion of debt, shares | 155,945 | ||||
Induced conversion expense | 299,577 | 299,577 | |||
Stock-based compensation expense | 48,239 | 48,239 | |||
Net income | $ 801,352 | 801,352 | |||
Balance at Dec. 31, 2013 | $ 3,243 | 13,127,995 | (1,379,654) | 11,751,584 | |
Balance, shares at Dec. 31, 2013 | 3,242,906 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Offering costs incurred in 2014 pertaining to December 2013 offering | (109,104) | $ (109,104) | |||
Issuance of common stock in connection with cashless exercise of warrants | $ 28 | (28) | |||
Issuance of common stock in connection with cashless exercise of warrants, shares | 28,477 | ||||
Discount on senior convertible notes | 1,250,000 | $ 1,250,000 | |||
Issuance of common stock in connection with consulting services | $ 80 | 1,602,533 | 1,602,933 | ||
Issuance of common stock in connection with consulting services, shares | 80,000 | ||||
Issuance of common stock in connection with exercise of stock options | $ 1 | 4,999 | $ 5,000 | ||
Issuance of common stock in connection with exercise of stock options, shares | 1,000 | (1,000) | |||
Induced conversion expense | |||||
Stock-based compensation expense | 163,646 | $ 163,646 | |||
Net income | (13,852,249) | (13,852,249) | |||
Balance at Dec. 31, 2014 | $ 3,352 | 16,040,361 | $ (15,231,903) | 811,810 | |
Balance, shares at Dec. 31, 2014 | 3,352,382 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
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 exercise of stock options, shares | |||||
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 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
OPERATING ACTIVITIES: | ||||
Net income (loss) | $ 26,908,771 | $ (7,340,038) | $ (13,852,249) | $ 801,352 |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||
Provision for Doubtful Accounts | 112,898 | 183,333 | ||
Depreciation | 56,435 | 11,284 | ||
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 deferred debt discount | 833,035 | 156,250 | $ 102,500 | |
Amortization of deferred financing costs | 144,903 | $ 17,458 | ||
Induced conversion expense | $ 299,577 | |||
Write down of loan receivable to realizable value | $ 50,000 | |||
Write-down of obsolete and slow moving inventory | 125,855 | 1,834,619 | ||
Stock-based compensation | 613,577 | $ 1,375,343 | $ 1,766,579 | $ 135,239 |
Utilization of net operating loss carryforward | (346,783) | |||
Deferred tax | $ 766,498 | (197,585) | ||
Stock-based expense in connection with waiver agreements (See Note 6) | $ 3,871,309 | |||
Deferred income tax benefit | $ 766,498 | 766,498 | 236,709 | |
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 | 94,006 | 838,002 |
Accounts receivable | 47,249 | 1,109,238 | 1,450,231 | (1,250,034) |
Inventories | 1,081,209 | (813,624) | (561,604) | (1,651,891) |
Prepaid expenses and vendor deposits | 84,238 | (131,070) | 536,937 | (735,180) |
Other assets | (74,615) | (309,281) | (26,076) | (53,284) |
Accounts payable | (386,151) | 686,069 | 796,627 | (2,085,087) |
Accrued expenses | (516,642) | (86,503) | 554,749 | 70,212 |
Customer deposits | $ (74,611) | 72,934 | (41,640) | (295,429) |
Income taxes | (2,715) | (2,715) | 53,622 | |
NET CASH USED IN OPERATING ACTIVITIES | $ (10,621,161) | $ (4,698,822) | (6,290,997) | $ (4,120,152) |
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 | (517,095) | ||
Purchases of tradenames | (20,000) | |||
Purchases of property and equipment | (194,766) | $ (101,071) | (560,410) | $ (14,779) |
NET CASH USED IN INVESTING ACTIVITIES: | (65,596) | $ (613,278) | (1,077,505) | (14,779) |
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 sale of common stock, net of offering costs | (109,104) | 9,125,103 | ||
Proceeds from senior convertible notes payable to related parties | $ 1,250,000 | 425,000 | ||
Proceeds from issuance of convertible debenture, net of discount | 1,662,500 | $ 500,000 | ||
Deferred financing costs | $ (139,667) | |||
Principal repayments of senior note payable to stockholder | $ (70,513) | |||
Proceeds from term loans payable | 1,000,000 | 750,000 | ||
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) | (728,847) | $ (271,153) |
Principal payments of capital lease obligations | (33,761) | (7,901) | ||
Proceeds from factoring facility | 0 | $ 407,888 | ||
Principal repayments of factoring facility | (407,888) | |||
Proceeds from loan payable from Vaporin, Inc. | $ 350,000 | |||
Proceeds from exercise of stock options | $ 2,500 | 5,000 | 70,300 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ 40,785,676 | 414,549 | 1,269,481 | 10,528,737 |
INCREASE (DECREASE) IN CASH | 30,098,919 | (4,897,551) | (6,009,021) | 6,393,806 |
CASH - BEGINNING OF PERIOD | 471,194 | 6,570,215 | 6,570,215 | 176,409 |
CASH - END OF PERIOD | 30,570,113 | 1,672,664 | 471,194 | 6,570,215 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||
Cash paid for interest | 251,920 | 76,615 | 103,068 | 297,508 |
Cash paid for income taxes | 2,791 | $ 3,550 | $ 3,550 | 13,770 |
Noncash 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 | |||
Issuance of common stock in connection with conversion of notes payable | 17,028,399 | 1,704,487 | ||
Cashless exercise of common stock purchase warrants | $ 143 | |||
Recognition of deferred debt discount on convertible notes payable | 1,250,000 | 98,970 | ||
Purchase of equipment through capital lease obligation | $ 179,359 | |||
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 | $ 1,704,487 | ||
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 (UNAUDITED) (Parentheticals) - 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 | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 operates fourteen retail stores and one retail kiosk in the Southeast of the United States of America and is focusing on expanding the number of Company operated stores as well as launching a franchise program. Vapor also designs, market, and distribute vaporizers, e-liquids, electronic cigarettes and accessories under the Vapor X ® ® ® 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 Company’s 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 Company’s common stock effectuated on July 8, 2015. On December 9, 2015, the Company filed an amendment to its Certificate of Incorporation to increase its authorized common stock to 500,000,000 shares. 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 Company’s 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). | Note 1. ORGANIZATION, BASIS OF PRESENTATION AND RECENT DEVELOPMENTS Organization Vapor Corp. (the “Company”) is the holding company for its wholly owned subsidiaries Smoke Anywhere U.S.A., Inc. (“Smoke”) and IVGI Acquisition, Inc. The Company designs, markets and distributes vaporizers, e-liquids, electronic cigarettes and accessories under the emagine vapor™, Krave ® ® ®, ® ® The Company was originally incorporated as Consolidated Mining International, Inc. in 1985 as a Nevada corporation, and the Company changed its name in 1987 to Miller Diversified Corporation whereupon the Company operated in the commercial cattle feeding business until October 31, 2003 when the Company sold substantially all of its assets and became a discontinued operation. On November 5, 2009, the Company acquired Smoke Anywhere USA, Inc., a distributor of electronic cigarettes, in a reverse triangular merger. As a result of the merger, Smoke Anywhere USA, Inc. became the sole operating business. On January 7, 2010, the Company changed its name to Vapor Corp. The Company reincorporated to the State of Delaware from the State of Nevada effective on December 31, 2013. Basis of Presentation and Reverse Stock Split The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Effective on December 27, 2013, the Company effected a reverse stock split of its common stock at a ratio of 1-for-5. No fractional shares of common stock were issued, and no cash or other consideration were paid as a result of the reverse stock split. Instead, the Company issued one whole share of post-reverse stock split common stock in lieu of each fractional share of common stock. As a result of the reverse stock split, the Company’s share capital was reduced to 51,000,000 shares from 251,000,000 shares, of which 50,000,000 shares are common stock and 1,000,000 shares are “blank check” preferred stock. All references in these notes and in the related consolidated financial statements to number of shares, price per share and weighted average number of shares outstanding of common stock prior to the reverse stock split (including the share capital decrease) have been adjusted to reflect the reverse stock split (including the share capital decrease) on a retroactive basis, unless otherwise noted. Merger with Vaporin, Inc. As fully-disclosed in Note 4 to these consolidated financial statements, on December 17, 2014, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Vaporin, Inc., a Delaware corporation (“Vaporin”) pursuant to which Vaporin was to merge with and into the Company with the Company being the surviving entity. On the same date, the Company also entered into a joint venture with Vaporin (the “Joint Venture”) through the execution of an operating agreement (the “Operating Agreement”) of Emagine the Vape Store, LLC, a Delaware limited liability company (“Emagine”), pursuant to which the Company and Vaporin were 50% members of Emagine. On March 4, 2015, the acquisition of Vaporin by the Company (the “Merger”) was completed pursuant to the terms of the Merger Agreement. In connection with the Merger, Emagine became a wholly-owned subsidiary of the Company. |
GOING CONCERN AND MANAGEMENT PL
GOING CONCERN AND MANAGEMENT PLANS | 12 Months Ended |
Dec. 31, 2014 | |
Liquidity And Financial Condition [Abstract] | |
Going Concern and Management Plans | Note 2. GOING CONCERN AND MANAGEMENT PLANS The Companys financialstatements for the year ended December 31, 2014 indicate there is substantial doubt about its ability to continue as a going concernas the Company requires additional equity and/or debt financing to continue its operations. The Company must ultimately generatesufficient cash flow to met its obligations on a timely basis, attain profitability in its business operations, and be able tofund its long term business development and growth plans. The Companys business will require significant amounts of capitalto sustain operations and make the investments it needs to execute its longer-term business plan. The Companys liquidityand capital resources have decreased as a result of the net loss of $13,852,249 that it incurred during the year ended December31, 2014. At December 31, 2014, the Companys accumulated deficit amounted to $15,231,903. At December 31, 2014, the Companyhad working capital of $127,874 compared to $11,657,615 at December 31, 2013, a decrease of $11,529,741. As described in Note 12(Subsequent Events), on March 4, 2015, the Company and institutional and individual accredited investors entered in a securitiespurchase agreement pursuant to which the Company issued and sold, in a $3.5 million private placement ($2.9 million in net proceeds),3,432,314 shares of common stock and warrants to purchase up to 2,735,132 shares of the Companys common stock. The Companywill use the net proceeds from the private placement for working capital. In addition, the Merger with Vaporin also provides anadditional financing transaction to occur subsequent to the closing of the Merger for up to $25 million in exchange for commonstock and warrants of the Company subject to the Company complying with certain financial covenants and performance-based metricsstill to be negotiated. The accompanying consolidatedfinancial statements have been prepared in conformity with accounting principles generally accepted in the United States of America(GAAP), which contemplate continuation of the Company as a going concern and realization of assets and satisfactionof liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statementsdo not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include anyadjustments that might result from the outcome of this uncertainty. The Companys existingliquidity is not sufficient to fund its operations, anticipated capital expenditures, working capital and other financing requirementsfor the foreseeable future. We believe we will need to raise additional debt or equity financing to maintain and expand the business.Any equity financing or the issuance of equity equivalents including convertible debt could be dilutive to our shareholders. Ifeither such additional capital is not available on terms acceptable to the Company or at all then the Company may need to curtailits operations and/or take additional measures to conserve and manage its liquidity and capital resources, any of which wouldhave a material adverse effect on our business, results of operations and financial condition. |
SUMMARY OF CERTAIN SIGNIFICANT
SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 period’s presentation. No changes to the Company’s net loss were made as a result of such reclassifications. Liquidity The Company reported a net loss allocable to common stockholders 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, 2016. 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 stockholder approval to increase our authorized common shares to 500 million. The stockholders approved the increase in the Company’s authorized shares on October 16, 2015. If all of the warrants were exercised simultaneously at a time when the trading price of the Company’s 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 Company’s delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducement offers on its condensed consolidated statements of operations. Accounts Receivable Accounts receivable, net is stated at the amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. 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 31 st As more fully disclosed in Note 3 and Note 4, the Company’s 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 Company’s 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 Company’s short term financial instruments include cash, due from merchant credit card processors, accounts receivable, accounts payable and accrued expenses, each of which approximate their fair values based upon their short term nature. The Company’s other financial instruments include notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities; Level 2 — quoted prices for similar assets and liabilities in active market or inputs that are observable; and Level 3 — inputs that are unobservable. Stock-Based Compensation The Company accounts for stock-based compensation under ASC 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 Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s 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 Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income. Convertible Debt Instruments The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should 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 Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. It is effective for annual reporting periods beginning after December 15, 2016. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company has not yet determined the effect of the adoption of this standard and it is not expected to have a material impact on the Company’s consolidated financial position and results of operations. In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern | Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, Smoke Anywhere USA, Inc., and its 50% joint venture interest in Emagine the Vape Store, LLC. All significant intercompany transactions and balances were eliminated. Use of estimates in the preparation of financial statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the preliminary valuation of the net assets acquired subsequent to December 31, 2014 in the Merger. Certain of our estimates could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary. Revenue recognition The Company recognizes revenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passes to customers and collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company’s delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. The Company periodically provides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the Company’s customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Company’s historical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducement offers on its consolidated statements of operations. Shipping and Handling Costs The Company policy is to provide free standard shipping and handling for most orders shipped during the year. Shipping and handling costs incurred are recognized in selling, general and administrative expenses. Such amounts aggregated $661,583 and $658,586 for the years ended December 31, 2014 and 2013 respectively. In certain circumstances, shipping and handling costs are charged to the customer and recognized in sales, net. The amounts recognized for the years ended December 31, 2014 and 2013 were $71,225 and $129,761, respectively. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. For financial statement purposes, investments in money market funds are considered a cash equivalent and are included in cash and cash equivalents. The Company maintains its cash and cash equivalents at high credit quality federally insured financial institutions, with balances, at times, in excess of the Federal Deposit Insurance Corporation’s insurance coverage limit of $250,000 per federally insured financial institution. Management believes that the financial institutions that hold the Company’s deposits are financially sound and, therefore, pose a minimum credit risk. The Company has not experienced any losses in such accounts. At December 31, 2014 and 2013, the Company did not hold cash equivalents. Accounts Receivable Accounts receivable, net is stated at the amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances and doubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the provision for allowances will change. Due From Merchant Credit Card Processor Due from merchant credit card processor represents monies held by the Company’s credit card processors. The funds are being held by the merchant credit card processors pending satisfaction of their hold requirements and expiration of charge backs/refunds from customers. Inventories Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. If the cost of the inventories exceeds their market value, provisions are recorded to write down excess inventory to its net realizable value. The Company’s inventories consist primarily of merchandise available for resale. Property and equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful life of the respective asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment: Description Useful Lives Warehouse fixtures 2 years Warehouse equipment 5 years Furniture and fixtures 5 years Computer hardware 3 years Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In connection with this review, the Company also reevaluates the depreciable lives for these assets. The Company assesses recoverability by determining whether the net book value of the related asset will be recovered through the projected undiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset may not be recoverable, it measures any impairment based on the projected future discounted cash flows as compared to the asset’s carrying value. Through December 31, 2014, the Company has not recorded any impairment charges on its long-lived assets. Advertising The Company expenses advertising cost as incurred. Warranty liability The Company’s limited lifetime warranty policy generally allows its end users and retailers to return defective purchased rechargeable products in exchange for new products. The Company estimates a reserve for warranty liability and records that reserve amount as a reduction of revenues and as an accrued expense on the accompanying consolidated balance sheets. The warranty claims and expense was not deemed material for the years ended December 31, 2014 and 2013. Income taxes The Company uses the asset and liability method of accounting for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740.”) Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and (ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. Product Development The Company includes product development expenses relating to the commercialization of new products which are expensed as incurred as part of operating expenses. Product development expenses for the years ended December 31, 2014 and 2013 were approximately $312,000 and $174,000, respectively. Fair value measurements The Company applies the provisions of Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). The Company’s short term financial instruments include cash, due from merchant credit card processors, accounts receivable, accounts payable and accrued expenses, each of which approximate their fair values based upon their short term nature. The Company’s other financial instruments include notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — quoted prices in active markets for identical assets or liabilities; Level 2 — quoted prices for similar assets and liabilities in active market or inputs that are observable; and Level 3 — inputs that are unobservable. Stock-Based Compensation The Company accounts for stock-based compensation under ASC 718, “Compensation — Stock Compensation” (“ASC 718”). These standards define a fair value based method of accounting for stock-based compensation. In accordance with ASC Topic 718, the cost of stock-based compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair value of the award as determined by the valuation model at the grant date or other measurement date. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Derivative Instruments The Company accounts for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic No. 815, “Accounting for Derivative Instruments and Hedging Activities,” (“ASC 815”) as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. The Company estimates fair values of derivative instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair values. In selecting the appropriate technique, the Company considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton valuation model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Black-Scholes-Merton valuation model) are highly volatile and sensitive to changes in the trading market price of the Company’s common stock. Since derivative financial instruments are initially and subsequently carried at fair values, the Company’s income (loss) going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the Company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income. Convertible Debt Instruments The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company amortizes the respective debt discount over the term of the notes, using the straight-line method, which approximates the effective interest method. The Company records, when necessary, induced conversion expense, at the time of conversion for the difference between the reduced conversion price per share and the original conversion price per share. Lease Accounting The Company evaluates each lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risks of ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreement calls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis over the lease term. The Company determines the straight-line rent impact of an operating lease upon inception of the lease. Recent Accounting Pronouncements The Financial Accounting Standards Board (“FASB”) has issued Accounting Standards Update (“ASU”) No. 2014-12, Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations. The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 — Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company is currently evaluating the potential impact, if any, the adoption of this standard will have on the Company’s consolidated financial position and results of operations. The FASB has issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern |
MERGER WITH VAPORIN, INC
MERGER WITH VAPORIN, INC | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 Company’s outstanding shares of common stock and the current Vapor directors comprising the majority of the board). The Merger closed on March 4, 2015 and the purchase price consideration paid by the Company consisted of the following: 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 Company’s common stock such that the former Vaporin stockholders collectively hold approximately 45% of the issued and outstanding shares of the Company’s common stock following consummation of the Merger. The aggregate value of these shares issued was $14,949,328, or approximately $5.50 per share, and was based on the closing price of the Company’s 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 Company’s common stock. The restricted stock units became fully-vested in connection with the Merger and as a result, were included as a part of the Company’s purchase price as no further services from the holders 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 Company’s common stock on March 4, 2015. Based on the terms of the Merger Agreement, the Company has agreed to issue these in twelve equal monthly instalments, with the first delivery date being the date of the closing of the Merger, however, all shares of common stock to be delivered 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 management’s knowledge of Vaporin’s 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 Company’s common stock to certain warrant holders of Vaporin as replacement for warrants issued in connection with previous Vaporin note payable issuances. In addition, the Company also issued 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 For the Nine Months Ended 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 Company’s 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 NOL’s 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. | Note 4. MERGER WITH VAPORIN, INC. Merger with Vaporin, Inc. On December 17, 2014, the Company entered into the Merger Agreement with Vaporin pursuant to which Vaporin was to merge with and into the Company with Vapor being the surviving entity. The Merger closed on March 4, 2015 whereby 100% of the issued and outstanding shares of Vaporin common stock (including shares of common stock issued upon conversion of Vaporin preferred stock immediately prior to the consummation of the merger in accordance with the Merger Agreement) were converted into, and became 2,718,307 shares of the Company’s common stock such that the former Vaporin stockholders collectively hold approximately 45% of the issued and outstanding shares of the Company’s common stock following consummation of the Merger. The options and warrants to acquire Vaporin common stock that were issued and outstanding as of the effective time of the Merger, as well as 182,000 restricted stock units which were exchangeable for Vaporin common stock, were assumed by the Company in the merger and the number of shares issued under such securities were adjusted to give effect to the Per Share Merger Consideration (as defined in the Merger Agreement). Pursuant to the terms of the Merger Agreement, the Company completed actions to cause its board of directors immediately following the consummation of the merger to be comprised of (x) three directors chosen by the Company’s Board of Directors (at least two of whom shall be independent for purposes of the Nasdaq listing rules) and (y) two directors chosen by the Vaporin Board or Directors (at least one of whom shall be independent for purposes of the Nasdaq listing rules), each to serve for a term expiring on the earlier of his or her death, resignation, removal or the Company’s next annual meeting of stockholders and, despite the expiration of his or her term, until his or her successor has been elected and qualified or there is a decrease in the size of the Company’s Board of Directors. If at any time prior to the effective time of the merger, any such board designee becomes unable or unwilling to serve as a director of the Company following consummation of the merger, then the party that designated such individual shall designate another individual to serve in such individual’s place. The Merger Agreement contained customary representations and warranties of the Company and Vaporin relating to their respective businesses. The Company and Vaporin have agreed to use commercially reasonable efforts to preserve intact its business organization and that of its significant subsidiaries, as well as maintain its rights, franchises and existing relations with customers, suppliers and employees. The Merger Agreement also contains covenants by each party to furnish current information to the other party. The Company has also agreed that, for a period of six years following the closing date of the merger, it will indemnify, defend and hold harmless each officer and director of Vaporin and its subsidiaries against losses arising from such person’s status as an officer or director of Vaporin or any of its subsidiaries prior to the effective time of the merger. The Company has also agreed to cover such directors and officers with its existing directors’ and officers’ insurance policy or obtain a six-year “tail” policy, in each case with coverages not less advantageous as Vaporin’s existing policy, provided, however, that the Company will not be required to pay more than 200% of Vaporin’s current premium for such insurance. The Merger Agreement contained customary conditions that were satisfied prior to the closing of the merger, including the requirement for the Company to receive gross proceeds from a $3.5 million equity offering disclosed in Note 13. Additionally, the Company must have received commitments from certain third parties for financing of up to $25 million to be used for the construction of retail stores and which is contingent on the achievement of certain performance metrics by the Company. The fair value of the purchase consideration issued to the sellers of Vaporin was allocated to fair value of the net tangible assets acquired, with the resulting excess allocated to separately identifiable intangibles, and the remainder recorded as goodwill. Goodwill recognized from the transactions mainly represented the expected operational synergies upon acquisition of the combined entity and intangibles not qualifying for separate recognition. Goodwill is not expected to be deductible for income tax purposes in the tax jurisdiction of the acquired business. The Company has not completed its evaluation of the purchase price allocation as it is currently conducting a thorough analysis to identify the intangible assets acquired, including whether or not any goodwill is to be recorded, in the Merger and determine the proper allocation of the fair value of such assets with the assistance of a third-party appraiser. The following table presents the unaudited pro-forma financial results, as if the acquisition of Vaporin had been completed as of January 1, 2013 and 2014: For the Years Ended 2014 2013 Revenues $ 20,253,052 $ 28,259,309 Net (loss) income $ (19,595,702 ) $ 415,316 Loss per share – basic and diluted $ (2.95 ) $ 0.05 The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2013 or to project potential operating results as of any future date or for any future periods. 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 purpose of the Joint Venture was to obtain and build-out retail stores for the sale of the Company and Vaporin’s products under the “Emagine Vapor” name or “The Vape Store, Inc.” name or other brands of the respective parties. The parties originally planned to finance the retail stores through third party loan financing secured by a blanket lien on the assets of Emagine. In connection with the Joint Venture, Emagine entered into a Secured Line of Credit Agreement, pursuant to which certain third parties have agreed to provide debt financing of up to $3 million to Emagine to finance the Joint Venture. The Company has accounted for the joint venture under the equity method of accounting for investments. For the year ended December 31, 2014, the operations of the joint-venture were immaterial. 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 seller’s 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 Company’s commitments. (See Note 10) The purchase price allocations were based, on management’s 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 Company’s 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 scheduled 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, December 31, 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 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following: December 31, 2014 2013 Computer hardware $ 389,373 $ 12,471 Furniture and fixtures 347,612 19,821 Warehouse fixtures 7,564 7,564 Warehouse equipment 16,708 16,708 Leasehold improvements 35,076 — 796,333 56,564 Less: accumulated depreciation and amortization (84,314 ) (27,879 ) $ 712,019 $ 28,685 During the year ended December 31, 2014 and 2013, the Company incurred $56,435 and $11,284, respectively, of depreciation expense. |
NOTES PAYABLE AND RECEIVABLE
NOTES PAYABLE AND RECEIVABLE | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable and Receivable | Note 6. NOTES PAYABLE $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 Company’s 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 Company’s common stock, $0.001 par value per share with an exercise price of $10.00 per share. The $1,250,000 Senior Convertible Notes accrue interest on the outstanding principal at an annual rate of 7% per annum. The principal and accrued interest on the Notes are due and payable on November 14, 2015, the maturity date of the Notes. The terms of the $1,250,000 Senior Convertible Notes included customary anti-dilution protection and also included “piggy-back” registration rights with respect to the shares of common stock underlying the $1,250,000 Senior Convertible Notes and warrants. The terms of the Notes provide that the Company may prepay the outstanding principal amount of the Notes, in whole or in part, by paying to the holders thereof an amount in cash equal to 115% of the principal amount to be redeemed, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to such holders through the date of such redemption payment. In connection with the completion of the securities purchase agreement for the $1,250,000 Senior Convertible Notes, the Company incurred financing costs of $139,667, which are being amortized on a straight-line basis, which approximates the interest rate method, over the one-year maturity period of the $1,250,000 Senior Convertible Notes. The Company incurred $17,458 in amortization expense of the deferred financing costs during the year ended December 31, 2014. The Notes are convertible into shares of the Company’s Common Stock at any time, in whole or in part, at the option of the holder thereof at a conversion price of $5.50 per share (the “Conversion Price”). The Conversion Price is subject to customary adjustment upon the occurrence of certain events, including but not limited to stock dividends, stock splits, subsequent rights offerings of the Company, pro rata distributions of the Company, and in connection with a “Fundamental Transaction” (as such term is defined in the securities purchase agreement, which includes, without limitation, mergers, consolidations, a sale of all or substantially all of the assets of the Company, transactions effecting a change in control of the Company and other similar transactions). In connection with the sale and issuance of the $1,250,000 Senior Convertible Notes, the Company also issued warrants to acquire an aggregate of 227,273 shares of the Company’s common stock. The Warrants are exercisable after 180 days from the date of issuance, or May 14, 2015, until the fifth anniversary of such date of issuance at an exercise price of $10.00 per share (subject to certain customary adjustments upon the occurrence of certain events, including but not limited to stock dividends, stock splits, subsequent rights offerings of the Company, pro rata distributions of the Company, and in connection with a Fundamental Transaction. Palladium Capital Advisors, LLC acted as the exclusive placement agent for the $1,250,000 Senior Convertible Notes and, as compensation therefor, the Company paid Palladium Capital Advisors, LLC a placement agent fee of $62,500, included as part of financing fees described above, and issued to them a common stock warrant to purchase up to 11,364 shares of our common stock at an initial exercise price of $10.00 per share. The warrant is immediately exercisable and expires on November 14, 2019. The exercise price and number of shares of common stock issuable under the warrant are subject to customary anti-dilutive adjustments for stock splits, stock dividends, recapitalizations and similar transactions. At any time the warrant may be exercised by means of a “cashless exercise” and the Company will not receive any proceeds at such time. On the date of the issuance of the $1,250,000 Senior Convertible Notes, the Company recorded a debt discount of $1,250,000, of which $701,250 was allocated on a relative fair value basis to the warrants issued and the remaining $548,750 was allocated on a relative fair value basis to the conversion feature embedded within the $1,250,000 Senior Convertible Notes. The debt discount will be amortized using the effective interest method over the life of the $1,250,000 Senior Convertible Note, as applicable, or until such time that the $1,250,000 Senior Convertible Notes are converted, in full or in part, into shares of common stock of the Company with any unamortized debt discount continuing to be amortized in the event of any partial conversion thereof and any unamortized debt discount being expensed at such time of full conversion thereof. During the year ended December 31, 2014, the Company recorded an aggregate $156,250 in non-cash interest expense related to the amortization of the debt discount, which is included in interest expense in the accompanying consolidated statement of operations. $300,000 Senior Convertible Notes Payable to Related Parties On June 19, 2012, the Company entered into securities purchase agreements with Kevin Frija, its former Chief Executive Officer, Harlan Press, its former Chief Financial Officer, and Doron Ziv, a then greater than 10% stockholder of the Company, pursuant to which Messrs. Frija, Press and Ziv purchased from the Company (i) $300,000 aggregate principal amount of the Company’s senior convertible notes (the “$300,000 Senior Convertible Notes”) and (ii) common stock purchase warrants to purchase up to an aggregate of 1,861 shares of the Company’s common stock. The Company incurred interest expense of $48,674 during 2013 on the $300,000 Senior Convertible Notes until they were converted in full into 56,338 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. $50,000 Senior Convertible Notes Payable to Related Parties On September 28, 2012, the Company entered into a securities purchase agreement with Kevin Frija, its former Chief Executive Officer, pursuant to which Mr. Frija purchased from the Company (i) a $50,000 principal amount senior convertible note of the Company (the “$50,000 Senior Convertible Note”) and (ii) common stock purchase warrants to purchase up to an aggregate of 275 shares of the Company’s common stock. The Company incurred interest expense of $8,113 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 8,333 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. During the year ended December 31, 2013, the Company recorded $3,530 in amortization expense related to the debt discount, which is included in interest expense in the accompanying consolidated statements of operations. $350,000 Senior Convertible Notes Payable to Related Parties On July 9, 2013, the Company entered into securities purchase agreements with Ralph Frija, the father of the Company’s former Chief Executive Officer Kevin Frija and a less than 5% stockholder of the Company, Philip Holman, the father of the Company’s Chief Executive Officer Jeffrey Holman and a less than 5% stockholder of the Company, and Angela Vaccaro, the Company’s Controller, pursuant to which Messrs. Frija and Holman and Ms. Vaccaro (each, a “Purchaser”) purchased from the Company (i) $350,000 aggregate principal amount of the Company’s senior convertible notes (the “$350,000 Senior Convertible Notes”) and (ii) common stock purchase warrants to purchase up to an aggregate of 675 shares of the Company’s common stock (the “Warrants”) allocable among such Purchasers as follows: • Ralph Frija purchased a Convertible Note in the principal amount of $200,000 and a Warrant to purchase up to 385 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $10,000 (5% of the $200,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)); • Philip Holman purchased a Convertible Note in the principal amount of $100,000 and a Warrant to purchase up to 964 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $5,000 (5% of the $100,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)); and Ms. Vaccaro purchased a Convertible Note in the principal amount of $50,000 and a Warrant to purchase up to 482 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $2,500 (5% of the $50,000 principal amount of the Convertible Note) by (y) $25.95 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)). The Convertible Notes issued on July 9, 2013 bear interest at 18% per annum, provide for cash interest payments on a monthly basis, mature on July 8, 2016, are redeemable at the option of the holders at any time after July 8, 2014, subject to certain limitations, are convertible into shares of the Company’s common stock at the option of the holders at an initial conversion price of $28.55 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July, 9, 2013) subject to certain anti-dilution protection and are senior unsecured obligations of the Company. The Company incurred interest expense of $16,126 during 2013 on the $350,000 Senior Convertible Notes. In conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013, the conversion price was reduced to $15.00 per share inducing the holders of $350,000 Senior Convertible Notes to fully convert all of these senior convertible notes into 23,334 shares of our common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. During the year ended December 31, 2013, the Company recorded $246,375 in induced conversion expense related to the reduction in the conversion price for the $350,000 Senior Convertible Notes. The induced conversion expense is included in other expense in the accompanying consolidated statements of operations. The Company recorded $4,550 as debt discount on the principal amount of the $350,000 Senior Convertible Notes issued on July 9, 2013 due to the valuation of the Warrants issued in conjunction therewith. Additionally, as a result of issuing the Warrants with the $350,000 Senior Convertible Notes, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $3,937, at the time of issuance provided to the holders of the Notes. The debt discounts applicable to the $350,000 Senior Convertible Notes was amortized, using the straight-line method, over the life of the $350,000 Senior Convertible Notes, until October 29, 2013 when the $350,000 Senior Convertible Notes were converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $4,550 and $3,937 in amortization expense related to the debt discounts and the beneficial conversion option, respectively. The amortization expense related to the debt discounts and the beneficial conversion option is included in interest expense in the accompanying consolidated statements of operations. The Warrants issued on July 9, 2013 are exercisable at initial exercise prices of $28.55 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013) subject to certain anti-dilution protection and may be exercised at the option of the holders for cash or on a cashless basis until July 8, 2018. $75,000 Senior Convertible Notes Payable to Related Parties On July 11, 2013, the Company and Ms. Vaccaro entered into another Securities Purchase Agreement pursuant to which she purchased (i) a Convertible Note in the principal amount of $75,000 (the “$75,000 Senior Convertible Note”) and (ii) a Warrant to purchase up to 144 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $3,750 (5% of the $75,000 principal amount of the Convertible Note) by (y) $26.135 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 11, 2013)). The Convertible Note issued on July 11, 2013 is the same as the Convertible Notes issued on July 9, 2013 except that it matures on July 10, 2016, it is redeemable on July 10, 2014 and its initial conversion price is $28.75 per share. The Warrant issued on July 11, 2013 is the same as the Warrants issued on July 9, 2013 except that its initial exercise price is $28.75 per share and it is exercisable until July 10, 2018. The Company incurred interest expense of $3,957 during 2013 on the $75,000 Senior Convertible Notes. In conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013, the conversion price was reduced to $15.00 per share inducing the holder of the $75,000 Senior Convertible Note to fully convert all of these senior convertible notes into 5,000 shares of our common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. During the year ended December 31, 2013, the Company recorded $53,202 in induced conversion expense related to the reduction in the conversion price for the $75,000 Senior Convertible Note. The induced conversion expense is included in other expense in the accompanying consolidated statements of operations. The Company recorded $825 as debt discount on the principal amount of the $75,000 Senior Convertible Note issued on July 11, 2013 due to the valuation of the Warrant issued in conjunction therewith. The debt discount applicable to the $75,000 Senior Convertible Note was amortized, using the straight-line method, over the life of the $75,000 Senior Convertible Note, until October 29, 2013 when the $75,000 Senior Convertible Note was converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $825 in amortization expense related to the debt discount, and is included in interest expense in the accompanying consolidated statements of operations. The $300,000 Senior Convertible Notes, as amended, the $50,000 Senior Convertible Note, as amended, the $350,000 Senior Convertible Notes, and the $75,000 Senior Convertible Note did not restrict the Company’s ability to incur future indebtedness. $500,000 Senior Convertible Note Payable to Stockholder On July 9, 2012, the Company borrowed $500,000 from Ralph Frija, the father of the Company’s former Chief Executive Officer Kevin Frija and a less than 5% stockholder of the Company, pursuant to a senior note (the “Senior Note”). The Senior Note, as amended (as described below), bears interest at 24% per annum, provides for cash principal and interest payments on a monthly basis, is a senior unsecured obligation of the Company, matures on April 22, 2016, is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $12.885 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding April 30, 2013) subject to certain anti-dilution protection and is a senior unsecured obligation of the Company. Initially, this Senior Note provided for only cash interest payments on a monthly basis, matured at the discretion of the Company on the earlier of (x) the date on which the Company consummated a single or series of related financings from which it received net proceeds in excess of 125% of the initial principal amount of the Senior Note or (y) January 8, 2013 and was not convertible at the option of the holder into shares of the Company’s common stock. On November 13, 2012, the Company and the above named holder of the $500,000 Senior Note amended the Note to extend its maturity date for payment from January 8, 2013 to January 8, 2014. On April 30, 2013, the Company and the above named holder of the Senior Note further amended the Note to provide for cash principal and interest payments on a weekly basis, extend the maturity date for payment to April 22, 2016 and make the Note convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $12.885 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding April 30, 2013) subject to certain anti-dilution protection. The Company incurred interest expense of $93,267 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 33,332 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. $500,000 Senior Convertible Note Payable On January 29, 2013, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Robert John Sali, pursuant to which Mr. Sali purchased from the Company (i) a $500,000 principal amount senior convertible note of the Company (the “2013 Convertible Note”) and (ii) common stock purchase warrants to purchase up to an aggregate of 1,628 shares of the Company’s common stock (the “Warrant”) (which number of shares represents the quotient obtained by dividing (x) $25,000 (5% of the $500,000 principal amount of the 2013 Convertible Note) by (y) $15.35 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013)). The Company generated aggregate proceeds of $500,000 from the sale of these securities pursuant to the Securities Purchase Agreement. The 2013 Convertible Note bears interest at 18% per annum, provides for cash interest payments on a monthly basis, matures on January 28, 2016, is redeemable at the option of the holder at any time after January 28, 2014 subject to certain limitations, is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $16.888 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013) subject to certain anti-dilution protection and is a senior unsecured obligation of the Company. The 2013 Convertible Note does not restrict the Company’s ability to incur future indebtedness. The Company incurred interest expense of $66,329 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 148,039 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. The Warrant is exercisable at initial exercise price of $16.888 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013) subject to certain anti-dilution protection and may be exercised at the option of the holder for cash or on a cashless basis until January 28, 2018. The Company recorded $10,131 as debt discount on the principal amount of the 2013 Senior Convertible Note issued on January 29, 2013 due to the valuation of the Warrant issued in conjunction therewith. Additionally, as a result of issuing the Warrant with the 2013 Senior Convertible Note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $79,527, at the time of issuance provided to the holder of the Note. The debt discounts applicable to the 2013 Convertible Note was amortized, using the straight-line method, over the life of the 2013 Convertible Note, until October 29, 2013 when the 2013 Convertible Note was converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $10,131 and $79,527 in amortization expense related to the debt discounts and the beneficial conversion option, respectively. The amortization expense related to the debt discounts and the beneficial conversion option is included in interest expense in the accompanying consolidated statements of operations. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Notes Payable and Receivable | Note 6. NOTES PAYABLE $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 Company’s 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 Company’s common stock, $0.001 par value per share with an exercise price of $10.00 per share. The $1,250,000 Senior Convertible Notes accrue interest on the outstanding principal at an annual rate of 7% per annum. The principal and accrued interest on the Notes are due and payable on November 14, 2015, the maturity date of the Notes. The terms of the $1,250,000 Senior Convertible Notes included customary anti-dilution protection and also included “piggy-back” registration rights with respect to the shares of common stock underlying the $1,250,000 Senior Convertible Notes and warrants. The terms of the Notes provide that the Company may prepay the outstanding principal amount of the Notes, in whole or in part, by paying to the holders thereof an amount in cash equal to 115% of the principal amount to be redeemed, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to such holders through the date of such redemption payment. In connection with the completion of the securities purchase agreement for the $1,250,000 Senior Convertible Notes, the Company incurred financing costs of $139,667, which are being amortized on a straight-line basis, which approximates the interest rate method, over the one-year maturity period of the $1,250,000 Senior Convertible Notes. The Company incurred $17,458 in amortization expense of the deferred financing costs during the year ended December 31, 2014. The Notes are convertible into shares of the Company’s Common Stock at any time, in whole or in part, at the option of the holder thereof at a conversion price of $5.50 per share (the “Conversion Price”). The Conversion Price is subject to customary adjustment upon the occurrence of certain events, including but not limited to stock dividends, stock splits, subsequent rights offerings of the Company, pro rata distributions of the Company, and in connection with a “Fundamental Transaction” (as such term is defined in the securities purchase agreement, which includes, without limitation, mergers, consolidations, a sale of all or substantially all of the assets of the Company, transactions effecting a change in control of the Company and other similar transactions). In connection with the sale and issuance of the $1,250,000 Senior Convertible Notes, the Company also issued warrants to acquire an aggregate of 227,273 shares of the Company’s common stock. The Warrants are exercisable after 180 days from the date of issuance, or May 14, 2015, until the fifth anniversary of such date of issuance at an exercise price of $10.00 per share (subject to certain customary adjustments upon the occurrence of certain events, including but not limited to stock dividends, stock splits, subsequent rights offerings of the Company, pro rata distributions of the Company, and in connection with a Fundamental Transaction. Palladium Capital Advisors, LLC acted as the exclusive placement agent for the $1,250,000 Senior Convertible Notes and, as compensation therefor, the Company paid Palladium Capital Advisors, LLC a placement agent fee of $62,500, included as part of financing fees described above, and issued to them a common stock warrant to purchase up to 11,364 shares of our common stock at an initial exercise price of $10.00 per share. The warrant is immediately exercisable and expires on November 14, 2019. The exercise price and number of shares of common stock issuable under the warrant are subject to customary anti-dilutive adjustments for stock splits, stock dividends, recapitalizations and similar transactions. At any time the warrant may be exercised by means of a “cashless exercise” and the Company will not receive any proceeds at such time. On the date of the issuance of the $1,250,000 Senior Convertible Notes, the Company recorded a debt discount of $1,250,000, of which $701,250 was allocated on a relative fair value basis to the warrants issued and the remaining $548,750 was allocated on a relative fair value basis to the conversion feature embedded within the $1,250,000 Senior Convertible Notes. The debt discount will be amortized using the effective interest method over the life of the $1,250,000 Senior Convertible Note, as applicable, or until such time that the $1,250,000 Senior Convertible Notes are converted, in full or in part, into shares of common stock of the Company with any unamortized debt discount continuing to be amortized in the event of any partial conversion thereof and any unamortized debt discount being expensed at such time of full conversion thereof. During the year ended December 31, 2014, the Company recorded an aggregate $156,250 in non-cash interest expense related to the amortization of the debt discount, which is included in interest expense in the accompanying consolidated statement of operations. $300,000 Senior Convertible Notes Payable to Related Parties On June 19, 2012, the Company entered into securities purchase agreements with Kevin Frija, its former Chief Executive Officer, Harlan Press, its former Chief Financial Officer, and Doron Ziv, a then greater than 10% stockholder of the Company, pursuant to which Messrs. Frija, Press and Ziv purchased from the Company (i) $300,000 aggregate principal amount of the Company’s senior convertible notes (the “$300,000 Senior Convertible Notes”) and (ii) common stock purchase warrants to purchase up to an aggregate of 1,861 shares of the Company’s common stock. The Company incurred interest expense of $48,674 during 2013 on the $300,000 Senior Convertible Notes until they were converted in full into 56,338 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. $50,000 Senior Convertible Notes Payable to Related Parties On September 28, 2012, the Company entered into a securities purchase agreement with Kevin Frija, its former Chief Executive Officer, pursuant to which Mr. Frija purchased from the Company (i) a $50,000 principal amount senior convertible note of the Company (the “$50,000 Senior Convertible Note”) and (ii) common stock purchase warrants to purchase up to an aggregate of 275 shares of the Company’s common stock. The Company incurred interest expense of $8,113 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 8,333 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. During the year ended December 31, 2013, the Company recorded $3,530 in amortization expense related to the debt discount, which is included in interest expense in the accompanying consolidated statements of operations. $350,000 Senior Convertible Notes Payable to Related Parties On July 9, 2013, the Company entered into securities purchase agreements with Ralph Frija, the father of the Company’s former Chief Executive Officer Kevin Frija and a less than 5% stockholder of the Company, Philip Holman, the father of the Company’s Chief Executive Officer Jeffrey Holman and a less than 5% stockholder of the Company, and Angela Vaccaro, the Company’s Controller, pursuant to which Messrs. Frija and Holman and Ms. Vaccaro (each, a “Purchaser”) purchased from the Company (i) $350,000 aggregate principal amount of the Company’s senior convertible notes (the “$350,000 Senior Convertible Notes”) and (ii) common stock purchase warrants to purchase up to an aggregate of 675 shares of the Company’s common stock (the “Warrants”) allocable among such Purchasers as follows: • Ralph Frija purchased a Convertible Note in the principal amount of $200,000 and a Warrant to purchase up to 385 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $10,000 (5% of the $200,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)); • Philip Holman purchased a Convertible Note in the principal amount of $100,000 and a Warrant to purchase up to 964 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $5,000 (5% of the $100,000 principal amount of the Convertible Note) by (y) $5.19 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)); and Ms. Vaccaro purchased a Convertible Note in the principal amount of $50,000 and a Warrant to purchase up to 482 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $2,500 (5% of the $50,000 principal amount of the Convertible Note) by (y) $25.95 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013)). The Convertible Notes issued on July 9, 2013 bear interest at 18% per annum, provide for cash interest payments on a monthly basis, mature on July 8, 2016, are redeemable at the option of the holders at any time after July 8, 2014, subject to certain limitations, are convertible into shares of the Company’s common stock at the option of the holders at an initial conversion price of $28.55 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July, 9, 2013) subject to certain anti-dilution protection and are senior unsecured obligations of the Company. The Company incurred interest expense of $16,126 during 2013 on the $350,000 Senior Convertible Notes. In conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013, the conversion price was reduced to $15.00 per share inducing the holders of $350,000 Senior Convertible Notes to fully convert all of these senior convertible notes into 23,334 shares of our common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. During the year ended December 31, 2013, the Company recorded $246,375 in induced conversion expense related to the reduction in the conversion price for the $350,000 Senior Convertible Notes. The induced conversion expense is included in other expense in the accompanying consolidated statements of operations. The Company recorded $4,550 as debt discount on the principal amount of the $350,000 Senior Convertible Notes issued on July 9, 2013 due to the valuation of the Warrants issued in conjunction therewith. Additionally, as a result of issuing the Warrants with the $350,000 Senior Convertible Notes, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $3,937, at the time of issuance provided to the holders of the Notes. The debt discounts applicable to the $350,000 Senior Convertible Notes was amortized, using the straight-line method, over the life of the $350,000 Senior Convertible Notes, until October 29, 2013 when the $350,000 Senior Convertible Notes were converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $4,550 and $3,937 in amortization expense related to the debt discounts and the beneficial conversion option, respectively. The amortization expense related to the debt discounts and the beneficial conversion option is included in interest expense in the accompanying consolidated statements of operations. The Warrants issued on July 9, 2013 are exercisable at initial exercise prices of $28.55 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 9, 2013) subject to certain anti-dilution protection and may be exercised at the option of the holders for cash or on a cashless basis until July 8, 2018. $75,000 Senior Convertible Notes Payable to Related Parties On July 11, 2013, the Company and Ms. Vaccaro entered into another Securities Purchase Agreement pursuant to which she purchased (i) a Convertible Note in the principal amount of $75,000 (the “$75,000 Senior Convertible Note”) and (ii) a Warrant to purchase up to 144 shares of the Company’s common stock (which number of shares represents the quotient obtained by dividing (x) $3,750 (5% of the $75,000 principal amount of the Convertible Note) by (y) $26.135 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding July 11, 2013)). The Convertible Note issued on July 11, 2013 is the same as the Convertible Notes issued on July 9, 2013 except that it matures on July 10, 2016, it is redeemable on July 10, 2014 and its initial conversion price is $28.75 per share. The Warrant issued on July 11, 2013 is the same as the Warrants issued on July 9, 2013 except that its initial exercise price is $28.75 per share and it is exercisable until July 10, 2018. The Company incurred interest expense of $3,957 during 2013 on the $75,000 Senior Convertible Notes. In conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013, the conversion price was reduced to $15.00 per share inducing the holder of the $75,000 Senior Convertible Note to fully convert all of these senior convertible notes into 5,000 shares of our common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. During the year ended December 31, 2013, the Company recorded $53,202 in induced conversion expense related to the reduction in the conversion price for the $75,000 Senior Convertible Note. The induced conversion expense is included in other expense in the accompanying consolidated statements of operations. The Company recorded $825 as debt discount on the principal amount of the $75,000 Senior Convertible Note issued on July 11, 2013 due to the valuation of the Warrant issued in conjunction therewith. The debt discount applicable to the $75,000 Senior Convertible Note was amortized, using the straight-line method, over the life of the $75,000 Senior Convertible Note, until October 29, 2013 when the $75,000 Senior Convertible Note was converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $825 in amortization expense related to the debt discount, and is included in interest expense in the accompanying consolidated statements of operations. The $300,000 Senior Convertible Notes, as amended, the $50,000 Senior Convertible Note, as amended, the $350,000 Senior Convertible Notes, and the $75,000 Senior Convertible Note did not restrict the Company’s ability to incur future indebtedness. $500,000 Senior Convertible Note Payable to Stockholder On July 9, 2012, the Company borrowed $500,000 from Ralph Frija, the father of the Company’s former Chief Executive Officer Kevin Frija and a less than 5% stockholder of the Company, pursuant to a senior note (the “Senior Note”). The Senior Note, as amended (as described below), bears interest at 24% per annum, provides for cash principal and interest payments on a monthly basis, is a senior unsecured obligation of the Company, matures on April 22, 2016, is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $12.885 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding April 30, 2013) subject to certain anti-dilution protection and is a senior unsecured obligation of the Company. Initially, this Senior Note provided for only cash interest payments on a monthly basis, matured at the discretion of the Company on the earlier of (x) the date on which the Company consummated a single or series of related financings from which it received net proceeds in excess of 125% of the initial principal amount of the Senior Note or (y) January 8, 2013 and was not convertible at the option of the holder into shares of the Company’s common stock. On November 13, 2012, the Company and the above named holder of the $500,000 Senior Note amended the Note to extend its maturity date for payment from January 8, 2013 to January 8, 2014. On April 30, 2013, the Company and the above named holder of the Senior Note further amended the Note to provide for cash principal and interest payments on a weekly basis, extend the maturity date for payment to April 22, 2016 and make the Note convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $12.885 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding April 30, 2013) subject to certain anti-dilution protection. The Company incurred interest expense of $93,267 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 33,332 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. $500,000 Senior Convertible Note Payable On January 29, 2013, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Robert John Sali, pursuant to which Mr. Sali purchased from the Company (i) a $500,000 principal amount senior convertible note of the Company (the “2013 Convertible Note”) and (ii) common stock purchase warrants to purchase up to an aggregate of 1,628 shares of the Company’s common stock (the “Warrant”) (which number of shares represents the quotient obtained by dividing (x) $25,000 (5% of the $500,000 principal amount of the 2013 Convertible Note) by (y) $15.35 (the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013)). The Company generated aggregate proceeds of $500,000 from the sale of these securities pursuant to the Securities Purchase Agreement. The 2013 Convertible Note bears interest at 18% per annum, provides for cash interest payments on a monthly basis, matures on January 28, 2016, is redeemable at the option of the holder at any time after January 28, 2014 subject to certain limitations, is convertible into shares of the Company’s common stock at the option of the holder at an initial conversion price of $16.888 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013) subject to certain anti-dilution protection and is a senior unsecured obligation of the Company. The 2013 Convertible Note does not restrict the Company’s ability to incur future indebtedness. The Company incurred interest expense of $66,329 during 2013 on the $50,000 Senior Convertible Notes until they were converted in full into 148,039 shares of the Company’s common stock and fully extinguished in conjunction with completion of the Private Placement (as defined in Note 9), on October 29, 2013. The Warrant is exercisable at initial exercise price of $16.888 per share (which represents 110% of the 30-day weighted average closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, preceding January 29, 2013) subject to certain anti-dilution protection and may be exercised at the option of the holder for cash or on a cashless basis until January 28, 2018. The Company recorded $10,131 as debt discount on the principal amount of the 2013 Senior Convertible Note issued on January 29, 2013 due to the valuation of the Warrant issued in conjunction therewith. Additionally, as a result of issuing the Warrant with the 2013 Senior Convertible Note, a beneficial conversion option was recorded as a debt discount reflecting the incremental conversion option intrinsic value benefit of $79,527, at the time of issuance provided to the holder of the Note. The debt discounts applicable to the 2013 Convertible Note was amortized, using the straight-line method, over the life of the 2013 Convertible Note, until October 29, 2013 when the 2013 Convertible Note was converted in full into shares of common stock of the Company. The remaining unamortized debt discounts was expensed at the time of the conversion. During the year ended December 31, 2013, the Company recorded $10,131 and $79,527 in amortization expense related to the debt discounts and the beneficial conversion option, respectively. The amortization expense related to the debt discounts and the beneficial conversion option is included in interest expense in the accompanying consolidated statements of operations. |
FACTORING FACILITY AND TERM LOA
FACTORING FACILITY AND TERM LOAN PAYABLE | 12 Months Ended |
Dec. 31, 2014 | |
Factoring Facility And Term Loan Payable | |
Factoring Facility and Term Loan Payable | Note 7. FACTORING FACILITY AND TERM LOAN PAYABLE Factoring Facility On August 8, 2013, the Company and Smoke entered into an accounts receivable factoring facility (the “Factoring Facility”) with Entrepreneur Growth Capital, LLC (the “Lender”) pursuant to an Invoice Purchase and Sale Agreement, dated August 8, 2013, by and among them (the “Factoring Agreement”). The Factoring Facility has an initial term of one year and automatically renews from month to month thereafter subject to the Company terminating it earlier upon at least 15 business days’ advance written notice provided that all obligations are paid (including a termination fee, if applicable, as specified in the Factoring Agreement). The Factoring Facility is secured by a security interest in substantially all of the Company’s assets. Under the terms of the Factoring Agreement, the Lender may, at its sole discretion, purchase certain of the Company’s eligible accounts receivable. Upon any acquisition of an account receivable, the Lender will advance to the Company up to 50% of the face amount of the account receivable. Each account receivable purchased by the Lender will be subject to a factoring fee of 1% of the gross face amount of such purchased account for each 30 day period (or part thereof) the purchased account remains unpaid. The Lender will generally have full recourse against the Company in the event of nonpayment of any such purchased account. The Factoring Agreement contains covenants and provisions relating to events of default that are customary for agreements of this type. The failure to satisfy covenants under the Factoring Agreement or the occurrence of other specified events that constitute an event of default could result in the termination of the Factoring Facility and/or the acceleration of the repayment obligations of the Company. During the year ended December 31, 2013 gross borrowings under the Factoring Facility were $407,888, all of which were repaid as of September 30, 2013. There were no borrowings during the year ended December 31, 2014. 2013 Term Loan On August 16, 2013, the Company and Smoke entered into a $750,000 term loan (the “2013 Term Loan”) with the Lender pursuant to a Credit Card Receivables Advance Agreement, dated August 16, 2013, by and among them (the “Term Agreement”). The Term Loan matured on August 15, 2014, was payable from the Company’s and Smoke’s merchant credit card receivables at the annual rate of 16% subject to the Lender retaining a daily fixed amount of $3,346 from the daily collection of the merchant credit card receivables and is secured by a security interest in substantially all of the Company’s assets. The Company used the proceeds of the Term Loan for general working capital purposes. At December 31, 2013 the Company had $478,847 of borrowings outstanding under the 2013 Term Loan. During the year ended December 31, 2014 and 2013, the Company recorded $76,617 and $44,769, respectively, in interest expense for the 2013 Term Loan and this amount is included in interest expense in the accompanying consolidated statements of operations. The 2013 Term Loan was repaid in full during the year ended December 31, 2014. 2014 Term Loan On September 23, 2014, the Company and Smoke entered into a $1,000,000 term loan (the “2014 Term Loan”) with the Lender pursuant to a secured promissory note entered into by the Company and Smoke in favor of the Lender (the “Secured Note”). Under the Secured Note, the 2014 Term Loan bears interest at 14% per annum and is secured by a security interest in substantially all of the Company’s assets. Under the Secured Note, the principal amount of the 2014 Term Loan is payable in twelve (12) successive monthly installments of $83,333 with the last payment due in September 2015. Interest on the 2014 Term Loan is payable in arrears. The Company used the proceeds of the 2014 Term Loan for general working capital purposes. The Term Agreement contains covenants that are customary for agreements of this type. The failure to satisfy covenants under the Term Agreement or the occurrence of other specified events that constitute an event of default could result in the termination of the Term Agreement (as well as the Factoring Agreement) and/or the acceleration of the repayment of the Term Loan and the other obligations of the Company (including the Factoring Facility). The Term Agreement contains provisions relating to events of default that are customary for agreements of this type. At December 31, 2014, the Company had $750,000 of borrowings outstanding under the 2014 Term Loan. During the year ended December 31, 2014, the Company recorded $24,086 in interest expense for the 2014 Term Loan and this amount is included in interest expense in the accompanying consolidated statements of operations. The Company’s Chief Executive Officer and Former Chief Financial Officer have personally guaranteed performance of certain of the Company’s obligations under the Factoring Agreement and the Term Agreement. In consideration of the Company’s Former Chief Financial Officer providing the personal guarantee, the Company has agreed to amend his employment agreement as described in Note 9. |
CAPITAL LEASE OBLIGATIONS
CAPITAL LEASE OBLIGATIONS | 12 Months Ended |
Dec. 31, 2014 | |
Leases [Abstract] | |
Capital Lease Obligations | Note 8. CAPITAL LEASE OBLIGATIONS On October 1, 2014, the Company entered into a capital lease obligation in connection with the acquisition of equipment for its retail locations in the principal amount of $179,359. Annual interest on the capital lease obligation is 15.8% and borrowings are to be repaid over 36 months maturing on October 17, 2017. During the year ended December 31, 2014, the Company incurred interest expense associated with the capital lease obligation of $4,679. Depreciation expense incurred during the year ended December 31, 2014 for equipment held under capital lease obligations was $9,964. The net book value of equipment held under capital lease obligations at December 31, 2014 is $169,395. Future minimum lease payments under non-cancelable capital leases that have initial or remaining terms in excess of one year at December 31, 2014 are due as follows: Capital 2015 $ 75,485 2016 75,485 2017 62,904 Total 213,874 Amounts representing interest payments (42,416 ) Present value of future minimum payments 171,458 Current portion of capital lease obligations (52,015 ) Capital lease obligations, long term $ 119,443 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 Company’s electronic cigarettes. In addition, during the term of the Consulting Agreement, which is 2 years, and during an 18-month post-termination period, the Company has agreed to pay Knight Global commissions payable in cash equal to 6% of “net sales” (as defined in the Consulting Agreement) of its products to retailers introduced by Knight Global and to retailers with which the Company has existing relationships and with which Knight Global is able, based on its verifiable efforts, to increase net sales of the Company’s products. The grant date fair value of the common shares issued on February 3, 2014 was $3,080,000 based on closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, on February 3, 2014. On January 24, 2015, the Company and Knight Global mutually agreed to terminate the Consulting Agreement as it was in the best interests of both parties to do so. As a result of such termination, the Company issued 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 Company’s 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: Number of Weighted Average Total 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 stockholder 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 stockholder 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 Vapor’s 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 isn’t under the Company’s 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 Company’s stockholders approved an increase to 500 million authorized common share on October 16, 2015. If all of the warrants were exercised simultaneously when the Company’s 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 underwriter’s 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. The $500,000 cost was recorded in other expenses on the condensed consolidated statement of operations for the nine months ended September 30, 2015. Warrants A summary of warrant activity for the nine months ended September 30, 2015 is presented below: Number of Weighted Average Weighted Average Aggregate 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 Range of Exercise Price Weighted Outstanding Weighted Weighted Exercisable $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 stockholders 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 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 Weighted Weighted-Average Aggregate Outstanding at January 1, 2015 268,860 $ 3.64 — $ — Options granted 3,946 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 Range of Exercise Price Weighted Outstanding Weighted Weighted Exercisable $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 Company’s 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 Company’s 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 | Note 9. STOCKHOLDERS’ EQUITY Preferred Stock The Company’s amended and restated articles of incorporation authorizes the Company’s Board of Directors to issue up to 1,000,000 shares of “blank check” preferred stock, having a $0.001 par value, in one or more series without stockholder approval. Each such series of preferred stock may have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as determined by the Company’s Board of Directors. At December 31, 2014 and 2013, no shares of preferred stock were issued or outstanding. Common Stock The Company’s amended and restated articles of incorporation authorizes the Company’s Board of Directors to issue up to 50,000,000 shares of common stock having a par value of $0.001 per share. Each share entitles the holder to one vote. Common Stock Issued for Services On March 15 and June 15, 2013, the Company issued a total of 4,000 shares of common stock, pursuant to a consultancy agreement dated March 4, 2013. The Company terminated this consultancy agreement effective June 2013. Prior to termination of the agreement, the Company had agreed to issue on a quarterly basis common stock as compensation for services provided thereunder. The Company determined that the fair value of the common stock issued was more readily determinable than the fair value of the services provided. Accordingly, the Company recorded the fair market value of the stock as compensation expense. The Company valued the shares issued on March 15 and June 15, 2013 shares at $29,500 and $57,500, respectively, based on closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, on March 15 and June 15, 2013, respectively. During the year ended December 31, 2013, the Company recognized stock-based compensation expense in the amount of $87,000, which is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. On February 3, 2014, the Company entered into a consulting agreement (the “Consulting Agreement”) with Knight Global Services, LLC (“Knight Global”) pursuant to which the Company retained Knight Global to assist the Company with increasing awareness of its electronic cigarette brands as well as assisting the Company to expand and diversify its relationships with large retailers and national chains. Knight Global is a wholly owned subsidiary of Knight Global, LLC of which Ryan Kavanaugh is an investor and principal. Effective March 5, 2014, the Board of Directors of the Company elected Mr. Kavanaugh as a member of the Board of Directors in accordance with the Consulting Agreement. Knight Global serves as the family office for Mr. Kavanaugh. Mr. Kavanaugh is the Founder and Chief Executive Officer of Relativity, a next-generation media company engaged in multiple aspects of entertainment, including film production; financing and distribution; television; sports management; music publishing; and digital media. Under the terms of the Consulting Agreement, the Company has issued to Mr. Kavanaugh 80,000 shares of its common stock, of which 10,000 shares vested immediately upon execution of the Consulting Agreement, 10,000 shares vested on May 3, 2014, 10,000 shares vested on August 3, 2014, 10,000 shares vested on November 3, 2014 and 10,000 shares will vest in installments of 10,000 shares each quarterly period beginning on the 90th day following November 3, 2014 and each ensuing quarterly period thereafter so long as the Consulting Agreement has not been terminated and during each quarterly period Knight Global has presented the Company with a minimum of six (6) bona fide opportunities for activities specified in the Consulting Agreement that are intended to increase awareness of the Company’s electronic cigarettes. In addition, during the term of the Consulting Agreement, which is 2 years, and during an 18-month post-termination period, the Company has agreed to pay Knight Global commissions payable in cash equal to 6% of “net sales” (as defined in the Consulting Agreement) of its products to retailers introduced by Knight Global and to retailers with which the Company has existing relationships and with which Knight Global is able, based on its verifiable efforts, to increase net sales of the Company’s products. No commissions were paid under the consulting agreement during the year ended December 31, 2014. The grant date fair value of the common shares issued on February 3, 2014 was $3,080,000 based on closing price per share of the Company’s common stock, as reported on the OTC Bulletin Board, on February 3, 2014. During the year ended December 31, 2014, the Company recognized stock-based compensation expense relating to the Consulting Agreement, in the amount of $1,602,933, which is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. 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 will incur $322,067 in connection with this final issuance during the first quarter of 2015. In addition, on January 24, 2015, the Company received notice from Ryan Kavanaugh, a director of the Company that he had resigned from the Company’s board of directors, effective immediately. Private Placement of Common Stock On October 22, 2013, the Company entered into a purchase agreement (the “Purchase Agreement”) with various institutional and individual accredited investors and certain of its officers and directors to raise gross proceeds of $10 million in a private placement of 666,668 shares of its common stock at a per share price of $15.00 (the “Private Placement”). On October 29, 2013, the Company completed the Private Placement. The Company received net proceeds from the Private Placement of approximately $9.0 million, after paying placement agent fees and estimated offering expenses, which the Company used to fund its growth initiatives and for working capital purposes. Of the approximate $1 million in offering costs, approximately $110,000 were incurred during the year ended December 31, 2014. Pursuant to the Purchase Agreement, concomitantly with completion of the Private Placement, the Company entered into a registration rights agreement with the investors (other than its participating officers and directors), pursuant to which the Company filed with the SEC an initial registration statement to register for resale the 643,234 shares of the Company’s common stock purchased by the investors (other than the Company’s participating officers and directors). The initial registration statement was declared effective by the SEC on January 27, 2014. On March 5, 2014, the Company filed a post-effective amendment to the initial registration statement. The post-effective amendment to the initial registration statement was declared effective by the SEC on March 11, 2014. On June 20, 2014, the Company filed a second post-effective amendment to the initial registration statement. The second post-effective amendment to the initial registration statement was declared effective by the SEC on June 27, 2014. If the second post-effective amendment to the initial registration statement after being declared effective by the SEC is not effective for resales for more than 20 consecutive days or more than 45 days in any 12 month period during the registration period (i.e., the earlier of the date on which the shares have been sold or are eligible for sale under SEC Rule 144 without restriction), the Company is required to pay the investors (other than the Company’s participating officers and directors) liquidated damages in cash equal to 1.5% of the aggregate purchase price paid by the investors for the shares for every 30 days or portion thereof until the default is cured. These cash payments could be as much as $81,489 for every 30 days. Under the terms of the Purchase Agreement, the Company: • Amended its existing equity incentive plan on November 20, 2013 to reduce the number of shares of its common stock reserved and available for issuance under the plan to 360,000 from 1,600,000. • Effectuated a reverse stock split of its common stock at a ratio of 1-for-5, which became effective in the marketplace at the opening of business December 27, 2013 (as disclosed in Note 1 above). • Reincorporated to the State of Delaware effective on December 31, 2013 (as disclosed in Note 1). • Reconstituted its board of directors effective April 25, 2014 so that the board of directors consists of five members, a majority of whom each qualify as an “independent director” as defined in NASDAQ Marketplace Rule 5605(a)(2) and the related NASDAQ interpretative guidance; and • Listed its common stock on The NASDAQ Capital Market effective May 30, 2014. In conjunction with completion of the Private Placement, on October 29, 2013, the holders of the Company’s approximately $1.7 million of outstanding senior convertible notes, some of whom were officers and directors of the Company, converted in full all of these senior convertible notes into approximately 780,000 shares of the Company’s common stock, whereupon all of these senior convertible notes were fully extinguished and cease to be outstanding. See Note 6. All of the warrants issued in conjunction with the convertible notes described in Note 6 and the Private Placement were evaluated in accordance with ASC 815 and were determined to be equity instruments. The Company estimated the fair value of these Warrants using the Black-Scholes-Merton valuation model. The significant assumptions which the Company used to measure their respective fair values included stock prices ranging from $5.00 to $17.50 per share, expected terms of 5 years, volatility ranging from 30.3% to 51.4%, risk free interest rates ranging from 0.71% to 0.90%, and a dividend yield of 0.0%. Warrants A summary of warrant activity for the years ended December 31, 2014 and 2013 is presented below: Number of Weighted- Weighted- Aggregate Outstanding at January 1, 2013 2,135 $ 5.40 Warrants granted 41,041 16.70 Warrants exercised — — Warrants forfeited or expired — — Outstanding at December 31, 2013 43,176 $ 16.15 Warrants granted 238,636 10.00 Warrants exercised (38,594 ) 16.50 Warrants forfeited or expired — — Outstanding at December 31, 2014 243,218 $ 10.05 5.0 $ — Exercisable at December 31, 2014 43,124 $ 16.15 5.0 $ — During the year ended December 31, 2014, 192,970 warrants were exercised in a cashless manner into 28,477 shares of common stock. Equity Incentive Plan There are 360,000 shares of common stock reserved for issuance under the Company’s Equity Incentive Plan (after giving effect to the reduction of the number of shares reserved and available for issuance thereunder and the 1-for-5 reverse stock split, each as implemented in accordance with the Purchase Agreement governing the Private Placement), which was duly adopted by the stockholders on November 24, 2009. The Plan provides for the granting of incentive stock options to employees, the granting of non-qualified stock options to employees, non-employee directors and consultants, and the granting of restricted stock to employees, non-employee directors and consultants in connection with their retention and/or continued employment by the Company. Options issued under the Plan generally have a ten-year term and generally become exercisable over a four-year period. Shares subject to awards that expire unexercised or are forfeited or terminated will again become available for issuance under the Plan. No participant in the Equity Incentive Plan can receive option grants and/or restricted shares for more than 20% of the total shares subject to the Plan. Stock-Based Compensation On March 6, 2014, the Board granted to Ryan Kavanaugh a non-qualified Director’s stock option award under the Company’s Equity Incentive Plan to purchase up to 12,000 shares of the Company’s common stock at an exercise price per share equal to $41.50 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date). On April 25, 2014, the Board granted to each of the three (3) other New Directors a non-qualified stock option award under the Company’s Equity Incentive Plan to purchase up to 12,000 shares of the Company’s common stock at an exercise price per share equal to $32.40 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date). Each of the New Director’s stock options expire on the fifth anniversary of the grant date, vest in equal annual installments over a three-year period from the grant date subject to he/she serving as a member of the Board on each such vesting date and is to be evidenced by a non-qualified stock option agreement customarily utilized under the Equity Incentive Plan. The weighted average grant date fair value of the March 6 and April 25, 2014 awards were $149,160 and $315,720, respectively. In addition, during the year ended December 31, 2014, the Company issued non-qualified stock option awards under the Company’s Equity Incentive Plan to purchase up to 2,400 shares of the Company’s common stock at an exercise price equal to $8.30 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date). The options vest in 3 annual installments and had an aggregate grant date fair value of $29,832. During the year ended December 31, 2013, the Company issued non-qualified stock option awards under the Company’s Equity Incentive Plan to purchase up to 2,000 shares of the Company’s common stock at an exercise price equal to $21.75 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date) that vest in 3 annual installments and had an aggregate grant date fair value of $25,900 and up to 31,200 shares of the Company’s common stock at an exercise price equal to $21.75 (the closing share price of the Company’s common stock as reported on the OTC Bulletin Board at the close of trading on the grant date) that vest in 4 annual installments and had an aggregate grant date fair value of $80,808. The fair value of employee stock options was estimated using the following weighted-average assumptions: For the Years Ended 2014 2013 Expected term 5 – 7 years 6.3 – 10 years Risk Free interest rate 1.57% – 1.72% 2.62% Dividend yield 0.0% 0.0% Volatility 27% – 31% 46.3% Stock option activity Options outstanding at December 31, 2014 under the various plans are as follows (in thousands): Plan Total Number Equity compensation plans not approved by security holders 180 Equity Incentive Plan 89 269 A summary of activity under all option Plans for the years ended December 31, 2014 and 2013 is presented below (in thousands, except per share data): Number of Weighted- Weighted- Aggregate Outstanding at January 1, 2013 226 $ 10.30 Options granted 8 21.75 Options exercised (8 ) 7.85 Options forfeited or expired (2 ) 6.35 Outstanding at December 31, 2013 224 10.85 Options granted 50 35.00 Options exercised (1 ) 5.00 Options forfeited or expired (4 ) 7.35 Outstanding at December 31, 2014 269 $ 15.40 6.53 $ — Exercisable at December 31, 2014 203 $ 10.85 6.45 $ — Options available for grants at December 31, 2014 260 For the years ended December 31, 2014 and 2013, the Company’s estimated forfeiture rate utilized ranged from 0.01% to 0.02%. During the years ended December 31, 2014 and 2013, the Company recognized stock-based compensation expense, for the vesting of stock options, of $163,646 and $48,239, respectively. Stock-based compensation expense is included as part of selling, general and administrative expense in the accompanying consolidated statements of operations. As of December 31, 2014, 1,012,745 common stock options that were granted had vested and 66,311 common stock options were unvested. At December 31, 2014 and 2013, the amount of unamortized stock-based compensation expense on unvested stock options granted to employees and consultants was and $476,828 and $150,037, respectively. The unamortized amounts will be amortized over the remaining vesting period through September 30, 2016. The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. Compensation expense includes the impact of an estimate for forfeitures for all stock options. The Company estimated the fair value of employee stock options using the Black-Scholes-Merton option pricing model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective awards. The expected term of such stock options represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by SAB 107 for “plain vanilla” options. Through September 30, 2014, the expected stock price volatility for the Company’s stock options was determined by using an average of the historical volatilities of the Company and industry peers. Beginning in the fourth quarter of 2014, the Company began estimating its expected volatility using the weekly trading prices of its own common stock as the Company felt this was a more appropriate measure. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. (Loss) Earnings Per Share The Company utilizes ASC 260, “Earnings per Share,” (“ASC 260”) to calculate earnings or loss per share. Basic earnings or loss per share is computed by dividing the net income or loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method) and the conversion of the Company’s convertible debt and warrants (using the if-converted method). Diluted loss per share excludes the shares issuable upon the exercise of stock options, convertible notes and common stock purchase warrants from the calculation of net loss per share, as their effect is antidilutive. The following table reconciles the numerator and denominator for the calculation: For the years ended 2014 2013 Net (loss) income – basic $ (13,852,249 ) $ 801,352 Denominator – basic: Weighted average number of common shares outstanding 3,283,030 2,563,697 Basic (loss) earnings per common share $ (4.22 ) $ 0.31 Net (loss) earnings – diluted $ (13,852,249 ) $ 801,352 Denominator – diluted: Basic weighted average number of common shares outstanding 3,283,030 2,563,697 Weighted average effect of dilutive securities: Common share equivalents of outstanding stock options — 69,886 Common share equivalents of convertible debt — — Common share equivalents of outstanding warrants — 3,690 Diluted weighted average number of common shares outstanding 3,283,030 2,637,273 Diluted (loss) earnings per common share $ (4.22 ) $ 0.30 Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: Convertible debt 227,273 — Stock options 268,860 1,287 Warrants 243,218 818 |
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 Board’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows: • Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and • Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. The following table summarizes the liabilities measured at fair value on a recurring basis as of 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 Company’s 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 Company’s 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 Company’s 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 Entity’s 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 Company’s 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 Company’s 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 For the nine 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 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10. INCOME TAXES The income taxprovision (benefit) consists of the following: For the Years ended December 31, 2014 2013 Current: Federal $ - $ 337,016 State and local - 29,344 Utilization of net operating loss carryforward - (346,783 ) - 19,577 Deferred: Federal (4,337,272 ) 202,531 State and local (463,060 ) 34,178 (4,800,332 ) 236,709 Change in valuation allowance 5,567,665 (781,077 ) 767,333 (544,368 ) Income tax provision (benefit) $ 767,333 $ (524,791 ) The following isa reconciliation of the expected tax expense (benefit) on the U.S. statutory rate to the actual tax expense (benefit) reflectedin the accompanying statement of operations: For the Years Ended December 31, 2014 2013 U.S. federal statutory rate (34.00 )% 34.00 % State and local taxes, net of federal benefit (2.98 )% 3.63 % Amortization of debt discount 13.95 % Debt conversion inducement 40.76 % Net operating loss tax adjustment (9.65 )% Other permanent differences 0.29 % 3.00 % Alternative minimum tax 6.97 % Change in valuation allowance 42.55 % (282.42 )% Income tax provision (benefit) 5.86 % (189.76 )% As of December 31, 2014 and 2013, theCompanys deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following: Years Ended December 31, 2014 2013 Current deferred tax assets: Net operating loss carryforwards $ 4,556,515 $ 169,404 Stock-based compensation expense 507,864 442,813 Alternative minimum tax credit carryforwards 15,336 19,283 Reserves and allowances 263,609 97,587 Inventory 269,865 59,320 Accrued expenses and deferred income 53,442 8,824 Severance 27,555 Charitable contributions 1,260 1,317 Total current deferred tax assets 5,695,446 798,548 Current deferred tax liabilities: Section 481 (a) adjustment (24,450 ) Property and equipment (7,600 ) Total current deferred tax liabilities (32,050 ) Net current deferred tax assets 5,695,446 766,498 Valuation allowance (5,695,446 ) Net deferred tax assets $ $ 766,498 In assessing therealization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferredtax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxableincome during the periods in which those temporary differences become deductible. Management considers the scheduled reversal ofdeferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After considerationof all of the positive and negative evidence available, management has determined that a valuation allowance of $5,695,446 and$0 are required at December 31, 2014 and 2013, respectively, to reduce the deferred tax assets to amounts that are more likelythan not to be realized. Should the factors underlying managements analysis change, future valuation adjustments to theCompanys net deferred tax assets may be necessary. At December 31,2014 the Company had U.S. federal and state net operating loss carryforwards (NOLS) of $12,214,479 and $12,812,444,respectively. At December 31, 2013 the Company had U.S. federal and state NOLS of $251,269 and $1,526,482, respectively. TheseNOLs expire beginning in 2032. Utilization of our NOLS may be subject to an annual limitation under section 382 and similar stateprovisions of the Internal Revenue Code due to changes of ownership that may have occurred or that could occur in the future, asdefined under the regulations. As required bythe provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining thatthe relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the morelikely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greaterthan 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between taxpositions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretationare referred to as unrecognized benefits. A liability is recognized (or amount of NOL or amount of tax refundableis reduced) for an unrecognized tax benefit because it represents an enterprises potential future obligation to the taxingauthority for a tax position that was not recognized as a result of applying the provisions of ASC 740. If applicable, interestcosts and penalties related to unrecognized tax benefits are required to be calculated and would be classified as interest andpenalties in general and administrative expense in the statement of operations. As of December 31, 2014 and 2013, no liabilityfor unrecognized tax benefit was required to be reported. No interest or penalties were recorded during the years ended December31, 2014 and 2013. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. TheCompany files U.S. federal and Florida, Maryland, Texas, New Jersey and Wisconsin state income tax returns. As of December 31,2014, the Companys U.S. and state tax returns remain subject to examination by tax authorities beginning with the tax yearended December 31, 2011. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Commitments and Contingencies | Note 9. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases its Florida officeand warehouse facilities under a twenty-four month lease agreement with an initial term through April 30, 2013 that the Companyextended in March 2014 when it exercised the second of three successive one-year renewal options. The lease provides for annualrental payments of $144,000 per annum (including 45 days of total rent abatement) during the initial twenty-four month term andannual rental payments of $151,200, $158,760 and $174,636 during each of the three one-year renewal options. In October 2013, theCompany amended the master lease to include an additional approximately 2,200 square feet for an additional annual rental paymentof $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 openedduring 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 fromone to five years, the Company is required to pay base and percentage rents and the Company is required to pay for common areaand 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 thelandlord on all four leases with two payments of $18,812 each for a total of $37,624. The landlord also kept the deposits on theseleases in the amount of $18,500. These amounts were expensed for a total amount of $56,124 during the nine months ended September30, 2015. During the nine months ended September30, 2015, the Company settled the lease commitment with the landlord of the retail store located in Ft. Lauderdale, FL. with asingle payment of $45,000. The landlord also kept the deposit on this leases in the amount of $8,309. Therefore, the Company incurredexpense in the total amount of $53,309 during the nine months ended September 30, 2015. Through the merger which occurred onMarch 4, 2015 the Company acquired additional lease commitments which included one (1) Florida office space and eleven (11) retailstores. Consistent with the Company’s retail expansion, 3 additional retail store leases were acquired in the three monthsended September 30, 2015. Future minimum lease payments undernon-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 forthe 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 endedSeptember 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 condensedconsolidated statement of operations. Changes in Officers and OfficerEmployment Agreements On March 27, 2015, Harlan Press notifiedthe Company of his intention to resign from the Company, effective April 10, 2015. Mr. Press previously served as Chief FinancialOfficer of the Company. In connection with the Company’s previously disclosed merger with Vaporin, Inc. in March 2015, Mr.Press was appointed Vice-President of Finance of the Company. Mr. Press received severance compensation and accrued vacation inaccordance with his employment agreement in the total amount of $159,810, which is divided into equal weekly payments that endon January 29, 2016 and has been included in accrued liabilities as of September 30, 2015. Effective September 15, 2015, VaporCorp. the Company appointed Gina Hicks as its Chief Financial Officer. On September 10, 2015, the Board of Directors approved thedecision to replace Mr. James Martin, the Company’s former Chief Financial Officer, with Ms. Hicks. In connection with herappointment, Ms. Hicks receives a base salary of $175,000 per year. Mr. Martin received severance compensation and accrued vacationin the total amount of $87,500, which is divided into equal weekly payments that end on March 11, 2016 and has been included inaccrued liabilities as of September 30, 2015.As of September 30, 2015, $155,277 of accrued severances is included in accrued expenseson the condensed consolidated balance sheet. On August 10, 2015, the Company enteredinto three-year Employment Agreements with Jeffrey Holman, the Company’s Chief Executive Officer, and Gregory Brauser, theCompany’s President. Each of the Employment Agreements provide for an annual base salary of $300,000 and a target bonus inan 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 EmploymentAgreements 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 definedin any filing of the Company with the SEC subsequent to the date of the Employment Agreements. Additionally, the Company approveda 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 Companywithout cause, termination for good reason by the executive or non-renewal by the Company. On August 13, 2015, the Company enteredinto consulting agreements with each of GRQ Consultants, Inc. and Grander Holdings, Inc. GRQ Consultants, Inc. will primarily focuson investor relations and presenting the Company and its business plans, strategy and personnel to the financial community. GranderHoldings, Inc. will primarily assist the Company in further developing and executing its acquisitions strategy, focusing on theCompany’s “The Vape Store” properties. Michael Brauser, the Chief Executive Officer of Grander Holdings, Inc.,is the father of Gregory Brauser, the Company’s President. Pursuant to the agreements, each consultant will receive an initialfee 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 beinvolved in various claims and legal actions arising in the ordinary course of our business. There were no pending material claimsor 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, Ruyan’ssecond patent infringement lawsuit against the Company as well as all of the other consolidated lawsuits were stayed as a resultof the Court granting a stay in one of the consolidated lawsuits. The Court granted the motion to stay Ruyan’s separate lawsuitsagainst the Company and the other defendants based on the filing of a request for inter partes reexamination of the ’944Patent 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 approvalof 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 complaintagainst 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 ElectronicCigarette” and U.S. Patent No. 8,490,628, entitled “Electronic Atomization Cigarette. On April 8, 2014, plaintiffsamended their complaint to add U.S. Patent No. 8,689,805, entitled “Electronic Cigarette.” The products accused ofinfringement by the plaintiff are various Krave, Fifty-one and Hookah Stix products and parts. Eight other companies were alsosued in separate lawsuits alleging infringement of one or more of the patents listed above. The Company filed its Answer and Counterclaimson May 1, 2014. The Company intends to vigorously defend against this lawsuit. On October 21, 2014, Fontem VenturesB.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 PatentNo. 8,863,752, entitled “Electronic Cigarette”. The products accused of infringement by plaintiffs are various Kraveand Fifty-One products and parts On January 15, 2015, the Company filed its Answer and Counterclaims. The Company will vigorouslydefend itself against such allegations. On December 2, 2014, Fontem VenturesB.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 againstthe 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 Vapor’s 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 furtheropinion on the outcome of these matters. On June 22, 2015, the Center for EnvironmentHealth, 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 Stateof California, County of Alameda. The suit seeks relief under California Proposition 65 which makes it unlawful for businessesto knowingly and intentionally expose individuals in California to chemicals known to cause birth defects or other harm withoutproviding clear and reasonable warnings. All of the defendants are alleged to have sold products containing significant quantitiesof nicotine without warnings in violation of Proposition 65. The plaintiff is seeking a civil penalty against these defendantsin the amount of $2,500 per day for each violation of Proposition 65, together with attorneys’ fees and costs. The Companyand its subsidiaries engaged counsel and intend to vigorously defend the allegations. Discovery commenced in November 2015. TheCompany 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 currentknowledge, sold any products into the State of California. Purchase Commitments At September 30, 2015 and December31, 2014, the Company has vendor deposits of $392,161 and $319,563, respectively, and vendor deposits are included as a componentof prepaid expenses and vendor deposits on the condensed consolidated balance sheets included herewith. | Note 11. COMMITMENTS AND CONTINGENCIES Employment Agreements On February 19,2013, the Company entered into an employment agreement with Mr. Jeffrey Holman pursuant to which Mr. Holman will be employed asPresident of the Company for a term that shall begin on February 19, 2013, and, unless sooner terminated as provided therein, shallend on December 31, 2015; provided that such term of employment shall automatically extend for successive one-year periods unlesseither party gives at least six months advance written notice of its intention not to extend the term of employment. Mr.Holman will receive a base salary of $182,000 for the first two years of the employment agreement. Mr. Holman shall be eligibleto participate in the Companys annual performance based bonus program, as the same may be established from time to timeby the Companys Board of Directors in consultation with Mr. Holman for executive officers of the Company. Resignation of Chief ExecutiveOfficer and Appointment of New Chief Executive Officer Effective April25, 2014, Kevin Frija resigned as the Companys Chief Executive Officer and the Companys Board of Directors appointedthe Companys President and incumbent member of the Board, Jeffrey Holman, as the Companys new Chief Executive Officer.In connection with Mr. Frijas resignation as Chief Executive Officer, the Board approved severance payments to Mr. Frijain an aggregate amount equal to one year of base salary at the rate of $159,000 per annum payable in installments in accordancewith the Companys normal payroll schedule conditioned upon his execution and delivery of a general release to the Company,which has become irrevocable in accordance with its terms and applicable law, and his compliance with the non-solicitation, confidentialityand non-competition covenants of his Employment Agreement dated February 27, 2012 with the Company until April 24, 2015 in certainrespects and indefinitely in other respects. During the year ended December 31, 2014 the Company accrued severance expense in theamount of $167,003, which is included as part of the selling, general and administrative expenses in accompanying consolidatedstatements of operations in connection with Mr. Frijas resignation. During the year ended December 31, 2014 $89,925 waspaid and $77,028 is included in accrued expenses in accompanying consolidated balance sheets. Termination of Asset PurchaseAgreement With International Vapor Group, Inc. On May 14, 2014,the Company and the Companys wholly-owned subsidiary IVGI Acquisition, Inc., a Delaware corporation (the Buyer)entered into the Asset Purchase Agreement with International Vapor Group, Inc. (IVG) pursuant to which the Companywas to purchase the business of IVG by acquiring substantially all of the assets and assuming certain of the liabilities of IVGin an asset purchase transaction. On July 25, 2014, the Company, the Buyer and the Owners David Epstein, David Herrera and NicolasMolina, in their capacities as the representatives of the Sellers and Owners, entered into a First Amendment to Asset PurchaseAgreement (the First Amendment). In connection with the First Amendment, the Company entered into a Secured PromissoryNote whereby it loaned IVG $500,000 for working capital purposes. The secured promissory note accrued interest at a rate of 8%per year and was due at the earlier of (a) six months after the date of the termination of the Asset Purchase Agreement or thedate the asset purchase closed. During the year ended December 31, 2014, the Company recognized interest income of $17,095 relatingto this loan receivable. On August 26, 2014,the Company, the Buyer, and the Sellers and David Epstein, David Herrera and Nicolas Molina, in their capacities as the representativesof the Sellers and the owners of International Vapor Group, Inc., entered into a Termination Letter, pursuant to which the partiesmutually terminated their previously announced Asset Purchase Agreement entered into on May 14, 2014 and amended on July 25, 2014.The Company and the Sellers mutually terminated the Asset Purchase Agreement because the parties could not agree upon certain operationaland financial matters pertaining to the post-closing integration of the Sellers business operations. There are no currentdisputes or disagreements between the Company and the Sellers and neither party is liable for any breakup fees or reimbursementof costs to the other party as a result of the termination of the Asset Purchase Agreement. On January 12, 2015,the Company entered into an agreement with IVG whereby the Company agreed to reduce the principal amount of the loan receivableby $50,000 if IVG were to remit payment of all principal and interest accrued on the loan receivable within one day. The Companyincluded the write-down of the loan receivable in selling, general and administrative expenses on the consolidated statement ofoperations for the year ended December 31, 2014. On January 13, 2015, IVG paid the Company in full. Lease Commitments The Company leasesits Florida office and warehouse facilities under a twenty-four month lease agreement with an initial term through April 30, 2013that the Company extended in March 2014 when it exercised the second of three successive one-year renewal options. The lease providesfor annual rental payments of $144,000 per annum (including 45 days of total rent abatement) during the initial twenty-four monthterm and annual rental payments of $151,200, $158,760 and $174,636 during each of the three one-year renewal options. In October2013, the Company amended the master lease to include an additional approximately 2,200 square feet for an additional annual rentalpayment of $18,000 subject to the same renewal options and other terms and conditions set forth in the master lease. During the yearended December 31, 2014, the Company entered into nine (9) real estate leases for eight (8) new retail kiosks and one (1) new retailstore. The kiosks opened during the fourth quarter of 2014 and the store is scheduled to open during 2015. The kiosks are locatedin malls in Florida, Maryland, New Jersey and Texas. The retail store is located in Ft. Lauderdale, FL. Under these leases, theinitial lease terms range from one to five years, the Company is required to pay base and percentage rents and the Company is requiredto pay for common area and maintenance charges and utilities. Future minimumlease payments under non-cancelable operating that have initial or remaining terms in excess of one year at December 31, 2014 aredue as follows: Operating Leases 2015 $ 572,798 2016 307,488 2017 300,279 2018 253,841 2019 203,964 Total $ 1,638,370 Rent expense forthe years ended December 31, 2014 and 2013 was $307,110 and $162,498, respectively. Legal Proceedings From time to timethe Company may be involved in various claims and legal actions arising in the ordinary course of our business. On May 15, 2011,the Company became aware that Ruyan Investment (Holdings) Limited (Ruyan) had named the Company, along with threeother sellers of electronic cigarettes in a lawsuit filed in the U.S. District Court for the Central District of California alleginginfringement of U.S. Patent No. 7,832,410, entitled Electronic Atomization Cigarette against the CompanysFifty-One Trio products. In that lawsuit, which was initially filed on January 12, 2011, Ruyan was unsuccessful in bringing suitagainst the Company due to procedural rules of the court. Subsequent thereto, on July 29, 2011, Ruyan filed a new lawsuit in whichit named the Company, along with seven other sellers of electronic cigarettes, alleging infringement of the same patent. On March1, 2013, the Company and Ruyan settled this multi-defendant federal patent infringement lawsuit as to them pursuant to a settlementagreement by and between them. Under the terms of the settlement agreement: ● The Company acknowledged the validity of Ruyans U.S. Patent No. 7,832,410 for Electronic Atomization Cigarette (the 410 Patent), which had been the subject of Ruyans patent infringement claim against the Company; ● The Company paid Ruyan a lump sum payment of $12,000 for the Companys previous sales of electronic cigarettes based on the 410 Patent; and ● On March 1, 2013, in conjunction with releasing one another (including their respective predecessors, successors, officers, directors and employees, among others) from claims related to the 410 Patent, the Company and Ruyan filed a Stipulated Judgment and Permanent Injunction with the above Court dismissing with prejudice all claims which have been or could have been asserted by them in the lawsuit. On June 22, 2012,Ruyan filed a second lawsuit against the Company alleging infringement of U.S. Patent No. 8,156,944, entitled Aerosol ElectronicCigarette (the 944 Patent). Ruyan also filed separate cases for patent infringement against nine other defendantsasserting infringement of the 944 Patent. Ruyans second lawsuit against the Company known as Ruyan Investment (Holdings)Limited v. Vapor Corp., No. 12-cv-5466, is pending in the United States District Court for the Central District of California.All of these lawsuits have been consolidated for discovery and pre-trial purposes. The Company intends to vigorously defend againstthis lawsuit. On February 25,2013, Ruyans second patent infringement lawsuit against the Company as well as all of the other consolidated lawsuits werestayed as a result of the Court granting a stay in one of the consolidated lawsuits. The Court granted the motion to stay Ruyansseparate lawsuits against the Company and the other defendants based on the filing of a request for inter partes reexaminationof the 944 Patent at the U.S. Patent and Trademark Office. As a result of the stay, all of the consolidated lawsuits involvingthe 944 Patent have been stayed until the reexamination is completed. As a condition to granting the stay of all the lawsuits,the Court required any other defendant who desires to seek reexamination of the 944 Patent and potentially seek another stay (oran extension of the existing stay) based on any such reexamination to seek such reexamination no later than July 1, 2013. Two otherdefendants sought reexamination of the 944 Patent before expiration of such Court-imposed deadline of July 1, 2013. All reexaminationproceedings of the 944 Patent have been stayed by the United States Patent and Trademark Office Patent Trial and Appeal Board pendingits approval of one or more of them. On December 24, 2014, the Patent Trial and Appeal Board issued its ruling that all of thechallenged claims in the reexamination proceedings of the 944 patent were invalid except for one claim. To the extent claim11 is asserted against the Company, the Company will vigorously defend itself against such allegations. Currently, the case remainsstayed. On March 5, 2014,Fontem Ventures, B.V. and Fontem Holdings 1 B.V. (the successors to Ruyan) filed a complaint against the Company in the U.S. DistrictCourt for the Central District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-1650. The complaintalleges infringement of U.S. Patent No. 8,365,742, entitled Aerosol Electronic Cigarette, U.S. Patent No. 8,375,957,entitled Electronic Cigarette (the 957 Patent), U.S. Patent No. 8,393,331, entitled AerosolElectronic Cigarette (the 331 Patent) and U.S. Patent No. 8,490,628, entitled Electronic AtomizationCigarette (the 628 Patent). On April 8, 2014, plaintiffs amended their complaint to add U.S. Patent No. 8,689,805,entitled Electronic Cigarette (the 805 Patent). The products accused of infringement by plaintiffsare various Krave, Fifty-One and Hookah Stix products and parts. Nine other companies were also sued in separate lawsuits alleginginfringement of one or more of the patents listed above. The Company filed its Answer and Counterclaims on May 1, 2014 and believesthe claims are without merit. Other defendants have filed petitions for inter partes reexamination of the 331, 628 and 805 Patentsat the U.S. Patent and Trademark Office, which petitions are pending. On October 21,2014, Fontem Ventures B.V. and Fontem Holdings 1 B.V. filed a complaint against the Company in the U.S. District Court for theCentral District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-8155. The complaint alleges infringementof United States Patent No. 8,863,752, entitled Electronic Cigarette. The products accused of infringement by plaintiffsare various Krave and Fifty-One products and parts. On January 15, 2015, the Company filed its Answer and Counterclaims. The Companywill 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 theCentral District of California, captioned Fontem Ventures B.V., et al. v. Vapor Corp., No. 14-cv-09267. The Compliant alleges infringementby plaintiffs are various Krave, Vapor X and Fifty-One products and parts. Fontem amended its compliant on December 16, 2014, toallege infringement of United States Patent No. 8,910,641, entitled Electronic Cigarette against the same products.On January 15, 2015, the Company filed its Answer and Counterclaims. The Company will vigorously defend itself against such allegations. All of the abovereferenced cases filed by Fontem have been consolidated and are currently scheduled for trail in November 2014. The parties arecurrently in active fact discovery and claim construction. Purchase Commitments At December 31,2014 and 2013, the Company has vendor deposits of $319,563 and $782,363, respectively, and vendor deposits are included as a componentof prepaid expenses and vendor deposits on the consolidated balance sheets included herewith. |
CONCENTRATION OF CREDIT RISK
CONCENTRATION OF CREDIT RISK | 12 Months Ended |
Dec. 31, 2014 | |
Risks and Uncertainties [Abstract] | |
Concentration of Credit Risk | Note 12. CONCENTRATION OF CREDIT RISK At December 31, 2014 accountsreceivable balances included concentrations from seven customers that had balances of an amount greater than 10%. The amounts rangedfrom $27,729 to $177,200. At December 31 2013, accounts receivable balances included a concentration from one customer in the amountof $268,768, which was an amount greater than 10% of the total net accounts receivable balance. Beginning the first quarterof 2012, the Company began selling electronic cigarettes in the country of Canada exclusively through a Canadian distributor.For the years ended December 31, 2014 and 2013, the Company had sales in excess of 10% to this Canadian distributor of $2,912,525and $3,847,310, respectively. For the year ended December 31, 2014 one other customer accounted for sales in excess of 10% withsales of $1,536,050. No other customer accounted for sales of 10% for the year ended December 31, 2013. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Subsequent Events [Abstract] | ||
Subsequent Events | NOTE 10. SUBSEQUENT EVENTS The Company evaluates events that have occurredafter 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 disclosurein the accompanying condensed consolidated financial statements other than those set forth below. On October 9, 2015 the Company acquired theassets of three established retail stores in Atlanta, Georgia. On November 6, 2015 the Company acquired the assets of three retailstores and a warehouse located in Atlanta, Georgia, Birmingham, Alabama, and Nashville, Tennessee. The Company incurred aggregatecost of $1,610,000 for the acquisitions. On October 1, 2015, theCompany’s shareholders authorized the Company to amend the Company’s Certificate of Incorporation to increase the authorizedshares of common stock from 150 million to 500 million. On October 30, 2015 the Company issued an aggregate15,000 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 1,798,676shares of common stock to certain investors in order to comply with its contractual obligations under waiver agreements (See Note7) The Company’s shareholder approved the issuance of the shares at the October 16, 2015 shareholder meeting. On December 9, 2015, the Company filed an amendment to its Certificate of Incorporation to increase its authorized common stock to 500,000,000 shares. | Note 13. SUBSEQUENT EVENTS The Company evaluatesevents that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based uponthe evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustmentor disclosure in the consolidated financial statements other disclosed. The merger closed on March4, 2015. Prior to the closing of the Merger, Vapor and Vaporin entered into a Securities Purchase Agreement (SecuritiesPurchase Agreement) with certain accredited investors providing for the sale of $350,000 of Vaporins ConvertibleNotes (the Notes). On January 29, 2015, the Company issued the notes. The Note accrues interest on the outstandingprincipal at an annual rate of 12%. The principal and accrued interest on the Note is due and payable on January 29, 2016 (theMaturity Date) The Note will not be convertible until such time as the Nasdaq Stock Market (Nasdaq)approves the listing of the shares to be issued upon conversion of the Note. In no event will the number of shares of the Companyscommon stock issuable upon conversion of the Note exceed 19.99% of the Companys issued and outstanding common stock, regardlessof the conversion price. In connection with theMerger, on March 3, 2015, the Company entered into a Securities Purchase Agreement (the Purchase Agreement) withcertain accredited investors providing for the sale of $3,500,960 in shares of the Companys Common Stock, par value $0.001per share at a price of $1.02 per share. The Company also issued Warrants to purchasers of the shares to acquire an aggregate of2,735,132 shares of the Companys Common Stock with an exercise price of $1.28 per share. The shares and Warrants were issuedand sold through an exempt private securities offering to certain accredited investors. Under the Purchase Agreement,the Company made certain customary representations and warranties to the purchasers concerning the Company and its operations.The Company has also agreed to register the Common Stock and the Warrants for resale pursuant to an effective registration statementwhich must be filed within 45 days of March 3, 2015 and must be effective by the later of (i) the 90th day following March 3,2015 (if no SEC review) or (ii) the 120th day following March 3, 2015 (if subject to SEC review). If the Form S-3 RegistrationStatement is not effective for resales for more than 10 consecutive days or more than 15 days in any 12 month period during theregistration period ( i.e. |
REVERSE STOCK SPLIT
REVERSE STOCK SPLIT | 12 Months Ended |
Dec. 31, 2014 | |
Stockholders Equity Reverse Stock Split [Abstract] | |
REVERSE STOCK SPLIT | Note 14. REVERSE STOCK SPLIT 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 at 11:59 pm. All warrant, option, common stock shares and per share information included herein gives effect to the 1 for 5 reverse split of the Company’s common stock effectuated on July 8, 2015. |
SUMMARY OF CERTAIN SIGNIFICAN26
SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||
Principles of consolidation | Principles of consolidation The accompanying consolidatedfinancial statements include the accounts of the Company, its wholly owned subsidiary, Smoke Anywhere USA, Inc., and its 50% jointventure interest in Emagine the Vape Store, LLC. All significant intercompany transactions and balances were eliminated. | |
Use of estimates in the preparation of the financial statements | Use of estimates in the preparationof the financial statements The preparation of condensed consolidatedfinancial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financialstatements, and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ fromthose estimates. These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuingequity securities and hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, andthe valuation of the net assets acquired in the Merger and retail store acquisitions. Certain of our estimates could be affectedby external conditions, including those unique to our industry, and general economic conditions. It is possible that these externalfactors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluatesall of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary. | Use of estimates in the preparation offinancial statements The preparation of consolidatedfinancial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements,and the reported amounts of net revenue and expenses during the reporting periods. Actual results could differ from those estimates.These estimates and assumptions include allowances, reserves and write-downs of receivables and inventory, valuing equity securitiesand hybrid instruments, share-based payment arrangements, deferred taxes and related valuation allowances, and the preliminaryvaluation of the net assets acquired subsequent to December 31, 2014 in the Merger. Certain of our estimates could be affectedby external conditions, including those unique to our industry, and general economic conditions. It is possible that these externalfactors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluatesall of its accounting estimates at least quarterly based on these conditions and records adjustments when necessary. |
Revenue recognition | Revenue recognition The Company recognizes revenue fromproduct sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangementexists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability isreasonably assured. Product sales and shipping revenues,net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passes to customersand collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that provides for transferof 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 consumptiontaxes. The Company periodically provides incentiveoffers to its customers to encourage purchases. Such offers include current discount offers, such as percentage discounts offcurrent purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similaroffers. Current discount offers, when accepted by the Companys customers, are treated as a reduction to the purchase priceof the related transaction, while inducement offers, when accepted by its customers, are treated as a reduction to the purchaseprice of the related transaction based on estimated future redemption rates. Redemption rates are estimated using the Companyshistorical experience for similar inducement offers. The Company reports sales, net of current discount offers and inducementoffers on its condensed consolidated statements of operations. | Revenue recognition The Company recognizesrevenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidenceof an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, andcollectability is reasonably assured. Product sales and shippingrevenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped, title passesto customers and collection is reasonably assured. Retail sales to customers are made pursuant to a sales contract that providesfor transfer of both title and risk of loss upon the Companys delivery to the carrier. Return allowances, which reduce productrevenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales andconsumption taxes. The Company periodicallyprovides incentive offers to its customers to encourage purchases. Such offers include current discount offers, such as percentagediscounts 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 reductionto the purchase price of the related transaction, while inducement offers, when accepted by its customers, are treated as a reductionto the purchase price of the related transaction based on estimated future redemption rates. Redemption rates are estimated usingthe Companys historical experience for similar inducement offers. The Company reports sales, net of current discount offersand inducement offers on its consolidated statements of operations. |
Shipping and Handling Costs | Shipping and Handling Costs The Company policy isto provide free standard shipping and handling for most orders shipped during the year. Shipping and handling costs incurred arerecognized in selling, general and administrative expenses. Such amounts aggregated $661,583 and $658,586 for the years ended December31, 2014 and 2013 respectively. In certain circumstances,shipping and handling costs are charged to the customer and recognized in sales, net. The amounts recognized for the years endedDecember 31, 2014 and 2013 were $71,225 and $129,761, respectively. | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considersall highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. For financial statementpurposes, investments in money market funds are considered a cash equivalent and are included in cash and cash equivalents. TheCompany maintains its cash and cash equivalents at high credit quality federally insured financial institutions, with balances,at times, in excess of the Federal Deposit Insurance Corporations insurance coverage limit of $250,000 per federally insuredfinancial institution. Management believes that the financial institutions that hold the Companys deposits are financiallysound and, therefore, pose a minimum credit risk. The Company has not experienced any losses in such accounts. At December 31,2014 and 2013, the Company did not hold cash equivalents. | |
Accounts Receivable | Accounts Receivable Accounts receivable, net is stated atthe amount the Company expects to collect. The Company provides a provision for allowances that includes returns, allowances anddoubtful accounts equal to the estimated uncollectible amounts. The Company estimates its provision for allowances based on historicalcollection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Companysestimate of the provision for allowances will change. At September 30, 2015 accounts receivablebalances 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 forthe three and nine months ended September 30, 2015. At December 31, 2014 accounts receivable balances included a concentrationfrom one customer of an amount greater than 10% of the total net accounts receivable balance ($172,684 from Customer A). As torevenues in fiscal 2014, one customers accounted for sales in excess of 10% of the net sales for the three months ended September30, 2014, ($732,225 from Customer A) and two customers for the nine months ended September 30, 2014 ($2,187,797 from CustomerA and $1,506,880, from Customer E), respectively. | 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 allowancesbased on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possiblethat the Companys estimate of the provision for allowances will change. |
Due From Merchant Credit Card Processor | Due From Merchant Credit CardProcessor Due from merchantcredit card processor represents monies held by the Companys credit card processors. The funds are being held by the merchantcredit card processors pending satisfaction of their hold requirements and expiration of charge backs/refunds from customers. | |
Inventories | Inventories Inventories arestated at the lower of cost (determined by the first-in, first-out method) or market. If the cost of the inventories exceeds theirmarket value, provisions are recorded to write down excess inventory to its net realizable value. The Companys inventoriesconsist primarily of merchandise available for resale. | |
Property and Equipment | Property and equipment Property and equipmentis stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected usefullife of the respective asset, after the asset is placed in service. The Company generally uses the following depreciable livesfor its major classifications of property and equipment: Description Useful Lives Warehouse fixtures 2 years Warehouse equipment 5 years Furniture and fixtures 5 years Computer hardware 3 years | |
Impairment of Long Lived Assets | Impairment of Long-Lived Assets The Company reviewslong-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset maynot be recoverable. In connection with this review, the Company also reevaluates the depreciable lives for these assets. The Companyassesses recoverability by determining whether the net book value of the related asset will be recovered through the projectedundiscounted future cash flows of the asset. If the Company determines that the carrying value of the asset may not be recoverable,it measures any impairment based on the projected future discounted cash flows as compared to the assets carrying value.Through December 31, 2014, the Company has not recorded any impairment charges on its long-lived assets. | |
Advertising | Advertising The Company expensesadvertising cost as incurred. | |
Warranty liability | Warranty liability The Companyslimited lifetime warranty policy generally allows its end users and retailers to return defective purchased rechargeable productsin exchange for new products. The Company estimates a reserve for warranty liability and records that reserve amount as a reductionof revenues and as an accrued expense on the accompanying consolidated balance sheets. The warranty claims and expense was notdeemed material for the years ended December 31, 2014 and 2013. | |
Income Taxes | Income taxes The Company uses theasset and liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (ASC 740.)Under this method, income tax expense is recognized as the amount of: (i) taxes payable or refundable for the current year and(ii) future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilitiesand their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply totaxable income in the years which those temporary differences are expected to be recovered or settled. The effect on deferredtax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes theenactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of availableevidence it is more likely than not that some portion or all of the deferred tax assets will not be realized. | |
Product Development | Product Development The Company includesproduct development expenses relating to the commercialization of new products which are expensed as incurred as part of operatingexpenses. Product development expenses for the years ended December 31, 2014 and 2013 were approximately $312,000 and $174,000,respectively. | |
Fair Value Disclosures [Text Block] | Note 8. FAIR VALUE MEASUREMENTS The fair value framework under the Financial Accounting Standards Board’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows: • Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and • Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability. The following table summarizes the liabilities measured at fair value on a recurring basis as of 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 Company’s 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 Company’s 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 Company’s 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 Entity’s 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 Company’s 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 Company’s 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 For the nine 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 | |
Stock-Based Compensation | Stock-Based Compensation The Company accountsfor stock-based compensation under ASC 718, Compensation-Stock Compensation (ASC 718). These standardsdefine a fair value based method of accounting for stock-based compensation. In accordance with ASC Topic 718, the cost of stock-basedcompensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The valueof the stock-based award is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair valueof the award as determined by the valuation model at the grant date or other measurement date. The resulting amount is chargedto expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generallythe vesting period. The Company considers many factors when estimating expected forfeitures, including types of awards, employeeclass, and historical experience. | |
Derivative Instruments | Derivative Instruments The Company accounts for free-standingderivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic No. 815, DerivativeInstruments and Hedging Activities, (ASC 815) as well as related interpretations of this topic. In accordancewith this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheetand are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closelyrelated to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either again or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on availablemarket data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. The Company estimates fair values ofderivative instruments and hybrid instruments using various techniques (and combinations thereof) that are considered to be consistentwith 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 generallyuses the Binomial Lattice model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (includingtrading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fairvalues of derivative financial instruments requires the development of significant and subjective estimates that may, and arelikely 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 andsensitive to changes in the trading market price of the Companys common stock. Since derivative financial instruments areinitially and subsequently carried at fair values, the Companys net income (loss) going forward will reflect the volatilityin these estimates and assumption changes. Under ASC 815, increases in the trading price of the Companys common stock andincreases 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 financialquarter result in the application of non-cash derivative income. | Derivative Instruments The Company accounts forfree-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC TopicNo. 815, Accounting for Derivative Instruments and Hedging Activities, (ASC 815) as well as relatedinterpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as eitherassets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embeddedderivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value withchanges in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instrumentsand hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rightsand obligations of each instrument. The Company estimatesfair values of derivative instruments and hybrid instruments using various techniques (and combinations thereof) that are consideredto be consistent with the objective of measuring fair values. In selecting the appropriate technique, the Company considers, amongother factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For lesscomplex instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton valuation model, adjustedfor 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 instrumentsrequires the development of significant and subjective estimates that may, and are likely to, change over the duration of theinstrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Black-Scholes-Mertonvaluation model) are highly volatile and sensitive to changes in the trading market price of the Companys common stock.Since derivative financial instruments are initially and subsequently carried at fair values, the Companys income (loss)going forward will reflect the volatility in these estimates and assumption changes. Under ASC 815, increases in the trading priceof the Companys common stock and increases in fair value during a given financial quarter result in the application ofnon-cash derivative expense. Conversely, decreases in the trading price of the Companys common stock and decreases in tradingfair 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 convertibledebt instruments when the Company has determined that the embedded conversion options should be bifurcated from their host instrumentsin accordance with ASC 815. The Company records discounts to convertible notes for the relative fair value of conversion optionsembedded in debt instruments. The Company amortizes the respective debt discount over the term of the notes, using the straight-linemethod, which approximates the effective interest method over a short-term period. | Convertible Debt Instruments The Company accountsfor convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcatedfrom their host instruments in accordance with ASC 470-20 Debt with Conversion and Other Options. The Company records,when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments basedupon the differences between the fair value of the underlying common stock at the commitment date of the note transaction andthe effective conversion price embedded in the note. The Company amortizes the respective debt discount over the term of the notes,using the straight-line method, which approximates the effective interest method. The Company records, when necessary, inducedconversion expense, at the time of conversion for the difference between the reduced conversion price per share and the originalconversion price per share. |
Lease Accounting | Lease Accounting The Company evaluateseach lease for classification as either a capital lease or an operating lease. If substantially all of the benefits and risksof ownership have been transferred to the Company as lessee, the Company records the lease as a capital lease at its inception.The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease agreementcalls for a scheduled rent increase during the lease term, the Company recognizes the lease expense on a straight-line basis overthe lease term. The Company determines the straight-line rent impact of an operating lease upon inception of the lease. | |
Recent Accounting Pronouncements | Recently Issued Accounting Pronouncements In April 2015, the Financial AccountingStandards 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 costsbe presented in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferredcharge. 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 (ASU2015-15). It states that, given the absence of authoritative guidance within the update, the SEC staff would not object to an entitydeferring and presenting debt issuance costs as an asset for revolving lines of credit and subsequently amortizing the deferreddebt issuance costs ratably over the term of the arrangement, regardless of whether there are any outstanding borrowings on theline 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 previouslyissued. Full retrospective application is required. The Company is currently evaluating the impact this guidance will have on itsconsolidated financial statements when adopted. In July 2015, the FASB issued AccountingStandards Update No. 2015-11, Simplifying the Measurement of Inventory In August 2014, the FASB issued ASU2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40): Disclosure of Uncertainties about anEntitys Ability to Continue as a Going Concern | Recent Accounting Pronouncements The Financial AccountingStandards Board (FASB) has issued Accounting Standards Update (ASU) No. 2014-12, Compensation Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance TargetCould Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and thatcould be achieved after the requisite service period, be treated as a performance condition. As such, the performance target shouldnot be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost shouldbe recognized in the period in which it becomes probable that the performance target will be achieved and should represent thecompensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in thisASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlieradoption is permitted. The adoption of this standard is not expected to have a material impact on the Companys consolidatedfinancial position and results of operations. The FASB has issued ASUNo. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting StandardsCodification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires thatan entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the considerationto which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 andshould be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initiallyapplying the ASU recognized at the date of initial application. The Company is currently evaluating the potential impact, if any,the adoption of this standard will have on the Companys consolidated financial position and results of operations. The FASB has issued ASUNo. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an EntitysAbility to Continue as a Going Concern |
Reclassifications | Reclassifications Certain prior period amounts in thecondensed consolidated financial statements have been reclassified to conform to the current periods presentation. No changesto the Companys net loss were made as a result of such reclassifications. | |
Liquidity | Liquidity TheCompany reported a net loss allocable to common shareholders of $11,159,250 for the nine months ended September 30, 2015. TheCompany had negative working capital of $7,044,860 as of September 30, 2015. The Company expects to continue incurring lossesbefore the impact of changes in fair value of derivatives for the foreseeable future and may need to raise additional capitalto pursue its retail store expansion, satisfy warrant obligations, and to continue as a going concern. The Company currently anticipatesthat 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, debtfinancings, or other means. However, the Company s outstandingwarrants sold as part of our July 29, 2015 public offering will separate from the Series A Units on January 23, 2016. Each warrantmay be cashlessly exercised for the Black Scholes value defined in the warrant agreement. The number of shares common stock weissue 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 authorizedcommon shares to 500 million. The shareholders approved the increase in the Company’s authorized shares on October 16, 2015.If all of the warrants were exercised simultaneously at a time when the trading price of the Company’s common stock wasbelow $0.17 per share, then the Company would not have sufficient authorized common stock to satisfy all the warrant exercisesand it could be required to use cash to pay warrant holders. Since the Company cannot predict the future stock price and whenthe warrant holders will exercise warrants and sell the underlying common shares, the Management cannot predict if the Companywill have sufficient cash resources to satisfy its obligation to the current warrant holders. | |
Identifiable Intangible Assets and Goodwill | Identifiable Intangible Assetsand Goodwill Identifiable intangible assets are recordedat cost, or when acquired as part of a business acquisition, at estimated fair value. Certain identifiable intangible assets areamortized over 5 and 10 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiableintangible 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 atDecember 31st or when events or changes in circumstances indicate evidence of potential impairment exists, using a fair value basedtest. As more fully disclosed in Note 3 andNote 4, the Companys amortizable intangible assets consist of the customer relations, trade names and technology, and assembledworkforce that were capitalized in connection with the completion of the Merger and retail store acquisitions. Accumulated amortizationon the amortizable intangible assets amounted to $155,237 at September 30, 2015. Amortization expense for the three and nine monthsended September 30, 2015 amounted to $66,530 and $155,237, respectively. The weighted-average remaining amortization period ofthe Companys amortizable intangible assets is approximately 6.08 years as of September 30, 2015. The estimated future amortizationof 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 ofAccounting 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 Companysother 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 exchangeprice that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageousmarket for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 alsoestablishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use ofunobservable 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 similarassets 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-basedcompensation under ASC Topic No. 718, Compensation-Stock Compensation (ASC 718). These standards definea fair value based method of accounting for stock-based compensation. In accordance with ASC 718, the cost of stock-based compensationis measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-basedaward is determined using the Black-Scholes-Merton valuation model, whereby compensation cost is the fair value of the award asdetermined by the valuation model at the grant date or other measurement date. The resulting amount is charged to expense on thestraight-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 historicalexperience. |
SUMMARY OF CERTAIN SIGNIFICAN27
SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||
Estimated Future Amortization of Patents | The estimated future amortization ofthe 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 | |
Schedule of Property And Equipment, Estimated Useful Lives | Description Useful Lives Warehouse fixtures 2 years Warehouse equipment 5 years Furniture and fixtures 5 years Computer hardware 3 years |
MERGER WITH VAPORIN, INC (Table
MERGER WITH VAPORIN, INC (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 | The following table presents the unauditedpro-forma financial results, as if the acquisition of Vaporin had been completed as of January 1, 2013 and 2014: For the Years Ended December 31, 2014 2013 Revenues $ 20,253,052 $ 28,259,309 Net (loss) income $ (19,595,702 ) $ 415,316 Loss per share - basic and diluted $ (0.59 ) $ 0.01 |
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 werebased, 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 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipmentconsists of the following: December 31, 2014 2013 Computer hardware $ 389,373 $ 12,471 Furniture and fixtures 347,612 19,821 Warehouse fixtures 7,564 7,564 Warehouse equipment 16,708 16,708 Leasehold improvements 35,076 - 796,333 56,564 Less: accumulated depreciation and amortization (84,314 ) (27,879 ) $ 712,019 $ 28,685 |
CAPITAL LEASE OBLIGATIONS (Tabl
CAPITAL LEASE OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Leases [Abstract] | |
Future Minimum Lease Payments Under Non-cancelable Capital Leases | Future minimumlease payments under non-cancelable capital leases that have initial or remaining terms in excess of one year at December 31, 2014are due as follows: Capital Lease 2015 $ 75,485 2016 75,485 2017 62,904 Total 213,874 Amounts representing interest payments (42,416 ) Present value of future minimum payments 171,458 Current portion of capital lease obligations (52,015 ) Capital lease obligations, long term $ 119,443 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
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 $ - | A summary of warrant activity for theyears ended December 31, 2014 and 2013 is presented below: Number of Warrants Weighted- Average Exercise Price Weighted- Average Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2013 10,677 $ 1.08 Warrants granted 205,203 3.34 Warrants exercised Warrants forfeited or expired Outstanding at December 31, 2013 215,880 $ 3.23 Warrants granted 1,193,181 2.00 Warrants exercised (192,970 ) 3.30 Warrants forfeited or expired Outstanding at December 31, 2014 1,216,091 $ 2.01 5.0 $ Exercisable at December 31, 2014 215,620 $ 3.23 5.0 $ |
Schedule of Additional Information Related to Warrants and Options | Options outstanding at December 31, 2014 under the various plans are as follows (in thousands): Plan Total Number of Options Outstanding in Plans Equity compensation plans not approved by security holders 900 Equity Incentive Plan 444 1,344 | |
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 | A summary of activity under all option Plans for the years ended December 31, 2014 and 2013 is presented below (in thousands, except per share data): Number of Weighted- Weighted- Aggregate Outstanding at January 1, 2013 226 $ 10.30 Options granted 8 21.75 Options exercised (8 ) 7.85 Options forfeited or expired (2 ) 6.35 Outstanding at December 31, 2013 224 10.85 Options granted 50 35.00 Options exercised (1 ) 5.00 Options forfeited or expired (4 ) 7.35 Outstanding at December 31, 2014 269 $ 15.40 6.53 $ — Exercisable at December 31, 2014 203 $ 10.85 6.45 $ — Options available for grants at December 31, 2014 260 |
Schedule for additional information related to options | The following table presents additional information related to options as of September 30, 2015: Options Outstanding Options Exercisable Range of Exercise Price Weighted Outstanding Weighted Weighted Exercisable $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 | |
Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share | The following table summarizes the Companyssecurities 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 | The following tablereconciles the numerator and denominator for the calculation: For the years ended December 31, 2014 2013 Net (loss) income - basic $ (13,852,249 ) $ 801,352 Denominator basic: Weighted average number of common shares outstanding 16,415,152 12,818,487 Basic (loss) earnings per common share $ (0.84 ) $ 0.06 Net (loss) earnings - diluted $ (13,852,249 ) $ 801,352 Denominator diluted: Basic weighted average number of common shares outstanding 16,415,152 12,818,487 Weighted average effect of dilutive securities: Common share equivalents of outstanding stock options - 349,428 Common share equivalents of convertible debt - - Common share equivalents of outstanding warrants - 18,450 Diluted weighted average number of common shares outstanding 16,415,152 13,186,365 Diluted (loss) earnings per common share $ (0.84 ) $ 0.06 Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: Convertible debt 1,136,364 Stock options 1,344,300 6,434 Warrants 1,216,091 4,089 |
Warrant [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 thevalues of certain assumptions used by the Companys custom models to estimate the fair value of the embedded conversion optionsand 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 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Provision | The income taxprovision (benefit) consists of the following: For the Years ended December 31, 2014 2013 Current: Federal $ - $ 337,016 State and local - 29,344 Utilization of net operating loss carryforward - (346,783 ) - 19,577 Deferred: Federal (4,337,272 ) 202,531 State and local (463,060 ) 34,178 (4,800,332 ) 236,709 Change in valuation allowance 5,567,665 (781,077 ) 767,333 (544,368 ) Income tax provision (benefit) $ 767,333 $ (524,791 ) |
Schedule of Effective Income Tax Rate Reconciliation | The following isa reconciliation of the expected tax expense (benefit) on the U.S. statutory rate to the actual tax expense (benefit) reflectedin the accompanying statement of operations: For the Years Ended December 31, 2014 2013 U.S. federal statutory rate (34.00 )% 34.00 % State and local taxes, net of federal benefit (2.98 )% 3.63 % Amortization of debt discount 13.95 % Debt conversion inducement 40.76 % Net operating loss tax adjustment (9.65 )% Other permanent differences 0.29 % 3.00 % Alternative minimum tax 6.97 % Change in valuation allowance 42.55 % (282.42 )% Income tax provision (benefit) 5.86 % (189.76 )% |
Schedule of Deferred Tax Assets and Liabilities | As of December 31, 2014 and 2013, theCompanys deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following: Years Ended December 31, 2014 2013 Current deferred tax assets: Net operating loss carryforwards $ 4,556,515 $ 169,404 Stock-based compensation expense 507,864 442,813 Alternative minimum tax credit carryforwards 15,336 19,283 Reserves and allowances 263,609 97,587 Inventory 269,865 59,320 Accrued expenses and deferred income 53,442 8,824 Severance 27,555 Charitable contributions 1,260 1,317 Total current deferred tax assets 5,695,446 798,548 Current deferred tax liabilities: Section 481 (a) adjustment (24,450 ) Property and equipment (7,600 ) Total current deferred tax liabilities (32,050 ) Net current deferred tax assets 5,695,446 766,498 Valuation allowance (5,695,446 ) Net deferred tax assets $ $ 766,498 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Future Minimum Lease Payments Under Non-cancelable Operating | The remaining minimum annual rents forthe 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 | Future minimum lease payments under non-cancelable operating that have initial or remaining terms in excess of one year at December 31, 2014 aredue as follows: Operating Leases 2015 $ 572,798 2016 307,488 2017 300,279 2018 253,841 2019 203,964 Total $ 1,638,370 |
ORGANIZATION, BASIS OF PRESEN37
ORGANIZATION, BASIS OF PRESENTATION, AND RECENT DEVELOPMENTS (Details Narrative) - USD ($) | Jul. 30, 2015 | Jul. 29, 2015 | Jul. 07, 2015 | Dec. 27, 2013 | Dec. 27, 2013 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 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 Company's common stock effectuated on July 8, 2015. | 1-for-5 | ratio of 1-for-5 | ||||||
Reverse stock split amendment date | Jul. 8, 2015 | ||||||||
Percentage of ownership | 50.00% | 50.00% | 50.00% | 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 |
ORGANIZATION, BASIS OF PRESEN38
ORGANIZATION, BASIS OF PRESENTATION, AND RECENT DEVELOPMENTS (Detail Narrative 1) - shares | Jul. 07, 2015 | Dec. 27, 2013 | Dec. 27, 2013 | Dec. 09, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 17, 2014 | Dec. 31, 2013 | Dec. 29, 2013 |
Common stock, shares authorized | 50,000,000 | 50,000,000 | 500,000,000 | 50,000,000 | 50,000,000 | ||||
Reverse split stock | the 1 for 5 reverse split of the Company's common stock effectuated on July 8, 2015. | 1-for-5 | ratio of 1-for-5 | ||||||
Share capital, shares authorized | 51,000,000 | 51,000,000 | 251,000,000 | ||||||
Blank check preferred stock | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||
Percentage of ownership | 50.00% | 50.00% | 50.00% | 50.00% | |||||
Subsequent event | |||||||||
Common stock, shares authorized | 500,000,000 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF 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 |
SUMMARY OF SIGNIFICANT ACCOUN40
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- Schedule of Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Warehouse Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 2 years |
Warehouse Equipment Member] | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 5 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 5 years |
Computer Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful Lives | 3 years |
SUMMARY OF CERTAIN SIGNIFICAN41
SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Sep. 30, 2015USD ($)Bonifide$ / shares | Sep. 30, 2014USD ($)Bonifide | Sep. 30, 2015USD ($)Bonifide$ / shares | Sep. 30, 2014USD ($)Bonifide | Dec. 31, 2014USD ($)Bonifide | Dec. 31, 2013 | 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 | |||||||
Accounts Receivable [Member] | Maximum [Member] | ||||||||
Percentage of accounts receivable | 10.00% | 10.00% | ||||||
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 | Bonifide | 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 | Bonifide | 1 | 1 | ||||||
Customer E [Member] | Revenues [Member] | ||||||||
Revenue | $ 1,506,880 |
SUMMARY OF CERTAIN SIGNIFICAN42
SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES (Details Narrative 1) - USD ($) | 12 Months Ended | |||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 17, 2014 | Dec. 27, 2013 | |
Accounting Policies [Abstract] | ||||
Percentage of ownership | 50.00% | 50.00% | 50.00% | |
Shipping and handling costs | $ 661,583 | $ 658,586 | ||
Shipping and handling revenues | 71,225 | 129,761 | ||
Cash balance insured by FDIC per financial institution | 250,000 | |||
Product development expenses | $ 312,000 | $ 174,000 |
GOING CONCERN AND MANAGEMENT 43
GOING CONCERN AND MANAGEMENT PLANS (Details Narrative) - USD ($) | Oct. 29, 2013 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
Net income | $ 33,624,757 | $ (4,836,115) | $ 26,908,771 | $ (7,340,038) | $ (13,852,249) | $ 801,352 | |
Retained earnings (accumulated deficit) | $ 11,676,868 | 11,676,868 | (15,231,903) | (1,379,654) | |||
Working capital | 127,874 | 11,657,615 | |||||
Decrease in working capital | $ 11,529,741 | ||||||
Proceeds from private placement of common stock and warrants, net of offering costs | $ 9,000,000 | $ 2,941,960 | |||||
Vaporin [Member] | |||||||
Company issued and sold value | 25,000,000 | ||||||
March 4, 2015 [Member] | |||||||
Company issued and sold value | 3,500,000 | ||||||
Proceeds from private placement of common stock and warrants, net of offering costs | $ 2,900,000 | ||||||
Issued common stock during period | 3,432,314 | ||||||
Number of warrants to purchase shares | 2,735,132 |
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 | 16,246,477 | |
Total allocation to identifiable intangible assets and goodwill | $ 17,735,084 |
MERGER WITH VAPORIN, INC - Sc45
MERGER WITH VAPORIN, INC - Schedule of Business Considertion (Details) (Parenthetical) | Sep. 30, 2015USD ($) |
Business Combinations [Abstract] | |
Debt discount | $ 54,623 |
MERGER WITH VAPORIN, INC - Sc46
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 |
MERGER WITH VAPORIN, INC - Sc47
MERGER WITH VAPORIN, INC - Schedule of Pro Forma Consolidated Results of Operations (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
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) | ||
Pro Forma [Member] | ||||||
Revenues | $ 20,253,052 | $ 28,259,309 | ||||
Net loss | $ (19,595,702) | $ 415,316 | ||||
Net loss per share | $ (0.59) | $ 0.01 |
MERGER WITH VAPORIN, INC (Detai
MERGER WITH VAPORIN, INC (Details Narrative) - USD ($) | Dec. 17, 2014 | Dec. 17, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 27, 2013 |
Percentage of ownership | 50.00% | 50.00% | 50.00% | 50.00% | ||
Merger closing date | Mar. 4, 2015 | |||||
Percentage of receive merger consideration to shareholders | 45.00% | |||||
Maximum percentage of current premium require to be paid | 2.00% | |||||
Joint Venture [Member] | ||||||
Percentage of issued and outstanding common stock shares | 0.50% | |||||
Common Stock [Member] | ||||||
Number of shares issued for merger | 2,718,307 | |||||
Issuance of common stock for cash, net of offering costs, shares | 666,668 | |||||
Vaporin [Member] | ||||||
Percentage of ownership | 0.50% | 0.50% | ||||
Number of shares issued for merger | 13,591,533 | |||||
Company issued and sold value | $ 25,000,000 | |||||
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 | 1.00% | |||||
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 value | $ 14,949,328 | |||||
Maximum percentage of current premium require to be paid | 5.50% | |||||
Vaporin [Member] | Restricted Stock [Member] | ||||||
Percentage of issued and outstanding common stock shares | 1.00% | |||||
Merger closing date | Mar. 4, 2015 | |||||
Number of shares issued for merger | 378,047 | 910,000 | ||||
Company issued and sold value | $ 2,079,071 | |||||
Maximum percentage of current premium require to be paid | 5.50% | |||||
Merger agreement period results | 12 months | |||||
Issuance of common stock for cash, net of offering costs, shares | 292,191 | |||||
Receive gross proceeds from equity offering | $ 3,500,000 |
MERGER WITH VAPORIN, INC (Det49
MERGER WITH VAPORIN, INC (Details Narrative 1) - USD ($) | Dec. 17, 2014 | Dec. 17, 2014 | Dec. 31, 2014 | Dec. 27, 2013 |
Merger closing date | Mar. 4, 2015 | |||
Percentage of receive merger consideration to shareholders | 45.00% | |||
Maximum percentage of current premium require to be paid | 2.00% | |||
Percentage of ownership | 50.00% | 50.00% | 50.00% | 50.00% |
Joint Venture [Member] | ||||
Proceeds from secured line of credit | $ 3,000,000 | |||
Vaporin [Member] | ||||
Issuance of common stock in connection with the Merger (See Note 3), shares | 13,591,533 | |||
Company issued and sold shares value | $ 25,000,000 | |||
Percentage of ownership | 0.50% | 0.50% | ||
Vaporin [Member] | Restricted Stock [Member] | ||||
Merger closing date | Mar. 4, 2015 | |||
Issuance of common stock in connection with the Merger (See Note 3), shares | 378,047 | 910,000 | ||
Company issued and sold shares value | $ 2,079,071 | |||
Maximum percentage of current premium require to be paid | 5.50% | |||
March 4, 2015 [Member] | ||||
Company issued and sold shares value | $ 3,500,000 |
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 |
RETAIL STORES AND KIOSKS (Detai
RETAIL STORES AND KIOSKS (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($)Lease | Sep. 30, 2015USD ($)Lease | Sep. 30, 2014USD ($) | Dec. 31, 2014Lease | |
Retail Stores And Kiosks - Schedule Of Purchase Price Allocations Based On Managements Knowledge Of Retail Businesses Acquired Details | ||||
Number of acquired stores | Lease | 3 | 3 | 1 | |
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 |
ACCRUED EXPENSES - Schedule of
ACCRUED EXPENSES - Schedule of Accrued Expenses (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
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 | $ 420,363 |
PROPERTY AND EQUIPMENT - Schedu
PROPERTY AND EQUIPMENT - Schedule of Property and Equipment (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 796,333 | $ 56,564 | |
Less: accumulated depreciation and amortization | $ (166,553) | (84,314) | (27,879) |
Property and equipment, net | $ 440,660 | 712,019 | 28,685 |
Computer Hardware [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 389,373 | 12,471 | |
Furniture and Fixtures [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 347,612 | 19,821 | |
Warehouse Fixtures [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 7,564 | 7,564 | |
Warehouse Equipment Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 16,708 | $ 16,708 | |
Leasehold Improvements Member] | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 35,076 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 56,435 | $ 11,284 |
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 | Dec. 31, 2014 | Dec. 31, 2013 | Aug. 03, 2015 | Mar. 31, 2015 | Mar. 04, 2015 | Jan. 12, 2015 |
Amortization of deferred debt discount | $ 67,797 | $ 833,035 | $ 156,250 | $ 102,500 | |||||||||||
Extinguishment loss | (1,544,044) | (1,544,044) | |||||||||||||
Interest expense | (7,183) | (8,499) | 348,975 | $ 383,981 | |||||||||||
Warrants exercise price | $ 6.40 | ||||||||||||||
Amortization of deferred financing costs | $ 32,857 | $ 144,903 | 17,458 | ||||||||||||
Loans receivable, net | $ 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 | 0.10% | ||||||||||||||
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] | |||||||||||||||
Amortization of 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 | ||||||||||||||
Sale of common stock | $ 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 of related party | $ 3,000,000 | ||||||||||||||
Notes maturity date | Mar. 31, 2016 | ||||||||||||||
1,250,000 Senior Convertible Notes Payable to Related Parties [Member] | |||||||||||||||
Amortization of 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 | ||||||||||||||
Loans receivable, net | $ 50,000 | ||||||||||||||
Convertible Debt Securities [Member] | |||||||||||||||
Amortization of 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 | |||||||||||||
Sale of common stock | $ 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 | 0.25% | ||||||||||||||
Common stock price per share | $ 2.50 | $ 2.50 | |||||||||||||
Percentage of additional amounts of principal and interest outstanding | 1.30% | 1.30% | |||||||||||||
Convertible Debt Securities [Member] | Chardan Capital Management, LLC [Member] | |||||||||||||||
Debt instrument accrued interest rate | 0.10% | ||||||||||||||
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 | ||||||||||||||
Convertible Debt Securities [Member] | July 31, 2015 and August 4, 2015 [Member] | |||||||||||||||
Notes payable interest | $ 459,144 | $ 459,144 | |||||||||||||
Extinguishment loss | $ 923,275 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | Nov. 14, 2014 | Oct. 29, 2013 | Jul. 11, 2013 | Jul. 09, 2013 | Apr. 30, 2013 | Jan. 29, 2013 | Nov. 13, 2012 | Sep. 28, 2012 | Jul. 09, 2012 | Jun. 19, 2012 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
Short-term Debt [Line Items] | ||||||||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||
Deferred financing costs | $ 139,667 | |||||||||||||||
Amortization of deferred financing costs | $ 32,857 | $ 144,903 | 17,458 | |||||||||||||
Amortization of deferred debt discount | $ 67,797 | $ 833,035 | $ 156,250 | $ 102,500 | ||||||||||||
Induced conversion expense | 299,577 | |||||||||||||||
Incremental conversion option intrinsic value benefit | ||||||||||||||||
Exercisable at initial exercise prices | $ 2.20 | $ 2.20 | $ 10.85 | |||||||||||||
Proceeds from convertible debt | $ 1,662,500 | 500,000 | ||||||||||||||
$1,250,000 Senior Convertible Notes Payable To Related Parties [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Debt principal amount | $ 1,250,000 | |||||||||||||||
Convertible promissory note | $ 1,250,000 | |||||||||||||||
Number of shares called by warrants | 1,136,364 | |||||||||||||||
Common stock, par value | $ 0.001 | |||||||||||||||
Exercise price per share | $ 2 | |||||||||||||||
Interest expense, debt | $ 1,250,000 | |||||||||||||||
Percentage of outstanding principal annual rate | 7.00% | |||||||||||||||
Notes maturity date | Nov. 14, 2015 | |||||||||||||||
Terms of senior convertible notes customary antidilution description | The terms of the $1,250,000 Senior Convertible Notesincluded customary anti-dilution protection and also included piggy-back registration rights with respect to theshares of common stock underlying the $1,250,000 Senior Convertible Notes and warrants. | |||||||||||||||
Percentage of cash equal of principal amount | 115.00% | |||||||||||||||
Deferred financing costs | $ 139,667 | |||||||||||||||
Amortization of deferred financing costs | $ 17,458 | |||||||||||||||
Debt discount amount | 1,250,000 | |||||||||||||||
Fair value of basis warrants issued | 701,250 | |||||||||||||||
Fair value of conversion feature issuance | 548,750 | |||||||||||||||
Amortization of deferred debt discount | $ 156,250 | |||||||||||||||
$1,250,000 Senior Convertible Notes Payable To Related Parties [Member] | Palladium Capital Advisors, LLC [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Number of shares called by warrants | 56,818 | |||||||||||||||
Exercise price per share | $ 2 | |||||||||||||||
Notes maturity date | Nov. 14, 2019 | |||||||||||||||
Placement agent fee | $ 62,500 | |||||||||||||||
300,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Debt principal amount | $ 300,000 | |||||||||||||||
Interest expense, debt | $ 48,674 | |||||||||||||||
Debt converted into stock | 281,691 | |||||||||||||||
300,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Harlan Press And Doron Ziv [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 300,000 | |||||||||||||||
Percentage of stockholders's grater than officers | 10.00% | |||||||||||||||
Issuance of warrants to purchase of common stock | 9,303 | |||||||||||||||
50,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Amortization of deferred debt discount | $ 3,530 | |||||||||||||||
50,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Debt principal amount | $ 50,000 | |||||||||||||||
Debt converted into stock | 41,667 | |||||||||||||||
50,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Mr. Frija [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 500,000 | |||||||||||||||
Interest expense, debt | $ 8,113 | |||||||||||||||
Issuance of warrants to purchase of common stock | 1,374 | |||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 350,000 | |||||||||||||||
Percentage of outstanding principal annual rate | 18.00% | |||||||||||||||
Notes maturity date | Jul. 8, 2016 | |||||||||||||||
Fair value of conversion feature issuance | $ 350,000 | 3,937 | ||||||||||||||
Amortization of deferred debt discount | 4,550 | |||||||||||||||
Debt converted into stock | 350,000 | |||||||||||||||
Percentage of conversion price | 1.10% | |||||||||||||||
Incremental conversion option intrinsic value benefit | $ 3,937 | |||||||||||||||
Debt discount | $ 350,000 | $ 4,550 | ||||||||||||||
Exercisable at initial exercise prices | $ 5.71 | |||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Warrant [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible into the common stock lower price per share | $ 5.71 | |||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | 350,000 | |||||||||||||||
Interest expense, debt | $ 16,126 | |||||||||||||||
Convertible into the common stock lower price per share | $ 3 | |||||||||||||||
Debt converted into stock | 116,668 | |||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||
Debt conversion converted instrument amount | $ 350,000 | |||||||||||||||
Induced conversion expense | 246,375 | |||||||||||||||
Conversion price amount | 350,000 | |||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Ralph Frija [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 200,000 | |||||||||||||||
Common stock purchase of warrants | 3,373 | |||||||||||||||
Amortization of deferred debt discount | $ 10,000 | |||||||||||||||
Percentage of stockholders's grater than officers | 5.00% | |||||||||||||||
Issuance of warrants to purchase of common stock | 1,927 | |||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||
Weighted average closing price per share | $ 5.19 | |||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Holman [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 100,000 | |||||||||||||||
Amortization of deferred debt discount | $ 5,000 | |||||||||||||||
Percentage of stockholders's grater than officers | 5.00% | |||||||||||||||
Issuance of warrants to purchase of common stock | 964 | |||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||
Weighted average closing price per share | $ 5.19 | |||||||||||||||
350,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Vaccaro [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 50,000 | |||||||||||||||
Amortization of deferred debt discount | $ 2,500 | |||||||||||||||
Issuance of warrants to purchase of common stock | 482 | |||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||
Weighted average closing price per share | $ 5.19 | |||||||||||||||
75,000 Senior Convertible Notes Payable to Related Parties [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | 75,000 | |||||||||||||||
Interest expense, debt | 3,957 | |||||||||||||||
Fair value of conversion feature issuance | 75,000 | |||||||||||||||
Amortization of deferred debt discount | $ 75,000 | 825 | ||||||||||||||
Debt conversion converted instrument amount | $ 75,000 | |||||||||||||||
Induced conversion expense | 53,202 | |||||||||||||||
Debt discount | $ 825 | |||||||||||||||
Number of stock shares issued during period | 75,000 | |||||||||||||||
Number convertible debt amended | $ 300,000 | |||||||||||||||
Number convertible debt amended 1 | 50,000 | |||||||||||||||
75,000 Senior Convertible Notes Payable to Related Parties [Member] | Private Placement [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible into the common stock lower price per share | $ 3 | |||||||||||||||
Debt converted into stock | 25,000 | |||||||||||||||
Debt conversion converted instrument amount | $ 75,000 | |||||||||||||||
75,000 Senior Convertible Notes Payable to Related Parties [Member] | Securities Purchase Agreements [Member] | Vaccaro [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 75,000 | |||||||||||||||
Notes maturity date | Jul. 10, 2016 | |||||||||||||||
Amortization of deferred debt discount | $ 3,750 | |||||||||||||||
Issuance of warrants to purchase of common stock | 718 | |||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||
Weighted average closing price per share | $ 5.227 | |||||||||||||||
Exercisable at initial exercise prices | $ 5.75 | |||||||||||||||
Option excercisable date | Jul. 10, 2018 | |||||||||||||||
500,000 Senior Convertible Note Payable to Stockholder [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Notes maturity date | Apr. 22, 2016 | Jan. 8, 2014 | ||||||||||||||
Convertible into the common stock lower price per share | $ 2.577 | |||||||||||||||
Percentage of conversion price | 1.10% | |||||||||||||||
Number convertible debt amended | $ 500,000 | |||||||||||||||
500,000 Senior Convertible Note Payable to Stockholder [Member] | Ralph Frija [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Notes maturity date | Apr. 22, 2016 | |||||||||||||||
Convertible into the common stock lower price per share | $ 2.577 | |||||||||||||||
Percentage of stockholders's grater than officers | 5.00% | |||||||||||||||
Percentage of conversion price | 110.00% | |||||||||||||||
Proceeds from convertible debt | $ 500,000 | |||||||||||||||
Percentage of proceeds excess of initial principal amount | 125.00% | |||||||||||||||
500,000 Senior Convertible Note Payable [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Percentage of outstanding principal annual rate | 18.00% | |||||||||||||||
Notes maturity date | Jan. 28, 2016 | |||||||||||||||
Convertible into the common stock lower price per share | $ 3.3775 | |||||||||||||||
Percentage of conversion price | 1.10% | |||||||||||||||
Incremental conversion option intrinsic value benefit | $ 79,527 | |||||||||||||||
500,000 Senior Convertible Note Payable [Member] | Warrant [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Exercisable at initial exercise prices | $ 3.3775 | |||||||||||||||
500,000 Senior Convertible Note Payable [Member] | Securities Purchase Agreements [Member] | Robert John Sali [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 500,000 | |||||||||||||||
Amortization of deferred debt discount | $ 25,000 | |||||||||||||||
Issuance of warrants to purchase of common stock | 8,142 | |||||||||||||||
Percentage of obtained by dividing | 5.00% | |||||||||||||||
Weighted average closing price per share | $ 3.07 | |||||||||||||||
Receive gross proceeds from equity offering | $ 500,000 | |||||||||||||||
500,000 Senior Convertible Note Payable [Member] | Private Placement | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | 50,000 | |||||||||||||||
Interest expense, debt | $ 93,267 | |||||||||||||||
Debt converted into stock | 166,662 | |||||||||||||||
50,000 Senior Convertible Note Payable [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Fair value of conversion feature issuance | 79,527 | |||||||||||||||
Amortization of deferred debt discount | $ 10,131 | |||||||||||||||
50,000 Senior Convertible Note Payable [Member] | Private Placement [Member] | ||||||||||||||||
Short-term Debt [Line Items] | ||||||||||||||||
Convertible promissory note | $ 50,000 | |||||||||||||||
Interest expense, debt | $ 66,329 | |||||||||||||||
Debt converted into stock | 148,039 | |||||||||||||||
Percentage of conversion price | 110.00% |
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 - Summar58
STOCKHOLDERS' EQUITY - Summary of Warrant Activity (Details) - Warrant [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Number of Warrants Outstanding, Beginning Balance | 243,218 | 215,880 | 10,677 |
Number of Warrants granted | 76,447,995 | 1,193,181 | 205,203 |
Number of warrants exercised | (192,970) | ||
Warrants Assumed in Merger | 49,594 | ||
Number of Warrants forfeited or expired | 1,216,091 | ||
Number of Warrants outstanding, Ending Balance | 76,740,807 | 243,218 | 215,880 |
Number of Warrants Exercisable | 76,740,807 | ||
Weighted Average Exercise Price, Warrants Outstanding, Beginning Balance | $ 10.06 | $ 3.23 | $ 1.08 |
Weighted Average Exercise Price, Warrants granted | $ 1.29 | 2 | $ 3.34 |
Weighted Average Exercise Price, Warrants exercised | $ 3.30 | ||
Weighted Average Exercise Price, Warrants assumed in merger | $ 26.22 | ||
Weighted Average Exercise Price, forfeited or expired | |||
Weighted Average Exercise Price, Warrants outstanding, Ending Balance | $ 1.33 | $ 10.06 | $ 3.23 |
Weighted Average Exercise Price, Exercisable | $ 1.33 | $ 3.23 | |
Weighted Average Remaining Contractual Terms (Years), Outstanding | 4 years 9 months 18 days | 5 years | |
Weighted Average Remaining Contractual Terms (Years), Exercisable | 4 years 2 months 12 days | 5 years | |
Aggregate Intrinsic Value, Outstanding | |||
Aggregate Intrinsic Value, Exercisable |
STOCKHOLDERS' EQUITY - Summary
STOCKHOLDERS' EQUITY - Summary of Warrant Activity (Details 1) - Warrant [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Number of Warrants Outstanding, Beginning Balance | 243,218 | 215,880 | 10,677 |
Number of Warrants granted | 76,447,995 | 1,193,181 | 205,203 |
Number of Warrants exercised | (192,970) | ||
Number of Warrants forfeited or expired | 1,216,091 | ||
Number of Warrants outstanding, Ending Balance | 76,740,807 | 243,218 | 215,880 |
Number of Warrants Exercisable | 76,740,807 | ||
Weighted Average Exercise Price, Warrants Outstanding, Beginning Balance | $ 10.06 | $ 3.23 | $ 1.08 |
Weighted Average Exercise Price, Warrants granted | $ 1.29 | 2 | $ 3.34 |
Weighted Average Exercise Price, Warrants exercised | $ 3.30 | ||
Weighted Average Exercise Price, forfeited or expired | |||
Weighted Average Exercise Price, Warrants outstanding, Ending Balance | $ 1.33 | $ 10.06 | $ 3.23 |
Weighted Average Exercise Price, Exercisable | $ 1.33 | $ 3.23 | |
Weighted Average Remaining Contractual Terms (Years), Outstanding | 4 years 9 months 18 days | 5 years | |
Weighted Average Remaining Contractual Terms (Years), Exercisable | 4 years 2 months 12 days | 5 years | |
Aggregate Intrinsic Value, Outstanding | |||
Aggregate Intrinsic Value, Exercisable |
STOCKHOLDERS' EQUITY - Schedule
STOCKHOLDERS' EQUITY - Schedule of Additional Information Related To Warrants and Options (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Exercisable at initial exercise prices | $ 2.20 | $ 10.85 |
Exercisable, Weighted Average Remaining Contractual Life (years) | 1 year 1 month 6 days | 6 years 6 months 11 days |
Number of Shares Exercisable | 210,853 | 203,000 |
Warrant [Member] | ||
Number of Shares Outstanding | 76,740,807 | |
Exercisable, Weighted Average Remaining Contractual Life (years) | 4 years 9 months 18 days | |
Number of Shares Exercisable | 76,740,807 | |
Warrant [Member] | Range of Exercise Price One [Member] | ||
Range of Exercise Price Lower Limit | $ 1 | |
Range of Exercise Price Upper limit | 1.99 | |
Exercisable at initial exercise prices | $ 1.24 | |
Number of Shares Outstanding | 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 | 75,251,835 | |
Warrant [Member] | Range of Exercise Price Two [Member] | ||
Range of Exercise Price Lower Limit | $ 2 | |
Range of Exercise Price Upper limit | 4.99 | |
Exercisable at initial exercise prices | $ 2.52 | |
Number of Shares Outstanding | 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 | 677,733 | |
Warrant [Member] | Range of Exercise Price Three [Member] | ||
Range of Exercise Price Lower Limit | $ 5 | |
Range of Exercise Price Upper limit | 6.99 | |
Exercisable at initial exercise prices | $ 6.40 | |
Number of Shares Outstanding | 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 | 551,305 | |
Warrant [Member] | Range of Exercise Price Four [Member] | ||
Range of Exercise Price Lower Limit | $ 7 | |
Range of Exercise Price Upper limit | 16.99 | |
Exercisable at initial exercise prices | $ 10.05 | |
Number of Shares Outstanding | 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 | 240,265 | |
Warrant [Member] | Range of Exercise Price Five [Member] | ||
Range of Exercise Price Lower Limit | $ 17 | |
Range of Exercise Price Upper limit | 66.20 | |
Exercisable at initial exercise prices | $ 64.52 | |
Number of Shares Outstanding | 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 | 19,669 | |
Stock Options [Member] | ||
Number of Shares Outstanding | 219,206 | |
Number of Shares Exercisable | 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 | |
Exercisable at initial exercise prices | $ 1.06 | |
Number of Shares Outstanding | 21,540 | |
Exercisable, Weighted Average Exercise Price | $ 1.06 | |
Exercisable, Weighted Average Remaining Contractual Life (years) | 6 years 6 months | |
Number of Shares Exercisable | 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 | |
Exercisable at initial exercise prices | $ 1.58 | |
Number of Shares Outstanding | 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 | 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 | |
Exercisable at initial exercise prices | $ 2.31 | |
Number of Shares Outstanding | 187,356 | |
Exercisable, Weighted Average Exercise Price | $ 2.31 | |
Exercisable, Weighted Average Remaining Contractual Life (years) | 1 month 6 days | |
Number of Shares Exercisable | 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 | |
Exercisable at initial exercise prices | $ 9.63 | |
Number of Shares Outstanding | 1,870 | |
Exercisable, Weighted Average Exercise Price | $ 9.63 | |
Exercisable, Weighted Average Remaining Contractual Life (years) | 2 years | |
Number of Shares Exercisable | 1,870 | |
Stock Options [Member] | ||
Exercisable, Weighted Average Remaining Contractual Life (years) | 10 months 24 days |
STOCKHOLDERS' EQUITY - Summar61
STOCKHOLDERS' EQUITY - Summary of Options Outstanding (Details) - shares | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Number of shares, Outstanding | 219,206 | 268,860 | 224,000 | 226,000 | |
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 - Summar62
STOCKHOLDERS' EQUITY - Summary of Stock Option Activity Under All Option Plans (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
STOCKHOLDERS' EQUITY: | |||
Number of shares, Outstanding, Beginning balance | 268,860 | 224,000 | 226,000 |
Number of shares, Options Granted | 3,947 | 50,000 | 8,000 |
Number of shares, Options Exercised | (1,000) | (8,000) | |
Number of shares, Options forfeited or expired | (53,600) | (4,000) | (2,000) |
Number of shares, Outstanding, Ending balance | 219,206 | 268,860 | 224,000 |
Number of shares, Options Exercisable | 210,853 | 203,000 | |
Options available for grants | 311,134 | 260,000 | |
Weighted Avg. Exercise Price, Outstanding, Beginning balance | $ 15.40 | $ 10.85 | $ 10.30 |
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ 5.61 | 35 | 21.75 |
Weighted Avg. Exercise Price, Options Exercised | 5 | 7.85 | |
Weighted Avg. Exercise Price, Options forfeited or expired | $ 6.83 | 7.35 | 6.35 |
Weighted Avg. Exercise Price, Outstanding, Ending balance | 2.22 | 15.40 | $ 10.85 |
Weighted Avg. Exercise Price, Exercisable Ending Balance | $ 2.20 | $ 10.85 | |
Weighted Avg. Remaining Contractual Life, Options Outstanding | 1 year 1 month 6 days | 6 years 6 months 11 days | |
Weighted Avg. Remaining Contractual Life, Options Exercisable | 10 months 24 days | 6 years 5 months 12 days | |
Aggregate Intrinsic Value, Options Outstanding | |||
Aggregate Intrinsic Value, Options Exercisable |
STOCKHOLDERS' EQUITY - Summar63
STOCKHOLDERS' EQUITY - Summary of Stock Option Activity Under All Option Plans (Details 1) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
STOCKHOLDERS' EQUITY: | |||
Number of shares, Outstanding, Beginning balance | 268,860 | 224,000 | 226,000 |
Number of shares, Options Granted | 3,947 | 50,000 | 8,000 |
Number of shares, Options Exercised | (1,000) | (8,000) | |
Number of shares, Options forfeited or expired | (53,600) | (4,000) | (2,000) |
Number of shares, Outstanding, Ending balance | 219,206 | 268,860 | 224,000 |
Number of shares, Options Exercisable | 210,853 | 203,000 | |
Options available for grants | 311,134 | 260,000 | |
Weighted Avg. Exercise Price, Outstanding, Beginning balance | $ 15.40 | $ 10.85 | $ 10.30 |
Weighted Avg. Exercise Price, Options Granted | $ 5.61 | 35 | 21.75 |
Weighted Avg. Exercise Price, Options Exercised | 5 | 7.85 | |
Weighted Avg. Exercise Price, Options forfeited or expired | $ 6.83 | 7.35 | 6.35 |
Weighted Avg. Exercise Price, Outstanding, Ending balance | 2.22 | 15.40 | $ 10.85 |
Weighted Avg. Exercise Price, Exercisable Ending Balance | $ 2.20 | $ 10.85 | |
Exercisable, Weighted Average Remaining Contractual Life (years) | 1 year 1 month 6 days | 6 years 6 months 11 days | |
Weighted Avg. Remaining Contractual Life, Options Exercisable | 10 months 24 days | 6 years 5 months 12 days | |
Aggregate Intrinsic Value, Options Outstanding | |||
Aggregate Intrinsic Value, Options Exercisable |
STOCKHOLDERS' EQUITY - Summar64
STOCKHOLDERS' EQUITY - Summary of Stock Option Outstanding Under Various Plans (Details) - shares | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Number of shares, Outstanding | 219,206 | 268,860 | 224,000 | 226,000 |
Equity Compensation Plans Not Approved By Security Holders [Member] | ||||
Number of shares, Outstanding | 900 | |||
Equity Incentive Plan [Member] | ||||
Number of shares, Outstanding | 444 |
STOCKHOLDERS' EQUITY - Fair Val
STOCKHOLDERS' EQUITY - Fair Value of Employee Stock Options Estimated Using Weighted-Average Assumptions (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Risk-free interest rate, minimum | 0.157% | |
Risk-free interest rate, maximum | 0.172% | |
Risk-free interest rate | 0.262% | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% | 0.00% |
Volatility | 0.463% | |
Volatility, minimum | 0.27% | |
Volatility, maximum | 0.31% | |
Minimum [Member] | ||
Expected term | 5 years | 6 years 3 months 18 days |
Maximum [Member] | ||
Expected term | 7 years | 10 years |
STOCKHOLDERS' EQUITY - Reconcil
STOCKHOLDERS' EQUITY - Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share (Details) - shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 76,990,013 | 1,625,710 | ||
Warrant [Member] | ||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 76,740,807 | 22,910 | 1,216,091 | 4,089 |
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 | 1,344,300 | 6,434 |
STOCKHOLDERS' EQUITY - Reconc67
STOCKHOLDERS' EQUITY - Reconciliation of Numerator and Denominator for Calculation of Earnings Per Share (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Net (loss) income - basic | $ 33,624,757 | $ (4,836,115) | $ 26,908,771 | $ (7,340,038) | $ (13,852,249) | $ 801,352 |
Weighted average number of common shares outstanding | 3,283,030 | 2,563,697 | ||||
Basic (loss) earnings per common share | $ (4.22) | $ 0.31 | ||||
Net (loss) earnings - diluted | $ (13,852,249) | $ 801,352 | ||||
Basic weighted average number of common shares outstanding | 3,283,030 | 2,563,697 | ||||
Common share equivalents of outstanding stock options | 349,428 | |||||
Common share equivalents of convertible debt | ||||||
Common share equivalents of outstanding warrants | 18,450 | |||||
Diluted weighted average number of common shares outstanding | 3,283,030 | 2,637,273 | ||||
Diluted (loss) earnings per common share | $ (4.22) | $ 0.30 | ||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 76,990,013 | 1,625,710 | ||||
Warrant [Member] | ||||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 76,740,807 | 22,910 | 1,216,091 | 4,089 | ||
Convertible Debt Securities [Member] | ||||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 1,136,364 | |||||
Stock Options [Member] | ||||||
Securities excluded from the weighted outstanding calculation because their inclusion would have been antidilutive: | 219,206 | 1,352,800 | 1,344,300 | 6,434 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | Jul. 30, 2015 | Jul. 29, 2015 | Jun. 19, 2015 | Mar. 03, 2015 | Feb. 03, 2014 | Oct. 29, 2013 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Nov. 14, 2015 | Jul. 09, 2015 | Jul. 07, 2015 | Jun. 30, 2015 | Jan. 24, 2015 |
Grant date fair value of common shares issued | $ 163,646 | $ 48,239 | |||||||||||||||
Stock-based compensation | $ 613,577 | $ 1,375,343 | $ 1,766,579 | $ 135,239 | |||||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||||||
Proceeds from related parties | 1,000,000 | ||||||||||||||||
Offering costs | $ 38,700,000 | (109,104) | |||||||||||||||
Percentage of liquidated damages in cash equal | 0.015% | ||||||||||||||||
Cash payments | $ 81,489 | $ 910,000 | |||||||||||||||
Common stock, shares outstanding | 8,455,505 | 8,455,505 | 3,352,382 | 3,242,906 | |||||||||||||
Common stock, shares issued | 8,455,505 | 8,455,505 | 3,352,382 | 3,242,906 | |||||||||||||
Derivative liability | $ 79,400,000 | $ 35,905,972 | $ 35,905,972 | $ 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, shares 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 | ||||||||||||||||
Common 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 | 0.015% | ||||||||||||||||
Cash payments | $ 52,500 | ||||||||||||||||
Derivative liability | $ 2,494,639 | ||||||||||||||||
Knight Global [Member] | |||||||||||||||||
Stock-based compensation | 156,000 | $ 299,000 | |||||||||||||||
General and Administrative Expense [Member] | |||||||||||||||||
Stock-based compensation | $ 322,067 | $ 1,266,058 | |||||||||||||||
Consulting Agreement [Member] | |||||||||||||||||
Stock-based compensation | $ 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] | |||||||||||||||||
Shares issued to employees | 400,000 | ||||||||||||||||
Grant date fair value of common shares issued | $ 3,080,000 | ||||||||||||||||
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 | 0.06% | ||||||||||||||||
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, shares outstanding | 465,720 | ||||||||||||||||
Common stock to be issued | 1,000,000 | ||||||||||||||||
Prior Investors [Member] | Waivers Agreements [Member] | Minimum [Member] | |||||||||||||||||
Common 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 (Details69
STOCKHOLDERS' EQUITY (Details Narrative 2) | Jul. 07, 2015 | Apr. 25, 2014USD ($)$ / sharesshares | Mar. 06, 2014USD ($)$ / sharesshares | Feb. 03, 2014USD ($)Bonifideshares | Dec. 27, 2013shares | Dec. 27, 2013shares | Oct. 29, 2013USD ($)shares | Oct. 22, 2013USD ($)$ / sharesshares | Jun. 15, 2013shares | Mar. 15, 2013shares | Sep. 30, 2015USD ($)$ / sharesshares | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($)$ / sharesshares | Dec. 31, 2013USD ($)$ / sharesshares | Jul. 31, 2015$ / shares | Jul. 29, 2015$ / shares | Jul. 25, 2015$ / shares | Jun. 30, 2015$ / shares | Mar. 31, 2015$ / shares | Mar. 03, 2015$ / shares | Nov. 20, 2013shares |
Preferred stock, par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||||
Preferred stock, shares authorized | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||||||||||
Preferred stock, shares issued | 0 | 0 | |||||||||||||||||||
Preferred stock, shares outstanding | 0 | 0 | |||||||||||||||||||
Common stock, par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||||
Common stock, shares authorized | 50,000,000 | 50,000,000 | 500,000,000 | 50,000,000 | 50,000,000 | ||||||||||||||||
Common stock, voting rights | Each share entitles the holder to one vote | ||||||||||||||||||||
Shares issued for services | 57,500 | 29,500 | |||||||||||||||||||
Grant date fair value of common shares issued | $ | $ 163,646 | $ 48,239 | |||||||||||||||||||
Proceeds from private placements | $ | $ 9,000,000 | $ 2,941,960 | |||||||||||||||||||
Equity issuance price per share | $ / shares | $ 0.48 | $ 0.87 | $ 1 | $ 1.70 | $ 1.60 | $ 5.20 | $ 5.50 | ||||||||||||||
Offering cost | $ | 1,000,000 | ||||||||||||||||||||
Offering cost incurred | $ | 110,000 | ||||||||||||||||||||
Number of register for resale | 3,216,171 | ||||||||||||||||||||
Percentage of liquidated damages in cash equal | 0.015% | ||||||||||||||||||||
Cash payments | $ | $ 81,489 | $ 910,000 | |||||||||||||||||||
Common stock reserved and available for issuance | 1,800,000 | ||||||||||||||||||||
Reverse stock split | the 1 for 5 reverse split of the Company's common stock effectuated on July 8, 2015. | 1-for-5 | ratio of 1-for-5 | ||||||||||||||||||
Volatility, minimum | 0.27% | ||||||||||||||||||||
Volatility, maximum | 0.31% | ||||||||||||||||||||
Risk-free interest rate, minimum | 0.157% | ||||||||||||||||||||
Risk-free interest rate, maximum | 0.172% | ||||||||||||||||||||
Dividend yield | 0.00% | 0.00% | |||||||||||||||||||
Common stock exercise price per share | $ / shares | $ 5.61 | $ 35 | $ 21.75 | ||||||||||||||||||
Stock-based compensation expense, for the vesting of stock options | $ | $ 163,646 | $ 48,239 | |||||||||||||||||||
Stock options granted | 1,012,745 | 331,555 | |||||||||||||||||||
Nonvested stock option | 476,828 | 150,037 | |||||||||||||||||||
Equity Incentive Plan [Member] | |||||||||||||||||||||
Common stock reserved and available for issuance | 1,800,000 | ||||||||||||||||||||
Reverse stock split | 1-for-5 reverse stock split. | ||||||||||||||||||||
Percentage of option grants and/or restricted shares for more than shares subject to Plan | 0.20% | ||||||||||||||||||||
Nonqualified Directors [Member] | |||||||||||||||||||||
Number of shares issued during period | 60,000 | ||||||||||||||||||||
Common stock exercise price per share | $ / shares | $ 8.30 | ||||||||||||||||||||
Weighted average grant date fair value | $ | $ 149,160 | ||||||||||||||||||||
Other Nonqualified Directors [Member] | |||||||||||||||||||||
Number of shares issued during period | 60,000 | ||||||||||||||||||||
Common stock exercise price per share | $ / shares | $ 6.48 | ||||||||||||||||||||
Weighted average grant date fair value | $ | $ 315,720 | ||||||||||||||||||||
Nonqualified Stock Option [Member] | |||||||||||||||||||||
Number of shares issued during period | 10,000 | ||||||||||||||||||||
Common stock exercise price per share | $ / shares | $ 4.35 | ||||||||||||||||||||
Weighted average grant date fair value | $ | $ 29,832 | $ 25,900 | |||||||||||||||||||
Minimum [Member] | |||||||||||||||||||||
Expected term | 5 years | 6 years 3 months 18 days | |||||||||||||||||||
Estimated forfeiture rate | 0.0002% | ||||||||||||||||||||
Maximum [Member] | |||||||||||||||||||||
Expected term | 7 years | 10 years | |||||||||||||||||||
Estimated forfeiture rate | 0.0001% | ||||||||||||||||||||
Maximum [Member] | Nonqualified Stock Option [Member] | |||||||||||||||||||||
Number of shares issued during period | 31,200 | ||||||||||||||||||||
Common stock exercise price per share | $ / shares | $ 4.35 | ||||||||||||||||||||
Weighted average grant date fair value | $ | $ 80,808 | ||||||||||||||||||||
Warrant [Member] | |||||||||||||||||||||
Expected term | 5 years | ||||||||||||||||||||
Volatility, minimum | 0.303% | ||||||||||||||||||||
Volatility, maximum | 0.514% | ||||||||||||||||||||
Risk-free interest rate, minimum | 0.0071% | ||||||||||||||||||||
Risk-free interest rate, maximum | 0.009% | ||||||||||||||||||||
Dividend yield | 0.00% | ||||||||||||||||||||
Number of warrants exercised | (192,970) | ||||||||||||||||||||
Number of cashless common stock shares | 142,383 | ||||||||||||||||||||
Warrant [Member] | Minimum [Member] | |||||||||||||||||||||
Equity issuance price per share | $ / shares | $ 1 | ||||||||||||||||||||
Warrant [Member] | Maximum [Member] | |||||||||||||||||||||
Equity issuance price per share | $ / shares | $ 3.50 | ||||||||||||||||||||
Senior Convertible Notes [Member] | |||||||||||||||||||||
Convertible promissory note | $ | $ 1,700,000 | ||||||||||||||||||||
Debt converted into stock | 780,000 | ||||||||||||||||||||
Mr. Kavanaugh [Member] | |||||||||||||||||||||
Shares issued to employees | 400,000 | ||||||||||||||||||||
Grant date fair value of common shares issued | $ | $ 3,080,000 | ||||||||||||||||||||
Stock-based compensation expense, for the vesting of stock options | $ | $ 3,080,000 | ||||||||||||||||||||
Mr. Kavanaugh [Member] | Award Vested Immediately Upon Execution of Consulting Agreement [Member] | |||||||||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||||||||
Mr. Kavanaugh [Member] | Award Vested On May 3, 2014 [Member] | |||||||||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||||||||
Mr. Kavanaugh [Member] | Award Vested On August 3, 2014 [Member] | |||||||||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||||||||
Mr. Kavanaugh [Member] | Award Vested On November 3, 2014 [Member] | |||||||||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||||||||
Mr. Kavanaugh [Member] | Award Vested In Quarterly Installment From November 3, 2014 [Member] | |||||||||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||||||||
Knight Global [Member] | |||||||||||||||||||||
Number of bona fide opportunities | Bonifide | 6 | ||||||||||||||||||||
Consulting Agreement, term | 2 years | ||||||||||||||||||||
Commissions payable in cash, percentage of "net sales" | 0.06% | ||||||||||||||||||||
Knight Global [Member] | Termination of Consulting Agreement [Member] | January 24, 2015 [Member] | |||||||||||||||||||||
Stock-based compensation expense | $ | $ 322,067 | ||||||||||||||||||||
Shares vested and expected to vest | 50,000 | ||||||||||||||||||||
Officers And Directors [Member] | |||||||||||||||||||||
Proceeds from private placements | $ | $ 10,000,000 | ||||||||||||||||||||
Number of shares issued for private placements | 3,333,338 | ||||||||||||||||||||
Equity issuance price per share | $ / shares | $ 3 | ||||||||||||||||||||
Nonqualified Stock Option [Member] | |||||||||||||||||||||
Number of shares issued during period | 12,000 | ||||||||||||||||||||
Common stock exercise price per share | $ / shares | $ 8.30 | ||||||||||||||||||||
Selling, General and Administrative Expenses [Member] | |||||||||||||||||||||
Stock-based compensation expense | $ | $ 87,000 | ||||||||||||||||||||
Selling, General and Administrative Expenses [Member] | Knight Global [Member] | |||||||||||||||||||||
Stock-based compensation expense | $ | $ 1,602,933 |
FACTORING FACILITY AND TERM L70
FACTORING FACILITY AND TERM LOAN PAYABLE (Details Narrative) - USD ($) | Sep. 23, 2014 | Aug. 16, 2013 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Aug. 08, 2013 |
Acquisition of account receivable, percentage of face amount advanced by lender | 0.50% | ||||||||
Factoring fee, percentage of gross face amount of purchased account receivable | 0.01% | ||||||||
Gross borrowings under Factoring Facility | $ 0 | $ 407,888 | |||||||
Borrowings outstanding under the Factoring Facility | 0 | 0 | |||||||
Term loan | 750,000 | 478,847 | |||||||
Interest expense | $ (7,183) | $ (8,499) | 348,975 | 383,981 | |||||
2013 Term Loan [Member] | |||||||||
Term loan | $ 750,000 | ||||||||
Term loan, maturity date | Aug. 15, 2014 | ||||||||
Term loan, annual rate | 0.16% | ||||||||
Retention of daily fixed amount from daily collection of merchant credit card receivables | $ 3,346 | ||||||||
Interest expense | 76,617 | $ 44,769 | |||||||
2014 Term Loan [Member] | |||||||||
Term loan | $ 1,000,000 | 750,000 | |||||||
Term loan, maturity date | Sep. 30, 2015 | ||||||||
Term loan, annual rate | 0.14% | ||||||||
Interest expense | $ 24,086 | ||||||||
Term loan, periodic payment, principal | $ 83,333 |
CAPITAL LEASE OBLIGATIONS - Fut
CAPITAL LEASE OBLIGATIONS - Future Minimum Lease Payments Under Non-cancelable Capital Leases (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Leases [Abstract] | |||
2,015 | $ 75,485 | ||
2,016 | 75,485 | ||
2,017 | 62,904 | ||
Total | 213,874 | ||
Amounts representing interest payments | (42,416) | ||
Present value of future minimum payments | 171,458 | ||
Current portion of capital lease obligations | $ 52,595 | 52,015 | |
Capital lease obligations, long term | $ 85,102 | $ 119,443 |
CAPITAL LEASE OBLIGATIONS (Deta
CAPITAL LEASE OBLIGATIONS (Details Narrative) - USD ($) | Oct. 02, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | Oct. 01, 2014 |
Interest expense associated with capital lease obligation | $ 4,679 | |||
Depreciation expense for equipment held under capital lease obligations | 56,435 | $ 11,284 | ||
Equipment [Member] | ||||
Capital lease obligation | $ 179,359 | |||
Annual interest on the capital lease obligation | 0.158% | |||
Capital lease obligation, repayment terms | 36 months maturing on October 17, 2017 | |||
Depreciation expense for equipment held under capital lease obligations | 9,964 | |||
Net book value of equipment held under capital lease obligations | $ 169,395 |
INCOME TAXES - Schedule of Defe
INCOME TAXES - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||||||
Federal | $ 337,016 | |||||
State and local | 29,344 | |||||
Utilization of net operating loss carryforward | (346,783) | |||||
Current (benefit) provision | 19,577 | |||||
Federal | $ (4,337,272) | 202,531 | ||||
State and local | (463,060) | 34,178 | ||||
Deferred (benefit) provision | $ 766,498 | 766,498 | 236,709 | |||
Change in valuation allowance | 5,567,665 | (781,077) | ||||
Deferred Tax Asset Net Durational | 767,333 | (544,368) | ||||
Income tax provision (benefit) | $ 2,177,057 | $ 767,333 | $ 767,333 | $ (524,791) |
INCOME TAXES - Schedule of Comp
INCOME TAXES - Schedule of Components of Income Tax Provision (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ||
U.S. federal statutory rate | (0.34%) | 0.34% |
State and local taxes net of federal benefit | (0.0298%) | 0.0363% |
Amortization of debt discount | 0.00% | 0.1395% |
Debt conversion inducement | 0.00% | 0.4076% |
Net operating loss tax adjustment | 0.00% | (0.0965%) |
Other permanent differences | 0.0029% | 0.03% |
Alternative minimum tax | 0.00% | 0.0697% |
Change in valuation allowance | 0.4255% | (2.8242%) |
Income tax provision (benefit) | 0.0586% | (1.8976%) |
INCOME TAXES - Schedule of Effe
INCOME TAXES - Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 4,556,515 | $ 169,404 |
Stock-based compensation expense | 507,864 | 442,813 |
Alternative minimum tax credit carryforwards | 15,336 | 19,283 |
Reserves and allowances | 263,609 | 97,587 |
Inventory | 269,865 | 59,320 |
Accrued expenses and deferred income | 53,442 | $ 8,824 |
Severance | 27,555 | |
Charitable contributions | 1,260 | $ 1,317 |
Total current deferred tax assets | $ 5,695,446 | 798,548 |
Section 481 (a) adjustment | (24,450) | |
Property and equipment | (7,600) | |
Total deferred tax liabilities | (32,050) | |
Net current deferred tax assets | $ 5,695,446 | $ 766,498 |
Valuation allowance | $ (5,695,446) | |
Net deferred tax assets | $ 766,498 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Valuation allowance | $ 5,695,446 | $ 0 |
Net operating loss carry forwards expiration date | expire beginning in 2032. | |
United State [Member] | ||
Net operating loss carryforwards | $ 12,214,479 | 251,269 |
Federal And State [Member] | ||
Net operating loss carryforwards | $ 12,812,444 | $ 1,526,482 |
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 | 35,905,972 | $ 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 - Sum78
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 |
Equity issuance price per share | $ 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 | 1.07% | 1.07% | 1.08% | 1.15% | 1.24% | 1.08% | 1.10% |
Risk-free rate | 0.0012% | 0.0162% | 0.017% | 0.0161% | 0.0137% | 0.0163% | 0.0137% |
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 - Sum79
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 | $ 35,905,972 | $ 35,905,972 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Future Minimum Lease Payments Under Non-cancelable Operating (Details) - Operating Leases [Member] - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
2015 (remainder) | $ 141,839 | |
2,015 | 490,503 | $ 572,798 |
2,016 | 380,113 | 307,488 |
2,017 | 60,251 | 300,279 |
2,018 | 31,952 | 253,841 |
2,020 | 18,963 | 203,964 |
Total | $ 1,123,621 | $ 1,638,370 |
COMMITMENTS AND CONTINGENCIES81
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Sep. 15, 2015 | Sep. 30, 2015 |
Mr. Press [Member] | ||
Commitment And Contingencies [Line Items] | ||
Compensation and accrued vacation | $ 159,810 | |
Ms. Hicks [Member] | ||
Commitment And Contingencies [Line Items] | ||
Annual base salary | $ 175,000 | |
Mr. Martin [Member] | ||
Commitment And Contingencies [Line Items] | ||
Compensation and accrued vacation | $ 87,500 |
COMMITMENTS AND CONTINGENCIES82
COMMITMENTS AND CONTINGENCIES (Details Narrative 1) | Jul. 25, 2014USD ($) | Apr. 25, 2014USD ($) | Feb. 19, 2013USD ($) | Oct. 31, 2013USD ($)ft² | Sep. 30, 2015USD ($)Lease | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)Lease | Sep. 30, 2014USD ($) | Dec. 31, 2014USD ($)BonifideLease | Dec. 31, 2013USD ($) | Mar. 04, 2015BonifideLease |
Commitment And Contingencies [Line Items] | |||||||||||
Selling, general and administrative expenses | $ 3,364,475 | $ 2,626,638 | $ 9,852,329 | $ 7,838,380 | $ 11,126,759 | $ 6,464,969 | |||||
Accrued expenses | 2,391,095 | 2,391,095 | $ 975,112 | 420,363 | |||||||
Annual rental payments | $ 109,239 | $ 46,841 | $ 601,301 | $ 137,852 | |||||||
Number of real estate properties | Bonifide | 9 | ||||||||||
Number of acquired stores | Lease | 3 | 3 | 1 | ||||||||
Rent expense | $ 307,110 | 162,498 | |||||||||
Payment to patent | 12,000 | ||||||||||
Vendor deposits | $ 392,161 | $ 392,161 | $ 319,563 | $ 782,363 | |||||||
Minimum [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Initial lease term | 1 year | ||||||||||
Maximum [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Initial lease term | 5 years | ||||||||||
Lease Agreement [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Lease term | 24 months | 24 months | |||||||||
Lease expiration date | Apr. 30, 2013 | ||||||||||
Lease extended month year | 2014-03 | ||||||||||
Lease renewal period | 1 year | 1 year | |||||||||
Annual rental payments | $ 18,000 | $ 144,000 | $ 144,000 | ||||||||
Area of square feet | ft² | 2,200 | ||||||||||
Kevin Frija [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Base salary | $ 159,000 | ||||||||||
Selling, general and administrative expenses | 167,003 | ||||||||||
Salary paid | 89,925 | ||||||||||
Accrued expenses | 77,028 | ||||||||||
Employment Agreements [Member] | Mr. Jeffrey Holman [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Base salary | $ 182,000 | ||||||||||
Employment agreement term | 2 years | ||||||||||
Asset Purchase Agreement [Member] | International Vapor Group, Inc [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Secured promissory note | $ 500,000 | ||||||||||
Debt interest rate | 0.08% | ||||||||||
Debt due date | 6 months | ||||||||||
Interest income relating to loan receivable | 17,095 | ||||||||||
Asset Purchase Agreement [Member] | International Vapor Group, Inc [Member] | January 12, 2015 [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Repayment of debt | 50,000 | ||||||||||
Lease Agreement [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Annual rental payments current | 151,200 | 151,200 | 151,200 | ||||||||
Annual rental payments two | 158,760 | 158,760 | 158,760 | ||||||||
Annual rental payments three | $ 174,636 | $ 174,636 | $ 174,636 | ||||||||
Number of real estate properties | Bonifide | 9 | ||||||||||
Lease Agreement [Member] | New Retail Kiosks [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Number of real estate properties | Bonifide | 8 | ||||||||||
Lease Agreement [Member] | New Retail Store [Member] | |||||||||||
Commitment And Contingencies [Line Items] | |||||||||||
Number of real estate properties | Bonifide | 1 | ||||||||||
Number of acquired stores | Lease | 3 | 3 | 11 |
COMMITMENTS AND CONTINGENCIES83
COMMITMENTS AND CONTINGENCIES (Details Narrative 2) - USD ($) | Aug. 13, 2015 | Aug. 10, 2015 | Sep. 30, 2015 |
Three Year Employment Agreements [Member] | |||
Commitment And Contingencies [Line Items] | |||
Annual base salary | $ 300,000 | ||
Bonus received | $ 100,000 | ||
Three Year Employment Agreements [Member] | Minimum [Member] | |||
Commitment And Contingencies [Line Items] | |||
Percentage of targeted bonus | 0.20% | ||
Three Year Employment Agreements [Member] | Maximum [Member] | |||
Commitment And Contingencies [Line Items] | |||
Percentage of targeted bonus | 2.00% | ||
Consulting Agreements [Member] | |||
Commitment And Contingencies [Line Items] | |||
Consulting fee payable | $ 50,000 | ||
Additional consulting fee payable | $ 20,000 | ||
Maryland and New Jersey [Member] | |||
Commitment And Contingencies [Line Items] | |||
Amount deposited for lease | $ 18,500 | ||
Payments for leasing costs | 56,124 | ||
Maryland and New Jersey [Member] | Lease Payment One [Member] | |||
Commitment And Contingencies [Line Items] | |||
Lease payment | 18,812 | ||
Maryland and New Jersey [Member] | Lease Payment Two [Member] | |||
Commitment And Contingencies [Line Items] | |||
Lease payment | 37,624 | ||
Ft. Lauderdale, FL [Member] | |||
Commitment And Contingencies [Line Items] | |||
Lease payment | 45,000 | ||
Amount deposited for lease | 8,309 | ||
Payments for leasing costs | $ 53,309 |
COMMITMENTS AND CONTINGENCIES84
COMMITMENTS AND CONTINGENCIES (Details Narrative 3) - USD ($) | Jun. 22, 2015 | Sep. 30, 2015 |
Commitments and Contingencies Disclosure [Abstract] | ||
Civil penalty against defendants | $ 2,500 | |
Accrued severance expenses | $ 155,277 | |
Seeking monetary damages | $ 1,982,504 |
CONCENTRATION OF CREDIT RISK (D
CONCENTRATION OF CREDIT RISK (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Accounts receivable | $ 273,659 | $ 273,659 | $ 239,652 | $ 1,802,781 | ||
Sales | $ 2,879,145 | $ 2,673,926 | $ 7,359,069 | $ 13,547,792 | $ 15,279,859 | $ 25,990,228 |
Accounts Receivable [Member] | ||||||
Concentration customers | seven customers | one customer | ||||
Accounts receivable | $ 268,768 | |||||
Accounts Receivable [Member] | Maximum [Member] | ||||||
Percentage of accounts receivable | 10.00% | 10.00% | ||||
Accounts receivable | $ 177,200 | |||||
Accounts Receivable [Member] | Minimum [Member] | ||||||
Accounts receivable | $ 27,729 | |||||
Sales Revenue, Net [Member] | ||||||
Concentration customers | one other customer | No other customer | ||||
Percentage of accounts receivable | 0.10% | |||||
Sales | $ 1,536,050 | |||||
Sales Revenue, Net [Member] | Canadian Distributor [Member] | ||||||
Concentration country | Canada | |||||
Sales | $ 2,912,525 | $ 3,847,310 | ||||
Sales Revenue, Net [Member] | Maximum [Member] | ||||||
Percentage of accounts receivable | 0.10% | |||||
Sales Revenue, Net [Member] | Maximum [Member] | Canadian Distributor [Member] | ||||||
Percentage of accounts receivable | 0.10% |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) | Nov. 10, 2015shares | Oct. 30, 2015shares | Oct. 09, 2015USD ($)Lease | Jun. 15, 2013shares | Mar. 15, 2013shares | Sep. 30, 2015USD ($)Leaseshares | Dec. 09, 2015shares | Oct. 01, 2015shares | Dec. 31, 2014Leaseshares | Dec. 31, 2013shares | Dec. 27, 2013shares |
Number of new retail store | Lease | 3 | 1 | |||||||||
Acquisitions cost | $ | $ 17,735,084 | ||||||||||
Common stock, shares authorized | 500,000,000 | 50,000,000 | 50,000,000 | 50,000,000 | |||||||
Shares issued for services | 57,500 | 29,500 | |||||||||
Subsequent Event [Member] | |||||||||||
Number of new retail store | Lease | 3 | ||||||||||
Acquisitions cost | $ | $ 1,610,000 | ||||||||||
Common stock, shares authorized | 500,000,000 | ||||||||||
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 |
SUBSEQUENT EVENTS (Details Na87
SUBSEQUENT EVENTS (Details Narrative 1) - USD ($) | Mar. 04, 2015 | Mar. 03, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
Common stock par value | $ 0.001 | $ 0.001 | $ 0.001 | ||
Subsequent Event [Member] | Nasdaq [Member] | |||||
Percentage of conversion of note exceed | 0.1999% | ||||
Subsequent Event [Member] | Securities Purchase Agreement [Member] | |||||
Convertible notes | $ 350,000 | ||||
Debt instrument accrued interest rate | 12.00% | ||||
Notes payable maturity date | Jan. 29, 2016 | ||||
Sale of common stock | $ 3,500,960 | ||||
Common stock par value | $ 0.001 | ||||
Common stock price per share | $ 1.02 | ||||
Issuance of warrant to purchases of common stock, shares | 2,735,132 | ||||
Warrant exercise price per share | $ 1.28 | ||||
Percentage of purchase price | 0.015% | ||||
Cash payment | $ 52,500 |
REVERSE STOCK SPLIT (Details Na
REVERSE STOCK SPLIT (Details Narrative) - shares | Jul. 07, 2015 | Dec. 27, 2013 | Dec. 27, 2013 | Jul. 29, 2015 |
Stockholders Equity Reverse Stock Split [Abstract] | ||||
Excess of stock shares authorized | 150,000,000 | 500,000,000 | ||
Reverse split stock | the 1 for 5 reverse split of the Company's common stock effectuated on July 8, 2015. | 1-for-5 | ratio of 1-for-5 |