XML 27 R16.htm IDEA: XBRL DOCUMENT

CURRENT LITIGATION

6 Months Ended

Jun. 30, 2016

The Company had the following financial commitments, represented by lease agreements, as of June 30 2016,

Year ending December 31,	Total		Future Obilgation
2016		43,537.58		46,825
2017		99,815.16		103,102
2018		56,911.90		58,281
				208,208

Rent expense for the three and six months ended June 30, 2016 was $3,561 and $7,122 compared to $1,187 and $1,187 for the same period in the prior year. All rental amounts are presented in discontinued operations.

On March 15, 2015 the Company entered into a 38-month lease agreement for office space 322 Nancy Lane, Suite 7, Knoxville, Tennessee. This office was the former operational headquarters for the Company. The Company is currently working with the landlord to find another tenant for this space and remove this obligation.

On April 25, 2016 the Company entered into a lease agreement for virtual office space on New York City, New York to conduct Company business and investor relations. Rent payments commenced on May 1, 2016. Total commitment is $2,790 with expiration of April 30, 2016.

On June 20, 2016, White Fox Japan LLC, the Company’s majority owned subsidiary entered into an approximately two-year lease for office space. The lease will commence on August 1, 2016, expiring June 19, 2018. Rent is fixed over the lease period at $7,300 per month.

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.

As of March 30, 2016, pursuant to a settlement agreement under trademark litigation with plaintiff, Breathe LLC (a Florida organization), the Company had ceased its continuing operations in the eCigarette business (the effective date of the discontinuance of operations in that industry). In accordance with the settlement agreement, the Company will pay two cash payments ($10,000 immediately and $15,000 was originally due by July 31, 2016 and was paid August 10, 2016.) The Company is also required to issue 500,000 restricted common shares of Company stock (which was issued April 15, 2016) in addition to the transfer of 5,000,000 common shares which it holds in Tauriga Sciences, Inc. The Company further agrees to split 50/50 any future sales of its held inventory. The sale of inventory shall be a joint effort by the two companies and shall last for a duration of one year from April 1, 2016. After such period, the Company will dispose of any remaining inventory.

On April 15, 2016 the Company issued 500,000 shares of common stock pursuant to this agreement to be recorded at the closing price of the stock as of the day the Company entered into the settlement agreement in the amount of $50,000 (at par value.)

As of August 15, 2016, the Company has not transferred the 5,000,000 common shares which it holds in Tauriga Sciences, Inc.