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SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2015
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 15. SUBSEQUENT EVENTS

 

The Company evaluates events that have occurred after the balance sheet date but before the consolidated financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the accompanying consolidated financial statements other than those set forth below.

 

On January 4, 2016, the Company issued an aggregate 214 shares of common stock to two employees and a consultant as compensation for services rendered to the Company.

 

On January 25, 2016, the Units in the July 2015 offering automatically separated into one-fourth of a share of Series A Convertible Preferred Stock and Series A Warrants. Each one-fourth share of Series A Convertible Preferred Stock may be converted into 0.1429 shares of Vapor common stock by the holder. From January 25, 2016 through April 6, 2016, 12,594 shares of Series A Convertible Preferred Stock have been converted and the Company has issued 503,799 shares of its common stock to settle these conversions. In addition, 43,100 Series A Warrants have been exercised through the cashless exercise provision in the Series A Warrant resulting in the issuance of 64.3 million shares of the Company’s common stock. As of the close of business April 6, 2016, there are 64,932,483 shares of the Company’s common stock issued and outstanding.

 

As of April 6, 2016, there were approximately 838 shares of Series A Convertible preferred stock, 1,031,670 Series A warrants outstanding. At April 6, 2016, the Company has approximately 4.94 billion shares of common stock available for future issuances. If all of the remaining 1,031,670 Series A Warrants were exercised pursuant to a cashless exercise and the closing bid price of our common stock as of the two trading days prior to the time of such exercise was $0.0037 per share and the Black Scholes Value of $75.7567 (the Black Scholes Value as of April 6, 2016), then a total of approximately 22.4 billion shares of our common stock would be issued to the holders of such Series A Warrants. If a sufficient number of shares of common stock are not available for issuance upon exercise of any Series A Warrants or if the Company fails to meet certain conditions set forth in the Series A Warrants, the Company may be required to elect to make cash payments to satisfy its obligations pursuant to the Series A Warrants.

 

On January 22, 2016, the Company received a letter from the Listing Qualifications Staff (the “Staff”) of The NASDAQ Stock Market LLC (“Nasdaq”) indicating that the Staff had determined to delist the Company’s securities based upon its concerns that the Company’s continued listing on Nasdaq, particularly pursuant to a grace period within which to regain compliance with the $1.00 bid price requirement set forth in Nasdaq Listing Rule 5450, is no longer in the public interest as that concept is described in Nasdaq Listing Rule 5110. Specifically, the Staff indicated that, given the potential for dilution of the Company’s stockholders that may be caused by the cashless exercise provision of the Company’s Series A warrants, the Staff believes that the grace period provided to the Company to regain compliance with the $1.00 bid price requirement is no longer warranted. Previously on September 14, 2015, the Staff had notified the Company that, based upon its non-compliance with the minimum $1.00 bid price requirement for the prior 30 consecutive business days, the Company – in accordance with the Nasdaq Listing Rules – had been provided a grace period, through March 14, 2016, to regain compliance with the minimum bid price requirement. On the afternoon of February 11, 2016, the Company was notified by Nasdaq that trading of the Company’s common stock would be halted.

 

After evaluating retail store operations, management decided to close one of its Atlanta area retail stores on February15, 2016. At the date of the store closing, the Company had a $12,600 obligation under the store lease.

 

On February 16, 2016, the “Company notified the Staff of Nasdaq that it was withdrawing its request to the Nasdaq Listing Qualifications Panel (the “Panel”) for an appeal of the delisting determination made by the Staff on January 22, 2016. As a result, the Company’s shares of common stock were suspended from The Nasdaq Capital Market at the opening of business on Wednesday, February 17, 2016. Nasdaq filed a Form 25 Notification of Delisting with the Securities Exchange Commission relating to the delisting of the Company’s common stock. The official delisting of the Company’s common stock became effective ten days thereafter. Upon the delisting from Nasdaq, the Company no longer met the “Equity Conditions” required to issue Company common stock to fulfill a cashless exercise pursuant to Section 1(d) of its Series A Warrants.

 

On February 17, 2016, certain holders (each, a “Holder”) of the Company’s Series A Warrants entered into standstill agreements with the Company (each, a “Standstill Agreement”), pursuant to which, among other things, each Holder agreed not to exercise their Series A Warrants pursuant to the “cashless exercise” provisions of the Series A Warrants prior to April 15, 2016, in whole or in part, which period may be extended in certain circumstances. These circumstances include the Company being delayed beyond April 15, 2016 in meeting the requirements for listing or quotation on the OTCQX or the OTCQB. The Standstill Agreements may be amended by Holders owning a majority of the issued and outstanding Series A Warrants executing the Standstill Agreements. On March 16, 2016, the Series A Warrant Standstill Agreements were amended and restated to extend indefinitely the exercise restriction on the Series A Warrants. Pursuant to the terms of the Amended Standstill Agreements, on any given trading day that a holder of the Series A Warrant wishes to exercise its Series A Warrants, such Holder has agreed that it will not exercise its Series A Warrant into a number of shares of common stock in excess of its pro-rata percentage of, in the aggregate among all Holders, 50% of the daily average composite trading volume of the Company’s common stock for the three-trading day period immediately prior to exercise. If a Holder does not exercise its pro-rata portion of its Series A Warrants on a given trading day, the unexercised amounts will not roll over and cumulate with subsequent trading days. More than 85% of the Series A Warrants are subject to the Amended Standstill Agreement. 

 

On March 15, 2016, the Company began trading on the OTCQB Market at the opening of the markets on March 16, 2016 under its temporary symbol, VPCOD. As of March 16, 2016, the Company met the “Equity Conditions” required to issue Company common stock to fulfill a cashless exercise pursuant to Section 1(d) of its Series A Warrants.

 

On March 21, 2016, the Company held a special meeting and the majority of its stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock at a ratio between 1-for-10,000 and 1-for-20,000, such ratio to be determined by the Company’s Board. The Board has the discretion to implement the Reverse Stock Split at any time prior to April 15, 2017.