S-1

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Victory Electronic Cigarettes Corporation is offering shares of its common stock. Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “ECIG”. The last reported sale price of our common stock on the Over-the-Counter Bulletin Board on May 12, 2014 was $7.65 per share. In conjunction with this offering, we intend to apply to list our common stock on the Nasdaq Global Market under the symbol “ECIG.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 9.

We have granted the underwriters a 30-day option to purchase up to an additional shares of our common stock from us at the public offering price less the underwriting discount if the underwriters sell more than shares of our common stock in this offering.

None of the Securities and Exchange Commission, any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You may rely on the information contained in this prospectus. Neither we nor any of the underwriters have authorized anyone to provide information different from that contained in this prospectus. When you make a decision about whether to invest in our common stock, you should not rely upon any information other than the information in this prospectus. Neither the delivery of this prospectus nor sale of our common stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these shares of our common stock in any circumstances under which the offer of solicitation is unlawful.

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications and other published independent sources. Some data is also based on our good faith estimates. Although we believe these third-party sources are reliable as of their respective dates, neither we nor the underwriters have independently verified the accuracy or completeness of this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section entitled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications.

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ^®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, before making an investment decision. All references to “we,” “us,” “our,” and the “Company” mean Victory Electronic Cigarettes Corporation.

Our Company

We are one of the leading marketers and distributors of products for the rapidly growing, global electronic cigarette (“e-cigarette”) industry. E-cigarettes are battery-powered products that simulate tobacco smoking through inhalation of nicotine vapor without the fire, flame, tobacco, tar, carbon monoxide, ash, stub, smell and other chemicals found in traditional combustible cigarettes. According to Euromonitor, the global tobacco industry represents a $756 billion market worldwide with an estimated 1.3 billion smokers globally according to The American Cancer Society, and these existing smokers are our target demographic and represent our primary source of revenue growth. We currently sell our products through more than 50,000 outlets across multiple channels across multiple countries, and have leading positions in the large U.S. and U.K. markets.

We accommodate the various product preferences of e-cigarette users by offering a comprehensive set of product offerings, including disposables, rechargeables, tanks, starter kits, e-liquids, open and closed-end vaping systems and accessories. Our high quality products consist of premium components and nicotine liquids that undergo rigorous quality testing during production. We market our products through what we believe is one of the most extensive brand portfolios in the e-cigarette industry. Our global brand portfolio includes such well-known brands as FIN, VIP, VAPESTICK, Victory, Victoria and El Rey brands. We believe that this combination of product breadth and quality, combined with our effective brand strategy, resonates strongly with consumers who associate our products with ease of use, quality, reliability and great taste.

Stronger consumer demand has led retailers to allocate additional shelf space to e-cigarettes and we strive to offer our products at or near every point of distribution where traditional cigarettes are available in the markets we serve. We sell our products through a variety of channels, including wholesale distributors, convenience stores, grocery stores, mass merchandisers, club stores, vape shops, retail mobile kiosk units, owned retail stores, independent retailers, our e-commerce websites, on-premise outlets such as restaurants and bars and other alternative outlets.

We are focused on rapidly securing additional retail distribution in both the domestic United States and international markets through strategic partnerships with key retailers and distributors. We plan on further penetrating existing markets and acquiring new customers by implementing our multi-brand/multi-product strategy, offering products across all price points, to satisfy the demand of consumers with varying preferences. We believe we offer retailers and distributors attractive margins as a result of our low-cost position and structured incentives.

Our goal is to become the leading e-cigarette company in the world. We expect to achieve that goal by maximizing our points of distribution, maintaining our low-cost position and continuing to differentiate our products and brands in order to resonate with consumers in local markets around the world. We have grown our business both organically and through strategic acquisitions. Our growth trajectory has been further enhanced by accelerating global demand for e-cigarettes over the past few years. Including the recent acquisitions as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Acquisitions” in this prospectus, for the period ended December 31, 2013, we generated $75.6 million of pro forma net revenues.

Our Market Opportunity

We operate within the rapidly growing and global e-cigarette industry, an emerging product category that is taking market share from the $756 billion global tobacco industry. The American Cancer Society estimates that there are 1.3 billion tobacco smokers in the world, consuming approximately 6 trillion cigarettes per year, or 190 thousand cigarettes per second. Tobacco use is the leading cause of preventable illness and death, causing more than 5 million annual deaths across the globe according to the Center for Disease Control and Prevention (“CDC”). We believe e-cigarettes offer a compelling alternative for current smokers, relative to traditional cigarettes.

Still in the early stages of its market penetration, the e-cigarette industry is highly fragmented with approximately 250 brands worldwide according to the CDC. Primarily propelled by the cannibalization of the traditional tobacco industry, the global e-cigarette industry has recently experienced dramatic growth. According to Euromonitor, e-cigarettes accounted for approximately $3.5 billion in 2013 global retail sales, with approximately 40% of sales generated in the U.S., 30% of sales generated in Europe, and 30% of sales generated in the rest of the world (“ROW”). Euromonitor estimated that significant market growth was achieved from 2012 to 2013 with the U.S., Europe and ROW generating growth rates of 180%, 160%, and 150%, respectively. Euromonitor projects e-cigarette sales to represent approximately $51 billion, or 4 % of the global tobacco and tobacco alternatives market industry by 2030. We believe that Victory is well positioned to benefit from, and take advantage of, these attractive market trends in the coming years.

Source: Euromonitor International 2013.

Business Strengths

Low-Cost Position

We believe we have differentiated ourselves from competitors through our distinct supply chain, which has allowed us to sustain our low-cost position. We believe our low-cost position is driven by direct sourcing, effective and efficient marketing and lean operations with a focus on continuous cost reduction. This cost advantage allows us to offer an attractive price proposition to our retail and distribution customers. Our low-cost position originates at our manufacturing facilities in China, where we work directly with our manufacturing partners instead of using third party sourcing agents. Further, in contrast to many of our competitors, who incur considerable advertising and marketing expenditures, we believe that having the majority of our marketing in-store at the point of purchase provides the highest return on investment. Finally, we have efficiently managed other operating costs by implementing strict corporate expense policies.

Leadership Position in Key Global e-Cigarette Markets

We are one of the largest global independent e-cigarette companies. In the United States, FIN is the fourth largest e-cigarette brand for the 52-week period ended April 15, 2014 in the expanded all outlets combined (“XAOC”) and convenience store channels according to Nielsen data. We also believe that in the U.K. and Western Europe, VAPESTICK and VIP combined to represent one of the largest e-cigarette businesses in the region.

Through our disciplined acquisition and expansion strategy, we believe we have one of the broadest global footprints in the e-cigarette industry. In January 2014, we closed our first international acquisition when we acquired Vapestick Holdings Limited (“Vapestick”), which included the VAPESTICK brand, a leading European brand of e-cigarettes. We have leveraged the VAPESTICK brand by entering into distribution arrangements in additional markets, such as Russia, Portugal and the Netherlands. According to Euromonitor, Russia is the world’s second largest e-cigarette market. In February 2014, we completed our acquisition of FIN Electronic Cigarette Corporation, Inc. (“FIN”), gaining access to a robust sales force and 50,000 outlets in the U.S. More recently, we acquired Must Have Limited (“VIP”) and its VIP brand in April 2014. We believe that the VIP acquisition further solidifies us as a leading player in Europe and brings further leading product portfolio breadth and a unique multi-channel distribution system that we believe is replicable worldwide. Our brands are also present in Latin America.

Multi-Channel Go-To-Market Approach

We operate a unique, diversified multi-channel distribution model, enabling us to efficiently reach our global end consumers with our products. We sell our products globally through food, drug and mass retailers, convenience stores, direct-store-delivery distributors, owned retail stores, retail mobile kiosk units, vape shops and through the e-commerce channel. As of May 12, 2014, we sold our products through more than 50,000 points of distribution globally. Today, we service a broad base of global strategic retailers, including Wal-Mart, Walgreens, and Tesco, and leading distributors, including McLane and Core-Mark in the United States and Palmer and Harvey in the United Kingdom.

We believe that our diversified channel mix provides us with an advantage over those of our competitors who offer their products through fewer channels. We also believe we will be able to quickly adapt and shift our channel mix as regulations and consumer preferences change. Additionally, we believe that having multiple touch points with end consumers drives customer loyalty and brand awareness.

Comprehensive Portfolio with Unique Growth Strategy

By differentiating our products based on appearance, quality, perceived value and price, we provide our retail and distribution partners with a one-stop solution for all of their e-cigarette needs across varying price points. We currently sell electronic cigarettes under several different brands, including FIN, VIP, VAPESTICK, Victory, Victoria and El Rey. Through this multi-brand/multi-product strategy, we have strategically positioned our portfolio to serve a diverse set of markets and consumer preferences. Ultimately, our target market is the approximately 1.3 billion tobacco smokers who exist worldwide. While many of our competitors limit themselves by focusing on a single brand or product type, our product offerings span the range of customer interests including disposables, rechargeables, tanks, starter kits, e-liquids, open and closed-end vaping systems and accessories. In the U.S. our Victory brand functions as our opening price point brand, while our FIN branded products represent our premium offering. We also offer a portfolio of exclusive or control brands, such as our Greenstix brand, which is manufactured exclusively for MAPCO Express, Inc.

Superior Organizational Capabilities and Leadership Team

We are led by a proven and experienced management team with an outstanding track record of success. We are unified by a common vision to build the best global e-cigarette company. Our President and Chief Executive Officer, Brent Willis, is an experienced chief executive with extensive experience leading public and private companies in the food and beverage industry and has significant expertise in building companies, operations and brands worldwide. Mr. Willis has assembled an executive team with broad experience across a wide range of disciplines including sales, marketing, distribution, operations, finance and technology.

Growth Strategies

Drive Organic Growth through Global Expansion, Distribution and Effective Merchandising

We are pursuing three strategies to drive organic growth:

Increase Sell-through and Trial through Effective Merchandising. While the e-cigarette industry may be complex, our merchandising story remains simple: focus on in-store point of sale marketing and merchandising, given that we believe a significant percentage of purchase decisions are made in-store. Our Company offers differentiated product packaging, innovative in-store marketing and customizable display solutions. We are also focused on experiential marketing, including participation in trade shows. We believe our focused marketing strategy delivers high impact results across our brands and generates superior sell-through and trial.

Increase Points of Distribution. We believe we can increase sales to new and existing retail and distribution customers by offering them attractive value chain economics through competitive mark-ups and co-investment programs. Furthermore, our partnership with Fields Texas Limited, which maintains long-standing relationships with some of the world’s largest retailers, provides us an additional avenue to increase distribution globally.

Accelerate International Expansion. According to Euromonitor, more than 88% of the source of volume of the tobacco industry business lies outside the United States. Our strategy is to increase our international sales by penetrating new and emerging markets where we expect rising consumer incomes and an increase in demand for e-cigarettes. We have implemented a distinct model for expansion into new markets. This model includes building out a localized e-commerce platform in the targeted region, installing retail mobile kiosk units (“RMUs” or “kiosks”) in popular shopping centers and erecting flagship stores in that region. We believe that RMUs offer attractive unit economics that are easily scalable. Our kiosk units function as a platform to educate our consumers and by providing important category and product information through our on-site kiosk managers. Given the tremendous success of our RMUs in the U.K., we plan to roll out the kiosk model in our other core markets.

Selectively Pursue Acquisition Opportunities

local presence in key geographic regions. Additionally, we have been able to identify and generate significant synergies through existing sourcing relationships and the consolidation of manufacturing platforms. We plan to continue to evaluate potential acquisition opportunities using a disciplined approach, pursuing only those opportunities that we believe will enhance long-term shareholder value.

Continue to Optimize Manufacturing, Supply Chain and Distribution Operations

We are committed to maintaining as low a cost as possible in order to provide attractive margins to new and existing customers. We believe our plans to integrate our distribution and fulfillment centers will allow us to improve our cost position as we increase scale. For example, we are currently in the process of integrating our automated ERP system and inventory management system across all of our recently acquired brands.

Evolve our Product Offering to Fit Dynamic Consumer and Product Trends

The global e-cigarette industry is still in nascent form and is continually evolving. Our Company has dedicated itself to identifying shifting consumer preferences and responding to those shifts before our competitors. We believe that our global footprint enables us to quickly identify consumer and product trends in one geographic location, analyze and adapt our business as needed, and rapidly drive appropriate changes to our other markets. We plan to continue to adapt to new technologies and products in order to increase our share of the market.

Our History and Recent Acquisitions

Victory was founded in April 2012, initially as an online e-cigarette business. In March 2013, we launched our first products through retail outlets, offering disposable e-cigarettes in regular and menthol flavors under the Victory brand. In June 2013, Victory became a public company traded on the over-the-counter market by means of a reverse merger with Teckmine Industries Inc. As part of our efforts to expand retail distribution, we signed a partnership agreement in December 2013 with Fields Texas Limited and Bill Fields, former CEO of Wal-Mart Stores Division, who also joined our board of directors at that time. We believe this was a significant event for the Company as Fields Texas Limited has long standing relationships with some of the world’s largest retailers and we intend to leverage those relationships to significantly expand distribution.

We have completed multiple strategic acquisitions as we continue to look for opportunities to grow our business. On January 9, 2014, we completed the acquisition of Vapestick. Vapestick owns the VAPESTICK brand, under which it sells premium e-cigarettes in Europe. Vapestick was founded in 2010 by co-founders Michael Clapper and Michiel Carmel. With its distinctive black and chrome style designs and signature blue light tips, VAPESTICK is sold both online (www.vapestick.co.uk) and through thousands of retail outlets across the United Kingdom and Europe, including Tesco, Costco, Harrods and Bargain Booze. Vapestick is a founding member of the European Electronic Cigarette Industry Trade Association (“ECITA”).

On February 28, 2014, we completed the acquisition of FIN. FIN, a wholly owned subsidiary of ours after the merger, was founded in 2011 and quickly became what management believes is one of the leading independent e-cigarette companies in the United States, according to Nielsen data, with distribution of its brands in more than 50,000 outlets in all 50 states across many channels of distribution, including food, drug, mass retail, gas and convenience stores. FIN is sold in some of the most well-known retailers in the country, including Wal-Mart, Sam’s Club, Walgreens, Rite-Aid, Kroger, 7-Eleven, Circle K, Stripes Convenience Stores and Mapco Express.

On April 22, 2014, we completed the acquisition of VIP. VIP, which is based in Manchester, United Kingdom, was founded in 2009 and has grown to become one of the leading e-cigarette companies

in England and Ireland. VIP has developed a broad portfolio of products that includes traditional rechargeable and disposable e-cigarettes, open and closed-end vaping systems, tanks and e-liquids. VIP offers its products through a unique multi-channel distribution model with their own retail stores, retail mobile kiosk units, online and traditional retail.

A further description of the terms of these acquisitions is described in “Management Discussion and Analysis of Financial Condition and Results of Operations” and “Business” in this prospectus.

Name Change

On April 8, 2014, our Board of Directors approved changing the Company name from “Victory Electronic Cigarettes Corporation” to “Electronic Cigarettes International Group, Ltd.”. On April 10, 2014, we received written consents in lieu of a meeting of stockholders from stockholders holding 50.54% of the outstanding shares of our common stock approving the name change. Our name change will take effect upon filing an amendment to our articles of incorporation with the state of Nevada, which will occur 20 days after we mail a Schedule 14C Information Statement to our shareholders of record as of April 10, 2014, which we expect to mail on May 19, 2014.

Summary of Risk Factors

Our business is subject to risks, as discussed more fully in the section entitled “Risk Factors” beginning on page 9. You should carefully consider all of the risks discussed in the “Risk Factors” section before investing in our common stock. In particular, the following factors may have an adverse effect on our business, which could cause a decrease in the price of our common stock and result in a loss of all or a portion of your investment:

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We have incurred losses and cannot assure you that we will achieve or maintain profitable operations.

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If we do not obtain additional financing, we will not be able to conduct our business operations and achieve our business objectives.

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We have a limited operating history and cannot offer any assurance as to our future financial results.

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The market for e-cigarettes is a niche market, subject to a great deal of uncertainty, and is still evolving.

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Our four years of operating history makes it difficult to accurately predict our future sales and appropriately budget our expenses.

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The FDA has recently proposed rules seeking to regulate e-cigarettes.

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The European Parliament has approved the revised European Union Tobacco Product Directive.

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Limitation by states and cities on sales of e-cigarettes may have a material adverse effect on our ability to sell our products in the United States.

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Changes in laws, regulations and other requirements could adversely affect our business, results of operations or financial condition.

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The recent development of e-cigarettes has not allowed the medical profession to study the long-term health effects of e-cigarette use.

Corporate Information

We were incorporated in the state of Nevada on May 19, 2004 as Teckmine Industries, Inc. (“Teckmine”). In July 2007, Teckmine became a public company traded in the over the counter market. On

June 25, 2013, pursuant to a share exchange agreement, we acquired Victory Electronic Cigarettes, Inc., a Nevada corporation (“VEC”), in which the existing stockholders of VEC exchanged all of their issued and outstanding shares of common stock for 32,500,000 shares of our common stock (the “Share Exchange”). After the consummation of the Share Exchange, stockholders of VEC owned 60.9% of our outstanding common stock and VEC became our wholly owned subsidiary. For accounting purposes, the Share Exchange was treated as a reverse acquisition with VEC as the acquirer and Teckmine Industries as the acquired party, and as a result the historical financial statements of the Company prior to the Share Exchange included in this prospectus are the historical financial statements of VEC. As a result of the reverse merger with Teckmine, Victory became a public company in June 2013. On July 11, 2013, we changed our name to “Victory Electronic Cigarettes Corporation”.

Our executive offices are located at 11335 Apple Drive, Nunica, Michigan 49448, and our telephone number is (616) 384-3272. Our website address is www.victoryecigs.com. Information contained in our website does not form part of this prospectus and is intended for informational purposes only.

The Offering

Common stock offered by us:

Option to purchase additional shares:

We have agreed to allow the underwriters to purchase up to an additional shares from us, at the public offering price less underwriting discounts and commissions, within 30 days from the date of this prospectus.

Common stock outstanding after this offering:

shares (or shares, if the underwriters exercise their option to purchase additional shares in full)

Use of proceeds:

We estimate that the net proceeds from our sale of shares of our common stock in this offering will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, based on the public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We expect to use $ of the net proceeds from this offering to repay indebtedness issued in conjunction with our acquisitions and previous financings and the remainder for general corporate purposes including working capital, product development, marketing activities, further expansion of our distribution channels and to fund cash components of future acquisitions.

Dividend Policy

We do not anticipate paying any cash dividends on our common stock. See “Dividend Policy.”

Risk factors:

Investing in our common stock involves a high degree of risk. Before buying any shares, you should read the discussion of material risks of investing in our common stock in “Risk Factors” beginning on page 9.

OTCBB symbol:

ECIG. In conjunction with this offering, we intend to apply to list our common stock on the Nasdaq Global Market under the symbol “ECIG.”

The number of shares of our common stock outstanding after this offering is based on 74,487,474 shares outstanding as of May 12, 2014, and excludes:

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7,025,000 shares of common stock issuable upon exercise of stock options outstanding under the 2013 Long Term Stock Incentive Plan, at exercise prices ranging from $0.25 to $9.05;

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200,000 shares of common stock issuable upon exercise of warrants at an exercise price of $0.25;

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18,032,762 shares of common stock issuable upon exercise of warrants at an exercise price of $5.00;

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1,008,353 shares of common stock issuable upon exercise of warrants at an exercise price of $6.50;

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5,475,000 shares of common stock issuable upon conversion of convertible debt at a conversion price of $5.00;

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3,729,358 shares of common stock issuable upon conversion of convertible debt at a conversion price of $6.50; and

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shares of common stock reserved for issuance under our 2014 Long-Term Incentive Plan upon the grant or exercise of future stock options, restricted stock units or restricted stock.

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our shares of common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Cautionary Note Regarding Forward-Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.

We have incurred losses and cannot assure you that we will achieve or maintain profitable operations.

As of December 31, 2013, we had an accumulated deficit of $21,293,048. We had a net loss of $20,706,448 for the year ended December 31, 2013. Our accumulated deficit and net loss are primarily due to, among other reasons, increases in our distribution and marketing expenditures to grow sales of our e-cigarettes, stock-based compensation expenses and the establishment of our business infrastructure and operations. We estimate our expenses over the next 12 months to be as high as $30,000,000, including general and administrative expenses. As of December 31, 2013, we had working capital of $60,608. We cannot assure you that we will generate operating profits on a sustainable basis as we continue to expand our infrastructure, make acquisitions, further develop our marketing efforts and otherwise implement our growth initiatives.

If we do not obtain additional financing, we will not be able to conduct our business operations and achieve our business objectives.

In order to achieve our objectives established in our business plan, investment capital is required to purchase inventory and invest in infrastructure to grow our business. We believe that our expenses will increase in the long-term as we anticipate our business will grow. We are unable to quantify those increases due to uncertainty with future expenses, such as increased costs associated with our growth and the cost of complying with governmental regulations. Our current capital resources are insufficient to fund our planned operations for the next 12-month period. If we are unable to generate sufficient profit to cover the shortfall, we may have to raise additional funds for the continued development of our business and the marketing of our products. Such additional funds may be raised through the sale of additional common stock, convertible debt and debt securities and/or commercial borrowing. There can be no assurance that a financing will continue to be available as necessary to meet these continuing development costs or, if the financing is available, that it will be on terms acceptable to us. The issuance of additional common stock, warrants and convertible debt securities by us will result in a significant dilution in the equity interests of our stockholders. Obtaining commercial loans or issuing debt securities, assuming those loans or the capital markets would be available to us, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may not be able to expand or continue our operations and developments and so may be forced to scale back or cease operations or discontinue our business and you could lose your entire investment.

We have a limited operating history and cannot offer any assurance as to our future financial results. You may lose your entire investment.

We have a limited operating history upon which to base any assumption as to the likelihood that we will be successful in implementing our business plan, and we may not be able to generate significant revenues or achieve profitability. There is no assurance that the growth rate we have experienced to date will continue. Even if we generate future revenues sufficient to expand operations, increased infrastructure costs and cost of goods sold and marketing expenses could impair or prevent us from generating profitable returns. We recognize that if we are unable to generate significant revenues from our business

development, we will not be able to earn profits or potentially continue operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

Our four years of operating history makes it difficult to accurately predict our future sales and appropriately budget our expenses.

On March 2, 2010, we began marketing and distributing electronic cigarettes. Because we have only four years of operating history, and our business is still evolving, it is difficult to accurately predict our future sales and appropriately budget our expenses. Additionally, our operations will be subject to risks inherent in the establishment of a developing new business, including, among other things, efficiently deploying our capital, developing our products, expanding our supply and distribution capabilities, integrating our acquisitions, developing and implementing our marketing campaigns and strategies and entering into international markets. Our ability to generate future sales will be dependent on a number of factors, many of which are beyond our control, including the pricing of competing products, overall demand for e-cigarettes, changes in consumer preferences, market competition and government regulation. We are currently expanding our staffing, advertising campaigns and operational expenditures in anticipation of future sales growth. If our sales do not increase as anticipated, we could incur significant losses due to our higher infrastructure expense levels if we are not able to decrease our advertising and operating expenses in a timely manner to offset any shortfall in future sales.

Our sales and profitability may decline as a result of increasing product costs and decreasing selling prices.

Our business is subject to pressure on pricing and costs caused by many factors, including intense competition, potential constrained sourcing capacity, pressure from consumers to reduce the prices we charge for our products and changes in consumer demand. These factors may cause us to experience increased costs, reduce our sales prices to consumers or experience reduced sales in response to increased prices, any of which could have a material adverse effect on our financial conditions, operating results and cash flows.

The market for e-cigarettes is a niche market, subject to a great deal of uncertainty, and is still evolving.

E-cigarettes, having recently been introduced to market, are at an early stage of development, represent a niche market and are evolving rapidly and are characterized by an increasing number of market entrants. Our future sales and any future profits are substantially dependent upon the widespread acceptance and use of e-cigarettes. Rapid growth in the use of, and interest in, e-cigarettes is recent, and may not continue on a lasting basis. The demand and market acceptance for these products is subject to a high level of uncertainty. Therefore, we are subject to all of the business risks associated with a new enterprise in a niche market, including risks of unforeseen capital requirements, failure of widespread market acceptance of e-cigarettes, in general or, specifically our products, failure to establish business relationships and competitive disadvantages as against larger and more established competitors.

The recent development of e-cigarettes has not allowed the medical profession to study the long-term health effects of e-cigarette use.

Because e-cigarettes were recently developed the medical profession has not had a sufficient period of time to study the long-term health effects of e-cigarette use. Currently, therefore, there is no way of knowing whether or not e-cigarettes are safe for their intended use. If the medical profession were to determine conclusively that e-cigarette usage poses long-term health risks, e-cigarette usage could decline, which could have a material adverse effect on our business, results of operations and financial condition.

The use of e-cigarettes may pose health risks as great as, or greater than, regular tobacco products.

According to the FDA, e-cigarettes may contain ingredients that are known to be toxic to humans and may contain other ingredients that may not be safe. In addition, other publicized recent studies contain

assertions that additional carcinogens, including formaldehyde, may be produced through the use of tank systems. Additionally, e-cigarettes may be attractive to young people and may lead them to try other tobacco products, including conventional cigarettes that are known to cause disease. Because clinical studies about the safety and efficacy of e-cigarettes have not been submitted to the FDA, consumers currently have no way of knowing whether e-cigarettes are safe before their intended use; what types or concentrations of potentially harmful chemicals are found in these products; or how much nicotine is being inhaled.

In this regard, the FDA, on April 25, 2014, announced a proposed rule (the “Rule”) establishing, for the first time, federal regulatory authority over, among other tobacco products, e-cigarettes. See, “— Government Regulation — United States” below for a more detailed discussion of the proposed rule.

In February 2012, it was reported in Florida that an e-cigarette exploded in a smoker’s mouth causing serious injury. Although there does not appear to be similar incidences elsewhere nor are there specific details concerning the Florida incident, there is a risk that an e-cigarette can cause bodily injury and the publicity from such instances of injury could dramatically slow the growth of the market for e-cigarettes.

Our products contain nicotine, which is considered to be a highly addictive substance.

Certain of our products contain nicotine, a chemical found in cigarettes and other tobacco products which is considered to be highly addictive. The Family Smoking Prevention and Tobacco Control Act, empowers the FDA to regulate the amount of nicotine found in tobacco products, but may not require the reduction of nicotine yields of a tobacco product to zero. Any FDA regulation may require us to reformulate, recall and or discontinue certain of the products we may sell from time to time, which may have a material adverse effect on our ability to market our products and have a material adverse effect on our business, financial condition, results of operations, cash flows and/or future prospects.

Sales of conventional tobacco cigarettes have been declining, which could have a material adverse effect on our business.

We believe that the vast majority of e-cigarette users are people trying to switch from regular cigarettes. The overall global market for conventional tobacco cigarettes has generally been declining in terms of volume of sales, however, as a result of restrictions on advertising and promotions, funding of smoking prevention campaigns, increases in regulation and excise taxes, a decline in the social acceptability of smoking, and other factors, and such sales are expected to continue to decline. While the sales of e-cigarettes have been increasing over the last several years, the e-cigarette market is only developing and is a fraction of the size of the conventional tobacco cigarette market. A continual decline in cigarette sales may adversely affect the growth of the e-cigarette market, which could have a material adverse effect on our business, results of operations and financial condition.

Our business may be affected if we are taxed like other tobacco products or if we are required to collect and remit sales tax on certain of our internet sales.

Presently the sale of e-cigarettes is not subject to federal, state and local excise taxes like the sale of conventional cigarettes or other tobacco products, all of which have faced significant increases in the amount of taxes collected on their sales. Should federal, state and local governments and/or other taxing authorities, including those in the EU or the United Kingdom, impose excise taxes similar to those levied against conventional cigarettes and tobacco products on our products, it may have a material adverse effect on the demand for our products, as consumers may be unwilling to pay the increased costs for our products.

We may be unable to establish the systems and processes needed to track and submit the excise and sales taxes we collect through Internet sales, which would limit our ability to market our products through our websites which would have a material adverse effect on our business, results of operations and financial condition. States such as New York, Hawaii, Rhode Island and North Carolina have begun collecting sales taxes on Internet sales where companies have used independent contractors in those states to solicit sales

from residents of that state. The requirement to collect, track and remit sales taxes based on independent affiliate sales may require us to increase our prices, which may affect demand for our products or conversely reduce our net profit margin, either of which would have a material adverse effect on our business, results of operations and financial condition.

We may not be able to implement successfully our growth strategy for our brands on a timely basis or at all.

We believe that our future success depends, in part, on our ability to implement our growth strategy of leveraging our existing brands and products to drive increased sales. Our ability to implement this strategy depends, among other things, on our ability to:

We may not be able to implement this growth strategy successfully, and our rates of sales and income growth may not be sustainable over time. Our sales and results of operations will be negatively affected if we fail to implement our growth strategy or if we invest resources in a growth strategy that ultimately proves unsuccessful.

We have limited marketing experience in marketing e-cigarettes and limited financial, personnel and other resources to undertake extensive marketing activities. If we are unable to generate significant market awareness for our products and our brands our operations may not generate sufficient revenues for us to execute our business plan, generate revenues and achieve profitable operations.

We believe that establishing and maintaining the brand identities of our products is a critical aspect of attracting and expanding a large client base. Promotion and enhancement of our brands will depend largely on our success in continuing to provide high quality products. If our customers and end users do not perceive our products to be of high quality, or if we introduce new products or enter into new business ventures that are not favorably received by our customers and end users, we will risk diluting our brand identities and decreasing their attractiveness to existing and potential customers.

Moreover, in order to attract and retain customers and to promote and maintain our brand equity in response to competitive pressures, we may have to increase substantially our financial commitment to creating and maintaining a distinct brand loyalty among our customers. If we incur significant expenses in an attempt to promote and maintain our brands, our profitability will likely be impaired.

We may not be able to establish sustainable relationships with large retailers or national chains.

We believe the best way to develop brand and product recognition and increase sales volume is to establish relationships with large retailers and national chains. We currently have established relationships with several large retailers and national chains and in connection therewith we have agreed to pay such retailers and chains fees, known as “slotting fees”, to carry and offer our products for sale based on the number of stores our products will be carried in. Two retailers account for between 35% and 40% of our U.S. sales, which, if lost, would have a material adverse effect on our business. These existing relationships are “at-will” meaning that either party may terminate the relationship for any reason or no reason at all. We

may not be able to sustain these relationships or establish other relationships with large retailers or national chains or, even if we do so, sustain such other relationships. Our inability to develop and sustain relationships with large retailers and national chains will impede our ability to develop brand and product recognition and increase sales volume and, ultimately, require us to pursue and rely on local and more fragmented sales channels, which will have a material adverse effect on our business, results of operations and financial condition.

We rely on the efforts of third party agents to generate sales of our products.

We rely significantly on the efforts of independent distributors to purchase and distribute our products to wholesalers and retailers. No single distributor currently accounts for a material percentage of our sales and we believe that should any of these relationships terminate we would be able to find suitable replacements and do so on a timely basis. However, any loss of distributors or our ability to timely replace any given distributor could have a material adverse effect on our business, financial condition and results of operations.

We rely, in part, on the efforts of independent salespersons who sell our products to distributors and major retailers and Internet sales affiliates to generate sales of products. No single independent salesperson or Internet affiliate currently accounts for a material percentage of our sales and we believe that should any of these relationships terminate we would be able to find suitable replacements and do so on a timely basis. However, any loss of independent sales persons or Internet sales affiliates or our ability to timely replace any one of them could have a material adverse effect on our business, financial condition and results of operations.

We depend on a small number of third party suppliers and manufacturers for our e-cigarette products.

We do not own or control our suppliers or our suppliers’ suppliers, and therefore we are unable to control or ensure our supply of products or the consistency of those products. We depend on a small number of third-party suppliers and manufacturers for our e-cigarette products, which include, but are not limited to, our electrical components, technology, flavorings and essences. Our customers associate certain characteristics of our products including the weight, feel, draw, flavor, packaging and other unique attributes of our products to the brands we market, distribute and sell. Export from certain provinces in the People’s Republic of China (“China”) or at times from Hong Kong have run into delays, as have imports and receipts in the United States. A natural or man-made disaster or other interruption in supply and or consistency of our products may harm our relationships and goodwill with customers, and have a materially adverse effect on our cash flow and our operations.

Substantially all of the Company’s products are manufactured by two suppliers in China, one of which sources our e-liquids. We do not have long-term contracts with either of these suppliers. Although we believe that several alternative and redundant sources for our products are available, any failure to obtain the components, chemicals constituents and manufacturing services necessary for the production of our products would have a material adverse effect on our business and prevent us from timely execution of our business plan and may result in additional expenditures of time and money in seeking viable new sources of supply and manufacturer alternatives.

Moreover our inability to replicate those certain characteristics of our products, which our customers associate and enjoy, which are unique to our brands, may cause a loss of customer loyalty, patronage and goodwill and which may have a material adverse effect on our business.

Disruption of our supply or distribution chains could adversely affect our business.

Damage or disruption to our third party manufacturing or distribution capabilities due to weather, natural disaster, fire, environmental incident, terrorism, pandemic, strikes, the financial or operational instability of key suppliers, distributors, warehousing, and transportation providers, or other reasons could impair the manufacture or distribution of our products. If we are unable or it is not financially feasible to

mitigate the likelihood or potential impact of such events, our business and results of operations could be negatively affected and additional resources could be required to restore our supply chain.

Our suppliers and product manufacturers are based in China. Should Chinese factories continue to draw public criticism for exporting unsafe products, whether those products relate to us or not, we may be adversely and materially affected by the stigma associated with Chinese production, which would affect our business operation, our revenues and our financial projections and prospects.

Moreover, products manufactured by our Chinese suppliers that are not considered safe and or those products that do not comply with U.S. regulatory requirements and safety and health standards may cause significant harm and or death to persons who use the product and subject us to liability and potential legal claims and cause injury to our reputation, goodwill and operating results.

Existing or pending patents could prevent us from operating our business in its present form.

Ruyan Investments Holding Ltd. (“Ruyan”), a Chinese company, and Fontem Ventures B.V. and Fontem Holdings 1 B.V., both Netherlands companies (“Fontem”), have each filed complaints for patent infringement against us and/or one of our subsidiaries, Fin Branding Group, LLC alleging infringement of certain U.S. patents related to e-cigarette technologies. Should the asserted patents be adjudged valid, enforceable and infringed by our manufacture, use, importation, marketing and/or sale of products, we may be forced to pay damages and/or be enjoined from infringing activity. We also may be required to obtain a license to the asserted patents or substantially modify or redesign our existing product line in order to continue operations. We can offer no assurances that a license would be available on acceptable terms or at all, or that we will be able to revise our business model economically, efficiently or at all. Should any of these events occur, they are likely to have a material adverse effect on our ability to operate our business.

We are currently defending ourselves and our subsidiary in the lawsuits mentioned above, in addition to other litigation that has come up in the course of our doing business. Should other parties contact us regarding any other possible infringement of intellectual property rights or commence any additional legal action against us, which would require us to participate in additional litigation, we may not have the resources to fund the required litigation costs, which may adversely affect our business prospects, financial condition and results of operations.

While the Company owns the United States trademark for the “Victory” brand for e-cigarettes and has filed a provisional patent application with the United States Patent and Trademark Office, we do not currently own any domestic or foreign patents relating to our electronic cigarettes, nor does the Company currently have any licenses to use any third-party intellectual property. As such, if the Company is not successful in obtaining intellectual property rights covering its products, or obtaining licenses to use a third-party’s intellectual property on reasonable and acceptable terms, it could result in lawsuits against us for trademark and/or intellectual property infringement, and the Company may not be able to counterclaim with its own infringement allegations. Any such infringement, litigation or adverse proceeding could result in substantial costs and diversion of resources and could seriously harm our business operations or results of operations.

We may be required to obtain licenses to patents or proprietary rights of others.

We may be required to obtain licenses to patents or proprietary rights of others. We cannot assure you that any licenses required under any such patents or proprietary rights would be made available on terms acceptable to us or at all. If we do not obtain such licenses, we could encounter delays in product market introductions while we attempt to design around such patents, or could find that the development, manufacture, or sale of products requiring such licenses could be foreclosed. Litigation may be necessary to

defend against claims of infringement asserted against us by others, or assert claims of infringement to enforce patents issued to us or exclusively licensed to us, to protect trade secrets or know-how possessed by us, or to determine the scope and validity of the proprietary rights of others. In addition, we may become involved in oppositions in foreign jurisdictions, reexaminations declared by the United States Patent and Trademark Office, or interference proceedings declared by the United States Patent and Trademark Office to determine the priority of inventions with respect to our patent applications or those of our licensors. Litigation, opposition, reexamination or interference proceedings could result in substantial costs to and diversion of effort by us, and may have a material adverse impact on, us. In addition, we cannot assure you that our efforts to maintain or defend our intellectual property will be successful.

We may not fully realize anticipated benefits from past or future acquisitions or equity investments.

Our growth to date has been, and we expect that a substantial portion of any future growth of our business will be, accomplished by acquiring existing businesses, products or technologies. The success of any acquisition will depend upon, among other things, our ability to integrate acquired personnel, operations, products and technologies into our organization effectively, to retain and motivate key personnel of acquired businesses and to retain their clients. In addition, we might not be able to identify suitable acquisition opportunities and accurately assess their value, growth potential, strengths, weaknesses, contingent and other liabilities, and potential profitability. Any acquisition may result in diversion of management’s attention from other business concerns and such acquisition may be dilutive to our financial results. We might also spend time and money investigating and negotiating with potential acquisition or investment targets, but not complete the transaction.

Although we expect to realize strategic, operational and financial benefits as a result of our past or future acquisitions and equity investments, we cannot predict whether and to what extent such benefits will be achieved. There are significant challenges to integrating an acquired operation into our business, including, but not limited to:

Any future acquisition could involve other risks, including the assumption of unidentified liabilities for which we, as a successor owner, may be responsible. These transactions typically involve a number of risks and present financial and other challenges, including the existence of unknown disputes, liabilities, or contingencies and changes in the industry, location, or regulatory or political environment in which these investments are located, that may arise after entering into such arrangements.

We may have to pay cash, incur debt, or issue our common stock, warrants, convertible debt or other debt securities to pay for any such acquisition, any of which could adversely affect our financial results, and there is no assurance that we will be able to obtain any necessary financing on acceptable terms. In addition, the sale of common stock, warrants and/or convertible debt to finance any such acquisitions could result in dilution to our stockholders, and certain of those securities may have rights, preferences, or privileges senior to those of our common stock. Additional indebtedness would result in increased fixed obligations and could also result in additional operational restrictions that would impede our ability to manage our operations.

We may encounter difficulties in managing our growth, which would adversely affect our results of operations.

If we are successful in growing our business, we will need to significantly expand our operations, which could put significant strain on our management and our operational and financial resources. To manage future growth, we will need to hire, train, and manage additional employees. Concurrent with expanding our operational and marketing capabilities, we will also need to increase our product development activities. We may not be able to support, financially or otherwise, future growth, or hire, train, motivate, and manage the required personnel. Our failure to manage growth effectively could limit our ability to achieve our goals.

Our success in managing our growth will depend in part on the ability of our executive officers to continue to implement and improve our operational, management, information and financial control systems and to expand, train and manage our employee base, and particularly to attract, expand, train, manage and retain a sales force to market our products on acceptable terms. Our inability to manage growth effectively could cause our operating costs to grow at a faster pace than we currently anticipate, and could have a material adverse effect on our business, financial condition, results of operations and prospects.

Expanding our operations internationally poses additional risks to our business, including numerous legal and regulatory risks.

As we grow our business internationally, we must successfully tailor our products to the unique customs and cultures of relevant countries and markets. Learning the customs and cultures of various countries and markets can be difficult and costly, and the failure to do so could slow international growth. In addition, we incur additional legal and compliance costs associated with our international operations and could become subject to legal penalties in foreign countries if we do not comply with local laws and regulations. Operating in international markets also exposes us to additional risks, including, among others:

These risks could lead to certain events that could lead to disruption of our e-cigarette business, significant expenditures and/or damage to our reputation, and could harm our reputation or have a material adverse effect on our business, results of operations and financial condition.

If we fail to comply with anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, we could be subject to civil and/or criminal penalties.

Our business operations and sales in countries outside the United States are subject to anti-corruption, anti-bribery and anti-kickback laws and regulations, including restrictions imposed by the Foreign Corrupt

Practices Act (“FCPA”), as well as the United Kingdom Bribery Act of 2010 (“UK Bribery Act”). The FCPA, UK Bribery Act, and similar anti-corruption, anti-bribery and anti-kickback laws in other jurisdictions generally prohibit companies and their intermediaries and agents from making improper payments to government officials or any other persons for the purpose of obtaining or retaining business. If we are found to be liable for violations of the FCPA or similar anti-corruption, anti-bribery and anti-kickback laws in international jurisdictions, either due to our own acts or out of inadvertence, or due to the acts or inadvertence of our intermediaries or agents, we could suffer criminal or civil fines or penalties or other repercussions, including reputational harm, which could have a material and adverse effect on our business, results of operations and financial condition.

A failure to comply with export control or economic sanctions laws and regulations could have a material adverse impact on our business, results of operations or financial condition. We may be unable to ensure that our distributors comply with applicable sanctions and export control laws.

We operate on a global basis, with approximately 40% of our product sales in 2013 being made to destinations outside the United States, including Western Europe. We face several risks inherent in conducting business internationally, including compliance with applicable economic sanctions laws and regulations, such as laws and regulations administered by the United States Department of Treasury’s Office of Foreign Assets Control, or OFAC, the United States Department of State and the United States Department of Commerce. We must also comply with all applicable export control laws and regulations of the United States and other countries. Violations of these laws or regulations could result in significant additional sanctions including criminal or civil fines or penalties, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business.

In certain countries, we may engage third party agents or intermediaries, such as customs agents, to act on our behalf and if these third party agents or intermediaries violate applicable laws, their actions may result in criminal or civil fines or penalties or other sanctions being assessed against us. We take certain measures designed to ensure our compliance with U.S. export and economic sanctions law and we believe that we have never sold our products to Iran, Cuba, Sudan or Syria through third party agents or intermediaries or made any effort to attract business from any of these countries. However, it is possible that some of our products were sold or will be sold to distributors or other parties that, without our knowledge or consent, re-exported or will re-export such products to these countries. Although none of our non-U.S. distributors are located in, or to our knowledge, conduct business with Iran, Cuba, Sudan or Syria, we may not be successful in ensuring compliance with limitations or restrictions on business with these or other countries subject to economic sanctions. There can be no assurance that we will be in compliance with export control or economic sanctions laws and regulations in the future. Any such violation could result in significant criminal or civil fines, penalties or other sanctions and repercussions, including reputational harm, that could materially adversely impact our business, results of operations or financial condition.

Additionally, we cannot predict whether and in what manner export or economic sanctions laws may change in the future, and countries or individuals that are not now currently the target of export or economic sanctions laws might, in the future, be the target of export or economic sanctions laws. We plan to expand our business internationally, including into Russia, and those expansion plans might be limited or otherwise adversely affected by changes to export or economic sanctions laws.

Our earnings could be adversely affected by currency exchange rates and currency devaluations.

The majority of our revenues are currently generated in U.S. dollars and British Pounds Sterling, however our manufacturers and suppliers are located in China. Fluctuations in exchange rates between our respective currencies could result in higher production and supply costs to us which would have an adverse effect on our profit margins and our business operation if we are not willing or able to pass those costs on to our customers or effectively hedge our currency exposure.

Moreover, if we attempt to hedge our risk in the currency markets and are unsuccessful and or if our competitors are more successful arbitraging the currency risk we may find ourselves at a competitive disadvantage to other market participants which would have a material adverse effect on our business operations.

We face intense competition and our failure to compete effectively could have a material adverse effect on our business, results of operations and financial condition.

We face intense competition from direct and indirect competitors, including “big tobacco,” “big pharma,” and other known and established or yet to be formed e-cigarette companies, each of whom pose a competitive threat to our current business and future prospects. We expect competition to intensify in the future. Certain of these companies are either currently competing with us or are focusing significant resources on providing products that will compete with our e-cigarette product offerings in the future.

Our principal competitors can be classified into three main categories: 1) tobacco companies; 2) other e-cigarette companies; and 3) pharmaceutical companies. We compete primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising and price. We are subject to highly competitive conditions in all aspects of our business, and barriers to entry into the online business are low. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors’ introduction of low-priced products or innovative products, cigarette excise taxes, higher absolute prices and larger gaps between price categories, and product regulation that diminishes the ability to differentiate tobacco products.

Tobacco companies, including Phillip Morris, R.J. Reynolds, and Lorillard, currently offer traditional tobacco products and may introduce new tobacco based cigarettes and smoking devices (e.g., the “tobacco containing smoking article” covered by patent # 20080092912 as filed by R.J. Reynolds, one of the world’s largest tobacco companies.) Because of their well-established sales and distribution channels, marketing expertise and significant resources, “big tobacco” is better positioned than small competitors to capture a larger share of the e-cigarette market. We also face competition from smaller tobacco companies that are much larger, better funded, and more established than us.

E-cigarette companies, that currently market competing products, include but are not limited to, Njoy, Blu, Vapor Corp., V2 Cigs and others. There can be no assurance that we will be able to compete successfully against any of the aforementioned competitors, who may have greater resources, capital, experience, market penetration, sales and distribution channels than us. We have no assurances that we will be able to compete with these competitors and that we will be successful in operating our business and increasing profitability. Our inability to successfully compete against these or any of our competitors will have a material adverse effect our business, results of operations and financial condition.

Pharmaceutical companies market smoking cessation aids and alternative nicotine delivery products such as, in the case of Glaxo SmithKline, Nicorette^® Gum, the NicoDerm^® patch, and the Zyban^® sustained release tablet, and in the case of Pfizer, Chantix^® prescription medication and the Nicotrol^® nicotine inhaler.

We face competition from foreign importers who do not comply with government regulation.

We face competition from foreign sellers of e-cigarettes that may illegally ship their products into the United States for direct delivery to customers. These market participants will not have the added cost and expense of complying with U.S. regulations and taxes and as a result will be able to offer their product at a more competitive price than us and potentially capture market share. Moreover, should we be unable to sell certain of our products during any regulatory approval process we have no assurances that we will be able to recapture those customers that we lost to our foreign domiciled competitors during any “blackout” periods, during which we are not permitted to sell our products. This competitive disadvantage may have a material adverse effect on our business, results of operations and our financial condition.

We rely on a limited number of key employees and may experience difficulty in attracting and hiring qualified new personnel in some areas of our business.

The loss of any of our key employees could adversely affect our business. As a member of the tobacco industry, we may experience difficulty in identifying and hiring qualified executives and other personnel in some areas of our business. This difficulty is primarily attributable to the health and social issues associated with the tobacco industry. The loss of services of any key employees or our inability to attract, hire and retain personnel with requisite skills could restrict our ability to develop new products, enhance existing products in a timely manner, sell products or manage our business effectively. These factors could have a material adverse effect on our business, results of operations and financial condition.

Currently, we do not have key person life insurance on our executive officers or board members and may be unable to obtain such insurance in the near future due to high cost or other reasons. The loss of the services of any of our executive officers/key employees could have a material adverse effect on our business, if we are unable to find suitable replacements.

We may experience product liability claims in our business, which could adversely affect our business.

The tobacco industry in general has historically been subject to frequent product liability claims. As a result, we may experience product liability claims from the marketing and sale of e-cigarettes. Any product liability claim brought against us, with or without merit, could result in:

Any one or more of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

We face a risk of product liability claims and may not be able to obtain adequate insurance, and any such claims could materially and adversely affect our reputation and brand image.

Our business exposes us to potential liability risks that may arise from the clinical testing, manufacture, and sale of our products. Substantial damage awards have been issued in certain jurisdictions against pharmaceutical and tobacco companies based on claims for injuries allegedly caused by the use of pharmaceutical and tobacco products, and similar claims may be brought against manufacturers and distributors of e-cigarette products. Liability claims may be expensive to defend and result in large judgments against us. We currently carry liability insurance, however there is no assurance that it will continue to be available to us at an affordable price if at all. Our insurance may not reimburse us, or the coverage may not be sufficient to cover claims made against us. We cannot predict any or all of the possible harms or side effects that may result from the use of our current products or any future products and, therefore, the amount of insurance coverage we currently hold may not be adequate to cover all liabilities we might incur. If we are sued for any injury allegedly caused by our products, our liability could exceed our ability to pay the liability. Whether or not we are ultimately successful in any adverse litigation, such litigation could consume substantial amounts of our financial and managerial resources, all of which could have a material adverse effect on our business, financial condition, results of operations, prospects and stock price. In addition, even if a product liability claim is found to be without merit or is otherwise

unsuccessful, the negative publicity surrounding such assertions regarding our products or processes could materially and adversely affect our reputation and brand image. Any loss of consumer confidence in the safety and quality of our products would be difficult and costly to overcome.

If we experience product recalls, we may incur significant and unexpected costs and our business reputation could be adversely affected.

We may be exposed to product recalls and adverse public relations if our products are alleged to cause illness or injury, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures that could exceed our product recall insurance coverage limits and harm to our reputation, which could have a material adverse effect on our business, results of operations and financial condition. In addition, a product recall may require significant management time and attention and may adversely impact on the value of our brands. Product recalls may lead to greater scrutiny by federal or state regulatory agencies and increased litigation, which could have a material adverse effect on our business, results of operations and financial condition.

Product exchanges, returns and warranty claims may adversely affect our business.

If we are unable to maintain an acceptable degree of quality control of our products we will incur costs associated with the exchange and return of our products as well as servicing our customers for warranty claims. Any of the foregoing on a significant scale may have a material adverse effect on our business, results of operations and financial condition.

Adverse economic conditions may adversely affect the demand for our products.

E-cigarettes are new to market and may be regarded by users as a novelty item and expendable as such demand for our products may be extra sensitive to economic conditions. When economic conditions are prosperous, discretionary spending typically increases; conversely, when economic conditions are unfavorable, discretionary spending often declines. Any significant decline in economic conditions that affects consumer spending could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to adapt as the e-cigarette industry and customer demand evolves, whether attributable to regulatory constraints or requirements, a lack of financial resources or our failure to respond in a timely and/or effective manner to new technologies, customer preferences, changing market conditions or new developments in our industry. Any of the failures to adapt for the reasons cited herein or otherwise could make our products obsolete and would have a material adverse effect on our business, financial condition and results of operations.

We may face liability for improper marketing, medical claims and labeling.

As a distributor and marketer of a product that the FDA may assert is a smoking cessation device and or a tobacco product, the Company faces potential fines, sanctions, administrative actions, penalties, and other liability for: improper labeling, making improper claims, referencing or publishing to its websites, marketing materials, advertisements, testimonials or representations that certain of our products have the ability or potential to treat, cure or otherwise improve a medical condition, and or provide a healthier alternative to other more traditional tobacco products.

Moreover, in light of the FDA’s recently issued proposed rule seeking to regulate various deemed tobacco products such as e-cigarettes, we may be required to follow federal and state tobacco labeling laws, and could face potential fines, sanctions, administrative actions, penalties and other liability, either civil and or criminal, for any violations thereof.

Any violation of law with respect to the Company’s marketing materials and or labeling could expose our company to liability including but not limited to fines, sanctions, administrative actions, penalties, civil actions and or criminal prosecution. And although our company maintains general liability insurance, our company’s insurance may not cover potential claims of this type or may not be adequate to indemnify our company for all liability that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our company’s business, results of operations and financial condition. (See “Government Regulation” beginning on page 7).

At present, we generate significant revenues through the sale of our products through our websites. We manage our websites and e-commerce platform internally and as a result any compromise of our security or misappropriation of proprietary information could have a material adverse effect on our business, prospects, financial condition and results of operations. We rely on encryption and authentication technology licensed from other companies to provide the security and authentication necessary to effect secure Internet transmission of confidential information, such as credit and other proprietary information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the technology used by us to protect client transaction data. Anyone who is able to circumvent our security measures could misappropriate proprietary information or cause material interruptions in our operations. We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches. To the extent that our activities or the activities of others involve the storage and transmission of proprietary information, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. For example the storage and loss of credit card numbers that may reside on our servers and be used directly by us or by our service suppliers (ex. merchant account processors). Our security measures may not prevent security breaches. Our failure to prevent these security breaches may result in consumer distrust and may adversely affect our business, results of operations and financial condition.

The requirements of being a U.S. public company may strain our resources and divert management’s attention.

We are required to comply with various corporate governance and financial reporting requirements under the Sarbanes-Oxley Act of 2002, the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations adopted by the Securities and Exchange Commission and the Public Corporation Accounting Oversight Board. We anticipate that we will spend approximately $500,000 each year to comply with these rules. Further, compliance with various regulatory reporting requires significant commitments of time from our management and our directors, which reduces the time available for the performance of their other responsibilities. Our failure to track and comply with the various rules may materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, lead to additional regulatory enforcement actions, and could adversely affect the value of our common stock.

We may experience difficulties in complying with Section 404 of the Sarbanes-Oxley Act in the future.

We are required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, to furnish a report by our management on, among other things, the effectiveness of our internal controls over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal controls over financial reporting. As a smaller reporting company, we are currently exempt from the requirement that our independent registered public accounting firm issue an opinion on our internal controls over financial reporting.

We concluded that our internal controls over financial reporting were effective as of December 31, 2013; however, we do not expect internal controls over financial reporting to prevent all error and all

fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Failure of our internal control systems to prevent error or fraud could materially adversely impact us, could lead to restatements of our financial statements and investors not being able to rely on the completeness and accuracy of the financial information contained in our filings with the SEC, and could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities or stockholder litigation. Any such failure could also cause investors to lose confidence in our reported financial information or our common stock listing on the Nasdaq Global Market to be suspended or terminated, which could adversely affect the value of our common stock.

On April 25, 2014, the FDA announced a proposed Rule seeking to establish, for the first time, federal regulatory authority over, among other tobacco products, e-cigarettes (collectively, “Deemed Tobacco Products”). If approved by the FDA in its current form, the final Rule would mandate with respect to Deemed Tobacco Products such as e-cigarettes:

Also under the Rule, manufacturers of newly Deemed Tobacco Products would be subject to, among other requirements, the following:

In addition, the Rule would require any “new tobacco product,” defined as any Deemed Tobacco Product that was not commercially marketed as of the “grandfathering” date of February 15, 2007, to obtain premarket approval before it could be marketed in the U.S. The premarket approval could take any of the following three pathways: 1) submission of a premarket tobacco product application (PMTA) and receipt of a marketing authorization order; 2) submission of a substantial equivalence (SE) report and receipt of an SE order; or 3) submission of a request for an exemption from SE requirements and receipt of an SE exemption determination. FDA has proposed a compliance policy that would delay enforcement of PMTA and SE requirements for two years after the effective date of the final Rule. Some of our products were not commercially marketed as of the grandfathering date. We cannot predict if our non-grandfathered products will receive the required premarket approval from FDA. Failure to obtain premarket approval could prevent us from marketing and selling our non-grandfathered products in the U.S. and, thus, have a material effect on our business, financial condition and results of operations.

The Rule contemplates enforcement actions being brought against products determined to be adulterated and misbranded under the Tobacco Control Act.

We cannot predict the impact the Rule, if approved and finalized, may have on our company specifically or the e-cigarette industry generally, though as it is enacted, it could have a material adverse effect on our business, results of operations and financial condition. In this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by the FDA. Costs, however, could be substantial and could have a material adverse effect on our business, results of operations and financial condition. At present, we are not able to predict whether the Rule will impact us to a greater degree than competitors in the industry, thus affecting our competitive position.

The European Parliament and the Council of the European Union have adopted a new Directive regulating tobacco and related products.

On April 3, 2014, the European Parliament and the Council of the European Union (“EU”) adopted a directive on the manufacture, presentation and sale of tobacco and related products (the “Tobacco Product Directive”) which will regulate e-cigarettes containing nicotine. In particular, the Tobacco Product Directive (1) will require e-cigarettes and refill containers to be sold in child- and tamper-proof packaging and nicotine liquids to contain only “ingredients of high purity”; (2) provides that e-cigarettes must deliver nicotine doses at “consistent levels under normal conditions of use” and come with health warnings, instructions for their use, information on “addictiveness and toxicity”, an ingredients list, and information on nicotine content; (3) will restrict the advertising and promotion of e-cigarettes; and (4) will require e-cigarette manufacturers and importers to notify EU Member States before placing new products on the market and to report annually to Member States (including on their sales volumes, types of users and their “preferences and trends”). The new Tobacco Product Directive will come into force in May 2014 and gives Member States a two-year transition period to bring national legislation into line with the Tobacco Product Directive.

We cannot predict how the new rules will be transposed into the national laws of EU Member States or the impact they may have on our company specifically or the e-cigarette industry generally, though they could have a material adverse effect on our business, results of operations and financial condition. Costs could be substantial and could have a material adverse effect on our business, results of operations and financial condition. In this regard, total compliance and related costs are not possible to predict and depend on the future requirements imposed by the EU Member States under the Tobacco Product Directive. Member States may decide, for example, to introduce further rules affecting e-cigarettes (for example, age restrictions) provided that these are compatible with the principles of free movement of goods in the Treaty on the Functioning of the European Union (TFEU). The Tobacco Product Directive also includes provisions that would allow Member States to ban specific e-cigarettes or types of cigarettes in certain circumstances if there are grounds to believe that they could present a serious risk to human health. If more than 3 Member States impose a ban and this is found to be duly justified, the European Commission could implement an EU wide ban.

In addition, failure to comply with any of the rules promulgated in accordance with the Tobacco Product Directive could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations and ability to market and sell our products in the EU.

At present, we are not able to predict whether the Tobacco Product Directive will impact us to a greater degree than competitors in the industry, thus affecting our competitive position.

EU and Member State laws on medical products and devices may apply to e-cigarettes.

There is existing legislation at the EU level and in Member States relating to medicinal products and medical devices. E-cigarettes are regarded by the competent authorities in some Member States as medicinal products and/or medical devices, and therefore require a marketing authorization prior to being placed on the market (as well as complying with all other requirements relating to medical products and devices).

In the United Kingdom, for example, the MHRA has announced that e-cigarettes will be regulated as medicines in the future. This would mean that e-cigarettes could only be sold in the United Kingdom if a marketing authorization is first obtained from the MHRA. It is not clear if and how the new EU Tobacco Product Directive may affect these proposals. In the meantime, the MHRA is encouraging companies to voluntarily license e-cigarettes and has indicated that it will continue to decide on a case by case basis whether products are medicinal products.

If we are ultimately required to obtain a marketing authorization to sell e-cigarettes as a medicinal product in the United Kingdom or elsewhere in the EU, we can give no assurances that we would be able to demonstrate to the satisfaction of the relevant competent authority that the conditions for granting a marketing authorization are satisfied.

Limitation by states and cities on sales of e-cigarettes may have a material adverse effect on our ability to sell our products in the United States.

Certain states and cities have enacted laws which preclude the use of e-cigarettes where traditional tobacco-burning cigarettes cannot be used and others have proposed legislation that would categorize e-cigarettes as tobacco products, equivalent to their tobacco burning counterparts. If the use of e-cigarettes is banned anywhere the use of traditional tobacco burning cigarettes is banned, e-cigarettes may lose their appeal as an alternative to cigarettes; which may have the effect of reducing the demand for our products and as a result have a material adverse effect on our business, results of operations and financial condition.

Changes in laws, regulations and other requirements could adversely affect our business, results of operations or financial condition.

In addition to the anticipated regulation of our business by the FDA, as reflected in the FDA’s recently proposed rule seeking to regulate e-cigarettes as a deemed tobacco product , the recent adoption of the EU Tobacco Product Directive, and the possibility of regulation as a medicinal product and/or medical device in the United Kingdom and other EU Member States, our business, results of operations or financial condition could be adversely affected by new or future legal requirements imposed by legislative or regulatory initiatives, including, but not limited to, those relating to health care, public health and welfare and environmental matters. For example, in recent years, states and many local and municipal governments and agencies, as well as private businesses, have adopted legislation, regulations or policies which prohibit, restrict, or discourage smoking; smoking in public buildings and facilities, stores, restaurants and bars; and smoking on airline flights and in the workplace. Furthermore, some states prohibit and others are considering prohibiting the sales of e-cigarettes to minors. Other similar laws and regulations are currently under consideration and may be enacted by state and local governments in the future. At present, it is not clear if e-cigarettes, which omit no smoke or noxious odors, are subject to such restrictions. If e-cigarettes are subject to restrictions on smoking in public and other places, our business, operating results and financial condition could be materially and adversely affected. New legislation or regulations may result in increased costs directly for our compliance or indirectly to the extent such requirements increase the prices of goods and services because of increased costs or reduced availability. We cannot predict whether such legislative or regulatory initiatives will result in significant changes to existing laws and regulations and/or whether any changes in such laws or regulations will have a material adverse effect on our business, results of operations or financial condition.

We may be unable to afford to comply with FDA regulation and the EU Tobacco Product Directive.

The anticipated costs of complying with future FDA regulations as well as the EU Tobacco Product Directive will be dependent on the rules issued by the FDA and the way the EU Tobacco Product Directive is transposed into national laws respectively. Since our products are manufactured by third parties, we anticipate that they will bear the initial investment associated with compliance and will pass those costs to us through price increases. If we need to seek FDA approval, then based on several factors including either pre-market approval or 510K application, we estimate an application could take between 6 to 24 months

with a cost of $100,000 to $2 million. If the device is deemed a drug and a device, we anticipate that the time and costs to comply with FDA and other country specific regulations, including, without limitation, the U.K.’s Medical Health Regulatory Authority, would be prohibitive to the future operations of our company and may have a material adverse effect on our business, results of operations and financial condition. In addition, failure to comply with FDA regulatory requirements or the national laws implementing the EU Tobacco Product Directive could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations and ability to market and sell our products.

Restrictions on the public use of e-cigarettes may reduce the attractiveness and demand for our e-cigarettes.

Certain states, cities, businesses, providers of transportation and public venues in the U.S. have already banned the use of e-cigarettes, while others are considering banning the use of e-cigarettes. If the use of e-cigarettes is banned anywhere the use of traditional tobacco burning cigarettes is banned, e-cigarettes may lose their appeal as an alternative to traditional tobacco burning cigarettes, which may reduce the demand for our products and, thus, have a material adverse effect on our business, results of operations and financial condition.

The FDA has issued an import alert which has limited our ability to import certain of our products.

As a result of FDA import alert 66-41 (which allows the detention of unapproved drugs promoted in the U.S.), U.S. Customs has from time to time temporarily and in some instances indefinitely detained products sent to us by our Chinese suppliers. If the FDA modifies the import alert from its current form which allows U.S. Customs discretion to release our products to us, to a mandatory and definitive hold we will no longer be able to ensure a supply of saleable product, which will have a material adverse effect on our business, results of operations and financial condition. We believe this FDA import alert will become less relevant to us as and when the FDA regulates e-cigarettes under the Tobacco Control Act.

The application of the Prevent All Cigarette Trafficking Act and/or the Federal Cigarette Labeling and Advertising Act to e-cigarettes would have a material adverse affect on our business.

At present, neither the Prevent All Cigarette Trafficking Act (which prohibits the use of the U.S. Postal Service to mail most tobacco products and which amends the Jenkins Act, which would require individuals and businesses that make interstate sales of cigarettes or smokeless tobacco to comply with state tax laws) nor the Federal Cigarette Labeling and Advertising Act (which governs how cigarettes can be advertised and marketed) apply to e-cigarettes. The application of either or both of these federal laws to e-cigarettes could result in additional expenses, could prohibit us from selling products through the internet and require us to change our advertising and labeling and method of marketing our products, any of which would have a material adverse effect on our business, results of operations and financial condition.

We may face the same governmental actions aimed at conventional cigarettes and other tobacco products.

Tobacco industry expects significant regulatory developments to take place over the next few years, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”). As of May 6, 2014, 178 countries, as well as the European Community, have become parties to the FCTC. The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:

If e-cigarettes are subject to one or more significant regulatory initiates enacted under the FCTC, our business, results of operations and financial condition could be materially and adversely affected.

If we have improperly marketed and distributed certain of our products in violation of FDA or EU regulations we may be subject to fines, sanctions, administrative actions, penalties and other liability, either civil and or criminal.

We may be subject to disciplinary, administrative, regulatory and or legal actions if the FDA, any regulatory agencies in EU Member States or other countries in which our products are sold and/or a court of proper jurisdiction determines that our products or the means by which we marketed and sold our products was affected without the proper regulatory approvals. Any such disciplinary, regulatory, administrative and or legal actions may subject us to fines, sanctions, administrative actions, penalties, orders to remove our products from sale and other liability, either civil or criminal, which may have a material adverse effect on our operations, financial results and business prospects.

The FDA has a number of investigatory tools available to it, including document requests and other required information submissions, facility inspections, and examinations and investigations. The use of any of these investigatory tools by the FDA could result in significant costs which may have a material adverse effect on our operations, financial results and business prospects.

Changes in governmental regulation may affect the countries in which we sell our products.

Foreign jurisdictions have varying policies and laws with respect to the use of e-cigarettes that vaporize nicotine. Countries such as the United Kingdom do not restrict its use (although the United Kingdom is currently encouraging voluntary licensing of e-cigarettes as medicinal products, see above), while other countries have restricted its use or have instituted a total ban, such as Thailand. If more countries move towards prohibition or introduce further restrictions on e-cigarettes, it will have a direct impact on our ability to market our products and will have a material adverse effect on our business.

On April 3, 2014, the EU adopted the Tobacco Product Directive which will regulate e-cigarettes containing nicotine. We cannot predict how the Tobacco Product Directive will be transposed into the national laws of EU Member States or the impact they may have on our company specifically or the e-cigarette industry generally, though they could have a material adverse effect on our business, results of operations and financial condition.

There is also existing legislation at the EU level and in Member States regulating medicinal products and medical devices. E-cigarettes are regarded by the competent authorities in some Member States as medicinal products and/or medical devices, and therefore require a marketing authorization prior to being placed on the market (as well as complying with all other requirements relating to medical products and devices). In the United Kingdom, for example, the MHRA has announced that e-cigarettes will be regulated

as medicines in the future. This would mean that e-cigarettes could only be sold in the United Kingdom if a marketing authorization is first obtained from the MHRA. It is not clear if and how the new EU Tobacco Product Directive may affect these proposals. If we are ultimately required to obtain a marketing authorization to sell e-cigarettes as medicinal products in the United Kingdom or elsewhere in the EU, we can give no assurances that we would be able to demonstrate to the satisfaction of the relevant competent authority that the conditions for granting a marketing authorization are satisfied.

If our third-party suppliers or contract manufacturers do not maintain appropriate standards of manufacturing in accordance with GMP and other manufacturing regulations, our development and commercialization activities could suffer significant interruptions or delays.

We rely, and intend to continue to rely, on third-party suppliers and contract manufacturers to provide us with our products. These suppliers and manufacturers must continuously adhere to good manufacturing practice (“GMP”) as well as any applicable corresponding manufacturing regulations outside of the United States. In complying with these regulations, we and our third-party suppliers and contract manufacturers must expend significant time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that our products meet applicable specifications and other regulatory requirements. Failure to comply with these requirements could result in an enforcement action against us, including warning letters, the seizure of products, suspension or withdrawal of approvals, shutting down of production and criminal prosecution. Any of these third-party suppliers or contract manufacturers will also be subject to audits by the FDA and other regulatory agencies. If any of our third-party suppliers or contract manufacturers fails to comply with GMP or other applicable manufacturing regulations, our ability to develop and commercialize our products could suffer significant interruptions and delays.

No liquid market currently exists for our common stock, and an active, liquid trading market for our common stock may not develop, which may cause our common stock to trade at a discount from the initial offering price and make it difficult for you to sell the common stock you purchase.

Our common stock is currently quoted on the OTCBB. Although we intend to apply to list the common stock on the Nasdaq Global Market, there can be no assurance that there will be an active market for our shares of common stock either now or in the future. If an active and liquid trading market does not develop or continue, you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all.

The market price for our common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits, which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.

The market for our common shares is characterized by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are, compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand.

Secondly, we are a speculative or “risky” investment due to our limited operating history, lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance.

As noted above, in conjunction with this offering, we intend to apply to list the common stock on the Nasdaq Global Market. However, there is no guarantee that even if do list on the Nasdaq Global Market, such listing will increase the trading volume of our common stock.

Future sales, or the perception of future sales, by us or our existing stockholders in the public market following this offering could cause the market price for our common stock to decline.

After this offering, the sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon consummation of this offering, we will have a total of shares of common stock outstanding. All shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act (“Rule 144”), including our directors, executive officers and other affiliates (including affiliates of Fields Texas Limited) may be sold only in compliance with the limitations described in “Shares Eligible for Future Sale.”

The shares held by investors in our private financings and certain of our directors, officers and employees immediately following the consummation of this offering will represent approximately % of our total outstanding shares of common stock following this offering, based on the number of shares outstanding as of , 2014. Such shares will be “restricted securities” within the meaning of Rule 144 and subject to certain restrictions on resale following the consummation of this offering. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144, as described in “Shares Eligible for Future Sale.”

In connection with this offering, we, our officers, directors and a majority of shareholders, including all significant shareholders, have agreed with the underwriters, subject to certain exceptions, not to sell, dispose of or hedge any shares of our common stock or other capital stock or securities convertible into or excercisable or exchangeable for shares of common stock or other capital stock or publicly announce any intention to do any of the foregoing during the period ending 180 days after the date of this prospectus, except with the prior written consent of Wells Fargo Securities, LLC and Canaccord Genuity, Inc. See “Underwriting — Lock-up Agreements” for a description of these lock-up agreements.

Upon the expiration of the lock-up agreements described above, shares held by the investors in private financings and certain of our directors, officers and employees will be eligible for resale, subject in the case of our directors, officers and other affiliates to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to registration rights agreements entered into in connection with our private financings and acquisitions, we granted the investors in such financings and the sellers of our acquired businesses the right, subject to certain conditions, to require us to register the sale of their shares of our common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, such investors and sellers could cause the prevailing market price of our common stock to decline. Following completion of this offering, the shares covered by registration rights would represent approximately % of our outstanding common stock (or %, if the underwriters exercise in full their

option to purchase additional shares). Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See “Shares Eligible for Future Sale.”

In addition, the shares of our common stock reserved for future issuance under the 2014 Long Term Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and Rule 144, as applicable. A total of shares of common stock have been reserved for immediate issuance under the 2014 Long Term Incentive Plan and the 2014 Long Term Incentive Plan provides that a total of up to 10% of our outstanding shares of common stock may be reserved for future issuances.

Our board of directors is authorized to issue additional shares of our stock which would dilute existing shareholders.

We are currently authorized to issue up to 300,000,000 shares of common stock, of which 74,487,474 shares are currently issued and outstanding. Additional shares of our common stock may be issued by our board of directors for such consideration as they may consider sufficient without seeking stockholder approval. The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current stockholders.

Investors will incur immediate and substantial dilution as a result of this offering.

Investors purchasing shares of our common stock in this offering will incur immediate and substantial dilution in net tangible book value per share. Assuming a public offering price of $ per share, purchasers of our common stock will effectively incur dilution of $ per share in the net tangible book value of their purchased shares. In addition, purchasers of common stock in this offering will have contributed approximately % of the aggregate price paid by all purchasers of our stock but will own only approximately % of our common stock outstanding after this offering. Furthermore, you may experience further dilution to the extent that shares of our common stock are issued upon the exercise of outstanding stock options and warrants. See “Dilution”.

Your percentage ownership of our common shares may be diluted by future share issuances.

To the extent we issue new shares to fund acquisitions, to raise additional capital, to compensate employees and other persons your percentage ownership of our shares will be diluted.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section of this prospectus entitled “Use of Proceeds.” The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our shares price and trading volume could decline.

The trading market for our shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

We do not intend to pay dividends for the foreseeable future, and you must rely on increases in the market prices of our common stock for returns on equity investment.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

The majority of our board does not consist of independent directors, which limits our ability to establish effective independent corporate governance procedures.

Our board is composed of six directors, one of whom we have determined to be independent based on the NASDAQ listing rules. Thus, the majority of our directors are not deemed independent, which is not a requirement since our common stock is not currently listed on a national securities exchange. Accordingly, without a majority of independent directors on our board, our ability to establish effective corporate governance procedures to oversee functions such as audit, compensation and corporate governance is limited. Furthermore, a majority of our directors, or four of the seven directors, are also executive officers of the Company. This structure gives our executive officers significant control over all corporate issues and decisions.

In the absence of a majority of independent directors, our executive officers, most of whom are also principal stockholders and directors, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between us and our shareholders generally and the controlling officers, shareholders or directors. We intend to apply to list the common stock on the Nasdaq Global Market in conjunction with this offering, which will require the successful satisfaction of the NASDAQ listing rules, including instituting a board comprised of a majority of independent directors. However, there can be no assurance as to whether or when we will be successful in appointing a majority of independent directors.

This prospectus contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact included in this prospectus are forward-looking statements. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “predict,” “project” and similar terms and phrases, including references to assumptions. However, these words are not the exclusive means of identifying such statements. These statements are contained in many sections of this prospectus, including those entitled “Prospectus Summary,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that we will achieve those plans, intentions or expectations. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected.

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained in this prospectus under the heading “Risk Factors,” as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this prospectus are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

We estimate that the net proceeds from the sale of common stock offered by us will be approximately $ million, based on the public offering price of $ per share, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ over-allotment option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $ million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, and increase our visibility in the marketplace. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds of this offering. However, we currently intend to use $ of the net proceeds to us from this offering, together with existing cash, to repay $ of indebtedness issued in conjunction with our acquisitions and previous financings, which indebtedness is described in “Management Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources” in this Prospectus, and the remainder for general corporate purposes, including working capital, product development, marketing activities, further expanding our distribution channels and ongoing acquisitions.

We plan to retain any earnings for the foreseeable future for our operations. We have never paid any dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements and such other factors as our Board of Directors deems relevant. In addition, our credit facility restricts our ability to pay dividends.

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2013:

The information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual public price. You should read this table together with the sections entitled “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as our financial statements and the related notes, which appear elsewhere in this prospectus.

The as adjusted net tangible book value of our common stock as of December 31, 2013, was approximately $ million, or $ per share based upon shares of common stock outstanding on such date. As adjusted net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of common stock outstanding after giving effect to the acquisitions of FIN, Vapestick and VIP and the sale of shares of the common stock we are offering based upon an assumed public offering price of $ per share, the closing price of our common stock on OTCBB on , 2014, and after deducting underwriting discounts and commissions and estimated offering expenses of approximately $ million.

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the offering price per share and the as adjusted net tangible book value per share of our common stock immediately after completion after this offering. This represents an immediate increase in as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to investors purchasing common stock in this offering.

The following table illustrates this dilution on a per share basis to new investors:

Each $1.00 increase (decrease) in the assumed public offering price of $ per share would increase (decrease) the net tangible book value, as adjusted to give effect to the acquisitions of FIN, Vapestick and VIP and this offering, by $ per share and the dilution to new investors by $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions. If the underwriters exercise their over-allotment option in full, the net tangible book value per share of our common stock, as adjusted to give effect to the acquisitions of FIN, Vapestick and VIP and this offering, would be $ per share, and the dilution as adjusted net tangible book value per share to investors in this offering would be $ per share of our common stock.

The table below summarizes as of December 31, 2013, on an as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by our existing stockholders and (ii) to be paid by new investors purchasing shares in our common stock in this offering at an assumed public offering price of $ per share, the closing price of our common stock on OTCBB on , 2014, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The total number of shares of our common stock reflected in the discussion and tables above is based on shares of our common stock outstanding, as of December 31, 2013, and excludes:

The unaudited pro forma combined balance sheet and combined statement of operations for the year ended December 31, 2013 present our consolidated results of operations giving pro forma effect to the recent acquisitions described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Acquisitions,” the recent private placement offerings, the proceeds of which were used to fund the acquisitions as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Private Placements,” and this offering and the use of the estimated net proceeds from this offering as described under “Use of Proceeds,” as if such transactions occurred on January 1, 2013, and for purposes of the balance sheet presentation as if such transactions occurred on December 31, 2013. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions on the historical financial information of the Company.

The unaudited pro forma consolidated financial information should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, all included elsewhere in this prospectus.

The unaudited pro forma consolidated financial information is included for informational purposes only and does not purport to reflect the Company’s results of operations or financial position that would have occurred had we operated as a combined entity with our recent acquisition during the periods presented. The unaudited pro forma consolidated financial information should not be relied upon as being indicative of our results of operations or financial position had the acquisitions and financings described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Acquisitions” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Private Placements,” respectively, and the use of the estimated net proceeds from this offering as described under “Use of Proceeds” occurred on the dates assumed. The unaudited pro forma consolidated financial information also does not project our results of operations or financial position for any future period or date.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition for the fiscal years ended December 31, 2013 and 2012, and should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Registration Statement.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Registration Statement. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

We are one of the leading marketers and distributors of products for the rapidly growing, global electronic cigarette (“e-cigarettes”) industry. E-cigarettes are battery-powered products that simulate tobacco smoking through inhalation of nicotine vapor without the fire, flame, tobacco, tar, carbon monoxide, ash, stub, smell and other chemicals found in traditional combustible cigarettes. According to Euromonitor, the global tobacco industry represents a $756 billion market worldwide with an estimated 1.3 billion smokers globally according to The American Cancer Society, and these existing smokers are our target demographic and represent our primary source of revenue growth. We currently sell our products through more than 50,000 outlets across multiple channels across multiple countries, and have leading positions in the large U.S. and U.K. markets.

We accommodate the various product preferences of e-cigarette users by offering a comprehensive set of product offerings, including disposables, rechargeables, tanks, starter kits, e-liquids, open and closed-end vaping systems and accessories. Our high quality products consist of premium components and nicotine liquids that undergo rigorous quality testing during production. We market our products through what we believe is one of the most extensive brand portfolios in the e-cigarette industry. Our global brand portfolio includes such well-known brands as FIN, VIP, VAPESTICK, Victory, Victoria and El Rey brands. We believe that this combination of product breadth and quality combined with our effective brand strategy, resonates strongly with consumers who associate our products with ease of use, quality, reliability and great taste.

We are focused on rapidly securing additional retail distribution in both the domestic United States and international markets through strategic partnerships with key retailers and distributors. We plan on further penetrating existing markets and acquiring new customers by implementing our multi-brand/multi-product strategy, offering retailers both premium and entry price point brands, to satisfy the demand of consumers with varying preferences. We believe we offer retailers and distributors outstanding margins as a result of our low-cost position and structured incentives.

further enhanced by accelerating global demand for e-cigarettes over the past few years. Including the recent acquisitions as described below, for the period ended December 31, 2013, we generated greater than $75 million of pro forma net revenues.

Agreements with Fields Texas Limited LLC’s affiliate, E-Cig Acquisition Company LLC

On December 30, 2013, we entered into a comprehensive partnership agreement (the “Agreement”) with Fields Texas Limited LLC’s affiliate, E-Cig Acquisition Company LLC (“Fields Texas”) pursuant to which Fields Texas will act as the exclusive agent of the Company to secure sales and distribution agreements of the Company’s products with various retailers and distributors both in the United States and internationally. Fields Texas will also support our acquisition, product development, marketing, pricing and promotional efforts both in the United States and internationally. Upon the execution of the Agreement, the Company issued Fields Texas warrants to purchase 6,975,000 shares of common stock at an exercise price of $9.05 per share. Pursuant to the adjustment provision contained in the warrant, as further described below, following the completion of our private offering on January 7, 2014, the exercise price of the warrant adjusted to $5.00 per share with the ability to purchase up to 12,624,750 shares of common stock. The Company also paid Fields Texas a $200,000 development fee to offset initial start-up costs and expenses.

Pursuant to the Agreement, we will pay Fields Texas ongoing commissions on the net sales of our products sold through the sales and distribution agreements secured by Fields Texas. In addition, for every $10,000,000 in annual net sales realized through the sales and distribution agreements secured by Fields Texas, up to an aggregate of $100,000,000 in annual net sales realized, we will issue Fields Texas five-year warrants (the “Warrants”) to purchase 530,000 shares of common stock at an exercise price equal to the closing price on the date the warrants are issued.

The exercise prices of the Warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes and dilutive issuances. Additionally, the exercise price of the Warrants will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than the current exercise price, with certain exceptions as further described in the Warrant. The holders of the Warrants have piggyback registration rights.

For a merger or acquisition, strategic partnership, joint venture, licensing or similar transaction that Fields Texas facilitates, we will pay a one-time fee equal to 5% of the purchase price paid in the same form of consideration as used in the transaction. To date, we have paid Fields Texas a commission of $500,000 and issued five-year warrants to purchase 500,000 shares of common stock at an exercise price of $10.00 per share in connection with the FIN acquisition, and will pay Fields Texas an additional $750,000 as commission upon our repaying of the Promissory Notes as described above. Pursuant to the adjustment provision contained in the Warrant, following the completion of our private offering on April 30, 2014, the exercise price of the Warrant adjusted to $6.50 per share with the ability to purchase up to 769,232 shares of common stock.

The term of the Agreement is for three years and will automatically be renewed for successive periods upon achieving annual net sales targets.

On January 9, 2014, we completed the acquisition of all of the issued and outstanding ordinary shares of Vapestick Holdings Limited, a company incorporated under the laws of England and Wales (“Vapestick”), pursuant to a Share Exchange Agreement by and between us, Vapestick and all of the shareholders of Vapestick dated December 15, 2013 (the “Exchange Agreement”).

Pursuant to the terms of the Exchange Agreement, we acquired all issued and outstanding shares of Vapestick from its shareholders in consideration for (a) an aggregate cash payment of £3,500,000 (approximately $5.74 million) and (b) the issuance of 6,595,900 shares of our common stock.

On February 28, 2014, we completed the acquisition of FIN Electronic Cigarette Corporation, Inc., a Delaware corporation (“FIN”), through a merger with and into VCIG LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“VCIG”), pursuant to the Agreement and Plan of Merger dated February 12, 2013, by and among the Company, VCIG, FIN, and Elliot B. Maisel, as representative of the FIN stockholders (the “Merger Agreement”).

Pursuant to the terms of the Merger Agreement, we acquired all issued and outstanding shares of FIN from its shareholders (the “FIN Shareholders”) in consideration for an aggregate of 10,000,000 shares of common stock (the “Merger Shares”). Additionally, on the Closing Date we paid $10 million of certain indebtedness and liabilities of FIN and its subsidiaries and issued $15 million of promissory notes (the “Promissory Notes”) to satisfy other indebtedness and liabilities of FIN and its subsidiaries. The Promissory Notes become due 90 days from the date of issuance, on May 29, 2014, and accrue interest at a rate of 10% per annum. We may prepay the Promissory Notes without penalty. If we fail to pay off the Promissory Notes in full by June 9, 2014, for every subsequent day the Promissory Notes are not paid in full, we will issue up to 12,500 shares of common stock per day to the note holders as a penalty payment, dependent on the outstanding principal amount at that time, but no more than a total of 500,000 shares of common stock (the “Late Payment Shares”).

In connection with the merger, the Company entered into a registration rights agreement with the FIN Shareholders, pursuant to which we agreed to register all of the Merger Shares and the Late Payment Shares, if any, on a Form S-1 registration statement. A further description of the terms of this registration rights agreement is described in “Description of Securities-Registration Rights Agreements” in this Prospectus.

On April 22, 2014, the Company entered into a share purchase agreement (the “Exchange Agreement”) by and between (i) the Company and (ii) the shareholders of Must Have Limited (“MHL”), an England and Wales incorporated limited company (the “MHL Shareholders”). Pursuant to the terms of the Exchange Agreement, the MHL Shareholders transferred to the Company all of the shares of MHL held by such shareholders in exchange for (1) the issuance of 2,300,000 shares (the “Exchange Shares”) of the Company’s common stock (the “Share Exchange”), (2) GBP £5,345,713.58 (equivalent to $9,000,000) in cash consideration, (3) $11,000,000 of promissory notes, (4) GBP £6,796,303 in respect of MHL’s surplus cash and (5) (if payable in accordance with the terms of the Exchange Agreement) up to $5,000,000 as an earn-out, if the gross profit of VIP is equal to or exceeds £12,300,000 for the twelve month period ending June 30, 2014.

On the closing date, the Company issued $11,000,000 principal amount of promissory notes (the “Promissory Notes”). The Promissory Notes become due at the earlier of (1) October 14, 2014, (2) the day the Company first trades it shares of common stock on certain listed exchanges (including the NYSE Market, the Nasdaq Capital Market, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange) or (3) the Company completes an underwritten public offering of a minimum of $40 million (the “Maturity Date”). Beginning 120 days following the date of issuance, the Promissory Notes will accrue interest at a rate of 10% per annum.

In connection with the Share Exchange, the Company entered into a registration rights agreement with the MHL Shareholders, pursuant to which the Company agreed to register all of the Exchange Shares on a Form S-1 registration statement. A further description of the terms of this registration rights agreement is described in “Description of Securities-Registration Rights Agreements” in this Prospectus.

As security for all of the Company’s obligations under the Promissory Notes and related documents executed in connection with the Share Exchange, MHL granted a guarantee in favor of the MHL Shareholders (the “MHL Shareholders’ Guarantee”) supported by a second priority security interest in all of MHL’s assets pursuant to the terms of the Debenture entered into between MHL and the security trustee for the MHL Shareholders (the “Security Agreement”).

In connection with the closing of the Share Exchange and the sale of the Notes, the Company, MHL, the Purchasers (as defined under “Liquidity and Capital Resources” below), the security trustee for the Purchasers, the MHL Shareholders and the security trustee for the MHL Shareholders entered into an intercreditor agreement (the “Intercreditor Agreement”). The Intercreditor Agreement governs the relative priorities (and certain other rights) of the Purchasers and MHL Shareholders pursuant the respective security agreements that each entered into with the Company and MHL.

Revenues for the years ended December 31, 2013 and 2012 were $3,102,729 and $1,470,204, respectively, an increase of $1,632,525 or approximately 111%. The increase in sales is primarily attributable to increases in online sales to new and recurring customers and sales to retail and wholesale customers, as a result of our increase in distributors and in marketing in 2013.

Cost of goods sold for the years ended December 31, 2013 and 2012 were $1,288,914 and $526,300, respectively, an increase of $762,614 or approximately 145%. The increase is primarily due to an increase in sales as well as a change in product mix to higher distributor and wholesaler sales, which have lower gross margin than our online sales to consumers. Management believes that cost of goods sold and shipping expense as a percent of net sales will maintain or marginally improve with increased scale and efficiency.

Advisory agreement warrant expense for the years ended December 31, 2013 and 2012 was $16,600,500 and $0 respectively. This expense was due to the warrants we issued to Fields Texas in connection with the advisory agreement that we entered into with Fields Texas on December 30, 2013 as discussed above.

Distribution marketing and advertising expenses for the years ended December 31, 2013 and 2012 were $1,078,180 and $323,167, respectively, an increase of $755,013. During the year ended December 31, 2013, we continued and increased various advertising campaigns to increase both online and point of sale brand awareness, which caused the increase in the expense.

Selling, general and administrative cost for the years ended December 31, 2013 and 2012 was $3,036,873 and $1,068,767, respectively. The increase is primarily due to cost associated with general administrative fees, insurance, telecommunications, printing, supplies, and other miscellaneous items.

Interest expense for the years ended December 31, 2013 and 2012 was $1,804,710 and $30,140, respectively. The increase was attributable to the interest paid on the convertible notes issued by the Company in 2013.

The net loss for the years ended December 31, 2013 and 2012 was $20,706,448 and $478,170, respectively. The net loss per common share for the years ended December 31, 2013 and 2012 was $0.48 and $0.01, respectively.

As of December 31, 2013, we had cash of $2,081,963 and working capital of $60,608 as compared to cash of $17,438 and a working capital deficit of $517,289 as of December 31, 2012. We estimate our operating expenses for the next 12 months may be as high as $30,000,000, consisting primarily of headcount and infrastructure costs, sales and marketing expenditures, research and development, general and administrative costs and acquisitions. We are in the early stages of our business. We are required to fund growth from financing activities, and we intend to rely on a combination of equity and debt financings. Due to market conditions and the early stage of our operations, there is considerable risk in our company being able to consummate debt and equity financings and on terms that are not overly dilutive to our existing shareholders. We can offer no assurance that we will be able to raise additional capital on acceptable terms or at all.

On June 25, 2013, we completed a private placement with investors for the sale of 10,000,000 shares of common stock at $0.25 per share for total net proceeds of $2,200,000.

On July 29, 2013, the Company entered into a loan repayment agreement with a note holder, pursuant to which the Company paid the $250,000 balance owed and accrued interest of $5,000 for a note that matured on January 31, 2014, in exchange for the note holder agreeing to cancel 1,600,000 shares of the Company’s common stock.

On November 4, 2013, we entered into private placement subscription agreements with three persons and issued three notes in the aggregate principal amount of $2,475,000. Immediately upon the issuance of the notes, our Company issued an aggregate of 1,649,999 common shares to such persons following which the aggregate principal amount of the notes was reduced to $1,650,000. Each note bears interest at 6% per annum and matures on January 1, 2014. These notes were paid in full on February 6, 2014.

On February 28, 2014, we issued $15,000,000 principal amount of promissory notes (the “FIN Promissory Notes”) to satisfy certain indebtedness and liabilities of FIN. The FIN Promissory Notes become due 90 days from the date of issuance, on May 29, 2014, and accrue interest at a rate of 10% per annum. We may prepay the FIN Promissory Notes without penalty. If we fail to pay off the FIN Promissory Notes in full by June 9, 2014, for every subsequent day the FIN Promissory Notes are not paid in full, we will issue up to 12,500 shares of common stock per day to the note holders as a penalty payment, dependent on the outstanding principal amount at that time, but no more than a total of 500,000 shares of common stock.

On April 22, 2014, we issued $11,000,000 principal amount of promissory notes (the “VIP Promissory Notes”) to the MHL Shareholders in connection with our acquisition of VIP. The VIP Promissory Notes become due at the earlier of (1) October 14, 2014, (2) the day the Company first trades it shares of a common stock on certain listed exchanges (including the NYSE Market, the Nasdaq Capital Market, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange) or (3) the Company completes an underwritten public offering of a minimum of $40 million (the “Maturity Date”). Beginning 120 days following the date of issuance, the VIP Promissory Notes will accrue interest at a rate of 10% per annum.

In connection with our acquisition of Vapestick, we agreed to 1) offer the former shareholders of Vapestick the opportunity to participate in future equity offerings by us for so long as they own in the aggregate the greater of 5% of our outstanding shares of common stock or 50% of the number of shares of

our common stock issued to the shareholders in connection with the acquisition, 2) fund the business of Vapestick in accordance with its business plan of approximately £350,000 per month until December 31, 2014, and 3) maintain the base salary and target cash bonus opportunities of the employees of Vapestick immediately after the acquisition for a period of twelve months following the acquisition.

On January 7, 2014, January 14, 2014, and January 31, 2014, we completed a “best efforts” private offering of $11,325,000 aggregate principal amount of 15% Senior Secured Convertible Promissory Notes (the “15% Notes”) and warrants (the “Warrants”) to purchase shares of common stock at an exercise price of $5.00 per share (the “First Offering”), with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $10,505,790 after deducting placement agent fees and other expenses.

On February 28, 2014, we completed another “best efforts” private offering of $16,050,000 aggregate principal amount of 15% Notes and Warrants (the “Second Offering” and together with the First Offering, the “Offerings”) with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $14,919,000 after deducting placement agent fees and other expenses.

15% Notes. The 15% Notes are due on the first anniversary of their respective issuance dates (the “Maturity Date”) if not converted prior to the Maturity Date and accrue interest at a rate of 15% on the aggregate unconverted and outstanding principal amount, payable in cash on a quarterly basis. The shares of common stock issuable upon conversion of the 15% Notes shall equal: (i) the principal amount of the Note divided by (ii) $5.00 (the “Conversion Price”). The Conversion Price for the 15% Notes is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, the conversion price of the Notes will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than the current exercise price, with certain exceptions as further described in the Notes. The 15% Notes may be prepaid in cash, in whole or in part, at any time for 115% of the outstanding principal and accrued interest.

Warrants. The Warrants issued in the Offerings are exercisable for an aggregate of 5,475,000 shares of the Company’s common stock. The Warrants are exercisable for a period of five years from their respective issue dates. The exercise price with respect to the Warrants is $5.00 per share. The exercise price and the amount of warrant shares for the Warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, the exercise price of the Warrants will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than the current exercise price, with certain exceptions as further described in the Warrant.

Registration Rights Agreement. In connection with the sale of the 15% Notes and Warrants in the Offerings, we entered into a registration rights agreement with the Purchasers, pursuant to which we agreed to register all of the shares of our common stock underlying the 15% Notes and the Warrants on a Form S-1 registration statement. A further description of the terms of such registration rights agreement is described in “Description of Securities-Registration Rights Agreements” in this Prospectus.

Security Agreement. As collateral security for all of the Company’s obligations under the Purchase Agreement and related documents executed in connection with the Offerings, the Company granted the Purchasers a first priority security interest in all of the Company’s assets pursuant to the terms of the Security Agreement entered into between the Company and the Purchasers (the “Security Agreement”).

On April 22, 2014, the Company completed a private offering with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $20,511,200 after deducting placement agent fees

and other expenses. Pursuant to a securities purchase agreement with the Purchasers (the “Purchase Agreement”), the Company issued to the Purchasers $24,175,824 principal amount of 6% Original Issue Discount Senior Secured Convertible Promissory Notes (the “6% Notes”).

6% Notes. The 6% Notes are due on the first anniversary of the issue date (the “Maturity Date”) less any amounts converted or redeemed prior to the Maturity Date and accrue interest at a rate of 6% on the aggregate unconverted and outstanding principal amount payable in cash on a monthly basis. The shares of common stock issuable upon conversion of the 6% Notes shall equal: (i) the principal amount of the Note to be converted (plus accrued interest and unpaid late charges, if any) divided by (ii) $9.92 (the “Original Conversion Price”). The Original Conversion Price for the 6% Notes is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, the conversion price of the Notes will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than the current exercise price, with certain exceptions as further described in the Notes. Pursuant to the adjustment provision contained in the Notes, following the completion of our private offering on April 30, 2014, the conversion price of the Notes adjusted to $6.50 per share. Additionally, should the Company complete an underwritten public offering of a minimum of $25 million, the conversion price would reset to the price that is equal to 115% of the VWAP of the Company’s shares of common stock on the trading day immediately following the pricing of such public offering should that price be lower than the conversion price then in effect. The Company must prepay $12,000,000 of the principal amount of the 6% Notes, plus any accrued and unpaid interest thereon, between 15 days and 30 days following the issue date. The 6% Notes may not be prepaid in whole or in part at any other time. The Purchasers have the right, in certain circumstances, to redeem all or portions of the 6% Notes, in exchange for either cash or shares of the Company’s common stock, including the ability to redeem an aggregate of up to $800,000 per month, as further described in Section 7 of the 6% Notes.

Registration Rights Agreement. In connection with the sale of the 6% Notes, the Company entered into a registration rights agreement with the Purchasers, pursuant to which the Company agreed to register all of the shares of our common stock underlying the 6% Notes on a Form S-1 registration statement. A further description of the terms of such registration rights agreement is described in “Description of Capital Stock and Other Securities-Registration Rights Agreements” in this Prospectus.

Security Agreements. As security for all of the Company’s obligations under the Purchase Agreement and related documents executed in connection with the Offering: (i) MHL (as defined above) granted a guarantee in favor of the Purchasers (the “Purchasers’ Guarantee”) supported by a first priority security interest in all of MHL’s assets pursuant to the terms of the Debenture entered into between MHL and the security trustee for the Purchasers (the “Purchasers’ Security Agreement”); and (ii) the Company granted the Purchasers a first priority security interest in all of the shares owned by the Company in MHL following completion of the Share Exchange, as further described above, pursuant to the terms of a share charge entered into between the Company and the security trustee for the Purchasers (the “Share Charge”).

On April 30, 2014, we completed an initial closing of a “best efforts” private offering of $3,139,987.50 (the “Offering”) of units, each unit consisting of (i) one share of our common stock and (ii) a warrant to purchase ¹/₄ share of our common stock (the “Units”). Pursuant to a purchase agreement, we sold 483,075 Units in the Offering, at a price of $6.50 per Unit, to a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $2,825,988.75 after deducting placement agent fees and other expenses. In the Offering, we issued 483,075 share of our common stock (the “Shares”) and warrants to purchase 120,768 shares of our common stock (the “Warrants”).

Warrants. The Warrants are exercisable for a period of five years from their issue date. The exercise price with respect to the Warrants is $6.50 per full share. The exercise price for the Warrants is subject to

adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances.

Registration Rights Agreement. In connection with the sale of the Shares and Warrants in the Offering, we entered into a registration rights agreement with the Purchasers, pursuant to which we agreed to register all of the Shares and shares of our common stock underlying the Warrants on a Form S-1 registration statement. A further description of the terms of such registration rights agreement is described in “Description of Securities-Registration Rights Agreements” in this Prospectus.

Operating activities for the year ended December 31, 2013 used cash of $2,004,325 compared to $590,515 for the year ended December 31, 2012, an increase of $1,413,810. This increase was primarily due to an increase in losses between the two periods. Our cash flows provided by investing activities were $29,385 and $0 for the years ended December 31, 2013 and 2012, respectively, an increase of $29,385 primarily due to proceeds from the sale of common stock. Our cash flows from financing activities were $4,098,235 and $601,594 for the years ended December 31, 2013 and 2012, respectively, an increase of $3,496,641 primarily due to the proceeds from the sales of common stock and convertible notes discussed above.

There were no off-balance sheet arrangements for the period ended December 31, 2013.

Revenue is derived from product sales and is recognized upon shipment to the customer. Direct sales to individual customers are recognized within internet sales in the accompanying consolidated statements of income, while all sales to retailers and distributors are recognized within retail and wholesale revenues. Returns are accepted, but are not significant to the Company’s overall operations. As such, no reserve for sales returns and allowances has been determined necessary by management at both December 31, 2013 and 2012. Payments received by the Company in advance are recorded as deferred revenue until the merchandise has shipped to the customer.

Accounts receivable, primarily from retail and wholesale customers or third-party internet brokers, are reported at the amount invoiced. Payment terms vary by customer and may be subject to an early payment discount. Management reviews accounts receivable on a monthly basis to determine if any receivables are potentially uncollectible. An overall allowance for doubtful accounts is determined based on a combination of historical experience, length of time outstanding, customer credit worthiness, and current economic trends. Management judgments and estimates are used in connection with establishing the allowance in any accounting period. Changes in estimates are reflected in the period they become known. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. As of December 31, 2013 and December 31, 2012, the Company expects the amount of any potentially uncollectible receivables to be insignificant and therefore no allowance for doubtful accounts that has been determined necessary by management. For the years ended December 31, 2013 and December 31, 2012, no accounts receivable were written off.

using the first-in, first-out method. Judgments and estimates are used in determining the likelihood that goods on hand can be sold to customers. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, inventory write-downs may be required.

Prepaid inventory consists of deposits paid for inventory to be manufactured by a third-party overseas supplier or inventory which is in-transit and the Company has not yet received title for the goods.

The Company awards stock based compensation as an incentive for employees to contribute to the Company’s long-term success. The Company accounts for employee stock based compensation in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”), which provides investors and other users of financial statements with more complete and neutral financial information, by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is measured based on the fair value of the equity or liability instruments issued on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain highly complex and subjective assumptions, including the expected life of the stock compensation awards and the Company’s expected common stock price volatility. The assumptions used in calculating the fair value of stock compensation awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary to use different assumptions, stock compensation expense could be materially different from what has been recorded in the current period.

ASC 718 covers a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718, at either the fair value of the services or the instruments issued in exchange for such services (based on the same methodology described for employee stock based compensation), whichever is more readily determinable.

Prior to the conversion to a C corporation on March 8, 2013, the Company acted as a pass-through entity for tax purposes. Accordingly, the consolidated financial statements do not include a provision for federal income taxes prior to the conversion. The Company’s earnings and losses were included in the previous members’ personal income tax returns and the income tax thereon, if any, was paid by the members.

The Company now files income tax returns in the United States, which are subject to examination by the tax authorities in that jurisdiction, generally for three years after the filing date. Income taxes are provided for under the liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The calculation of the Company’s tax liabilities for uncertain income tax positions based on estimates of whether, and the extent to which, additional taxes will be required.

In assessing the possible realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In making this assessment, management does not believe that it is more likely than not that the Company will realize the benefits of the net deferred tax assets as of December 31, 2013. This determination was based on cumulative net losses as of the balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 — Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.

Level 2 — Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 2 also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data.

Level 3 — Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market data.

The Company has various processes and controls in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models used to estimate fair value. The Company performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent reviews of the valuations are performed and any material exposures are escalated through a management review process.

The Company utilizes a binomial option pricing model to derive the estimated fair value. Key inputs into the model include a discount for lack of marketability on the stock price, expected volatility, and a risk-free interest rate. Any significant changes to these inputs would have a significant impact to the fair value. The changes in fair value of the warrants are measured at each reporting date and recognized in earnings. See further discussion in Note 7.

Assets and liabilities measured at fair value as of December 31, 2013 are summarized as follows:

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

In July 2013, the FASB issued guidance on the Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under the guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, noting several exceptions. This guidance is effective for fiscal and interim reporting periods beginning after December 15, 2013. The Company has determined that this new guidance will not have a material impact on its consolidated financial statements.

For a discussion of subsequent events in 2014, please see “Significant Developments in 2014” earlier in this section.

On January 9, 2014 Victory acquired Vapestick, a European e-cigarette company. This was followed by our acquisition of FIN on February 28, 2014 and VIP on April 22, 2014. Both FIN and VIP market e-cigarette products and accessories in the United States and United Kingdom, respectively. The following is a discussion of the pro forma results for the year ended December 31, 2013. The following discussion should be read in conjunction with the Company’s combined financial statements and the pro forma financial data contained elsewhere in this prospectus.

On a pro forma basis, total revenues would have increased $72.5 million, to $75.6 million for the year ended December 31, 2013, compared to actual total revenues of $3.1 million for the same period. The increase is due to the additional revenue provided by the acquisitions, specifically $41.9 million of revenue realized by FIN in 2013 and $26.9 million of revenue realized by VIP in 2013.

On a pro forma basis, total cost of goods sold would have increased $32.6 million, to $33.9 million for the year ended December 31, 2013, compared to actual total cost of goods sold of $1.3 million for the same period. The increase is due to the additional product costs associated with the acquired companies, specifically $22.3 million of costs of goods sold by FIN and $9.1 million of costs of goods sold by VIP.

On a pro forma basis, income (loss) from operations would have increased by $6.2 million to ($12.7) million for the year ended December 31, 2013. This compares to actual operating income (loss) of ($18.9) million for Victory for the same period. The increase is primarily due to the acquisition of VIP which

provided an additional $13.3 million of income from operations offset by FIN’s operational income (loss) of ($6.2) million.

The fair value of our common stock, an input to the binomial model used to value the warrants held by Fields Texas Limited, reflects a 25% marketability discount given the low trading volume of our common stock. Upon listing on the NASDAQ, and sufficient trading volume, this discount will be eliminated.

On a pro forma basis, net income (loss) would have decreased by $63.8 million to ($84.5) million. This compares to actual net income (loss) of ($20.7) million for the year ended December 31, 2013. This pro forma loss reflects the costs associated with the fair market value of $31.6 million for the warrants issued in our financing activities in connection with our acquisitions and an interest expense of $7.1 million related to such financing activities.

Our common stock, par value $0.001 (the “common stock”) trades on the OTCBB under the symbol “ECIG.” Prior to July 15, 2013, our common stock was listed under the symbol TCKM. The OTCBB is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. An OTCBB equity security generally is any equity that is not listed or traded on a national securities exchange. In conjunction with this offering, we intend to apply to list the common stock on the Nasdaq Global Market under the symbol “ECIG.”

The following table shows, for the periods indicated, the high and low bid prices per share of our common stock as reported by the OTCBB quotation service. These bid prices represent prices quoted by broker-dealers on the OTCBB quotation service. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

On May 12, 2014, the closing price of our common stock on OTCBB was $7.65 per share.

As of May 12, 2014, there were approximately 173 holders of record of our common stock. However, we believe that there are significantly more beneficial holders of our common stock as many beneficial holders hold their stock in “street” name through brokerage clearing houses, depositories or others in unregistered form.

We have never declared or paid dividends on our common stock, and our board of directors does not intend to declare or pay any dividends on the common stock in the foreseeable future. Our earnings are expected to be retained for use in expanding our business. The declaration and payment in the future of any cash or stock dividends on the common stock will be at the discretion of the board of directors and will depend upon a variety of factors, including our future earnings, capital requirements, financial condition and such other factors as our board of directors may consider to be relevant from time to time.

Ultimately, our target market is the approximately 1.3 billion tobacco smokers who exist worldwide. While many of our competitors limit themselves by focusing on a single brand or product type, our product offerings span the range of customer interests including disposables, rechargeables, tanks, starter kits, e-liquids, open and closed-end vaping systems and accessories. In the U.S. our Victory brand functions as our opening price point brand, while our FIN branded products represent our premium offering. We also offer a portfolio of exclusive or control brands, such as our Greenstix brand, which is manufactured exclusively for MAPCO Express, Inc.

Drive Organic Growth Through Global Expansion, Distribution and Effective Merchandising

Increase Sell-Through and Trial Through Effective Merchandising. While the e-cigarette industry may be complex, our merchandising story remains simple: focus on in-store point of sale marketing and merchandising, given that we believe a significant percentage of purchase decisions are made in-store. Our Company offers differentiated product packaging, innovative in-store marketing and customizable display solutions. We are also focused on experiential marketing, including participation in trade shows. We believe our focused marketing strategy delivers high impact results across our brands and generates superior sell-through and trial.

Increase Points of Distribution. We believe we can increase sales to new and existing retail and distribution customers by offering them attractive value chain economics through competitive mark-ups and co-investment programs. Furthermore, our partnership with Fields Texas Limited, which maintains long-standing relationships with some of the world’s largest retailers, provides us an additional avenue to increase distribution globally.

Accelerate International Expansion. According to Euromonitor, more than 88% of the source of volume of the tobacco industry business lies outside the United States. Our strategy is to increase our international sales by penetrating new and emerging markets where we expect rising consumer incomes and an increase in demand for e-cigarettes. We have implemented a distinct model for expansion into new markets. This model includes building out a localized e-commerce platform in the targeted region, installing retail mobile kiosk units (“RMUs” or “kiosks”) in popular shopping centers and erecting flagship stores in that region. We believe that RMUs offer attractive unit economics that are easily scalable. Our kiosk units function as a platform to educate our consumers and by providing important category and product information through our on-site kiosk managers. Given the tremendous success of our RMUs in the U.K., we plan to roll out the kiosk model in our other core markets.

Acquisitions are a key part of our strategy to quickly penetrate certain channels and new geographies. Our historical acquisitions have provided us with distribution platforms that have enabled us to establish a local presence in key geographic regions. Additionally, we have been able to identify and generate significant synergies through existing sourcing relationships and the consolidation of manufacturing platforms. We plan to continue to evaluate potential acquisition opportunities using a disciplined approach, pursuing only those opportunities that we believe will enhance long-term shareholder value.

Continue to Optimize Manufacturing, Supply Chain and Distribution Operations

“Electronic cigarettes” or “e-cigarettes,” are battery-powered products that enable users to inhale vapor without smoke, tar, ash or carbon monoxide. Some e-cigarettes look like traditional cigarettes, and, regardless of their construction, are comprised of three functional components:

When a user draws air through the e-cigarette, the air flow is detected by a sensor, which activates a heating element that vaporizes the solution stored in the mouthpiece/cartridge. The solution is then vaporized and it is this vapor that is inhaled by the user. The cartridge contains either a nicotine solution or a nicotine-free solution, either of which may be flavored.

We believe our company offers smokers an alternative to traditional cigarettes for a number of reasons. Our products, which contain only four ingredients versus more than 4,000 ingredients and chemicals in tobacco cigarettes, are free of tar and other chemical substances which are produced in traditional cigarettes. No burning or combustion occurs while using e-cigarettes. Our e-cigarettes are rechargeable by an electric outlet or car charger so there are no cigarette butts or ashes to dispose of. The United States Food and Drug Administration (“FDA”) has not, nor has the medical community, fully studied the possible health effects of e-cigarette products. Although certain countries, cities, businesses and providers of transportation have banned the use of e-cigarettes, we believe we provide consumers an opportunity to smoke in additional places without the social stigmas increasingly associated with traditional cigarettes.

Our products are sold under multiple brands, including but not limited to (1) Victory, (2) FIN, (3) VAPESTICK, and (4) VIP. E-cigarettes are typically sold individually, with refills sold in packs of three or five, with each refill equivalent to approximately 1.5–2.5 packs of cigarettes. Customers are also able to purchase starter kits, which generally consist of a rechargeable battery, a charger and various quantities of e-cigarettes, and customers are able to purchase such items separately in addition to other products such as carrying cases and refills. E-cigarette cartridges are available in a variety of flavors including regular tobacco, menthol, strawberry, blueberry, cherry, coffee, vanilla and chocolate. We offer a full range of e-cigarette products and related accessories including disposable e-cigarettes, rechargeable kits, prefilled cartomizers, e-liquids, tanks, open and closed-end vaping systems and carry and charging cases.

Most smokers enjoy the substantial and emotional feeling of smoking, which we believe is one reason why smoking cessation gums or patches have only limited effectiveness. Our company provides smokers an experience similar to smoking a traditional cigarette without the fire, flame, tobacco, tar, carbon monoxide, ash, stub or smell found in tobacco cigarettes.

E-cigarettes are a relatively new product category that has only started to gain consumer traction in the past three years. The category of products has evolved in the last few years, with minor evolutions in product functionality and cosmetics since inception to become “more real cigarette like” in taste, feel, and appearance. We believe that all of our major competitors source virtually all of their components from China, with a few competitors sourcing flavoring systems in the United States. There are multiple sources for production of e-cigarettes in China, with most major competitors sourcing from two or three major factories, the same ones utilized by our Company. Warehousing and transportation is performed and/or organized either by the producers, or set up independently by the Company. Federal Express, DHL, Royal Mail container shipping, and other major global shippers and freight forwarders are all involved in the supply chain.

We distribute e-cigarettes globally through multiple channels, including traditional retail stores, company owned retail stores, kiosks and online. All of our products are available for sale on our e-commerce websites. The online business is comprised of monthly subscribers that receive product refills for their rechargeable kits monthly, and consumers that buy directly via our e-commerce websites. Our United States retail business was recently expanded within the last two years, and since then our products have experienced increased same store sales on a monthly basis, while we have continued distribution growth to new outlets. Our distribution approach to United States retail stores is via brokers and distributors as a way to scale our resources.

Our international business also represents growth potential as we continue to enter into distribution agreements with established retailers and distributors in major international markets.

We have entered into an exclusive agent agreement with Fields Texas, the terms of which are further described in “Management Discussion and Analysis of Financial Condition and Results of Operations” in this Prospectus, to act as the exclusive agent to secure sales and distribution agreements for all of the Company’s products and brands with various retailers and distributors both in the United States and internationally. Fields Texas will also support our acquisition, product development, marketing, pricing and promotional efforts both in the United States and internationally. The term of our agreement with Fields Texas is for three years and will automatically be renewed for successive periods upon achieving annual net sales targets.

In addition, Daymon Worldwide, which is one of the largest convenience store distributors in the United States with 22,000 associates and strength across the United States and internationally, has been contracted exclusively to represent us in the United States.

We believe we have one of the most diversified distributor bases and customer bases in the independent e-cigarette industry with global retail distribution exceeding 50,000 stores. Two retailers account for between 35% and 40% of our U.S. sales, which, if lost, would have a material adverse effect on our business.

We have been a very active marketer in the industry, with a leadership team that has extensive experience in brand building. In addition to online marketing, we have made important investments in point of sale marketing, including impactful displays and product placements within retail stores. We believe that after superior packaging, point of sale marketing has the highest return on investment of any marketing activity. We believe our advantage revolves around (1) our branding, which resonates with our key target audience, (2) our taste, which was preferred for most real tobacco taste in recent testing of our merchandising solutions which allow for customization by the retailer and provides higher visibility to users at the point of purchase to drive sales, (3) our brand awareness built through our internet expertise,

which creates high levels of exposure with our target consumer, and (4) our value pricing, which allows our retailers to enjoy the highest landed margins in the industry with attractive pricing for consumers.

The e-cigarette industry is extremely competitive with low barriers to entry. Competition is based on availability, brand development and recognition and price. We compete with other sellers of e-cigarettes, such as big tobacco companies, independent domestic and international e-cigarette companies, small internet and kiosk e-cigarette companies as well as multiple resellers and distributors. Our direct competitors sell products that are substantially similar to ours and through the same channels we use to sell our products. We compete with these direct competitors for sales through the internet as well as distributors, wholesalers and retailers including national chain stores, tobacco shops, gas stations, grocery chains and other outlets associated with the selling of tobacco products.

We own the United States trademark for the “Victory” brand for e-cigarettes. It has been approved by the U.S. Patent and Trademark Office for publication. Completion of the federal registration process is expected in the fall of 2014. Additionally, we own the United States trademark for the “FIN” brand, “VAPESTICK” brand and “VIP” brand for e-cigarettes, as well as the United Kingdom trademark for the “VAPESTICK” brand and “VIP” brand for e-cigarettes and the European trademark for the “VAPESTICK” brand for e-cigarettes.

We do not currently own any domestic or foreign patents relating to e-cigarettes. On November 7, 2013, the Company filed a provisional patent application titled ECO MICRO-ELECTRIC THERMAL DEVICE, issue number 41849, with the United States Patent and Trademark Office. The invention creates perpetual electricity and thermal energy in micro-electric devices and can be used to replace the battery device that currently heats a filament to atomize and/or vaporize a liquid.

We are a defendant in a certain patent lawsuit as described in “ — Legal Proceedings” below.

Third party lawsuits alleging our infringement of patents, trade secrets or other intellectual property rights could have a material adverse effect on our business, results of operations and financial condition.

For a discussion of the risk factors relating to intellectual property that we believe could materially affect our actual and expected results, see “Risk Factors” in this Prospectus.

We currently have no manufacturing capabilities. Our products are manufactured to meet our design specifications by third party manufacturers. We source substantially all of our products from two major suppliers in China. The remainder of our products are sourced in the United States and the United Kingdom. These suppliers also supply and produce product for many of our large competitors. We believe that several alternative and redundant sources for our products are available.

Based on the December 2010 U.S. Court of Appeals for the D.C. Circuit’s decision in Sottera, Inc. v. Food & Drug Administration, 627 F.3d 891 (D.C. Cir. 2010), the United States Food and Drug Administration (the “FDA”) is permitted to regulate e-cigarettes as “tobacco products” under the Family Smoking Prevention and Tobacco Control Act of 2009 (the “Tobacco Control Act”). Under this Court

decision, the FDA is not permitted to regulate e-cigarettes as “drugs” or “devices” or a “combination product” under the Federal Food, Drug and Cosmetic Act unless they are marketed for therapeutic purposes. Because we do not market our e-cigarettes for therapeutic purposes, our e-cigarettes are subject to being classified as “tobacco products” under the Tobacco Control Act. The Tobacco Control Act grants the FDA broad authority over the design, manufacture, distribution, sale, marketing and packaging of tobacco products, although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction of nicotine yields of a tobacco product to zero, it has authority to impose tobacco product standards that it deems appropriate for the protection of public health.

The Tobacco Control Act also requires establishment, within the FDA’s new Center for Tobacco Products, of a Tobacco Products Scientific Advisory Committee to provide advice, information and recommendations with respect to the safety, dependence or health issues related to tobacco products. The Tobacco Control Act imposes significant new restrictions on the advertising and promotion of tobacco products. For example, the law requires the FDA to finalize certain portions of regulations previously adopted by the FDA in 1996 (which were struck down by the Supreme Court in 2000 as beyond the FDA’s authority). As written, these regulations would significantly limit the ability of manufacturers, distributors and retailers to advertise and promote tobacco products, by, for example, restricting the use of color, graphics and sound effects in advertising, limiting the use of outdoor advertising, restricting the sale and distribution of non-tobacco items and services, gifts, and sponsorship of events and imposing restrictions on the use for cigarette or smokeless tobacco products of trade or brand names that are used for non-tobacco products. The law also requires the FDA to issue future regulations regarding the promotion and marketing of tobacco products sold or distributed over the internet, by mail order or through other non-face-to-face transactions in order to prevent the sale of tobacco products to minors.

It is likely that the Tobacco Control Act could result in a decrease in tobacco product sales in the United States, including sales of our e-cigarettes.

The FDA has previously indicated that it intends to regulate e-cigarettes under the Tobacco Control Act through the issuance of deeming regulations that would include e-cigarettes under the definition of a “tobacco product” under the Tobacco Control Act subject to the FDA’s jurisdiction. On April 25, 2014, the FDA announced a proposed rule (the “Rule”) seeking to establish, for the first time, federal regulatory authority over, among other tobacco products, e-cigarettes (collectively, “Deemed Tobacco Products”).

If approved by the FDA in its current form, the final Rule would mandate with respect to Deemed Tobacco Products such as e-cigarettes:

Also under the Rule, manufacturers of newly Deemed Tobacco Products would be subject to, among other requirements, the following:

The Rule contemplates enforcement actions being brought against products determined to be adulterated and misbranded. The Rule’s comment period is currently schedule to terminate July 9, 2014. It is not known when the Rule could become final. The Rule contains various compliance dates based on the publication date of the final Rule in the Federal Register.

The application of the Tobacco Control Act to e-cigarettes could impose, among other things, restrictions on the content of nicotine in e-cigarettes, the advertising, marketing and sale of e-cigarettes, the use of certain flavorings and the introduction of new products. We cannot predict the scope of such regulations or the impact they may have on our company specifically or the e-cigarette industry generally, though if enacted, they could have a material adverse effect on our business, results of operations and financial condition.

State and local governments currently legislate and regulate tobacco products, including what is considered a tobacco product, how tobacco taxes are calculated and collected, to whom and by whom tobacco products can be sold and where tobacco products may or may not be smoked. Certain states and cities have enacted laws which preclude the use of e-cigarettes where traditional tobacco burning cigarettes cannot be used and others have proposed legislation that would categorize e-cigarettes as tobacco products, equivalent to their tobacco burning counterparts. If the use of e-cigarettes is banned anywhere the use of traditional tobacco burning cigarettes is banned, e-cigarettes may lose their appeal as an alternative to cigarettes; which may have the effect of reducing the demand for our products and as a result have a material adverse effect on our business, results of operations and financial condition.

As a result of FDA import alert 66-41 (which allows the detention of unapproved drugs promoted in the U.S.), U.S. Customs has from time to time temporarily and in some instances indefinitely detained products sent to us by our Chinese suppliers. If the FDA modifies the import alert from its current form which allows U.S. Customs discretion to release our products to us, to a mandatory and definitive hold we will no longer be able to ensure a supply of saleable product, which will have a material adverse effect on our business, results of operations and financial condition. However, we believe this FDA import alert will become less relevant to us as and when the FDA regulates e-cigarettes under the Tobacco Control Act.

At present, neither the Prevent All Cigarette Trafficking Act (which prohibits the use of the U.S. Postal Service to mail most tobacco products and which amends the Jenkins Act, which would require individuals and businesses that make interstate sales of cigarettes or smokeless tobacco to comply with state tax laws) nor the Federal Cigarette Labeling and Advertising Act (which governs how cigarettes can be advertised and marketed) apply to e-cigarettes. The application of either or both of these federal laws to e-cigarettes would have a material adverse effect on our business, results of operations and financial condition.

The Tobacco industry expects significant regulatory developments to take place internationally over the next few years, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”). As of May 6, 2014, 178 countries, as well as the European Community, have

become parties to the FCTC. The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:

If e-cigarettes are subject to one or more significant regulatory initiatives enacted under the FCTC, our business, results of operations and financial condition could be materially and adversely affected.

On April 3, 2014, the EU adopted the Tobacco Product Directive which will regulate e-cigarettes containing nicotine. In particular, the Tobacco Product Directive (1) will require e-cigarettes and refill containers to be sold in child- and tamper-proof packaging and nicotine liquids to contain only “ingredients of high purity”; (2) provides that e-cigarettes must deliver nicotine doses at “consistent levels under normal conditions of use” and come with health warnings, instructions for their use, information on “addictiveness and toxicity”, an ingredients list, and information on nicotine content; (3) will restrict the advertising and promotion of e-cigarettes; and (4) will require e-cigarette manufacturers and importers to notify EU Member States before placing new products on the market and to report annually to Member States (including on their sales volumes, types of users and their “preferences and trends”).

The new Tobacco Product Directive will come into force in May 2014 and gives Member States a two-year transition period to bring national legislation into line with the Tobacco Product Directive. Its effect will depend on how Member States transpose the Directive into their national laws. Member States may decide, for example, to introduce further rules affecting e-cigarettes (for example, age restrictions) provided that these are compatible with the principles of free movement of goods in the TFEU. The Tobacco Product Directive also includes provisions that would allow Member States to ban specific e-cigarettes or types of e-cigarettes in certain circumstances if there are grounds to believe that they could present a serious risk to human health. If more than 3 Member States impose a ban and this is found to be duly justified, the European Commission could implement an EU wide ban. Similarly, the Tobacco Product Directive provides that Member States may prohibit a certain category of tobacco or related products on grounds relating to a specific situation in that Member State for public health purposes. Such measures must be notified to the European Commission to determine whether they are justified.

placed on the market (as well as complying with all other requirements relating to medical products and devices). In the United Kingdom, for example, the MHRA has announced that e-cigarettes will be regulated as medicines in the future. This would mean that e-cigarettes could only be sold in the United Kingdom if a marketing authorization is first obtained from the MHRA. It is not clear if and how the new EU Tobacco Product Directive may affect these proposals.

There are also other national laws in Member States regulating e-cigarettes. It is not clear what impact the new Tobacco Product Directive will have on these laws.

We cannot predict the scope of any of the new rules described above or the impact they may have on our company specifically or the e-cigarette industry generally, though they could have a material adverse effect on our business, results of operations and financial condition. In this regard, total compliance and related costs are not possible to predict and depend on the future requirements imposed by the FDA under the Tobacco Control Act, the EU Member States under the Tobacco Product Directive or by any other relevant regulatory authority under applicable law. Costs, however, could be substantial and could have a material adverse effect on our business, results of operations and financial condition and ability to market and sell our products. In addition, failure to comply with any of the rules promulgated in accordance with the Tobacco Control Act, the Tobacco Product Directive or any other applicable law could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations. Furthermore, if we are ultimately required to obtain a license to sell e-cigarettes as a medicine in the United Kingdom or elsewhere in the EU, we can give no assurances that we would be able to demonstrate to the satisfaction of the relevant competent authorities that the conditions for granting a marketing authorization are satisfied,. At present, we are not able to predict whether any of the regulation described above will impact us to a greater degree than competitors in the industry, thus affecting our competitive position.

On April 8, 2014, our Board of Directors approved changing the Company name from “Victory Electronic Cigarettes Corporation” to “Electronic Cigarettes International Group, Ltd.”. On April 10, 2014, we received written consents in lieu of a meeting of stockholders from stockholders holding 50.54% of the outstanding shares of our common stock approving the name change. The name change will take effect upon filing an amendment to our articles of incorporation with the state of Nevada, which will occur 20 days after we send out a Schedule 14C Information Statement to our shareholders of record as of April 10, 2014, which we expect to occur on May 19, 2014.

brands in more than 50,000 outlets in all 50 states across many channels of distribution, including food, drug, mass retail, gas and convenience stores. FIN is sold in some of the most well-known retailers in the country, including Wal-Mart, Sam’s Club, Walgreens, Rite-Aid, Kroger, 7-Eleven, Circle K, Stripes Convenience Stores and Mapco Express.

On April 22, 2014, we completed the acquisition of VIP. VIP, which is based in Manchester, United Kingdom, was founded in 2009 and has grown to become one of the leading e-cigarette companies in England and currently maintains the number one market position in Ireland. VIP has developed a broad portfolio of products that includes traditional rechargeable and disposable e-cigarettes, open and closed-end vaping systems, tanks and e-liquids. VIP offers its products through a unique multi-channel distribution model with their own retail stores, retail mobile kiosk units, online and traditional retail.

A further description of the terms of these acquisitions is described in “Management Discussion and Analysis of Financial Condition and Results of Operations” in this Prospectus.

We are a holding company and run our operations through four wholly-owned subsidiaries consisting of Victory Electronic Cigarettes, Inc. a Nevada corporation, Vapestick Holdings Limited, a company incorporated under the laws of England and Wales, VCIG LLC, a Delaware limited liability company, whose wholly owned subsidiary is FIN Branding Group, LLC, and Must Have Limited, an England and Wales incorporated limited company.

We currently have approximately 130 employees, all of which are full-time, across all functions of finance, supply chain, legal, sales, marketing, and customer service. From time to time we engage independent contractors to provide services as necessary. None of our staff are currently covered by a collective bargaining agreement. We have had no labor-related work stoppages and we believe our relations with our staff are excellent.

Victory maintains its corporate headquarters, having an area of approximately 2,500 square feet, at 11335 Apple Drive, Nunica, MI 49448, which we lease for $1,500 per month. The lease is on a month-to-month basis with no long term or other commitments or contracts. We believe our corporate offices are suitable and adequate to operate our business at this time. Our subsidiary, FIN, sub-leases its corporate offices, having an area of approximately 3,928 square feet, at 3414 Peachtree Road, N.E., Atlanta, GA 30326, for $5,460 per month, increasing to $5,625 per month on January 1, 2015. The lease commenced on January 1, 2013 and terminates on January 31, 2015. Our subsidiary, Vapestick leases an area of approximately 3,100 square feet, at Ground Floor, Building 2, Imperial Place, Maxwell Road, Borehamwood, Hertfordshire WD6 1JN, for $9,570 (5,800 sterling) per month, with a break option after three years. Our subsidiary, VIP, leases its corporate offices as well as a storage and distribution center, at 14 Dale Industrial Estate, Phoenix Way, Radcliffe, Manchester, at an annual rental rate of £13,420.00. This lease expires in November of 2015.

VIP maintains a lease of an additional distribution center at Unit P1 (9 & 10), Heywood Distribution Park, Heywood, OL10 2TS, having an area of approximately 8,084 square feet, at an annual rental rate of £44,800. The least expires in May of 2018. Additionally, we house inventory in a few distribution centers on a month-to-month basis with no long term or other commitments or contracts. We are looking to lease additional space to house our inventory as it increases through our acquisitions.

We fully utilize our current premises. At the same time, we are always looking for more efficient solutions and stronger infrastructures to support our operations. We are currently exploring new integrated inventory, accounting, and operations ERP solutions to enable a stronger platform on which to rapidly scale the business.

On June 22, 2012, Ruyan filed a lawsuit against our subsidiary Fin Branding Group, LLC (“FIN”), as well as several other sellers and distributors of e-cigarettes, alleging infringement of U.S. Patent No. 8,156,944 (the “‘944 Patent”) based on the manufacture, use, importation, marketing and/or sale of certain products. On July 31, 2012, FIN filed an answer and counterclaims against Ruyan in the lawsuit. The various lawsuits were consolidated for discovery purposes as Ruyan Investment Holdings Ltd. vs. Soterra, Inc., et. al., Case No. 2:12 CV-05454-GAF-FFM, which is pending in the United States District Court for the Central District of California.

On September 13, 2012, FIN filed a request for inter partes reexamination of the ‘944 Patent with the U.S. Patent and Trademark Office seeking to invalidate claims of the ‘944 Patent. On October 15, 2012, FIN filed a motion in the District Court to stay the lawsuit pending the outcome of its reexamination. On November 27, 2012, the U.S. Patent and Trademark Office granted FIN’s request for inter partes reexamination of the ‘944 Patent and issued an Office Action to Ruyan. On January 28, 2013, and February 5, 2013, Ruyan filed responses to the Office Action. On February 25, 2013, the District Court granted FIN’s motion to stay the lawsuit until the reexamination is complete. On February 27, 2013, FIN filed comments in the reexamination proceeding.

On July 24, 2013, CB Distributors, Inc., and DR Distributors, LLC (collectively “CB Distributors”), two co-defendants in the consolidated lawsuit, separately filed a request for inter partes review of the ‘944 Patent with the U.S. Patent and Trademark Office. On December 30, 2013, the U.S. Patent and Trademark Office issued a decision to institute CB Distributors’ inter partes review of the ‘944 Patent, and ordered a stay of FIN’s reexamination proceeding. FIN’s reexamination and, correspondingly, the lawsuit each remain stayed pending the completion of CB Distributors’ inter partes review. No scheduling order or trial date has been entered by the District Court, and no discovery will take place while the lawsuit is stayed. The Company intends to continue to vigorously defend FIN against Ruyan’s claims.

On March 5, 2014, Fontem filed a complaint against us and FIN alleging infringement of U.S. Patents Nos. 8,365,742, 8,375,957, 8,393,331, and 8,490,628 based on our manufacture, use, importation, marketing and/or sale of certain products. On April 8, 2013, Fontem filed an amended complaint additionally alleging infringement of U.S. Patent No. 8,689,805. The case is pending in the United States District Court for the Central District of California, Case No. CV14-1651-GW-MRW. The deadline for Victory and FIN to file an answer to the complaint is currently May 16, 2014.

Such patent lawsuits as well as any other potential future third-party lawsuits alleging infringement of patents, trade secrets or other intellectual property rights could force us to do one or more of the following:

From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. Other than as described above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Our executive officers, directors and other significant employees and their ages and positions are as follows:

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

Brent David Willis has served as the Chief Executive Officer, President, Secretary and a director of our Company since June 25, 2013. From June 2012 until June 2013, Mr. Willis served as Chief Operating Officer of Victory Electronic Cigarettes, Inc. From 2009 to 2013, Mr. Willis served as the Chairman and Chief Executive Officer of Liberty Ammunition Inc., a private lead-free ammunition company. From 2008 to present, Mr. Willis has served as the Chairman of Throwdown Industries Inc., a private mixed martial arts company. From 2008 to 2009, Mr. Willis was the Chairman and Chief Executive Officer of Vascular Technologies, Inc., a private medical device company. Mr. Willis served as the Chief Executive Officer and on the board of directors of Cott Corporation (NYSE: COT), a retail brand beverage company, from 2006 to 2008 and on the board of directors for the American Beverage Association. From 2002 to 2006, Mr. Willis was the Global Chief Commercial Officer, President, and on the board of management for Anheuser-Busch InBev SA/NV (NYSE: BUD) AmBev (NYSE: ABV). At InBev, he developed and implemented growth initiatives and acquisitions. From 1996 through 2001, Mr. Willis served as a President in Latin America for the Coca-Cola Company. From 1987 through 1996, Mr. Willis worked for Kraft Foods, Inc., where he managed a number of Kraft’s brands, developed their category management system in the United States, led acquisitions and joint ventures in Japan, Korea, Indonesia and others, and helped launch the Kraft brand in China. Mr. Willis obtained a Bachelors of Science in Engineering from the United States Military Academy at West Point in 1982 and obtained a Masters in Business Administration from the University of Chicago in 1991.

We believe Mr. Willis is qualified to serve on our board of directors because of his education and business experiences, including his experience as a director of Victory Electronic Cigarettes, Inc., as described above.

James P. McCormick has served as the Chief Financial Officer of the Company since April 30, 2014. From January 2013 through April 2014, Mr. McCormick was an independent management consultant in the consumer goods sector supporting international investment analysis, M&A opportunities and brand and trade marketing strategic reviews. From January 2011 through December 2012,

Mr. McCormick was the Chief Financial Officer of Sodexo, Inc. a global food and facilities management company. From January 2009 through December 2010, Mr. McCormick was the Chief Financial Officer of Federal Flange, Inc., an oil and gas manufacturing company. From 1992 through 2008, Mr. McCormick was a senior manager with British American Tobacco, a multinational tobacco company, holding numerous Chief Executive Officer and Chief Financial Officer roles around the world. Mr. McCormick obtained a Bachelors of Science in Finance and Accounting from the Eastern Illinois University in 1988 and obtained a Masters in Business Administration from Southern Illinois University (Edwardsville) in 1992.

Marc Hardgrove has served as the Chief Creative Innovation Officer and a director of our Company since June 25, 2013. Marc Hardgrove is a co-founder of Victory Electronic Cigarettes, Inc., and from November 2010 to present, Mr. Hardgrove has served as the Chief Executive Officer of Victory Electronic Cigarettes, Inc. In 1997, Mr. Hardgrove co-founded Jumpline Inc., a private web hosting company and served as Vice President for nine years from 1999 to 2007. Jumpline Inc. expanded from a start-up to be a large web hosting company in the United States. Jumpline Inc. has customers in 97 countries and hosts over 150,000 websites around the world. Mr. Hardgrove is a major equity holder of Jumpline Inc. and currently sits on the board of directors for the company. In 2006, Mr. Hardgrove co-founded a web2.0 business called Next Net Media LLC. Next Net Media LLC is a private search engine optimization company in the United States that manages search results for over 5,000 small businesses. Mr. Hardgrove sits on the Next Net Media LLC board of directors and continues to own a significant equity stake in the limited liability company. Mr. Hardgrove is a graduate of The Ohio State University (1994) with a double major in Business-Marketing and Finance.

We believe Mr. Hardgrove is qualified to serve on our board of directors because of his education and business experiences, including his experience with Victory Electronic Cigarettes, Inc., as described above.

Michael Clapper has served as the Co-Founder and Executive Chairman of the Vapestick Holdings Limited group of companies from 2010 to 2013. Mr. Clapper is a regular e-cigarette industry commentator on U.K. radio and television. He has also served on the board of the European Electronic Cigarette Industry Trade Association (ECITA) since 2011 and was elected Chairman of ECITA in March 2014. In 2009, Mr. Clapper formed Clapper Ventures LLP, a private equity fund with investments in financial services, consumer products and internet marketing companies. Mr. Clapper has served as Chair of Clapper Ventures LLP since its founding. From 1991- 2009 Mr. Clapper was the Founder and Chief Executive Officer of Enterprise Group, a U.K.-based company which grew to become one of the U.K.’s largest distributors of mortgages and loans. In 2007, Enterprise Group was ranked the U.K.’s 31st fastest growing private company by The Sunday Times “Fast Track 100”. Mr. Clapper was voted “Business Leader of the Year” at the British Mortgage Awards in 2008.

We believe Mr. Clapper is qualified to serve on our board of directors because of his education and business experiences, including his experience with Vapestick Holdings Limited, as described above.

James P. Geiskopf has served as a director of our Company since June 25, 2013. James P. Geiskopf has 32 years of experience in the car rental industry. From 1975 to 1986, Mr. Geiskopf was the Chief Financial Officer of Budget Rent a Car of Fairfield California. From 1986 to 2007, Mr. Geiskopf was the President and Chief Executive Officer of Budget Rent a Car of Fairfield California. In 2007, Mr. Geiskopf successfully sold the franchise and its four locations. Mr. Geiskopf served on the board of directors of Suisun Valley Bank from 1986 to 1993. The bank was successfully sold to a larger institution in 1993. Mr. Geiskopf also served on the board of directors of Napa Valley Bancorp from 1991 to 1993. The bank holding company was successfully sold to a larger institution in 1993. Mr. Geiskopf was the President and director of the Resource Group from 2007 to 2009, a resource company quoted on the OTC-BB with a class of shares registered under the Exchange Act. Mr. Geiskopf was President, Secretary, Treasurer, and director of Search By Headlines.com from 2011-2012, a company quoted on the OTC-BB with a class of shares registered under the Exchange Act.

We believe Mr. Geiskopf is qualified to serve on our board of directors because of his education and business experiences, including his experience with other public companies, as described above.

William R. Fields has served as a director of our Company since December 30, 2013. Mr. Fields is currently Chairman of Fields Texas Limited LLC and Four Corners Sourcing International. In addition, Mr. Fields is also a General Partner of Origentics Rejuvenation Centers and Managing Partner of Strategic Brands LLC. Previously, Mr. Fields served as Chairman and Chief Executive Officer of Factory 2-U Stores, Inc. from 2002 to 2003, President and Chief Executive Officer of Hudson’s Bay Company from 1997 to 1999 and as Chairman and Chief Executive Officer of Blockbuster Entertainment Group, a division of Viacom, Inc., from 1996 to 1997. Mr. Fields has also held numerous positions with Wal-Mart Stores, Inc., which he joined in 1971. He left Wal-Mart in March 1996 as President and Chief Executive Officer of Wal-Mart Stores Division, and Executive Vice President of Wal-Mart Stores, Inc. Mr. Fields has also served as a director of the following companies during the past five years: Lexmark International, Biosara Corporation, as Chairman, since 2009, Graphic Packaging Corporation from 2005 to 2008, Sharper Image Corporation from 2006 to 2008, and VitaminSpice LLC from 2009 to 2010.

Mr. Fields’ qualifications to serve on our board of directors include his significant executive management experience.

Paul Herman is the Chief Executive Officer of Bluebox Corporate Finance Limited, a boutique investment banking firm that he co-founded in 2012. From 2000 to 2012, Mr. Herman was a partner with Cavendish Corporate Finance LLP, a U.K. independent firm advising on sell side M&A for mid-market companies, becoming one of the Senior Partners of the firm in 2007 and serving on the Executive Committee since 2010. While at Cavendish Corporate Finance LLP, Mr. Herman advised on the sale of dozens of businesses across a variety of industries. From 1997 to 2000 Mr. Herman was Associate Director on the private equity team of Nikko Europe, a Japanese securities firm with a focus on originating and executing private equity transactions. From 1994 to 1997 Mr. Herman was a chartered accountant with PriceWaterhouseCoopers. Mr. Herman received his B.S. degree in Computer Science and Accounting from Manchester University.

Mr. Herman’s qualifications to serve on our board of directors include his significant financial experience.

Each director of our company is to serve for a term of one year ending on the date of subsequent annual meeting of stockholders following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director is to serve until his successor is elected and qualified or until his death, resignation or removal. Our board of directors is to elect our officers and each officer is to serve until his successor is elected and qualified or until his death, resignation or removal.

Our board of directors currently consists of six members. In conjunction with this offering, we intend to apply to list the common stock on the Nasdaq Global Market, which will require the satisfaction of the NASDAQ listing rules, including instituting a board comprised of a majority of independent directors. To that extent we plan on appointing the requisite number of directors, whom we expect to qualify as independent directors under the corporate governance standards of the Nasdaq Global Market and the independence requirements of Rule 10A-3 of the Exchange Act, as necessary to constitute a board that is comprised of a majority of independent directors.

We do not have an audit committee financial expert serving on our Board of Directors as we are not currently required to have an audit committee since our common stock is not currently listed on a national securities exchange. In conjunction with this offering, we intend to apply to list the common stock on the Nasdaq Global Market, which will require the successful satisfaction of the NASDAQ listing rules, including having audit, compensation and governance committees comprise solely of independent directors including having a member of the audit committee be audit committee financial expert.

As we intend to apply to list the common stock on the Nasdaq Global Market in conjunction with this offering, we have used the definition of “independence” of The NASDAQ Stock Market to make the determination of whether our directors are deemed to be independent. Based on this definition, we have determined that James Gieskopf is an independent director.

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers during the years ended December 31, 2013, and 2012.

On June 25, 2013, we entered into an employment agreement with Brent Willis whereby we agreed to employ Brent Willis as our Chief Executive Officer.

Pursuant to the terms of the agreement, we agreed to pay Mr. Willis a base salary of $200,000 per annum subject to annual review commencing January 1, 2014. The base salary for the 2013 calendar year shall be based upon an amount of $200,000 pro-rated from June 25, 2013, which was $92,308. In January of each year starting in 2014, the board of directors will determine if a salary adjustment increase is warranted for Mr. Willis and shall establish criteria for the payment of an incentive bonus with respect to such year. Mr. Willis may be entitled to a performance bonus which is based upon criteria to be established by the board of directors. If Mr. Willis achieves such targets as established by the board of directors, Mr. Willis will earn a performance bonus calculated at 50% of base salary. If Mr. Willis exceeds the target established by the board of directors, Mr. Willis will have the opportunity to earn a performance bonus of up to 100% of base salary. If established and defined by the board of directors, Mr. Willis shall be eligible to participate in our company’s stock option or share award plan, which shall provide for a potential stock or stock option award each year commensurate with the achievement of the performance bonus, subject to vesting and other requirements.

For 2013, Mr. Willis was entitled to receive 3,000,000 shares, options, warrants or share equivalents, to be vested at a rate of 50% on December 31, 2013 and 50% on December 31, 2014. Accordingly, on June 25, 2013, he was granted 3,000,000 options by the board of directors, which have an exercise price of $0.25. In the event of a significant financial event or a change of control, all shares, options, warrants or share equivalents will immediately vest.

Mr. Willis is entitled to three weeks’ vacation with pay annually. Our company has agreed to reimburse Mr. Willis for all expenses reasonably incurred in connection with the performance of his duties under the agreement.

The term of the employment agreement is effective from June 25, 2013 until January 1, 2014, unless terminated in accordance with the agreement. The employment agreement renews thereafter on an annual basis beginning January 1, 2014 to December 31, 2014 and for every successive year thereafter unless the parties terminate the agreement. Either party must provide written notice to the other party if the former elects not to renew the employment agreement, however, the exercising party shall provide such written notice on or before 60 days prior to the commencement of the renewal period.

Pursuant to the terms of the employment agreement, Mr. Willis has agreed that he will not, without the prior written consent of our company, during the term of the employment agreement or for a period of 12 months after the expiration or termination of the employment, engage in or carry on business or otherwise have any interest in or permit Mr. Willis’ name to be used in connection with any e-cigarette business which is competitive to the business of our company or which provides the same or substantially similar services as the business of our company. Further, and under such circumstances, Mr. Willis has agreed he will not solicit, interfere with, accept any business from or render any services to anyone whom Mr. Willis knows or should have reason to know is a client or prospective client of our company.

Our company may terminate the employment agreement for the following reasons at any time by delivery of a notice of termination for any of the following reasons:

Pursuant to the terms of the employment agreement, we have agreed to defend, indemnify and hold harmless Mr. Willis if he is threatened or made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer or employee of our company.

On July 9, 2013, we entered into an employment agreement with Robert Hartford, whereby Mr. Hartford agreed to provide employment services as the Chief Financial Officer of our company. We agreed to pay Mr. Hartford a base salary of $100,000 per annum subject to annual review commencing January 1, 2014. The base salary for the 2013 calendar year shall be based upon an amount of $100,000 pro-rated from July 9, 2013, which was $46,154. In January of each year starting in 2014, the board of directors will determine if a salary adjustment increase is warranted for Mr. Hartford and shall establish criteria for the payment of an incentive bonus with respect to such year. Mr. Hartford may be entitled to a performance bonus which is based upon a target of three areas consisting of profit growth, free cash flow and cash flow management; and a strategic objective (e.g. funding, line of credit, etc.). If Mr. Hartford achieves such targets as established by the board of directors, Mr. Hartford will earn a performance bonus calculated at 25% of base salary. If established and defined by the board of directors, Mr. Hartford shall be eligible to participate in our company’s stock option or share award plan, which shall provide for a potential stock or stock option award each year commensurate with the achievement of the performance bonus, subject to vesting and other requirements.

For 2013, Mr. Hartford was entitled to receive options to purchase up to 1,000,000 common shares of our company at a price of $0.25 per share for a period of five years, to be vested at a rate of 50% on December 31, 2013 and 50% on December 31, 2014. Accordingly, on July 9, 2013, he was granted 1,000,000 options by the board of directors, which have an exercise price of $0.25.

In the event of a significant financial event or a change of control, all shares, options, warrants or share equivalents will immediately vest.

Mr. Hartford is entitled to three weeks’ vacation with pay annually. Our company has agreed to reimburse Mr. Hartford for all expenses reasonably incurred in connection with the performance of his duties under the agreement.

The term of the employment agreement is effective from July 9, 2013 until January 1, 2014, unless terminated in accordance with the agreement. The employment agreement renews thereafter on an annual basis beginning January 1, 2014 to December 31, 2014 and for every successive year thereafter unless the parties terminate the agreement. Either party must provide written notice to the other party if the former elects not to renew the employment agreement; however, the exercising party shall provide such written notice on or before 60 days prior to the commencement of the renewal period.

Pursuant to the terms of the employment agreement, Mr. Hartford has agreed that he will not, without the prior written consent of our company, during the term of the employment agreement or for a period of 12 months after the expiration or termination of the employment, engage in or carry on business or otherwise have any interest in or permit Mr. Hartford’s name to be used in connection with any e-cigarette business which is competitive to the business of our company or which provides the same or substantially similar services as the business of our company. Further, and under such circumstances, Mr. Hartford has agreed he will not solicit, interfere with, accept any business from or render any services to anyone whom Mr. Hartford knows or should have reason to know is a client or prospective client of our company.

Our company may terminate the employment agreement for the following reasons at any time by delivery of a notice of termination for any of the following reasons:

Pursuant to the terms of the employment agreement, we have agreed to defend, indemnify and hold harmless Mr. Hartford if he is threatened or made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer or employee of our company.

On June 25, 2013, we entered into an employment agreement with Marc Hardgrove whereby we agreed to employ Marc Hardgrove as Chief Creative Innovation Officer.

Pursuant to the terms of the agreement, we agreed to pay Mr. Hardgrove a base salary of $150,000 per annum subject to annual review commencing January 1, 2014. The base salary for the 2013 calendar year shall be based upon an amount of $150,000 pro-rated from June 25, 2013, which was $69,231. In January of each year starting in 2014, the board of directors will determine if a salary adjustment increase is

warranted for Mr. Hardgrove and shall establish criteria for the payment of an incentive bonus with respect to such year. Mr. Hardgrove may be entitled to a performance bonus which is based upon criteria to be established by the board of directors. If Mr. Hardgrove achieves such targets as established by the board of directors, Mr. Hardgrove will earn a performance bonus calculated at 50% of base salary. If Mr. Hardgrove exceeds the target established by the board of directors, Mr. Hardgrove will have the opportunity to earn a performance bonus of up to 100% of base salary. If established and defined by the board of directors, Mr. Hardgrove shall be eligible to participate in our company’s stock option or share award plan, which shall provide for a potential stock or stock option award each year commensurate with the achievement of the performance bonus, subject to vesting and other requirements. Mr. Hardgrove is entitled to three weeks’ vacation with pay annually. Our company has agreed to reimburse Mr. Hardgrove for all expenses reasonably incurred in connection with the performance of his duties under the agreement.

The term of the employment agreement is effective from June 25, 2013 until January 1, 2014, unless terminated in accordance with the agreement. The employment agreement renews thereafter on an annual basis beginning January 1, 2014 to December 31, 2014 and for every successive year thereafter unless the parties terminate the agreement. Either party must provide written notice to the other party if the former elects not to renew the employment agreement; however, the exercising party shall provide such written notice on or before 60 days prior to the commencement of the renewal period.

Pursuant to the terms of the employment agreement, Mr. Hardgrove has agreed that he will not, without the prior written consent of our company, during the term of the employment agreement or for a period of 12 months after the expiration or termination of the employment, engage in or carry on business or otherwise have any interest in or permit Mr. Hardgrove’s name to be used in connection with any e-cigarette business which is competitive to the business of our company, or which provides the same or substantially similar services as the business of our company. Further, and under such circumstances, Mr. Hardgrove has agreed he will not solicit, interfere with, accept any business from or render any services to anyone whom Mr. Hardgrove knows or should have reason to know is a client or prospective client of our company.

Our company may terminate the employment agreement for the following reasons at any time by delivery of a notice of termination for any of the following reasons:

Pursuant to the terms of the employment agreement, we have agreed to defend, indemnify and hold harmless Mr. Hardgrove if he is threatened or made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer or employee of our company.

The following table provides information relating to the unexercised options and stock awards that have not vested for the named executive officers as of December 31, 2013. Each award to each named executive is shown separately, with a footnote describing the award’s vesting schedule.

Our non-employee directors generally receive $50,000 annually for serving on our Board, which is paid quarterly in cash, as well as 100,000 options to purchase shares of our common stock annually. Mr. Fields, who became a director on December 30, 2013, was awarded warrants as described below and will also receive the standard non-employee director compensation in future fiscal years. The following table reflects all compensation awarded to, earned by or paid to the Company’s directors for the fiscal year ended December 31, 2013.

Our executive employment agreements do not call for any potential payments upon termination or change in control other than the vesting of any unvested options.

Our Board has adopted written policy governing the approval of related party transactions that complies with all applicable SEC requirements and NASDAQ Listing Rules. Our related parties include directors (including any nominee for election as a director), executive officers, 5% shareholders and the immediate family members of these persons. Our Chief Financial Officer, in consultation with other members of management and outside counsel, as appropriate, will review potential related party transactions to determine if they are subject to the policy. If so, the transaction will be referred to the Audit Committee of our Board of Directors for approval. In determining whether to approve a related party transaction, our Audit Committee will consider, among other factors, the fairness of the proposed transaction, the direct or indirect nature of the related party’s interest in the transaction, the appearance of an improper conflict of interests for any director or executive officer, taking into account the size of the transaction and the financial position of the related party, whether the transaction would impair an outside director’s independence, the acceptability of the transaction to our regulators and any possible violations of other of our corporate policies. Upon completion of the offering, our Related Party Transactions Policy will be available on our website at www.victoryecigs.com.

Except as described below, during the past three years, there have been no transactions, whether directly or indirectly, between our company and any of our officers, directors, beneficial owners of more than 5% of our outstanding common stock or their family members, that exceeded $16,125.

As of December 31, 2013, Brent Willis, our Chief Executive Officer and a Director, had loans outstanding to our company in amounts totaling approximately $60,000 and Marc Hardgrove had loaned amounts totaling approximately $388,166, respectively, including accrued interest of approximately $$6,690 and $$103,010, respectively. These payables accrue interest at a rate of 12% annually and mature on January 31, 2014. These notes have been paid in full as of February 6, 2014.

of consideration as used in the transaction. To date, we have paid Fields Texas a commission of $1,250,000 and issued five-year warrants to purchase 500,000 shares of common stock at an exercise price of $10.00 per share in connection with the FIN acquisition. Pursuant to the adjustment provision contained in the Warrant, following the completion of our private offering on April 30, 2014, the exercise price of the Warrant adjusted to $6.50 per share with the ability to purchase up to 769,232 shares of common stock.

The term of the Agreement is for three years and will automatically be renewed for successive periods upon achieving annual net sales targets.

Vapestick has a search engine optimization (“SEO”) service agreement with a company that is 50% owned by one of Vapestick’s directors, Michael Clapper, one of the Company’s current directors. Per the agreement, Vapestick will pay 18% of the gross revenue, plus applicable value added tax, arising from sales made by, on, or through relevant websites. Total costs incurred under this agreement were $321,238 and $218,718 for the years ended December 31, 2013 and 2012.

On January 27, 2014, the parties amended the SEO service agreement. Pursuant to the terms of the amended agreement Vapestick will pay £15,000 for each month during which the agreement continues, and will pay an additional £10,000 per month for each month during the whole of which the Vapestick website is found at all times on page 1 of Google UK’s organic search listings, following a search of Google UK only, using only the key phrase “electronic cigarette”. The amended agreement can be terminated by either party by written notice immediately following persistent breach that has not been remedied within 30 days of notice of such breach or upon 12 months notice.

At December 31, 2012, Vapestick owed a director of the Company $58,189 related to cash advances of $32,332 made to cover short-term operating needs of and $25,857 for services provided under the SEO service agreement. There were no stated terms on the cash advances provided by the director.

At December 31, 2012, a director of Vapestick owed $27,116 to Vapestick. There were no stated terms on the advance provided to the Director. This was paid back January 9, 2014, at the closing of our acquisition of Vapestick.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 12, 2014 by (a) each stockholder who is known to us to own beneficially 5% or more of our outstanding common stock; (b) all directors; (c) our executive officers, and (d) all executive officers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares of common stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their shares of common stock.

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of May 12, 2014. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of May 12, 2014 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise identified, the address of our directors, officers and 5% shareholders is c/o Victory Electronic Cigarettes Corporation, 11335 Apple Drive, Nunica, Michigan 49448.

In the discussion that follows, we have summarized selected provisions of our certificate of incorporation, bylaws and the Nevada Revised Statutes (the “NRS”) relating to our capital stock. This summary is not complete. This discussion is subject to the relevant provisions of Nevada law and is qualified in its entirety by reference to our certificate of incorporation and our bylaws. You should read the provisions of our certificate of incorporation and our bylaws as currently in effect for provisions that may be important to you.

The Company is authorized to issue 300,000,000 shares of its capital stock consisting of 300,000,000 shares of common stock, par value $0.001 per share. As of May 12, 2014, 74,487,474 shares of our common stock were issued and outstanding.

Each share of common stock entitles the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively. Accordingly, the stockholders of our common stock who hold, in the aggregate, more than fifty percent of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.

Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors out of funds legally available. We have not paid any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of our business. Any future disposition of dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.

Holders of our common stock have no preemptive rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities. There are no provisions in our certificate of incorporation or our by-laws that would prevent or delay change in our control.

Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our board of directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our board of directors may deem relevant.

As of May 12, 2014, we had warrants to purchase 19,241,115 shares of our common stock outstanding, with exercise prices and expiration dates as listed below:

The exercise price of the warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications and mergers or other corporate change. Additionally, the exercise price of the warrants will be adjusted should the Company issue any equity or convertible debt at a purchase price that is less than the current exercise price, with certain exceptions as further described in each of the respective warrants.

As of May 12, 2014, we had granted 7,525,000 options under our 2013 Plan, of which 500,000 options have been exercised, 4,500,000 options have vested and 2,525,000 options have yet to vest. The vesting dates, exercise prices and expiration dates are listed below.

On April 8, 2014, our Board of Directors approved the 2014 Long-Term Stock Incentive Plan (the “2014 Plan”). On April 10, 2014, we received written consents in lieu of a meeting of stockholders from stockholders holding 50.54% of the outstanding shares of our common stock approving the 2014 Plan. The 2014 Plan took effect upon Board Approval and will become a shareholder approved plan 20 days after we mail a Schedule 14C Information Statement to our shareholders of record as of April 10, 2014, which we expect to mail on May 19, 2014. As of May 12, 2014, we have not granted any shares under the 2014 Plan.

As of May 12, 2014, we had $51,550,824 of outstanding convertible note, which could at the current time be convertible into 9,194,358 shares of our common stock, with conversion prices and maturity dates as listed below:

The exercise price of the convertible notes are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications and mergers or other corporate change.

We may be or in the future we may become subject to Nevada’s control share laws. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record with addresses in Nevada on the corporation’s stock ledger, and if the corporation does business in Nevada, including through an affiliated corporation. This control share law may have the effect of discouraging corporate takeovers. As of December 7, 2012, we have 191 stockholders of record and none of them have addresses of record in Nevada.

The control share law focuses on the acquisition of a “controlling interest,” which means the ownership of outstanding voting shares that would be sufficient, but for the operation of the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (1) one-fifth or more but less than one-third; (2) one-third or more but less than a majority; or (3) a majority or more. The ability to exercise this voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that an acquiring person, and those acting in association with that person, will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell the shares to others. If the buyer or buyers of those shares themselves do not acquire a controlling interest, the shares are not governed by the control share law.

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than the acquiring person, who did not vote in favor of approval of voting rights, is entitled to demand fair value for such stockholder’s shares.

In addition to the control share law, Nevada has a business combination law, which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the interested stockholder first becomes an interested stockholder, unless the corporation’s Board of Directors approves the combination in advance. For purposes of Nevada law, an interested stockholder is any person who is: (a) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation; or (b) an affiliate or associate of the corporation and at any time within the previous three years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of

the then-outstanding shares of the corporation. The definition of “business combination” contained in the statute is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of our company from doing so if it cannot obtain the approval of our Board of Directors.

In connection with the sale of notes and warrants in our January and February offerings, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the purchasers in those offerings, pursuant to which we agreed to register all of the shares of our common stock underlying the notes and the warrants (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC by May 15, 2014 (the “Filing Date”) and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”). However, if the Registrable Securities are being registered on a Registration Statement in connection with an underwritten public offering, then the Registrable Securities may be cutback on such Registration Statement by the underwriters. A Registration Statement for such cutback shares will be filed 45 days following the effectiveness date of such underwritten Registration Statement.

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages in cash to each purchaser in the amount equal to 2% for the purchase price paid for the notes and warrants then owned by such purchaser for each 30-day period for which the Company is non-compliant.

In connection with our acquisition of FIN, we entered into a registration rights agreement (the “FIN Registration Rights Agreement”) with the shareholders of FIN, pursuant to which we agreed to register all of the Merger Shares and the Late Payment Shares, as further described elsewhere in the prospectus, if any (the “Registrable Securities”) on a Form S-1 registration statement (the “FIN Registration Statement”) to be filed with the SEC by April 26, 2014 (the “Filing Date”), subject to (1) underwriter approval should the Company be involved in an underwritten public offering and if such approval is not granted then Filing Date means the 45th calendar day following the closing date of such underwritten public offering and (2) the satisfaction of the registration rights of the purchasers in our January and February offerings, which if not satisfied by the Filing Date, will cause the Filing Date to be a date following the purchasers’ registration rights being satisfied, and to cause the FIN Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages to the FIN Shareholders in cash in the amount equal to $2,170,000, 2% of the value of the Merger Shares on the Closing Date, which was $108,600,000, for each 30-day period for which the Company is non-compliant.

In connection with our acquisition of VIP, we entered into a registration rights agreement (the “ VIP Registration Rights Agreement”) with the MHL Shareholders, pursuant to which the Company agreed to register all of the Exchange Shares (the “Registrable Securities”) on a Form S-1 registration statement (the “VIP Registration Statement”) to be filed with the SEC by May 27, 2014 (the “Filing Date”), subject to (1) underwriter approval should the Company be involved in an underwritten public offering and if such approval is not granted then Filing Date means the 45th calendar day following the closing date of such underwritten public offering and (2) the satisfaction of any registration rights previously granted by the Company, and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

amount equal to $310,500, 2% of the value of the Exchange Shares on the Closing Date, which was $15,525,000, for each 30-day period for which the Company is non-compliant.

In connection with the sale of the notes in our April 22, 2014 offering, we entered into a registration rights agreement (the “First April Registration Rights Agreement”) with the purchasers, pursuant to which the Company agreed to register all of the shares of our common stock underlying the Notes (the “Registrable Securities”) on a Form S-1 registration statement (the “First April Registration Statement”) to be filed with the SEC by June 6, 2014 (the “Filing Date”), subject to (1) underwriter approval should the Company be involved in an underwritten public offering and if such approval is not granted then Filing Date means the 45th calendar day following the closing date of such underwritten public offering and (2) subject to the satisfaction of any registration rights previously granted by the Company, and to cause the First April Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the First April Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages in cash to each purchaser in the amount equal to 2% for the purchase price paid for the notes then owned by such purchaser for each 30-day period for which the Company is non-compliant.

In connection with the sale of the shares and warrants in our April 30, 2014 offering, we entered into a registration rights agreement (the “Second April Registration Rights Agreement”) with the purchasers, pursuant to which we agreed to register all of the shares and shares of our common stock underlying the warrants (the “Registrable Securities”) on a Form S-1 registration statement (the “Second April Registration Statement”) to be filed with the SEC within 90 calendar days following the uplisting of our common stock on the Nasdaq Stock Market (the “Filing Date”) and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the Second April Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages in cash to each purchaser in the amount equal to 2% of the purchase price paid for the shares and warrants then owned by such purchaser for each 30-day period for which the Company is non-compliant.

Our common stock is listed on the OTCBB under the symbol “ECIG.” In conjunction with this offering, we intend to apply to list the common stock on the Nasdaq Global Market under the symbol “ECIG.”

The transfer agent and registrar for our common stock is Nevada Agency and Transfer Company. The transfer agent’s address is 50 West Liberty Street, Suite 880, Reno, Nevada 89501, and its telephone number is 775-322-0626.

As of May 12, 2014, we had 74,487,474 shares of common stock outstanding, not including shares issuable upon exercise of our warrants. All shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless they are purchased by our “affiliates,” as that term is defined in Rule 144 promulgated under the Securities Act.

The outstanding shares of our common stock not included in this prospectus will be available for sale in the public market as follows:

Of our outstanding shares, as of May 12, 2014 approximately 25,547,844 shares are beneficially owned by executive officers, directors and affiliates (excluding shares of our common stock which may be acquired upon exercise of stock options and warrants which are currently exercisable or which become exercisable within 60 days of May 12, 2014). The approximately 48,939,600 remaining shares, including shares issued in connection with our recent acquisitions and private placements which contain restrictive legends regarding their availability to resell, constitute our public float.

In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for a least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates who own shares that were acquired from us or an affiliate of ours at least six months prior to the proposed sale are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

In connection with this offering, we, our officers, directors and a majority of stockholders, including all significant stockholders, have agreed with the underwriters, subject to certain exceptions, not to sell, dispose of or hedge any shares of our common stock or other capital stock or securities convertible into or excercisable or exchangeable for shares of common stock, or other capital stock or publicly announce any intention to do any of the foregoing during the period ending 180 days after the date of this prospectus, except with the prior written consent of Wells Fargo Securities, LLC and Canaccord Genuity, Inc.

The 180-day restricted period described in the preceding paragraph will be automatically extended if:

in which case the restrictions described in this paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event. See “Underwriting.”

Pursuant to registration rights agreements entered into in connection with our private financings and acquisitions, we granted the investors in such financings and the sellers of our acquired businesses the right, subject to certain conditions, to require us to register the sale of their shares of our common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, such investors could cause the prevailing market price of our common stock to decline. Following completion of this offering, the shares covered by registration rights would represent approximately % of our outstanding common stock (or %, if the underwriters exercise in full their option to purchase additional shares). Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. These shares also may be sold under Rule 144 under the Securities Act, depending on their holding period and subject to restrictions in the case of shares held by persons deemed to be our affiliates.

MATERIAL UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a summary of the material United States federal income and estate tax consequences to a non-U.S. holder (as defined below) of the purchase, ownership and disposition of our common stock as of the date hereof. Except where noted, this summary deals only with common stock that is held as a capital asset.

A “non-U.S. holder” means a person (other than a partnership) that is not for United States federal income tax purposes any of the following:

This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federal income and estate tax consequences different from those summarized below. This summary does not address all aspects of United States federal income and estate taxes and does not deal with foreign, state, local or other tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances. In addition, it does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws (including if you are a United States expatriate, “controlled foreign corporation,” “passive foreign investment company” or a partnership or other pass-through entity for United States federal income tax purposes). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.

If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our common stock, you should consult your tax advisors.

If you are considering the purchase of our common stock, you should consult your own tax advisors concerning the particular United States federal income and estate tax consequences to you of the ownership of the common stock, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

Dividends paid to a non-U.S. holder of our common stock generally will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a United States permanent establishment) are not subject to the withholding tax, provided certain certification and disclosure requirements are satisfied. Instead, such dividends are subject to United States federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under the Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

A non-U.S. holder of our common stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to complete an applicable Internal Revenue Service Form W-8 and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our common stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable United States Treasury regulations. Special certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than corporations or individuals.

A non-U.S. holder of our common stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.

Any gain realized on the disposition of our common stock generally will not be subject to United States federal income tax unless:

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the sale under regular graduated United States federal income tax rates. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by United States source capital losses, even though the individual is not considered a resident of the United States. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a United States person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% (or such lower rate as may be specified by an applicable income tax treaty) of its effectively connected earnings and profits, subject to adjustments.

We believe we are not and do not anticipate becoming a “United States real property holding corporation” for United States federal income tax purposes.

Common stock held by an individual non-U.S. holder at the time of death will be included in such holder’s gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

We must report annually to the Internal Revenue Service and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty.

A non-U.S. holder will be subject to backup withholding for dividends paid to such holder unless such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code), or such holder otherwise establishes an exemption.

Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale of our common stock within the United States or conducted through certain United States-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s United States federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

A 30% United States federal withholding tax may apply to any dividends paid after June 30, 2014, and the gross proceeds from a disposition of our common stock occurring after December 31, 2016, in each case paid to (i) a “foreign financial institution” (as specifically defined in the Code), whether such foreign financial institution is the beneficial owner or an intermediary, unless such foreign financial institution agrees to verify, report and disclose its United States “account” holders (as specifically defined in the Code) and meets certain other specified requirements or (ii) a non-financial foreign entity, whether such non-financial foreign entity is the beneficial owner or an intermediary, unless such entity provides a certification that the beneficial owner of the payment does not have any substantial United States owners or provides the name, address and taxpayer identification number of each such substantial United States owner and certain other specified requirements are met. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. You should consult your own tax advisor regarding these requirements and whether they may be relevant to your ownership and disposition of our common stock.

Subject to the terms and conditions of the underwriting agreement dated , 2014, the Company has agreed to sell to the Underwriters, and the Underwriters have agreed to purchase from the Company, the common stock.

The underwriting agreement provides that the obligation of the underwriters to purchase and accept delivery of the shares of common stock offered by this prospectus are subject to approval by their counsel of legal matters and to certain other conditions set forth in the underwriting agreement. The underwriters are obligated to purchase and accept delivery of all of the shares of common stock offered by this prospectus, if any are purchased, other than those covered by the option to purchase additional shares of common stock described below.

We have granted the underwriters an option, exercisable within 30 days after the date of this prospectus, to purchase in whole or in part at any time up to an aggregate of additional shares of common stock, at the public offering price set forth on the cover page of this prospectus, less the underwriting discount. If purchased, these additional shares of common stock will be sold by the underwriters on the same terms as those on which the shares of common stock offered by this prospectus are sold.

The underwriters propose to offer shares of common stock directly to the public at the public offering price indicated on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. The underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to other dealers. If all of the shares of common stock are not sold at the public offering price, the underwriters may change the public offering price and the other selling terms.

The following table shows the per share and total underwriting discount that we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option.

We have agreed to reimburse the underwriters for certain expenses relating to clearing this offering with the Financial Industry Regulatory Authority, Inc. in the amount up to $ . We estimate that the total expenses of the offering payable by us, excluding the underwriting discount, will be approximately $ million.

We have agreed to indemnify the underwriters against various liabilities, including certain liabilities under the Securities Act and the Exchange Act or to contribute to payments the underwriters may be required to make because of any of those liabilities.

The 180-day restricted period described in the preceding paragraph will be automatically extended if:

Until this offering is completed, SEC rules may limit the ability of the underwriters and certain selling group members to bid for and purchase shares of common stock. As an exception to these rules, the underwriters may engage in certain transactions that stabilize the price of the shares of common stock. These transactions may include short sales, stabilizing transactions, purchases to cover positions created by short sales and passive market making. A short sale is covered if the short position is no greater than the number of shares of common stock available for purchase by the underwriters under the option to purchase additional common stock. The underwriters can close out a covered short sale by exercising the option to purchase additional shares of common stock or purchasing shares of common stock in the open market. In determining the source of shares of common stock to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares of common stock compared to the price available under the option to purchase additional shares of common stock. The underwriters may also sell shares of common stock in excess of the option to purchase additional shares of common stock, creating a naked short position. The underwriters must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares of common stock in the open market after pricing that could adversely affect investors who purchase in the offering. As an additional means of facilitating the offering, the underwriters may bid for, and purchase, shares of common stock in the open market to stabilize the price of the shares of common stock. The underwriters may also reclaim selling concessions allowed to an underwriter or a dealer for distributing the shares of common stock in the offering, if the syndicate repurchases previously distributed shares of common stock to cover syndicate short positions or to stabilize the price of the shares of common stock. These activities may raise or maintain the market price of the shares of common stock above independent market levels or prevent or retard a decline in the market price of the shares of common stock.

In connection with this transaction, the underwriters may engage in passive market making transactions in the shares of common stock, prior to the pricing and completion of this offering. Passive market making is permitted by Regulation M of the Securities Act and consists of displaying bids no higher than the bid prices of independent market makers and making purchases at prices no higher than these independent bids and effected in response to order flow. Net purchases by a passive market maker on each day are limited to a specified percentage of the passive market maker’s average daily trading volume in the shares of common stock during a specified period and must be discontinued when such limit is reached. Passive market making may cause the price of the shares of common stock to be higher than the price that otherwise would exist in the open market in the absence of such transactions.

These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the shares of common stock. As a result the price of the shares of common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities. If these activities are commenced, they may be discontinued by the underwriters without notice at any time.

A prospectus may be made available in electronic format on websites or through other online services maintained by the underwriters of the offering, or by its affiliates. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by the underwriters is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriters in their capacity as underwriters and should not be relied upon by investors.

Our common stock is currently listed on the Over-the-Counter Bulletin Board under the symbol “ECIG.” In conjunction with this offering, we intend to apply to list the common stock on the Nasdaq Global Market under the symbol “ECIG.”

The underwriters and their affiliates have provided, and may in the future provide, various investment banking, financial advisory and other financial services to us and our affiliates for which it has received, and in the future may receive, advisory or transaction fees, as applicable, plus out-of-pocket expenses of the nature and in amounts customary in the industry for these financial services. In addition to investment banking services that the underwriters and their affiliates provide from time to time, we have banking and brokerage transactions in the ordinary course of business with the underwriter and its affiliates. It is expected that we will continue to use the underwriters and their affiliates for various services in the future.

On December 31, 2012, our subsidiary FIN Branding Group, LLC entered into a credit and security agreement, as amended on September 10, 2013, for a $20,000,000 asset-based revolving loan with Wells Fargo Bank, National Association as lender.

On February 28, 2014 we completed a private placement in which we sold a principal amount of $250,000 of 15% Senior Secured Convertible Notes (“Notes”) and warrants to purchase shares of our common stock to affiliates of Canaccord Genuity Inc., at an exercise price of $5.00 per share.

In addition, on April 22, 2014, Dalmore Group, LLC received from us warrants convertible into 118,353 shares of our common stock, at an exercise price of $6.50 per share.

The Notes and warrants purchased by Canaccord Genuity Inc.’s affiliates as well as warrants received by Dalmore Group, LLC are each an item of value that is deemed by FINRA to be included in the total underwriting compensation received by the underwriters in connection with this offering pursuant to FINRA Rule 5110.

The distribution of the shares of common stock in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of shares of common stock are made. Any resale of the shares of common stock in Canada must be made under applicable securities laws which will vary depending on the

relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the shares of common stock.

By purchasing shares of common stock in Canada and accepting a purchase confirmation a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:

Further details concerning the legal authority for this information is available on request.

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the shares of common stock, for rescission against us in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the shares of common stock. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the shares of common stock. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which the shares of common stock were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the shares of common stock as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

All of our directors and officers as well as the experts named herein are located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons are located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Canadian purchasers of shares of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the shares of common stock in their particular circumstances and about the eligibility of the shares of common stock for investment by the purchaser under relevant Canadian legislation.

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), including each Relevant Member State that has implemented amendments to Article 3(2) of the Prospectus Directive introduced by the 2010 PD Amending Directive (each, an “Early Implementing Member State”), each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of any shares of common stock to the public in that Relevant Member State prior to the publication of a prospectus in relation to the common stock which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer of the common stock to the public in that Relevant Member State may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

(a) to any legal entity which is a “qualified investor” as defined in the Prospectus Directive;

(b) to fewer than 100 (or, in the case of Early Implementing Member States, 150) natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the Subscribers; or

provided that no such offer of the common stock referred to in (a) to (c) above shall require the issuer or any Subscriber to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive and each person who initially acquires any shares of the common stock or to whom any offer is made will be deemed to have represented, warranted and agreed to and with the issuer or any Subscriber that it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares of the common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe to any shares of the common stock, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State. The expression “2010 PD Amending Directive” means Directive 2010/73/EU.

This prospectus and any other material in relation to the securities described herein is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospective Directive that also (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, (the “Order”), (ii) fall within Article 49(2)(a) to (d) of the Order and (iii) are persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). The securities are only available to, and any invitation, offer or agreement to engage in investment activity with respect to such securities will be engaged in only with, relevant persons. This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this prospectus or any of its contents.

The distribution of this prospectus in the United Kingdom to anyone not falling within the above categories is not permitted and may contravene FSMA. No person falling outside those categories should treat this prospectus as constituting a promotion to him, or act on it for any purposes whatever. Recipients of this prospectus are advised that we, the underwriters and any other person that communicates this prospectus are not, as a result solely of communicating this prospectus, acting for or advising them and are not responsible for providing recipients of this prospectus with the protections which would be given to those who are clients of any aforementioned entities that is subject to the Financial Services Authority Rules.

This document as well as any other material relating to the shares of our common stock that are the subject of the offering contemplated by this prospectus do not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations. Our common stock will not be listed on the SWX Swiss Exchange and, therefore, the documents relating to our common stock, including, but not limited to, this document, do not claim to comply with the disclosure standards of the listing rules of SWX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SWX Swiss Exchange.

Our common stock is being offered in Switzerland by way of a private placement, i.e. to a small number of selected investors only, without any public offer and only to investors who do not purchase shares of our common stock with the intention to distribute them to the public. The investors will be individually approached by us from time to time.

This document as well as any other material relating to our common stock is personal and confidential and does not constitute an offer to any other person. This document may only be used by those investors to whom it has been handed out in connection with the offering described herein and may neither directly nor indirectly be distributed or made available to other persons without our express consent. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in (or from) Switzerland.

The validity of the shares of common stock to be issued in this offering and certain other legal matters with respect to the offering will be passed upon for us by each of Robinson Brog Leinwand Greene Genovese & Gluck P.C. and Lionel Sawyer & Collins. Certain legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, New York, New York.

Our financial statements as of and for the year ended December 31, 2013 included in this prospectus have been audited by McGladrey LLP, independent registered public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein, and are included in reliance on such report given upon the authority of said firm as experts in auditing and accounting. Our financial statements as of and for the year ended December 31, 2012 included in this prospectus have been audited by Accell Audit & Compliance P.A. (“Accell”), independent registered public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein, and are included in reliance on such report given upon the authority of said firm as experts in auditing and accounting.

Effective April 1, 2014, we dismissed Accell as the Company’s independent registered public accounting firm. Effective April 1, 2014, we engaged McGladrey LLP (“McGladrey”) as its registered public accounting firm. The decision to change registered public accounting firms and the appointment of the new registered public accounting firm was made by the Company’s Board of Directors. During the Company’s two most recent fiscal years and through April 1, 2014, there were no disagreements with Accell on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Accell, would have caused them to make reference thereto in their reports on the financial statements for such years. During the two most recent fiscal years and through April 1, 2014, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

The financial statements for Vapestick as of and for the years ended December 31, 2013 and 2012 included in this prospectus have been audited by Accell, independent registered public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein, and are included in reliance on such report given upon the authority of said firm as experts in auditing and accounting.

The financial statements for FIN as of and for the years ended December 31, 2013 and 2012 included in this prospectus have been audited by Crow Shields Bailey, PC, independent public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein, and are included in reliance on such report given upon the authority of said firm as experts in auditing and accounting.

The financial statements for MHL as of and for the years ended June 30, 2013 and 2012 and for the period ended December 31, 2013 included in this prospectus have been audited by SCCA Ltd T/a Stafford & Co., independent public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein, and are included in reliance on such report given upon the authority of said firm as experts in auditing and accounting.

We filed with the SEC a registration statement under the Securities Act for the common stock in this offering. This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were filed with the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits that were filed with the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement.

We file annual, quarterly, and current reports and other information with the SEC. Our filings with the SEC are available to the public on the SEC’s website at www.sec.gov. Those filings are also available to the public on our corporate website at www.victoryecigs.com. The information we file with the SEC or contained on, or linked to through, our corporate website or any other website that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part. You may also read and copy, at the SEC’s prescribed rates, any document we file with the SEC, including the registration statement (and its exhibits) of which this prospectus is a part, at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room.

We have audited the accompanying consolidated balance sheet of Victory Electronic Cigarettes Corporation as of December 31, 2013, and the related consolidated statements of operations and comprehensive income, stockholders’ deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2013 consolidated financial statements, referred to above present fairly, in all material respects, the financial position of Victory Electronic Cigarettes Corporation as of December 31, 2013, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the financial statements, the 2013 consolidated financial statements as previously filed on March 31, 2014, have been restated.

We have audited the accompanying consolidated balance sheet of Victory Electronic Cigarettes Corporation and subsidiary (the “Company”) as of 2012, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Victory Electronic Cigarettes Corporation and subsidiary as of December 31, 2012, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Victory Electronic Cigarettes Corporation (“Victory”) together with its wholly-owned subsidiary Victory Electronic Cigarettes, Inc. (“VEC”), collectively referred to herein as the “Company”, imports and distributes smokeless electronic cigarettes. It offers starter kits, cartridges, carrying cases, charger packs, disposable tobacco, and other related products for smokers. The Company offers its products through retail stores, distributors, independent retailers, and grocery and convenience store operators, as well as online in the United States. Pursuant to the Company’s recent acquisitions in 2014, the Company has expanded its operations outside of the United States. See Note 12. The Company’s primary operations are based in Nunica, Michigan.

These consolidated financial statements represent the consolidated financial statements of Victory, formerly known as Teckmine Industries, Inc, (“Teckmine”), and its wholly-owned operating subsidiary VEC. VEC was formed as a limited liability company under the laws of the State of Florida on March 2, 2010 and effected a conversion on March 8, 2013 into a corporation under the laws of the State of Nevada.

On June 25, 2013, pursuant to a share exchange agreement, Teckmine acquired VEC in which the existing stockholders of VEC exchanged all of their issued and outstanding shares of common stock for 32,500,000 shares of common stock of Teckmine (the “Reverse Merger”). The Reverse Merger was treated as a reverse recapitalization with VEC as the accounting acquirer and Teckmine as the accounting acquired party. Immediately after the consummation of the Reverse Merger, the previous stockholders of VEC owned 60.9% of Teckmine’s outstanding common stock and VEC became a wholly-owned subsidiary of Teckmine. Teckmine was renamed Victory. See Note 2.

As a result, the business and financial information included in these consolidated financial statements are the business and financial information of VEC.

The Company is restating its consolidated financial statements for the year ended December 31, 2013 to correct errors related to the fair value of warrant liabilities, the allocation of proceeds related to the issuance of common stock and a debt instrument and stock compensation expense. The Company’s decision to restate the aforementioned consolidated financial statements was made as a result of management’s reconsideration of the fair value of its stock as included in various valuation models. On April 21, 2014, management concluded, and the Board of Directors has agreed, that the fair value of the Company’s stock previously determined as if the Company were a private enterprise did not properly consider the public trading value of the Company’s stock. This error impacted the warrant liability and stockholders’ deficit in the consolidated balance sheet as well as advisory agreement warrant expense, selling, general and administrative expense and interest expense in the accompanying consolidated statement of operations and comprehensive income; accordingly, these were misstated in the previously issued consolidated financial statements. The December 31, 2013 consolidated balance sheet, consolidated statement of operations and comprehensive income, consolidated statement of stockholders’ deficit, and notes to the consolidated financial statements have been restated to correct these errors.

The effect of these error corrections on the consolidated statement of operations and comprehensive income for the year ended December 31, 2013 is to increase the net loss by $11,278,890 (including

increasing advisory agreement warrant expense and selling, general and administrative expense by $9,627,269 and $200,000, respectively, and increasing interest expense by $1,451,621).

The Company’s consolidated financial statements have been restated as follows:

The consolidated financial statements include the accounts of Victory and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

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 amounts reported in the consolidated financial statements. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include the allowance for doubtful accounts, the reserve for excess and obsolete inventory, assumptions used in the valuation of stock-based compensation, warrant liabilities and the allocation of proceeds with regard to convertible debt instruments as well as the recoverability of the Company’s net deferred tax assets.

Financial instruments that potentially subject the Company to significant concentrations of credit risk include cash in banks in excess of federally insured limits. The Company manages this risk by maintaining all deposits in high quality financial institutions. Cash is deposited in various financial institutions. Due to the timing of deposits and posting of disbursements, balances occasionally exceed amounts insured by the Federal Deposit Insurance Corporation.

At December 31, 2013 and 2012, there were no significant concentrations of accounts receivable included in the accompanying consolidated balance sheets.

In both 2013 and 2012, all of the Company’s products were obtained from vendors in the People’s Republic of China (“China”). Because the Company sources products in China, the Company is significantly affected by economic conditions in that country, including increased duties, possible employee turnover, and labor unrest. However, the Company believes that if necessary, alternative vendors for inventory would be available.

Revenue is derived from product sales and is recognized upon shipment to the customer and when collection is reasonably assured. Direct sales to individual customers are recognized within internet sales in the accompanying consolidated statements of operations and comprehensive income, while all sales to retailers and distributors are recognized within retail and wholesale revenues. Returns are accepted for a limited period, but are not significant to the Company’s overall operations. As such, no reserve for sales returns and allowances has been determined necessary by management at both December 31, 2013 and 2012. Payments received by the Company in advance are recorded as deferred revenue until the merchandise has shipped to the customer.

The Company recognizes the direct cost of purchasing product for sale, including freight-in and packaging, as cost of goods sold in the accompanying consolidated statements of operations and comprehensive income.

Outgoing shipping and handling costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income and totaled $282,935 and $168,350 for the years ended December 31, 2013 and 2012, respectively.

The Company expenses advertising and promotion costs as incurred. Advertising and promotion expense recognized for the years ended December 31, 2013 and 2012 was $1,078,180 and $323,167, respectively, and is included in distribution, marketing, and advertising in the accompanying statements of operations and comprehensive income.

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At December 31, 2013 and 2012, the Company had no cash equivalents.

Accounts receivable are primarily from retail and wholesale customers or third-party internet brokers. Management reviews accounts receivable on a monthly basis to determine if any receivables are potentially uncollectible. An allowance for doubtful accounts is determined based on a combination of historical experience, length of time outstanding, customer credit worthiness, and current economic trends. As of December 31, 2013 and 2012, the Company expects the amount of any potentially uncollectible receivables to be insignificant; therefore, no allowance for doubtful accounts has been determined necessary by management. For the years ended December 31, 2013 and 2012, no accounts receivable were written off.

Inventory, which consists of ready for sale disposable and rechargeable e-cigarettes, batteries, cartomizers and other accessories, is carried at the lower of cost or fair market value. Cost is determined using the first-in, first-out method. Historical inventory usage and current revenue trends are considered in estimating both excess and obsolete inventories. If actual product demand and market conditions are less favorable than those projected by management, inventory write-downs may be required.

The Company records furniture and equipment at historical cost, less accumulated depreciation. Major expenditures for additions and improvements that substantially extend the useful life of furniture and equipment or increase its operating effectiveness are capitalized. Repair and maintenance costs are expensed as incurred.

Long-lived assets are reviewed for impairment whenever events or circumstances warrant such a review. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value, which is measured by future discounted cash flows.

The Company depreciates the cost of property and equipment over the estimated useful lives of the assets, ranging from five to ten years, using the straight-line method. As of December 31, 2013 and 2012, the Company had furniture and equipment of $29,385 and $0, respectively, and accumulated depreciation of $2,009 and $0, respectively. Depreciation expense for the years ended December 31, 2013 and 2012 was $2,009 and $0, respectively.

The Company awards stock based compensation as an incentive for employees to contribute to the Company’s long-term success. The cost is measured based on the fair value of the equity or liability instruments issued on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain assumptions, including the expected life of the stock compensation awards and the Company’s expected common stock price volatility.

The Company accounts for stock based compensation awards issued to non-employees for services, at either the fair value of the services or the instruments issued in exchange for such services (based on the same methodology described for employee stock based compensation), whichever is more readily determinable.

Basic earnings (loss) per share (“EPS”) is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share data reflects the potential dilution of securities that could share in the earnings of an entity, such as stock options and warrants and convertible debt instruments only in periods where such effect would have been dilutive.

The asset and liability method is used in accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and

deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The calculation of the Company’s tax liabilities for uncertain income tax positions based on estimates of whether, and the extent to which, additional taxes will be required.

Prior to the conversion to a corporation on March 8, 2013, the Company was a pass-through entity for income tax purposes. Accordingly, the consolidated financial statements do not include a provision for federal income taxes prior to the conversion. The Company’s earnings and losses were included in the previous members’ personal income tax returns and the income tax thereon, if any, was paid by the members. The Company now files income tax returns in the United States and state and local jurisdictions, which are subject to examination by the tax authorities in that jurisdiction, generally for three years after the filing date.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the consolidated financial statements.

The carrying amounts of cash, accounts receivable, and accounts payable approximate fair value as of December 31, 2013 and 2012, because of the relatively short maturities of these instruments.

The estimated fair values for financial instruments presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values. The carrying values of the Company’s promissory notes approximate fair value because the underlying instruments are fixed-rate notes based on current market rates and current maturities.

Certain reclassifications have been made to the prior year balances in order to conform to the current year presentation. These reclassifications had no impact on working capital, net income, stockholders’ deficit or cash flows as previously reported.

The transaction between Teckmine (renamed Victory) and VEC described in Note 1 was accounted for as a reverse recapitalization of VEC. VEC is the accounting acquirer (and legal acquiree) based on Teckmine’s status as a non operating, public shell company, VEC stockholders obtaining approximately

60.9% of the post-transaction common shares of stock and post-transaction management and Board composition (VEC). As a result, the common stock of VEC was retroactively restated to give effect to the 32,500,000 shares issued in the June 25, 2013 share exchange agreement.

On June 25, 2013, Victory completed a private placement transaction concurrently with the Reverse Merger to provide post-transaction working capital. As a result of the private placement, 10,000,000 shares were issued at $0.25 per share resulting in proceeds of $2,500,000. During the private placement, Victory incurred issuance costs of $290,400 which were netted against the proceeds.

Additionally, in conjunction with the closing of the Reverse Merger, various other share-based transactions occurred as follows:

Effective on January 31, 2013, in anticipation of the Reverse Merger, Teckmine issued $200,000 of convertible promissory notes (the “Teckmine Notes”). The Teckmine Notes were assumed by the Company in the Reverse Merger and, as such, were recorded at fair value which was considered to approximate face value plus accrued and unpaid interest given the short remaining term to maturity and terms reflective of current market conditions. These notes bear interest at 12% and are due on January 31, 2014 or are convertible to the unregistered common stock of the Company at a conversion price that was set at $0.25 at the time of the Reverse Merger. On January 31, 2014, the Teckmine Notes were converted to 800,000 shares of the Company’s common stock and accrued and unpaid interest was paid in cash.

Concurrent with the issuance of the Teckmine Notes, Teckmine issued 200,000 five-year common stock warrants (the “Teckmine Warrants”). The warrants were assumed in the Reverse Merger and are exercisable for unregistered common stock of the Company at an exercise price of $0.25. The Teckmine Warrants are considered to be equity instruments based on the fact that the terms are not subject to adjustment and no circumstances exist under which the holder can receive cash in exchange for the warrant and/or the underlying shares.

The Company no longer maintains any revolving credit lines and has closed its credit cards. The Company had a balance due on these credit cards of $0 and $20,641 at December 31, 2013 and 2012, respectively.

In addition to the Teckmine Notes described in Note 2, on November 4, 2013, the Company issued 6% convertible debentures with a total face value of $2,475,000, maturing on January 1, 2014 convertible at $0.50 per common share at the Company’s option or by the holders if the Company does not convert or repay the notes on or prior to the maturity date. Concurrent with the issuance of the notes, 1,649,999 shares of the Company’s unregistered common stock were issued to the investors and the face amount of the notes was reduced to $1,650,000. The proceeds from the notes were allocated based on the proportionate fair values of the debt and the shares issued creating a discount on the debt of $1,451,621 which was fully amortized to interest expense during the year ended December 31, 2013. At December 31, 2013, $1,200,000 of the note was repaid, and on January 1, 2014, the remaining balance of $450,000 was repaid in full satisfaction of the notes.

On December 30, 2013, the Company entered into a comprehensive partnership agreement (the “Agreement”) with Fields Texas Limited LLC’s affiliate, E-Cig Acquisition Company LLC (“Fields Texas”), which is partially owned by one of the Company’s directors. See Note 7.

At December 31, 2013 and 2012, stockholders of the Company had loaned amounts totaling $448,166 and $703,570, respectively, which is included in due to related parties in the accompanying consolidated balance sheets. Associated accrued interest of approximately $110,000 and $34,000, respectively, is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. These payables accrue interest at a rate of 12% annually and have a maturity date of January 31, 2014.

On January 27, 2013 (prior to the Reverse Merger ), a related party loaned the Company $250,000 and VEC issued a promissory note for the principal amount with a maturity date of January 31, 2014. As an incentive to advance the loan, VEC issued an 8% interest in VEC to the related party which was converted into 40,000 common shares of VEC (pre-reverse merger). On June 25, 2013, pursuant to the Reverse Merger, the Company exchanged the related party’s shares for 2,600,000 Victory shares. On July 29, 2013, the Company entered into a loan repayment agreement with the related party whereby the Company repaid the $250,000 as full and final settlement. In exchange for early repayment, the related party surrendered 1,600,000 of the 2,600,000 shares issued. Given the fact that this transaction was with a related party and the shares had minimal value at issuance, this transaction has been recorded in stockholders’ deficit.

At December 31, 2012, the Company owed deferred compensation to three individuals totaling $350,000. The deferred compensation was non-interest bearing and for services rendered during 2012. Such amounts were paid in 2013.

In September 2013, the Company moved its operations from Ballground, Georgia to Nunica, Michigan and entered into a month to month agreement with a company related to the Chief Executive Officer to provide office and warehouse facilities, as well as administrative services to include a call center, order fulfillment, purchasing, inventory management and accounting for a monthly fee of approximately $21,000 per month. The contract is cancellable at any time by either party.

From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with the applicable accounting literature. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. Certain insurance policies held by the Company may reduce the cash outflows with respect to an adverse outcome on certain of these litigation matters. The Company does not believe it is reasonably possible that any of these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

On December 30, 2013, the Company entered into the Agreement described above whereby Fields Texas will act as the exclusive agent to secure sales and distribution agreements for the Company’s products with various retailers and distributors. Fields Texas will also support the Company’s acquisition, product development, marketing, pricing and promotional efforts.

Pursuant to the Agreement, the Company paid and recorded an expense of $200,000 related to a development fee and issued Fields Texas five-year warrants to purchase 6,975,000 shares of the Company’s

common stock. The warrants have an original strike price of $9.05, and contain a provision which could reduce the strike price based on certain future events and are thus considered to be a liability. In addition, the Company will pay Fields Texas commissions on the net sales of their products sold. Also, for every $10,000,000 in annual net sales realized, pursuant to the agreement, up to $100,000,000, the Company will issue Fields Texas additional five-year warrants to purchase 530,000 shares of common stock at an exercise price equal to the closing price on the date the warrants are issued.

For a merger or acquisition, strategic partnership, joint venture, licensing or similar transaction that Fields Texas facilitates, Victory will pay a one-time fee of 5% of proceeds. The term of the Agreement is for three years and will automatically be renewed for successive periods upon achieving annual net sales targets.

As a result of this Agreement, a liability has been recorded at December 31, 2013 with the related expense recorded in advisory agreement warrants in the accompanying consolidated statements of operations and comprehensive income. The warrants were valued at the balance sheet date using a binomial pricing model based on the terms of the warrant agreement.

In order to calculate the fair value of the warrants, certain assumptions are made regarding components of the model including the estimated fair value of the underlying common stock, risk-free interest rate and volatility. Changes to the assumptions could cause significant adjustments to the valuation. At December 31, 2013, the assumptions are as follows:

The fair value of the underlying common stock was determined based on the traded price of the Company’s stock with a marketability discount of 25%. The risk-free interest rate is based on the yield of U.S. treasury bonds over the expected term. The expected stock volatility is based on historical common stock prices for comparable publicly traded companies over a period commensurate with the life of the instrument.

During 2013, the Company adopted the 2013 Stock Option Plan (the “Plan”) which is intended to advance the interest of the Company’s stockholders by enhancing the Company’s ability to attract, retain, and motivate persons who make (or are expected to make) important contributions to the Company. The maximum aggregate number of shares of the Company’s common stock that may be issued under the Plan is 10,000,000 shares. As of December 31, 2013, the Company granted an aggregate of 9,700,000 stock options to purchase the Company common stock to directors, officers and certain employees and consultants. During the fourth quarter, 2,000,000 of the options were forfeited, leaving 7,700,000 options outstanding at December 31, 2013. The options granted in June and July of 2013 which total 7,500,000 are exercisable at $0.25 and the 200,000 options granted in December are exercisable at $9.05 per share. The options are exercisable for a period of five years from the date of grant. Options to purchase 2,500,000 shares vested immediately, while options to purchase the remaining 5,200,000 shares vested 50% on December 31, 2013 and 50% on December 31, 2014.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the following table. The Company calculates expected volatility based on a comparable industry group and estimates the expected term of its stock options using

the simplified method. The expected term represents an estimate of the time options are expected to remain outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant. The stock price is based on the Company’s trading price at the date of grant and with a marketability discount of 25%. The assumptions are as follows:

A summary of option activity under the Plan as of December 31, 2013, and changes during the year then ended is presented below:

The weighted-average grant-date fair value of options granted during the years ended December 31, 2013 was $0.47.

Total stock based compensation expense for the year ended December 31, 2013 and 2012 was $435,000 and $0, respectively. As of December 31, 2013, there was $130,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized during 2014.

The following table represents a reconciliation of basic and diluted earnings per share:

For the periods where the Company reported losses, all common stock equivalents are excluded from the computation of diluted earnings per share, since the result would be antidilutive. Securities, that were not included in the calculation of diluted earnings per share because to do so would have been antidilutive for the periods presented, are as follows:

Due to the Company’s loss and the valuation allowance related to the resulting tax benefit, there was no income tax expense for the current year.

The reconciliation between the effective tax rate and the statutory rate is as follows:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The significant components of the deferred income tax asset (liability) are as follows:

The Company has net operating loss carryforwards for federal purposes of approximately $2,493,908 and $0 for the years ended December 31, 2013 and 2012, respectively. The losses will begin expiring in 2033.

deferred tax assets is dependent upon the generation of future taxable income during the periods in which those differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In making this assessment, management does not believe that it is more likely than not that the Company will realize the benefits of the net deferred tax assets as of December 31, 2013. This determination was based on cumulative net losses as of the balance sheet date.

Upon adoption, the Company had no unrecognized tax benefits, and there were no material changes for the year ended December 31, 2013. The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expenses. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. There was no interest or penalties related to income tax matters for the year ended December 31, 2013. The company does not have any open years for audit as of December 31, 2013.

Level 1 — Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

As described in Note 1, the Company re-evaluated its common stock price which resulted in a restatement. There were no other changes to the Company’s valuation techniques that had, or are expected to have, a material impact on its consolidated financial position or results of operations.

The following is a description of the valuation methodologies used for instruments measured at fair value:

Assets and liabilities measured at fair value as of December 31, 2013 are summarized as follows:

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 assets).

(the “Notes”) and warrants (the “Warrants”) to purchase shares of Common Stock at an exercise price of $5.00 per share (the “First Offering”), with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $10,505,790 after deducting placement agent fees and other expenses.

On February 28, 2014, we completed another “best efforts” private offering of $16,050,000 aggregate principal amount of Notes and Warrants (the “Second Offering” and together with the First Offering, the “Offerings”) with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $14,919,000 after deducting placement agent fees and other expenses.

The Notes are due on the first anniversary of their respective issuance dates (the “Maturity Date”) if not converted prior to the Maturity Date and accrue interest at a rate of 15% on the aggregate unconverted and outstanding principal amount, payable in cash on a quarterly basis. The shares of Common Stock issuable upon conversion of the Notes shall equal: (i) the principal amount of the Note divided by (ii) $5.00. The conversion price for the Notes is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. The Notes may be prepaid in whole or in part at any time for 115% of the outstanding principal and accrued interest.

The Warrants issued in the Offerings are exercisable for an aggregate of 5,475,000 shares of the Company’s Common Stock. The Warrants are exercisable for a period of five years from their respective issue dates. The exercise price with respect to the Warrants is $5.00 per share. The exercise price for the Warrants is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances.

In connection with the sale of the Notes and Warrants in the Offerings, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which we agreed to register all of the shares of our Common Stock underlying the Notes and the Warrants (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC by May 15, 2014 (the “Filing Date”) and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages in cash to each Purchaser in the amount equal to 2% of the purchase price paid for the Notes and Warrants then owned by such Purchaser for each 30-day period for which the Company is non-compliant.

As collateral security for all of the Company’s obligations under the Purchase Agreement and related documents executed in connection with the Offerings, the Company granted the Purchasers a first priority security interest in all of the Company’s assets pursuant to the terms of the Security Agreement entered into between the Company and the Purchasers (the “Security Agreement”

and other expenses. Pursuant to a securities purchase agreement with the Purchasers (the “Purchase Agreement”), the Company issued to the Purchasers 6% Original Issue Discount Senior Secured Convertible Promissory Notes for a principal amount of $24,175,824 (the “Notes”).

The Notes are due on the first anniversary of the issue date (the “Maturity Date”) less any amounts converted or redeemed prior to the Maturity Date and accrue interest at a rate of 6% on the aggregate unconverted and outstanding principal amount payable in cash on a monthly basis. The shares of Common Stock issuable upon conversion of the Notes shall equal: (i) the principal amount of the Note to be converted (plus accrued interest and unpaid late charges, if any) divided by (ii) $9.92 (the “Original Conversion Price”). The Original Conversion Price for the Notes is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances. Additionally, should the Company complete an underwritten public offering of a minimum of $25 million, the conversion price would reset to the price that is equal to 115% of the VWAP of the Company’s shares of common stock on the trading day immediately following the pricing of such public offering should that price be lower than the Original Conversion Price. The Company must prepay $12,000,000 of the principal amount of the Notes, plus any accrued and unpaid interest thereon, between 15 days and 30 days following the issue date. The Notes may not be prepaid in whole or in part at any other time. The Purchasers have the right, in certain circumstances, to redeem all or portions of the Notes, in exchange for either cash or shares of the Company’s common stock, including the ability to redeem an aggregate of up to $800,000 per month, as further described in Section 7 of the Notes.

In connection with the sale of the Notes, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which the Company agreed to register all of the shares of our Common Stock underlying the Notes (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC by June 6, 2014, subject to the satisfaction of any registration rights previously granted by the Company (the “Filing Date”) and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages in cash to each Purchaser in the amount equal to 2% for the purchase price paid for the Notes then owned by such Purchaser for each 30-day period for which the Company is non-compliant.

As security for all of the Company’s obligations under the Purchase Agreement and related documents executed in connection with the Offering: (i) MHL (as defined below) granted a guarantee in favor of the Purchasers (the “Purchasers’ Guarantee”) supported by a first priority security interest in all of MHL’s assets pursuant to the terms of the Debenture entered into between MHL and the security trustee for the Purchasers (the “Purchasers’ Security Agreement”); and (ii) the Company granted the Purchasers a first priority security interest in all of the shares owned by the Company in MHL following completion of the Share Exchange, as further described below, pursuant to the terms of a share charge entered into between the Company and the security trustee for the Purchasers (the “Share Charge”).

On April 30, 2014, we completed an initial closing of a “best efforts” private offering of $3,139,987.50 (the “Offering”) of units, each unit consisting of (i) one (1) share of our common stock, par value $0.001 per

share (the “Common Stock) and (ii) a warrant to purchase ¹/₄ share of our Common Stock (the “Units”). Pursuant a purchase agreement, we sold 483,075 Units in the Offering, at a price of $6.50 per Unit, to a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $2,825,988.75 after deducting placement agent fees and other expenses. In the Offering, we issued 483,075 share of our Common Stock (the “Shares”) and warrants to purchase 120,768 shares of our Common Stock (the “Warrants”).

The Warrants are exercisable for a period of five years from their issue date. The exercise price with respect to the Warrants is $6.50 per full share. The exercise price for the Warrants is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate change and dilutive issuances.

In connection with the sale of the Shares and Warrants in the Offerings, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the Purchasers, pursuant to which we agreed to register all of the Shares and shares of our Common Stock underlying the Warrants (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC within 90 calendar days following the uplisting of our Common Stock on the Nasdaq Stock Market (the “Filing Date”) and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages in cash to each Purchaser in the amount equal to 2% of the purchase price paid for the Shares and Warrants then owned by such Purchaser for each 30-day period for which the Company is non-compliant.

On January 9, 2014, we completed the acquisition of all of the issued and outstanding ordinary shares of Vapestick Holdings Limited, a company incorporated under the laws of England and Wales (“Vapestick”), pursuant to a Share Exchange Agreement by and between us, Vapestick and all of the shareholders of Vapestick (the “Shareholders”) dated December 15, 2013 (the “Exchange Agreement”).

Pursuant to the terms of the Exchange Agreement, we acquired all issued and outstanding shares of Vapestick from its Shareholders in consideration for (a) an aggregate cash payment of £3,500,000 (approximately $5.74 million) and (b) the issuance of 6,595,900 shares of our Common Stock.

The assets and liabilities of Vapestick shown below are based on preliminary estimates of their acquisition date fair values. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. As such, the Company has not yet completed the valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of Vapestick’s assets acquired and liabilities assumed, along with the related allocations to goodwill and intangible assets. The fair values of certain tangible assets, intangible assets, and residual goodwill are the most significant areas not yet finalized and therefore are subject to change. The final fair value determinations may be significantly different than those shown below.

The excess of the purchase price over the net assets has been preliminarily allocated to goodwill pending final valuation by an independent valuation firm. The Company expects that intangible assets will be identified and valued and some portion of the identified intangibles will be subject to amortization.

On February 28, 2014, (the “Closing Date”), we completed the acquisition (the “Merger”) of FIN Electronic Cigarette Corporation, Inc., a Delaware corporation (“FIN”), through a merger with and into VCIG LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“VCIG”), pursuant to the Agreement and Plan of Merger dated February 12, 2013, by and among the Company, VCIG, FIN, and Elliot B. Maisel, as representative of the FIN stockholders (the “Merger Agreement”).

Pursuant to the terms of the Merger Agreement, and on the Closing Date, we acquired all issued and outstanding shares of FIN from its shareholders (the “FIN Shareholders”) in consideration for an aggregate of 10,000,000 shares of Common Stock (the “Merger Shares”). Additionally, on the Closing Date we paid $10 million of certain indebtedness and liabilities of FIN and its subsidiaries and issued $15 million of promissory notes (the “Promissory Notes”) to satisfy other indebtedness and liabilities of FIN and its subsidiaries. The Promissory Notes become due 90 days from the date of issuance, on May 29, 2014, and accrue interest at a rate of 10% per annum. We may prepay the Promissory Notes without penalty. If we fail to pay off the Promissory Notes in full by June 9, 2014, for every subsequent day the Promissory Notes are not paid in full, we will issue up to 12,500 shares of Common Stock per day, dependent on the outstanding principal amount at that time, but no more than a total of 500,000 shares of Common Stock, to the note holders as a penalty payment (the “Late Payment Shares”).

In connection with the Merger, the Company entered into a registration rights agreement (the “FIN Registration Rights Agreement”) with the FIN Shareholders, pursuant to which we agreed to register all of

the Merger Shares and the Late Payment Shares, if any (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC by April 26, 2014, subject to the satisfaction of the registration rights of the Purchasers in connection with the January and February 2014 private offerings, which if not satisfied by the Filing Date, will cause the Filing Date to be a date following the Purchasers, registration rights being satisfied (the “Filing Date”), and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Effective Date”).

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages to the FIN Shareholders in cash in the amount equal to 2% of the value of the Merger Shares on the Closing Date for each 30-day period for which the Company is non-compliant.

The Company has not yet assessed the fair value of the assets acquired and the liabilities assumed in this transaction. Revenues and expenses of FIN will be included in the consolidated financial statements beginning February 28, 2014.

On April 22, 2014 (the “Closing Date”), the Company entered into a share purchase agreement (the “Exchange Agreement”) by and between (i) the Company and (ii) the shareholders of Must Have Limited (“MHL”), an England and Wales incorporated limited company (the “MHL Shareholders”). Pursuant to the terms of the Exchange Agreement, the MHL Shareholders transferred to the Company all of the shares of MHL held by such shareholders in exchange for (1) the issuance of 2,300,000 shares (the “Exchange Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), (2) GBP £5,345,713.58 (equivalent to $9,000,000) in cash consideration, (3) $11,000,000 of promissory notes (the “Share Exchange”), (4) GBP £6,796,303 in respect of MHL’s surplus cash, and (5) (if payable in accordance with the terms of the Exchange Agreement) up to $5,000,000 as an earn-out.

On the Closing Date, the Company issued $11,000,000 of promissory notes (the “Promissory Notes”). The Promissory Notes become due at the earlier of 1) October 14, 2014, 2) the day the Company first trades it shares of common stock on certain listed exchanges (including the NYSE Market, the Nasdaq Capital Market, the Nasdaq Global Select Market, the Nasdaq Global Market or the New York Stock Exchange) or 3) the Company completes an underwritten public offering of a minimum of $40 million (the “Maturity Date”). Beginning 120 days following the date of issuance, the Promissory Notes will accrue interest at a rate of 10% per annum.

In connection with the Share Exchange, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the MHL Shareholders, pursuant to which the Company agreed to register all of the Exchange Shares (the “Registrable Securities”) on a Form S-1 registration statement (the “Registration Statement”) to be filed with the SEC within 30 calendar days following the completion of the audit of the MHL financial statement for the MHL 2013 fiscal year, subject to the satisfaction of any registration rights previously granted by the Company (the “Filing Date”), and to cause the Registration Statement to be declared effective under the Securities Act within 90 days following the Filing Date (the “Required Filing Date”).

If the Registration Statement is not filed by the Filing Date or declared effective by the Required Effective Date, the Company is required to pay partial liquidated damages to the MHL Shareholders in the amount equal to 2% of the value of the Exchange Shares on the Closing Date for each 30-day period for which the Company is non-compliant.

As security for all of the Company’s obligations under the Promissory Notes and related documents executed in connection with the Share Exchange, MHL granted a guarantee in favor of the MHL

Shareholders (the “MHL Shareholders’ Guarantee”) supported by a second priority security interest in all of MHL’s assets pursuant to the terms of the Debenture entered into between MHL and the security trustee for the MHL Shareholders (the “Security Agreement”).

In connection with the closing of the Share Exchange and the sale of the Notes, on April 22, 2014, the Company, MHL, the Purchasers, the security trustee for the Purchasers, the MHL Shareholders and the security trustee for the MHL Shareholders entered into an intercreditor agreement (the “Intercreditor Agreement”). The Intercreditor Agreement governs the relative priorities (and certain other rights) of the Purchasers and MHL Shareholders pursuant the respective security agreements that each entered into with the Company and MHL.

The Company has not yet assessed the fair value of the assets acquired and the liabilities assumed in this transaction. Revenues and expenses of Must Have will be included in the consolidated financial statements beginning April 22, 2014.

We have audited the accompanying consolidated balance sheets of Vapestick Holdings Limited (“the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vapestick Holdings Limited as of December 31, 2013 and 2012 and the results of their consolidated operations and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

See accompanying notes to the consolidated financial statements and Independent Auditors’ Report

Vapestick Holdings Limited (“Holdings”) was incorporated on September 16, 2011, and registered under the Companies Act of 2006 in England. Holdings was established as a holding company for Vapestick Branding Limited and The Vapestick Group Limited, the primary trading company, along with The Vapestick Group Limited’s wholly owned subsidiaries: Vaporstick Limited, Vapeaway Limited and Electronic Cigarette Direct Limited (collectively, the “Company”). The Company imports and distributes electronic cigarettes and their components via the internet and other wholesale and retail outlets and its primary operations are based near London, England.

The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements are comprised of the accounts of the Company. All intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates.

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of accounts receivable and inventory. Cash is deposited in various financial institutions. At times, amounts on deposit may be in excess of the Financial Services Compensation Scheme (FSCS) insurance limits.

Revenue is derived from product sales and is recognized upon shipment to the customer. Returns are accepted, but are not significant to the Company’s overall operations. Payments received by the Company in advance are recorded as deferred revenue until the merchandise has shipped to the customer. The Company had no deferred revenue at December 31, 2013 or 2012.

The Company recognizes the direct cost of purchasing products for sale, including freight-in and packaging, as cost of goods sold in the accompanying income statement. The Company purchases all of its products from two suppliers in China.

Outgoing shipping and handling costs are included in selling expenses in the accompanying statements of income.

The Company recognizes advertising and promotion costs as incurred. The amount of advertising and promotion expense recognized for the years ended December 31, 2013 and 2012 were $106,505 and $168,561, respectively.

The Company considers all highly liquid investments, with maturities of three months or less when purchased, to be cash equivalents. At December 31, 2013 and 2012, the Company had no cash equivalents.

Accounts receivable, primarily from retail customers or third-party internet brokers, are reported at the amount invoiced. Payment terms vary by customer and may be subject to an early payment discount. Management reviews accounts receivable on a monthly basis to determine if any receivables are potentially uncollectible. An overall allowance for doubtful accounts is determined based on a combination of historical experience, length of time outstanding and specific identification. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. As of December 31, 2013 and 2012, the Company expects these receivables to be fully collectible and therefore has not estimated an allowance for doubtful accounts for either period.

Inventory, which consists of ready for sale disposable e-cigarettes, batteries, cartomizers and other accessories, is carried at the lower of cost or fair market value. Cost is determined using the first-in, first-out method.

The Company records furniture and equipment at historical cost, less accumulated depreciation. Expenditures for additions and improvements over $1,500 that substantially extend the useful life of property and equipment or increase its operating effectiveness are capitalized. Repair and maintenance costs are expensed as incurred. Long-lived assets are reviewed for impairment whenever events or circumstances warrant such a review, at least annually, pursuant to the provisions Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 360 Property, Plant, and Equipment. The Company depreciates the cost of furniture and equipment over the estimated useful lives of the assets, ranging from two to ten years, using the straight-line method. For the years ended December 31, 2013 and 2012, the Company had depreciation expense of $26,454 and $16,254, respectively. At December 31, 2013 and 2012, accumulated depreciation was $49,927 and $21,604, respectively.

The Company has reported the financial statements in US dollars at December 31, 2013 and 2012 as translated from British Sterling Pounds. The Company translated assets and liabilities at exchange rates in effect at the balance sheet dates. The Company translates their revenues and expenses using average rates during the year. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income in the accompanying consolidated balance sheets and consolidated statements of stockholders’ equity (deficit). The spot rates used as of December 31, 2013 and 2012 were 1.6541 and 1.6273, respectively. The average rates used for the years ended December 31, 2013 and 2012 were 1.5646 and 1.5849, respectively.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their

respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.

The Company is taxed is accordance with United Kingdom Corporation Tax, which is a corporate tax levied on the profits made by companies that are resident and trade in the UK. The rate of corporation tax is determined by the financial year, which runs from April 1 to the following March 31, and was 20% for the years ended December 31, 2013 and 2012.

Management has evaluated tax positions in accordance with ASC 740, Income Taxes, and has not identified any significant tax positions, other than those disclosed.

The Company has evaluated subsequent events through March 24, 2014, the date the financial statements were available to be issued.

The Company has a revolving credit line with a bank that has a maximum credit limit of approximately $364,000 as of December 31, 2013. The balance on the line was $357,026 at December 31, 2013. The line is callable at any time, bears interest of approximately 4.5% per year over the prevailing Bank of England Base Rate (0.5% at December 31, 2013) and is secured by substantially all of the Company’s assets. The agreement calls for the Company to maintain adjusted tangible net worth not less than a minimum amount of approximately $265,000 for the year ended December 31, 2013. As of December 31, 2013, the Company was not in compliance with this covenant.

The components of income tax expense for the years ended December 31, 2013 and 2012 are as follows:

There is no difference between income tax expense computed by applying the statutory income tax rate to earnings before taxes.

A £40,000 note that bears interest at 5.0% per year over the prevailing Bank of England Base Rate (0.5% at December 31, 2013), with 60 payments of £764 per month (approximately $1,264 at December 31, 2013) and a maturity date of January 2017 and secured by various assets of the Company. The balance due on this note as of December 31, 2013 and 2012 was $45,913 and 60,095, respectively. This note was paid in full subsequent to December 31, 2013.

A £30,000 note that bears interest at 4.6% per year, with 12 payments of £2,561 per month and secured by various assets of the Company. This note was paid in full during May 2013. The balance due on this note as of December 31, 2012 was $15,109.

Scheduled principal payments due on the term notes as of December 31, 2013 are as follows:

The Company has a search engine optimization (SEO) service agreement with a company that is 50% owned by one of the Company’s directors. Per the agreement, the Company will pay 18% of the gross revenue, plus applicable value added tax, arising from sales made by, on, or through relevant websites. Total costs incurred under this agreement were $321,238 and $218,718 for the years ended December 31, 2013 and 2012.

At December 31, 2012, the Company owed a director of the Company $58,189 related to cash advances of $32,332 made to cover short-term operating needs of and $25,857 for services provided under the SEO service agreement. There were no stated terms on the cash advances provided by the director.

At December 31, 2012, a director of the Company owed $27,116 to the Company. There were no stated terms on the advance provided to the Director.

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines than an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of December 31, 2013 and 2012, the Company is not aware of any commitments or contingencies that are expected to have an adverse effect on the Company.

On January 9, 2014, all issued and outstanding shares in the capital of the Company were acquired by Victory Electronic Cigarettes Corporation (“Victory”) pursuant to a share exchange agreement. The terms of the share exchange agreement resulted in the shareholders of the Company receiving (a) an aggregate cash payment of £3,500,000 (approximately $5,740,000), (b) the issuance of 6,516,205 shares of Victory common stock, and (c) an agreement from Victory to issue an aggregate number of additional shares of common stock equal to 10% of all shares of common stock that Victory issues in any subsequent financing, up to gross proceeds of $1,925,000, calculated on a fully diluted basis.

We have audited the accompanying financial statements of Fin Branding Group, LLC, (an Illinois LLC and subsidiary of FGM, LLC) which comprise the balance sheets as of December 31, 2013 and 2012, and the related statements of operations, members’ equity and cash flows for the years then ended, and the related notes to the financial statements.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Member of American Institute of Certified Public Accountants and Alabama Society of Certified Public Accountants.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fin Branding Group, LLC, as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

As discussed in Note 13 to the financial statements, on February 28, 2014, the Company merged with Victory Electronic Cigarette Corporation, Inc.

Fin Branding Group, LLC, (Fin) is an Illinois limited liability company organized June 10, 2011 as Finiti Branding Group, LLC, and continuing until dissolved by consent of all members, for the purpose of manufacture, import, export, distribution and sale of electronic cigarettes and other products as determined by management. The Company is a 70% owned subsidiary of FGM, LLC (FGM). The remaining 30% is owned by members unrelated to FGM.

During 2012, Fin changed its legal name from Finiti Branding Group, LLC, to Fin Branding Group, LLC.

The Company imports and distributes rechargeable and disposable electronic cigarettes in tobacco and menthol flavors, as well as related refill and replacement and accessory products under the Fin and Finiti brands. Products are sold to wholesale distributors and big-box retailers, drug and grocery retail chains, convenience stores and specialty retailers, both directly and through distributors. Products are also sold directly to consumers through the Company’s e-retail website.

Certain amounts in 2012 have been reclassified to conform with the 2013 presentation.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Management has estimated an allowance of $400,000 based on the Company’s history and management’s expectations for future returns, credits and uncollectible accounts.

Finished goods inventory was written down by approximately $1,159,000 during 2013 based on management’s estimate of the minimum amount that would be obtainable in a bulk sale of older inventory items. Management has estimated an allowance of $300,000 for additional potential inventory losses.

Actual uncollectible receivables and inventory losses could differ from these estimates, and the differences could be material.

The Company supplies products and services and extends credit where permitted by law to customers primarily in the United States of America. The majority of sales are to large retail chains and distributors servicing convenience stores. Sales to the Company’s largest customer accounted for 33% of 2013 sales and

61% of 2012 sales and sales to the five largest customers accounted for 82% of 2013 sales and 87% of 2012 sales. Receivables from these customers account for 68% of accounts receivable at December 31, 2013 and 93% of accounts receivable at December 31, 2012.

Substantially all of the Company’s products are manufactured by two firms located in China. Material amounts of inventory are located in China or in transit from China at December 31, 2013 and 2012. Insurance coverage of inventory in transit has been obtained from a commercial insurance carrier.

The Company maintains cash balances at national financial institutions with branches located in Alabama (and Illinois in 2012 and through June 2013). The accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per bank starting January 1, 2013 and up to $250,000 per bank for savings and money market accounts with no limits for non-interest-bearing transaction accounts through December 31, 2012. At December 31, 2013 and 2012, and during the years then ended, the Company had no cash balances that were not covered by FDIC insurance.

Inventory is stated at the lower of cost or market with cost being determined by specific identification using cost layers. Freight-in and duty costs are included in inventory cost. Freight-out costs are charged to cost of sales when incurred.

Property and equipment are recorded at cost and expenditures for improvements are capitalized. Normal repairs and maintenance charges are expensed as incurred. Depreciation is provided by the straight-line method over the estimated useful lives of the respective assets as follows:

The Company employs a comprehensive marketing campaign targeted at end-user consumers. In-store marketing consists of product giveaways and point of purchase marketing. Out-of-store marketing consists of media advertising, event marketing, social media and trade shows. Advertising costs are expensed when incurred. Costs of marketing equipment and long-lived promotional materials such as trade show booths, retail display units and story boards are capitalized and depreciated over the expected useful life of the assets. Point of purchase marketing items are added to inventory when purchased and charged to cost of sales as the items are shipped to customers. Advertising costs of $4,389,682 and 247,610, respectively, and other marketing costs of $7,239,972 and $1,027,967, respectively, are included in 2013 and 2012 operating expenses.

The Company collects various taxes from customers and remits these amounts to applicable taxing authorities. The Company’s accounting policy is to exclude these taxes from revenue and cost of sales.

The Company files federal and state income tax returns and is taxed as a partnership under the Internal Revenue Code and similar state statutes. In lieu of income taxes, the members of the limited

liability company are taxed on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for federal or state income taxes related to the Company is included in these financial statements. As a result, the Company has no tax positions resulting in unrecognized tax benefits that are subject to significant increase or decrease.

The Company files income tax returns in the U.S. federal jurisdiction, and numerous states. There are currently no years for which the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities.

Trade accounts receivable are stated net of an allowance for doubtful accounts of $400,000 in 2013 and $2,600 in 2012. The Company estimates the allowance based on its historical experience of the customer collections. Accounts that are determined by management to be uncollectible are charged off against the allowance at the time that determination is made. All of the net trade receivables are pledged as collateral on long-term debt.

Inventory in-transit is made up of product in the possession of a common carrier or non-vessel operating common carrier (NVOCC), for which ownership and title has passed from the vendor to the Company. Inventory in China consists of component parts held for use in the manufacture of new products. Raw materials consist of nicotine held in China for use in manufacturing certain products.

Vendor advances are made up of deposits of approximately 20% of purchase orders for inventory manufactured in China, required to be paid prior to manufacture starting. These amounts are remitted to Chinese manufacturers through a related company as discussed in Note 5. Vendor advances are applied to inventory purchases when products are shipped.

As discussed in Note 1 to the financial statements, the Company is a 70% owned subsidiary of FGM, LLC (FGM). Gulf Distributing Holdings, LLC owns an equity interest in FGM. Various other entities are affiliated with Fin through common control with FGM and minority members.

Transactions with FGM, Gulf Distributing Holdings, LLC and its subsidiaries and related entities (Gulf), and other related parties are discussed below.

Under the terms of a subordination agreement with Wells Fargo, FGM and the minority members have waived the right to demand payment of principal on subordinated demand notes until all indebtedness under the credit agreement with Wells Fargo has been repaid and Wells Fargo has released its lien in the collateral. Therefore, subordinated notes payable to members have been classified as long-term liabilities.

Loan costs at December 31, 2012 include $650,000 payable to an affiliate of FGM, for services performed in connection with obtaining the Wells Fargo Bank credit agreement.

Product sales are made to Gulf. Receivables from Gulf are $(91,771) and $25,902 at December 31, 2013 and 2012, respectively, and are included in accounts receivable.

The Company’s supplier oversight and quality control is outsourced to an affiliated firm in China controlled by one of the Company’s minority members. Substantially all payments for inventory purchases are made through this affiliated firm, which receives a fee of 8% of the manufacturing costs of products manufactured in China. This fee is included in costs of inventory purchases. Total amounts paid to the affiliated firm for inventory purchases and deposits amounted to $32,557,089 in 2013 and $15,621,365 in 2012.

The Company’s accounting and administrative functions are performed by Gulf for a monthly service fee. Monthly consulting fees and office rent are paid to a company affiliated with minority members. Executive and office salaries paid by Gulf and affiliates of minority members attributable to Fin are charged back to the Company. Other expenses are paid on behalf of the Company by Gulf and minority members and affiliated companies. Commissions are paid to Gulf under a commission agreement. Interest is computed on notes payable to FGM, Gulf, and minority members as discussed above. Amounts attributable to these transactions included in the statements of operations are detailed in the following schedule:

Fin was formed on June 10, 2011 by means of capital contributions from two members:

The formation of Fin was expected to more effectively utilize the assets and expertise of both members in the production, importing, exporting, sale, and distribution of Fin and Finiti electronic cigarettes. The goodwill of $1,361,714 arising from the business combination consists primarily of contractual rights, trade secrets and proprietary information, and was calculated as follows:

Goodwill is calculated as the excess of the purchase price paid over the net assets recognized. The goodwill recorded as part of the S2 acquisition primarily reflects the value of start-up activities conducted and contracts and agreements entered into by S2, as well as any intangible assets that do not qualify for separate recognition. Goodwill is not amortizable nor deductible for tax purposes.

During 2011, FGM acquired a controlling interest in the Company through additional capital contributions. According to the terms of the Company’s operating agreement, the change in ownership was recorded by adjusting capital accounts so that FGM’s and minority members’ capital accounts equaled their proportionate shares of the Company’s net fair value. During 2012, FGM acquired additional capital interests as incentive for Gulf entering a revolving credit agreement with the Company and subordinating its collateral rights under the revolving credit agreement to Wells Fargo Bank as described in Note 5. During 2013, FGM acquired additional capital interests and incentive for additional loans made to the Company.

As described above, in conjunction with the acquisition of the net assets of S2 Partners, Inc., the Company has recorded goodwill as an asset (included on the accompanying balance sheets). In accordance with U.S. generally accepted accounting principles, the Company does not amortize its goodwill. Instead, the goodwill asset will be tested periodically and written down (if necessary) to its current value. Goodwill is tested for impairment on an ongoing basis, generally at least quarterly.

As discussed in Note 11, the Company is involved in a patent infringement lawsuit and various trademark disputes. In accordance with accounting principles generally accepted in the United States of America (US GAAP), the costs of defending patents and trademarks are being deferred until such time as the disputes are resolved.

Costs associated with acquiring new debt are capitalized and amortized over a period of time corresponding with the term of the related loan. Net loan costs reported on the balance sheet at December 31, consist of the following:

Effective December 31, 2012, the Company entered into a credit agreement with Wells Fargo Bank (Lender) which provides for a revolving credit and/or letters of credit commitment in the maximum combined amount of $20 million. Amount of credit to be provided is additionally limited to specified percentages of eligible receivables and eligible finished goods and in-transit inventory. The commitment terminates on December 31, 2015. Virtually all of the Company’s assets are pledged as collateral, including rights to any profits resulting from the sale of the Company’s distribution agreements or other intangible assets. All collections of accounts receivable are required to be applied to reduce any revolving credit balance outstanding. The agreement provides for variable interest rates. The interest rate is the Daily Three Month LIBOR plus a margin of 3%, the margin will be reduced to 2.5% in 2014 providing the Company meets specified requirements for EBITDA for the year ending December 31, 2013. At December 31, 2013 and 2012, interest rates are 3.25% and 3.306%.

The balance due on the loan was $13,369,899 and $0 at December 31, 2013 and 2012.

The credit agreement was amended during 2013 to increase the amount of inventory includable in the borrowing base. The agreement was amended subsequent to year end to modify debt covenants, extend inventory increase through July 2014 and modify other collateral requirements, and to allow for the merger with Victory as discussed in Note 13.

The Company is obligated to Lender to comply with a number of debt covenants. Among these covenants is a restriction on the amount of distributions that the Company is allowed to make. Also, covenants require the Company to provide specified reports on collateral and meet certain monthly financial balances and ratios. The Company did not meet one of these ratios for the months of September, October, November and December 2013 and January 2014. Lender has waived these specified defaults.

As discussed in Note 5, notes payable to related parties are subordinated to the Wells Fargo credit agreement. Under the terms of the subordination agreement between Wells Fargo, FGM, and the minority members, no principal payments may be made on demand notes to members until all Wells Fargo indebtedness has been paid. Interest payments may be made provided the Company meets specified financial balance requirements. Under the terms of the subordination and intercreditor agreement between

Wells Fargo and Gulf, interest payments may be made according to the terms of the revolving credit agreement with Gulf provided the Company meets specified financial balance requirements. Principal payments on the revolving credit balance may be made starting July 1, 2013, up to specified limits, providing the Company meets specified financial balance and ratio requirements.

The Wells Fargo credit agreement includes a subjective acceleration clause and a lockbox arrangement. Therefore, in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 470-10-45-5, the balance has been classified as a current liability.

On November 15, 2012, the Company started a 401(k) plan (Plan) with discretionary company matching contributions and automatic enrollment. Discretionary profit sharing contributions may also be made by the Company. The Plan covers all employees age 18 and over with one year of service. Employees who were employed on the Plan’s effective date are not required to meet service requirements to participate. During 2013 and 2012, the Company matched 30% of an employee’s contribution to the plan up to 6% of the employee’s gross wages.

During 2013, the Company entered into a barter transaction, exchanging finished goods inventory with a net book value of $1,231,516 for barter credits redeemable for a percentage of future purchases of media advertising (redeemable for 100% of cost of media usage during the fourth quarter of 2013). The barter transaction was recorded as a sale at the agreed upon fair value of the inventory, which was $2,850,000. All of the barter credits were used during 2013, and $2,850,000 is included in advertising expense reported as other operating expenses for 2013.

The Company has been named as a defendant in a lawsuit filed by Ruyan Investments Holdings, Ltd. in the U.S. District Court for the Central District of California. The suit asserts patent infringement and seeks monetary damages and injunctive relief. The Company filed a request for reexamination by the U.S. Patent and Trademark Office, seeking to invalidate claims of the patent involved, and a motion to stay the litigation pending the outcome of the reexamination. The request for inter parties reexamination of the patent was granted during 2012, and the reexamination is pending. The motion to stay the litigation was granted in February 2013, and no further activity on the litigation is expected to take place until the reexamination is complete. Ruyan’s parent company was purchased by Imperial Tobacco Group in 2013 and, subsequent to the balance sheet date, a subsidiary of Imperial Tobacca Group, Fontem Ventures, B.V., filed an additional patent infringement suit against Fin and other e-cigarette companies, citing newly issued patents acquired as part of this purchase. Management and outside legal counsel are unable to evaluate the likelihood of a favorable or unfavorable outcome or estimate the range of potential loss. In the event of an unfavorable outcome, it is likely that the loss would be material.

From time to time, the Company may be involved in litigation and regulatory investigations arising in the ordinary course of business. While the ultimate outcome of any such matters is not presently determinable, it is the opinion of management that the resolution of any claims resulting from such matters will not have a material adverse effect on the financial position or results of operations of the Company.

A 2013 U.S. Court of Appeals decision determined that, although electronic cigarettes may not be regulated as drug/device products, they can be regulated by the Food and Drug Administration (FDA) as “tobacco products” under the Family Smoking Prevention and Tobacco Control Act of 2009 (the Act). In Fall of 2013, the FDA issued a proposed rule (currently under review by the OMB) extending its regulatory authority over tobacco products under the Act to additional products including electronic cigarettes. Such regulation could include subjecting electronic cigarettes to various general controls and requiring a premarket review of any product not marketed as of February 15, 2007 and unmodified since then. The Company’s management and in-house corporate attorney have presented to FDA, consulted with industry groups and various experts and past FDA officials, and do not think it likely that FDA final regulations, when and if issued, will require that e-cigarettes be taken off of the market immediately. However, in the event that final FDA regulations subject e-cigarette products to the new tobacco product requirements as they currently exist, such requirements may have a material adverse effect on the Company’s operations.

The Company has an agreement for sales and marketing services for various trade channels provided by an unrelated company. The agreement provides for payment of commissions of 5% of monthly sales to customers in the specified channels through February 2014 and business development fees of $10,000 per month through February 2013. The commission agreement automatically renews for successive one year periods unless written notice of intention not to renew is given prior to the end of the period in effect.

The Company has a commitment to an unrelated entity to make specified payments upon distribution reaching specified numbers of stores. Rebate agreements with this entity and other unrelated entities provide for rebates of various percentages of sales for periods from one to two years, with provision for renewal.

As discussed in Note 5, the Company has service agreements with Gulf and with a company affiliated with a minority member. These agreements continue until terminated by the related parties. Under the terms of the agreements, Gulf is entitled to a fee of 6% of the manufacturing costs of products sold by the Company through distribution relationships established by Gulf and the affiliated company is entitled to a fee of 8% of the manufacturing costs of products manufactured in China. A January 1, 2013 agreement with a company affiliated with minority members calls for monthly payments of $12,500 for consulting and $1,250 for office rent for three years, automatically renewable for successive three year terms unless terminated, termination subject to approval from the minority member.

The Company is a member of an industry association which has entered into a consulting and services agreement with an unrelated party calling for monthly fees of $10,000 over a two year term, cancellable by either party with sixty days notice, renewable for successive twelve month terms. The Company is paying the fees under this agreement.

Other sales and services agreements exist with various related and unrelated entities. The terms of these agreements generally specify that they may be terminated by either party with required notice of 3 months or less.

Management has evaluated subsequent events through March 19, 2014, the date which the financial statements were available to be issued.

On February 28, 2014, the Company was merged into Victory Electronic Cigarette Corp, Inc. (Victory) (a publicly traded corporation). The merger resulted in the Company becoming a wholly owned subsidiary of Victory. The Revolver and member debt were eliminated as of February 28, 2014, as part of this transaction. Additionally, as part of this transaction, various contracts with related parties were terminated and the covenants with a bank were restructured.

We have audited the accompanying financial statements of Must Have Ltd, which comprise the balance sheets as of June 30, 2013 and 2012, and the related statements of profit and loss, changes in stockholder’s equity and cash flows for the years then ended and the related notes to the financial statements.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Must Have Ltd, as of June 30 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United Kingdom. Accounting principles generally accepted in the United Kingdom vary in certain important respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in the United States Generally Accepted Accounting Principles section.

None of the company’s activities were acquired or discontinued during the current year or previous year.

The company has no recognised gains or losses other than the profits for the current year or previous year.

The financial statements were approved by the Board of Directors on 25 April 2014 and were signed on its behalf by:

The financial statements have been prepared under the historical cost convention.

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

During the year, it was decided by the directors’ to alter the fixture and fittings and office equipment depreciation policy in order to reduce all kiosk additions 50% straight line each year. This was an increase from 15% reducing balance.

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Rentals paid under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease.

The company operates a defined contribution pension scheme. Contributions payable to the company’s pension scheme are charged to the profit and loss account in the period to which they relate.

The tax charge on the profit on ordinary activities for the year was as follows:

The following loan to directors subsisted during the years ended 30 June 2013 and 30 June 2012:

One of the directors, David Levin, had an overdrawn loan account outstanding at the year end amounting to £76,093. This was repaid on 22 July 2013.

On the 31st January 2013 (the Grant Date), Must Have Ltd (the Company) entered into an EMI Option Agreement with David Jonathan Ryder (the Option Holder).

The principle terms and conditions of the share-based payment arrangements are as follows:

The Company granted an option to the option holder to acquire up to a maximum of 302 Shares.

Subject to legal details included in the share option agreement, the Option may be exercised at any time after the Grant Date and before the date falling on the tenth anniversary of the Grant Date.

Share — means a fully paid ordinary share of £0.10 each in the capital of the company.

The following assumptions are used to determine the fair value of share options at the respective date of grant:

The expected volatility for share options granted on 31st January 2013 has been estimated by reference to historic volatility of a sample of comparable companies, given the lack of share price trading history for the Company.

The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

National Insurance is payable on gains made by employees on exercise of share options granted to them.

The financial statements prepared under UK GAAP can be reconciled to US GAAP based on the inclusion of a share based payment in relation to the EMI option granted at 31st January 2013. The financial statements completed to 30th June 2013 under UK GAAP did not include a value for the costs of the grant of the option as an expense to the profit and loss as this is not a requirement under UK GAAP. Under US GAAP an estimated costs of £10,000 has been included as an expense to the profit and loss account. This value has been calculated by using the Black Scholes model and the assumptions as detailed in the share based payments note.

The financial statements prepared under UK GAAP were prepared based on small company status, as per the FRSSE. To present the financial statements more akin to US GAAP these financial statements include certain disclosures and notes which would be included in a medium sized company and prepared as such, such as a cashflow statement. A USGAAP cashflow statement has also been included to show the fundamental differences between the disclosures.

The company is entitled to exemption from audit under Section 477 of the Companies Act 2006 for the year ended 31 December 2013.

The members have not required the company to obtain an audit of its financial statements for the year ended 31 December 2013 in accordance with Section 476 of the Companies Act 2006.

The financial statements have been prepared in accordance with the special provisions of Part 15 of the Companies Act 2006 relating to small companies and with the Financial Reporting Standard for Smaller Entities (effective April 2008).

The financial statements were approved by the Board of Directors on and were signed on its behalf by:

The financial statements have been prepared under the historical cost convention and in accordance with the Financial Reporting Standard for Smaller Entities (effective April 2008).

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Plant and machinery etc — 50% on cost, 25% reducing balance and 15% reducing balance.

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Rentals paid under operating leases are charged to the profit and loss account on a straight line basis over the period of the lease.

The company operates a defined contribution pension scheme. Contributions payable to the company’s pension scheme are charged to the profit and loss account in the period to which they relate.

The tax charge on the profit on ordinary activities for the year was as follows:

Nevada Revised Statutes (NRS) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors, officers, employees and agents. The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe that his conduct was unlawful.

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.

Our bylaws include an indemnification provision under which we have the power to indemnify our current and former directors, trustees, officers, employees and other agents against expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement actually and reasonably incurred by any such person, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. Our bylaws further provide for the advancement of all expenses incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is determined that the party is not entitled to be indemnified under our bylaws. These indemnification rights are contractual, and as such will continue as to a person who has ceased to be a director, trustee, officer, employee or other agent, and will inure to the benefit of the heirs, executors and administrators of such a person.

On January 31, 2013, we issued convertible notes in the principal amount of $200,000 and warrants to purchase 200,000 shares of our common stock to investors in a private offering. The sale and the issuance of the notes and warrants were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation S promulgated under the Securities Act (“Regulation S”).

On June 25, 2013, we issued 32,500,000 shares of our common stock to the shareholders of Victory Electronic Cigarettes, Inc. (“VEC”) in connection with our acquisition of VEC (the “Reverse Merger”). The shares were issued in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act, Rule 506 of Regulation D promulgated under the Securities Act (“Regulation D”) and Regulation S.

On June 25, 2013, in connection with the Reverse Merger we completed a private placement, pursuant to which we issued an aggregate of 10,000,000 shares of our common stock at a price of $0.25 per share for

gross proceeds of $2,500,000. The shares were offered and sold in reliance upon exemptions from registration pursuant to Regulation S and Regulation D.

On June 25, 2013, we issued 620,800 shares of our common stock to one finder in connection with the private placement. The shares were issued in reliance upon exemptions from registration pursuant to Regulation S and/or Section 4(a)(2) of the Securities Act.

On June 25, 2013, we issued 223,200 shares of our common stock to Wolverton Securities Ltd. pursuant to the terms of an advisory agreement. The shares were issued in reliance upon exemptions from registration pursuant to Regulation S and/or Section 4(a)(2) of the Securities Act.

On November 4, 2013, we issued convertible notes in the aggregate principal amount of $2,475,000, pursuant to a private offering. The notes were issued in reliance upon exemptions from registration pursuant to Regulation S and/or Section 4(a)(2) of the Securities Act.

On January 9, 2014, we issued 6,595,900 shares of our common stock to the shareholders of Vapestick Holdings Limited (“Vapestick”) in connection with our acquisition of Vapestick. The shares were issued in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act and Regulation S.

On January 7, 2014, January 14, 2013, and January 31, 2014, we completed a “best efforts” private offering of $11,325,000 aggregate principal amount of 15% Senior Secured Convertible Promissory Notes (the “Notes”) and warrants (the “Warrants”) to purchase 2,265,000 shares of common stock at an exercise price of $5.00 per share (the “First Offering”), with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $10,505,790 after deducting placement agent fees and other expenses.

On February 28, 2014, we completed another “best efforts” private offering of $16,050,000 aggregate principal amount of Notes and Warrants to purchase 3,210,000 shares of common stock at an exercise price of $5.00 per share (the “Second Offering” and together with the First Offering, the “Offerings”) with a group of accredited investors (the “Purchasers”) for total net proceeds to the Company of $14,919,000 after deducting placement agent fees and other expenses.

The sale and the issuance of the Notes and Warrants in the Offerings were offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated under the Securities Act (“Regulation D”). We made this determination based on the representations of each Purchaser which included, in pertinent part, that each such Purchaser was (a) an “accredited investor” within the meaning of Rule 501 of Regulation D or (b) a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and upon such further representations from each Purchaser that (i) such Purchaser is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (ii) the Purchaser agrees not to sell or otherwise transfer the purchased shares unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (iii) the Purchaser has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, (iv) the Purchaser had access to all of our documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers regarding the terms and conditions of the offering and to obtain any additional information which we possessed or were able to acquire without unreasonable effort and expense, and (v) the Purchaser has no need for the liquidity in its investment in us and could afford the complete loss of such investment. In addition, there was no general solicitation or advertising for securities issued in reliance upon Regulation D.

On February 28, 2014, we issued 10,000,000 shares of our common stock (the “Merger Shares”) to the shareholders of FIN Electronic Cigarette Corporation, Inc. (“FIN”) in connection with our acquisition of FIN.

The Merger Shares were issued in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D. These shares of our common stock qualified for exemption under Section 4(a)(2) since the issuance of the shares by us did not involve a public offering. In addition, the FIN Shareholders and/or the Representative had the necessary investment intent consistent with Section 4(a)(2) since (i) such FIN Shareholder is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (ii) the FIN Shareholders agreed not to sell or otherwise transfer the Merger Shares unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (iii) the FIN Shareholder and/or the Representative has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, (iv) the FIN Shareholder and/or the Representative had access to all of our documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers regarding the terms and conditions of the offering and to obtain any additional information which we possessed or were able to acquire without unreasonable effort and expense, and (v) FIN Shareholders agreed to and received share certificates bearing a standard Securities Act legend. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” In addition, there was no general solicitation or advertising for securities issued in reliance upon Regulation D. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(a)(2)and Rule 506 of Regulation D of the Securities Act for this transaction.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting certificates in such denominations and registered in such names as required by underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) For purposes of determining any liability under the Securities Act, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereonto duly authorized, in the City of Nunica, State of Michigan, on May 13, 2014.

We, the undersigned officers and directors of Victory Electronic Cigarettes Corporation, hereby severally constitute Brent Willis and James P. McCormick, and each of them singly, as true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names, in the capacities indicated below the registration statement filed herewith and any amendments to said registration statement, and generally to do all such things in our name and behalf in our capacities as officers and directors to enable Victory Electronic Cigarettes Corporation to comply with the provisions of the Securities Act of 1933 and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said registration statement and any and all amendments thereto. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.



Title of Each Class Of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)	Amount of Registration Fee
Common stock, $0.001 par value per share	$149,500,000	$19,255.60


	Per Share	Total
Initial price to public	$	$
Underwriting discounts and commissions(1)	$	$
Proceeds before expenses to Victory Electronic Cigarettes Corporation	$	$


	As of December 31, 2013 (unaudited)
	Actual			Pro Forma			Pro Forma As Adjusted
Cash and cash equivalents	$	2,081,963		$	8,522,454

Short-term debt
Revolving line of credit		—			357,026
Convertible promissory note		650,000			37,375,000
Promissory notes		—			26,000,000
Due to related parties		448,166			448,166
Notes payable		—			10,869,899
Long-term debt
Warrant liability		16,600,500			48,157,793

Total Debt		17,698,666			123,207,884
Equity
Common stock: 100,000,000 shares authorized, 53,393,999 shares issued and outstanding, actual; 300,000,000 shares authorized, 74,487,474 shares issued and outstanding, pro forma; 300,000,000 shares authorized, shares issued and outstanding, pro forma as adjusted		53,394			72,290
Additional paid in capital		4,727,138			177,807,800
Accumulated deficit		(21,293,048	)		(50,352,105	)
Total stockholders’ equity		(16,512,516	)		127,527,985

Total capitalization	$	87,984		$	175,685,778


Assumed public offering price per share			$
As adjusted net tangible book value per share as of December 31, 2013 before giving effect to the acquisitions of FIN, Vapestick and VIP and this offering			$
Increase in as adjusted net tangible book value per share attributed to new investors purchasing shares from us in this offering			$
As adjusted net tangible book value per share after giving effect to this offering			$

Dilution in as adjusted net tangible book value per share to new investors in this offering			$


Prospectus Summary			1
Risk Factors			9
Cautionary Note Regarding Forward-Looking Statements			31
Use of Proceeds			32
Dividend Policy			33
Capitalization			34
Dilution			35
Pro Forma Financial Data			37
Management’s Discussion and Analysis of Financial Condition and Results of Operations			43
Market Price Information for Our Shares			55
Business			57
Management			70
Executive Compensation			74
Related Party Transactions			79
Principal Stockholders			81
Description of Capital Stock			83
Shares Eligible for Future Sale			88
Material United States Federal Income and Estate Tax Consequences to Non-U.S. Holders			90
Underwriting			93
Legal Matters			99
Experts			99
Where You Can Find More Information			99
Index to Financial Statements			F-1


	Shares Purchased			Total Consideration				Average Price Per Share
	Number	Percent		Amount		Percent		Average Price Per Share
Existing stockholders			%		$		%		$
New investors

Total			100%		$		100%		$


	Historical										Acquisition Adjustments			Acquisition Related Financing Adjustments			Pro Forma for Acquisitions			Equity Offering Adjustments	Pro Forma Combined
	Victory			Vapestick		FIN			Must Have		Acquisition Adjustments			Acquisition Related Financing Adjustments			Pro Forma for Acquisitions			Equity Offering Adjustments	Pro Forma Combined
ASSETS
Current Assets:
Cash	$	2,081,963		$	187,084	$	28,543		$	12,128,182	$	(36,145,553	)(a)	$	26,275,000	(e)	$	8,522,454
												(2,500,000	)(b)		22,000,000	(g)
															(3,532,765	)(f)
															(12,000,000	)(l)
Accounts receivable, net of allowance		112,921			181,949		2,536,753			1,052,230		—			—			3,883,853
Inventory		340,636			107,866		26,638,883			2,962,290		(7,804,275	)(c)		—			22,245,400
Prepaid inventory		—			254,717		—			—		—			—			254,717
Prepaid and other current assets		42,704			5,252		1,078,825			—		—			—			1,126,781
Other current assets		6,750			—		76,706			—		—			—			83,456

Total current assets	$	2,584,974		$	736,868	$	30,359,710		$	16,142,702	$	(46,449,828	)	$	32,742,235		$	36,116,661
Goodwill		—			—		1,361,714			—		(1,361,714	)(c)		—			—
												158,750,903	(a)		—			158,750,903
Intangible assets												57,873,000	(a)		—			57,873,000
Deferred debt issue costs															3,532,765	(f)		3,532,765
Loan costs, net		—			—		582,053			—		(582,053	)(c)		—			—
Deferred charges		—			—		204,474			—		(204,474	)(c)		—			—
Property and equipment, net		27,376			47,954		2,294,443			270,850		(1,063,669	)(c)		—			1,576,954

Total assets	$	2,612,350		$	784,822	$	34,802,394		$	16,413,552	$	166,962,166		$	36,275,000		$	257,850,283


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses	$	306,200		$	300,002	$	2,553,124		$	5,737,412	$	—		$	—		$	8,896,738
Accounts payable — related parties		—			—		2,100,533			—		(2,100,533	)(c)		—			—
Revolving line of credit, net		—			357,026		—			—		—			—			357,026
Senior convertible note		—			—		—			—		—			24,175,824	(g)		9,116,376
															(2,175,824	)(g)
															(883,624	) (j)
															(12,000,000	)(l)
Convertible promissory notes		650,000			—		—			—		—						650,000
Promissory notes		—			—		—			—		26,000,000	(a)		—			26,000,000
Private placement funds received in advance		1,100,000			—		—			—		—			(1,100,000	)(e)		—
Due to related parties		448,166			—		—			—		—			—			448,166
Other liabilities		20,000			—		—			—		—			24,876,764	(k)		25,780,388
															883,624	(j)
Notes payable		—			—		13,369,899			—		(2,500,000	)(b)		—			10,869,899
Current maturities of long-term debt		—			15,170		—			—		—			—			15,170

Total current liabilities	$	2,524,366		$	672,198	$	18,023,556		$	5,737,412	$	21,399,467		$	33,776,764		$	82,133,763
Long Term Liabilities:
Warrant liability	$	16,600,500		$	—	$	—		$	—	$	—		$	31,557,293	(h)	$	48,157,793
Note payable — related parties		—			—		19,351,468			—		(19,351,468	)(c)		—			—
Long-term debt, less current maturities		—			30,743		—			—		—			—			30,743

Total long-term liabilities	$	16,600,500		$	30,743	$	19,351,468		$	—	$	(19,351,468	)	$	31,557,293		$	48,188,536

Total liabilities	$	19,124,866		$	702,941	$	37,375,024		$	5,737,412	$	2,047,999		$	65,334,057		$	130,322,299

Stockholders' equity (deficit)
Common stock	$	53,394		$	178	$	—		$	660	$	18,896	(a)	$	—		$	72,290
												(838	)(d)
Other comprehensive income		—			5,911		—			—		(5,911	)(d)		—			—
Additional paid-in capital		4,727,138			—		—			16,488		173,080,662	(a)		—			177,824,288
		—			—		—			—		(16,488	)(d)		—			(16,488	)
Retained earnings (accumulated deficit)		(21,293,048	)		75,792		(2,572,630	)		10,658,992		(8,162,154	)(d)		(29,059,057	)(i)		(50,352,105	)

Total stockholders' equity (deficit)	$	(16,512,516	)	$	81,881	$	(2,572,630	)	$	10,676,140	$	164,914,167		$	(29,059,057	)	$	127,527,985

Total liabilities and stockholders' equity (deficit)	$	2,612,350		$	784,822	$	34,802,394		$	16,413,552	$	166,962,166		$	36,275,000		$	257,850,283


	Vapestick Holdings Limited		FIN Branding Group, LLC		Must Have LTD		Total
Cash consideration	$	5,746,965	$	10,000,000	$	20,398,588	$	36,145,553
Promissory notes issued to seller		—		15,000,000		11,000,000		26,000,000
Common stock		48,974,558		108,600,000		15,525,000		173,099,558

		54,721,523		133,600,000		46,923,588		235,245,111
Less: Net assets acquired		81,881		7,863,186		10,676,140		18,621,207
Less: Identifiable intangibles		10,700,000		47,173,000		—		57,873,000

Goodwill	$	43,939,642	$	78,563,814	$	36,247,448	$	158,750,904


	January			February			Total
Proceeds	$	11,325,000		$	16,050,000		$	27,375,000	*
Fair value of warrants		(9,574,364	)		(21,982,929	)	$	(31,557,293	)
Fair value of conversion feature		(5,670,373	)		(19,206,391	)	$	(24,876,764	)
Convertible promissory notes		—			—			—

Fair value amounts in excess of proceeds	$	(3,919,737	)	$	(25,139,320	)	$	(29,059,057	)


Face value of debt	$	24,175,824
Original issue discount		(2,175,824	)

Proceeds	$	22,000,000


	January			February
Fair value of common shares	$	7.99		$	10.95
Term (years)		5.00			5.00
Term-matched risk-free interest rate		1.65	%		1.50	%
Term-matched stock volatility		40	%		40	%
Exercise price	$	5.00		$	5.00


Fair value of common shares	$	7.05
Term (years)		1.00
Term-matched risk-free interest rate		0.11	%
Term-matched stock volatility		40	%
Exercise price	$	9.92


	Historical											Acquisition Adjustments			Acquisition Related Financing Adjustments			Pro Forma Statement of Operations
	Victory			Vapestick		FIN			Must Have(a)			Acquisition Adjustments			Acquisition Related Financing Adjustments			Pro Forma Statement of Operations
Revenues
Sales	$	3,102,729		$	3,609,360	$	41,927,596		$	26,917,187		$	—		$	—		$	75,556,872
Cost of goods sold		1,288,914			1,259,668		22,273,519			9,077,466			—			—			33,899,567

Gross profit		1,813,815			2,349,692		19,654,077			17,839,721			—			—			41,657,305

Operating expenses
Advisory agreement warrants		16,600,500			—		—			—			—			—			16,600,500
Distribution, advertising and marketing		1,078,180			106,505		—			—			—			—			1,184,685
Selling, general and administrative		3,036,873			1,848,012		25,831,286			4,532,236			1,317,733	(b)		—			36,566,140

Total operating costs	$	20,715,553		$	1,954,517	$	25,831,286		$	4,532,236		$	1,317,733		$	—		$	54,351,325

Income (loss) from operations	$	(18,901,738	)	$	395,175	$	(6,177,209	)	$	13,307,485		$	(1,317,733	)	$	—		$	(12,694,020	)
Interest Expense (Income)
Fair value in excess of proceeds		—			—		—			—			—			29,059,057	(e)		29,059,057
Interest expense (income)		1,804,710			17,727		1,594,088			(26,644	)		1,359,184	(c)		34,417,212	(g)		42,699,042
																3,532,765	(f)

Income (loss) before taxes		(20,706,448	)		377,448		(7,771,297	)		13,334,129			(2,676,917	)		(67,009,034	)		(84,452,119	)
Income tax expense		—			78,078		—			4,142,605			(4,220,683	)(d)		—			—

Net income (loss)	$	(20,706,448	)	$	299,370	$	(7,771,297	)	$	9,191,524		$	1,543,766		$	(67,009,034	)	$	(84,452,119	)

Comprehensive income (loss)
Foreign currency measurement		—			13,332		—			—			—			—			13,332

Total comprehensive income (loss)	$	(20,706,448	)	$	312,702	$	(7,771,297	)	$	9,191,524		$	1,543,766		$	(67,009,034	)	$	(84,438,787	)

Net loss per common share:
Basic and diluted	$	(0.48	)															$	(1.37	)

Weighted average numer of shares outstanding
Basic and diluted		42,871,414											18,896,205						61,767,619


	Vapestick Holdings Limited		FIN Branding Group, LLC			Total
Decrease in amortization of loan costs	$	—	$	(300,427	)	$	(300,427	)
Decrease in depreciation expense due to write-off of retail displays		—		(71,840	)		(71,840	)
Amortization of customer relationships over a preliminary estimated useful life of 10 years		290,000		1,400,000			1,690,000

	$	290,000	$	1,027,733		$	1,317,733


Wells Fargo Securities		Canaccord Genuity


	FIN Branding Group, LLC			Must Have LTD		Total
Obligations due to related parties	$	(1,240,816	)	$	—	$	(1,240,816	)
Promissory notes issued to sellers		1,500,000			1,100,000		2,600,000

	$	259,184		$	1,100,000	$	1,359,184


Recurring fair value measurements	December 31, 2013
	Total		Level 1		Level 2		Level 3
Liabilities:
Warrant Liability	$	16,600,500	$	—	$	—	$	16,600,500


	Fiscal 2014				Fiscal 2013
	High		Low		High			Low
First Quarter (January 1 — March 31)	$	19.99	$	9.06		N/A	(1)	N/A(1)
Second Quarter (April 1 — June 30) (through May 12, 2014)	$	12.80	$	7.50	$	0.57	(1)	$0.40(1)
Third Quarter (July 1 — September 30)	$	—	$	—	$	60.00		$0.56
Fourth Quarter (October 1 — December 31)	$	—	$	—	$	27.50		$5.05


Plan Category	Number of Securities to Be Issued upon Exercise of Outstanding Options		Weighted Average Exercise Price of Outstanding Options		Number of Securities Remaining Available for Future Issuance under the Plan(3)
	*(a)*		*(b)*		*(c)*
Equity compensation plans approved by security holders(1)		7,500,000	$	0.25		—
Equity compensation plans not approved by security holders(2)		—		—		2,250,000

Total		7,500,000	$	0.25		2,250,000


Name	Age		Position	Date First Elected or Appointed
Brent David Willis		53	Chief Executive Officer, President, Secretary and Director	June 25, 2013
James P. McCormick		47	Chief Financial Officer and Treasurer	April 30, 2014
Marc Hardgrove		40	Chief Creative Innovation Officer and Director	June 25, 2013
Michael Clapper		43	President — International and Director	January 9, 2014
James P. Geiskopf		53	Director	June 25, 2013
William R. Fields		63	Director	December 30, 2013
Paul Herman		41	Director	January 9, 2014


Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Brent D. Willis(1)		2013		92,308		—		—		150,000		—		—		—		242,308
Chief Executive Officer,
President and Secretary

Robert Hartford(2)		2013		46,154		—		—		50,000		—		—		—		96,154
Chief Financial Officer and Treasurer

Marc Hardgrove(3)		2013		69,231		—		—		—		—		—		—		69,231
Chief Creative Innovation Officer

Nathan Woods(4)		2013		—		—		—		—		—		—		—		—
Former Chief Executive Officer and President		2012		—		—		—		—		—		—		—		—


	Option Awards												Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units Or Other Rights That Have Not Vested ($)
Brent D. Willis		1,500,000	(1)		1,500,000	(2)		—	$	0.25		6/25/18		—		—	$	—	$	—
Robert Hartford		500,000	(3)		500,000	(2)		—	$	0.25		7/9/18		—		—	$	—	$	—
Marc Hardgrove		—			—			—		—		—		—		—	$	—	$	—
Nathan Woods		—			—			—		—		—		—		—	$	—	$	—


	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
James P. Geiskopf(1)		25,000		—		25,000		—		—		—		50,000
William R. Fields(2)		—		—		—		—		—		235,000		235,000


Name and address of beneficial owner	Amount and Nature of Beneficial Ownership			Percent of class of common stock(1)
5% Shareholders:
Paul Simon		3,900,000			5.2	%

Directors and Officers:
Brent David Willis Chief Executive Officer, President, Secretary and Director		6,265,000	(2)		8.2	%
James P. McCormick Chief Financial Officer and Treasurer		—			—
Marc Hardgrove Chief Creative Innovation Officer and Director		17,550,000			23.6	%
Michael Clapper President — International and Director		2,693,048			3.6	%
James P. Geiskopf Director		800,000	(3)		1.1
William R. Fields Director		3,371,689	(4)		4.3	%
Paul Herman Director		329,795	(5)		*
Directors and Officers as a group (7 persons)		31,009,532			38.8	%


Number of Warrants		Exercise Price		Expiration Date
	200,000	$	0.25	January 31, 2018
	11,993,512	$	5.00	December 27, 2018
	181,000	$	5.00	December 30, 2018
	1,620,000	$	5.00	January 7, 2019
	345,000	$	5.00	January 14, 2019
	300,000	$	5.00	January 31, 2019
	3,593,250	$	5.00	February 28, 2019
	769,232	$	6.50	February 28, 2019
	118,353	$	6.50	April 22, 2019
	120,768	$	6.50	April 30, 2019


Number of Options		Exercise Price		Vesting Date	Expiration Date
	2,300,000	$	0.25	Vested	June 25, 2018
	2,000,000	$	0.25	Vested	July 10, 2018
	200,000	$	9.05	Vested	December 27, 2018
	12,500	$	9.05	June 30, 2014	December 27, 2018
	12,500	$	9.05	December 31, 2014	December 27, 2018
	1,500,000	$	0.25	December 31, 2014	June 25, 2018
	500,000	$	0.25	December 31, 2014	July 9, 2018
	500,000	$	0.25	December 31, 2015	June 25, 2018


Current Principal Amount Outstanding		Interest Rate			Conversion Price		Shares Convertible Into		Maturity Date
$	8,100,000		15	%	$	5.00		1,620,000	January 7, 2015
$	1,725,000		15	%	$	5.00		345,000	January 14, 2015
$	1,500,000		15	%	$	5.00		300,000	January 31, 2015
$	16,050,000		15	%	$	5.00		3,210,000	February 28, 2015
$	24,175,824		6	%	$	6.50		3,719,358	April 22, 2015


Underwriter		Number of Shares
Wells Fargo Securities, LLC
Canaccord Genuity, Inc.
Total


Consolidated Financial Statements for the years ended December 31, 2013 and 2012 — Victory Electonic Cigarettes Corporation			F-2

Consolidated Financial Statements for the years ended December 31, 2013 and 2012 — Vapestick Holdings Limited			F-27

Financial Statements for the years ended December 31, 2013 and 2012 — FIN Branding Group, LLC			F-38

Financial Statements for the years ended June 30, 2013 and 2012 — Must Have Ltd.			F-56

Financial Statements (unaudited) for the period ended December 31, 2013 — Must Have Ltd.			F-72


Report of Independent Registered Public Accounting Firm — 2013			F–3

Report of Independent Registered Public Accounting Firm — 2012			F–4

Consolidated Balance Sheets as of December 31, 2013 and 2012			F–5

Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2013 and 2012			F–6

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013 and 2012			F–7

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012			F–8

Notes to Consolidated Financial Statements			F–9


	December 31, 2013 (as restated)			December 31, 2012
Assets
Current assets:
Cash	$	2,081,963		$	17,438
Accounts receivable		112,921			157,295
Inventory		340,636			287,373
Prepaid expenses		42,704			150,671
Other current assets		6,750			—

Total current assets		2,584,974			612,777
Furniture and equipment, net		27,376			—

Total assets	$	2,612,350		$	612,777

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable and accrued expenses	$	306,200		$	37,853
Deferred revenue		—			17,699
Revolving credit line		—			20,641
Convertible promissory notes		650,000			—
Private placement funds received in advance		1,100,000			—
Due to related parties		448,166			703,870
Deferred compensation		—			350,003
Other liabilities		20,000			—

Total current liabilities		2,524,366			1,130,066
Warrant liability		16,600,500			—

Total liabilities	$	19,124,866		$	1,130,066

Stockholders’ deficit
Common stock, $.001 par value; 100,000,000 shares authorized, 53,394,000 and 32,500,000 shares issued and outstanding at December 31, 2013 and 2012, respectively	$	53,394		$	32,500
Additional paid-in capital		4,727,138			36,811
Accumulated deficit		(21,293,048	)		(586,600	)

Total stockholders’ deficit	$	(16,512,516	)	$	(517,289	)

Total liabilities and stockholders’ deficit	$	2,612,350		$	612,777


	Years Ended December 31,
	2013 (as restated)			2012
Revenues
Internet sales	$	1,758,762		$	855,758
Retail and wholesale revenues		1,343,967			614,446

Total revenues		3,102,729			1,470,204

Cost of goods sold		1,288,914			526,300

Gross profit		1,813,815			943,904

Operating expenses
Advisory agreement warrants	$	16,600,500		$	—
Distribution, marketing and advertising		1,078,180			323,167
Selling, general and administrative		3,036,873			1,068,767

Total operating expenses		20,715,553			1,391,934

Loss from operations	$	(18,901,738	)	$	(448,030	)

Other expense
Interest expense		(1,804,710	)		(30,140	)

Loss before income taxes		(20,706,448	)		(478,170	)

Income tax provision		—			—

Net loss		(20,706,448	)		(478,170	)

Other comprehensive income (loss)		—			—
Comprehensive loss	$	(20,706,448	)	$	(478,170	)

Net loss per common share:
Basic	$	(0.48	)	$	(0.01	)

Diluted	$	(0.48	)	$	(0.01	)

Weighted average number of shares outstanding
Basic		42,871,414			32,500,000

Diluted		42,871,414			32,500,000


	Common stock						Additional paid-in capital			Accumulated deficit			Total stockholders’ deficit
	Shares			Amount			Additional paid-in capital			Accumulated deficit			Total stockholders’ deficit
Balance at December 31, 2011		32,500,000		$	32,500		$	36,811		$	(108,430	)	$	(39,119	)
Net loss		—			—			—			(478,170	)		(478,170	)
Balance at December 31, 2012		32,500,000			32,500			36,811			(586,600	)		(517,289	)

Sale of common shares, net of issuance costs		10,000,000			10,000			2,199,600			—			2,209,600
Issuance of common shares in reverse merger		10,844,000			10,844			(10,844	)		—			—
Debt assumed as part of reverse merger		—			—			(210,000	)		—			(210,000	)
Retirement of shares returned from shareholder		(1,600,000	)		(1,600	)		1,600			—			—
Issuance of common shares		1,650,000			1,650			823,350			—			825,000
Stock based compensation		—			—			235,000			—			235,000
Net loss		—			—			—			(9,427,558	)		(9,427,558	)

Balance at December 31, 2013, as previously filed		53,394,000		$	53,394		$	3,075,517		$	(10,014,158	)	$	(6,885,247	)

Issuance of common shares		—			—			1,451,621			—			1,451,621
Stock based compensation		—			—			200,000			—			200,000
Net loss		—			—			—			(11,278,890	)		(11,278,890	)

Balance at December 31, 2013, as restated		53,394,000		$	53,394		$	4,727,138		$	(21,293,048	)	$	(16,512,516	)


	Year Ended December 31,
	2013 (as restated)			2012
Cash flows from operating activities:
Net loss	$	(20,706,448	)	$	(478,170	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation expense		2,009			—
Stock based compensation		435,000			—
Amortization of debt discount		1,451,621			—
Amortization of deferred financing costs		210,020			—
Warrant liability		16,600,500			—
Changes in operating assets and liabilities:
Accounts receivable		44,374			(156,977	)
Inventory		(53,263	)		(241,177	)
Prepaid expenses		107,967			(119,588	)
Other current assets		(6,750	)		—
Accounts payable and accrued expenses		258,347			37,695
Other liabilities		20,000			—
Deferred revenue		(17,699	)		17,699
Deferred compensation		(350,003	)		350,003

Net cash (used in) operating activities		(2,004,325	)		(590,515	)

Cash flows from investing activities:
Purchases of property and equipment		(29,385	)		—

Net cash (used in) investing activities		(29,385	)		—

Cash flows from financing activities:
Due to related parties		(255,704	)		580,953
Sale of common stock related private placement		2,209,600			—
Sale of common stock related to convertible debentures		2,276,621			—
Payment of debt issuance costs		(210,020	)		—
Revolving line of credit		(20,641	)		20,641
Convertible debentures		198,379			—
Private placement funds received in advance		1,100,000			—
Repayment of convertible debentures		(1,200,000	)		—

Net cash provided by financing activities		4,098,235			601,594

Net change in cash		2,064,525			11,079
Cash beginning of the period		17,438			6,359

Cash at end of the period	$	2,081,963		$	17,438

Supplementary Cash Flow Information
Cash paid for interest	$	368,028		$	23

Non-cash financing transactions
Stock issued in reverse merger	$	10,844		$	—

Convertible debenture assumed as part of reverse merger	$	210,000		$	—

Retirement of shares returned from shareholder	$	1,600		$	—


	Year Ended December 31, 2013
	As Previously Reported			Adjustments			As Restated
Advisory agreement warrants	$	6,973,231		$	9,627,269		$	16,600,500
Selling, general and administrative		2,836,873			200,000			3,036,873
Interest expense		353,089			1,451,621			1,804,710
Net loss		(9,427,558	)		(11,278,890	)		(20,706,448	)