Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 1 - Organization and Operations
Vapir Enterprises, Inc.
Vapir Enterprises Inc. (“Vapir Enterprises” or the “Company”) was incorporated in the State of Nevada on December 17, 2009.
The Company’s principal business is focused on inventing, developing and producing aromatherapy devices and vaporizers. The
Company’s aromatherapy devices utilize heat and convection air and thereby extract natural essences and produce fresh fragrances.
Vapir, Inc. (“Vapir”) is a wholly owned subsidiary of the Company and was incorporated in the State of California in
October 2006.
Note 2 - Significant and Critical Accounting
Policies and Practices
Basis of Presentation
The accompanying interim unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange Commission for interim financial information, which
includes condensed consolidated financial statements and present the consolidated financial statements of the Company and its wholly-owned
subsidiary as of March 31, 2017. All intercompany transactions and balances have been eliminated. Accordingly, the condensed consolidated
financial statements do not include all the information and notes necessary for a comprehensive presentation of financial position
and results of operations and should be read in conjunction with the Annual Report, Form 10-K for the year ended December 31,
2016. It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been
made, which are necessary for a fair financial statement presentation. Significant intercompany accounts and transactions have
been eliminated in consolidation. The results for the interim period are not necessarily indicative of the results to be expected
for the year ending December 31, 2017. The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Use of Estimates and Assumptions and Critical
Accounting Estimates and Assumptions
In preparing the unaudited condensed consolidated
financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities
as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ
significantly from those estimates. Significant estimates made by management include, but are not limited to allowance for doubtful
accounts, inventory obsolescence and markdowns, the useful life of property and equipment, the valuation of deferred tax assets
and liabilities, valuation of intangible assets, the assumptions used to calculate fair value of stock options and warrants granted,
stock-based compensation and the fair value of common stock issued.
Cash equivalents
The Company considers all highly liquid debt instruments
and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The
Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance
Corporation. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250,000. As of March 31, 2017, the Company has not reached bank balances exceeding the FDIC insurance limit. To reduce its
risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial
institution in which it holds deposits.
Accounts receivable and allowance for doubtful
accounts
The Company has a policy of providing
on allowance for doubtful accounts based on its best estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary
based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account
balances deemed to be uncollectible are charged to bad debt expense and included in the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. As of March 31, 2017, the Company has included $27,369
in the allowance for doubtful accounts. The Company recorded bad debt expense of $25,360 during the three months ended March 31,
2017. During the three months ended March 31, 2016, the Company recorded bad debt expense of $1,297.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 2 - Significant and Critical Accounting Policies and Practices
(continued)
Inventory
Inventory Valuation
The Company values inventory, consisting of finished
goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method. The Company
reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability,
equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination
of estimated market value include (i) estimates of future demand, and (ii) competitive pricing pressures. For the three months
ended March 31, 2017 and 2016, the Company did not record a reserve for slow-moving inventory.
Inventory Obsolescence and Markdowns
The Company evaluates its current level of inventory
considering historical sales and other factors and, based on this evaluation, classifies inventory markdowns in the income statement
as a component of cost of goods sold pursuant to ASC 420 – “Exit or Disposal Cost Obligations”, to adjust inventory
to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic
conditions, customer demand or competition differ from expectations.
There was no inventory obsolescence for the reporting
period ended March 31, 2017 or 2016. There was no lower of cost or market adjustments for the reporting period ended March 31,
2017 or 2016.
Advances to suppliers
Advances to a supplier represents the cash paid
in advance which is usually in three installment payments for the purchase of inventory. The advances to a supplier are interest
free and unsecured. As of March 31, 2017, advance to the Company’s major supplier amounted $109,079. Upon shipment of the
purchase inventory, the Company reclassifies or records such advances to the supplier into inventory.
Property and Equipment
Property and equipment are carried at cost less
accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of
the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When
assets are retired, or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included
in the consolidated statement of operations.
Revenue recognition
The Company follows ASC 605 – “Revenue
Recognition” in accounting for revenue related transactions. The Company will recognize revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii)
the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Consideration paid to promote and sell the Company’s
products to customers is typically recorded as marketing costs incurred by the Company. If the amount of consideration paid to
customers exceeds the marketing costs, any excess is recorded as a reduction of revenue. The Company follows the requirements of
ASC 605-50-45-2, Revenue Recognition—Customer Payments and Incentives.
Cost of Sales
The primary components of cost of sales include
the cost of the product and shipping fees.
Shipping and Handling Costs
The Company accounts for shipping
and handling fees in accordance with ASC 605. While amounts charged to customers for shipping products are included in revenues,
the related costs are classified in cost of goods sold as incurred. Shipping costs included in cost of goods sold were $20,592
and $31,856 for the three months ended March 31, 2017 and 2016, respectively.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 2 - Significant and Critical Accounting
Policies and Practices (continued)
Advertising Costs
The Company applies ASC 720 “Other
Expenses” to account for advertising related costs. Pursuant to ASC 720-35-25-1, the Company expenses the advertising
costs when the first time the advertising takes place. Advertising costs were $8,675 and $63,835 for the three months ended
March 31, 2017 and 2016, respectively.
The amounts paid to customers for marketing expenses
incurred on behalf of the Company are recorded as marketing cost and not as a reduction of revenue in accordance with ASC 605-50-45-2,
Revenue Recognition—Customer Payments and Incentives.
Income Taxes
The Company discloses tax years that remain subject
to examination by major tax jurisdictions pursuant to the ASC Paragraph 740. The federal and state income tax returns of the Company
are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed. The Company’s
2016, 2015 and 2014 tax years are still subject to federal and state tax examination.
Earnings per Share
Earnings per share (“EPS”) is the amount
of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per
share. EPS is computed pursuant to ASC 260 – “Earnings per Share”. Pursuant to ASC 260-10-45-10 through 260-10-45-16,
basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number
of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by
deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for
the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears
in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except
that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive
potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares
issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC 260-10-45-45-21 through 260-10-45-45-23,
diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder.
The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected
in diluted EPS by application of the treasury stock method unless the provisions of paragraphs ASC 260-10-45-35 through 45-36
and ASC 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include non-vested
stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see ASC 260-10-55-23). Anti-dilutive
contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the treasury stock
method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later)
and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common
stock at the average market price during the period. (See ASC 260-10-45-29 and AS 260-10-55-4 through 55-5.) c. The incremental
shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included
in the denominator of the diluted EPS computation. Pursuant to ASC 260-10-45-40 through 45-42 convertible securities shall be
reflected in diluted EPS by application of if converted method. The convertible preferred stock or convertible debt shall be assumed
to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method,
conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The Company’s
contingent shares issuance arrangement, stock options or warrants are as follows:
|
|
For the
Period Ended
March 31,
2017
|
|
|
For the
Period Ended
March 31,
2016
|
|
Stock Options
|
|
|
1,940,000
|
|
|
|
2,440,100
|
|
Convertible Debt
|
|
|
5,599,357
|
|
|
|
5,299,357
|
|
Stock Warrants
|
|
|
500,000
|
|
|
|
500,000
|
|
Total contingent shares issuance arrangement, convertible debt, stock options or warrants
|
|
|
8,039,357
|
|
|
|
8,240,700
|
|
There were no incremental common shares under
the Treasury Stock Method for the reporting period ended March 31, 2017 or 2016.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 2 - Significant and Critical Accounting
Policies and Practices (continued)
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued the FASB Accounting
Standards Update No. 2014-09 “
Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)
This guidance amends the existing FASB Accounting
Standards Codification, creating a new Topic 606,
Revenue from Contracts with Customer.
The core principle of the guidance
is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company has
assessed the impact of this pronouncement and will continue to evaluate new transactions. The Company has not identified any transactions,
and does not expect transactions, that will have a material impact on the financial statements as a result of this pronouncement.
Note 3 - Going Concern
The Company has elected to adopt
early application of Accounting Standards Update No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic
205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).
The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the condensed consolidated financial statements, the Company has an accumulated deficit of approximately $2.78
million at March 31, 2017, a net loss of approximately $282,000 and net cash used in operating activities of approximately $12,578
for the three months ended March 31, 2017. These factors raise substantial doubt about the Company’s ability to continue
as a going concern.
The Company is attempting to further implement
its business plan and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support
its daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes
in the viability of its strategy to further implement its business plan and generate sufficient revenue and in its ability to raise
additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent
upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds
by way of a public or private offering. The consolidated financial statements do not include any adjustments related to the recoverability
and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the
Company is unable to continue as a going concern.
Note 4 - Property and Equipment
Property and equipment, stated at cost, less accumulated
depreciation consisted of the following:
|
|
Estimated life
|
|
As of
March 31,
2017
(Unaudited)
|
|
|
As of
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
Auto
|
|
3 years
|
|
$
|
12,522
|
|
|
$
|
12,522
|
|
Furniture and fixtures
|
|
5 years
|
|
|
23,743
|
|
|
|
23,743
|
|
Tooling equipment
|
|
4 years
|
|
|
100,510
|
|
|
|
100,510
|
|
Leasehold improvements
|
|
5 years
|
|
|
35,206
|
|
|
|
35,206
|
|
Less: Accumulated depreciation
|
|
|
|
|
(113,933
|
)
|
|
|
(107,419
|
)
|
|
|
|
|
$
|
58,048
|
|
|
$
|
64,562
|
|
Depreciation expense amounted to $6,514 and
$6,497 for the three months ended March 31, 2017 and 2016, respectively.
The Company completes its annual impairment testing
of property and equipment every fourth quarter of the fiscal year to evaluate the recoverability of property and equipment or whenever
events or changes in circumstances indicate that the property and equipment’s carrying amount may not be recoverable. The
Company did not record any impairment of its property and equipment at March 31, 2017 and December 31, 2016, respectively.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 5 - Intangible Assets
Intangible assets consist of the following:
|
|
As of
March 31,
2017
(Unaudited)
|
|
|
As of
December 31,
2016
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
1,001,212
|
|
|
$
|
1,001,212
|
|
Trademarks
|
|
|
6,430
|
|
|
|
6,430
|
|
|
|
|
1,007,642
|
|
|
|
1,007,642
|
|
Accumulated amortization
|
|
|
(835,909
|
)
|
|
|
(826,646
|
)
|
Intangible assets, net
|
|
$
|
171,734
|
|
|
$
|
181,574
|
|
Customer Relationships are amortized based upon
the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated
over the estimated fifteen-year life of the Customer Relationships.
Legal costs associated with serving and
protecting trademarks are being capitalized. The Company filed trademarks for its company logos with an estimated useful life of
15 years. The Company is amortizing the costs of trademarks over their estimated useful lives on a straight-line basis. Amortization
of trademarks is included in operating expenses as reflected in the accompanying condensed consolidated statements of operations.
The Company assesses fair value for any impairment to the carrying values. The Company did not record any impairment of its intangible
assets at March 31, 2017 and December 31, 2016, respectively.
Amortization expense was $9,840 and $16,794 for the three months ended March 31, 2017 and 2016, respectively.
Future amortization of intangible assets is as follows:
2017 (remainder of the year)
|
|
$
|
29,520
|
|
2018
|
|
|
39,361
|
|
2019
|
|
|
39,361
|
|
2020
|
|
|
39,361
|
|
2021 and thereafter
|
|
|
24,131
|
|
Total
|
|
$
|
171,734
|
|
Note 6 - Loan and Notes Payable
|
|
As of
March 31,
2017
(Unaudited)
|
|
|
As of
December 31,
2016
|
|
|
|
|
|
|
|
|
|
|
The Company obtained a business loan in May 2011 from a financial institution with a credit line up to
$200,000 and secured by all assets of the Company. This loan bears a variable interest based on changes in the Bank of the West
Prime Rate and is due on demand. As of March 31, 2017, the variable interest rate was 4.75%.
|
|
$
|
197,000
|
|
|
$
|
197,000
|
|
Notes payable
The Company has a 4.75% Promissory note of $100,000 issued with the same financial institution on May 10, 2011 payable over 60 consecutive monthly installments with monthly principal payment of $1,650 and interest starting in June 2012. Amounts outstanding under this loan and note are personally guaranteed by the CEO of the Company and are due in full by on April 23, 2017. This note has been extinguished accordingly.
|
|
|
300
|
|
|
|
5,050
|
|
Unsecured Promissory note of $50,000 bearing interest of 5.28%, issued in February 2016 payable over 36 consecutive monthly installments of $1,506 starting in March 2016 and is due on March 9, 2019.
|
|
|
32,832
|
|
|
|
36,882
|
|
|
|
|
|
|
|
|
|
|
Less: Current maturities
|
|
|
(16,997
|
)
|
|
|
(21,722
|
)
|
Note payable, net of current maturities
|
|
$
|
16,135
|
|
|
$
|
20,410
|
|
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 6 - Loan and Notes Payable (continued)
Future minimum Loan and Notes Payable principal
payments are as follows:
2017 (Remainder of Year)
|
|
$
|
12,737
|
|
2018
|
|
|
15,907
|
|
2019
|
|
|
4,487
|
|
Total Remaining Payments
|
|
$
|
33,132
|
|
Convertible Notes payable
On April 3, 2015, the Company closed a
financing transaction by entering into a Securities Purchase Agreement with two accredited investors for an aggregate subscription
amount of $500,000. Pursuant to the Securities Purchase Agreement, the Company issued 6% Convertible Debentures and warrants to
acquire 500,000 shares of the Company’s common stock at an exercise price of $0.10 per share.
The terms of the Debenture and the Warrants are
as follows:
6% Convertible Debenture
The total principal amount of the Debenture
is $500,000. The Debenture accrues interest at 6% per annum and matured on October 3, 2016. The Debenture is convertible any time
after its issuance date. The Purchaser has the right to convert the Debenture into shares of the Company’s common stock at
$0.10 per share. The conversion price, however, is subject to full ratchet anti-dilution in the event that the Company issues any
securities at a per share price lower than the conversion price then in effect. The Company paid financing costs of $22,500 in
connection with this Debenture which was initially recorded as prepaid financing cost and was amortized over the term of the Debenture.
The note was initially issued on April 3, 2015 at a discount of $500,000. The unpaid principal balance due as of December 31, 2016
and March 31, 2017 was $500,000.
Debt discount was fully amortized during
the year ended December 31, 2016.
On March 23, 2017, the Company completed
the extension of its $500,000 6% Senior Convertible Debenture. The Company and the investors held on-going discussions prior to
and post maturity to extend the original agreement. As a result of the extension, the new maturity date is amended to July 26,
2018. Accordingly, the outstanding Convertible Debenture was classified as a Long-term Liability.
Warrants
The Company issued warrants to acquire
500,000 shares of the Company’s common stock. The Warrants issued in this transaction are immediately exercisable at an exercise
price of $0.10 per share, subject to applicable adjustments including full ratchet anti-dilution in the event that the Company
issue any securities at a per share price lower than the exercise price then in effect. The Warrants have an expiration period
of five years from the date of the original issuance.
Note 7 - Related Party Transactions
Advances from Executive Officer,
Significant Stockholder
From time to time, the Company’s
Chairman, CEO and significant stockholder advances funds to the Company for working capital purposes. These advances are unsecured,
due upon demand and bear interest at 5% per annum.
At March 31, 2017 and December 31, 2016,
these advances amounted to $840,434 and $831,084, respectively. Included in the advances are accrued interest due to the Company’s
CEO totaling $46,934 and $37,583, at March 31, 2017 and December 31, 2016, respectively.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 8 - Derivative Liabilities
Since the terms of the Debentures and Warrants
in the April 2015 closing include a down-round provision under which the conversion price and exercise price could be affected
by future equity offerings undertaken by the Company under the provisions of ASC 815-40, “Derivatives and Hedging - Contracts
in an Entity’s Own Stock”, the embedded conversion options and the warrants were accounted for as derivative liabilities
at the date of issuance and adjusted to fair value through earnings at each reporting date. In accordance with ASC 815, the Company
has bifurcated the conversion feature of the convertible Debentures, along with the free-standing warrant derivative instruments
and recorded derivative liabilities on their issuance date. The Company uses the Black Scholes model to value the derivative liabilities.
The Debentures were all discounted in full based on the valuations and the Company recognized an additional derivative expense
of $188,378 upon initial recording of the derivative liabilities. The total debt discount of $500,000 consisted of valuation of
the derivatives of $250,407 and the valuation of the warrants of $249,593 to be amortized over the terms of the note. These derivative
liabilities are then revalued on each reporting date. The loss resulting from the change in fair value of these convertible instruments
was $149,516 for the three months ended March 31, 2017 compared to a gain of $105,864 for the three months ended March 31, 2016.
At March 31, 2017 the Company recorded a warrant derivative liability of $74,811 and note derivative liability of $380,618.
The following table summarizes the values of certain
assumptions used by the Company’s custom model to estimate the fair value of the derivative liabilities as of March 31, 2017:
|
|
As of
March 31,
2017
|
|
|
|
(Unaudited)
|
|
Stock price
|
|
$
|
0.03
|
|
Weighted average strike price
|
|
$
|
0.10
|
|
Remaining contractual term (years)
|
|
|
1.32 to 3.00 years
|
|
Volatility
|
|
|
269% to 299
|
%
|
Risk-free rate
|
|
|
1.03% to 1.50
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
The following table sets forth a summary of the
changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis:
|
|
For the
three months
ended
March 31,
2017
|
|
Beginning balance
|
|
$
|
305,913
|
|
Change in fair value of derivative liabilities
|
|
|
149,516
|
|
Ending balance
|
|
$
|
455,429
|
|
Note 9 - Commitments and Contingencies
Operating lease
In June 2014, a lease agreement was signed for
an office and warehousing space consisting of approximately 5,000 square feet located in San Jose, California with a term commencing
in June 2014 and expiring in October 2015. In August 2015, the Company entered into an amendment agreement to extend the term of
the lease which will expire on December 31, 2018. Pursuant to the amended agreement, the lease requires the Company to pay a monthly
base rent of $5,050 plus a pro rata share of operating expenses beginning November 1, 2015. The base rent is subject to an annual
increase beginning in November 2016 as defined in the amended lease agreement. This lease agreement is personally guaranteed by
the President of the Company.
Effective September 15, 2016, the Company entered
into a one year lease of space consisting of approximately 1,819 square feet located in San Jose, California, with the term expiring
in September 14, 2017. The base rent for the new agreement is $1,819 per month. As a result, the Company entered into a sublease
agreement (“Sub Lessee”) to sublease the previous office and warehousing space in San Jose, California with a term
commencing on September 1, 2016 and expiring October 31, 2017. The sublease agreement requires the sub lessee to pay to the Company
a base rent of $5,050 plus pro rata share of operating expenses beginning September 1, 2016. The base rent increased beginning
in November 2016 as defined in the amended lease agreement, to $5,202.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 9 - Commitments and Contingencies
(continued)
Litigation
Future minimum rental payments required under this
operating lease are as follows:
Years ending December 31:
|
|
|
|
|
|
|
|
2017
|
|
$
|
56,212
|
|
2018
|
|
|
64,236
|
|
Total
|
|
$
|
120,448
|
|
From time to time, the Company is involved in litigation
matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot
be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened
against the Company, the ultimate disposition of which would have a material adverse effect on the Company’s business, results
of operations, financial condition or cash flows.
Note 10 - Stockholders’ Deficit
Shares Authorized
The authorized capital of the Company consists
of 100,000,000 shares of common stock, par value $0.001 per share and 20,000,000 shares of preferred stock, par value $0.001 per
share.
Vapir Enterprises, Inc. and Subsidiary
Notes to Unaudited Condensed Consolidated Financial
Statements
Note 10 - Stockholders’ Deficit (continued)
Warrants
In April 2015, the Company issued a 6%
Convertible Debenture (the “Debenture”) and warrants exercisable into 500,000 shares of common stock at an
exercise price of $0.60 per share which was adjusted down to $0.10 as a result of the Company’s issuance of options
with an exercise price of $0.10 in January 2016 (the “Warrants”). Refer to debt footnote for additional detail.
Additionally, during the three months ended March 31, 2017, a total of 1,243 warrants expired. Stock warrant activities for
the three months ended March 31, 2017 are summarized as follows:
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic
Value
|
|
Balance at December 31, 2016
|
|
|
501,243
|
|
|
|
3.73
|
|
|
|
3.25
|
|
|
|
-
|
|
Expired
|
|
|
(1,243
|
)
|
|
|
1,264
|
|
|
|
-
|
|
|
|
-
|
|
Balance at March 31, 2017
|
|
|
500,000
|
|
|
|
.10
|
|
|
|
3.00
|
|
|
|
-
|
|
Warrants exercisable at March 31, 2017
|
|
|
500,000
|
|
|
$
|
.10
|
|
|
|
3.00
|
|
|
$
|
-
|
|
Options
During the three months ended March 31, 2017,
100 stock options expired. Stock option activities for the three months ended March 31, 2017 are summarized as follows:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic Value
|
|
Balance at December 31, 2016
|
|
|
1,940,100
|
|
|
|
.14
|
|
|
|
4.04
|
|
|
|
-
|
|
Expired
|
|
|
(100
|
)
|
|
|
700
|
|
|
|
|
|
|
|
-
|
|
Balance at March 31, 2017
|
|
|
1,940,000
|
|
|
|
.10
|
|
|
|
3.79
|
|
|
|
-
|
|
Options exercisable at March 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Note 11 - Concentration of Credit Risk
Concentration of Revenue and Supplier
During the three months ended March 31, 2017,
sales to two customers represented approximately 35% of the Company’s net sales relative to 40% during the three months
ended March 31, 2016.
As of March 31, 2017, and December 31, 2016, the
Company had two customers representing approximately 29% of accounts receivable and one customer representing approximately 29%
of accounts receivable, respectively.
Additionally, we use electronic contract manufacturers
(EMS) to make our products (primarily located in China). We specify the requirements and specification and the products are built
based on the Specification and Design. We have been able to extend our credit with our suppliers but there are always risk that
suppliers reduce their credit limit or terms of credit
Note 12 - Subsequent Events
The Company has evaluated all events that occurred
after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.
The Management of the Company determined that there were no reportable subsequent event(s) to be disclosed.