CURRENT LITIGATION	9 Months Ended
Sep. 30, 2015
Notes to Financial Statements
CURRENT LITIGATION	Typenex Dispute On May 18, 2015, Typenex Co-Investment, LLC (“Typenex”) filed a binding arbitration notice against the Company in the State of Utah, Case No. 150903317 (the “Utah Lawsuit”) regarding a certain Warrant to Purchase Shares of Common Stock (the “Warrant”) issued by the Company to Typenex on April 28, 2014 (the “Arbitration”) in connection with a Convertible Promissory Note of the same date (the “Note”). On April 29, 2015, Typenex sent a Notice of Exercise to the Company for the issuance of 7,541,511 shares of the Company’s common stock (the “Initial Shares”) based on a cashless exercise provision contained in the Warrant along with an opinion letter indicating the shares should be issued without restrictive legend pursuant to Rule 144 under the Securities Act of 1933, as amended. The Company immediately filed for an emergency injunction in the State of New Jersey, the location of the Company’s transfer agent. The injunction was granted The Company has filed a response and counterclaim to the Arbitration notice alleging, among other things, that Typenex did not fulfill its obligations under the original Note and failed to disclose material matters regarding Typenex and its principal to the Company and requested damages and attorneys’ fees be paid by Typenex to the Company. On September 8, 2015, the Company’s transfer agent was required to release the Initial Share to Typenex as a result of the Company failing to maintain the bond requirement agreed to by the Company and Typenex as part of the injunction. The number of Initial Shares is based on a price reset to equal the conversion price associated with the Note. The price reset which resulted in the partial conversion to 7,541,511 common shares based on the difference between the current market value (market price of $0.25 multiplied by exercise shares of 690,625) and the exercise price ($0.0375) multiplied by number of exercise shares (690,625.) This number is then divided by the adjusted price of the common stock ($0.01946.) On October 13, 2015, Typenex and the Company participated in a mediation in an attempt to resolve the Utah Lawsuit without either party having to incur additional legal and court fees. As a result of the mediation and in order to resolve the Utah Lawsuit and the Arbitration and all other disputes between, on November 17, 2015 (the “Typenex Effective Date”), the Company and Typenex entered into a Settlement Agreement, Waiver and Release of Claims (the “Settlement Agreement”) and related Exchange Agreement (the “Exchange Agreement”), Pursuant to the terms of the Settlement Agreement and Exchange Agreement, the Company agreed to issue to Typenex 8,000,000 shares of the Company’s common shares of stock in exchanges for any rights Typenex may or may not have had under the Warrant. The Company will deliver the shares to Typenex in two installments: (i) 4,000,000 Shares with five trading days of the Effective Date (the “First Installment Shares”) and (ii) 4,000,000 Shares on or before January 1, 2016 (the “Second Installment Shares”). The First Installment Shares and the Second Installment Shares are collectively referred to herein as the Typenex Shares. Additionally, pursuant to the Settlement Agreement, beginning on January 1, 2016, Typenex shall have the right to put the Typenex Shares back to the Company (the “Put Right”) at the following prices: (a) for Typenex Shares put to the Company from January 1, 2016 to April 30, 2016 the price will be $0.01 per share; (b) for Typenex Shares put to the Company from May 1, 2016 to August 31, 2016 the price will be at $0.02 per share; and (c) any Typenex Shares put to Company between September 1, 2016 and December 31, 2016 the price will be at $0.03 per share. Typenex shall have the right to put up to 666,667 Typenex Shares per month to Company (the “Monthly Put Amount”) per month. If the number of Typenex Shares put to Company in a given month is less than the Monthly Put Amount such difference, the “Rollover Shares”, Typenex shall have the right to put such Typenex Shares to Company at any time in the same or immediately succeeding period. In addition to the Monthly Put Amount, Typenex shall also have the right to put up to 666,667 Rollover Shares per month to Company. At such time that Typenex’s Net Sales (gross proceeds of sales of the Typenex Shares sold in a minus any trading commissions or costs associated with clearing and selling such Typenex Shares minus the purchase price paid for any shares of Common Stock purchased on the open market) of Typenex Shares is equal to or greater than $200,000, Typenex’s Put Right shall automatically terminate and Typenex shall have no further rights to put Typenex Shares or Rollover Shares. Additionally, Typenex agreed that during any calendar week it would not sell more Typenex Shares than the greater of (i) 10% of the weekly trading volume of the Common Stock as reported on Bloomberg, L.P. or (ii) an aggregate market value of $5,000. Upon execution of the Settlement Agreement and Exchange Agreement, both parties released all claims each may have against the other relating to any other agreements to which both may be party except for any disputes that may arise under the Settlement Agreement, Exchange Agreement and the documents ancillary to both. Under the Settlement Agreement, the Company executed a Confession of Judgment in the amount of $500,000 (the “Confession of Judgment”). In the event the Company commits a material breach of the Settlement Agreement which is not cured within five trading days, Typenex shall have the right to enforce the Confession of Judgment. The Confession of Judgment, if filed as set forth above, would carry an interest rate of 12% until paid. Trademark dispute On August 5, 2015, the Company received a notice from Breathe, LLC, a Florida limited liability company (“Breathe LLC”), that the Company was violating Breathe LLC’s trademark rights under U.S. Trademark Registration No. 4,633,887 for the name “Breathe” filed on September 27, 2013 and a demand for the Company to immediately cease and desist from such use. The Company believes that it has rights of prior use to the name “Breathe” under the federal trademark laws. As such, on August 10, 2015, the Company filed (i) a Petition for Cancellation with the United States Patent and Trademark Office regarding U.S. Trademark Registration No. 4,633,887 and (ii) a Complaint against Breathe LLC in the United States District Court of Eastern District of Tennessee (the "Tennessee Court"), Civil Action No. 3:15-cv-00345 requesting a declaratory judgment regarding the Company’s rights to use the trademark. A default judgment is currently pending in the Tennessee Court against Breathe LLC for failure to respond to the Tennessee Court complaint. Breathe LLC has requested the default judgment not be entered and that it be given an extension of time to respond. The Tennessee Court has not ruled on Breathe LLC’s request as of the date of the filing of this Form 10-Q. On August 16, 2015, the Company was notified that on August 12, 2015 Breathe LLC filed a Complaint in the United States Southern District Court of New York (the “New York Court”), Civil Action N. 1:15-cv-06403, against the Company and its Chief Executive Officer, Joshua Kimmel, demanding, among other things, damages of $5,000,000 and an injunction restraining the Company from using the name “Breathe”. On November 8, 2015, the New York Court held a hearing regarding Breathe LLC’s request for a preliminary injunction. On the same day, the New York Court entered an order denying Breathe LLC’s request for a preliminary injunction finding "uncontroverted evidence showing that Kimmel began distributing, promoting and advertising electronic cigarettes with the "Breathe" mark prior to September 27(, 2013).". Despite the New York Court’s denial, the overall litigation continues. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so. If the Company is unable to prevail, it may be required to market its products under a different name.

CURRENT LITIGATION

9 Months Ended

Sep. 30, 2015

Typenex Dispute

On May 18, 2015, Typenex Co-Investment, LLC (“Typenex”) filed a binding arbitration notice against the Company in the State of Utah, Case No. 150903317 (the “Utah Lawsuit”) regarding a certain Warrant to Purchase Shares of Common Stock (the “Warrant”) issued by the Company to Typenex on April 28, 2014 (the “Arbitration”) in connection with a Convertible Promissory Note of the same date (the “Note”). On April 29, 2015, Typenex sent a Notice of Exercise to the Company for the issuance of 7,541,511 shares of the Company’s common stock (the “Initial Shares”) based on a cashless exercise provision contained in the Warrant along with an opinion letter indicating the shares should be issued without restrictive legend pursuant to Rule 144 under the Securities Act of 1933, as amended. The Company immediately filed for an emergency injunction in the State of New Jersey, the location of the Company’s transfer agent. The injunction was granted The Company has filed a response and counterclaim to the Arbitration notice alleging, among other things, that Typenex did not fulfill its obligations under the original Note and failed to disclose material matters regarding Typenex and its principal to the Company and requested damages and attorneys’ fees be paid by Typenex to the Company.

On September 8, 2015, the Company’s transfer agent was required to release the Initial Share to Typenex as a result of the Company failing to maintain the bond requirement agreed to by the Company and Typenex as part of the injunction. The number of Initial Shares is based on a price reset to equal the conversion price associated with the Note. The price reset which resulted in the partial conversion to 7,541,511 common shares based on the difference between the current market value (market price of $0.25 multiplied by exercise shares of 690,625) and the exercise price ($0.0375) multiplied by number of exercise shares (690,625.) This number is then divided by the adjusted price of the common stock ($0.01946.)

On October 13, 2015, Typenex and the Company participated in a mediation in an attempt to resolve the Utah Lawsuit without either party having to incur additional legal and court fees. As a result of the mediation and in order to resolve the Utah Lawsuit and the Arbitration and all other disputes between, on November 17, 2015 (the “Typenex Effective Date”), the Company and Typenex entered into a Settlement Agreement, Waiver and Release of Claims (the “Settlement Agreement”) and related Exchange Agreement (the “Exchange Agreement”), Pursuant to the terms of the Settlement Agreement and Exchange Agreement, the Company agreed to issue to Typenex 8,000,000 shares of the Company’s common shares of stock in exchanges for any rights Typenex may or may not have had under the Warrant. The Company will deliver the shares to Typenex in two installments: (i) 4,000,000 Shares with five trading days of the Effective Date (the “First Installment Shares”) and (ii) 4,000,000 Shares on or before January 1, 2016 (the “Second Installment Shares”). The First Installment Shares and the Second Installment Shares are collectively referred to herein as the Typenex Shares.

Additionally, pursuant to the Settlement Agreement, beginning on January 1, 2016, Typenex shall have the right to put the Typenex Shares back to the Company (the “Put Right”) at the following prices: (a) for Typenex Shares put to the Company from January 1, 2016 to April 30, 2016 the price will be $0.01 per share; (b) for Typenex Shares put to the Company from May 1, 2016 to August 31, 2016 the price will be at $0.02 per share; and (c) any Typenex Shares put to Company between September 1, 2016 and December 31, 2016 the price will be at $0.03 per share. Typenex shall have the right to put up to 666,667 Typenex Shares per month to Company (the “Monthly Put Amount”) per month. If the number of Typenex Shares put to Company in a given month is less than the Monthly Put Amount such difference, the “Rollover Shares”, Typenex shall have the right to put such Typenex Shares to Company at any time in the same or immediately succeeding period. In addition to the Monthly Put Amount, Typenex shall also have the right to put up to 666,667 Rollover Shares per month to Company. At such time that Typenex’s Net Sales (gross proceeds of sales of the Typenex Shares sold in a minus any trading commissions or costs associated with clearing and selling such Typenex Shares minus the purchase price paid for any shares of Common Stock purchased on the open market) of Typenex Shares is equal to or greater than $200,000, Typenex’s Put Right shall automatically terminate and Typenex shall have no further rights to put Typenex Shares or Rollover Shares.

Additionally, Typenex agreed that during any calendar week it would not sell more Typenex Shares than the greater of (i) 10% of the weekly trading volume of the Common Stock as reported on Bloomberg, L.P. or (ii) an aggregate market value of $5,000.

Upon execution of the Settlement Agreement and Exchange Agreement, both parties released all claims each may have against the other relating to any other agreements to which both may be party except for any disputes that may arise under the Settlement Agreement, Exchange Agreement and the documents ancillary to both. Under the Settlement Agreement, the Company executed a Confession of Judgment in the amount of $500,000 (the “Confession of Judgment”). In the event the Company commits a material breach of the Settlement Agreement which is not cured within five trading days, Typenex shall have the right to enforce the Confession of Judgment. The Confession of Judgment, if filed as set forth above, would carry an interest rate of 12% until paid.

Trademark dispute

On August 5, 2015, the Company received a notice from Breathe, LLC, a Florida limited liability company (“Breathe LLC”), that the Company was violating Breathe LLC’s trademark rights under U.S. Trademark Registration No. 4,633,887 for the name “Breathe” filed on September 27, 2013 and a demand for the Company to immediately cease and desist from such use. The Company believes that it has rights of prior use to the name “Breathe” under the federal trademark laws. As such, on August 10, 2015, the Company filed (i) a Petition for Cancellation with the United States Patent and Trademark Office regarding U.S. Trademark Registration No. 4,633,887 and (ii) a Complaint against Breathe LLC in the United States District Court of Eastern District of Tennessee (the "Tennessee Court"), Civil Action No. 3:15-cv-00345 requesting a declaratory judgment regarding the Company’s rights to use the trademark. A default judgment is currently pending in the Tennessee Court against Breathe LLC for failure to respond to the Tennessee Court complaint. Breathe LLC has requested the default judgment not be entered and that it be given an extension of time to respond. The Tennessee Court has not ruled on Breathe LLC’s request as of the date of the filing of this Form 10-Q. On August 16, 2015, the Company was notified that on August 12, 2015 Breathe LLC filed a Complaint in the United States Southern District Court of New York (the “New York Court”), Civil Action N. 1:15-cv-06403, against the Company and its Chief Executive Officer, Joshua Kimmel, demanding, among other things, damages of $5,000,000 and an injunction restraining the Company from using the name “Breathe”. On November 8, 2015, the New York Court held a hearing regarding Breathe LLC’s request for a preliminary injunction. On the same day, the New York Court entered an order denying Breathe LLC’s request for a preliminary injunction finding "uncontroverted evidence showing that Kimmel began distributing, promoting and advertising electronic cigarettes with the "Breathe" mark prior to September 27(, 2013).". Despite the New York Court’s denial, the overall litigation continues. Although the Company believes it will prevail on the merits, there can be no guaranty that it will do so. If the Company is unable to prevail, it may be required to market its products under a different name.