Document and Entity Information
Document and Entity Information | 3 Months Ended |
Sep. 30, 2016shares | |
Document and Entity Information: | |
Entity Registrant Name | VAPOR HUB INTERNATIONAL INC. |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2016 |
Amendment Flag | false |
Entity Central Index Key | 1,515,718 |
Current Fiscal Year End Date | --06-30 |
Entity Common Stock, Shares Outstanding | 90,292,443 |
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 | 2,017 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | vhub |
Vapor Hub International Inc. -
Vapor Hub International Inc. - Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 | |
Current Assets: | |||
Cash | $ 85,942 | $ 607,960 | |
Accounts Receivable | 4,505 | 880 | |
Inventory | 790,399 | 585,489 | |
Prepaid expenses and other current assets | 229,204 | 38,254 | |
Other current assets | 10,556 | 10,556 | |
Total Current Assets | 1,120,606 | 1,243,139 | |
Fixed assets, net | 126,320 | 134,223 | |
Long term assets | 14,427 | 14,341 | |
Total Assets | 1,261,353 | 1,391,703 | |
Current Liabilities: | |||
Accounts payable and accrued expenses | 614,216 | 828,146 | |
Deferred income | 155,276 | 94,754 | |
Equipment leases payable | 851 | 1,247 | |
Convertible notes payable, net of unamortized debt discount, current | 91,197 | 315,373 | |
Notes payable, net of unamortized debt discount | 135,096 | 7,211 | |
Loans from related parties | 146,277 | 103,409 | |
Derivative liabilities, current | 503,887 | 827,883 | |
Total Current Liabilities | 1,646,800 | 2,178,023 | |
Long Term Liabilities: | |||
Notes payable- long term | 21,587 | 23,137 | |
Long term liabilities | 21,587 | 23,137 | |
TOTAL LIABILITIES | 1,668,387 | 2,201,160 | |
Stockholders' Deficit | |||
Preferred stock | [1] | ||
Common stock | [2] | 90,292 | 86,860 |
Additional paid-in capital | 808,595 | 775,929 | |
Accumulated deficit | (1,305,921) | (1,672,246) | |
Total Stockholders Deficit | (407,034) | (809,457) | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 1,261,353 | $ 1,391,703 | |
[1] | $0.001 par value, 10,000,000 authorized, 0 issued and outstanding as of September 30, 2016 and June 30, 2016, respectively | ||
[2] | $0.001 par value, 1,010,000,000 shares authorized, 90,292,443 and 86,860,375 issued and outstanding as of September 30, 2016 and June 30, 2016, respectively. |
Statement of Financial Position
Statement of Financial Position - Parenthetical - $ / shares | Sep. 30, 2016 | Jun. 30, 2016 |
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 | 1,010,000,000 |
Common Stock, Shares Issued | 90,292,443 | 86,860,375 |
Common Stock, Shares Outstanding | 90,292,443 | 86,860,375 |
Vapor Hub International Inc. -4
Vapor Hub International Inc. - Unaudited Condensed Statements of Operations - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement | ||
Merchandise sales, net | $ 2,425,222 | $ 1,962,345 |
Royalties | 70,000 | |
Total net revenues | 2,495,222 | 1,962,345 |
Cost of revenue | 1,559,097 | 1,203,842 |
Gross profit | 936,125 | 758,503 |
General and administrative expenses | 665,656 | 701,741 |
Net income from operations | 270,469 | 56,762 |
Other income (expense): | ||
Interest expense | (33,273) | (32,686) |
Amortization of finance fees | (35,364) | (9,765) |
Interest expense- amortization of debt discount | (126,031) | (42,181) |
Loss on extinguishment of debt | (74,870) | |
Change in fair value of derivative liabilities | 366,195 | (45,483) |
Other income (expense) | 96,656 | (130,115) |
Net income (loss) before taxes | 367,125 | (73,353) |
Income tax provision | 800 | 800 |
Net income (loss) | $ 366,325 | $ (74,153) |
Net loss per share: | ||
Net income per share, basic | $ 0 | $ 0 |
Net income per share, diluted | $ 0 | $ 0 |
Weighted average shares outstanding: | ||
Weighted average shares outstanding, basic | 88,986,765 | 72,455,606 |
Weighted average shares outstanding, diluted | 158,843,321 | 72,455,606 |
Vapor Hub International Inc. -5
Vapor Hub International Inc. - Unaudited Condensed Statements of Cash Flows - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
OPERATING ACTIVITIES: | ||
Net income (loss) | $ 366,325 | $ (74,153) |
Adjustments to reconcile net (loss) to net cash provided used in operating activities: | ||
Depreciation | 7,903 | 7,764 |
Amortization of debt discount on convertible notes | 126,031 | 1,165 |
Amortization of debt discount on short term note | 38,179 | |
Amortization of deferred finance costs | 35,364 | 14,765 |
Amortization of derivative debt discount | 2,837 | |
Loss on extinguishment | 42,198 | |
Change in derivative liabilities | (366,194) | 45,483 |
Non cash interest for conversion of notes payable | 8,406 | |
Changes in operating assets and liabilities: | ||
Accounts receivable, increase decrease | (3,625) | 181 |
Inventory, increase decrease | (204,910) | (176,224) |
Prepaid expenses and other current long term assets, increase decrease | (41,778) | 6,582 |
Security deposit, increase decrease | (86) | (7,446) |
Deferred income, increase decrease | 60,522 | (29,669) |
Accounts payable and accrued expenses, increase decrease | (177,831) | 64,529 |
Net Cash used in Operating Activities | (147,675) | (106,007) |
INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (5,734) | |
Net cash used in investing activities | (5,734) | |
FINANCING ACTIVITIES: | ||
Payments on leased property loans | (396) | (1,071) |
Payments on finances of insurance premiums | (21,287) | (32,507) |
Proceeds from related party loans | 47,718 | (36,188) |
Payments on related party loans | (4,850) | |
Payments on convertible notes payable | (393,977) | (105,469) |
Proceeds from short term notes payable | 200,000 | |
Payments on short term notes payable | (86,003) | |
Payments for deferred finance costs | (17,500) | |
Payments on auto loan payable | (1,551) | (1,491) |
Net cash provided by financing activities | (374,343) | (80,229) |
Net change in cash | (522,018) | (191,970) |
Cash, beginning of period | 607,960 | 351,081 |
Cash, end of period | 85,942 | 159,111 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 32,713 | 33,886 |
Cash paid for income taxes | 800 | 800 |
Non-cash transactions: | ||
Non cash repayment and borrowings of short term note payable | 2,500 | |
Insurance premium financing | 149,173 | 146,908 |
Derivative liability | 74,112 | $ 114,067 |
Shares issued for extinguishment of debt | $ 36,098 |
Note 1- Incorporation, Nature o
Note 1- Incorporation, Nature of Operations and Acquisition | 3 Months Ended |
Sep. 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 Companys 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 and atomizers. |
Note 2 - Summary of Significant
Note 2 - Summary of Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 2 - Summary of Significant Accounting Policies | NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying (a) condensed balance sheet at June 30, 2016 has been derived from audited statements and (b) the condensed unaudited financial statements as of and for the periods ended September 30, 2016 and 2015, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (US GAAP) for complete financial statements, and should be read in conjunction with the audited financial statements and related footnotes included in the Companys Annual Report on Form 10-K for the year ended June 30, 2016 (the 2016 Annual Report), filed with the Securities and Exchange Commission (the SEC) on October 13, 2016. It is managements opinion, however, that all material adjustments (consisting of normal recurring adjustments), have been made which are necessary for a fair financial statements presentation. The financial statements include all material adjustments (consisting of normal recurring accruals) necessary to make the financial statements not misleading as required by Regulation S-X, Rule 10-01. Operating results for the three months ended September 30, 2016 are not necessarily indicative of the results of operations expected for the year ending June 30, 2017. This summary of significant accounting policies of the Company is presented to assist in understanding the Companys unaudited condensed financial statements. The unaudited condensed financial statements and notes are representations of the Companys management, which is responsible for their integrity and objectivity. These accounting policies conform to US GAAP and have been consistently applied in the preparation of the unaudited condensed financial statements. The Company operates in one segment in accordance with accounting guidance Financial Accounting Standards Board (FASB) ASC Topic 280, Segment Reporting. The Companys Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. Going Concern The Companys unaudited condensed 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 Companys cash balance as of September 30, 2016, its working capital deficit along with other factors raise substantial doubt about its ability to continue as a going concern. The accompanying unaudited condensed 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 using $147,675 in cash from operations in the three months ended September 30, 2016 and using $374,343 in financing activities during the same period. The Company does not believe that its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the Companys future capital requirements will depend on many factors, including the Companys results from operations and the growth rate of the Companys business. The Companys near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth. 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 Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. 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 did not have any cash accounts in excess of FDIC insured limits as of September 30, 2016. The Company relied on three manufacturers to make all of the Companys Mods during the three months ended September 30, 2016 and one manufacturer to make all of the Companys Mods during the three months ended September 30, 2015. The Company had a concentration in accounts payable of 45% and 49% to two manufacturers as of September 30, 2016. Financial Instruments and Fair Value Measurement Pursuant to ASC 820, Fair Value Measurements and Disclosures Level 1 Level 2 Level 3 The Companys financial instruments consist principally of cash, accounts payable, accrued liabilities, amounts due to related parties, derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Companys 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 Companys 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 merchandise 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. The Company recognizes royalty revenues when products are sold by third parties 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. Deferred Revenue The Company accrues deferred revenue when customer payments are received, but product has not yet shipped. As of September 30, 2016 and June 30, 2016, the Company had recorded $155,276 and $94,754, respectively for deferred revenue 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 expects to recognize the $155,276 into revenue during the current fiscal year. Advertising Expense Advertising costs are expensed as incurred. Advertising expense for the three months ended September 30, 2016 and 2015 were $13,015 and $38,657, respectively and are included in general and administrative expenses. Deferred Finance 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. Unamortized finance costs for the three months ended September 30, 2016 and as of June 30, 2016 were $100,302 and $133,166 respectively. The Company adopted ASU 2015-03 , which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. have a significant impact on financial position, results of operations cash flows. Modification of Debt Instruments The Company evaluated modifications of debt instruments 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. Basic and Diluted Net Loss 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 September 30, 2016, there were 69,856,556 dilutive securities related to the convertible notes payable as the Company had net income and as of September 30, 2015, there were no dilutive securities as the Company had incurred a net loss. See Note 9 for further discussion. 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. currently in the process of evaluating the impact of adoption on 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. currently in the process of evaluating the impact of the adoption on s 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. 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. currently evaluating the potential impact this standard will have on 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. currently evaluating the potential impact this standard will have on 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. do not expect the adoption of this ASU to have a significant impact on financial position, results of operations and cash flows. The Company has reviewed other recent accounting pronouncements issued prior to the date of issuance of financial statements included in this report, and do not believe any of these pronouncements will have a material impact on financial statements. |
Note 3 - Officers' Loans Payabl
Note 3 - Officers' Loans Payable | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 3 - Officers' Loans Payable | NOTE 3 OFFICERS LOANS PAYABLE As of September 30, 2016 and June 30, 2016, the Company had a balance of $146,277 and $103,409 respectively, outstanding as related party loans from Kyle Winther, the Companys CEO, Lori Winther, the Companys 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 a 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. |
Note 4 - Inventories
Note 4 - Inventories | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 4 - Inventories | NOTE 4 INVENTORIES As of September 30, 2016 and June 30, 2016, the Company had a balance of $790,399 and $585,489, 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 September 30, 2016 and June 30, 2016. |
Note 5 - Lease Commitments
Note 5 - Lease Commitments | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 5 - Lease Commitments | NOTE 5 LEASE COMMITMENTS 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 September 30, 2016 of $ and a security deposit of $6,380 was paid to the landlord in relation to this lease. 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 Company has a remaining commitment under this lease as of September 30, 2016 of $ The Premises the Companys prior facility located at 67 W. Easy St., Unit 115, Simi Valley, CA 93065 and as the Companys primary office location. In addition to providing office space, the approximately 5,000 square foot facility also 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 Companys 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 $ as of September 30, 2016 and a security deposit of $ was paid to the landlord in relation to this lease. Rent expense for the three months ended September 30, 2016 and 2015 was $31,668 and $32,952, respectively. |
Note 6 - Related Parties
Note 6 - Related Parties | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 6 - Related Parties | NOTE 6 RELATED PARTIES From time to time the Company will engage the services of Winther & Co. an accounting firm owned by the husband of the Companys CFO. Winther & Co. provides bookkeeping, accounting and tax services to the Company. For the three months ended September 30, 2016 and 2015, the Company incurred approximately $ and $ , respectively, in fees with Winther & Co. As of September 30, 2016 and June 30, 2016 the Company had Accounts Payable outstanding to related parties for accounting fees of $ and $0, respectively. Reference is also made to the Officers Loans Payable described in Note 3 and the Commercial Lease Agreement with the Winther Family Trust described in Note 5. |
Note 7 - Convertible Notes Paya
Note 7 - Convertible Notes Payable | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 7 - Convertible Notes Payable | NOTE 7 CONVERTIBLE NOTES PAYABLE Note Holder Balance Unamortized Original Unamortized Deferred Balance of Convertible Notes, Net of September 30, 2016 Derivative Discount Finance Cost Discount Debt Discount Discount and Deferred Cost Iliad Co Loan Payable 43,156 - (1,875) (1,875) 41,281 TCA Global Loan Payable 505,432 (357,089) (98,427) (455,516) 49,916 Total Convertible Notes Payable 548,588 (357,089) (100,302) (457,391) 91,197 Description of Outstanding Convertible Note Obligations Outstanding as of September 30, 2016 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 investors 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. 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 of $245,000 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. 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 Companys 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 Companys 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); 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. 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 $81,632 (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 Company evaluated the Exchange Amendment dated July 15, 2016 to the Exchange Agreement dated May 12, 2016 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 $42,198. The Second Exchange Agreement and related Second Exchange Note restructured 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 Companys 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 Companys outstanding common stock. The Company determined that the conversion feature of the Second Exchange Note meets the definition of an embedded derivative that should be separated and accounted for as a derivative liability. See Note 10 for a discussion relating to derivative liability. As of November 14, 2016, the outstanding balance on the Second Exchange Note was $0. 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 $706,911 and amortized $223,791 during the year ended June 30, 2016, leaving an unamortized balance of $483,120. For the three months ended September 30, 2016, the Company incurred an amortization expense of $126,031, leaving an unamortized balance of $357,089 at the end of the period. 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 Companys payment obligations, any amount due to TCA under the facility will, at TCAs 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys common stock equal to: (a) the Conversion Amount minus the net realized amount, divided by (b) the average volume weighted average price of the Companys 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. The payment and performance of all the Companys 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 Companys 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 Companys Business Loan and Security Agreement with B of I Federal Bank (the Bank), entered into on November 3, 2015. Upon repayment of the Companys indebtedness under the Business Loan and Security Agreement, the Bank released its liens on the Companys 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 September 30, 2016 the outstanding balance of the TCA Note was $505,432. 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 Companys common stock on December 24, 2015 (the Advisory Fee Shares), representing 4.99% of the Companys 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 TCAs 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 TCAs 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. During the three months ended September 30, 2016, the Company amortized $21,913, leaving an unamortized balance of $62,087 at the end of the period. 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 10 for a discussion relating to derivative liability. |
Note 8 - Notes Payable
Note 8 - Notes Payable | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 8 - Notes Payable | NOTE 8 NOTES PAYABLE Note Holder Balance 9/30/2016 Unamortized Original Issue Discount Balance, net of Discount 9/30/2016 Calco Commercial Insurance $ 47,570 $ - $ 47,570 AFCO Insurance 80,315 - 80,315 Bank of the West - short term portion 7,211 - 7,211 Total Short Term Notes Payable $ 135,096 $ - $ 135,096 Bank of the West - long term portion $ 21,587 $ - $ 21,587 Total Long Term Notes Payable $ 21,587 $ - $ 21,587 Bank of the West On December 29, 2014, Kyle Winther, the Companys 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 September 30, 2016 the outstanding balance was $28,798, with $7,211 and $21,587 classified as short term and long term, respectively. 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. Other Short Term Facilities Effective July 10, 2016, the Company entered into an Agreement to finance its annual General Liability insurance coverage. The insurance coverage is provided through Calco Commercial Insurance. The amount of the policy is $77,240 with $59,072 being financed at 8% over 10 months with a monthly payment of $6,126. The Company made a down payment on the policy of $18,168. At September 30, 2016, the remaining premium obligation due under the Agreement was $47,570. As of August 22, 2016, the Company entered into an insurance contract with Lloyds of London financed by AFCO for Directors and Officers insurance coverage. The amount of the policy is $109,392 with $90,100 being financed at 6.85% over 9 months with a monthly payment of $10,299. The Company made a down payment on the policy of $19,292. At September 30, 2016, the remaining balance was $80,315. |
Note 9 - Net Income (loss) Per
Note 9 - Net Income (loss) Per Common Share | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 9 - Net Income (loss) Per Common Share | NOTE 9 NET INCOME (LOSS) PER COMMON SHARE A summary of net income (loss) and shares used to compute net income (loss) per share for the three months ended September 30, 2016 and 2015 is as follows: September 30, 2016 September 30, 2015 Net income (loss) for computation of basic and dilutive net income (loss) per share $ 366,325 $ (74,153) Basic and dilutive net income (loss) per share $ 0.00 $ (0.00) Basic weighted average shares outstanding 88,986,765 72,455,606 Dilutive weighted average shares outstanding 158,843,321 72,455,606 Dilutive shares for the three months ended September 30, 2016 of 69,856,556 are related to the TCA Global Loan Payable, TCA Advisory Fee and the Iliad Co Loan Payable. |
Note 11 - Equity
Note 11 - Equity | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 11 - Equity | NOTE 11 EQUITY Issuance of Common Stock The Company issued to Typenex Co-Investment, LLC shares of its common stock as partial payment of the Companys 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 12 - Litigation
Note 12 - Litigation | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 12 - Litigation | NOTE 12 LITIGATION Except as described below, the Company knows of no material existing or pending legal proceedings against the Company, nor is it involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Companys directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to the Companys interest. 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 Companys 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. On January 28, 2016, Darin Dyroff, an individual, filed a lawsuit in the Superior Court of the State of California, County of San Luis Obispo, Case Number 16CV-0047 against Vip Vapor Shop & Lounge, Kennedy Enterprises, and Does 1-100. Vapor Hub was served with the Complaint by Dyroff on July 18, 2016. The Complaint asserts causes of action for strict products liability and negligent products liability and the defendant is seeking damages for pain and suffering, mental and emotional distress, future medical care, loss of earnings, lost earnings capacity, property damage, punitive damages, and costs of suit. On September 23, 2016, Steam Distribution, LLC, a defendant in the case, filed a Cross-Complaint against Vapor Hub. The case has been remitted to the Companys product liability insurance carrier and is being handled by them. The insurance company agreed to defend Vapor Hub under its insurance policy subject to the satisfaction of the policys $10,000 deductible. The company does not know the potential exposure on the claim, but believes its exposure is immaterial. |
Note 13 - Subsequent Events
Note 13 - Subsequent Events | 3 Months Ended |
Sep. 30, 2016 | |
Notes | |
Note 13 - Subsequent Events | NOTE 13 SUBSEQUENT EVENTS Subsequent to September 30, 2016, the Company paid all accrued interest and remaining principal on the Second Exchange Note, and the balance of the Exchange Note as of November 21, 2016 is $0. |
Note 2 - Summary of Significa18
Note 2 - Summary of Significant Accounting Policies: Going Concern (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Going Concern | Going Concern The Companys unaudited condensed 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 Companys cash balance as of September 30, 2016, its working capital deficit along with other factors raise substantial doubt about its ability to continue as a going concern. The accompanying unaudited condensed 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 using $147,675 in cash from operations in the three months ended September 30, 2016 and using $374,343 in financing activities during the same period. The Company does not believe that its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the Companys future capital requirements will depend on many factors, including the Companys results from operations and the growth rate of the Companys business. The Companys near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth. 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 Significa19
Note 2 - Summary of Significant Accounting Policies: Use of Estimates (Policies) | 3 Months Ended |
Sep. 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 Companys 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 Significa20
Note 2 - Summary of Significant Accounting Policies: Concentration of Risk (Policies) | 3 Months Ended |
Sep. 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 did not have any cash accounts in excess of FDIC insured limits as of September 30, 2016. The Company relied on three manufacturers to make all of the Companys Mods during the three months ended September 30, 2016 and one manufacturer to make all of the Companys Mods during the three months ended September 30, 2015. The Company had a concentration in accounts payable of 45% and 49% to two manufacturers as of September 30, 2016. |
Note 2 - Summary of Significa21
Note 2 - Summary of Significant Accounting Policies: Financial Instruments and Fair Value Measurement (Policies) | 3 Months Ended |
Sep. 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 Companys financial instruments consist principally of cash, accounts payable, accrued liabilities, amounts due to related parties, derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Companys 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 Companys 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 Significa22
Note 2 - Summary of Significant Accounting Policies: Revenue Recognition (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Revenue Recognition | Revenue Recognition The Company recognizes merchandise 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. The Company recognizes royalty revenues when products are sold by third parties 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 Significa23
Note 2 - Summary of Significant Accounting Policies: Deferred Revenue (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Deferred Revenue | Deferred Revenue The Company accrues deferred revenue when customer payments are received, but product has not yet shipped. As of September 30, 2016 and June 30, 2016, the Company had recorded $155,276 and $94,754, respectively for deferred revenue 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 expects to recognize the $155,276 into revenue during the current fiscal year. |
Note 2 - Summary of Significa24
Note 2 - Summary of Significant Accounting Policies: Advertising Expense (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Advertising Expense | Advertising Expense Advertising costs are expensed as incurred. Advertising expense for the three months ended September 30, 2016 and 2015 were $13,015 and $38,657, respectively and are included in general and administrative expenses. |
Note 2 - Summary of Significa25
Note 2 - Summary of Significant Accounting Policies: Deferred Finance Costs, Net (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Deferred Finance Costs, Net | Deferred Finance 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. Unamortized finance costs for the three months ended September 30, 2016 and as of June 30, 2016 were $100,302 and $133,166 respectively. The Company adopted ASU 2015-03 , which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. have a significant impact on financial position, results of operations cash flows. |
Note 2 - Summary of Significa26
Note 2 - Summary of Significant Accounting Policies: Modification of Debt Instruments (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Modification of Debt Instruments | Modification of Debt Instruments The Company evaluated modifications of debt instruments 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. |
Note 2 - Summary of Significa27
Note 2 - Summary of Significant Accounting Policies: Basic and Diluted Net Loss Per Share (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Policies | |
Basic and Diluted Net Loss Per Share | Basic and Diluted Net Loss 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 September 30, 2016, there were 69,856,556 dilutive securities related to the convertible notes payable as the Company had net income and as of September 30, 2015, there were no dilutive securities as the Company had incurred a net loss. See Note 9 for further discussion. |
Note 2 - Summary of Significa28
Note 2 - Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Sep. 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. currently in the process of evaluating the impact of adoption on 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. currently in the process of evaluating the impact of the adoption on s 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. 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. currently evaluating the potential impact this standard will have on 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. currently evaluating the potential impact this standard will have on 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. do not expect the adoption of this ASU to have a significant impact on financial position, results of operations and cash flows. The Company has reviewed other recent accounting pronouncements issued prior to the date of issuance of financial statements included in this report, and do not believe any of these pronouncements will have a material impact on financial statements. |
Note 7 - Convertible Notes Pa29
Note 7 - Convertible Notes Payable: Schedule of Convertible Notes Payable Text Block (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Schedule of Convertible Notes Payable Text Block | Note Holder Balance Unamortized Original Unamortized Deferred Balance of Convertible Notes, Net of September 30, 2016 Derivative Discount Finance Cost Discount Debt Discount Discount and Deferred Cost Iliad Co Loan Payable 43,156 - (1,875) (1,875) 41,281 TCA Global Loan Payable 505,432 (357,089) (98,427) (455,516) 49,916 Total Convertible Notes Payable 548,588 (357,089) (100,302) (457,391) 91,197 |
Note 8 - Notes Payable_ Schedul
Note 8 - Notes Payable: Schedule of Notes Payable Text Block (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Schedule of Notes Payable Text Block | Note Holder Balance 9/30/2016 Unamortized Original Issue Discount Balance, net of Discount 9/30/2016 Calco Commercial Insurance $ 47,570 $ - $ 47,570 AFCO Insurance 80,315 - 80,315 Bank of the West - short term portion 7,211 - 7,211 Total Short Term Notes Payable $ 135,096 $ - $ 135,096 Bank of the West - long term portion $ 21,587 $ - $ 21,587 Total Long Term Notes Payable $ 21,587 $ - $ 21,587 |
Note 9 - Net Income (loss) Pe31
Note 9 - Net Income (loss) Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Tables/Schedules | |
Schedule of Earnings Per Share, Basic and Diluted | September 30, 2016 September 30, 2015 Net income (loss) for computation of basic and dilutive net income (loss) per share $ 366,325 $ (74,153) Basic and dilutive net income (loss) per share $ 0.00 $ (0.00) Basic weighted average shares outstanding 88,986,765 72,455,606 Dilutive weighted average shares outstanding 158,843,321 72,455,606 |
Note 2 - Summary of Significa32
Note 2 - Summary of Significant Accounting Policies: Going Concern (Details) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Details | ||
Net Cash used in Operating Activities | $ 147,675 | $ 106,007 |
Net cash provided by financing activities | $ 374,343 | $ 80,229 |
Note 2 - Summary of Significa33
Note 2 - Summary of Significant Accounting Policies: Deferred Revenue (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Details | ||
Deferred Revenue | $ 155,276 | $ 94,754 |
Note 2 - Summary of Significa34
Note 2 - Summary of Significant Accounting Policies: Advertising Expense (Details) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Details | ||
Advertising Expense | $ 13,015 | $ 38,657 |
Note 3 - Officers' Loans Paya35
Note 3 - Officers' Loans Payable (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Details | ||
Loans from related parties | $ 146,277 | $ 103,409 |
Note 4 - Inventories (Details)
Note 4 - Inventories (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Details | ||
Inventory | $ 790,399 | $ 585,489 |
Note 5 - Lease Commitments (Det
Note 5 - Lease Commitments (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 15 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | |
S.J. Real Estate Group, LLC | ||||
Other Commitment | $ 3,190 | $ 3,190 | ||
Winther Family Trust | ||||
Monthly Lease and Rental Expense | 5,650 | |||
Susana Business Center, LLC | ||||
Other Commitment | 21,624 | 21,624 | ||
Monthly Lease and Rental Expense | $ 1,716 | |||
Security Deposit | 1,802 | $ 1,802 | ||
Total | ||||
Operating Leases, Rent Expense | $ 31,668 | $ 32,952 |
Note 6 - Related Parties (Detai
Note 6 - Related Parties (Details) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Details | ||
Professional Fees | $ 10,156 | $ 18,262 |
Note 7 - Convertible Notes Pa39
Note 7 - Convertible Notes Payable: Schedule of Convertible Notes Payable Text Block (Details) | Sep. 30, 2016USD ($) |
Iliad Co Loan Payable | Balance 09/30/2016 | |
Convertible Notes Payable, Current | $ 43,156 |
Iliad Co Loan Payable | Unamortized Deferred Finance Cost Discount | |
Convertible Notes Payable, Current | (1,875) |
Iliad Co Loan Payable | BalanceOfDebtDiscountMember | |
Convertible Notes Payable, Current | (1,875) |
Iliad Co Loan Payable | Convertible Notes, Net of Discount and Deferred Cost | |
Convertible Notes Payable, Current | 41,281 |
TCA Global Loan Payable | Balance 09/30/2016 | |
Convertible Notes Payable, Current | 505,432 |
TCA Global Loan Payable | Unamortized Original Derivative Discount | |
Convertible Notes Payable, Current | (357,089) |
TCA Global Loan Payable | Unamortized Deferred Finance Cost Discount | |
Convertible Notes Payable, Current | (98,427) |
TCA Global Loan Payable | BalanceOfDebtDiscountMember | |
Convertible Notes Payable, Current | (455,516) |
TCA Global Loan Payable | Convertible Notes, Net of Discount and Deferred Cost | |
Convertible Notes Payable, Current | 49,916 |
Total Convertible Notes Payable | Balance 09/30/2016 | |
Convertible Notes Payable, Current | 548,588 |
Total Convertible Notes Payable | Unamortized Original Derivative Discount | |
Convertible Notes Payable, Current | (357,089) |
Total Convertible Notes Payable | Unamortized Deferred Finance Cost Discount | |
Convertible Notes Payable, Current | (100,302) |
Total Convertible Notes Payable | BalanceOfDebtDiscountMember | |
Convertible Notes Payable, Current | (457,391) |
Total Convertible Notes Payable | Convertible Notes, Net of Discount and Deferred Cost | |
Convertible Notes Payable, Current | $ 91,197 |
Note 7 - Convertible Notes Pa40
Note 7 - Convertible Notes Payable (Details) - USD ($) | Nov. 14, 2016 | Dec. 24, 2015 | Aug. 12, 2015 |
Iliad Research Trading LP | |||
Convertible Notes Payable | $ 245,000 | ||
Convertible Debt, Current | $ 0 | ||
TCA Global Credit Master Fund, LP | |||
Convertible Notes Payable | $ 750,000 |
Note 8 - Notes Payable_ Sched41
Note 8 - Notes Payable: Schedule of Notes Payable Text Block (Details) - Balance 09/30/2016 | Sep. 30, 2016USD ($) |
Calco Commercial Insurance | |
Other Notes Payable | $ 47,570 |
AFCO Insurance | |
Other Notes Payable | 80,315 |
Bank of the West- short term portion | |
Other Notes Payable | 7,211 |
Total Short Term Notes Payable | |
Other Notes Payable | 135,096 |
Bank of the West- long term portion | |
Other Notes Payable | 21,587 |
Total Long Term Notes Payable | |
Other Notes Payable | $ 21,587 |
Note 8 - Notes Payable (Details
Note 8 - Notes Payable (Details) - General Liability Insurance - USD ($) | Sep. 30, 2016 | Jul. 10, 2014 |
General Liability Insurance | $ 59,072 | |
General Liability Insurance Coverage | $ 47,570 |
Note 9 - Net Income (loss) Pe43
Note 9 - Net Income (loss) Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Details | ||
Net loss for computation of basic and dilutive net (loss) per share | $ 366,325 | $ (74,153) |
Earnings Per Share, Basic and Diluted | $ 0 | $ 0 |
Weighted average shares outstanding, basic | 88,986,765 | 72,455,606 |
Weighted average shares outstanding, diluted | 158,843,321 | 72,455,606 |