Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2016 | |
Document and Entity Information: | ||
Entity Registrant Name | VAPOR HUB INTERNATIONAL INC. | |
Document Type | 10-K | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Entity Central Index Key | 1,515,718 | |
Current Fiscal Year End Date | --06-30 | |
Entity Common Stock, Shares Outstanding | 86,860,375 | |
Entity Public Float | $ 32,196,772 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | FY | |
Trading Symbol | vhub |
Vapor Hub International Inc. -
Vapor Hub International Inc. - Consolidated Balance Sheets - USD ($) | Jun. 30, 2016 | Jun. 30, 2015 | |
Current Assets: | |||
Cash | $ 607,960 | $ 351,081 | |
Accounts receivable | 880 | 9,511 | |
Inventory | 585,489 | 323,784 | |
Prepaid expenses and other current assets | 38,254 | 61,269 | |
Deferred finance costs | 133,166 | 39,258 | |
Other current assets | 10,556 | 9,474 | |
Total Current Assets | 1,376,305 | 794,377 | |
Fixed assets, net | 134,223 | 159,546 | |
Long term assets | 14,341 | 6,895 | |
Total Assets | 1,524,869 | 960,818 | |
Current Liabilities: | |||
Accounts payable and accrued expenses | 828,146 | 509,618 | |
Deferred income | 94,754 | 82,499 | |
Equipment leases payable | 1,247 | ||
Convertible notes payable, net of unamortized debt discount | 448,539 | 192,091 | |
Notes payable, net of unamortized debt discount | 7,211 | 384,769 | |
Loans from related parties | 103,409 | 96,312 | |
Derivative liabilities | 827,883 | 68,584 | |
Total Current Liabilities | 2,311,189 | 1,333,873 | |
Long Term Liabilities: | |||
Equipment leases payable | 5,440 | ||
Notes payable | 23,137 | 29,189 | |
Long term liabilities | 23,137 | 34,629 | |
TOTAL LIABILITIES | 2,334,326 | 1,368,502 | |
Stockholders' deficit | |||
Preferred stock | [1] | ||
Common stock | [2] | 86,860 | 72,456 |
Additional paid-in capital | 775,929 | 557,463 | |
Accumulated deficit | (1,672,246) | (1,037,603) | |
Total Stockholders Deficit | (809,457) | (407,684) | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 1,524,869 | $ 960,818 | |
[1] | $0.001 par value, 10,000,000 authorized, 0 issued and outstanding as of June 30, 2016 and 2015 | ||
[2] | $0.001 par value, 1,010,000,000 and 140,000,000 shares authorized, 86,860,375 and 72,455,606 issued and outstanding as of June 30, 2016 and June 30, 2015, respectively |
Statement of Financial Position
Statement of Financial Position - Parenthetical - $ / shares | Jun. 30, 2016 | Jun. 30, 2015 |
Statement of Financial Position | ||
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par Value | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 1,010,000,000 | 140,000,000 |
Common Stock, Shares Issued | 86,860,375 | 72,455,606 |
Common Stock, Shares Outstanding | 86,860,375 | 72,455,606 |
Vapor Hub International Inc. -4
Vapor Hub International Inc. - Statements of Operations - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Income Statement | ||
Revenue | $ 6,497,550 | $ 5,296,342 |
Cost of revenue | 3,551,069 | 3,202,067 |
Gross profit | 2,946,481 | 2,094,275 |
Wages and payroll taxes | 1,392,805 | 1,207,369 |
Other General and administrative expenses | 1,322,857 | 1,302,991 |
General and administrative expenses | 2,715,662 | 2,510,360 |
Net income (loss) from operations | 230,819 | (416,085) |
Other income (expense) | ||
Investor settlement | (15,000) | |
Interest expense | (176,560) | (163,016) |
Finance fees | (103,695) | (6,762) |
Interest expense- debt discount | (348,316) | (6,125) |
Loss on extinguishment of debt | (475,575) | |
Change in derivative liability | 254,484 | (19,609) |
Other income (expense) | (864,662) | (195,512) |
Loss before taxes | (633,843) | (611,597) |
Income tax provision | 800 | 2,400 |
Net loss | $ (634,643) | $ (613,997) |
Net loss per share: | ||
Net loss per share, basic and diluted | $ (0.01) | $ (0.01) |
Weighted average shares outstanding: | ||
Weighted average shares outstanding, basic and diluted | 76,419,180 | 68,164,099 |
Vapor Hub International Inc. -5
Vapor Hub International Inc. - Statement of Changes in Stockholders' (Deficit) - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance, Value at Jun. 30, 2014 | $ 68,060 | $ (69,311) | $ (423,606) | $ (424,877) |
Balance, Shares at Jun. 30, 2014 | 68,060,001 | |||
Stock issued for services, Value | $ 300 | 5,700 | 6,000 | |
Stock issued for services, Shares | 300,000 | |||
Stock options granted | 10,850 | 10,850 | ||
Gotama Note Conversion, Value | $ 4,096 | 610,244 | 614,340 | |
Gotama Note Conversion, Shares | 4,095,605 | |||
Net loss | (613,997) | (613,997) | ||
Balance, Value at Jun. 30, 2015 | $ 72,456 | 557,463 | (1,037,603) | $ (407,684) |
Balance, Shares at Jun. 30, 2015 | 72,455,606 | 310,000 | ||
Stock issued for Advisory Fee, Value | $ 3,810 | 99,060 | $ 102,870 | |
Stock issued for Advisory Fee, Shares | 3,810,000 | |||
Stock issued for Conversion of Debt, Value | $ 10,594 | 119,406 | 130,000 | |
Stock issued for Conversion of Debt, Shares | 10,594,769 | |||
Net loss | (634,643) | (634,643) | ||
Balance, Value at Jun. 30, 2016 | $ 86,860 | $ 775,929 | $ (1,672,246) | $ (809,457) |
Balance, Shares at Jun. 30, 2016 | 86,860,375 | 310,000 |
Vapor Hub International Inc. -6
Vapor Hub International Inc. - Statements of Cash Flows - USD ($) | 12 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | ||
OPERATING ACTIVITIES: | |||
Net loss | $ (634,643) | $ (613,997) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation | 31,057 | 22,051 | |
Amortization of debt discount on convertible notes | 348,316 | 3,226 | |
Amortization of debt discount on short term note | 5,902 | ||
Amortization of deferred finance costs | 83,380 | 6,762 | |
Amortization of derivative debt discount | 6,125 | ||
Loss on extinguishment of old loans | 475,575 | ||
Change in derivative liability | (254,484) | 19,609 | |
Non cash finance fees | 11,875 | ||
Non cash interest for conversion of notes payable | 54,341 | ||
Share based compensation for services- common stock | 6,000 | ||
Share based compensation- options | 10,850 | ||
Changes in operating assets and liabilities: | |||
Accounts receivable, increase decrease | 8,631 | (9,511) | |
Inventory, increase decrease | (261,705) | (127,621) | |
Prepaid expenses and other current assets, increase decrease | 54,811 | 96,638 | |
Security deposit, increase decrease | (7,446) | 5,267 | |
Deferred income, increase decrease | 12,255 | (224,636) | |
Accounts payable and accrued expenses, increase decrease | 282,430 | 289,760 | |
Net cash used in operating activities | 138,176 | (437,359) | |
INVESTING ACTIVITIES: | |||
Purchase of property and equipment | (5,734) | (39,890) | |
Net cash used in investing activities | (5,734) | (39,890) | |
FINANCING ACTIVITIES: | |||
Payments on leased property loans | (4,193) | (3,772) | |
Payments on financed insurance premiums | (73,750) | ||
Proceeds from related party loans | 75,000 | 80,543 | |
Payments on related party loans | (67,903) | (85,608) | |
Net proceeds from convertible notes payable | 593,350 | 272,008 | |
Payments on convertible notes payable | (531,359) | (70,313) | |
Net proceeds from short term notes payable | 296,639 | 483,071 | |
Payments on short term notes payable | (157,295) | (152,291) | |
Payments on auto loan payable | (6,052) | (2,875) | |
Net cash provided by financing activities | 124,437 | 520,763 | |
Net change in cash | 256,879 | 43,514 | |
Cash, beginning of period | 351,081 | 307,567 | |
Cash, end of period | 607,960 | 351,081 | |
Supplemental disclosure of cash flow information: | |||
Cash paid for interest | 161,274 | 106,738 | |
Cash paid for income taxes | 800 | 2,400 | |
Non-cash transactions: | |||
Insurance premium financing | 32,878 | 13,001 | |
Non cash assumption of vehicle note payable | [1] | 39,275 | |
Common stock issued for convertible note payable | 130,000 | 614,340 | |
Non cash repayment and borrowings of short term note payable | 69,054 | ||
Non-cash additions to note payable | 831,256 | ||
Debt extinguishment | 715,289 | ||
Original issue discount on notes payable | 60,000 | ||
Additional debt discount | 83,089 | ||
Advisory fee paid in common stock | 102,870 | ||
Derivative liability | $ 706,911 | $ 48,975 | |
[1] | $36,976 vehicle cost and $2,299 prepaid warranty |
Note 1- Incorporation, Nature o
Note 1- Incorporation, Nature of Operations and Acquisition | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 1- Incorporation, Nature of Operations and Acquisition | NOTE 1- INCORPORATION, NATURE OF OPERATIONS AND ACQUISITION Vapor Hub International Inc. (formerly DogInn, Inc.) (hereinafter known as “the Company”) was incorporated in the State of Nevada on July 15, 2010. On February 14, 2014, the Company entered into a Share Exchange Agreement with Vapor Hub Inc., a California corporation (“Vapor”), Delite Products, Inc., a California corporation (“Delite”) and the shareholders of both companies (the “Exchange Agreement”). As a result of the closing of the transactions contemplated by the Exchange Agreement, Vapor and Delite became the Company’s wholly owned subsidiaries (which subsidiaries were subsequently merged into the Company on May 18, 2015, ending the separate existences of Vapor and Delite.) and the Company now carries on the business of developing, producing, marketing and selling the next generation of electronic cigarettes, known as vaping devices, and related accessories, including e-liquids, batteries and atomizers. Business Overview Product Description Vaping devices (as well as electronic cigarettes, also known as e-cigarettes) are battery-powered products that allow users to inhale water vapor instead of the smoke, ash, tar and carbon monoxide associated with traditional cigarettes. In contrast to e-cigarettes, vaping devices are often precision manufactured from metallic materials and do not look like traditional cigarettes. Vaping devices, as compared to e-cigarettes, also offer a unique user experience as a result of greater vapor production, enriched taste, and an ability to highly customize a device with different mechanical components and fashionable accessories, including different colors and finishes. Sourcing The Company uses third party contract manufacturers to produce and finish its mods (“Mods”), including its Limitless Mechanical Mod, from facilities located in both Southern California and China. The Company’s Mods, which are made from a metallic material such as steel, brass or copper, are custom machined to meet the Company’s design specifications. Once machined, unfinished products are delivered to the Company’s location in Simi Valley or to a third party service provider to be buffed, polished and to add various treatments and embellishments, such as paint and engravings. Finished products are then held in inventory for distribution and sale. In the Company’s fiscal year ended June 30, 2015, the Company relied on one manufacturer to machine all of its Mods and in the fiscal year ended June 30, 2016, the Company relied on two. Although the Company has relied on a limited number of manufacturers to machine its Mods, the Company believes manufacturing capacity is available to meet its current and planned needs. The Company does not currently have any long term agreements in place for the manufacture of its Mods. With respect to the Company’s custom designed atomizers which it markets and distributes globally, in the Company’s fiscal year ended June 30, 2016, the Company sourced these products from one manufacturer located in the United States. In the Company’s fiscal year ended June 30, 2015, the Company sourced its atomizers from two manufacturers located in the United States. The Company believes that suppliers for its atomizers are available to meet its current and planned needs. The Company sources its proprietary E-liquids (such as our Binary Premium E-Liquid) from an ISO Class 7 certified manufacturer in the USA, which helps ensure their purity and quality. In addition to sourcing its own e-liquids, the Company also purchases e-liquid from other reputable American suppliers for resale through its distribution channels. Product Distribution Products distributed by the Company include vaping devices and related accessories purchased from third parties for resale as well as its own vaping devices and related accessories, which it designs and sources, including its popular “Limitless Mechanical Mods”, “Limitless Box Mod” and “Limitless Atomizer”, as well as “Binary Premium e-Liquid”. The Company markets and sells its vaping devices and related products to end customers through its website www.vapor-hub.com, to retail stores through direct sales both in the United States and internationally, and through third party wholesalers both in the United States and internationally who then resell the Company’s products to retailers in their territory. Retailers of the Company’s products include vaping shops throughout the United States and in approximately 23 other countries. The Company also distributes its products on a limited basis through convenience stores and gas stations. In 2016 and 2015, approximately 28% and 6%, respectively, of the Company’s sales were to customers outside of the United States. All such sales are denominated in United States Dollars, therefore, there are no foreign currency risks associated with international sales by the Company. All assets and liabilities are generated and located in the United States. With respect to vaping devices and related products that the Company sells through third party wholesalers, the Company typically sells its products to these wholesalers for their re-sale on a non-exclusive basis and the Company also typically does not have long term contractual arrangements with any of its wholesalers. Operation of Retail Stores The Company sells its products and those of third parties to end consumers directly through its retail location located in Simi Valley, California. Through its retail location, the Company sells and markets vaping devices as well as e-liquid, accessories, and supplies relating to vaping devices to both novice users as well as consumers who demand high end technical devices. October 15, 2015, the Company closed a second retail location that it previously operated in Chatsworth, California and the Company has no plans to open additional stores. The Company opened its retail locations in order to create brand recognition for its products and also to enable the Company to gather information about user preferences in the rapidly evolving vaping industry. In 2016 and 2015, the Company’s retail sales accounted for approximately 6.6% and 10% of its revenue, respectively. |
Note 2 - Summary of Significant
Note 2 - Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 2 - Summary of Significant Accounting Policies | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial statements. Basis of Presentation The financial statements, and the accompanying notes, are prepared in accordance with US GAAP and pursuant to the instructions to Form 10-K of the Securities and Exchange Commission. The Company’s fiscal year end is June 30. The Company operates in one segment, in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting. The Company’s Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. Going Concern The Company’s consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s cash balance as of June 30, 2016 along with its continued net losses and working capital deficit along with other factors raise substantial doubt about its ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. The Company continues to face liquidity and capital resources constraints despite generating $138,176 in cash from operations in the fiscal year ended June 30, 2016. The Company does not believe that the proceeds from its debt facilities (see Note 7 and Note 9) along with its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the Company’s future capital requirements will depend on many factors, including the Company’s results from operations and the growth rate of the Company’s business. The Company’s near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth on terms that are more favorable than the company’s existing credit facilities. The Company is also pursuing various means to increase revenues, reduce operating costs and to improve overall cash flow. The Company presently does not have any arrangements for additional financing. However, the Company continues to evaluate various financing strategies to support its current operations and fund its future growth. Use of Estimates The preparation of financial statements in conformity with US GAAP 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. The Company regularly evaluates significant estimates and assumptions related to its accounts receivable allowance, accounts payable, deferred income tax asset valuation allowances, fair value of derivative liability, fair value of stock and stock options, useful life of fixed assets, recoverability of long lived assets, inventory reserves, estimates of sales return and accrual for potential liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At June 30, 2016, the Company had no cash equivalents. Concentration of Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company had $295,799 in excess of FDIC insured limits. The Company relied on two and one manufacturer(s) to make all of the Company’s Mods during the years ended June 30, 2016 and 2015, respectively. Financial Instruments and Fair Value Measurement Pursuant to ASC 820, Fair Value Measurements and Disclosures Level 1 Level 2 Level 3 The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties, and derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Pursuant to ASC 820, the fair value of the Company’s derivative liability is determined based on “Level 3” inputs, which consist of unobservable inputs. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. Revenue Recognition The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable. For retail transactions, revenue is recognized at the point of sale. For wholesale and online transactions, revenue is recognized at the time goods are shipped. Shipping and Handling Payments by customers to the Company for shipping and handling costs are included in revenue on the statements of operations, while the Company’s expense is included in cost of goods sold. Shipping and handling for inventory is included as a component of inventory on the balance sheets, and in cost of revenues in the statements of operations when the product is sold. Deferred Income The Company accrues deferred income when customer payments are received, but product has not yet shipped. As of June 30, 2016 and 2015, the Company had recorded $94,754 and $82,499, respectively for deferred income as a result of prepayments for product made by customers. Those prepayments are recognized into revenue at the point those prepaid products have subsequently shipped. The Company recognized the $82,499 into revenue during the year ended June 30, 2016. The Company expects to recognize the $94,754 into revenue during the following fiscal year. Inventories Inventories consist primarily of vaping devices, electronic cigarettes, e-liquid and related supplies and accessories and are stated at the lower of cost (first-in, first-out) or market value. Property and Equipment Property and equipment consists of computer equipment, furniture, facility equipment, and leasehold improvements which are carried at historical cost and are depreciated over the estimated useful lives of the related assets. Estimated useful lives are from 3 to 10 years. Expenditures for maintenance and repairs are charged against operations. The modified accelerated cost recovery system (straight line) is used for federal income tax purposes and also for financial reporting as the difference between the two does not appear to be material. Impairment of Long-lived Assets and Goodwill The Company evaluates goodwill for impairment annually in the fourth quarter, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying amount. The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. The Company typically uses discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those the Company believes hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill. The Company periodically evaluates whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value. The Company’s impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, the Company assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If actual results are not consistent with the Company’s assumptions and estimates, or the Company’s assumptions and estimates change due to new information, the Company may be exposed to an impairment charge in the future. Advertising Expense Advertising costs are expensed as incurred. Advertising expense for the year ended June 30, 2016 and 2015 were $106,734 and $140,771, respectively and are included in general and administrative expenses. Debt The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes. Convertible debt derivative treatment If the conversion feature within convertible debt meets the requirements to be treated as a derivative, the Company estimates the fair value of the convertible debt derivative using Black-Scholes upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt. Convertible debt – beneficial conversion feature If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt. Accounting for Derivatives Liabilities The Company evaluates contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity Modification of Debt Instruments Modifications or exchanges of debt, which are not considered a troubled debt restructuring, are considered extinguishments if the terms of the new debt and the original instrument are substantially different. The instruments are considered substantially different when the present value of the cash flows under the terms of the new debt instrument are at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. The fair value of non-cash consideration associated with the new debt instrument, such as warrants, are included as a day one cash flow in the 10% cash flow test. If the original and new debt instruments are substantially different, the original debt is derecognized and the new debt is initially recorded at fair value, with the difference recognized as an extinguishment gain or loss. Deferred Financing Costs, Net Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized to interest expense over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful. For the year ending June 30, 2016, the Company incurred $199,750 in costs in connection with the negotiation of a financing transaction with TCA Global Credit Master Fund, LP. The unamortized finance costs for the years ended June 30, 2016 and 2015 were $133,167 and $39,654 respectively. Basic and Diluted Net Income per Share The Company computes net income per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants or debentures. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2016 and 2015, there were no dilutive securities as the Company had incurred net losses. Income Taxes The Company accounts for income taxes under the provisions of ASC Topic 740-10, Income Taxes When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2011 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2011 Fiscal Period and forward for various states. Stock Based Compensation Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instrument is fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instrument granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates. For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” the Company performs an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, the Company uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in the Company’s consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company’s financial statements. For the years ended June 30, 2016 and 2015, the Company had $0 and $10,850, respectively, of stock based compensation relating to employees. Non-Cash Equity Transactions Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to current market price. Recent Accounting Pronouncements In August 2016 the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The Company is currently in the process of evaluating the impact of the adoption on its financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance. In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet. Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet. The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The Company is currently evaluating the potential impact this standard will have on its financial statements and related disclosures. In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. The Company is currently evaluating the potential impact this standard will have on its financial statements and related disclosures. In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations and cash flows. In April 2015, the FASB issued ASU 2015-03, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations and cash flows. The Company has reviewed other recent accounting pronouncements issued prior to the date of issuance of its financial statements included in this report, and does not believe any of these pronouncements will have a material impact on its consolidated financial statements. |
Note 3 - Capital Stock
Note 3 - Capital Stock | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 3 - Capital Stock | NOTE 3 – CAPITAL STOCK The Company is authorized to issue 1,010,000,000 shares of common stock and had 86,860,375 and 72,455,606 shares of common stock issued and outstanding as of June 30, 2016 and 2015, respectively. On February 2, 2015, the Board of Directors of the Company approved an Amended and Restated Articles of Incorporation of the Company (the “Amended and Restated Articles”) and the Amended and Restated Articles were filed by the Company with the Secretary of State of the State of Nevada on February 5, 2015. The Amended and Restated Articles increase the authorized number of shares of common stock, par value $0.001, of the Company from 140,000,000 shares to 1,010,000,000. The Company is also authorized to issue 10,000,000 shares of preferred stock and had no shares of preferred stock issued and outstanding as of June 30, 2016. On February 2, 2015, the Company filed a Certificate of Withdrawal of Certificate of Designation (“Certificate of Withdrawal”) with the Secretary of State of the state of Nevada. The certificate withdraws the Certificate of Designation filed by the Company on January 9, 2014, which designated all of the Company’s preferred stock as “Series A Preferred Stock.” Following the filing of the Certificate of Withdrawal, the Company has 10,000,000 shares of undesignated preferred stock, par value $0.001, available for future designation by the Company’s Board of Directors. On March 10, 2015 the Company entered into an independent contractor agreement with a service provider. Pursuant to the terms of the agreement, the Company agreed to grant the service provider 300,000 non-forfeitable, fully vested shares of its common stock, valued at $6,000 (based on the estimated fair market value of the shares on March 10, 2015, the date of grant) as partial consideration for the services provided to the Company pursuant to the terms of the agreement. On June 30, 2015, the Company converted the Gotama Capital S.A. convertible promissory notes with an aggregate balance of $614,340 at a price of $0.15 per share, representing the entire principal amount and all accrued interest of the three convertible promissory notes issued to Gotama Capital S.A., into an aggregate of 4,095,605 shares of the Company’s common stock, par value $0.001 per share. On December 25, 2015, the Company issued to TCA Global Credit Master Fund, LP 3,810,000 shares of its common stock as partial consideration for advisory services rendered to the Company (see Note 7). During 2016, the Company issued to Typenex Co-Investment, LLC shares of its common stock as partial payment of the Company’s outstanding debt obligations to Typenex as follows (see Note 7): Date of Issuance Number of Shares of Common Stock Conversion Price Consideration February 16, 2016 918,386 $0.016333 Conversion of $15,000.00 of debt. March 15, 2016 918,386 $0.016333 Conversion of $15,000.00 of debt. April 15, 2016 3,160,556 $0.015820 Conversion of $50,000.00 of debt. May 15, 2016 5,597,441 $0.008754 Conversion of $49,000.00 of debt. Stock-Option Plans On February 2, 2015, the Company adopted its 2015 Omnibus Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of stock options (both incentive stock options and non-qualified stock options), restricted stock, restricted stock units, stock appreciation rights, performance-based awards, dividend equivalents, stock payments and deferred stock units to eligible participants. Eligible participants include officers, employees, non-employee directors and certain consultants and advisers. The aggregate number of shares of the Company’s common stock authorized for issuance under the 2015 Plan is 20,400,000, subject to adjustment as described in the 2015 Plan. The outstanding options (each of which were granted on June 30, 2015) each have an exercise price of $0.0419 per share of Common Stock. The Company estimates the fair value of each option on the grant date using the Black-Scholes model. The following assumptions were made in estimating the fair value: 2015 Annual dividend yield - Expected life (years) 5 Risk-free interest rate 1.63% Expected volatility 121.10% Fair value of options granted 0.035 The expected volatility was estimated by calculating the standard deviation of daily price changes in the Company’s stock from the Company’s date of inception to the date of the grant and the five-year constant maturity treasury rate on the date of the grant was used for the risk free rate. Stock-based compensation expense is recognized over the employees’ or service provider’s requisite service period, generally the vesting period of the award. Stock-based compensation expense included in the accompanying statements of operations for the years ending June 30, 2016 and 2015 was $0 and $10,850, respectively. A summary of stock option activity is as follows: Number of Shares Weighted Average Exercise Price Outstanding at July 1, 2014 - $ - Granted 310,000 0.0419 Exercised - - Forfeited - - Outstanding at June 30, 2015 310,000 $ 0.0419 Granted - - Exercised - - Forfeited - - Outstanding at June 30, 2016 310,000 $ 0.0419 All the 310,000 options outstanding at June 30, 2016 and 2015 were fully vested on the grant date, have an exercise price of $0.0419, a weighted average remaining life of 9 years, and an aggregate intrinsic value at $0.00 price per share at June 30, 2016. Warrant Issuance During the period from inception (July 12, 2013) to June 30, 2014, the Company received a fee of $30,000 in exchange for the right of an unaffiliated third party to share in 10% of the net profits derived from operations of the Chatsworth Vapor Hub lounge. The profit sharing arrangement was terminated on February 23, 2016 in exchange for the payment by the Company of $15,000 and the issuance by the Company of a warrant exercisable on or before February 23, 2020 to purchase 100,000 shares of the Company’s common stock at an exercise price per share of $0.15. The Company valued the warrant using the Black Scholes Option Pricing Model resulting in a de-minimis fair market value. The inputs used for the Black Scholes calculation were: stock price of $0.03, exercise price of $0.15, volatility of 218% and risk free interest rate of 0.23%. Prior to the termination of the profit sharing arrangement, no amounts had been earned and no obligations were due under the arrangement. There are no other warrants outstanding as of June 30, 2016. |
Note 4 - Inventories
Note 4 - Inventories | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 4 - Inventories | NOTE 4 – INVENTORIES As of June 30, 2016 and 2015, the Company had a balance of $585,489 and $323,784, respectively, as inventories which consist of vaping devices, electronic cigarettes, e-liquid, related supplies, and accessories. There was no reserve for inventory obsolescence as of either June 30, 2016 or 2015. |
Note 5 - Lease Commitments
Note 5 - Lease Commitments | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 5 - Lease Commitments | NOTE 5 – LEASE COMMITMENTS The Company entered into a lease agreement with S. J. Real Estate Group, LLC to lease a retail space in Chatsworth, California, effective September 13, 2013. The lease term was for two years with a monthly lease payment of $2,214. Effective October 15, 2015, the Company and the landlord agreed to terminate the lease and the Company closed its retail store located at the location. The Company has no further obligation due under the lease agreement. On February 28, 2015, the Company entered into a lease agreement with landlord Samantha Carrington to provide retail space for its Simi Valley retail location and on April 1, 2015, the Simi Valley retail location opened at the new premises. The lease term extends through March 31, 2017 with a monthly lease payment of $3,190. The Company has a remaining commitment under this lease as of June 30, 2016 of $28,710 and a security deposit of $6,380 was paid to the landlord in relation to this lease. The Company entered into a lease agreement with S.B.P.W., LLC to lease warehouse and office space in Simi Valley, California effective August 5, 2013 which agreement was subsequently amended on February 20, 2014. The lease term extended through April 30, 2015 with a monthly lease payment of $2,035 which increased to $4,070 effective July 1, 2014. On September 1, 2015, the Company terminated this lease and surrendered its facility at 67 W Easy St., Unit 115, Simi Valley, CA 93065. The Company has no further obligation due under the lease agreement. On September 1, 2015, the Company entered into a Commercial Lease Agreement with the Winther Family Trust, pursuant to which the Company leases property located at 1871 Tapo Street, Simi Valley, CA 93065 (the “Premises”), for a term of 60 months commencing on September 1, 2015. The Company will pay a base rent of $5,650 per month for the duration of the term and also made a security deposit in the same amount. The Premises is replacing the Company’s prior facility located at 67 W. Easy St., Unit 115, Simi Valley, CA 93065 and will serve as the Company’s primary office location. In addition to providing office space, the approximately 5,000 square foot facility will also be used for warehousing and shipping. The lessor of the Premises, the Winther Family Trust, is controlled by Niels Winther and Lori Winther. Both Niels Winther and Lori Winther are Directors of the Company, and Lori Winther also serves as the Company’s Chief Financial Officer and Secretary. On September 15, 2015, the Company entered into a lease agreement with Santa Susana Business Center, LLC to lease warehouse and office space at 4685 Runway Street, Unit D, Simi Valley, CA 93063. The lease term extends through September 30, 2017 with a monthly lease payment of $1,716 and increasing to $1,802 on October 1, 2016. The Company has a remaining commitment under this lease of $26,772 as of June 30, 2016 and a security deposit of $1,716 was paid to the landlord in relation to this lease. Rent expense for the years ended June 30, 2016 and 2015 was $133,664 and $92,185, respectively. |
Note 6 - Related Parties
Note 6 - Related Parties | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 6 - Related Parties | NOTE 6 – RELATED PARTIES As of June 30, 2016 and June 30, 2015, the Company had a balance of $103,409 and $96,312, respectively, outstanding as related party loans from Kyle Winther, the Company’s CEO, Lori Winther, the Company’s CFO and Winther & Company, CPAs (an entity owned by Lori Winther, and her husband, Niels Winther, CPA, who is a director of the Company), as well as Chase Bank Line of Credit (which was extended to the Company, though owed personally by Niels and Lori Winther). The outstanding balances are unsecured, non-interest bearing and repayable upon demand. From time to time the Company will engage the services of Winther & Co. an accounting firm owned by the husband of the Company’s CFO. Winther & Co. provides bookkeeping, accounting and tax services to the Company. For the years ended June 30, 2016 and 2015, the Company incurred approximately $56,180 and $82,000, respectively, in fees with Winther & Co. As of June 30, 2016 and June 30, 2015 the Company had Accounts Payable outstanding to related parties for accounting fees of $0 and $12,369, respectively. Reference is also made to the Commercial Lease Agreement with the Winther Family Trust described in Note 5. |
Note 7 - Convertible Notes Paya
Note 7 - Convertible Notes Payable | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 7 - Convertible Notes Payable | NOTE 7 – CONVERTIBLE NOTES PAYABLE Note Holder Balance June 30, 2015 Unamortized Original Derivative Discount Unamortized Original Issue Discount Balance of Debt Discount Balance, net of Discount 6/30/2015 Typenex Co-Investment, LLC $163,131 $ (27,718) $ (14,594) $ (42,313) $ 120,818 Typenex Co-Investment, LLC 89,057 (15,132) (2,652) (17,784) 71,273 Total Convertible Notes Payable $252,188 $ (42,850) $ (17,246) $ (60,097) $ 192,091 Note Holder Balance June 30, 2016 Unamortized Original Derivative Discount Balance net of Derivative Discount 6/30/16 Iliad Co Loan Payable $ 272,250 $ - $ 272,250 TCA Global Loan Payable 659,409 (483,120) 176,289 Total Convertible Notes Payable $ 931,659 $ (483,120) $ 448,539 Description of Outstanding Convertible Note Obligations Iliad Co-Investment Note On August 12, 2015, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with Iliad Research & Trading, L.P, a Utah limited liability partnership (“Iliad”), pursuant to which the Company concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “Original August Note”). The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover the investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction. In consideration for the Original August Note, the investor paid an aggregate cash purchase price of $200,000, computed as follows: $245,000 original principal balance, less the original issue discount of $40,000, and less the transaction costs. The Original August Note was originally scheduled to mature on February 12, 2016 and the Company could prepay all or a portion of the amount owed earlier than it is due without penalty. The original issue discount of $40,000 was recorded as debt discount and fully amortized to interest expense during the fiscal year ended June 30, 2016. Interest did not accrue on the unpaid principal balance of the Original August Note unless an event of default occurred. Upon the occurrence of an event of default, the outstanding balance of the Original August Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law. In addition, if an event of default occurs under the Original August Note, the investor may declare all unpaid principal, plus all accrued interest and other amounts due under the Original August Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the Original August Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter. On February 19, 2016, the Company entered into an Amendment to Promissory Note with Iliad which extended the maturity date of the Original August Note to April 12, 2016 and increased the principal amount of the note by $2,500 as consideration for the extension. The Company evaluated the Amendment to Promissory Note under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”), noting it did not meet the criteria for substantial modification under ASC 470, and accordingly treated the amendment as a modification to the Original August Note, adding $2,500 to the balance and extending the due date under the modified terms. On May 12, 2016 but effective as of April 15, 2016, the Company entered into an Exchange Agreement with Iliad (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the Company and Iliad exchanged the Original August Note for a new promissory note in the original principal amount of $272,250 (the “Exchange Note”), which balance includes an exchange fee of $24,750. The Company evaluated the Exchange Agreement under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”), noting it met the criteria for substantial modification under ASC 470, and accordingly treated the Exchange Agreement as an extinguishment of debt and recorded a loss of extinguishment of debt of $54,225. The related derivative liability was also extinguished (see Note 8 for further discussion). The Exchange Note was issued in substitution of and not in satisfaction of the Original August Note. The Exchange Note provided that the Company was to make the following payments to Iliad: (a) a payment in shares of the Company’s common stock within three trading days of June 15, 2016 based on a note conversion amount of $50,000 and a conversion price that was equal to 70% of the average of the three lowest closing bid prices of the Company’s common stock in the twenty trading days immediately preceding such conversion (this payment of shares was not made by the Company as a result of a subsequent note amendment, see Note 14); and (b) a payment equal to the remaining aggregate outstanding balance of the Exchange Note on or before July 15, 2016, which payment must be made in cash. The Company identified an embedded derivative liability in the Exchange Note with an original estimated fair market value of $29,475 and recorded this as a derivative liability. See Note 8 for a discussion relating to the original derivative liability and re-measurement of such derivate liability and Note 14 for a discussion of a further modification to this facility. As of June 30, 2016, the outstanding balance on the Exchange Note was $272,250. TCA Global Credit Master Fund LP Note December 2015 On December 24, 2015, the Company entered into a Senior Secured Credit Facility Agreement (the “Loan Agreement”) with TCA Global Credit Master Fund, LP (“TCA”). At the initial closing on December 24, 2015, the Company issued to TCA a Convertible Promissory Note in the principal amount of $750,000 (the “TCA Note”). The TCA Note is scheduled to mature on June 24, 2017 (the “Maturity Date”). At any time prior to the Maturity Date or the earlier termination of the Loan Agreement, the Company can request up to $9,250,000 of additional loans, which additional loans may be made in the sole discretion of TCA. The Company may prepay borrowings at any time, in whole or in part, without penalty. Upon origination, the Company recorded a debt discount of $750,000 and amortized $266,880 during the year ended June 30, 2016, leaving an unamortized balance of $483,120. The loan will accrue interest on the unpaid principal balance at an annual rate of 18%. The Company made interest only payments of $11,250 on each of January 24, February 24 and March 24, 2016, and thereafter, will make payments of approximately $56,208 of principal and interest per month until the Maturity Date. In the event the Company is in default under the loan agreement with TCA or any related transaction document, including as a result of a default in the Company’s payment obligations, any amount due to TCA under the facility will, at TCA’s option, bear interest from the date due until such past due amount is paid in full at an annual rate of 22%. In addition, upon the occurrence and during the continuance of an event of default under the transaction documents, TCA may terminate its commitments to the Company and declare all of the Company’s obligations to TCA to be immediately due and payable. While the Note is outstanding, but only upon the occurrence of (i) an event of default under the loan agreement with TCA or any related transaction document or (ii) the Company’s mutual agreement with TCA, TCA may convert, subject to certain beneficial ownership limitations, all or any portion of the outstanding principal, accrued and unpaid interest and any other sums due and payable under the Note or any other transaction document (such total amount, the “Conversion Amount”) into a number of shares of the Company’s common stock equal to: (i) the Conversion Amount divided by (ii) eighty-five percent (85%) of the lowest of the daily volume weighted average price of the Company’s common stock during the five business days immediately prior to the conversion date (the “Conversion Shares”). Upon liquidation by TCA of Conversion Shares, if TCA realizes a net amount from such liquidation equal to less than the Conversion Amount, the Company is obligated to issue to TCA additional shares of the Company’s common stock equal to: (a) the Conversion Amount minus the net realized amount, divided by (b) the average volume weighted average price of the Company’s common stock during the five business days immediately prior to the date upon which TCA requests additional shares. The Company accounted for the conversion feature as a derivate liability (see Note 8 for further discussion). The payment and performance of all the Company’s indebtedness and other obligations to TCA, including all borrowings under the loan agreement and related agreements, are secured by liens on substantially all of the Company’s assets pursuant to a Security Agreement. Of the proceeds received at the initial closing, approximately $106,000 was used to pay in full all indebtedness outstanding under the Company’s Business Loan and Security Agreement with B of I Federal Bank (the “Bank”), entered into on November 3, 2015. Upon repayment of the Company’s indebtedness under the Business Loan and Security Agreement, the Bank released its liens on the Company’s assets. After the payment of approximately $51,000 of fees and cash expenses to TCA in connection with the loan transaction, the Company received net proceeds of approximately $593,000. As of June 30, 2016 the outstanding balance of the TCA Note was $659,409. In connection with the Loan Agreement, the Company agreed to pay to TCA a fee for advisory services provided to the Company prior to the entry into the Loan Agreement in the amount of $126,000 (the “Advisory Fee”). As partial payment of the Advisory Fee, the Company issued to TCA 3,810,000 shares of the Company’s common stock on December 24, 2015 (the “Advisory Fee Shares”), representing 4.99% of the Company’s issued and outstanding shares of common stock on such date. In the event that TCA receives net proceeds from the sale of such shares that are less than the Advisory Fee, TCA may require the Company to issue additional shares of common stock in an amount sufficient such that, when sold and the net proceeds from such sale are added to the net proceeds from the sale of any of the previously issued and sold Advisory Fee Shares, TCA shall have received total net funds equal to the Advisory Fee. Notwithstanding the foregoing, subject to certain conditions, the Company has the right to redeem the Advisory Fee Shares then in TCA’s possession for an amount payable in cash equal to the Advisory Fee, less any net cash proceeds received by TCA from previous sales of Advisory Fee Shares. In the event TCA has not realized net proceeds from the sale of Advisory Fee Shares equal to at least the Advisory Fee by the earlier to occur of: (i) December 24, 2016; (ii) the occurrence of an event of default under the transaction documents; or (iii) the Maturity Date, then at any time thereafter, TCA has the right to require the Company to redeem all of the Advisory Fee Shares then in TCA’s possession for cash equal to the Advisory Fee, less any cash proceeds received by TCA from any previous sales of Advisory Fee Shares. The Advisory Fee was recorded as a deferred finance fee of $126,000 and the Company amortized $42,000 during the year ended June 30, 2016, leaving an unamortized balance of $84,000. The Company determined that the Conversion feature of the TCA Note and the Advisory Fee meets the definition of an embedded derivative that should be separated and accounted for as a derivative liability. See Note 8 for a discussion relating to derivative liability. Description of Terminated Convertible Note Obligations Notes Issued to Gotama Capital S.A. On March 14, 2014, the Company closed the first of three tranches of a financing transaction pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $185,000 to Gotama Capital S.A. in exchange for cash proceeds of $185,000. The note bore interest at a rate of 8% per annum, with interest being payable on May 15 th On June 30, 2015, the Company converted $614,340 at a price of $0.15 per share, representing the entire principal amount of $560,000 and all accrued interest in the amount of $54,340 on the three convertible promissory notes issued to Gotama Capital S.A., into an aggregate of 4,095,605 shares of the Company’s common stock, par value $0.001 per share. As a result of the conversion, the three notes issued to Gotama Capital are no longer outstanding. Note Issued to Typenex Co-Investment, LLC in November, 2014 On November 4, 2014, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company concurrently issued to Investor a Secured Convertible Promissory Note in a principal amount of $1,687,500 (the “November Note”). The outstanding balance of this note as of June 30, 2016 and 2015 was $0 and $252,188, respectively. As of June 30, 2015, the unamortized debt discount balance was $60,096, the Company amortized $7,337 during the year ended June 30, 2016, leaving an unamortized debt discount of $52,759 which was recorded to loss on extinguishment of debt upon extinguishment of the November Note. As further described below, on December 18, 2015 the company entered into a Note Settlement Agreement relating to the November Note. Typenex Co-Investment June 2015 Note (See Note 9) On June 4, 2015, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company, pursuant to which the Company concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “June Note”). In consideration for the June Note, the investor paid an aggregate cash purchase price of $200,000, computed as follows: $245,000 original principal balance, less the original issue discount of $40,000, and less the transaction costs. The June Note matured on December 4, 2015 and, as further described below, on December 18, 2015 the company entered into a Note Settlement Agreement relating to the June Note. As of June 30, 2015 the outstanding balance on the June Note was $245,000 and as of June 30, 2016, the outstanding balance on the June Note was $0. As of June 30, 2015, the unamortized debt discount balance was $34,098 and the Company amortized $34,098 during the year ended June 30, 2016, leaving an unamortized debt discount of $0. Note Settlement Agreement relating to the November Notes and the June Note On December 18, 2015, the Company and Typenex Co-Investment, LLC (the “Investor”) entered into a Note Settlement Agreement. The Note Settlement Agreement relates to the November Note and the June Note (collectively, the “Modified Notes”). The Note Settlement Agreement restructured the payment provision of the notes, including the June Note which was due and payable in full on December 4, 2015. The Company was to have made $50,000 monthly payments beginning December 15, 2015 and the remaining outstanding balance was to have been paid on or before March 15, 2016. This payment schedule was amended on February 19, 2016 (see below for a description of the Amendment to Note Settlement Agreement). As consideration for Investor’s agreement to enter into the Note Settlement Agreement, the Company agreed to increase the outstanding balance of each note by 15% (the “Restructure Effect”). Following the application of the Restructure Effect and including a $5,000 transaction expense fee, the outstanding balance of the November Note was $107,443 and the outstanding balance of the June Note was $281,750. The Company identified a derivative liability associated with the Note Settlement Agreement (See Note 8 below). The Company evaluated the Note Settlement Agreement under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”). ASC 470 requires modifications 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. For extinguished debt, a difference between the re-acquisition price and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains. The Company noted the change in terms per the Note Settlement Agreement, met the criteria for substantial modification under ASC 470, and accordingly treated the modification as extinguishment of the original November Note and June Note, replaced by the new convertible note under the modified terms. The Company recorded a loss on extinguishment of debt of $427,848 (which includes the unamortized debt discount of $52,759 noted above) during the year ended June 30, 2016, including true-up shares of 3,432,068 accrued in the amount of approximately $36,000 in the accompanying balance sheet (See Note 14). Amendment to Note Settlement Agreement On February 19, 2016, the Company entered into an Amendment to Note Settlement Agreement (the “Settlement Agreement Amendment”) with Investor. The Settlement Agreement Amendment relates to the Note Settlement Agreement (the “Original Agreement”) entered into between the parties on December 18, 2015. The Original Agreement, as amended by the Settlement Agreement Amendment, restructures the payment provision of the Modified Notes. The Settlement Agreement Amendment restructures the payment provisions contained in the Original Agreement and provides that the Company is to make the following payments to Investor, in lieu of the previously agreed to $50,000 cash payments, notwithstanding the terms of the Modified Notes (the “Restructure”): (a) a cash payment in the amount of $35,000 payable upon execution of the Settlement Agreement Amendment together with 918,386 shares of the Company’s common stock (subject to adjustment as described in the Settlement Agreement Amendment) based on a note conversion amount of $15,000 and a conversion price of $0.016333, which shares are to be issued and delivered pursuant to the terms of the Settlement Agreement Amendment and (b) a cash payment on or before March 15, 2016 in the amount of $35,000 together with shares of the Company’s common stock based on a note conversion amount of $15,000 and a conversion price of $0.016333, which 918,386 shares were issued and delivered pursuant to the terms of the Settlement Agreement Amendment; and (c) a payment equal to the remaining aggregate outstanding balance of the Modified Notes on or before April 15, 2016, which payment must be made in cash (collectively, the “Note Payments”). This Settlement Agreement Amendment was further modified on May 12, 2016 as described below. As consideration for Investor’s agreement to enter into the Settlement Agreement Amendment, the Company agreed to pay Investor a restructuring fee of $2,500.00. The Company evaluated the Settlement Agreement Amendment under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”). The Company noted the change in terms per the Settlement Agreement Amendment did not meet the criteria for substantial modification under ASC 470, and accordingly treated the amendment as a modification to the Note Settlement Agreement, adding $2,500 to the balance and extending the due date under the modified terms. On May 12, 2016 but effective as of April 15, 2016, the Company entered into Amendment #2 to Note Settlement Agreement (the “Second Amendment”) with Typenex Co-Investment, LLC (the “Investor”). The Second Amendment relates to the Note Settlement Agreement entered into between the parties on December 18, 2015, as previously amended on February 19, 2016 (as previously amended, the “Original Agreement”). The Original Agreement, as amended by the Second Amendment, restructures the payment provision of the Modified Notes. The Second Amendment restructures the payment provisions contained in the Original Agreement and provides that the Company is to make the following payments to Investor notwithstanding the terms of the Modified Notes (the “Restructure”): (a) a cash payment in the amount of $35,000 payable on or before April 15, 2016 together with 3,160,556 shares of the Company’s common stock (subject to adjustment as described in the Settlement Agreement Amendment) based on a note conversion amount of $50,000 and a conversion price of $0.015820, which shares are to be issued and delivered pursuant to the terms of the Settlement Agreement Amendment and (b) a cash payment on or before May 15, 2016 in the amount of $35,000 together with shares of the Company’s common stock based on a note conversion amount of $50,000 and a conversion price to be determined in accordance with the Notes, which shares are to be issued and delivered pursuant to the terms of the Settlement Agreement Amendment (see Note 3 for share issuance description); and (c) a payment equal to the remaining aggregate outstanding balance of the Notes on or before June 15, 2016, which payment must be made in cash (collectively, the “Note Payments”). The Second Amendment also provides that outstanding balance on each of the November Note and the June Note will bear interest at the rate of 10% per annum from the effective date of the amendment until such notes are repaid in full; previously, the June Note did not accrue interest on the unpaid principal balance of the note unless an event of default occurred. As consideration for Investor’s agreement to enter into the Second Amendment, the Company agreed to pay Investor a restructuring fee of $15,316. The Company evaluated the Second Amendment under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”), noting it did not meet the criteria for substantial modification under ASC 470, and accordingly treated the amendment as a modification to the Original Agreement. During the year ended June 30, 2016, the Company made principal payments of $277,009 and converted $130,000 of the Note Settlement into 10,594,769 shares. As of June 30, 2016, the outstanding balance under the November Note and June Note is $0. Upon the final payoff of the November Note and June Note, the Company recorded a gain on extinguishment of debt of $6,498 related to the re-measurement of the derivative liability. |
Note 8 - Derivative Liabilities
Note 8 - Derivative Liabilities | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 8 - Derivative Liabilities | NOTE 8 – DERIVATIVE LIABILITIES [ Note name June 30, 2015 Estimated Fair Value Upon Issuance Change in Estimated Fair Value Extinguishment of Debt June 30, 2016 EMBEDDED CONVERSION FEATURE: Chicago ventures 68,584 1,597 (70,181)* - Typenex 330,946 (324,448) (6,498) - Iliad 29,475 82,465 111,940 TCA 706,911 (105,534) 601,376 TCA Advisory fee 23,130 91,440 114,570 Total 68,584 1,090,462 (254,481) (76,679) 827,887 *this was accounted for as part of the $427,848 loss described in Note 7. The Company evaluated each of the Typenex November Note and June Note (see Note 7), Iliad Co-Investment Note (see Note 7), the TCA Note (see Note 7) and the terms of the Advisory Fee payable to TCA (see Note 7) under the requirements of ASC 480 “Distinguishing Liabilities from Equity” and concluded that none of the foregoing fall within the scope of ASC 480. The Company then evaluated each of the Iliad Co-Investment Note, the TCA Note and the terms of the Advisory Fee payable to TCA under the requirements of ASC 815 “Derivatives and Hedging” and concluded that each the foregoing contain features that result in an embedded derivative. The Company has recorded the fair value of each derivative as a current liability in the balance sheet as of June 30, 2016. The change in fair value was recorded as other expense in the statement of operations for the year ended June 30, 2016. In arriving at fair-value estimates, the Company utilizes the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the fair value hierarchy, the fair-value measurement is characterized based upon the lowest level input. For the Company, recurring fair-value measurements are performed for the derivative liability. The derivative liability is recognized in the balance sheet at fair value. Changes in the fair value of the derivative liability are reported in the statement of operations. The Company does not have any liabilities that reduce risk associated with hedging exposure and has not designated the derivative liability as a hedge instrument. The Company did not have any derivatives valued using Level 1 and Level 2 inputs as of June 30, 2016. The Company categorized the derivative liability as Level 3 with a fair value of $827,887 as of June 30, 2016 using the Black-Scholes pricing model. The Company used the following input ranges: stock price $0.006-$0.01; expected term 0.58-0.96 years; risk-free rate 0.36%-0.45%; and volatility 150%-156%. Unobservable inputs were the prevailing interest rates, the Company’s stock volatility and the expected term. There have been no transfers between Level 1, Level 2, or Level 3 categories. Level 3 as of June 30, 2015 was $68,584; Level 3 additions for the twelve months ended June 30, 2016 were $1,090,464 for the initial recognition with a $(254,481) valuation adjustment and a $(76,679) adjustment related to extinguishment of debt at June 30, 2016; Level 3 at June 30, 2016 was $827,887. |
Note 9 - Notes Payable
Note 9 - Notes Payable | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 9 - Notes Payable | NOTE 9 – NOTES PAYABLE Note Holder Balance 6/30/2015 Unamortized Original Issue Discount Balance, net of Discount 6/30/2015 Typenex Unsecured Short Term (Note 7) $ 245,000 $ (34,098) $ 210,902 B of I Bank 153,655 - 153,655 The Hartford 13,001 - 13,001 Bank of the West - short term portion 7,211 - 7,211 Total Short Term Notes Payable $ 418,867 $ (34,098) $ 384,769 Bank of the West - long term portion $ 29,189 $ - $ 29,189 Total Long Term Notes Payable $ 29,189 $ - $ 29,189 Note Holder Balance June 30, 2016 Unamortized Original Issue Discount Balance, net of Discount June 30, 2016 Bank of the West - short term portion $ 7,211 $ - $ 7,211 Bank of the West - long term 23,137 - 23,137 $ 30,348 $ - $ 30,348 Bank of the West On December 29, 2014, Kyle Winther, the Company’s CEO, entered into a vehicle financing agreement with the Bank of the West. Pursuant to the agreement, the amount financed was $39,275, payable in 48 monthly payments plus accrued interest at a rate of 3.9%, with monthly payments of $614 and a maturity date of December 29, 2018. In January 2015, the Company agreed to assume the payments on this loan and capitalized the vehicle. As of June 30, 2016 the outstanding balance was $30,348, with $7,211 and $23,137 classified as short term and long term, respectively. As of June 30, 2015 the outstanding balance was $36,400, with $7,211 and $29,189 classified as short term and long term, respectively. Terminated Facilities with B of I Federal Bank On January 2, 2015, the Company entered into a Business Loan and Security Agreement with B of I Federal Bank (the “Bank”). Pursuant to the agreement, the Company borrowed $200,000 from the Bank and received net proceeds of $195,000 USD after deducting an origination fee of $5,000. The loan was payable in 147 payments of $1,728 due each business day beginning on and after January 5, 2015, with the initial total repayment amount (subject to certain exceptions) being equal to $254,000. On June 2, 2015, the Company entered into a new Business Loan and Security Agreement with the Bank. Pursuant to the agreement, the Company borrowed $175,000 from the Bank and received net proceeds of $104,071 after deducting an origination fee of $1,875 and the repayment of $69,054 in full satisfaction of the Company’s remaining obligations under that certain Business Loan and Security Agreement entered into with the Bank on January 2, 2015. The new loan was payable in 126 payments of $1,708 due each business day beginning on June 3, 2015, with the total repayment amount (subject to certain exceptions) being equal to $215,249 (the “Total Repayment Amount”). As of June 30, 2016 and 2015, the outstanding balance was $0 and $153,655, respectively. On November 3, 2015, the Company entered into a new Business Loan and Security Agreement with the Bank. Pursuant to the agreement, the Company borrowed $125,000 from the Bank and received net proceeds of $93,615 after deducting an origination fee of $3,023 and the repayment of $28,361 in full satisfaction of the Company’s remaining obligations under that certain Business Loan and Security Agreement entered into with the Bank on June 2, 2015. The new loan was payable in 126 payments of $1,220 due each business day beginning on November 4, 2015, with the total repayment amount (subject to certain exceptions) being equal to $153,750. On December 24, 2015, the loan balance of $106,000 was paid off upon the closing of the financing transaction with TCA Global Credit Master Fund, LP. Prior to their repayment, each of the facilities with the Bank were secured by all personal property of the Company and were also personally guaranteed by Lori Winther, Kyle Winther and Gary Perlingos. The Company evaluated each of the agreements entered into on June 2, 2015 and November 3, 2015 under ASC 470-50-40 “Extinguishments of Debt” (“ASC 470”), and determined that neither agreement constituted a substantial modification under ASC 470, and accordingly treated the agreements as a modification to the original January 2, 2015 facility. |
Note 10 - Income Tax
Note 10 - Income Tax | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 10 - Income Tax | NOTE 10 – INCOME TAX The provision for income taxes was determined by applying the statutory federal income tax rate to net income before income taxes and is as follows for the year ending June 30, 2015 and June 30, 2016: 2016 2015 Federal tax $ - $ - State tax $ 800 $ 2,400 The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes were as follows: 2016 2015 Statutory federal income tax rate (34)% (34) % State taxes, net of federal benefit (4)% (3) % Other (1)% (2) % (39)% (39) % |
Note 11 - Loss Per Common Share
Note 11 - Loss Per Common Share | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 11 - Loss Per Common Share | NOTE 11 – LOSS PER COMMON SHARE A summary of the net loss and shares used to compute net loss per share for the year ended June 30, 2016 and 2015 is as follows: 2016 $ 2015 Net loss for computation of basic and dilutive net (loss) per share $ (634,643) $ (613,997) Basic and dilutive net (loss) per share $ (0.01) $ (0.01) Basic and dilutive weighted average shares outstanding $ 76,419,180 $ 68,164,099 |
Note 12 - Property and Equipmen
Note 12 - Property and Equipment | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 12 - Property and Equipment | NOTE 12 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: June 30, 2016 June 30, 2015 Automobile $ 36,976 $ 36,976 Computer 16,756 16,756 Furniture and equipment 112,302 106,568 Leasehold improvements 44,300 44,300 Accumulated depreciation (76,111) (45,054) Property and equipment, net $ 134,223 $ 159,546 |
Note 13 - Litigation
Note 13 - Litigation | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 13 - Litigation | NOTE 13 – LITIGATION On November 4, 2015, the Company filed a lawsuit in the Superior Court of California, County of Orange, Case Number 30-2015-00818492-CU-BC-CJC against Kevin Crump, an individual, Magnavape, Inc. and Magnavon, Inc. alleging breach of contract, fraud, negligent misrepresentation, intentional interference with economic advantage and negligent interference with economic advantage relating to the production by the defendants of the Company’s AR Mods. The lawsuit prayer is for $3,000,000. This amount includes general damages, lost profits and punitive damages against the defendants. A mandatory settlement conference is scheduled for February 24, 2017 and a jury trial is scheduled for March 27, 2017. |
Note 14 - Subsequent Events
Note 14 - Subsequent Events | 12 Months Ended |
Jun. 30, 2016 | |
Notes | |
Note 14 - Subsequent Events | Note 14 – Subsequent events On July 15, 2016, the Company entered into a second Exchange Agreement (the “Second Exchange Agreement”) with Iliad. Pursuant to the Second Exchange Agreement, the Company and Iliad exchanged the Exchange Note for a new promissory note in the original principal amount of $81,631.88 (the “Second Exchange Note”), which balance includes an exchange fee of $2,500. The Second Exchange Note was issued in substitution of and not in satisfaction of the Exchange Note. The Second Exchange Agreement and related Second Exchange Note restructure the payment provisions of the Exchange Note. The Second Exchange Note provides that the Company is to make to Iliad a payment equal to the remaining aggregate outstanding balance of the Second Exchange Note on or before July 15, 2017, which payment must be made in cash. Interest accrues on the outstanding balance of the Second Exchange Note at a rate of 10% per annum; provided, however that if the Company fails to repay the Second Exchange Note when due, or if the Company is otherwise in default under the Second Exchange Note, at the option of Iliad a default interest rate of 18% per annum will apply. In the event the Company is in default under the Second Exchange Note, Iliad also has the option to accelerate the note with the outstanding balance becoming immediately due and payable at an amount equal to 115% of the outstanding balance of the Second Exchange Note as of the date the event of default occurred. The Second Exchange Note may be prepaid without penalty at any time. The Second Exchange Note provides that, until the Second Exchange Note has been paid in full, Iliad may convert all or part of the outstanding note balance (the “Conversion Amount”) into shares of common stock of the Company at the Conversion Price (as defined below). Notwithstanding the foregoing, the Company has the option to pay the Conversion Amount in cash in lieu of delivering shares of its common stock. As used, “Conversion Price” means a price per share equal to 70% of the average of the three lowest closing bid prices of the Company’s common stock in the twenty trading days immediately preceding the applicable conversion. The Second Exchange Note provides that the Company may not issue shares to Iliad under the Second Exchange Note if the issuance of such shares would cause Iliad to beneficially own more than 9.99% of the Company’s outstanding common stock. As of October 10, 2016, the outstanding balance on the Second Exchange Note was $23,264. Issuance of Common Stock Subsequent to June 30, 2016, the Company issued to Typenex Co-Investment, LLC shares of its common stock as partial payment of the Company’s outstanding debt obligations to Typenex as follows (see Note 7): Date of Issuance Number of Shares of Common Stock Conversion Price Consideration August 5, 2016 118,456 $0.014467 Issuance of true up shares in connection with debt conversion on March 15, 2016. August 5, 2016 3,313,612 $0.007723 Issuance of true up shares in connection with debt conversion on April 15, 2016. |
Note 2 - Summary of Significa21
Note 2 - Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Basis of Presentation | Basis of Presentation The financial statements, and the accompanying notes, are prepared in accordance with US GAAP and pursuant to the instructions to Form 10-K of the Securities and Exchange Commission. The Company’s fiscal year end is June 30. The Company operates in one segment, in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting. The Company’s Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. |
Note 2 - Summary of Significa22
Note 2 - Summary of Significant Accounting Policies: Going Concern (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Going Concern | Going Concern The CompanyÂ’s consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The CompanyÂ’s cash balance as of June 30, 2016 along with its continued net losses and working capital deficit along with other factors raise substantial doubt about its ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. The Company continues to face liquidity and capital resources constraints despite generating $138,176 in cash from operations in the fiscal year ended June 30, 2016. The Company does not believe that the proceeds from its debt facilities (see Note 7 and Note 9) along with its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the CompanyÂ’s future capital requirements will depend on many factors, including the CompanyÂ’s results from operations and the growth rate of the CompanyÂ’s business. The CompanyÂ’s near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth on terms that are more favorable than the companyÂ’s existing credit facilities. The Company is also pursuing various means to increase revenues, reduce operating costs and to improve overall cash flow. The Company presently does not have any arrangements for additional financing. However, the Company continues to evaluate various financing strategies to support its current operations and fund its future growth. |
Note 2 - Summary of Significa23
Note 2 - Summary of Significant Accounting Policies: Use of Estimates (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with US GAAP 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. The Company regularly evaluates significant estimates and assumptions related to its accounts receivable allowance, accounts payable, deferred income tax asset valuation allowances, fair value of derivative liability, fair value of stock and stock options, useful life of fixed assets, recoverability of long lived assets, inventory reserves, estimates of sales return and accrual for potential liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the CompanyÂ’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. |
Note 2 - Summary of Significa24
Note 2 - Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At June 30, 2016, the Company had no cash equivalents. |
Note 2 - Summary of Significa25
Note 2 - Summary of Significant Accounting Policies: Concentration of Risk (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Concentration of Risk | Concentration of Risk Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company had $295,799 in excess of FDIC insured limits. The Company relied on two and one manufacturer(s) to make all of the CompanyÂ’s Mods during the years ended June 30, 2016 and 2015, respectively. |
Note 2 - Summary of Significa26
Note 2 - Summary of Significant Accounting Policies: Financial Instruments and Fair Value Measurement (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Financial Instruments and Fair Value Measurement | Financial Instruments and Fair Value Measurement Pursuant to ASC 820, Fair Value Measurements and Disclosures Level 1 Level 2 Level 3 The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties, and derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Pursuant to ASC 820, the fair value of the Company’s derivative liability is determined based on “Level 3” inputs, which consist of unobservable inputs. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. |
Note 2 - Summary of Significa27
Note 2 - Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Revenue Recognition | Revenue Recognition The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable. For retail transactions, revenue is recognized at the point of sale. For wholesale and online transactions, revenue is recognized at the time goods are shipped. |
Note 2 - Summary of Significa28
Note 2 - Summary of Significant Accounting Policies: Shipping and Handling (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Shipping and Handling | Shipping and Handling Payments by customers to the Company for shipping and handling costs are included in revenue on the statements of operations, while the CompanyÂ’s expense is included in cost of goods sold. Shipping and handling for inventory is included as a component of inventory on the balance sheets, and in cost of revenues in the statements of operations when the product is sold. |
Note 2 - Summary of Significa29
Note 2 - Summary of Significant Accounting Policies: Deferred Income (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Deferred Income | Deferred Income The Company accrues deferred income when customer payments are received, but product has not yet shipped. As of June 30, 2016 and 2015, the Company had recorded $94,754 and $82,499, respectively for deferred income as a result of prepayments for product made by customers. Those prepayments are recognized into revenue at the point those prepaid products have subsequently shipped. The Company recognized the $82,499 into revenue during the year ended June 30, 2016. The Company expects to recognize the $94,754 into revenue during the following fiscal year. |
Note 2 - Summary of Significa30
Note 2 - Summary of Significant Accounting Policies: Inventories (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Inventories | Inventories Inventories consist primarily of vaping devices, electronic cigarettes, e-liquid and related supplies and accessories and are stated at the lower of cost (first-in, first-out) or market value. |
Note 2 - Summary of Significa31
Note 2 - Summary of Significant Accounting Policies: Property and Equipment (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Property and Equipment | Property and Equipment Property and equipment consists of computer equipment, furniture, facility equipment, and leasehold improvements which are carried at historical cost and are depreciated over the estimated useful lives of the related assets. Estimated useful lives are from 3 to 10 years. Expenditures for maintenance and repairs are charged against operations. The modified accelerated cost recovery system (straight line) is used for federal income tax purposes and also for financial reporting as the difference between the two does not appear to be material. |
Note 2 - Summary of Significa32
Note 2 - Summary of Significant Accounting Policies: Impairment of Long-lived Assets and Goodwill (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Impairment of Long-lived Assets and Goodwill | Impairment of Long-lived Assets and Goodwill The Company evaluates goodwill for impairment annually in the fourth quarter, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying amount. The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. The Company typically uses discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those the Company believes hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. The loss recognized cannot exceed the carrying amount of goodwill. The Company periodically evaluates whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the assetÂ’s carrying value over its fair value. The CompanyÂ’s impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, the Company assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If actual results are not consistent with the CompanyÂ’s assumptions and estimates, or the CompanyÂ’s assumptions and estimates change due to new information, the Company may be exposed to an impairment charge in the future. |
Note 2 - Summary of Significa33
Note 2 - Summary of Significant Accounting Policies: Advertising Expense (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Advertising Expense | Advertising Expense Advertising costs are expensed as incurred. Advertising expense for the year ended June 30, 2016 and 2015 were $106,734 and $140,771, respectively and are included in general and administrative expenses. |
Note 2 - Summary of Significa34
Note 2 - Summary of Significant Accounting Policies: Debt (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Debt | Debt The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes. Convertible debt derivative treatment If the conversion feature within convertible debt meets the requirements to be treated as a derivative, the Company estimates the fair value of the convertible debt derivative using Black-Scholes upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt. Convertible debt – beneficial conversion feature If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt. |
Note 2 - Summary of Significa35
Note 2 - Summary of Significant Accounting Policies: Accounting For Derivatives Liabilities (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Accounting For Derivatives Liabilities | Accounting for Derivatives Liabilities The Company evaluates contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in EntityÂ’s Own Equity |
Note 2 - Summary of Significa36
Note 2 - Summary of Significant Accounting Policies: Modification of Debt Instruments (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Modification of Debt Instruments | Modification of Debt Instruments Modifications or exchanges of debt, which are not considered a troubled debt restructuring, are considered extinguishments if the terms of the new debt and the original instrument are substantially different. The instruments are considered substantially different when the present value of the cash flows under the terms of the new debt instrument are at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. The fair value of non-cash consideration associated with the new debt instrument, such as warrants, are included as a day one cash flow in the 10% cash flow test. If the original and new debt instruments are substantially different, the original debt is derecognized and the new debt is initially recorded at fair value, with the difference recognized as an extinguishment gain or loss. |
Note 2 - Summary of Significa37
Note 2 - Summary of Significant Accounting Policies: Deferred Financing Costs, Net (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Deferred Financing Costs, Net | Deferred Financing Costs, Net Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized to interest expense over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful. For the year ending June 30, 2016, the Company incurred $199,750 in costs in connection with the negotiation of a financing transaction with TCA Global Credit Master Fund, LP. The unamortized finance costs for the years ended June 30, 2016 and 2015 were $133,167 and $39,654 respectively. |
Note 2 - Summary of Significa38
Note 2 - Summary of Significant Accounting Policies: Basic and Diluted Net Income Per Share (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Basic and Diluted Net Income Per Share | Basic and Diluted Net Income per Share The Company computes net income per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants or debentures. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2016 and 2015, there were no dilutive securities as the Company had incurred net losses. |
Note 2 - Summary of Significa39
Note 2 - Summary of Significant Accounting Policies: Income Taxes (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Income Taxes | Income Taxes The Company accounts for income taxes under the provisions of ASC Topic 740-10, Income Taxes When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2011 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2011 Fiscal Period and forward for various states. |
Note 2 - Summary of Significa40
Note 2 - Summary of Significant Accounting Policies: Stock Based Compensation (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Stock Based Compensation | Stock Based Compensation Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instrument is fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instrument granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates. For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” the Company performs an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, the Company uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in the Company’s consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company’s financial statements. For the years ended June 30, 2016 and 2015, the Company had $0 and $10,850, respectively, of stock based compensation relating to employees. |
Note 2 - Summary of Significa41
Note 2 - Summary of Significant Accounting Policies: Non-cash Equity Transactions (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Non-cash Equity Transactions | Non-Cash Equity Transactions Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to current market price. |
Note 2 - Summary of Significa42
Note 2 - Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2016 the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The Company is currently in the process of evaluating the impact of the adoption on its financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance. In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet. Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet. The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The Company is currently evaluating the potential impact this standard will have on its financial statements and related disclosures. In September 2015, the FASB issued ASU 2015-16, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This ASU is effective for interim and annual reporting period beginning after December 15, 2016, including interim periods within those fiscal years, with the option to early adopt for financial statements that have not been issued. The Company is currently evaluating the potential impact this standard will have on its financial statements and related disclosures. In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations and cash flows. In April 2015, the FASB issued ASU 2015-03, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The Company does not expect the adoption of this ASU to have a significant impact on its financial position, results of operations and cash flows. The Company has reviewed other recent accounting pronouncements issued prior to the date of issuance of its financial statements included in this report, and does not believe any of these pronouncements will have a material impact on its consolidated financial statements. |
Note 3 - Capital Stock_ Schedul
Note 3 - Capital Stock: Schedule of Stockholders Equity (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Tables/Schedules | |
Schedule of Stockholders Equity | 2015 Annual dividend yield - Expected life (years) 5 Risk-free interest rate 1.63% Expected volatility 121.10% Fair value of options granted 0.035 |
Note 3 - Capital Stock_ Sched44
Note 3 - Capital Stock: Schedule of Share-based Compensation, Stock Options, Activity (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Tables/Schedules | |
Schedule of Share-based Compensation, Stock Options, Activity | Number of Shares Weighted Average Exercise Price Outstanding at July 1, 2014 - $ - Granted 310,000 0.0419 Exercised - - Forfeited - - Outstanding at June 30, 2015 310,000 $ 0.0419 Granted - - Exercised - - Forfeited - - Outstanding at June 30, 2016 310,000 $ 0.0419 |
Note 7 - Convertible Notes Pa45
Note 7 - Convertible Notes Payable: Schedule of Convertible Notes Payable Text Block (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Tables/Schedules | |
Schedule of Convertible Notes Payable Text Block | Note Holder Balance June 30, 2015 Unamortized Original Derivative Discount Unamortized Original Issue Discount Balance of Debt Discount Balance, net of Discount 6/30/2015 Typenex Co-Investment, LLC $163,131 $ (27,718) $ (14,594) $ (42,313) $ 120,818 Typenex Co-Investment, LLC 89,057 (15,132) (2,652) (17,784) 71,273 Total Convertible Notes Payable $252,188 $ (42,850) $ (17,246) $ (60,097) $ 192,091 Note Holder Balance June 30, 2016 Unamortized Original Derivative Discount Balance net of Derivative Discount 6/30/16 Iliad Co Loan Payable $ 272,250 $ - $ 272,250 TCA Global Loan Payable 659,409 (483,120) 176,289 Total Convertible Notes Payable $ 931,659 $ (483,120) $ 448,539 |
Note 8 - Derivative Liabiliti46
Note 8 - Derivative Liabilities: Schedule of Derivative Liabilities at Fair Value (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Tables/Schedules | |
Schedule of Derivative Liabilities at Fair Value | Note name June 30, 2015 Estimated Fair Value Upon Issuance Change in Estimated Fair Value Extinguishment of Debt June 30, 2016 EMBEDDED CONVERSION FEATURE: Chicago ventures 68,584 1,597 (70,181)* - Typenex 330,946 (324,448) (6,498) - Iliad 29,475 82,465 111,940 TCA 706,911 (105,534) 601,376 TCA Advisory fee 23,130 91,440 114,570 Total 68,584 1,090,462 (254,481) (76,679) 827,887 |
Note 2 - Summary of Significa47
Note 2 - Summary of Significant Accounting Policies: Going Concern (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Details | ||
Net cash used in operating activities | $ 138,176 | $ (437,359) |
Note 2 - Summary of Significa48
Note 2 - Summary of Significant Accounting Policies: Deferred Income (Details) - USD ($) | Jun. 30, 2016 | Jun. 30, 2015 |
Details | ||
Deferred Revenue | $ 94,754 | $ 82,499 |
Note 2 - Summary of Significa49
Note 2 - Summary of Significant Accounting Policies: Advertising Expense (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Details | ||
Advertising Expense | $ 106,734 | $ 140,771 |
Note 3 - Capital Stock (Details
Note 3 - Capital Stock (Details) - shares | Jun. 30, 2016 | Dec. 25, 2015 | Jun. 30, 2015 | Mar. 10, 2015 |
Common Stock, Shares Issued | 86,860,375 | 72,455,606 | ||
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 | ||
Service Provider | ||||
Common Stock, Shares Issued | 300,000 | |||
Gotama Capital S.A. | ||||
Common Stock, Shares Issued | 4,095,605 | |||
TCA Global Credit Master Fund, LP | ||||
Common Stock, Shares Issued | 3,810,000 |
Note 3 - Capital Stock_ Sched51
Note 3 - Capital Stock: Schedule of Stockholders Equity (Details) | 12 Months Ended |
Jun. 30, 2016 | |
Details | |
Fair Value Assumptions, Expected Term | 5 years |
Fair Value Assumptions, Risk Free Interest Rate | 1.63% |
Fair Value Assumptions, Expected Volatility Rate | 121.10% |
Note 3 - Capital Stock_ Sched52
Note 3 - Capital Stock: Schedule of Share-based Compensation, Stock Options, Activity (Details) - $ / shares | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2016 | |
Details | ||
Balance, Shares | 310,000 | 310,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | $ 0.0419 | $ 0.0419 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | 310,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 0.0419 |
Note 4 - Inventories (Details)
Note 4 - Inventories (Details) - USD ($) | Jun. 30, 2016 | Jun. 30, 2015 |
Details | ||
Inventory | $ 585,489 | $ 323,784 |
Note 5 - Lease Commitments (Det
Note 5 - Lease Commitments (Details) - USD ($) | 1 Months Ended | 12 Months Ended | 25 Months Ended | 34 Months Ended | 35 Months Ended | ||
Sep. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Aug. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2016 | Sep. 15, 2015 | |
S.J. Real Estate Group, LLC | |||||||
Operating Leases, Rent Expense | $ 2,214 | ||||||
Other Commitment | $ 28,710 | $ 28,710 | $ 28,710 | ||||
S.B.P.W., LLC | |||||||
Operating Leases, Rent Expense | $ 2,035 | $ 4,070 | |||||
Winther Family Trust | |||||||
Monthly Lease and Rental Expense | 5,650 | ||||||
Susana Business Center, LLC | |||||||
Other Commitment | $ 26,772 | ||||||
Monthly Lease and Rental Expense | $ 1,716 | ||||||
Security Deposit | $ 1,716 | ||||||
Total | |||||||
Operating Leases, Rent Expense | $ 133,664 | $ 92,185 |
Note 6 - Related Parties (Detai
Note 6 - Related Parties (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Details | ||
Due to Related Parties, Current | $ 103,409 | $ 96,312 |
Professional Fees | 56,180 | 82,000 |
Accrued Professional Fees, Current | $ 0 | $ 12,369 |
Note 7 - Convertible Notes Pa56
Note 7 - Convertible Notes Payable: Schedule of Convertible Notes Payable Text Block (Details) - USD ($) | Jun. 30, 2016 | Jun. 30, 2015 |
Typenex Co- Investment, LLC | Balance 06/30/2015 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | $ 163,131 | |
Typenex Co- Investment, LLC | Unamortized Original Derivative Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (27,718) | |
Typenex Co- Investment, LLC | Unamortized Original Issue Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (14,594) | |
Typenex Co- Investment, LLC | BalanceOfDebtDiscountMember | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (42,313) | |
Typenex Co- Investment, LLC | Balance, net of Discount 06/30/2015 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 120,818 | |
TypenexCoMember | Balance 06/30/2015 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 89,057 | |
TypenexCoMember | Unamortized Original Derivative Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (15,132) | |
TypenexCoMember | Unamortized Original Issue Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (2,652) | |
TypenexCoMember | BalanceOfDebtDiscountMember | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (17,784) | |
TypenexCoMember | Balance, net of Discount 06/30/2015 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 71,273 | |
Total Convertible Notes Payable | Balance 06/30/2015 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 252,188 | |
Total Convertible Notes Payable | Unamortized Original Derivative Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | $ (483,120) | (42,850) |
Total Convertible Notes Payable | Unamortized Original Issue Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (17,246) | |
Total Convertible Notes Payable | BalanceOfDebtDiscountMember | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (60,097) | |
Total Convertible Notes Payable | Balance, net of Discount 06/30/2015 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | $ 192,091 | |
Total Convertible Notes Payable | Balance 06/30/2016 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 931,659 | |
Total Convertible Notes Payable | Balance, net of Discount 06/30/2016 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 448,539 | |
Iliad Co Loan Payable | Balance 06/30/2016 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 272,250 | |
Iliad Co Loan Payable | Balance, net of Discount 06/30/2016 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 272,250 | |
TCA Global Loan Payable | Unamortized Original Derivative Discount | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | (483,120) | |
TCA Global Loan Payable | Balance 06/30/2016 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | 659,409 | |
TCA Global Loan Payable | Balance, net of Discount 06/30/2016 | ||
Current portion of, convertible notes payable, net of unamortized debt discount, current | $ 176,289 |
Note 7 - Convertible Notes Pa57
Note 7 - Convertible Notes Payable (Details) - USD ($) | Apr. 10, 2014 | Mar. 14, 2014 | May 31, 2014 | Jun. 30, 2016 | Dec. 24, 2015 | Aug. 12, 2015 | Jun. 04, 2015 | Nov. 04, 2014 | May 19, 2014 |
Iliad Research & Trading, LP | |||||||||
Convertible Notes Payable | $ 245,000 | ||||||||
Convertible Debt, Current | $ 272,250 | ||||||||
TCA Global Credit Master Fund, LP | |||||||||
Convertible Notes Payable | $ 750,000 | ||||||||
Gotama Capital SA | |||||||||
Convertible Notes Payable | $ 200,000 | $ 185,000 | $ 175,000 | ||||||
Proceeds from Convertible Debt | $ 200,000 | $ 185,000 | $ 149,881 | ||||||
Typenex Co- Investment, LLC | |||||||||
Convertible Notes Payable | $ 245,000 | $ 1,687,500 |
Note 8 - Derivative Liabiliti58
Note 8 - Derivative Liabilities: Schedule of Derivative Liabilities at Fair Value (Details) - USD ($) | Jun. 30, 2016 | Jun. 30, 2015 |
Derivative liabilities | $ 827,883 | $ 68,584 |
June 30, 2015 | Chicago Ventures | ||
Derivative liabilities | 68,584 | |
June 30, 2015 | Total | ||
Derivative liabilities | 68,584 | |
Change in Estimated Fair Value | Chicago Ventures | ||
Derivative liabilities | 1,597 | |
Change in Estimated Fair Value | Typenex | ||
Derivative liabilities | (324,448) | |
Change in Estimated Fair Value | Iliad | ||
Derivative liabilities | 82,465 | |
Change in Estimated Fair Value | TCA | ||
Derivative liabilities | (105,534) | |
Change in Estimated Fair Value | TCA Advisory Fee | ||
Derivative liabilities | 91,440 | |
Change in Estimated Fair Value | Total | ||
Derivative liabilities | (254,481) | |
Extinguishment of Debt | Chicago Ventures | ||
Derivative liabilities | (70,181) | |
Extinguishment of Debt | Typenex | ||
Derivative liabilities | (6,498) | |
Extinguishment of Debt | Total | ||
Derivative liabilities | (76,679) | |
June 30, 2016 | Iliad | ||
Derivative liabilities | 111,940 | |
June 30, 2016 | TCA | ||
Derivative liabilities | 601,376 | |
June 30, 2016 | TCA Advisory Fee | ||
Derivative liabilities | 114,570 | |
June 30, 2016 | Total | ||
Derivative liabilities | 827,887 | |
Estimated Fair Value Upon Issuance | Typenex | ||
Derivative liabilities | 330,946 | |
Estimated Fair Value Upon Issuance | Iliad | ||
Derivative liabilities | 29,475 | |
Estimated Fair Value Upon Issuance | TCA | ||
Derivative liabilities | 706,911 | |
Estimated Fair Value Upon Issuance | TCA Advisory Fee | ||
Derivative liabilities | 23,130 | |
Estimated Fair Value Upon Issuance | Total | ||
Derivative liabilities | $ 1,090,462 |
Note 9 - Notes Payable (Details
Note 9 - Notes Payable (Details) - USD ($) | Jun. 30, 2016 | Nov. 03, 2015 | Jun. 30, 2015 | Jun. 02, 2015 | Jan. 02, 2015 |
B of I Federal Bank- Loan 1 | |||||
Other Short-term Borrowings | $ 200,000 | ||||
Net Proceeds | 195,000 | ||||
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums | 5,000 | ||||
Short-term Bank Loans and Notes Payable | $ 1,728 | ||||
B of I Federal Bank Loan 2 | |||||
Other Short-term Borrowings | $ 175,000 | ||||
Net Proceeds | 104,071 | ||||
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums | $ 1,875 | ||||
B of I Federal Bank-Loan 3 | |||||
Other Short-term Borrowings | $ 125,000 | ||||
Net Proceeds | 93,615 | ||||
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums | $ 3,023 | ||||
Typenex Unsecured Short Term | Balance 06/30/2015 | |||||
Other Notes Payable | $ 245,000 | ||||
Typenex Unsecured Short Term | Unamortized Original Issue Discount | |||||
Other Notes Payable | (34,098) | ||||
Typenex Unsecured Short Term | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | 210,902 | ||||
B of I Bank | Balance 06/30/2015 | |||||
Other Notes Payable | 153,655 | ||||
B of I Bank | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | 153,655 | ||||
The Hartford | Balance 06/30/2015 | |||||
Other Notes Payable | 13,001 | ||||
The Hartford | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | 13,001 | ||||
Bank of the West- short term portion | Balance 06/30/2015 | |||||
Other Notes Payable | 7,211 | ||||
Bank of the West- short term portion | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | 7,211 | ||||
Bank of the West- short term portion | Balance 06/30/2016 | |||||
Other Notes Payable | $ 7,211 | ||||
Bank of the West- short term portion | Balance, net of Discount 06/30/2016 | |||||
Other Notes Payable | 7,211 | ||||
Total Short Term Notes Payable | Balance 06/30/2015 | |||||
Other Notes Payable | 418,867 | ||||
Total Short Term Notes Payable | Unamortized Original Issue Discount | |||||
Other Notes Payable | (34,098) | ||||
Total Short Term Notes Payable | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | 384,769 | ||||
Bank of the West- long term portion | Balance 06/30/2015 | |||||
Other Notes Payable | 29,189 | ||||
Bank of the West- long term portion | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | 29,189 | ||||
Bank of the West- long term portion | Balance 06/30/2016 | |||||
Other Notes Payable | 23,137 | ||||
Bank of the West- long term portion | Balance, net of Discount 06/30/2016 | |||||
Other Notes Payable | $ 23,137 | ||||
Total Long Term Notes Payable | Balance 06/30/2015 | |||||
Other Notes Payable | 29,189 | ||||
Total Long Term Notes Payable | Balance, net of Discount 06/30/2015 | |||||
Other Notes Payable | $ 29,189 |
Note 10 - Income Tax (Details)
Note 10 - Income Tax (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | (34.00%) | (34.00%) |
Effective Income Tax Rate Reconciliation, Tax Contingency, State and Local, Amount | $ (4) | $ (3) |
Effective Income Tax Rate Reconciliation, Deduction, Other, Amount | (1) | (2) |
State Tax | ||
Income Taxes Receivable | $ 800 | $ 2,400 |
Note 11 - Loss Per Common Sha61
Note 11 - Loss Per Common Share (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Details | ||
Net loss for computation of basic and dilutive net (loss) per share | $ (634,643) | $ (613,997) |
Net loss per share, basic and diluted | $ (0.01) | $ (0.01) |
Weighted average shares outstanding, basic and diluted | 76,419,180 | 68,164,099 |
Note 12 - Property and Equipm62
Note 12 - Property and Equipment (Details) - USD ($) | Jun. 30, 2016 | Jun. 30, 2015 |
Details | ||
Property, Plant and Equipment, Other, Net | $ 36,976 | $ 36,976 |
Property, Plant and Equipment, Other, Gross | 16,756 | 16,756 |
Furniture and Fixtures, Gross | 112,302 | 106,568 |
Leasehold Improvements, Gross | 44,300 | 44,300 |
Property, Plant and Equipment, Other, Accumulated Depreciation | (76,111) | (45,054) |
Property, Plant and Equipment, Net | $ 134,223 | $ 159,546 |