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BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements are presented on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included.

For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015. Our financial condition as of March 31, 2016, and operating results for the three months ended March 31, 2016 are not necessarily indicative of the financial condition and results of operations that may be expected for any future interim period or for the year ending December 31, 2016.

Change in Estimate. The Company periodically reviews the depreciation and amortization periods for long-lived assets to ensure that the service lives coincide with the periods over which the assets are expected to provide service benefits. During the first quarter of 2016, management determined that the amortization periods for identifiable intangible assets associated with the FIN reporting unit should be reduced. Accordingly, the amortization period for customer relationships was reduced from 10 years to 4 years, and the amortization period for trade names was reduced from 13 years to 10 years. For the three months ended March 31, 2016, the aggregate effect of this change in estimate resulted in an increase in the Company’s net loss by $348 (less than $0.01 per share).

Revision of 2015 Statement of Operations. As discussed in Note 1 to the consolidated financial statements included in the Company’s 2015 Annual Report on Form 10-K, during the fourth quarter of 2015 management discovered two errors, one of which affects the previously issued financial statements for the three months ended March 31, 2015. This reporting error relates to the issuance of a credit to a large customer of the Company’s wholly owned subsidiary, FIN Electronic Cigarette Corporation, Inc., in June 2014 and resulted from the Company’s agreement to provide retroactive price concessions. In the previously issued balance sheet as of December 31, 2014, the Company failed to account for the unsettled portion of this price concession through the recognition of a liability of $2,269 as of December 31, 2014. The impact of this error on the Company’s previously reported results of operations for the three months ended March 31, 2015, was an understatement of net sales by $538.

Management has evaluated the effect of this error on the Company’s results of operations for the three months ended March 31, 2015, and determined that the impact is quantitatively and qualitatively immaterial to the Company’s previously reported results of operations for the three months ended March 31, 2015. Therefore, the Company determined that an amendment of the previously filed Quarterly Report on Form 10-Q for three months ended March 31, 2015 was not necessary. Accordingly, under SEC Staff Accounting Bulletin No. 108 the Company has revised the previously issued financial statements for the three months ended March 31, 2015 included herein to correct this error.

Additionally, in the previously issued statement of operations for the three months ended March 31, 2015, the Company incorrectly classified certain expenses which have been reclassified to conform with the current presentation. These reclassifications have been corrected in the statement of operations for the three months ended March 31, 2015, and explained in the footnotes to the table below.

The following table sets forth the previously reported results of operations for the three months ended March 31, 2015 along with the adjustments discussed above to reconcile previously reported amounts to the revised amounts for the three months ended March 31, 2015 as presented in the accompanying consolidated financial statements:

	Previously
	Reported			Adjustments			Revised

Net sales	$	11,092		$	538	⁽¹⁾	$	11,630
Cost of goods sold		(5,830	)		557	⁽²⁾		(5,273	)
Gross profit		5,262			1,095			6,357

					(557	)⁽²⁾
Operating expenses		(22,945	)		815	⁽³⁾		(22,687	)
Loss from operations		(17,683	)		1,353			(16,330	)
Other income (expense), net		(49,569	)		(815	)⁽³⁾		(50,384	)
Income before income taxes		(67,252	)		538			(66,714	)
Income tax expense		(252	)		-			(252	)

Net loss	$	(67,504	)	$	538		$	(66,966	)

Loss per common share- basic and diluted	$	(3.49	)	$	0.03		$	(3.46	)

	⁽¹⁾	Revision of previously reported net sales related to the correction of an error for $538 in the accounting for a retroactive price concession, as discussed above.
	⁽²⁾	Reclassification of $557 of kiosk rental costs from cost of goods sold to selling and marketing expenses.
	⁽³⁾	Reclassification of $810 loss on conversion of notes from professional fees and other to derivative fair value adjustment and reclassification of $5 of interest expense from professional fees and other to interest expense.