Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 31, 2015 | Feb. 19, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | CEREBAIN BIOTECH CORP. | |
Entity Central Index Key | 1,453,099 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,960,347 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2015 | Jun. 30, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 7,642 | $ 486 |
Prepaid expenses | 57,259 | 157,102 |
Deferred Financing Costs | 29,063 | 28,125 |
Total current assets | 93,964 | 185,713 |
Long-term assets: | ||
Patent rights | 83,900 | 183,900 |
Total assets | 177,864 | 369,613 |
Current liabilities: | ||
Accounts payable | 490,113 | 399,486 |
Related party payables | 590,500 | 530,459 |
Convertible note to stockholders, current portion, net of debt discount of $0 and $66,969, respectively | 77,500 | 210,531 |
Notes payable to stockholders | 120,000 | 18,000 |
Related party notes payable | 113,000 | 113,000 |
Total current liabilities | 1,391,113 | 1,271,476 |
Long term liabilities: | ||
Convertible note to stockholders, net of debt discount of approximately $169,000 and $0, respectively | 1,573,446 | 1,475,000 |
Total liabilities | $ 2,964,559 | $ 2,746,476 |
Commitments and contingencies (Note 4) | ||
Stockholders' deficit | ||
Preferred stock ($0.001 par value: 1,000,000 shares authorized; none issued and outstanding) | ||
Common stock ($0.001 par value: 249,000,000 shares authorized; 5,960,347 and 4,835,347 shares issued and outstanding at December 31 and June 30, 2015, respectively) | $ 5,960 | $ 4,835 |
Additional paid in capital | 7,375,022 | 6,712,747 |
Accumulated deficit | (10,167,677) | (9,094,445) |
Total stockholders' deficit | (2,786,695) | (2,376,863) |
Total liabilities and stockholders' deficit | $ 177,864 | $ 369,613 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2015 | Jun. 30, 2015 |
Long term liabilities: | ||
Net of debt discount, current portion | $ 0 | $ 66,969 |
Net of debt discount Non current | $ 169,000 | $ 0 |
Stockholders' deficit | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, authorized shares | 1,000,000 | 1,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, Authorized shares | 249,000,000 | 249,000,000 |
Common stock, Issued shares | 5,960,347 | 4,835,347 |
Common stock, outstanding shares | 5,960,347 | 4,835,347 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Operating Expenses | ||||
Selling, general and administrative expenses | $ 406,372 | $ 428,426 | $ 726,445 | $ 772,643 |
Research and development costs | $ 121,875 | $ 243,750 | ||
Patent Royalty Expense | $ 12,500 | $ 125,000 | ||
Marketing expenses | 815 | $ 39,351 | 36,040 | $ 100,237 |
Total operating expenses | 419,687 | 589,652 | 887,485 | 1,116,630 |
Other (income) expense | ||||
Accretion of debt discount | 14,105 | $ 37,329 | 28,165 | $ 96,186 |
Loss from extinguishment of debt | 48,750 | 48,750 | ||
Financing costs | 20,983 | $ 16,875 | 37,813 | $ 33,750 |
Interest expense | 35,822 | 32,665 | 71,019 | 63,385 |
Total other (income) expense | 98,698 | 86,869 | 185,747 | 193,321 |
Net operating loss | (518,385) | (676,521) | (1,073,232) | (1,309,951) |
Loss before income taxes | $ (518,385) | $ (676,521) | $ (1,073,232) | $ (1,309,951) |
Income taxes | ||||
Net loss | $ (518,385) | $ (676,521) | $ (1,073,232) | $ (1,309,951) |
Loss per share: | ||||
Basic and diluted loss per share | $ (0.09) | $ (0.15) | $ (0.20) | $ (0.30) |
Basic and diluted weighted average shares outstanding | 5,567,141 | 4,396,405 | 5,236,570 | 4,310,542 |
UNAUDITED CONDENSED CONSOLIDAT5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flows from operating activities: | ||
Net loss | $ (1,073,232) | $ (1,309,951) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Accretion of debt discount | 28,165 | $ 96,186 |
Loss from extinguishment of debt | 48,750 | |
Stock based compensation related to stock options | 136,650 | $ 156,750 |
Amortization of prepaid consulting compensation | 134,072 | 475,904 |
Amortization of deferred financing costs | 37,812 | $ 33,750 |
Correction of an error | 100,000 | |
Changes in operating assets and liabilities: | ||
Prepaid expenses | 49,771 | $ (12,281) |
Accounts payable | 160,627 | 86,552 |
Related party payables | 215,041 | 101,743 |
Net cash used in operating activities | $ (162,344) | (371,347) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock and warrants, net of offering costs | 135,300 | |
Notes payable to stockholders | $ 169,500 | 250,000 |
Net cash flows provided by financing activities: | 169,500 | 385,300 |
Net change in cash and cash equivalents | 7,156 | 13,953 |
Cash and cash equivalents- beginning of period | 486 | 1,688 |
Cash and cash equivalents- end of period | $ 7,642 | $ 15,641 |
Cash paid during the period for: | ||
Interest | ||
Income tax | ||
Supplemental disclosure on non-cash investing and financing activities: | ||
Beneficial conversion feature on convertible note | $ 179,000 | $ 119,928 |
Stock issued for prepaid services | 84,000 | $ 122,300 |
Stock issued for Financing Fee | $ 38,750 | |
Options issued for prepaid services | $ 83,450 | |
Stock issued for satisfaction of accounts payable | $ 70,000 | |
Stock issued for satisfaction of related party payables | $ 155,000 | $ 40,000 |
Conversion convertible notes payable and interest into stock | 25,781 | |
Conversion of related party notes payable and interest into stock | $ 32,653 | |
Reclassification of debt from shareholders to convertible debt | $ 10,000 |
ORGANIZATION AND PRINCIPAL ACTI
ORGANIZATION AND PRINCIPAL ACTIVITIES | 6 Months Ended |
Dec. 31, 2015 | |
Organization And Principal Activities | |
Note 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES | Description of Business Cerebain Biotech Corp. (Formerly Discount Dental Materials, Inc.) ("Cerebain Biotech"), was incorporated on December 18, 2007 under the laws of Nevada. The Company is a smaller reporting biomedical company and through its wholly owned subsidiary, Cerebain Operating, Inc. (Formerly Cerebain Biotech Corp.), the Company's business revolves around the discovery of products for the treatment of Alzheimer's disease utilizing Omentum. The Company plans to produce products that will include both a medical device solution as well as a synthetic drug solution. Cerebain Operating, Inc. was incorporated on February 22, 2010, in the State of Nevada. The accompanying (a) condensed balance sheet at June 30, 2015 has been derived from audited statements and (b) unaudited interim condensed financial statement as of December 31, 2015 and for the three and six months ended December 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended June 30, 2015 included on Form 10-K filed with the Securities and Exchange Commission on September 22, 2015. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Dec. 31, 2015 | |
Basis Of Presentation | |
Note 2 - BASIS OF PRESENTATION | The Company operates in one segment in accordance with accounting guidance Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 280, Segment Reporting Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of approximately $10,170,000 and $9,100,000 at December 31 and June 30, 2015, respectively, and had a net loss of approximately $1,100,000 and $1,300,000 for the six months ended December 31, 2015 and 2014, respectively, and net cash used in operating activities of approximately $160,000 and $370,000 for the six months ended December 31, 2015 and 2014, respectively, with no revenue earned since inception. These matters raise substantial doubt about our ability to continue as a going concern. While the Company is in the process of developing its medical device solution and its synthetic drug solution for the treatment of dementia, the Company's cash position may not be significant enough to support the Company's daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies | |
Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements. Use of Estimates The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: useful lives and residual values of long-lived assets, the valuation of equity instruments and the valuation of warrants and options. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Cerebain Biotech Corp. and its wholly-owned subsidiary, Cerebain Operating, Inc. (collectively referred to as the "Company"). There are no material intercompany transactions. Reclassifications Certain reclassifications have been made to prior fiscal year amounts or balances to conform to the presentation adopted in the current fiscal year, which did not have any impact to consolidated net income or stockholder's equity amounts previously reported. Advertising Costs Advertising costs are recorded as general and administrative expenses when they are incurred. Advertising costs charged to operations were approximately $36,000 and $100,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $800 and $39,000 for the three months ended December 31, 2015 and 2014, respectively, and are included in marketing costs in the accompanying consolidated statements of operations. Research and Development The Company expenses the cost of research and development as incurred. Research and development costs charged to operations were approximately $0 and $244,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $0 and $122,000 for the three months ended December 31, 2015 and 2014, respectively, and are included in research and development costs in the accompanying consolidated statements of operations. Deferred Financing Costs Deferred financing costs represent costs incurred in connection with obtaining the debt financing. These costs are amortized ratably and charged to interest expense over the term of the related debt. In connection with two of the debt issuances as discussed in Note 6, the Company issued 175,000 shares of the Company's common stock. The Company recorded the approximate $174,000 value of the shares issued as a deferred financing cost and will amortize the expense associated with these issuances over the life of each note. Concentrations, Risks, and Uncertainties The Company is a startup company subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. Recent Accounting Pronouncements The Company has evaluated new accounting pronouncements that have been issued and are not yet effective for the Company and determined that there are no such pronouncements expected to have an impact on the Company's future financial statements. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Dec. 31, 2015 | |
Commitments And Contingencies | |
Note 4 - COMMITMENTS AND CONTINGENCIES | Employment Agreements Eric Clemons On June 15, 2013, the Company entered into an employment agreement with Eric Clemons. Terms of the agreement included the following: · An annual salary of One Hundred Fifty-Six Thousand Dollars ($156,000), which has been paid in full. · Bonus of $40,000 upon the delivery to the company of a prototype medical device from Sonos Models Inc., which has been paid in full. · Cash bonus should he be responsible for the Company consolidating with or merge into another corporation or convey all or substantially all of its assets to another corporation, will receive a cash bonus calculated using a Lehman formula of 5% for the first $1,000,000, 4% for the second $1,000,000, 3% for the third $1,000,000, 2% for the fourth $1,000,000, and 1% thereafter. To date, this incentive has not earned or been paid. · Option to acquire up to 100,000 Shares of our Common Stock at an exercise price of $5.00 per share subject to a vesting schedule. Fair Market Value of these options totaled approximately $822,000, and is recognized ratably over the vesting period in selling, general and administrative expense. The options were valued using the Black-Scholes value option pricing model with the following inputs: volatility of 100%; risk-free interest rate of 1.04%; expected term of 5 years; and 0% dividend yield. As of December 31, 2015, 60,000 options to purchase the Company's common stock have vested. The Company recognized selling, general and administrative expense of approximately $84,000 for six months ended December 31, 2015 and 2014, respectively, and approximately $42,000 for three months ended December 31, 2015 and 2014, respectively. The compensation expected to be recognized in selling, general and administrative expense in future years is approximately $247,000. On October 1, 2014, the Company entered into an addendum to the employment agreement. The addendum had no accounting impact on the prior agreement. Terms of the addendum include included the following: · Extension of employment until June 15, 2017. · Annual salary of One Hundred Ninety Five Thousand Dollars ($195,000). · Option to acquire up to 100,000 Shares of our Common Stock under the Company's 2014 Omnibus Stock Grant and Option Plan at an exercise price of $1.20 per share subject to a vesting schedule. Fair Market Value of these options totaled approximately $90,000, and is recognized ratably over the vesting period in selling, general and administrative expense. The options were valued using the Black-Scholes value option pricing model with the following inputs: volatility of 100%; risk-free interest rate of 1.69%; expected term of 5 years; and 0% dividend yield. As of December 31, 2015, 40,000 options to purchase the Company's common stock have vested. The Company recognized selling, general and administrative expense of approximately $9,000 and $22,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $4,500 and $22,000 for the three months ended December 31, 2015 and 2014, respectively.. The compensation expected to be recognized in selling, general and administrative expense in future years is approximately $49,000. On March 1, 2015, the Company entered into an addendum to the employment agreement. The addendum had no accounting impact on the prior agreements. Terms of the addendum included a cash placement bonus equal to an amount up to 10% of the aggregate purchase price paid by each purchaser of the Company's Securities, where the purchaser of said Securities has been directly introduced to the Company by Mr. Clemons. From January through March 2015, $31,250 was earned and paid, which was recognized as a reduction of the proceeds from the sale of shares of common stock. To date, no employee or employer payroll taxes have been withheld, remitted to taxing authorities, or recognized by the Company for cash compensation paid. As a result, the Company could be liable such payroll taxes and any related penalties and interest. Wesley Tate On June 15, 2013, the Company entered into an employment agreement with Wesley Tate. Terms of the agreement included the following: · Annual salary of One Hundred Five Thousand Dollars ($105,000), which has been paid in full. · Bonus of $20,000 upon the delivery to the company of a prototype medical device form Sonos Models, Inc., which has been paid in full. · Option to acquire up to 50,000 Shares of our Common Stock at an exercise price of $5.00 per share subject to a vesting schedule. Fair Market Value of these options totaled approximately $411,000, and is recognized ratably over the vesting period in selling, general and administrative expense. The options were valued using the Black-Scholes value option pricing model with the following inputs: volatility of 100%; risk-free interest rate of 1.04%; expected term of 5 years; and 0% dividend yield. As of December 31, 2015, 30,000 options to purchase the Company's common stock have vested. The Company recognized selling, general and administrative expense of approximately $42,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $21,000 for the three months ended December 31, 2015 and 2014, respectively.. The compensation expected to be recognized in selling, general and administrative expense in future years is approximately $123,000. On April 1, 2014, the Company entered into an addendum to this agreement. The addendum had no accounting impact on the prior agreement. Terms of the addendum included 25,000 of the company's common restricted shares representing a retention bonus as an incentive for him to remain in the employment of the Company for the next 12 months. The company recognized a prepaid expense of approximately $37,500, which has been fully amortized to selling, general and administrative. The Company recognized selling, general and administrative expense of approximately $0 and $19,000 for the six months ended December 31, 2015 and 2014, respectively, and $0 and $9,500 for the three months ended December 31, 2015 and 2014, respectively. On October 1, 2014, the Company entered into an addendum to the employment agreement. The addendum had no accounting impact on the prior agreements. Terms of the agreement included the following: · Extension of employment until June 15, 2017. · Annual salary of One Hundred Fifty Six Thousand Dollars ($156,000) · Option to acquire up to 50,000 Shares of our Common Stock under the Company's 2014 Omnibus Stock Grant and Option Plan at an exercise price of $1.20 per share subject to a vesting schedule. Fair Market Value of these options totaled approximately $90,000, and is recognized ratably over the vesting period in selling, general and administrative expense. The options were valued using the Black-Scholes value option pricing model with the following inputs: volatility of 100%; risk-free interest rate of 1.69%; expected term of 5 years; and 0% dividend yield. As of December 31, 2015, 20,000 options to purchase the Company's common stock have vested. The Company recognized selling, general and administrative expense of approximately $4,600 and $11,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $2,300 and $11,000 for the three months ended December 31, 2015 and 2014, respectively. The compensation expected to be recognized in future years is approximately $25,000. On October 1, 2015, the Company entered into a new employment agreement. The new contract had no accounting impact on the prior agreements. Terms of the agreement included the following: · Extension of employment until October 2018. · Annual salary of One Hundred Fifty Six Thousand Dollars ($156,000) · Stock grant of 150,000 of the Company's common restricted shares for services provided to the company. The Company recognized selling, general and administrative expense of approximately $40,000 and $0 for the three and six months ended December 31, 2015 and 2014, respectively. To date, no employee or employer payroll taxes have been withheld, remitted to taxing authorities, or recognized by the Company for cash compensation paid. As a result, the Company could be liable such payroll taxes and any related penalties and interest. Commitments In September 2012, the Company entered into an agreement with Sonos Models, Inc. ("Sonos") to build up to three medical device prototypes to be used for testing. In April 2014, the Company entered into an addendum to the agreement with Sonos, which included a commitment by the Company to pay Sonos up to One Million Dollars ($1,000,000) cash, excluding stock based compensation, for research and development costs. These costs will be recognized in research and development expense as costs are incurred. To date, Sonos has been issued 325,000 restricted shares of the company's stock, 20,000 warrants to purchase the company's stock and paid approximately $180,000, of which $25,000 has been incurred towards the Company's monetary commitment. Consulting Agreements Between December 2013 and December 2015, the Company entered into service and consulting agreements with various individuals to provide assistance to the Company in several areas including the marketing of its biomedical products upon the availability of the device, capital markets and marketing strategies, advertising services and assistance in the introduction of the Company to medical device testing organization and to facilitate access to doctors in numerous countries, including Poland, Uzbekistan and China. They were compensated an approximate aggregate 778,500 shares of the Company's fully vested and non-forfeitable common stock and cash payments of $198,000 and $185,000 for the fiscal years ended 2015 and 2014, respectively. These contracts are for twelve months to 24 months and may be renewed or extended for any period as may be agreed by the parties. As of December 31, 2015 the Company has extended some of the contracts for additional periods. Any of the parties may terminate their respective agreement by providing thirty (30) days written notice of such termination. The Company has recognized $30,000 in accounts payable which is in arrears with one contractual obligation and is in discussions with the consultant to renegotiate the terms of the contract. As these contracts are for a period of up to twelve months to twenty four months, the Company recorded approximately $1,900,000 as the value of the shares issued to prepaid expense and is amortizing the expense associated with these issuances over a twelve to twenty four month period. For the six months ended December 31, 2015 and 2014, the Company recognized an expense of approximately $94,000 and $199,000, respectively, and approximately $41,000 and $96,000 for the three months ended December 31, 2015 and 2014, respectively. The unamortized portions of these contracts are approximately $52,000 and included in prepaid expenses on the balance sheet at December 31, 2015. In December 2014, the Company entered into consulting agreements with two individuals to provide business consulting services for a period of twelve months. Compensation was fully vested and non-forfeitable options to acquire up to 100,000 shares of our common stock, at an exercise price of $1.30 per share. Fair Market Value of these options totaled approximately $83,000, and is to be recognized ratably over the service period in selling, general and administrative expense. The options were valued using the Black-Scholes value option pricing model with the following inputs: volatility of 100%; risk-free interest rate of 0.49%; expected term of 2 years; and 0% dividend yield. For the six months ended December 31, 2015 and 2014, the Company recognized in selling, general and administrative expense approximately $35,000 and $7,000, respectively, and approximately $14,000 and $7,000 for the three months ended December 31, 2015 and 2014, respectively. The unamortized portions of these contracts were approximately $0 at December 31, 2015. In March 2015, the Company has entered into a consulting agreement with an individual to provide marketing and social media strategy services for a period of twelve months. Compensation was an engagement fee of $30,000 and monthly consulting fee of $3,500. The Company recognized the $30,000 as a prepaid expense to be amortized to marketing expense over the service period. For the six months ended December 31, 2015 and 2014, the Company recognized marketing expense of approximately $15,000 and $0, respectively, and approximately $7,500 and $0 for the three months ended December 31, 2015 and 2014, respectively. The unamortized portion of this contract is approximately $5,000 and included in prepaid expenses on the balance sheet at December 31, 2015. As of December 31, 2015, future maturities of prepaid expenses on value of shares issued for consulting are as follows: Fiscal year ending June 30, 2016 $ 37,259 2017 20,000 Total $ 57,259 Legal The Company is not involved in any legal matters arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows. |
PATENT RIGHTS
PATENT RIGHTS | 6 Months Ended |
Dec. 31, 2015 | |
Patent Rights | |
Note 5 - PATENT RIGHTS | On June 10, 2010, the Company entered into a Patent License Agreement under which the Company acquired the exclusive rights to certain intellectual property related to using Omentum for treating dementia conditions. Under the agreement the Company has paid rights fees of $50,000 to Dr. Saini, and the Company issued Dr. Saini 825,000 shares of our common stock, valued at $6,600 (based on the fair market value on the date of grant) restricted in accordance with Rule 144. In addition, Dr. Saini will have the option to participate in the sale of equity by the Company in the future, up to ten percent (10%) of the money raised, in exchange for the applicable number of his shares. To date, Dr. Saini has not participated in any sales of equity. In addition, the Patent License agreement provides for a royalty payment of six (6) percent of the value of the net sales, as defined, generated from the sale of licensed products. The agreement also provides for yearly minimum royalty payments of $50,000 for the fourth (June 2014), fifth (June 2015), and sixth (June 2016) anniversary of the date of the agreement, and a yearly minimum royalty payment of $100,000 for each year thereafter during the term of the agreement. The Company has accrued the minimum patent royalty expense associated with the patent rights in accounts payable and is currently in arrears and in discussions to renegotiate the terms of the agreement. The term of the agreement shall continue until the patent in the intellectual property expires, unless terminated sooner under the provisions of the agreement, as defined. The patent will have an estimated useful life of 20 years based on the term of the patent. Amortization of the patent will begin when the patent is issued by the United States Patent and Trademark Office and put in use. Legal fees pertaining to the patent are recorded as general and administrative expenses when they are incurred. Legal fees charged to operations were approximately $0 and $2,800 for the six months ended December 31, 2015 and 2014, respectively and approximately $0 and $800 for the three months ended December 31, 2015 and 2014, respectively. The Company recognized a patent royalty expense of approximately $25,000 and an additional $100,000 for the correction of error for the six months ended December 31, 2015 compared to $0 for the six months ended December 31, 2014 and patent royalty expense of approximately $12,500 and $0 for the three months ended December 31, 2015 and 2014, respectively. The accrued payable of $125,000 pertaining to the patent royalty expense at December 31, 2015 is included in related party payables. In connection with the Patent Licensing Agreement, the Company incurred $50,000 royalty fees in fiscal year 2014 and 2015, which were capitalized to patent rights on the balance sheet. After further analysis, the Company determined that the royalty fees should have been expensed to selling, general and administrative expenses. The effect of the correction of the error can be seen in Note 12. |
NOTES PAYABLE TO RELATED PARTIE
NOTES PAYABLE TO RELATED PARTIES STOCKHOLDERS | 6 Months Ended |
Dec. 31, 2015 | |
Notes Payable To Stockholders | |
Note 6 - NOTES PAYABLE TO RELATED PARTIES STOCKHOLDERS | Short Term Note Payable Notes Payable to Stockholders In May and June, 2015, the Company entered into an unsecured promissory note totaling $8,000 with a stockholder. The terms of the note have not been negotiated. In December 2015, the Company entered into an unsecured $112,000 consolidated promissory note with a stockholder. The note matures on March 31, 2016 and accrues no interest. In addition, the Company issued to a holder 125,000 shares of the Company's common stock. The Company recorded the approximate $39,000 value of the shares issued as a deferred financing cost and will amortize the expense associated with this issuance over a four month period. The Company used a recent sale of stock to determine the fair market value of the transaction. For the three and six months ended December 31, 2015 and 2014, the company recognized interest expense of approximately $9,700 and $0, respectively, associated with these issuances. The unamortized portion of this issuance is approximately $29,000 and included in deferred financing costs on the balance sheet at December 31, 2015. Related Party Notes Payable In January 2013, the Company converted $356,700 of related party payables owed under consulting agreements, into related party notes payable. The notes were scheduled to mature on December 31, 2013 and accrued interest at seven and one-half (7.5) percent per annum at maturity. However, on December 30, 2013, the Company converted $219,700 of related party notes payable to common stock. As of December 31, 2015, the outstanding balance of the related party notes payable is $113,000. The Company is currently in default and is in discussions with the noteholder to restructure the terms of the note. Long Term Note Payable Convertible Note Payable Between September 2013 and June 2015, the Company entered into various unsecured convertible promissory notes with non-affiliate stockholders for principal amounts between $15,000 to $1,475,000, and totaling $1,820,000. Under the terms of these notes, they mature between June 2015 and October 2018, accrue interest at 7.5% to 8.0% per annum, and are convertible into shares of our common stock at a conversion rates of between $0.20 and $5.00 per share, but only if such conversion would not cause the Noteholders to own more than 9.9% of our outstanding common stock, and contains piggyback registration rights. In addition, the company granted to one noteholder a cashless option to purchase one (1) share of the Company's common stock, $.001 par value, at the exercise price of $0.50 per share, for each share the holder is entitled to pursuant to the promissory note. The options are fully vested and shall expire in three (3) years. In December 2015, the company reduced the conversion rate of one of the convertible notes to $0.75. In December 2014, the company converted $25,000 of convertible notes payable and accrued interest of $781 and issued 12,891 shares of restricted stock. In addition, the Company issued to a holder 50,000 shares of the Company's common stock. The Company recorded the $135,000 value of the shares issued as a deferred financing cost and will amortize the expense associated with this issuance over a twenty-four month period. The Company used a recent sale of stock to determine the fair market value of the transaction. For the six months ended December 31, 2015 and 2014, the company recognized interest expense of approximately $28,000 and $34,000, respectively, and $11,000 and $17,000 for the three months ended December 31, 2015 and 2014, respectively, associated with these issuances. The unamortized portion of this issuance is approximately $0 at December 31, 2015. For the period ended December 31, 2015, the Company is in default approximately $38,000 on some of the notes and is in discussions with the noteholders to restructure the terms of the notes. To properly account for certain Convertible Promissory Notes, the Company performed a detailed analysis to obtain a thorough understanding of the transactions, including understanding the terms of each instrument issued, and any related derivatives entered into. The Company first reviewed ASC Topic 815, to identify whether any equity-linked features in the Notes are freestanding or embedded. The Company determined that there were no free standing features. The Notes were then analyzed in accordance with Topic 815 to determine if the Note should be accounted for at fair value and remeasured at fair value in income. The Company determined that the Notes did not meet the requirements of Topic 815. The Company then reviewed ASC Topic 470-20, and determined that the Notes met the criteria of a conventional convertible note and that the certain Notes had a beneficial conversion feature, which was recorded as a debt discount against the face amount of the Note. Certain Convertible Promissory Notes were issued as Amended and Consolidated Convertible Notes. These Amended and Consolidated Notes were reviewed using the aforementioned analysis and the new debt discount was recorded against the face amount of the new note with an increase or decrease to additional paid in capital. The company also reviewed ASC Topic 470-50-40, Debt Modifications and Extinguishments, as it related to an Amended and Consolidated Note. ASC 470 requires modification to debt instruments to be evaluated to assess whether the modifications are considered "substantial modifications". A substantial modification of terms shall be accounted for like an extinguishment. The company noted the change in terms per the note met the criteria for substantial modification under ASC 470 and accordingly treated the modification as extinguishment. The company recognized the remaining Debt Discount of approximately $50,000 as a loss from debt extinguishment for the three and six month periods ended December 31, 2015. The company also performed an analysis pertaining to the warrants included in the same note. The company reviewed ASC Topic 470-20-25, Debt with Conversion and Other Options, and determined the relative fair value discount of the warrants was approximately $83,000. The Company recognized an accretion of debt discount expense of approximately $77,000 and $96,000 for the six months ended December 31, 2015 and 2014, respectively and approximately $63,000 and $37,000 for the three months ended December 31, 2015 and 2014, respectively. The accretion of debt discount expense expected to be recognized in future years is approximately $170,000. The Company recognized interest expense on all notes of approximately $71,000 and $63,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $36,000 and $33,000 for the three months ended December 31, 2015 and 2014, respectively. Accrued interest on all notes payable to stockholders and other related parties at December 31, 2015 totaled approximately $335,000 and is included in related party payables. As of December 31, 2015, future maturities of notes payable are as follows: Fiscal year ending June 30, 2016 $ 77,500 2017 $ 1,475,000 2018 267,500 Total outstanding notes $ 1,820,000 Debt Discount $ (169,054 ) Net Notes Payable $ 1,650,946 |
STOCK TRANSACTIONS
STOCK TRANSACTIONS | 6 Months Ended |
Dec. 31, 2015 | |
Stock Transactions | |
Note 7 - STOCK TRANSACTIONS | On May 18, 2015, the Company entered a Stock Purchase Agreement for the purchase of 1,600,000 shares for total gross proceeds of $2,000,000 by June 30, 2015. As of December 31, 2015, a total of 240,000 have been purchased for a total of $300,000. In September 2015, the Stock Purchase Agreement was amended to extend the date to acquire the remainder of the shares by December 31, 2015. In December 2015, the Stock Purchase Agreement was amended to extend the date to acquire the remainder of the shares by March 31, 2016. In September 2015, the Company issued Eric Clemons, a related party, 250,000 shares of common stock at $0.31 per share for payment of $77,500 of related party payables, specifically compensation expense, and Wesley Tate, a related party, 250,000 shares of common stock at $0.31 per share for payment of $77,500 of related party payables specifically compensation expense, for an aggregate of 500,000 shares of the Company's common stock for payment of $155,000 of related party payables. This issuance was completed in accordance with Section 4(a)(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. For the six month period ended December 31, 2015, the Company issued 425,000 shares of common stock to various individuals as payment for consulting services per contracts dated between October 2015 and December 2015 (See Note 4 and Note 6). The aggregate Fair Market Value of these shares was approximately $123,000 as the fair market value of the stock was between $0.21 and $0.45 per share. The Company used recent sales of stock to determine the fair market value of these transactions. These issuances were completed in accordance with Section 4(a)(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. For the six month period ended December 31, 2015, the Company issued 200,000 shares of our common stock to an individual for conversions of accounts payable. The aggregate Fair Market Value of these shares was approximately $70,000 as the conversion price was $0.35 per share. This issuance was completed in accordance with Section 4(a)(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. |
OPTIONS AND WARRANTS
OPTIONS AND WARRANTS | 6 Months Ended |
Dec. 31, 2015 | |
Options And Warrants | |
Note 8 - OPTIONS AND WARRANTS | Options For the six month period ended December 31, 2015, the Company had 400,000 options outstanding at an average exercise price of $2.65, with 250,000 options exercisable and an expected compensation to be recognized of $444,000. For the six months ended December 31, 2015 and 2014, the Company recognized an expense of approximately $172,000 and $164,000, respectively, and $81,000 and $102,000 for the three month period ended December 31, 2015 and 2014, respectively. The expense expected to be recognized is approximately $444,000. Warrants For the six month period ended December 31, 2015, the Company had 1,355,000 warrants outstanding at an average exercise price of $0.55, with 1,355,000 warrants exercisable and 5,000 warrants forfeited compared to 35,000 warrants outstanding and exercisable for the period ended June 30, 2015. For the three and six months ended December 13, 2015 and 2014, the Company recognized an expense of $0. The expense expected to be recognized is $0. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions | |
Note 9 - RELATED PARTY TRANSACTIONS | In September 2015, the Company issued Eric Clemons, a related party, 250,000 shares of common stock at $0.31 per share for payment of $77,500 of related party payables, specifically compensation expense, and Wesley Tate, a related party, 250,000 shares of common stock at $0.31 per share for payment of $77,500 of related party payables, specifically compensation expense, for an aggregate of 500,000 shares of our common stock for payment of $155,000 of related party payables. This issuance was completed in accordance with Section 4(a)(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Dec. 31, 2015 | |
Earnings Per Share | |
Note 10 - EARNINGS PER SHARE | FASB ASC Topic 260, Earnings Per Share The total number of potential additional dilutive options and warrants outstanding was approximately 1,800,000 and 425,000 for the six months ended December 31, 2015 and 2014, respectively. In addition, the convertible notes convert at an exercise price of between $0.20 and $5.00 per share of common stock representing approximately 1.8 million shares. The options, warrants and shares underlying the convertible note were considered for the dilutive calculation but in periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. The following table sets forth the computation of basic and diluted net income per share: For The Six Months ended December 31, 2015 2014 Net loss attributable to the common stockholders $ (1,073,232 ) $ (1,309,951 ) Basic weighted average outstanding shares of common stock 5,236,570 4,310,542 Dilutive effect of options and warrants - - Diluted weighted average common stock and common stock equivalents 5,236,570 4,310,542 Earnings (loss) per share: Basic and diluted $ (0.20) $ (0.30) |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Dec. 31, 2015 | |
Income Taxes | |
NOTE 11- INCOME TAXES | The Company accounts for income taxes under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 740, Income Taxes ("ASC 740"). Under ASC 740, 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. December 31, 2015 June 30, 2015 Loss carryforwards $ 3,400,000 $ 2,900,000 Less valuation allowance (3,400,000 ) (2,900,000 ) Total net deferred tax assets $ -- $ -- The provision (benefit) for income taxes for the period ended December 31, 2015 and 2014, assumes a 34% effective tax rate for federal income taxes. The Company has no state income taxes liability. The Company had deferred income tax assets as of December 31, 2015 and 2014 are as follows: The Company provided a valuation allowance equal to the deferred income tax assets for the periods ended December 31, 2015 and 2014, respectively, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards. At December 31, 2015, the Company had approximately $10,000,000 in Federal and State tax loss carryforwards that can be utilized in future periods to reduce taxable income, and begin to expire in 2030. Pursuant to Internal Revenue Code Section 382, the future utilization of our net operating loss carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. The Company did not identify any material uncertain tax positions on tax returns that will be filed. The Company has not filed any of its income tax returns. The fiscal years ended June 30, 2015, 2014, 2013, 2012, 2011 and 2010 are open for examination. |
CORRECTION OF AN ERROR
CORRECTION OF AN ERROR | 6 Months Ended |
Dec. 31, 2015 | |
Correction Of Error | |
NOTE 12 - CORRECTION OF AN ERROR | In connection with the Patent Licensing Agreement (See Note 5), the Company incurred $50,000 royalty fees in fiscal year 2014 and 2015, which were improperly capitalized to patent rights on the prior year balance sheet. After further analysis, the Company determined that the royalty fees should have been expensed to selling, general and administrative expenses. To properly account for the correction of the error, the Company considered ASC Topic 205. Based on an analysis of the results of the correction, the Company determined that the correction was immaterial to the prior years issued financial statements and recorded the corrections in the current year ending 2016. The conclusion was based on the fact that the Company is in the early stages of its life cycle, has not begun primary operations, to date the Company has been focused on capital raising efforts necessary to fund development of a prototype. As a result, available cash has been limited and account balances directly related to cash have relatively small account balances. Therefore, cash flow and the availability of funds is what the Company believes investors and potential investors are focused on, not non-cash corrections of errors. The Company further believes investors are focused on the viability of the technology, eventual FDA approval, and licensing or sale of the technology. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Dec. 31, 2015 | |
Subsequent Events | |
Note 13 - SUBSEQUENT EVENTS | In January 2016, the Company issued Eric Clemons, a related party, 150,000 shares of common stock at $0.30 per share for payment of $45,000 of related party payables, specifically compensation expense, and Wesley Tate, a related party, 150,000 shares of common stock at $0.30 per share for payment of $45,000 of related party payables specifically compensation expense, for an aggregate of 300,000 shares of the Company's common stock for payment of $90,000 of related party payables. This issuance was completed in accordance with Section 4(a)(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. In February 2016, the Company issued 150,000 shares of common stock to Scott McCallum, former Governor of Wisconsin, as payment for consulting services per contract dated February 9, 2016. The aggregate Fair Market Value of these shares was approximately $83,000 as the fair market value of the stock was $0.55 per share. The Company used recent sales of stock to determine the fair market value of these transactions. These issuances were completed in accordance with Section 4(a)(2) of the Securities Act in an offering without any public offering or distribution. These shares are restricted securities and include an appropriate restrictive legend. |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | |
Use of Estimates | The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: useful lives and residual values of long-lived assets, the valuation of equity instruments and the valuation of warrants and options. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. |
Principles of Consolidation | The accompanying consolidated financial statements include the accounts of Cerebain Biotech Corp. and its wholly-owned subsidiary, Cerebain Operating, Inc. (collectively referred to as the "Company"). There are no material intercompany transactions. |
Reclassifications | Certain reclassifications have been made to prior fiscal year amounts or balances to conform to the presentation adopted in the current fiscal year, which did not have any impact to consolidated net income or stockholder's equity amounts previously reported. |
Advertising Costs | Advertising costs are recorded as general and administrative expenses when they are incurred. Advertising costs charged to operations were approximately $36,000 and $100,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $800 and $39,000 for the three months ended December 31, 2015 and 2014, respectively, and are included in marketing costs in the accompanying consolidated statements of operations. |
Research and Development | The Company expenses the cost of research and development as incurred. Research and development costs charged to operations were approximately $0 and $244,000 for the six months ended December 31, 2015 and 2014, respectively, and approximately $0 and $122,000 for the three months ended December 31, 2015 and 2014, respectively, and are included in research and development costs in the accompanying consolidated statements of operations. |
Deferred Financing Costs | Deferred financing costs represent costs incurred in connection with obtaining the debt financing. These costs are amortized ratably and charged to interest expense over the term of the related debt. In connection with two of the debt issuances as discussed in Note 6, the Company issued 175,000 shares of the Company's common stock. The Company recorded the approximate $174,000 value of the shares issued as a deferred financing cost and will amortize the expense associated with these issuances over the life of each note. |
Concentrations, Risks, and Uncertainties | The Company is a startup company subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. |
Recent Accounting Pronouncements | The Company has evaluated new accounting pronouncements that have been issued and are not yet effective for the Company and determined that there are no such pronouncements expected to have an impact on the Company's future financial statements. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Dec. 31, 2015 | |
Commitments And Contingencies Tables | |
Schedule of Maturity of Prepaid Expense | As of December 31, 2015, future maturities of prepaid expenses on value of shares issued for consulting are as follows: Fiscal year ending June 30, 2016 $ 37,259 2017 20,000 Total $ 57,259 |
NOTES PAYABLE TO RELATED PART21
NOTES PAYABLE TO RELATED PARTIES STOCKHOLDERS (Tables) | 6 Months Ended |
Dec. 31, 2015 | |
Notes Payable To Stockholders Tables | |
Future maturities of notes payable | As of December 31, 2015, future maturities of notes payable are as follows: Fiscal year ending June 30, 2016 $ 77,500 2017 $ 1,475,000 2018 267,500 Total outstanding notes $ 1,820,000 Debt Discount $ (169,054 ) Net Notes Payable $ 1,650,946 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Dec. 31, 2015 | |
Earnings Per Share Tables | |
Computation of basic and diluted net income per share | The following table sets forth the computation of basic and diluted net income per share: For The Six Months ended December 31, 2015 2014 Net loss attributable to the common stockholders $ (1,073,232 ) $ (1,309,951 ) Basic weighted average outstanding shares of common stock 5,236,570 4,310,542 Dilutive effect of options and warrants - - Diluted weighted average common stock and common stock equivalents 5,236,570 4,310,542 Earnings (loss) per share: Basic and diluted $ (0.20) $ (0.30) |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Dec. 31, 2015 | |
Income Taxes Tables | |
Deferred income tax assets | The Company had deferred income tax assets as of December 31, 2015 and 2014 are as follows: December 31, 2015 June 30, 2015 Loss carryforwards $ 3,400,000 $ 2,900,000 Less valuation allowance (3,400,000 ) (2,900,000 ) Total net deferred tax assets $ -- $ -- |
BASIS OF PRESENTATION (Details
BASIS OF PRESENTATION (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Jun. 30, 2015 | |
Basis Of Presentation Details Narrative | |||||
Accumulated deficit | $ (10,167,677) | $ (10,167,677) | $ (9,094,445) | ||
Net loss | $ (518,385) | $ (676,521) | (1,073,232) | $ (1,309,951) | |
Net cash used in operating activities | $ (162,344) | $ (371,347) |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Summary Of Significant Accounting Policies Details Narrative | ||||
Advertising costs | $ 800 | $ 39,000 | $ 36,000 | $ 100,000 |
Research and development costs | $ 121,875 | $ 243,750 |
COMMITMENTS AND CONTINGENCIES26
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2015USD ($) |
Commitments And Contingencies Details | |
2,016 | $ 37,259 |
2,017 | 20,000 |
Total | $ 57,259 |
COMMITMENTS AND CONTINGENCIES27
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Marketing expense | $ 815 | $ 39,351 | $ 36,040 | $ 100,237 | |
Consulting Agreements [Member] | Various Individuals [Member] | |||||
Recognized selling, general and administrative expense | 41,000 | $ 96,000 | 94,000 | 199,000 | |
Prepaid expense unamortized | 52,000 | 52,000 | |||
Consulting Agreements [Member] | Two Individuals [Member] | |||||
Recognized selling, general and administrative expense | 14,000 | 7,000 | 35,000 | 7,000 | |
Prepaid expense unamortized | 0 | 0 | |||
Consulting Agreements [Member] | Individual [Member] | |||||
Prepaid expense unamortized | 5,000 | 5,000 | |||
Marketing expense | $ 7,500 | 0 | $ 15,000 | 0 | |
Employee Agreement with Eric Clemons [Member] | |||||
Stock options to purchase | 60,000 | 60,000 | |||
Recognized selling, general and administrative expense | $ 42,000 | 42,000 | $ 84,000 | 84,000 | |
Employee Agreement with Eric Clemons [Member] | Omnibus Stock Grant and Option Plan [Member] | |||||
Stock options to purchase | 40,000 | 40,000 | |||
Recognized selling, general and administrative expense | $ 4,500 | 22,000 | $ 9,000 | 22,000 | |
Employee Agreement with Wesley Tate [Member] | |||||
Stock options to purchase | 30,000 | 30,000 | |||
Recognized selling, general and administrative expense | $ 21,000 | 21,000 | $ 42,000 | 42,000 | |
Employee Agreement with Wesley Tate [Member] | On April 1, 2014 [Member] | |||||
Recognized selling, general and administrative expense | $ 0 | 9,500 | $ 0 | 19,000 | |
Employee Agreement with Wesley Tate [Member] | On October 1, 2014 [Member] | |||||
Stock options to purchase | 20,000 | 20,000 | |||
Recognized selling, general and administrative expense | $ 2,300 | $ 11,000 | $ 4,600 | 11,000 | |
Employee Agreement with Wesley Tate [Member] | On October 1, 2015 [Member] | |||||
Recognized selling, general and administrative expense | $ 40,000 | $ 0 |
PATENT RIGHTS (Details Narrativ
PATENT RIGHTS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Patent Rights Details Narrative | ||||
Legal fees | $ 0 | $ 800 | $ 0 | $ 2,800 |
Royalty expense | 25,000 | $ 0 | ||
Patent Royalty Expense | 12,500 | 125,000 | ||
Accrued payable pertaining to patent royalty expense | $ 125,000 | $ 125,000 |
NOTES PAYABLE TO RELATED PART29
NOTES PAYABLE TO RELATED PARTIES STOCKHOLDERS (Details) | Dec. 31, 2015USD ($) |
Fiscal year ending June 30, | |
2,016 | $ 77,500 |
2,017 | 1,475,000 |
2,018 | 267,500 |
Total outstanding notes | 1,820,000 |
Debt Discount | (169,054) |
Net Notes Payable | $ 1,650,946 |
NOTES PAYABLE TO RELATED PART30
NOTES PAYABLE TO RELATED PARTIES STOCKHOLDERS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Jun. 30, 2015 | |
Interest expense | $ 35,822 | $ 32,665 | $ 71,019 | $ 63,385 | |
Deferred financing costs | 29,063 | 29,063 | $ 28,125 | ||
Loss from extinguishment of debt | 48,750 | 48,750 | |||
Convertible Note Payable [Member] | |||||
Interest expense | 9,700 | $ 0 | |||
Deferred financing costs | 29,000 | 29,000 | |||
Convertible Note Payable [Member] | |||||
Interest expense | 9,700 | $ 0 | |||
Convertible Note Payable One [Member] | |||||
Interest expense | 11,000 | 17,000 | 28,000 | 34,000 | |
Deferred financing costs | 0 | 0 | |||
Long term note payable expense | 38,000 | ||||
Loss from extinguishment of debt | 48,750 | 48,750 | |||
Accretion of debt discount expense | 63,000 | 37,000 | 77,000 | 96,000 | |
Notes Payable [Member] | |||||
Interest expense | 36,000 | $ 33,000 | 71,000 | $ 63,000 | |
Related party notes payable | 335,000 | 335,000 | |||
January 2013, Short Term Note Payable [Member] | |||||
Related party notes payable | $ 113,000 | $ 113,000 |
STOCK TRANSACTIONS (Details Nar
STOCK TRANSACTIONS (Details Narrative) | 6 Months Ended |
Dec. 31, 2015USD ($)shares | |
Common stock issued for purchase agreements, shares | 240,000 |
Common stock issued for purchase agreements, amount | $ | $ 300,000 |
Consulting services [Member] | |
Common stock shares issued as payment | 425,000 |
Convertible Note Payable [Member] | |
Common stock shares issued for conversions | 200,000 |
OPTIONS AND WARRANTS (Details N
OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Options [Member] | ||||
Outstanding | 400,000 | |||
Average exercise price | $ 2.65 | |||
Exercisable | 250,000 | |||
Compensation expected to be recognized | $ 444,000 | |||
Recognized expense | $ 81,000 | $ 102,000 | $ 172,000 | $ 164,000 |
Warrants [Member] | ||||
Outstanding | 1,355,000 | |||
Average exercise price | $ 0.55 | |||
Exercisable | 1,355,000 | |||
Forfeited | 5,000 | |||
Recognized expense | $ 0 | $ 0 | $ 0 | $ 0 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | |
Earnings Per Share Details | ||||
Net loss attributable to the common stockholders | $ (518,385) | $ (676,521) | $ (1,073,232) | $ (1,309,951) |
Basic weighted average outstanding shares of common stock | 5,236,570 | 4,310,542 | ||
Dilutive effect of options and warrants | ||||
Diluted weighted average common stock and common stock equivalents | 5,236,570 | 4,310,542 | ||
Earnings (loss) per share: | ||||
Basic and diluted | $ (0.09) | $ (0.15) | $ (0.20) | $ (0.30) |
EARNINGS PER SHARE (Details Nar
EARNINGS PER SHARE (Details Narrative) - $ / shares | 6 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Total dilutive warrants | 1,800,000 | 425,000 |
Minimum [Member] | ||
Exercise price | $ 0.20 | |
Maximum [Member] | ||
Exercise price | $ 5 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2015 | Jun. 30, 2015 |
Income Taxes Details | ||
Loss carryforwards | $ 3,400,000 | $ 2,900,000 |
Less - valuation allowance | $ (3,400,000) | $ (2,900,000) |
Total net deferred tax assets |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 6 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details Narrative | ||
Effective tax rate for federal income taxes | 34.00% | 34.00% |
Federal and State tax loss carryforwards | $ 10,000,000 | |
Expiry year | 2,030 |
CORRECTION OF AN ERROR (Details
CORRECTION OF AN ERROR (Details) - USD ($) | Dec. 31, 2015 | Jun. 30, 2015 | Jun. 30, 2014 |
Patent rights | $ 83,900 | $ 183,900 | |
Correction of Error [Member] | |||
Patent rights | $ 50,000 | $ 50,000 |