10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

or

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 333-185083

 

VAPIR ENTERPRISES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	27-1517938
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2365 Paragon Dr., Suite B

San Jose, California 95131

Telephone: (800) 841-1022

(Address and telephone number of Registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☐  No  ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).  Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐		Accelerated Filer	☐
Non-Accelerated Filer	☐	(Do not check if a smaller reporting company)	Smaller Reporting Company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 12, 2016, there were 49,766,819 shares of common stock, par value $0.001, outstanding.

VAPIR ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Period Ended March 31, 2016

TABLE OF CONTENTS

		Page
PART 1 - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
SIGNATURES		35

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Vapir Enterprises, Inc.    “SEC” refers to the Securities and Exchange Commission.

2

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

VAPIR ENTERPRISES, INC.

March 31, 2016 and 2015

INDEX TO THE CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

CONTENTS

Condensed Consolidated Balance Sheets at March 31, 2016 (Unaudited) and December 31, 2015	4
Condensed Consolidated Statements of Operations - For the Three Months Ended March 31, 2016 and 2015 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2016 and 2015 (Unaudited)	6
Notes to the Condensed Consolidated Financial Statements (Unaudited)	7

3

VAPIR ENTERPRISES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of			As of
	March 31, 2016			December 31, 2015
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	54,994		$	7,858
Accounts receivable, net		4,687			24,518
Inventory, net		192,798			212,411
Prepaid expense and other current assets		14,195			18,424
Advances to suppliers		132,078			136,427
Total Current Assets		398,752			399,638
OTHER ASSETS:
Property and equipment, net		81,171			87,668
Intangible assets, net		358,382			375,176
Deposit		2,813			2,813
Total Other Assets		442,366			465,657
Total Assets	$	841,118		$	865,295
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	249,802		$	225,882
Convertible notes payable, net of debt discounts		330,602			247,724
Loan payable		197,000			197,000
Notes payable - current maturities		35,632			19,800
Customer deposits		14,075			20,609
Advances from related party		531,147			370,614
Deferred rent		11,669			10,728
Derivative liabilities		96,789			202,653
Total Current Liabilities		1,466,716			1,295,010
LONG-TERM LIABILITIES:
Notes payable, net of current maturities		33,152			5,250
Total Long-term Liabilities		33,152			5,250
Total Liabilities		1,499,868			1,300,260
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock $0.001 par value: 20,000,000 shares authorized; none issued and outstanding		-			-
Common stock $0.001 par value: 100,000,000 shares authorized; 49,766,819 and 48,466,819 shares issued and outstanding, respectively		49,767			48,467
Additional paid in capital		475,583			31,374
Deferred stock-based compensation		(31,429	)		-
Accumulated deficit		(1,152,671	)		(514,806	)
Total Stockholders' Deficit		(658,750	)		(434,965	)
Total Liabilities and Stockholders' Deficit	$	841,118		$	865,295

See accompanying notes to the unaudited condensed consolidated financial statements

4

VAPIR ENTERPRISES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended
	March 31, 2016			March 31, 2015
	(Unaudited)			(Unaudited)
Net revenues	$	376,072		$	334,615
Cost of sales		235,631			185,775
Gross profit		140,441			148,840
OPERATING EXPENSES:
Selling expenses		57,004			21,818
Compensation		248,799			142,959
Professional and consulting fees		372,163			139,646
General and administrative		100,990			91,421
Total Operating Expenses		778,956			395,844
LOSS FROM OPERATIONS		(638,515	)		(247,004	)
OTHER INCOME (EXPENSE):
Change in fair value of derivative liabilities		105,864			-
Interest expense, net		(105,214	)		(7,074	)
Other income (expense), net		650			(7,074	)
LOSS BEFORE INCOME TAX PROVISION		(637,865	)		(254,078	)
INCOME TAX PROVISION		-			-
NET LOSS	$	(637,865	)	$	(254,078	)
EARNINGS PER SHARE:
Basic and diluted	$	(0.01	)	$	(0.01	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted		49,622,862			48,335,129

See accompanying notes to the unaudited condensed consolidated financial statements

5

VAPIR ENTERPRISES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Months Ended
	March 31, 2016			March 31, 2015
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(637,865	)	$	(254,078	)
Adjustments to reconcile net loss to net cash used in operating activities
Bad debt expense		1,297			-
Depreciation		6,497			390
Amortization of intangible assets		16,794			16,790
Amortization of deferred financing cost		3,730			-
Amortization of debt discount		82,878			-
Change in fair value of derivative liabilities		(105,864	)		-
Stock based compensation		414,080			62,500
Changes in assets and liabilities:
Accounts receivable		18,534			867
Prepaid expense and other current assets		499			-
Advances to suppliers		4,349			40,435
Inventory		19,613			(19,765	)
Accounts payable and accrued expenses		29,453			(29,156	)
Deferred rent		941			-
Customer deposits		(6,534	)		52,775
NET CASH USED IN OPERATING ACTIVITIES		(151,598	)		(129,242	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related party		155,000			130,000
Repayments to related party for advances		-			(3,000	)
Proceeds received from notes payable		50,000			-
Payments of notes payable		(6,266	)		(4,950	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		198,734			122,050
NET CHANGE IN CASH		47,136			(7,192	)
CASH - beginning of period		7,858			27,304
CASH - end of period	$	54,994		$	20,112
SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:
Interest paid	$	5,594		$	5,066
Income taxes paid	$	-		$	-
Non-cash investing and financing activities:
Issuance of common stock for deferred stock-based compensation	$	31,429		$	-

See accompanying notes to the unaudited condensed consolidated financial statements

6

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 1 - Organization and Operations

Vapir Enterprises, Inc.

Vapir Enterprises Inc. (formerly FAL Exploration Corp.) (“Vapir Enterprises” or the “Company”) was incorporated in the State of Nevada on December 17, 2009. The Company’s principal business is focused on inventing, developing and producing aromatherapy devices and vaporizers. The Company’s aromatherapy devices utilize heat and convection air and thereby extract natural essences and produce fresh fragrances.

Acquisition of Vapir, Inc. Treated as a Reverse Acquisition

On December 30, 2014, Vapir, Inc., a private California corporation (“Vapir”), which is the historical business, entered into a Share Exchange Agreement with the Company, all of the stockholders of Vapir (the “Vapir Shareholders”), and the Company’s controlling stockholders whereby the Company agreed to acquire all of the issued and outstanding capital stock of Vapir in exchange for 38,624,768 shares of the Company’s common stock. On December 30, 2014, the transaction closed and Vapir is now a wholly-owned subsidiary of the Company. The number of shares issued represented approximately 80.0% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement. In addition, Vapir’s board of directors and management obtained the board and management control of the combined entity stock immediately after the consummation of the Share Exchange Agreement.

As a result of the controlling financial interest of the former stockholders of Vapir, for financial statement reporting purposes, the business combination between Vapir and Vapir Enterprises has been treated as a reverse acquisition with Vapir deemed the accounting acquirer and Vapir Enterprises deemed the accounting acquiree under the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) Section 805-10-55. The reverse acquisition is deemed a capital transaction and the net assets of Vapir (the accounting acquirer) are carried forward to Vapir Enterprises (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition process utilizes the capital structure of Vapir Enterprises and the assets and liabilities of Vapir which are recorded at historical cost. The equity of the combined entity is the historical equity of Vapir retroactively restated to reflect the number of shares issued by Vapir Enterprises in the transaction.

Vapir, Inc. was incorporated in the State of California in October 2006. 

Note 2 - Significant and Critical Accounting Policies and Practices

Basis of Presentation- Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

7

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued) 

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i)	Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
(ii)	Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.
(iii)	Inventory obsolescence and markdowns: The Company’s estimate of potentially excess and slow-moving inventories is based on evaluation of inventory levels and aging, review of inventory turns and historical sales experiences. The Company’s estimate of reserve for inventory shrinkage is based on the historical results of physical inventory cycle counts.
(iv)	Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
(v)	Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry-forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
(vi)	Estimates and assumptions used in valuation of derivative liabilities and equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value derivative liabilities, share options and similar instruments.
(vii)	Estimates and assumptions used in valuation of stock-based compensation: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

8

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued) 

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Principles of Consolidation

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10, all majority-owned subsidiaries-all entities in which a parent has a controlling financial interest-shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

The consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting period(s) as follows:

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition, if applicable)	Attributable interest
Vapir Enterprises, Inc.	The State of Nevada, U.S.A.	December 17, 2009		100	%
Vapir, Inc.	The State of California, U.S.A.	October 2006 (December 30, 2014)		100	%

The consolidated financial statements include all accounts of the Company and Vapir as of March 31, 2016 and for the three months then ended.

All inter-company balances and transactions have been eliminated.

Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. 

9

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued) 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, advances to suppliers, accounts payable and accrued expenses, and customer deposits approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable and notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at March 31, 2016 and December 31, 2015.

The Company’s Level 3 financial liabilities consist of the embedded conversion feature on convertible notes and derivative warrants for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation and the derivative liability on the conversion feature of the convertible notes payable. The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a third party valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Level 3 Financial Liabilities - Derivative Warrant Liabilities and Derivative Liability on Conversion Feature

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability and derivative liability on the conversion feature at every reporting period and recognizes gains or losses in the consolidated statements of operations that are attributable to the change in the fair value of the derivative liabilities.

The following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of March 31, 2016:

	Amount		Level 1		Level 2		Level 3
Derivative liability - Embedded conversion	$	42,235	$	-	$	-	$	42,235
Derivative liabilities - Tainted Warrants		54,554		-		-		54,554
	$	96,789	$	-	$	-	$	96,789

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

The Company’s non-financial assets include inventories. The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts. 

10

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued)

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

Pursuant to ASC Paragraphs 360-10-35-29 through 35-36 Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group). Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions about its use of the asset (asset group) and shall consider all available evidence. The assumptions used in developing those estimates shall be reasonable in relation to the assumptions used in developing other information used by the entity for comparable periods, such as internal budgets and projections, accruals related to incentive compensation plans, or information communicated to others. However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset group) are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of those possible outcomes. Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall be made for the remaining useful life of the asset (asset group) to the entity. For long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present value technique will often be the appropriate technique with which to estimate fair value.

Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses. The Company did not consider it necessary to record any impairment charges during the three months ended March 31, 2016 and 2015.

Cash equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents.  The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

As of March 31, 2016, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

11

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued)

Accounts receivable and allowance for doubtful accounts

Pursuant to FASB ASC paragraph 310-10-35-47 trade receivables that management has the intent and ability to hold for the foreseeable future shall be reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts. The Company follows FASB ASC paragraphs 310-10-35-7 through 310-10-35-10 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC paragraph 310-10- 35-9 Losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) The amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay.

Bad debt expense is included in general and administrative expenses.

Pursuant to FASB ASC paragraph 310-10-35-41 Credit losses for trade receivables (uncollectible trade receivables), which may be for all or part of a particular trade receivable, shall be deducted from the allowance. The related trade receivable balance shall be charged off in the period in which the trade receivables are deemed uncollectible. Recoveries of trade receivables previously charged off shall be recorded when received. The Company charges off its trade account receivables against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

As of March 31, 2016 and December 31, 2015, there was $2,661 and $1,373 allowance for doubtful accounts, respectively. The Company recorded bad debt expense of $1,297 and $0 during the three months ended March 31, 2016 and 2015, respectively.

Inventory

Inventory Valuation

The Company values inventory, consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) estimates of future demand, and (ii) competitive pricing pressures.

Inventory Obsolescence and Markdowns

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventory to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

There was no inventory obsolescence for the reporting period ended March 31, 2016 or 2015. There was no lower of cost or market adjustments for the reporting period ended March 31, 2016 or 2015.

Advances to suppliers

Advances to suppliers represent the cash paid in advance for the purchase of inventory. The advances to suppliers are interest free and unsecured.

12

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued)

Property and Equipment

Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

	Estimated Useful Life (Years)
Auto	3
Furniture and fixture	5
Leasehold improvement	*

(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Leases

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 a lessee and a lessor shall consider whether a lease meets any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. In accordance with paragraphs 840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the present value of the minimum lease payments using the lessee's incremental borrowing rate unless both of the following conditions are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee's incremental borrowing rate. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

Operating leases primarily relate to the Company’s leases of office spaces. When the terms of an operating lease include tenant improvement allowances, periods of free rent, rent concessions, and/or rent escalation amounts, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized, which is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Intangible assets

The Company records the purchase of intangible assets not purchased in a business combination in accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets” and records intangible assets acquired in a business combination or pushed-down pursuant to acquisition by its parent in accordance with ASC 805 “Business Combinations”.

13

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued)

Customer Relationships are based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated life of the customer relationships.

In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

1.	Significant underperformance relative to expected historical or projected future operating results;
2.	Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.	Significant negative industry or economic trends.

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company evaluates the recoverability of intangible assets annually which is every 4^th quarter of the fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

Customer Deposits

Customer deposits consisted of prepayments from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of the products, in compliance with its revenue recognition policy.

Derivative Instruments and Hedging Activities

The Company accounts for derivative instruments and hedging activities in accordance with paragraph 815-10-05-4 of the FASB Accounting Standards Codification (“Paragraph 815-10-05-4”). Paragraph 815-10-05-4 requires companies to recognize all derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends upon: (i) whether the derivative has been designated and qualifies as part of a hedging relationship, and (ii) the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument based upon the exposure being hedged as either a fair value hedge, cash flow hedge or hedge of a net investment in a foreign operation.

Derivative Liability

The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations and comprehensive income (loss) as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

14

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued)

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The adoption of Section 815-40-15 has affected the accounting for (i) certain freestanding warrants that contain exercise price adjustment features and (ii) convertible bonds issued by foreign subsidiaries with a strike price denominated in a foreign currency.

The Company marks to market the fair value of the embedded derivative convertible notes and derivative warrants at each balance sheet date and records the change in the fair value of the embedded derivative convertible notes and derivative warrants as other income or expense in the consolidated statements of operations.

The Company utilizes the Lattice model that values the liability of the derivative convertible notes and derivative warrants. The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument. Therefore, the fair value may not be appropriately captured by simple models. In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives). The Lattice model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features. Based on these features, there are two primary events that can occur; the Holder exercises the Warrants or the Warrants are held to expiration. Vapir Enterprises, Inc. and Subsidiary

The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.). Projections were then made on the underlying factors which led to potential scenarios. Probabilities were assigned to each scenario based on management projections. This led to a cash flow projection and a probability associated with that cash flow.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company and members of their immediate families ; e. management of the Company and members of their immediate families ; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

15

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 - Significant and Critical Accounting Policies and Practices (continued)

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Revenue recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Cost of Sales

The primary components of cost of sales include the cost of the product and shipping fees.

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred. Shipping costs included in cost of good sold were $31,856 and $23,421 for the three months ended March 31, 2016 and 2015, respectively.

Advertising Costs

The Company follows the guidance of the Section 720-35-25 of the FASB Accounting Standards Codification (“Section 720-35-25”) as to when advertising costs should be expensed. Pursuant to ASC Paragraph 720-35-25-1 the costs of advertising shall be expensed either as incurred or the first time the advertising takes place. The accounting policy the Company selected from these two alternatives was to expense the advertising costs when the first time the advertising takes place. Deferring the costs of advertising until the advertising takes place assumes that the costs have been incurred for advertising that will occur, such as the first public showing of a television commercial for its intended purpose and the first appearance of a magazine advertisement for its intended purpose. Such costs shall be expensed immediately if such advertising is not expected to occur.

Pursuant to ASC Paragraph 720-35-25-5 costs of communicating advertising are not incurred until the item or service has been received and shall not be reported as expenses before the item or service has been received, such as the costs of television airtime which shall not be reported as advertising expense before the airtime is used. Once it is used, the costs shall be expensed, unless the airtime was used for direct-response advertising activities that meet the criteria for capitalization under ASC paragraph 340-20-25-4.

Advertising costs were $4,710 and $7,914 for the three months ended March 31, 2016 and 2015, respectively.

16

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 – Significant and Critical Accounting Policies and Practices (continued)

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

a. The exercise price of the option.

b. The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

c. The current price of the underlying share.

17

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 – Significant and Critical Accounting Policies and Practices (continued)

d. The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.

e. The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

f. The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Deferred Tax Assets and Income Tax Provision

The Company was a Subchapter S corporation, until December 30, 2014 during which time the Company was treated as a pass through entity for federal income tax purposes. Under Subchapter S of the Internal Revenue Code stockholder of an S corporation are taxed separately on their distributive share of the S corporation’s income whether or not that income is actually distributed.

Effective December 31, 2014, the Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in 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 statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

18

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 – Significant and Critical Accounting Policies and Practices (continued)

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Tax years that remain subject to examination by major tax jurisdictions

The Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

Earnings per Share

Earnings per share ("EPS") is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260-10-55-23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation. Pursuant to ASC Paragraphs 260-10-45-40 through 45-42 convertible securities shall be reflected in diluted EPS by application of if converted method. The convertible preferred stock or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The Company’s contingent shares issuance arrangement, stock options or warrants are as follows: 

	Contingent shares issuance arrangement, stock options or warrants
	For the Period Ended March 31, 2016		For the Period Ended March 31, 2015
Stock Option Shares		2,440,100		100
Sub-total: stock option shares		2,440,100		100
Warrant Shares		501,343		1,263
Sub-total: warrant shares		501,343		1,263
Total contingent shares issuance arrangement, stock options or warrants		2,941,443		1,363

19

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 2 – Significant and Critical Accounting Policies and Practices (continued)

There were no incremental common shares under the Treasury Stock Method for the reporting period ended March 31, 2016 or 2015.

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

Note 3 - Going Concern

The Company has elected to adopt early application of Accounting Standards Update 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 (“ASU 2014-15”).

The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $1.15 million at March 31, 2016, a net loss of approximately $638,000 and net cash used in operating activities of approximately $152,000 for the three months ended March 31, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to further implement its business plan and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company is unable to continue as a going concern.

20

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 4 - Property and Equipment

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

	Estimated life	March 31, 2016 (Unaudited)			December 31, 2015
Auto	3 years	$	12,522		$	12,522
Furniture and fixtures	5 years		23,743			23,743
Tooling equipment	4 years		97,710			97,710
Leasehold improvements	5 years		35,206			35,206
Less: Accumulated depreciation			(88,010	)		(81,513	)
		$	81,171		$	87,668

(i) Depreciation Expense

Depreciation expense amounted to $6,497 and $390 for the three months ended March 31, 2016 and 2015, respectively.

(ii) Impairment

The Company completes its annual impairment testing of property and equipment every 4^th quarter of the fiscal year to evaluate the recoverability of property and equipment or whenever events or changes in circumstances indicate that the property and equipment’s carrying amount may not be recoverable. The Company did not record any impairment of its property and equipment at March 31, 2016 and December 31, 2015, respectively.

Note 5 - Intangible Assets

Intangible assets consist of the following:

	March 31, 2016 (Unaudited)			December 31, 2015
Customer relationships	$	1,001,212		$	1,001,212
Trademarks		6,430			6,430
		1,007,642			1,007,642
Accumulated amortization		(649,260	)		(632,466	)
Intangible assets, net	$	358,382		$	375,176

Customer Relationships are amortized based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated fifteen-year life of the Customer Relationships.

Legal costs associated with serving and protecting trademark are being capitalized. The Company filed trademarks for its company logos with an estimated useful life of 15 years. The Company will amortize the costs of intangible assets over their estimated useful lives on a straight-line basis. Amortization of intangible assets is included in operating expenses as reflected in the accompanying condensed consolidated statements of operations. The Company assesses fair value for any impairment to the carrying values. The Company did not record any impairment of its intangible assets at March 31, 2016 and December 31, 2015, respectively.

21

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 5 - Intangible Assets (continued)

Amortization expense was $16,794 and $16,790 for the three months ended March 31, 2016 and 2015, respectively. Future amortization of intangible assets is as follows:

2016 (remainder of the year)	$	50,382
2017		67,176
2018		67,176
2019		67,176
2020 and thereafter		106,472
Total	$	358,382

Note 6 - Loan and Notes Payable

Loan payable

	March 31, 2016		December 31, 2015
Business loan obtained in May 2011 from Bank of the West with a credit line up to $200,000 and secured by all assets of the Company. This loan bears interest at 4.75% per annum.	$	197,000	$	197,000

Note payable

	March 31, 2016			December 31, 2015
4.75% Promissory note of $100,000 issued to Bank of the West on May 10, 2011 payable over 60 consecutive monthly installments with monthly principal payment of $1,650 and interest starting in June 2012. Amounts outstanding under this loan and note are personally guaranteed by the CEO of the Company.	$	20,100		$	25,050
5.28% unsecured Promissory note of $50,000 issued to Bank of the West in February 2016 payable over 36 consecutive monthly installments with monthly payment of $1,506 and interest starting in March 2016		48,684			-
Less : Current maturities		(33,152	)		(19,800	)
Note payable, net of current maturities	$	35,632		$	5,250

Future minimum principal payments under the notes are as follows:

For Fiscal Year:
2016 (remainder of the year)	$	26,672
2017		21,757
2018		15,915
2019		4,440
Total remaining Payments		68,784

22

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 7 - Related Party Transactions

Related parties

Related parties with whom the Company had transactions are:

Related Parties		Relationship
Management and significant stockholders
Mr. Hamid Emarlou		Chairman, CEO and significant stockholder of the Company

Advances from Executive Officer, Significant Stockholder

From time to time, Chairman, CEO and significant stockholder of the Company advance funds to the Company for working capital purpose. These advances are unsecured, due upon demand and bear 5% interest per annum.

During 2014, the Company’s CEO provided advances to the Company for working capital purposes for a total of $266,000 and the Company repaid $130,000 of these advances. The advances are due on demand and bear 5% interest per annum. Between February 2015 and November 2015, the Company’s CEO provided advances to the Company for working capital purposes for a total of $300,500 and the Company repaid $73,000 of these advances. Between January 2016 and March 2016, the Company’s CEO provided advances to the Company for working capital purposes for a total of $155,000. At March 31, 2016 and December 31, 2015, these advances amounted to $531,147 and $370,614, respectively. Included in the advances are accrued interest due to the Company’s CEO totaling $12,647 and $7,114, at March 31, 2016 and December 31, 2015 respectively.

Note 8 - Convertible Notes Payable

On April 3, 2015, the Company closed a financing transaction by entering into a Securities Purchase Agreement dated April 3, 2015 (the “Securities Purchase Agreement”) with certain accredited investors (the “Purchasers”) for an aggregate subscription amount of $500,000 (the “Purchase Price”). Pursuant to the Securities Purchase Agreement, the Company issued a 6% Convertible Debenture (the “Debenture”) and warrants to acquire 500,000 shares of the Company's common stock at an exercise price of $0.60 per share (the “Warrants”).

The terms of the Debenture and the Warrants are as follows:

6% Convertible Debenture

The total principal amount of the Debentures is $500,000. The Debenture accrues interest at 6% per annum and the Debenture has a maturity date of October 3, 2016. The Debenture is convertible any time after its issuance date. The Purchaser has the right to convert the Debenture into shares of the Company’s common stock at $0.50 per share. The conversion price, however, is subject to full ratchet anti-dilution in the event that the Company issues any securities at a per share price lower than the conversion price then in effect. The Company paid financing costs of $22,500 in connection with this Debenture which is initially recorded as prepaid financing cost and is being amortized over the term of the Debenture.

Warrants

The Company issued warrants to acquire 500,000 shares of the Company's common stock. The Warrants issued in this transaction are immediately exercisable at an exercise price of $0.60 per share, subject to applicable adjustments including full ratchet anti-dilution in the event that the Company issue any securities at a per share price lower than the exercise price then in effect. The Warrants have an expiration period of five years from the date of the original issuance.

23

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 8 - Convertible Notes Payable (continued)

Convertible notes payable consisted of the following:

	March 31, 2016
6% Convertible promissory notes	$	500,000
Initial Discount		(500,000	)
Accumulated amortization of discount through March 31, 2016		330,602
Remaining discount as of March 31, 2016		(169,398	)
Convertible notes payable, net	$	330,602

Note 9 - Derivative Liabilities

Since the terms of the Debentures and Warrants in the April 2015 closing include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company under the provisions of 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, along with the free-standing warrant derivative instruments and recorded derivative liabilities on their issuance date. The Company uses the Simple Binomial Lattice model to value the derivative liabilities. The Debentures were all discounted in full based on the valuations and the Company recognized an additional derivative expense of $188,378 upon initial recording of the derivative liabilities. The total debt discount of $500,000 consisted of initial valuation of the derivatives of $250,407 and the valuation of the warrants of $249,593 to be amortized over the terms of the note. These derivative liabilities are then revalued on each reporting date. The gain resulting from the decrease in fair value of these convertible instruments was $105,864 for the three months ended March 31, 2016. At March 31, 2016, the Company recorded a warrant derivative liability of $54,554 and note derivative liability of $42,235.

For the three months ended March 31, 2016 and 2015 the Company recognized $82,878 and $0, respectively of amortization of debt discount. For the three months ended March 31, 2016 and 2015 the Company recognized $3,730 and $0, respectively of amortization of deferred financing cost. The amortization of debt discount and deferred financing cost were included in interest expense. As of March 31, 2016 and December 31, 2015, accrued interest related to this Debenture amounted to $29,936 and $22,456, respectively.

The following table summarizes the values of certain assumptions used by the Company’s custom model to estimate the fair value of the derivative liabilities as of March 31, 2016:

	March 31, 2016
Stock price	$	0.11
Weighted average strike price	$	0.50
Remaining contractual term (years)		0.50 to 4.00 years
Volatility		266% to 319	%
Risk-free rate		0.59% to 1.21	%
Dividend yield		0.0	%

The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis:

	For the three months ended March 31, 2016
Beginning balance	$	202,653
Change in fair value of derivative liabilities		(105,864	)
Ending balance	$	96,789

24

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 10 - Commitments and Contingencies

Operating lease

In June 2014, a lease agreement was signed for an office and warehousing space consisting of approximately 5,000 square feet located in San Jose, California with a term commencing in June 2014 and expiring in October 2015. In August 2015, the Company entered into an amendment agreement to extend the term of the lease which will expire on December 31, 2018. Pursuant to the amendment agreement, the lease requires the Company to pay a monthly base rent of $5,050 plus a pro rata share of operating expenses beginning November 1, 2015. The base rent is subject to an annual increase beginning in November 2016 as defined in the amended lease agreement. This lease agreement is personally guaranteed by the President of the Company.

Future minimum rental payments required under this operating lease are as follows:

Fiscal Year ending December 31:
2016 (remainder of the year)	$	45,753
2017		62,721
2018		64,236
Total	$	172,710

Rent expense was $21,643 and $10,537 for the three months ended March 31, 2016 and 2015, respectively.

Litigation

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.

Note 11 - Stockholders’ Deficit

Shares Authorized

The authorized capital of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.

Common Stock

On January 7, 2016, the Company entered into a seven month consulting agreement to provide strategic consulting and business advisory services. Pursuant to the consulting agreement, the Company issued 500,000 shares of the Company’s common stock. The Company revalued these common shares at the fair value of $55,000 or $0.11 per common share based on the quoted trading price at the end of the reporting period, March 31, 2016. In connection with the issuance of these common shares, the Company recorded stock based compensation of $23,571 for the three months ended March 31, 2016 and deferred stock- based compensation of $31,429 as of March 31, 2016.

On January 12, 2016, the Company issued an aggregate of 200,000 shares of the Company’s common stock to two board of directors of the Company for services rendered. The Company valued these common shares at the fair value of $70,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $70,000 for the three months ended March 31, 2016.

On January 12, 2016, the Company issued 100,000 shares of the Company’s common stock to a consultant for marketing services rendered. The Company valued these common shares at the fair value of $35,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $35,000 for the three months ended March 31, 2016.

25

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 11 - Stockholders’ Deficit (continued)

On January 12, 2016, the Company issued 500,000 shares of the Company’s common stock to a consultant for business advisory services rendered. The Company valued these common shares at the fair value of $175,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $175,000 for the three months ended March 31, 2016.

Warrants

Stock warrant activities for the three months ended March 31, 2016 are summarized as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2015		501,263		$	3.74		4.25	$	-
Granted		-			-		-		-
Forfeited		(20	)		250.00		-		-
Balance at March 31, 2016		501,243			3.73		4.00		-
Warrants exercisable at March 31, 2016		501,243		$	3.73		4.00	$	-

Options

Stock option activities for the three months ended March 31, 2016 are summarized as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2015		100		$	700		1.17	$	-
Granted		2,480,000			0.10		5.00		-
Exercised/forfeited/expired		(40,000	)		0.10		5.00		-
Balance at March 31, 2016		2,440,100			0.13		4.79		-
Options exercisable at March 31, 2016		100		$	700		1.42	$	-
Weighted average fair value of warrants granted during the period						$	0.35

On January 12, 2016, the Company granted an aggregate of 2,080,000 five year options to purchase shares of common stock to CEO of the Company and six employees of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share. The 2,080,000 options were valued on the grant date at approximately $0.35 per option or a total of $728,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.35 per share (based on the quoted trading prices on the date of grant), volatility of 286% (based from volatilities of similar companies), expected term of 5 years, and a risk free interest rate of 1.55%. In March 2016, 40,000 of these unvested options were forfeited due to termination of an employee.

On January 12, 2016, the Company granted 400,000 five year options to purchase shares of common stock to a consultant of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share. The 400,000 options were valued on the grant date at approximately $0.35 per option or a total of $140,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.35 per share (based on the quoted trading prices on the date of grant), volatility of 286% (based from volatilities of similar companies), expected term of 5 years, and a risk free interest rate of 1.55%.

26

Vapir Enterprises, Inc. and Subsidiary

Notes to the Unaudited Condensed Consolidated Financial Statements

Note 11 - Stockholders’ Deficit (continued)

During the three months ended March 31, 2016, the Company recorded stock-based compensation expense in connection with stock option awards of $110,509.  As of March 31, 2016, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $745,273. At March 31, 2016 there was approximately $24,000 intrinsic value for the stock options outstanding in the above table.

Note 12 - Concentration of Credit Risk

Concentration of Revenue and Supplier

During the three months ended March 31, 2016 sales to two customer represented approximately 40% of the Company’s net sales. During the three months ended March 31, 2015 sales to two customers represented approximately 41% of the Company’s net sales.

As of March 31, 2016 and December 31, 2015, accounts receivable from two customers represented approximately 74% and two customer represented 92% of the accounts receivable, respectively.

The Company purchased inventories and products from one vendor totaling approximately $176,000 and $177,000 during the three months ended March 31, 2016 and 2015, respectively.

Note 13 - Subsequent Events

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent event(s) to be disclosed.

27

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. Our actual results or actions may differ materially from these forward-looking statements for many reasons. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect.  

Forward-Looking Statements

Certain information contained in this Quarterly Report on Form 10-Q, as well as other written and oral statements made or incorporated by reference from time to time by the Company and its representatives in other reports, filings with the Securities and Exchange Commission, press releases, conferences or otherwise, may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. This information includes, without limitation, statements concerning the Company's future financial position and results of operations, planned expenditures, business strategy and other plans for future operations, the future mix of revenues and business, customer retention, project reversals, commitments and contingent liabilities, future demand and industry conditions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Generally, the words “anticipate,” “believe,” “estimate,” “expect,” “may” and similar expressions, identify forward-looking statements, which generally are not historical in nature. Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth in this Quarterly Report on Form 10-Q, the specific risk factors identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

The following discussion is qualified in its entirety by, and should be read in conjunction with, the Company's condensed financial statements, including the notes thereto, included in this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

Overview

Vapir Enterprises, Inc. was originally incorporated under the laws of the State of Nevada on December 17, 2009 under the name Apps Genius Corp. Our original business was to develop, market, publish and distribute social games and software applications that consumers could use on a variety of platforms, including social networks, wireless devices and stand-alone websites. We were unsuccessful in operating our business and on October 7, 2013 we entered into a Membership Interest Purchase Agreement with FAL Minerals LLC and we changed our name to FAL Exploration Corp. The agreement with FAL Minerals LLC has since been terminated and we have now entered into the Exchange Agreement with Vapir, Inc. and its shareholders. In addition, we changed our name to Vapir Enterprises, Inc. to better represent our new business operations.

On December 30, 2014, Vapir, Inc., a private California corporation (“Vapir”), which is the historical business, entered into a Share Exchange Agreement with the Company, all of the stockholders of Vapir (the “Vapir Shareholders”), and the Company’s controlling stockholders whereby the Company agreed to acquire all of the issued and outstanding capital stock of Vapir in exchange for 38,624,768 shares of the Company’s common stock. On December 30, 2014, the transaction closed and Vapir is now a wholly-owned subsidiary of the Company. The number of shares issued represented approximately 80.0% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement. In addition, Vapir’s board of directors and management obtained the board and management control of the combined entity stock immediately after the consummation of the Share Exchange Agreement. 

Vapir, Inc., our subsidiary, was incorporated on October 26, 2006 in the State of California.

Vapir, Inc. specializes in the revolutionary technology of digital aromatherapy which is the art and science of utilizing naturally extracted aromatic essences from plants to balance and harmonize while freshening the environment with pleasant and distinctive fragrances. We invent, develop and produce revolutionary and easy to use digital aromatherapy devices by utilizing heat and convection air.

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On January 7, 2016, the Company entered into an eight month consulting agreement with a consultant to provide business advisory and investor relations services. Pursuant to the consulting agreement, the Company issued 500,000 shares of the Company’s common stock.

On January 12, 2016, the Company issued an aggregate of 200,000 shares of the Company’s common stock to two board of directors of the Company for services to be rendered in fiscal 2016.

On January 12, 2016, the Company issued 100,000 shares of the Company’s common stock to a consultant for marketing services to be rendered in fiscal 2016.   

On January 12, 2016, the Company issued 500,000 shares of the Company’s common stock to a consultant for business advisory services to be rendered in fiscal 2016.

On January 12, 2016, the Company granted an aggregate of 2,080,000 five year options to purchase shares of common stock to CEO of the Company and six employees of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share.

On January 12, 2016, the Company granted 400,000 five year options to purchase shares of common stock to a consultant of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share.

Results of Operations

Three Months Ended March 31, 2016 Compared to the Three Months Ended March 31, 2015 

Net Revenues

Net sales for the three months ended March 31, 2016 and 2015 were $376,072 and $334,615 respectively, an increase of $41,457 or approximately 12%. The increase in sales during the three months ended March 31, 2016 was primarily attributable to an increase in sales of our vaporizers product and accessories to one of our major wholesale customers. Additionally, revenues from retail or websites sales increased by approximately $6,000 during the three months ended March 31, 2016.

Cost of Sales

Cost of goods sold for the three months ended March 31, 2016 and 2015 were $235,631 and $185,775, respectively, an increase of $49,856 or approximately 27%. Cost of goods sold increased and is primarily due to the increase in sales of our vaporizers products and also an increase in freight and shipping cost during the three months ended March 31, 2016.

Operating Expenses

Total operating expenses for the three months ended March 31, 2016 and 2015 were $778,956 and $395,844, respectively, an increase of $383,112 or approximately 97%. The increase in operating expenses during the three months ended March 31, 2016 is primarily due to an increase in marketing and advertising fees of our vaporizer products of approximately $35,000, an increase in stock based consulting of approximately $258,000 and an increase in stock based compensation of $90,000 in connection with common stock and stock options granted to CEO, Directors, employees and consultants of the Company during the three months ended March 31, 2016.

Other Expense, net

Total other income (expense), net for the three months ended March 31, 2016 and 2015 were $650 and ($7,074), respectively, an increase of $7,724. The increase in other income (expense), net is the result of the recognition of the gain resulting from the decrease in fair value of derivative liabilities of approximately $106,000 offset by interest expense from related party advances and convertible debentures and also includes amortization of debt discount and deferred financing cost of approximately $105,000 in connection with the issuance of convertible debentures.

Net loss

Net loss for the three months ended March 31, 2016 and 2015 was $637,865 and $254,078, respectively, as a result of the items discussed above.

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Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis.

We are not aware of any known trends or any known demands, commitments or events that will result in our liquidity increasing or decreasing in any material way. We are not aware of any matters that would have an impact on future operations.

Our net revenues are not sufficient to fund our operating expenses. At March 31, 2016, we had a cash balance of approximately $55,000 and working capital (deficit) of ($1,068,000). Our cash increased during the three months ended March 31, 2016 by $47,000 from our cash balance at December 31, 2015 of $8,000. During the three months ended March 31, 2016, we borrowed $50,000 of note payable which will mature in February 2019 and a total of $155,000 of loans from a related party to fund our operating expenses, pay our obligations, and grow our company. We currently have no material commitments for capital expenditures. We may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, that our cash will not be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for up to 12 months. We presently have no other alternative source of working capital. We may not have sufficient working capital and net revenues to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations. We will need to raise significant additional capital to fund our operating expenses, pay our obligations, and grow our company. Therefore, our future operations will be dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.

We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, there is substantial doubt about our ability to continue as a going concern.

Our liquidity may be negatively impacted by the significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly.

Inflation and Changing Prices

Neither inflation nor changing prices for the three months ended March 31, 2016 had a material impact on our operations.

Off-Balance Sheet Arrangements

None.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.

We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements. 

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Significant matters requiring the use of estimates and assumptions include, but may not be limited to, accounts receivable allowances and evaluation of impairment of long lived assets and intangible assets and the fair value of common stock issued. Management believes that its estimates and assumptions are reasonable, based on information that is available at the time they are made. 

Revenue recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Intangible assets

In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following: 

1.	Significant underperformance relative to expected historical or projected future operating results;
2.	Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.	Significant negative industry or economic trends.

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company considers current events and circumstances by attending trade shows, having a constant direct dialogue with our distributors, and an internal review and research by management to keep current with the vaporizer industry and to determine if there is any economic downturn.

The Company evaluates the recoverability of intangible assets annually or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. If it is determined by reviewing the above factors that a possible impairment exists, the Company must then determine if the carrying amount of the intangibles is recoverable based upon the comparison of the total undiscounted future cash flows from the intangibles to the carrying amount of the intangibles. Based on our assessment in 4^th quarter of fiscal 2015, we determined that the sum of the future undiscounted cash flows exceeded the carrying amount of the intangibles and therefore the carrying amount of the intangible is recoverable.

Derivative Liabilities

The Company follows the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Stock”, for the embedded conversion options and the warrants that 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, along with the free-standing warrant derivative instruments and recorded derivative liabilities on their issuance date. The Company uses the Simple Binomial Lattice model to value the derivative liabilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide this information.

Item 4. Controls and Procedures.

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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With respect to the quarterly period ending March 31, 2016, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our management has concluded that our disclosure controls and procedures were not effective as of March 31, 2016 due to our limited internal resources and lack of ability to have multiple levels of transaction review. In connection with this evaluation, management identified the following control deficiencies that represent material weaknesses as of March 31, 2016:

(1)	Lack of an independent audit committee or audit committee financial expert. Although our board of directors serves as the audit committee it has no independent directors. These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.
(2)	We do not have sufficient experience from our accounting personnel with the requisite U.S. GAAP public company reporting experience that is necessary for adequate controls and procedures due to our limited resources with appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of generally accepted accounting principles.
(3)	Need for greater integration, oversight, communication and financial reporting of the books and records of our satellite offices.
(4)	Lack of sufficient segregation of duties such that the design over these areas relies primarily on detective controls and could be strengthened by adding preventative controls to properly safeguard company assets.

However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. We also plan to improve the effectiveness of the accounting group by continuing to augment our existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions. We plan to hire additional senior accounting personnel or additional independent consultants once we generate significantly more revenue or raise significant additional working capital. We will also improve segregation procedures by strengthening cross approval of various functions including quarterly internal audit procedures where appropriate. We believe that the foregoing steps will remediate the significant deficiency identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in this quarterly report on Form 10-Q has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this problem, and intends to develop procedures to address them to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

Changes in Internal Controls.

There have been no changes in our internal controls over financial reporting or in other factors during the fiscal quarter ended March 31, 2016, that materially affected, or is likely to materially affect, our internal control over financial reporting.

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PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations, financial condition or cash flows.

Item 1A. Risk Factors

The application of the Federal Food, Drug and Cosmetic Act to all tobacco products, including products like the Company’s vaporizers, will have a material adverse effect on our business.

On May 9, 2016, the Food and Drug Administration (FDA) announced the issuance of a final rule (the “Rule”) deeming all tobacco products, including “electronic cigarettes” and their components and parts, subject to the Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended by the Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act). As a result of the new Rule, all electronic cigarette products will be subject to the same FD&C Act provisions and relevant regulatory requirements to which cigarettes are subject, with respect to the following:

1. Enforcement action against products determined to be adulterated or misbranded (other than enforcement actions based on lack of a marketing authorization during an applicable compliance period);

2. Required submission of ingredient listing and reporting of HPHCs;

3. Required registration of tobacco product manufacturing establishments and product listing;

4. Prohibition against sale and distribution of products with modified risk descriptors (e.g., "light," "low," and "mild" descriptors) and claims unless FDA issues an order authorizing their marketing;

5. Prohibition on the distribution of free samples (same as cigarettes);

6. Premarket review requirements;

7. Implementation of minimum age and identification restrictions to prevent sales to individuals under age 18;

8. Inclusion of a health warning; and

9. Prohibition of sale of electronic cigarettes in vending machines, unless in a facility that never admits youth.

The application of the Rule will result in additional expenses, could affect the markets we sell our products in, could require us to change our advertising and labeling and method of marketing our products, any of which would have a substantial adverse effect on our business, results of operation and financial condition.  In addition, the application process of our products by the FDA could cost the Company several hundred thousand dollars.

We may face the same governmental actions aimed at conventional cigarettes and other tobacco products.

The tobacco industry expects significant regulatory developments to take place over the next few years, driven principally by the World Health Organization’s Framework Convention on Tobacco Control, or the FCTC. The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:

● the levying of substantial and increasing tax and duty charges;

● restrictions or bans on advertising, marketing and sponsorship;

● the display of larger health warnings, graphic health warnings and other labeling requirements;

● restrictions on packaging design, including the use of colors and generic packaging;

● restrictions or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

● requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents levels;

● requirements regarding testing, disclosure and use of tobacco product ingredients;

33

● increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;

● elimination of duty free allowances for travelers; and

● encouraging litigation against tobacco companies.

If vaporizers and/or electronic cigarettes are subject to one or more significant regulatory initiates enacted under the FCTC, our business, results of operations and financial condition could be materially and adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Common Stock

On January 7, 2016, the Company entered into a seven month consulting agreement to provide strategic consulting and business advisory services. Pursuant to the consulting agreement, the Company issued 500,000 shares of the Company’s common stock. The Company revalued these common shares at the fair value of $55,000 or $0.11 per common share based on the quoted trading price at the end of the reporting period, March 31, 2016. In connection with the issuance of these common shares, the Company recorded stock based compensation of $23,571 for the three months ended March 31, 2016 and deferred stock- based compensation of $31,429 as of March 31, 2016.

On January 12, 2016, the Company issued an aggregate of 200,000 shares of the Company’s common stock to two board of directors of the Company for services rendered. The Company valued these common shares at the fair value of $70,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $70,000 for the three months ended March 31, 2016.

On January 12, 2016, the Company issued 100,000 shares of the Company’s common stock to a consultant for marketing services rendered. The Company valued these common shares at the fair value of $35,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $35,000 for the three months ended March 31, 2016.

On January 12, 2016, the Company issued 500,000 shares of the Company’s common stock to a consultant for business advisory services rendered. The Company valued these common shares at the fair value of $175,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $175,000 for the three months ended March 31, 2016.

Options

On January 12, 2016, the Company granted an aggregate of 2,080,000 five year options to purchase shares of common stock to CEO of the Company and six employees of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share. In March 2016, 40,000 of these unvested options were forfeited due to termination of an employee.

On January 12, 2016, the Company granted 400,000 five year options to purchase shares of common stock to a consultant of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

31.1	Section 302 Certification by the Registrant’s Principal Executive Officer and Principal Financial Officer*
32.1	Section 906 Certification by the Registrant’s Principal Executive Officer and Principal Financial Officer*
101.ins	XBRL Instance Document
101.sch	XBRL Taxonomy Schema Document
101.cal	XBRL Taxonomy Calculation Document
101.def	XBRL Taxonomy Linkbase Document
101.lab	XBRL Taxonomy Label Linkbase Document
101.pre	XBRL Taxonomy Presentation Linkbase Document

* Filed herein

34

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Vapir Enterprises, Inc.
Date: May 13, 2016	By:	/s/ Hamid Emarlou
		Hamid Emarlou
		Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)

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EX-31.1

 EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Hamid Emarlou, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vapir Enterprises, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2016	By:	/s/ Hamid Emarlou
		Hamid Emarlou Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer

Pursuant to U.S.C. Section 1350

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vapir Enterprises, Inc. a Nevada corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the period ending March 31, 2016 of the Company (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. 

Date: May 13, 2016	By:	/s/ Hamid Emarlou
		Hamid Emarlou Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 07, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	VAPIR ENTERPRISES INC.
Entity Central Index Key	0001489588
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2016
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		0

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash	$ 54,994	$ 7,858
Accounts receivable, net	4,687	24,518
Inventory, net	192,798	212,411
Prepaid expense and other current assets	14,195	18,424
Advances to suppliers	132,078	136,427
Total Current Assets	398,752	399,638
OTHER ASSETS:
Property and equipment, net	81,171	87,668
Intangible assets, net	358,382	375,176
Deposit	2,813	2,813
Total Other Assets	442,366	465,657
Total Assets	841,118	865,295
CURRENT LIABILITIES:
Accounts payable and accrued expenses	249,802	225,882
Convertible notes payable, net of debt discounts	330,602	247,724
Loan payable	197,000	197,000
Notes payable - current maturities	35,632	19,800
Customer deposits	14,075	20,609
Advances from related party	531,147	370,614
Deferred rent	11,669	10,728
Derivative liabilities	96,789	202,653
Total Current Liabilities	1,466,716	1,295,010
LONG-TERM LIABILITIES:
Notes payable, net of current maturities	33,152	5,250
Total Long-term Liabilities	33,152	5,250
Total Liabilities	$ 1,499,868	$ 1,300,260
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock $0.001 par value: 20,000,000 shares authorized; none issued and outstanding
Common stock $0.001 par value: 100,000,000 shares authorized; 49,766,819 and 48,466,819 shares issued and outstanding, respectively	$ 49,767	$ 48,467
Additional paid in capital	475,583	$ 31,374
Deferred stock-based compensation	(31,429)
Accumulated deficit	(1,152,671)	$ (514,806)
Total Stockholders' Deficit	(658,750)	(434,965)
Total Liabilities and Stockholders' Deficit	$ 841,118	$ 865,295

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	49,766,819	48,466,819
Common stock, shares outstanding	49,766,819	48,466,819

XML

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statements of Operations [Abstract]
Net revenues	$ 376,072	$ 334,615
Cost of sales	235,631	185,775
Gross profit	140,441	148,840
OPERATING EXPENSES:
Selling expenses	57,004	21,818
Compensation	248,799	142,959
Professional and consulting fees	372,163	139,646
General and administrative	100,990	91,421
Total Operating Expenses	778,956	395,844
LOSS FROM OPERATIONS	(638,515)	$ (247,004)
OTHER INCOME (EXPENSE):
Change in fair value of derivative liabilities	105,864
Interest expense, net	(105,214)	$ (7,074)
Other income (expense), net	650	(7,074)
LOSS BEFORE INCOME TAX PROVISION	$ (637,865)	$ (254,078)
INCOME TAX PROVISION
NET LOSS	$ (637,865)	$ (254,078)
EARNINGS PER SHARE:
Basic and diluted	$ (0.01)	$ (0.01)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted	49,622,862	48,335,129

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (637,865)	$ (254,078)
Adjustments to reconcile net loss to net cash used in operating activities
Bad debt expense	1,297
Depreciation	6,497	$ 390
Amortization of intangible assets	16,794	$ 16,790
Amortization of deferred financing cost	3,730
Amortization of debt discount	82,878
Change in fair value of derivative liabilities	(105,864)
Stock based compensation	414,080	$ 62,500
Changes in assets and liabilities:
Accounts receivable	18,534	$ 867
Prepaid expense and other current assets	499
Advances to suppliers	4,349	$ 40,435
Inventory	19,613	(19,765)
Accounts payable and accrued expenses	29,453	$ (29,156)
Deferred rent	941
Customer deposits	(6,534)	$ 52,775
NET CASH USED IN OPERATING ACTIVITIES	(151,598)	(129,242)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from related party	$ 155,000	130,000
Repayments to related party for advances		$ (3,000)
Proceeds received from notes payable	$ 50,000
Payments of notes payable	(6,266)	$ (4,950)
NET CASH PROVIDED BY FINANCING ACTIVITIES	198,734	122,050
NET CHANGE IN CASH	47,136	(7,192)
CASH - beginning of period	7,858	27,304
CASH - end of period	54,994	20,112
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$ 5,594	$ 5,066
Income taxes paid
Non-cash investing and financing activities:
Issuance of common stock for deferred stock-based compensation	$ 31,429

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Organization and Operations

3 Months Ended

Mar. 31, 2016

Organization and Operations [Abstract]

Organization and Operations

Note 1 - Organization and Operations

Vapir Enterprises, Inc.

Vapir Enterprises Inc. (formerly FAL Exploration Corp.) (“Vapir Enterprises” or the “Company”) was incorporated in the State of Nevada on December 17, 2009. The Company’s principal business is focused on inventing, developing and producing aromatherapy devices and vaporizers. The Company’s aromatherapy devices utilize heat and convection air and thereby extract natural essences and produce fresh fragrances.

Acquisition of Vapir, Inc. Treated as a Reverse Acquisition

On December 30, 2014, Vapir, Inc., a private California corporation (“Vapir”), which is the historical business, entered into a Share Exchange Agreement with the Company, all of the stockholders of Vapir (the “Vapir Shareholders”), and the Company’s controlling stockholders whereby the Company agreed to acquire all of the issued and outstanding capital stock of Vapir in exchange for 38,624,768 shares of the Company’s common stock. On December 30, 2014, the transaction closed and Vapir is now a wholly-owned subsidiary of the Company. The number of shares issued represented approximately 80.0% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement. In addition, Vapir’s board of directors and management obtained the board and management control of the combined entity stock immediately after the consummation of the Share Exchange Agreement.

As a result of the controlling financial interest of the former stockholders of Vapir, for financial statement reporting purposes, the business combination between Vapir and Vapir Enterprises has been treated as a reverse acquisition with Vapir deemed the accounting acquirer and Vapir Enterprises deemed the accounting acquiree under the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) Section 805-10-55. The reverse acquisition is deemed a capital transaction and the net assets of Vapir (the accounting acquirer) are carried forward to Vapir Enterprises (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition process utilizes the capital structure of Vapir Enterprises and the assets and liabilities of Vapir which are recorded at historical cost. The equity of the combined entity is the historical equity of Vapir retroactively restated to reflect the number of shares issued by Vapir Enterprises in the transaction.

Vapir, Inc. was incorporated in the State of California in October 2006. 

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Significant and Critical Accounting Policies and Practices

3 Months Ended

Mar. 31, 2016

Significant and Critical Accounting Policies and Practices [Abstract]

Significant and Critical Accounting Policies and Practices

Note 2 - Significant and Critical Accounting Policies and Practices

Basis of Presentation- Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i)	Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
(ii)	Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.
(iii)	Inventory obsolescence and markdowns: The Company’s estimate of potentially excess and slow-moving inventories is based on evaluation of inventory levels and aging, review of inventory turns and historical sales experiences. The Company’s estimate of reserve for inventory shrinkage is based on the historical results of physical inventory cycle counts.
(iv)	Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
(v)	Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry-forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
(vi)	Estimates and assumptions used in valuation of derivative liabilities and equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value derivative liabilities, share options and similar instruments.
(vii)	Estimates and assumptions used in valuation of stock-based compensation: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Principles of Consolidation

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10, all majority-owned subsidiaries-all entities in which a parent has a controlling financial interest-shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

The consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting period(s) as follows:

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition, if applicable)	Attributable interest
Vapir Enterprises, Inc.	The State of Nevada, U.S.A.	December 17, 2009		100	%
Vapir, Inc.	The State of California, U.S.A.	October 2006 (December 30, 2014)		100	%

The consolidated financial statements include all accounts of the Company and Vapir as of March 31, 2016 and for the three months then ended.

All inter-company balances and transactions have been eliminated.

Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, advances to suppliers, accounts payable and accrued expenses, and customer deposits approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable and notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at March 31, 2016 and December 31, 2015.

The Company’s Level 3 financial liabilities consist of the embedded conversion feature on convertible notes and derivative warrants for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation and the derivative liability on the conversion feature of the convertible notes payable. The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a third party valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Level 3 Financial Liabilities - Derivative Warrant Liabilities and Derivative Liability on Conversion Feature

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability and derivative liability on the conversion feature at every reporting period and recognizes gains or losses in the consolidated statements of operations that are attributable to the change in the fair value of the derivative liabilities.

The following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of March 31, 2016:

	Amount		Level 1		Level 2		Level 3
Derivative liability - Embedded conversion	$	42,235	$	-	$	-	$	42,235
Derivative liabilities - Tainted Warrants		54,554		-		-		54,554
	$	96,789	$	-	$	-	$	96,789

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

The Company’s non-financial assets include inventories. The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts. 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

Pursuant to ASC Paragraphs 360-10-35-29 through 35-36 Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group). Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions about its use of the asset (asset group) and shall consider all available evidence. The assumptions used in developing those estimates shall be reasonable in relation to the assumptions used in developing other information used by the entity for comparable periods, such as internal budgets and projections, accruals related to incentive compensation plans, or information communicated to others. However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset group) are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of those possible outcomes. Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall be made for the remaining useful life of the asset (asset group) to the entity. For long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present value technique will often be the appropriate technique with which to estimate fair value.

Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses. The Company did not consider it necessary to record any impairment charges during the three months ended March 31, 2016 and 2015.

Cash equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents.  The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

As of March 31, 2016, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

Accounts receivable and allowance for doubtful accounts

Pursuant to FASB ASC paragraph 310-10-35-47 trade receivables that management has the intent and ability to hold for the foreseeable future shall be reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts. The Company follows FASB ASC paragraphs 310-10-35-7 through 310-10-35-10 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC paragraph 310-10- 35-9 Losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) The amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay.

Bad debt expense is included in general and administrative expenses.

Pursuant to FASB ASC paragraph 310-10-35-41 Credit losses for trade receivables (uncollectible trade receivables), which may be for all or part of a particular trade receivable, shall be deducted from the allowance. The related trade receivable balance shall be charged off in the period in which the trade receivables are deemed uncollectible. Recoveries of trade receivables previously charged off shall be recorded when received. The Company charges off its trade account receivables against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

As of March 31, 2016 and December 31, 2015, there was $2,661 and $1,373 allowance for doubtful accounts, respectively. The Company recorded bad debt expense of $1,297 and $0 during the three months ended March 31, 2016 and 2015, respectively.

Inventory

Inventory Valuation

The Company values inventory, consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) estimates of future demand, and (ii) competitive pricing pressures.

Inventory Obsolescence and Markdowns

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventory to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

There was no inventory obsolescence for the reporting period ended March 31, 2016 or 2015. There was no lower of cost or market adjustments for the reporting period ended March 31, 2016 or 2015.

Advances to suppliers

Advances to suppliers represent the cash paid in advance for the purchase of inventory. The advances to suppliers are interest free and unsecured.

Property and Equipment

Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

	Estimated Useful Life (Years)
Auto	3
Furniture and fixture	5
Leasehold improvement	*

(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Leases

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 a lessee and a lessor shall consider whether a lease meets any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. In accordance with paragraphs 840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the present value of the minimum lease payments using the lessee's incremental borrowing rate unless both of the following conditions are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee's incremental borrowing rate. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

Operating leases primarily relate to the Company’s leases of office spaces. When the terms of an operating lease include tenant improvement allowances, periods of free rent, rent concessions, and/or rent escalation amounts, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized, which is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Intangible assets

The Company records the purchase of intangible assets not purchased in a business combination in accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets” and records intangible assets acquired in a business combination or pushed-down pursuant to acquisition by its parent in accordance with ASC 805 “Business Combinations”.

Customer Relationships are based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated life of the customer relationships.

In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

1.	Significant underperformance relative to expected historical or projected future operating results;
2.	Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.	Significant negative industry or economic trends.

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company evaluates the recoverability of intangible assets annually which is every 4^th quarter of the fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

Customer Deposits

Customer deposits consisted of prepayments from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of the products, in compliance with its revenue recognition policy.

Derivative Instruments and Hedging Activities

The Company accounts for derivative instruments and hedging activities in accordance with paragraph 815-10-05-4 of the FASB Accounting Standards Codification (“Paragraph 815-10-05-4”). Paragraph 815-10-05-4 requires companies to recognize all derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends upon: (i) whether the derivative has been designated and qualifies as part of a hedging relationship, and (ii) the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument based upon the exposure being hedged as either a fair value hedge, cash flow hedge or hedge of a net investment in a foreign operation.

Derivative Liability

The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations and comprehensive income (loss) as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The adoption of Section 815-40-15 has affected the accounting for (i) certain freestanding warrants that contain exercise price adjustment features and (ii) convertible bonds issued by foreign subsidiaries with a strike price denominated in a foreign currency.

The Company marks to market the fair value of the embedded derivative convertible notes and derivative warrants at each balance sheet date and records the change in the fair value of the embedded derivative convertible notes and derivative warrants as other income or expense in the consolidated statements of operations.

The Company utilizes the Lattice model that values the liability of the derivative convertible notes and derivative warrants. The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument. Therefore, the fair value may not be appropriately captured by simple models. In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives). The Lattice model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features. Based on these features, there are two primary events that can occur; the Holder exercises the Warrants or the Warrants are held to expiration. Vapir Enterprises, Inc. and Subsidiary

The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.). Projections were then made on the underlying factors which led to potential scenarios. Probabilities were assigned to each scenario based on management projections. This led to a cash flow projection and a probability associated with that cash flow.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company and members of their immediate families ; e. management of the Company and members of their immediate families ; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Revenue recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Cost of Sales

The primary components of cost of sales include the cost of the product and shipping fees.

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred. Shipping costs included in cost of good sold were $31,856 and $23,421 for the three months ended March 31, 2016 and 2015, respectively.

Advertising Costs

The Company follows the guidance of the Section 720-35-25 of the FASB Accounting Standards Codification (“Section 720-35-25”) as to when advertising costs should be expensed. Pursuant to ASC Paragraph 720-35-25-1 the costs of advertising shall be expensed either as incurred or the first time the advertising takes place. The accounting policy the Company selected from these two alternatives was to expense the advertising costs when the first time the advertising takes place. Deferring the costs of advertising until the advertising takes place assumes that the costs have been incurred for advertising that will occur, such as the first public showing of a television commercial for its intended purpose and the first appearance of a magazine advertisement for its intended purpose. Such costs shall be expensed immediately if such advertising is not expected to occur.

Pursuant to ASC Paragraph 720-35-25-5 costs of communicating advertising are not incurred until the item or service has been received and shall not be reported as expenses before the item or service has been received, such as the costs of television airtime which shall not be reported as advertising expense before the airtime is used. Once it is used, the costs shall be expensed, unless the airtime was used for direct-response advertising activities that meet the criteria for capitalization under ASC paragraph 340-20-25-4.

Advertising costs were $4,710 and $7,914 for the three months ended March 31, 2016 and 2015, respectively.

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

a. The exercise price of the option.

b. The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

c. The current price of the underlying share.

d. The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.

e. The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

f. The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Deferred Tax Assets and Income Tax Provision

The Company was a Subchapter S corporation, until December 30, 2014 during which time the Company was treated as a pass through entity for federal income tax purposes. Under Subchapter S of the Internal Revenue Code stockholder of an S corporation are taxed separately on their distributive share of the S corporation’s income whether or not that income is actually distributed.

Effective December 31, 2014, the Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in 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 statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Tax years that remain subject to examination by major tax jurisdictions

The Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

Earnings per Share

Earnings per share ("EPS") is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260-10-55-23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation. Pursuant to ASC Paragraphs 260-10-45-40 through 45-42 convertible securities shall be reflected in diluted EPS by application of if converted method. The convertible preferred stock or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The Company’s contingent shares issuance arrangement, stock options or warrants are as follows: 

	Contingent shares issuance arrangement, stock options or warrants
	For the Period Ended  March 31, 2016		For the Period Ended  March 31, 2015
Stock Option Shares		2,440,100		100
Sub-total: stock option shares		2,440,100		100
Warrant Shares		501,343		1,263
Sub-total: warrant shares		501,343		1,263
Total contingent shares issuance arrangement, stock options or warrants		2,941,443		1,363

There were no incremental common shares under the Treasury Stock Method for the reporting period ended March 31, 2016 or 2015.

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

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Going Concern

3 Months Ended

Mar. 31, 2016

Going Concern [Abstract]

Going Concern

Note 3 - Going Concern

The Company has elected to adopt early application of Accounting Standards Update 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 (“ASU 2014-15”).

The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $1.15 million at March 31, 2016, a net loss of approximately $638,000 and net cash used in operating activities of approximately $152,000 for the three months ended March 31, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to further implement its business plan and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company is unable to continue as a going concern.

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Property and Equipment

3 Months Ended

Mar. 31, 2016

Property and Equipment [Abstract]

Property and Equipment

Note 4 - Property and Equipment

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

	Estimated life	March 31, 2016  (Unaudited)			December 31, 2015
Auto	3 years	$	12,522		$	12,522
Furniture and fixtures	5 years		23,743			23,743
Tooling equipment	4 years		97,710			97,710
Leasehold improvements	5 years		35,206			35,206
Less: Accumulated depreciation			(88,010	)		(81,513	)
		$	81,171		$	87,668

(i) Depreciation Expense

Depreciation expense amounted to $6,497 and $390 for the three months ended March 31, 2016 and 2015, respectively.

(ii) Impairment

The Company completes its annual impairment testing of property and equipment every 4^th quarter of the fiscal year to evaluate the recoverability of property and equipment or whenever events or changes in circumstances indicate that the property and equipment’s carrying amount may not be recoverable. The Company did not record any impairment of its property and equipment at March 31, 2016 and December 31, 2015, respectively.

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Intangible Assets

3 Months Ended

Mar. 31, 2016

Intangible Assets [Abstract]

Intangible Assets

Note 5 - Intangible Assets

Intangible assets consist of the following:

	March 31, 2016  (Unaudited)			December 31,  2015
Customer relationships	$	1,001,212		$	1,001,212
Trademarks		6,430			6,430
		1,007,642			1,007,642
Accumulated amortization		(649,260	)		(632,466	)
Intangible assets, net	$	358,382		$	375,176

Customer Relationships are amortized based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated fifteen-year life of the Customer Relationships.

Legal costs associated with serving and protecting trademark are being capitalized. The Company filed trademarks for its company logos with an estimated useful life of 15 years. The Company will amortize the costs of intangible assets over their estimated useful lives on a straight-line basis. Amortization of intangible assets is included in operating expenses as reflected in the accompanying condensed consolidated statements of operations. The Company assesses fair value for any impairment to the carrying values. The Company did not record any impairment of its intangible assets at March 31, 2016 and December 31, 2015, respectively.

Amortization expense was $16,794 and $16,790 for the three months ended March 31, 2016 and 2015, respectively. Future amortization of intangible assets is as follows:

2016 (remainder of the year)	$	50,382
2017		67,176
2018		67,176
2019		67,176
2020 and thereafter		106,472
Total	$	358,382

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Loan and Notes Payable

3 Months Ended

Mar. 31, 2016

Loan and Notes Payable/Convertible Notes Payable [Abstract]

Loan and Notes Payable

Note 6 - Loan and Notes Payable

Loan payable

	March 31,  2016		December 31,  2015
Business loan obtained in May 2011 from Bank of the West with a credit line up to $200,000 and secured by all assets of the Company. This loan bears interest at 4.75% per annum.	$	197,000	$	197,000

Note payable

	March 31, 2016			December 31, 2015
4.75% Promissory note of $100,000 issued to Bank of the West on May 10, 2011 payable over 60 consecutive monthly installments with monthly principal payment of $1,650 and interest starting in June 2012. Amounts outstanding under this loan and note are personally guaranteed by the CEO of the Company.	$	20,100		$	25,050
5.28% unsecured Promissory note of $50,000 issued to Bank of the West in February 2016 payable over 36 consecutive monthly installments with monthly payment of $1,506 and interest starting in March 2016		48,684			-
Less : Current maturities		(33,152	)		(19,800	)
Note payable, net of current maturities	$	35,632		$	5,250

Future minimum principal payments under the notes are as follows:

For Fiscal Year:
2016 (remainder of the year)	$	26,672
2017		21,757
2018		15,915
2019		4,440
Total remaining Payments		68,784

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Related Party Transactions

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Note 7 - Related Party Transactions

Related parties

Related parties with whom the Company had transactions are:

Related Parties		Relationship
Management and significant stockholders
Mr. Hamid Emarlou		Chairman, CEO and significant stockholder of the Company

Advances from Executive Officer, Significant Stockholder

From time to time, Chairman, CEO and significant stockholder of the Company advance funds to the Company for working capital purpose. These advances are unsecured, due upon demand and bear 5% interest per annum.

During 2014, the Company’s CEO provided advances to the Company for working capital purposes for a total of $266,000 and the Company repaid $130,000 of these advances. The advances are due on demand and bear 5% interest per annum. Between February 2015 and November 2015, the Company’s CEO provided advances to the Company for working capital purposes for a total of $300,500 and the Company repaid $73,000 of these advances. Between January 2016 and March 2016, the Company’s CEO provided advances to the Company for working capital purposes for a total of $155,000. At March 31, 2016 and December 31, 2015, these advances amounted to $531,147 and $370,614, respectively. Included in the advances are accrued interest due to the Company’s CEO totaling $12,647 and $7,114, at March 31, 2016 and December 31, 2015 respectively.

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Convertible Notes Payable

3 Months Ended

Mar. 31, 2016

Loan and Notes Payable/Convertible Notes Payable [Abstract]

Convertible Notes Payable

Note 8 - Convertible Notes Payable

On April 3, 2015, the Company closed a financing transaction by entering into a Securities Purchase Agreement dated April 3, 2015 (the “Securities Purchase Agreement”) with certain accredited investors (the “Purchasers”) for an aggregate subscription amount of $500,000 (the “Purchase Price”). Pursuant to the Securities Purchase Agreement, the Company issued a 6% Convertible Debenture (the “Debenture”) and warrants to acquire 500,000 shares of the Company's common stock at an exercise price of $0.60 per share (the “Warrants”).

The terms of the Debenture and the Warrants are as follows:

6% Convertible Debenture

The total principal amount of the Debentures is $500,000. The Debenture accrues interest at 6% per annum and the Debenture has a maturity date of October 3, 2016. The Debenture is convertible any time after its issuance date. The Purchaser has the right to convert the Debenture into shares of the Company’s common stock at $0.50 per share. The conversion price, however, is subject to full ratchet anti-dilution in the event that the Company issues any securities at a per share price lower than the conversion price then in effect. The Company paid financing costs of $22,500 in connection with this Debenture which is initially recorded as prepaid financing cost and is being amortized over the term of the Debenture.

Warrants

The Company issued warrants to acquire 500,000 shares of the Company's common stock. The Warrants issued in this transaction are immediately exercisable at an exercise price of $0.60 per share, subject to applicable adjustments including full ratchet anti-dilution in the event that the Company issue any securities at a per share price lower than the exercise price then in effect. The Warrants have an expiration period of five years from the date of the original issuance.

Convertible notes payable consisted of the following:

	March 31, 2016
6% Convertible promissory notes	$	500,000
Initial Discount		(500,000	)
Accumulated amortization of discount through March 31, 2016		330,602
Remaining discount as of March 31, 2016		(169,398	)
Convertible notes payable, net	$	330,602

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Derivative Liabilities

3 Months Ended

Mar. 31, 2016

Derivative Liabilities [Abstract]

Derivative Liabilities

Note 9 - Derivative Liabilities

Since the terms of the Debentures and Warrants in the April 2015 closing include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company under the provisions of 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, along with the free-standing warrant derivative instruments and recorded derivative liabilities on their issuance date. The Company uses the Simple Binomial Lattice model to value the derivative liabilities. The Debentures were all discounted in full based on the valuations and the Company recognized an additional derivative expense of $188,378 upon initial recording of the derivative liabilities. The total debt discount of $500,000 consisted of initial valuation of the derivatives of $250,407 and the valuation of the warrants of $249,593 to be amortized over the terms of the note. These derivative liabilities are then revalued on each reporting date. The gain resulting from the decrease in fair value of these convertible instruments was $105,864 for the three months ended March 31, 2016. At March 31, 2016, the Company recorded a warrant derivative liability of $54,554 and note derivative liability of $42,235.

For the three months ended March 31, 2016 and 2015 the Company recognized $82,878 and $0, respectively of amortization of debt discount. For the three months ended March 31, 2016 and 2015 the Company recognized $3,730 and $0, respectively of amortization of deferred financing cost. The amortization of debt discount and deferred financing cost were included in interest expense. As of March 31, 2016 and December 31, 2015, accrued interest related to this Debenture amounted to $29,936 and $22,456, respectively.

The following table summarizes the values of certain assumptions used by the Company’s custom model to estimate the fair value of the derivative liabilities as of March 31, 2016:

	March 31,  2016
Stock price	$	0.11
Weighted average strike price	$	0.50
Remaining contractual term (years)		0.50 to 4.00 years
Volatility		266% to 319	%
Risk-free rate		0.59% to 1.21	%
Dividend yield		0.0	%

The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis:

	For the three months ended March 31, 2016
Beginning balance	$	202,653
Change in fair value of derivative liabilities		(105,864	)
Ending balance	$	96,789

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 10 - Commitments and Contingencies

Operating lease

In June 2014, a lease agreement was signed for an office and warehousing space consisting of approximately 5,000 square feet located in San Jose, California with a term commencing in June 2014 and expiring in October 2015. In August 2015, the Company entered into an amendment agreement to extend the term of the lease which will expire on December 31, 2018. Pursuant to the amendment agreement, the lease requires the Company to pay a monthly base rent of $5,050 plus a pro rata share of operating expenses beginning November 1, 2015. The base rent is subject to an annual increase beginning in November 2016 as defined in the amended lease agreement. This lease agreement is personally guaranteed by the President of the Company.

Future minimum rental payments required under this operating lease are as follows:

Fiscal Year ending December 31:
2016 (remainder of the year)	$	45,753
2017		62,721
2018		64,236
Total	$	172,710

Rent expense was $21,643 and $10,537 for the three months ended March 31, 2016 and 2015, respectively.

Litigation

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.

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Stockholders' Deficit

3 Months Ended

Mar. 31, 2016

Stockholders' Deficit [Abstract]

Stockholders' Deficit

Note 11 - Stockholders’ Deficit

Shares Authorized

The authorized capital of the Company consists of 100,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per share.

Common Stock

On January 7, 2016, the Company entered into a seven month consulting agreement to provide strategic consulting and business advisory services. Pursuant to the consulting agreement, the Company issued 500,000 shares of the Company’s common stock. The Company revalued these common shares at the fair value of $55,000 or $0.11 per common share based on the quoted trading price at the end of the reporting period, March 31, 2016. In connection with the issuance of these common shares, the Company recorded stock based compensation of $23,571 for the three months ended March 31, 2016 and deferred stock- based compensation of $31,429 as of March 31, 2016.

On January 12, 2016, the Company issued an aggregate of 200,000 shares of the Company’s common stock to two board of directors of the Company for services rendered. The Company valued these common shares at the fair value of $70,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $70,000 for the three months ended March 31, 2016.

On January 12, 2016, the Company issued 100,000 shares of the Company’s common stock to a consultant for marketing services rendered. The Company valued these common shares at the fair value of $35,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $35,000 for the three months ended March 31, 2016.

On January 12, 2016, the Company issued 500,000 shares of the Company’s common stock to a consultant for business advisory services rendered. The Company valued these common shares at the fair value of $175,000 or $0.35 per common share based on the quoted trading price on the date of grant. In connection with the issuance of these common shares, the Company recorded stock based compensation of $175,000 for the three months ended March 31, 2016.

Warrants

Stock warrant activities for the three months ended March 31, 2016 are summarized as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic  Value
Balance at December 31, 2015		501,263		$	3.74		4.25	$	-
Granted		-			-		-		-
Forfeited		(20	)		250.00		-		-
Balance at March 31, 2016		501,243			3.73		4.00		-
Warrants exercisable at March 31, 2016		501,243		$	3.73		4.00	$	-

Options

Stock option activities for the three months ended March 31, 2016 are summarized as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic  Value
Balance at December 31, 2015		100		$	700		1.17	$	-
Granted		2,480,000			0.10		5.00		-
Exercised/forfeited/expired		(40,000	)		0.10		5.00		-
Balance at March 31, 2016		2,440,100			0.13		4.79		-
Options exercisable at March 31, 2016		100		$	700		1.42	$	-
Weighted average fair value of warrants granted during the period						$	0.35

On January 12, 2016, the Company granted an aggregate of 2,080,000 five year options to purchase shares of common stock to CEO of the Company and six employees of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share. The 2,080,000 options were valued on the grant date at approximately $0.35 per option or a total of $728,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.35 per share (based on the quoted trading prices on the date of grant), volatility of 286% (based from volatilities of similar companies), expected term of 5 years, and a risk free interest rate of 1.55%. In March 2016, 40,000 of these unvested options were forfeited due to termination of an employee.

On January 12, 2016, the Company granted 400,000 five year options to purchase shares of common stock to a consultant of the Company. The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share. The 400,000 options were valued on the grant date at approximately $0.35 per option or a total of $140,000 using a Black-Scholes option pricing model with the following assumptions: stock price of $0.35 per share (based on the quoted trading prices on the date of grant), volatility of 286% (based from volatilities of similar companies), expected term of 5 years, and a risk free interest rate of 1.55%.

During the three months ended March 31, 2016, the Company recorded stock-based compensation expense in connection with stock option awards of $110,509.  As of March 31, 2016, there were total unrecognized compensation costs related to non-vested share-based compensation arrangements of $745,273. At March 31, 2016 there was approximately $24,000 intrinsic value for the stock options outstanding in the above table.

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Concentration of Credit Risk

3 Months Ended

Mar. 31, 2016

Concentration of Credit Risk [Abstract]

Concentration of Credit Risk

Note 12 - Concentration of Credit Risk

Concentration of Revenue and Supplier

During the three months ended March 31, 2016 sales to two customer represented approximately 40% of the Company’s net sales. During the three months ended March 31, 2015 sales to two customers represented approximately 41% of the Company’s net sales.

As of March 31, 2016 and December 31, 2015, accounts receivable from two customers represented approximately 74% and two customer represented 92% of the accounts receivable, respectively.

The Company purchased inventories and products from one vendor totaling approximately $176,000 and $177,000 during the three months ended March 31, 2016 and 2015, respectively.

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

Note 13 - Subsequent Events

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent event(s) to be disclosed.

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Significant and Critical Accounting Policies and Practices (Policies)

3 Months Ended

Mar. 31, 2016

Significant and Critical Accounting Policies and Practices [Abstract]

Basis of Presentation- Unaudited Interim Financial Information

Basis of Presentation- Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i)	Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
(ii)	Allowance for doubtful accounts: Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.
(iii)	Inventory obsolescence and markdowns: The Company’s estimate of potentially excess and slow-moving inventories is based on evaluation of inventory levels and aging, review of inventory turns and historical sales experiences. The Company’s estimate of reserve for inventory shrinkage is based on the historical results of physical inventory cycle counts.
(iv)	Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
(v)	Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry-forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
(vi)	Estimates and assumptions used in valuation of derivative liabilities and equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value derivative liabilities, share options and similar instruments.
(vii)	Estimates and assumptions used in valuation of stock-based compensation: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Principles of Consolidation

Principles of Consolidation

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10, all majority-owned subsidiaries-all entities in which a parent has a controlling financial interest-shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

The consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting period(s) as follows:

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition, if applicable)	Attributable interest
Vapir Enterprises, Inc.	The State of Nevada, U.S.A.	December 17, 2009		100	%
Vapir, Inc.	The State of California, U.S.A.	October 2006 (December 30, 2014)		100	%

The consolidated financial statements include all accounts of the Company and Vapir as of March 31, 2016 and for the three months then ended.

All inter-company balances and transactions have been eliminated.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepaid expenses and other current assets, advances to suppliers, accounts payable and accrued expenses, and customer deposits approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable and notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at March 31, 2016 and December 31, 2015.

The Company’s Level 3 financial liabilities consist of the embedded conversion feature on convertible notes and derivative warrants for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation and the derivative liability on the conversion feature of the convertible notes payable. The Company valued the automatic conditional conversion, re-pricing/down-round, change of control; default and follow-on offering provisions using a lattice model, with the assistance of a third party valuation specialist, for which management understands the methodologies. These models incorporate transaction details such as Company stock price, contractual terms, maturity, risk free rates, as well as assumptions about future financings, volatility, and holder behavior as of the date of issuance and each balance sheet date.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Level 3 Financial Liabilities - Derivative Warrant Liabilities and Derivative Liability on Conversion Feature

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative warrant liability and derivative liability on the conversion feature at every reporting period and recognizes gains or losses in the consolidated statements of operations that are attributable to the change in the fair value of the derivative liabilities.

The following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of March 31, 2016:

	Amount		Level 1		Level 2		Level 3
Derivative liability - Embedded conversion	$	42,235	$	-	$	-	$	42,235
Derivative liabilities - Tainted Warrants		54,554		-		-		54,554
	$	96,789	$	-	$	-	$	96,789

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

The Company’s non-financial assets include inventories. The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts. 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

Pursuant to ASC Paragraphs 360-10-35-29 through 35-36 Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group). Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions about its use of the asset (asset group) and shall consider all available evidence. The assumptions used in developing those estimates shall be reasonable in relation to the assumptions used in developing other information used by the entity for comparable periods, such as internal budgets and projections, accruals related to incentive compensation plans, or information communicated to others. However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset group) are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of those possible outcomes. Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall be made for the remaining useful life of the asset (asset group) to the entity. For long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present value technique will often be the appropriate technique with which to estimate fair value.

Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses. The Company did not consider it necessary to record any impairment charges during the three months ended March 31, 2016 and 2015.

Cash equivalents

Cash equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents.  The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

As of March 31, 2016, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

Accounts receivable and allowance for doubtful accounts

Accounts receivable and allowance for doubtful accounts

Pursuant to FASB ASC paragraph 310-10-35-47 trade receivables that management has the intent and ability to hold for the foreseeable future shall be reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts. The Company follows FASB ASC paragraphs 310-10-35-7 through 310-10-35-10 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC paragraph 310-10- 35-9 Losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) The amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay.

Bad debt expense is included in general and administrative expenses.

Pursuant to FASB ASC paragraph 310-10-35-41 Credit losses for trade receivables (uncollectible trade receivables), which may be for all or part of a particular trade receivable, shall be deducted from the allowance. The related trade receivable balance shall be charged off in the period in which the trade receivables are deemed uncollectible. Recoveries of trade receivables previously charged off shall be recorded when received. The Company charges off its trade account receivables against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

As of March 31, 2016 and December 31, 2015, there was $2,661 and $1,373 allowance for doubtful accounts, respectively. The Company recorded bad debt expense of $1,297 and $0 during the three months ended March 31, 2016 and 2015, respectively.

Inventory

Inventory

Inventory Valuation

The Company values inventory, consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) estimates of future demand, and (ii) competitive pricing pressures.

Inventory Obsolescence and Markdowns

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventory to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

There was no inventory obsolescence for the reporting period ended March 31, 2016 or 2015. There was no lower of cost or market adjustments for the reporting period ended March 31, 2016 or 2015.

Advances to suppliers

Advances to suppliers

Advances to suppliers represent the cash paid in advance for the purchase of inventory. The advances to suppliers are interest free and unsecured.

Property and Equipment

Property and Equipment

Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

	Estimated Useful Life (Years)
Auto	3
Furniture and fixture	5
Leasehold improvement	*

(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

Leases

Leases

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 a lessee and a lessor shall consider whether a lease meets any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. In accordance with paragraphs 840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the present value of the minimum lease payments using the lessee's incremental borrowing rate unless both of the following conditions are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee's incremental borrowing rate. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

Operating leases primarily relate to the Company’s leases of office spaces. When the terms of an operating lease include tenant improvement allowances, periods of free rent, rent concessions, and/or rent escalation amounts, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized, which is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Intangible assets

Intangible assets

The Company records the purchase of intangible assets not purchased in a business combination in accordance with ASC 350-30-65 “Goodwill and Other Intangible Assets” and records intangible assets acquired in a business combination or pushed-down pursuant to acquisition by its parent in accordance with ASC 805 “Business Combinations”.

Customer Relationships are based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated life of the customer relationships.

In accordance with ASC 350-30-65, “Intangibles - Goodwill and Others”, the Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

1.	Significant underperformance relative to expected historical or projected future operating results;
2.	Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.	Significant negative industry or economic trends.

When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. The Company evaluates the recoverability of intangible assets annually which is every 4^th quarter of the fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

Customer Deposits

Customer Deposits

Customer deposits consisted of prepayments from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of the products, in compliance with its revenue recognition policy.

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

The Company accounts for derivative instruments and hedging activities in accordance with paragraph 815-10-05-4 of the FASB Accounting Standards Codification (“Paragraph 815-10-05-4”). Paragraph 815-10-05-4 requires companies to recognize all derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends upon: (i) whether the derivative has been designated and qualifies as part of a hedging relationship, and (ii) the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument based upon the exposure being hedged as either a fair value hedge, cash flow hedge or hedge of a net investment in a foreign operation.

Derivative Liability

Derivative Liability

The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations and comprehensive income (loss) as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The adoption of Section 815-40-15 has affected the accounting for (i) certain freestanding warrants that contain exercise price adjustment features and (ii) convertible bonds issued by foreign subsidiaries with a strike price denominated in a foreign currency.

The Company marks to market the fair value of the embedded derivative convertible notes and derivative warrants at each balance sheet date and records the change in the fair value of the embedded derivative convertible notes and derivative warrants as other income or expense in the consolidated statements of operations.

The Company utilizes the Lattice model that values the liability of the derivative convertible notes and derivative warrants. The reason the Company picks the Lattice model is that in many cases there may be multiple embedded features or the features of the bifurcated derivatives may be so complex that a Black-Scholes valuation does not consider all of the terms of the instrument. Therefore, the fair value may not be appropriately captured by simple models. In other words, simple models such as Black-Scholes may not be appropriate in many situations given complex features and terms of conversion option (e.g., combined embedded derivatives). The Lattice model is based on future projections of the various potential outcomes. The features that were analyzed and incorporated into the model included the exercise and full reset features. Based on these features, there are two primary events that can occur; the Holder exercises the Warrants or the Warrants are held to expiration. Vapir Enterprises, Inc. and Subsidiary

The Lattice model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, exercise price, volatility, etc.). Projections were then made on the underlying factors which led to potential scenarios. Probabilities were assigned to each scenario based on management projections. This led to a cash flow projection and a probability associated with that cash flow.

Related Parties

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company and members of their immediate families ; e. management of the Company and members of their immediate families ; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Revenue recognition

Revenue recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Cost of Sales

Cost of Sales

The primary components of cost of sales include the cost of the product and shipping fees.

Shipping and Handling Costs

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred. Shipping costs included in cost of good sold were $31,856 and $23,421 for the three months ended March 31, 2016 and 2015, respectively.

Advertising Costs

Advertising Costs

The Company follows the guidance of the Section 720-35-25 of the FASB Accounting Standards Codification (“Section 720-35-25”) as to when advertising costs should be expensed. Pursuant to ASC Paragraph 720-35-25-1 the costs of advertising shall be expensed either as incurred or the first time the advertising takes place. The accounting policy the Company selected from these two alternatives was to expense the advertising costs when the first time the advertising takes place. Deferring the costs of advertising until the advertising takes place assumes that the costs have been incurred for advertising that will occur, such as the first public showing of a television commercial for its intended purpose and the first appearance of a magazine advertisement for its intended purpose. Such costs shall be expensed immediately if such advertising is not expected to occur.

Pursuant to ASC Paragraph 720-35-25-5 costs of communicating advertising are not incurred until the item or service has been received and shall not be reported as expenses before the item or service has been received, such as the costs of television airtime which shall not be reported as advertising expense before the airtime is used. Once it is used, the costs shall be expensed, unless the airtime was used for direct-response advertising activities that meet the criteria for capitalization under ASC paragraph 340-20-25-4.

Advertising costs were $4,710 and $7,914 for the three months ended March 31, 2016 and 2015, respectively.

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

a. The exercise price of the option.

b. The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

c. The current price of the underlying share.

d. The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.

e. The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

f. The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Deferred Tax Assets and Income Tax Provision

Deferred Tax Assets and Income Tax Provision

The Company was a Subchapter S corporation, until December 30, 2014 during which time the Company was treated as a pass through entity for federal income tax purposes. Under Subchapter S of the Internal Revenue Code stockholder of an S corporation are taxed separately on their distributive share of the S corporation’s income whether or not that income is actually distributed.

Effective December 31, 2014, the Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in 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 statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Tax years that remain subject to examination by major tax jurisdictions

Tax years that remain subject to examination by major tax jurisdictions

The Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

Earnings per Share

Earnings per Share

Earnings per share ("EPS") is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35 through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260-10-55-23). Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation. Pursuant to ASC Paragraphs 260-10-45-40 through 45-42 convertible securities shall be reflected in diluted EPS by application of if converted method. The convertible preferred stock or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The Company’s contingent shares issuance arrangement, stock options or warrants are as follows: 

	Contingent shares issuance arrangement, stock options or warrants
	For the Period Ended  March 31, 2016		For the Period Ended  March 31, 2015
Stock Option Shares		2,440,100		100
Sub-total: stock option shares		2,440,100		100
Warrant Shares		501,343		1,263
Sub-total: warrant shares		501,343		1,263
Total contingent shares issuance arrangement, stock options or warrants		2,941,443		1,363

There were no incremental common shares under the Treasury Stock Method for the reporting period ended March 31, 2016 or 2015.

Cash Flows Reporting

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

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Significant and Critical Accounting Policies and Practices (Tables)

3 Months Ended

Mar. 31, 2016

Significant and Critical Accounting Policies and Practices [Abstract]

Schedule of company's subsidiaries and variable interest entities

Name of consolidated subsidiary or entity	State or other jurisdiction of incorporation or organization	Date of incorporation or formation (date of acquisition, if applicable)	Attributable interest
Vapir Enterprises, Inc.	The State of Nevada, U.S.A.	December 17, 2009		100	%
Vapir, Inc.	The State of California, U.S.A.	October 2006 (December 30, 2014)		100	%

Schedule of fair value of financial assets and liabilities measured on recurring basis

	Amount		Level 1		Level 2		Level 3
Derivative liability - Embedded conversion	$	42,235	$	-	$	-	$	42,235
Derivative liabilities - Tainted Warrants		54,554		-		-		54,554
	$	96,789	$	-	$	-	$	96,789

Schedule of estimated useful lives of property and equipment

	Estimated Useful Life (Years)
Auto	3
Furniture and fixture	5
Leasehold improvement	*

(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

Schedule of contingent shares issuance arrangement, stock options or warrants

	Contingent shares issuance arrangement, stock options or warrants
	For the Period Ended  March 31, 2016		For the Period Ended  March 31, 2015
Stock Option Shares		2,440,100		100
Sub-total: stock option shares		2,440,100		100
Warrant Shares		501,343		1,263
Sub-total: warrant shares		501,343		1,263
Total contingent shares issuance arrangement, stock options or warrants		2,941,443		1,363

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Property and Equipment [Abstract]

Summary of property and equipment

	Estimated life	March 31, 2016  (Unaudited)			December 31, 2015
Auto	3 years	$	12,522		$	12,522
Furniture and fixtures	5 years		23,743			23,743
Tooling equipment	4 years		97,710			97,710
Leasehold improvements	5 years		35,206			35,206
Less: Accumulated depreciation			(88,010	)		(81,513	)
		$	81,171		$	87,668

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Intangible Assets [Abstract]

Schedule of intangible assets

	March 31, 2016  (Unaudited)			December 31,  2015
Customer relationships	$	1,001,212		$	1,001,212
Trademarks		6,430			6,430
		1,007,642			1,007,642
Accumulated amortization		(649,260	)		(632,466	)
Intangible assets, net	$	358,382		$	375,176

Schedule of future amortization of intangible assets

2016 (remainder of the year)	$	50,382
2017		67,176
2018		67,176
2019		67,176
2020 and thereafter		106,472
Total	$	358,382

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Loan and Notes Payable (Tables)

3 Months Ended

Mar. 31, 2016

Loan and Notes Payable/Convertible Notes Payable [Abstract]

Schedule of loan payable

	March 31,  2016		December 31,  2015
Business loan obtained in May 2011 from Bank of the West with a credit line up to $200,000 and secured by all assets of the Company. This loan bears interest at 4.75% per annum.	$	197,000	$	197,000

Schedule of note payable

	March 31, 2016			December 31, 2015
4.75% Promissory note of $100,000 issued to Bank of the West on May 10, 2011 payable over 60 consecutive monthly installments with monthly principal payment of $1,650 and interest starting in June 2012. Amounts outstanding under this loan and note are personally guaranteed by the CEO of the Company.	$	20,100		$	25,050
5.28% unsecured Promissory note of $50,000 issued to Bank of the West in February 2016 payable over 36 consecutive monthly installments with monthly payment of $1,506 and interest starting in March 2016		48,684			-
Less : Current maturities		(33,152	)		(19,800	)
Note payable, net of current maturities	$	35,632		$	5,250

Schedule of future minimum principal payments

For Fiscal Year:
2016 (remainder of the year)	$	26,672
2017		21,757
2018		15,915
2019		4,440
Total remaining Payments		68,784

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Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Schedule of related parties transactions

Related Parties		Relationship
Management and significant stockholders
Mr. Hamid Emarlou		Chairman, CEO and significant stockholder of the Company

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Convertible Notes Payable (Tables)

3 Months Ended

Mar. 31, 2016

Loan and Notes Payable/Convertible Notes Payable [Abstract]

Schedule of convertible notes payable

	March 31, 2016
6% Convertible promissory notes	$	500,000
Initial Discount		(500,000	)
Accumulated amortization of discount through March 31, 2016		330,602
Remaining discount as of March 31, 2016		(169,398	)
Convertible notes payable, net	$	330,602

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Derivative Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Liabilities [Abstract]

Summary of fair value of derivative liabilities

	March 31,  2016
Stock price	$	0.11
Weighted average strike price	$	0.50
Remaining contractual term (years)		0.50 to 4.00 years
Volatility		266% to 319	%
Risk-free rate		0.59% to 1.21	%
Dividend yield		0.0	%

Summary of the changes in fair value on recurring basis

	For the three months ended March 31, 2016
Beginning balance	$	202,653
Change in fair value of derivative liabilities		(105,864	)
Ending balance	$	96,789

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies [Abstract]

Schedule of future minimum rental payments

Fiscal Year ending December 31:
2016 (remainder of the year)	$	45,753
2017		62,721
2018		64,236
Total	$	172,710

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Stockholders' Deficit (Tables)

3 Months Ended

Mar. 31, 2016

Warrants [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of option and warrant activities

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic  Value
Balance at December 31, 2015		501,263		$	3.74		4.25	$	-
Granted		-			-		-		-
Forfeited		(20	)		250.00		-		-
Balance at March 31, 2016		501,243			3.73		4.00		-
Warrants exercisable at March 31, 2016		501,243		$	3.73		4.00	$	-

Options [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of option and warrant activities

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic  Value
Balance at December 31, 2015		100		$	700		1.17	$	-
Granted		2,480,000			0.10		5.00		-
Exercised/forfeited/expired		(40,000	)		0.10		5.00		-
Balance at March 31, 2016		2,440,100			0.13		4.79		-
Options exercisable at March 31, 2016		100		$	700		1.42	$	-
Weighted average fair value of warrants granted during the period						$	0.35

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Organization and Operations (Details) - Share Exchange Agreement [Member]	1 Months Ended
	Dec. 30, 2014 shares
Organization and Operations (Textual)
Common stock issued to acquire capital stock of Vapir	38,624,768
Business acquisition, description	The number of shares issued represented approximately 80.0% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement.

XML

Significant and Critical Accounting Policies and Practices (Details )	3 Months Ended
	Mar. 31, 2016
Vapir Enterprises, Inc. [Member]
Variable Interest Entity [Line Items]
State or other jurisdiction of incorporation or organization	The State of Nevada, U.S.A.
Date of incorporation or formation (date of acquisition, if applicable)	December 17, 2009
Attributable interest	100.00%
Vapir, Inc. [Member]
Variable Interest Entity [Line Items]
State or other jurisdiction of incorporation or organization	The State of California, U.S.A.
Date of incorporation or formation (date of acquisition, if applicable)	October 2006 (December 30, 2014)
Attributable interest	100.00%

XML

Significant and Critical Accounting Policies and Practices (Details 1) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	$ 96,789	$ 202,653
Embedded conversion [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	42,235
Tainted Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	$ 54,554
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 1 [Member] | Embedded conversion [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 1 [Member] | Tainted Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 2 [Member] | Embedded conversion [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 2 [Member] | Tainted Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	$ 96,789
Level 3 [Member] | Embedded conversion [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	42,235
Level 3 [Member] | Tainted Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	$ 54,554

XML

Significant and Critical Accounting Policies and Practices (Details 2)	3 Months Ended
	Mar. 31, 2016
Auto [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	3 years
Furniture and fixture[Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	5 years
Leasehold improvement [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	P0Y	[1]

[1] Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

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Significant and Critical Accounting Policies and Practices (Details 3) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Summary of contingent shares issuance arrangement stock options or warrants
Contingent shares issuance arrangement, Stock Option Shares	2,440,100	100
Contingent shares issuance arrangement, Warrant Shares	501,343	1,263
Total contingent shares issuance arrangement, stock options or warrants	2,941,443	1,363
Stock Option Shares [Member]
Summary of contingent shares issuance arrangement stock options or warrants
Contingent shares issuance arrangement, Stock Option Shares	2,440,100	100
Warrant Shares [Member]
Summary of contingent shares issuance arrangement stock options or warrants
Contingent shares issuance arrangement, Warrant Shares	501,343	1,263

XML

Significant and Critical Accounting Policies and Practices (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Significant and Critical Accounting Policies and Practices (Textual)
Voting rights, description	As a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation.
Amount of federal deposit insurance corporation	$ 250,000
Allowance for doubtful accounts	2,661		$ 1,373
Bad debt expense	$ 1,297
Lease agreements, description	a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.
Shipping costs	$ 31,856	$ 23,421
Advertising costs	$ 4,710	$ 7,914

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Going Concern (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Going Concern (Textual)
Accumulated deficit	$ (1,152,671)		$ (514,806)
Net loss	(637,865)	$ (254,078)
Net cash used in operating activities	$ (151,598)	$ (129,242)

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Property and Equipment (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Summary of property and equipment
Less: Accumulated depreciation	$ (88,010)	$ (81,513)
Property and equipment, net	$ 81,171	$ 87,668
Auto [Member]
Summary of property and equipment
Estimated life	3 years	3 years
Property and equipment, gross	$ 12,522	$ 12,522
Furniture and fixtures [Member]
Summary of property and equipment
Estimated life	5 years	5 years
Property and equipment, gross	$ 23,743	$ 23,743
Tooling equipment [Member]
Summary of property and equipment
Estimated life	4 years	4 years
Property and equipment, gross	$ 97,710	$ 97,710
Leasehold improvements [Member]
Summary of property and equipment
Estimated life	5 years	5 years
Property and equipment, gross	$ 35,206	$ 35,206

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Property and Equipment (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Property and equipment (Textual)
Depreciation expense	$ 6,497	$ 390

XML

Intangible Assets (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Intangible Assets [Abstract]
Customer relationships	$ 1,001,212	$ 1,001,212
Trademarks	6,430	6,430
Intangible assets, gross	1,007,642	1,007,642
Accumulated amortization	(649,260)	(632,466)
Intangible assets, net	$ 358,382	$ 375,176

XML

Intangible Assets (Details 1)	Mar. 31, 2016 USD ($)
Future amortization of intangible assets
2016 (remainder of the year)	$ 50,382
2017	67,176
2018	67,176
2019	67,176
2020 and thereafter	106,472
Total	$ 358,382

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Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 16,794	$ 16,790
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	15 years

XML

Loan and Notes Payable (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Loan and Notes Payable/Convertible Notes Payable [Abstract]
Business loan obtained in May 2011 from Bank of the West with a credit line up to $200,000 and secured by all assets of the Company. This loan bears interest at 4.75% per annum.	$ 197,000	$ 197,000

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Loan and Notes Payable (Details 1) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Loan and Notes Payable/Convertible Notes Payable [Abstract]
4.75% Promissory note of $100,000 issued to Bank of the West on May 10, 2011 payable over 60 consecutive monthly installments with monthly principal payment of $1,650 and interest starting in June 2012. Amounts outstanding under this loan and note are personally guaranteed by the CEO of the Company.	$ 20,100	$ 25,050
5.28% unsecured Promissory note of $50,000 issued to Bank of the West in February 2016 payable over 36 consecutive monthly installments with monthly payment of $1,506 and interest starting in March 2016	48,684
Less : Current maturities	(35,632)	$ (19,800)
Note payable, net of current maturities	$ 33,152	$ 5,250

XML

Loan and Notes Payable (Details 2)	Mar. 31, 2016 USD ($)
Loan and Notes Payable/Convertible Notes Payable [Abstract]
2016 (remainder of the year)	$ 26,672
2017	21,757
2018	15,915
2019	4,440
Total remaining Payments	$ 68,784

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Loan and Notes Payable (Details Textual) - Bank of West [Member]	3 Months Ended
	Mar. 31, 2016 USD ($) Installments
Loan payable [Member]
Loan and Note Payable (Textual)
Interest rate	4.75%
Maximum line of credit	$ 200,000
Note payable [Member]
Loan and Note Payable (Textual)
Interest rate	4.75%
Promissory note issued	$ 100,000
Note issuance date	May 10, 2011
Number of installments | Installments	60
Monthly principal payment	$ 1,650
Unsecured Promissory note [Member]
Loan and Note Payable (Textual)
Interest rate	5.28%
Note issuance date	Feb. 29, 2016
Number of installments | Installments	36
Monthly principal payment	$ 1,506
Unsecured Promissory note	$ 50,000

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Related Party Transactions (Details) - USD ($)	3 Months Ended		10 Months Ended	12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Nov. 30, 2015	Dec. 31, 2014	Dec. 31, 2015
Related party transactions (Textual)
Advances from CEO to the Company for working capital purposes	$ 155,000	$ 130,000	$ 300,500	$ 266,000
Repayments of advances by the Company			$ 73,000	$ 130,000
Due to related party	$ 531,147				$ 370,614
Interest rate	5.00%
Accrued interest	$ 12,647				$ 7,114

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Convertible Notes Payable (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Loan and Notes Payable/Convertible Notes Payable [Abstract]
6% Convertible promissory notes	$ 500,000
Initial Discount	(500,000)
Accumulated amortization of discount through March 31, 2016	330,602
Remaining discount as of March 31, 2016	(169,398)
Convertible notes payable, net	$ 330,602	$ 247,724

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Convertible Notes Payable (Details Textual) - USD ($)		3 Months Ended
	Apr. 03, 2015	Mar. 31, 2016
Convertible Notes Payable (Textual)
Debenture rate of interest		5.00%
Principal amount of convertible debentures		$ 500,000
Securities Purchase Agreement [Member]
Convertible Notes Payable (Textual)
Aggregate subscription amount	$ 500,000
Debenture rate of interest	6.00%
Number of common stock to be acquired by issuing debenture and warrants	500,000
Exercise price per share (the "Warrants")	$ 0.6
Warrant [Member]
Convertible Notes Payable (Textual)
Exercise price per share (the "Warrants")		$ 0.6
Warrant expiration period		5 years
6% Convertible Debenture [Member]
Convertible Notes Payable (Textual)
Principal amount of convertible debentures		$ 500,000
Maturity date debenture		Oct. 03, 2016
Debenture conversion price per share		$ 0.5
Payment of financing cost		$ 22,500

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Derivative Liabilities (Details)	3 Months Ended
	Mar. 31, 2016 $ / shares
Stock price	$ 0.11
Weighted average strike price	$ 0.50
Dividend yield	0.00%
Minimum [Member]
Remaining contractual term (years)	6 months
Volatility	266.00%
Risk-free rate	0.59%
Maximum [Member]
Remaining contractual term (years)	4 years
Volatility	319.00%
Risk-free rate	1.21%

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Derivative Liabilities (Details 1) - Level 3 [Member]	3 Months Ended
	Mar. 31, 2016 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Beginning balance	$ 202,653
Change in fair value of derivative liabilities	(105,864)
Ending balance	$ 96,789

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Derivative Liabilities (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Derivative Liabilities (Textual)
Derivative expense	$ 188,378
Derivative liabilities	96,789		$ 202,653
Debt discount	(500,000)
Change in fair value of derivative liabilities	105,864
Amortization of debt discount	82,878
Amortization of deferred financing cost	3,730
Accrued interest related to debenture amount	29,936		$ 22,456
Embedded conversion [Member]
Derivative Liabilities (Textual)
Derivative liabilities	42,235
Derivative [Member]
Derivative Liabilities (Textual)
Debt discount	250,407
Warrant [Member]
Derivative Liabilities (Textual)
Derivative liabilities	54,554
Debt discount	$ 249,593

XML

Commitments and Contingencies (Details)	Dec. 31, 2015 USD ($)
Fiscal Year ending December 31:
2016 (remainder of the year)	$ 45,753
2017	62,721
2018	64,236
Total	$ 172,710

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Commitments and Contingencies (Details Textual)	1 Months Ended	3 Months Ended
	Aug. 31, 2015 USD ($)	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Jun. 30, 2014 ft²
Commitments and Contingencies (Textual)
Area of office and warehousing space | ft²				5,000
Monthly base rent	$ 5,050
Lease expiration date	Dec. 31, 2018
Rent expense		$ 21,643	$ 10,537

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Stockholders' Deficit (Details) - USD ($)		3 Months Ended
	Jan. 12, 2016	Mar. 31, 2016
Summary of stock warrant activities
Granted, Number of Warrants	2,080,000
Warrants [Member]
Summary of stock warrant activities
Beginning Balance, Number of Warrants/Option	501,263	501,263
Granted, Number of Warrants
Forfeited, Number of Warrants		(20)
Ending Balance, Number of Warrants/Option		501,243
Warrants/Options exercisable, Number of Warrants/Option		501,243
Beginning Balance, Weighted Average Exercise Price	$ 3.74	$ 3.74
Issued, Weighted Average Exercise Price
Forfeited, Weighted Average Exercise Price		$ 250.00
Ending Balance, Weighted Average Exercise Price		3.73
Warrants/Options exercisable, Weighted Average Exercise Price		$ 3.73
Beginning Balance, Weighted Average Remaining Contractual Life (Years)		4 years 3 months
Ending Balance, Weighted Average Remaining Contractual Life (Years)		4 years
Warrants exercisable, Weighted Average Remaining Contractual Life (Years)		4 years
Warrants outstanding, Aggregate Intrinsic Value
Warrants exercisable, Aggregate Intrinsic Value

XML

Stockholders' Deficit (Details 1) - USD ($)		3 Months Ended
	Jan. 12, 2016	Mar. 31, 2016
Summary of option activities
Granted, Number of Options	2,080,000
Options [Member]
Summary of option activities
Beginning Balance, Number of Warrants/Option	100	100
Granted, Number of Options	2,080,000	2,480,000
Exercised/forfeited/expired, Number of Options		(40,000)
Ending Balance, Number of Warrants/Option		2,440,100
Warrants/Options exercisable, Number of Warrants/Option		100
Beginning Balance, Weighted Average Exercise Price	$ 700	$ 700
Granted, Weighted Average Exercise Price	$ 0.35	0.10
Exercised/forfeited/expired, Weighted Average Exercise Price		0.10
Ending Balance, Weighted Average Exercise Price		0.13
Warrants/Options exercisable, Weighted Average Exercise Price		$ 700
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		1 year 2 months 1 day
Granted, Weighted Average Remaining Contractual Life (Years)		5 years
Exercised/forfeited/expired, Weighted Average Remaining Contractual Life (Years)		5 years
Ending Balance, Weighted Average Remaining Contractual Life (Years)		4 years 9 months 15 days
Options exercisable, Weighted Average Remaining Contractual Life (Years)		1 year 5 months 1 day
Weighted average fair value of warrants granted during the period		$ 0.35
Option outstanding, Aggregate Intrinsic Value
Option exercisable, Aggregate Intrinsic Value

XML

Stockholders' Deficit (Details Textual)			3 Months Ended
	Jan. 12, 2016 USD ($) Directors Employee $ / shares shares	Jan. 07, 2016 USD ($) $ / shares shares	Mar. 31, 2016 USD ($) $ / shares shares	Mar. 31, 2015 USD ($)	Dec. 31, 2015 $ / shares shares
Stockholders' Equity (Textual)
Common stock, shares authorized | shares			100,000,000		100,000,000
Common stock, par value | $ / shares			$ 0.001		$ 0.001
Preferred stock, shares authorized | shares			20,000,000		20,000,000
Preferred stock, par value | $ / shares			$ 0.001		$ 0.001
Common stock price per share | $ / shares			$ 0.11
Stock based compensation			$ 414,080	$ 62,500
Granted, Number of Options | shares	2,080,000
Common Stock [Member]
Stockholders' Equity (Textual)
Common stock fair value		$ 55,000
Common stock shares issued | shares		500,000
Common stock price per share | $ / shares		$ 0.11
Stock based compensation			23,571
Deferred stock- based compensation			$ 31,429
Employee Stock Option [Member]
Stockholders' Equity (Textual)
Options vested and exercisable, excercise price | $ / shares	$ 0.10
Weighted-average grant-date fair value | $ / shares	$ 0.35		$ 0.10
Granted, Number of Options | shares	2,080,000		2,480,000
Number of employee | Employee	6
Option vesting rights, description	The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share.
Option exercise price | $ / shares	$ 0.35
Black-Scholes Option, value	$ 728,000
Options forfeited | shares			40,000
Expected volatility rate	286.00%
Expected term	5 years
Risk free interest rate	1.55%
Stock Option [Member]
Stockholders' Equity (Textual)
Stock based compensation			$ 110,509
Unrecognized compensation costs related to non-vested share-based compensation			745,273
Intrinsic value for the stock options outstanding			24,000
Consultant for marketing services [Member] | Common Stock [Member]
Stockholders' Equity (Textual)
Common stock fair value	$ 35,000
Common stock shares issued | shares	100,000
Common stock price per share | $ / shares	$ 0.35
Stock based compensation			35,000
Consultant for business advisory services [Member] | Common Stock [Member]
Stockholders' Equity (Textual)
Common stock fair value	$ 175,000
Common stock shares issued | shares	500,000
Common stock price per share | $ / shares	$ 0.35
Stock based compensation			175,000
Director [Member] | Common Stock [Member]
Stockholders' Equity (Textual)
Common stock fair value	$ 70,000
Common stock shares issued | shares	200,000
Common stock price per share | $ / shares	$ 0.35
Stock based compensation			$ 70,000
Number of director | Directors	2
Consultant [Member] | Stock Option [Member]
Stockholders' Equity (Textual)
Options vested and exercisable, excercise price | $ / shares	$ 0.10
Weighted-average grant-date fair value | $ / shares	$ 0.35
Granted, Number of Options | shares	400,000
Option vesting rights, description	The options granted vest one third at the end of each of the first three years from the date of issuance and are exercisable at $0.10 per share.
Option exercise price | $ / shares	$ 0.35
Black-Scholes Option, value	$ 140,000
Expected volatility rate	286.00%
Expected term	5 years
Risk free interest rate	1.55%

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Concentration of Credit Risk (Details) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) Customer Vendor	Mar. 31, 2015 USD ($) Customer Vendor	Dec. 31, 2015 Customer
Concentration Risk [Line Items]
Number of vendor | Vendor	1	1
Purchased inventories and products for sale | $	$ 176,000	$ 177,000
Accounts Receivable [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	74.00%		92.00%
Number of customers	2		2
Sales [Member]
Concentration Risk [Line Items]
Concentration risk, percentage	40.00%	41.00%
Number of customers	2	2