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RELATED PARTY TRANSACTIONS
6 Months Ended
Jun. 30, 2015
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

The Company, through the acquisition of Vapestick, became a party to a distribution agreement with MPL Ltd. (“MPL”). Under the terms of the agreement, MPL is licensed to act as the manufacturer, importer and distributor for Vapestick products for specified retailers in return for a royalty payment. Either party may terminate the agreement after January 1, 2016 on six months prior notice and the satisfaction of certain conditions. The Chief Executive Officer of MPL is related to the Company’s President-International. Sales and purchases for the three months ended June 30, 2015 were approximately $61 and $124, respectively. Sales and purchases for the six months ended June 30, 2015 were approximately $376 and $268, respectively. As of June 30, 2015, the Company had an accounts receivable balance of approximately $75 from this related party.

 

Since early 2014, logistical and service support has been provided by an affiliate of the Company’s former President. Services have been benchmarked against other providers and management of the Company believes the costs are competitive. The Company or the affiliate may elect to discontinue this arrangement at any time. Services provided by this related party for the three months ended June 30, 2015 and 2014 totaled approximately $126 and $97, respectively. Services provided by this related party for the six months ended June 30, 2015 and 2014 totaled approximately $277 and $182, respectively. As of June 30, 2015, accounts payable includes $46 payable to this related party.

 

Certain marketing and logistics support services are provided by entities controlled by a key employee of the Company’s GEC division that was acquired from Hardwire. These services were provided prior to the Company’s 2014 acquisition of GEC and have continued under the Company’s ownership. This arrangement may be discontinued by either party at any time. Services incurred by the Company under this arrangement for the three and six months ended June 30, 2015 were approximately $386 and $816, respectively. No amounts were incurred under this arrangement for the three and six months ended June 30, 2014 since the Company did not acquire GEC until July 2014. As of June 30, 2015, accounts payable includes $65 payable to this related party.

 

The Company, through the acquisition of Vapestick, became a party to a supplier agreement with Internet Marketing Hub Ltd. (“IMH”). Under the terms of the agreement, IMH provides the labor and expertise for the design, development and maintenance, including search engine optimization for internet marketing on two websites operated by Vapestick. The Company’s President-International is a 50% owner of IMH. Depending on the results of IMH’s services, the Company is obligated to pay up to $39 per month. Total costs incurred under this agreement were approximately $18 and $130 for the three months ended June 30, 2015 and 2014, respectively. Total costs incurred under this agreement were approximately $50 and $271 for the six months ended June 30, 2015 and 2014, respectively.

 

In January 2015, two warrant holders amended their warrants whereby the number of warrants would be 1,000,000 each at an exercise price of $0.75 per share and certain adjustment provisions were removed. These transactions were entered into with affiliates of a member of the Company’s board of directors who was also a significant shareholder. Management determined that the affiliates surrendered rights that were significantly greater in value than the consideration exchanged by $44,230 and, accordingly, this amount was treated as a capital contribution since it was entered into with related parties. Additionally, in March 2015, a consultant surrendered a warrant to purchase 1,000,000 shares at common stock at an exercise price of $0.75. The fair value of the warrant on the date of surrender resulted in a gain on extinguishment of warrants of $2,233.

 

The Company’s Chief Executive Officer purchased $195 principal amount of January 2014 15% Convertible Notes, which were purchased from another note holder, as well as warrants to purchase 260,608 shares of the Company’s common stock at an exercise price of $1.01, which were issued in conjunction with the note purchase.