Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 31, 2016 | Feb. 17, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | XFIT BRANDS, INC. | |
Entity Central Index Key | 1,623,554 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 29,356,890 | |
Trading Symbol | XFTB | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Dec. 31, 2016 | Jun. 30, 2016 |
Current Assets | ||
Cash | $ 78,745 | $ 6,829 |
Accounts receivable | 593,567 | 179,636 |
Inventory | 400,008 | 288,184 |
Prepaid expenses | 63,947 | 114,060 |
Total Current Assets | 1,136,267 | 588,709 |
Long Term Assets | ||
Property and equipment, net | 51,941 | 37,676 |
Deposits | 23,467 | 23,467 |
Intangible assets, net | 14,762 | 13,640 |
Goodwill | 33,695 | |
TOTAL ASSETS | 1,260,132 | 663,492 |
Current Liabilities | ||
Accounts payable | 491,928 | 730,026 |
Related party payable | 95,620 | 95,620 |
Accrued expenses and interest | 122,505 | 273,819 |
Customer deposits | 254,241 | 129,201 |
Line of credit | 34,999 | 34,999 |
Billings in excess of earnings | 9,132 | |
Total Current Liabilities | 1,008,425 | 1,263,665 |
Notes payable, net of discounts | 3,500,000 | 2,478,720 |
Total Liabilities | 4,508,425 | 3,742,385 |
Commitments and contingencies (Note 10) | ||
Stockholders' Deficit | ||
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2016 and June 30, 2016 | ||
Common stock, $0.0001 par value, 1,250,000,000 shares authorized, 29,156,890 and 21,192,807 shares issued and outstanding as of December 31, 2016 and June 30, 2016, respectively | 2,916 | 2,119 |
Additional paid in capital | 5,594,736 | 4,712,245 |
Accumulated deficit | (8,845,945) | (7,793,257) |
Total Stockholders' Deficit | (3,248,293) | (3,078,893) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 1,260,132 | $ 663,492 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2016 | Jun. 30, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
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 | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 1,250,000,000 | 1,250,000,000 |
Common stock, shares issued | 29,156,890 | 21,192,807 |
Common stock, shares outstanding | 29,156,890 | 21,192,807 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues | ||||
Product sales | $ 902,185 | $ 674,675 | $ 1,394,192 | $ 1,147,931 |
Cost of revenues | 577,829 | 386,487 | 854,937 | 645,331 |
Gross profit | 324,356 | 288,188 | 539,255 | 502,600 |
Operating expenses | ||||
General and administrative | 526,472 | 402,575 | 924,717 | 847,505 |
Sales and marketing | 74,328 | 84,302 | 138,503 | 174,196 |
Total operating expenses | 600,800 | 486,877 | 1,063,220 | 1,021,701 |
Loss from operations | (276,444) | (198,689) | (523,965) | (519,101) |
Interest expense | (194,216) | (142,279) | (353,148) | (258,556) |
Loss on extinguishment of debt | (175,575) | (175,575) | ||
Net loss | $ (646,235) | $ (340,968) | $ (1,052,688) | $ (777,657) |
Loss per common share - basic and diluted | $ (0.02) | $ (0.02) | $ (0.04) | $ (0.04) |
Weighted average shares outstanding - basic and diluted | 26,479,922 | 20,492,500 | 23,954,299 | 20,492,500 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities | ||
Net loss | $ (1,052,688) | $ (777,657) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation and amortization | 18,209 | 29,942 |
Loss on extinguishment of debt | 175,575 | |
Amortization of debt issuance costs and loan discount | 127,753 | 91,905 |
Stock-based compensation | 57,192 | 75,433 |
Changes in operating assets and liabilities | ||
Accounts receivable | (166,834) | (116,065) |
Royalties receivable | 9,587 | |
Prepaid expenses | 50,113 | 127,337 |
Inventory | (57,122) | (84,160) |
Accounts payable | (112,011) | 158,044 |
Accrued expenses | 19,825 | (1,036) |
Billing in excess of earnings | (17,701) | |
Customer deposits | 125,040 | 51,633 |
Net cash used in operating activities | (832,649) | (435,037) |
Cash flow from investing activities | ||
Purchase of intangibles and property and equipment | (10,510) | |
Acquisition of Environmental Turf Services, net of cash acquired | (184,260) | |
Net cash used in investing activities | (184,260) | (10,510) |
Cash flows from financing activities | ||
Net proceeds from line of credit | 34,197 | |
Proceeds from borrowings on notes payable | 1,000,000 | 500,000 |
Repayment of notes payable | (125,000) | |
Proceeds from sale of stock | 213,825 | |
Net cash provided by financing activities | 1,088,825 | 534,197 |
Net increase in cash | 71,916 | 88,650 |
Cash at beginning of period | 6,829 | 51,016 |
Cash at end of period | 78,745 | 139,666 |
Supplemental cash flow information: | ||
Cash paid for interest | 38,214 | 103,305 |
Non-cash investing and financing activities: | ||
Value of common shares issued as a loan fee | 50,000 | |
Interest expense added to loan principal balance | 34,000 | |
Principal and accrued interest settled with common stock | 278,689 | |
Patent acquired with shares of common stock | 8,900 | |
Payables settled with shares of common stock | 126,087 | |
Common stock issued to acquire Environmental Turf Services | $ 146,000 |
Nature of the Business and Sign
Nature of the Business and Significant Accounting Policies | 6 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Nature of the Business and Significant Accounting Policies | NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES History of the Company XFit Brands, Inc. (“XFit” or the “Company”) was incorporated on September 16, 2014 under the laws of the State of Nevada. The fiscal year of the Company is June 30. XFit’s principal business activity is the design, development, and worldwide marketing and selling of functional equipment, training gear, apparel and accessories for the sports market and fitness industry. The Company provides a full portfolio of products and services spanning Mixed Martial Arts and other high and low impact fitness regimes and own the trademarks Throwdown®, EnviroTurf®, GlideBoxx® and Transformations. Products are sold to gyms, fitness facilities, universities, first responders and directly to consumers via website and through third-party catalogues through a mix of independent distributors and licensees. These financial statements represent the consolidated financial statements of XFit and its wholly owned operating subsidiaries Throwdown Industries Holdings, LLC (“Holdings”), Throwdown Industries, LLC (“TDLLC”), and Throwdown Industries, Inc. (“TDINC”). Forward Stock Split On March 28, 2016, the Board of Directors approved a 1-for-5 forward split of its outstanding shares of common stock (and proportional increase of its authorized common stock from 250 million shares to 1.25 billion shares) with a record date of April 14, 2016 and an effective date of April 15, 2016. Prior to the split, the Company had 4,118,500 shares issued and outstanding and after the split, the Company had 20,592,500 shares issued and outstanding. All references to the number of shares and per-share amounts within these condensed consolidated financial statements, including the notes thereto, have been retroactively restated to reflect this stock split, unless explicitly stated otherwise. Basis of presentation The accompanying condensed consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes as of and for the years ended June 30, 2016 and 2015, which were filed with the Company’s annual report Form 10-K on September 29, 2016. The results of operations for the six months ended December 31, 2016 are not necessarily indicative of results that may be expected for the year ending June 30, 2017 or for any other interim period. Basis of Consolidation The condensed consolidated financial statements include the accounts of XFit, Holdings and TDINC. All significant intercompany transactions and balances have been eliminated in consolidation. Recent Accounting Pronouncements The Company has implemented all applicable new accounting standards and does not believe that there are any other new accounting pronouncements that have been issued that may have a material impact on the condensed consolidated financial statements. In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs . Loss per Share The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the period. To compute the diluted weighted average number of shares outstanding, the Company begins with the basic weighted average number of shares outstanding and adds any potentially dilutive securities that are convertible into shares of common stock. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. For the six months ended December 31, 2016 and 2015, the Company had warrants and options outstanding to acquire shares of common stock that totaled 2,999,281 and 2,268,615 shares, respectively, which were excluded as their effect would have been anti-dilutive. Reclassifications Certain reclassifications were made to the prior period, condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. Use of Estimates Condensed consolidated financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long-lived assets, and the fair value of equity instruments issued. Actual results could differ from those estimates. Loan Discounts and Loan Fees The Company amortizes loan discounts over the term of the loan using the effective interest method. Costs associated with obtaining financing are capitalized and amortized over the term of the related loans using the effective interest method. Amortization of the debt issuance costs and loan discount was $127,753 and $91,905 for the six months ended December 31, 2016 and 2015, respectively, which was recorded as a component of interest expense on the condensed consolidated statements of operations. |
Acquisition of Environmental Tu
Acquisition of Environmental Turf Services | 6 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Acquisition of Environmental Turf Services | NOTE 2 – ACQUISITION OF ENVIRONMENTAL TURF SERVICES On October 14, 2016, but effective as of October 10, 2016, XFit Brands, Inc. (“XFit” or the “Company”) acquired the assets of Environmental Turf Services, LLC (“EnviroTurf”) pursuant to a definitive Asset Purchase Agreement dated October 10, 2016 (the “Purchase Agreement”) between the Company and EnviroTurf. The acquisition was completed on October 14, 2016 upon delivery and acceptance of the schedules to the Purchase Agreement (the “Acquisition”). At the closing of the Acquisition, the Company paid and issued to EnviroTurf a total purchase price of $346,000 as follows: (i) assumption of $200,000 of EnviroTurf’s accounts payable and (ii) 2,000,000 unregistered shares of XFit Common Stock (the “Purchase Price Shares”), which were valued at the closing price on the date of XFit’s Common Stock on the date of the Acquisition. The Company financed the Acquisition and related costs through a combination of cash on hand and internally-generated working capital. The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed as follows: Cash $ 15,740 Accounts receivable 247,097 Inventory 54,702 Property and equipment 24,696 Goodwill 33,695 Accrued expenses (3,163 ) Billing in excess of earnings (26,767 ) Total purchase consideration $ 346,000 The above allocation is preliminary and is subject to change. Because the acquisition was consummated on October 14, 2016, the Company has begun to assess the fair value of the various net assets acquired, but has not yet completed this assessment. The Company is also in the process of identifying other intangible assets, such as customer relationships and recipes that may need to be recognized apart from goodwill. Once identified, these other intangible assets, if any, will be recorded at their fair values. The Company is working to finalize the allocations as quickly as possible, and anticipates that the allocation will not be final for approximately 6 months. Any adjustments necessary may be material to the condensed consolidated balance sheet and the amount of goodwill recognized. Any resulting adjustments would have no impact to the December 31, 2016 reported operating results. Because the Company acquired the assets of EnviroTurf, any resulting goodwill will be deductible for income tax purposes over a subsequent 15-year period. The operating results of EnviroTurf are included in the Company’s operating results beginning as of October 10, 2016. Included in the Company’s operating results are revenues of $201,240, cost of revenues of $159,367 and operating expenses totaling $110,445 that are related to EnviroTurf. The following pro forma, unaudited operating results include the operating results of EnviroTurf as if the Acquisition was completed on July 1, 2016. Revenues $ 1,826,215 Net loss $ (1,101,947 ) Loss per common share – basic and dilutive $ (0.04 ) Weighted average shares outstanding – basic and dilutive 25,106,473 |
Property and Equipment, Net
Property and Equipment, Net | 6 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 3 – PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following at: December 31, 2016 June 30, 2016 (Unaudited) Office furniture and equipment $ 51,794 $ 51,794 Automobiles 24,696 - Warehouse equipment 15,254 15,254 Molds and dies 4,200 4,200 Leasehold Improvements 4,227 4,227 Total, cost 100,171 75,475 Accumulated Depreciation (48,230 ) (37,799 ) Property and equipment, net $ 51,941 $ 37,676 Depreciation expense for the six months ended December 31, 2016 and 2015 was $10,431 and $6,151, respectively. |
Intangible Assets, Net
Intangible Assets, Net | 6 Months Ended |
Dec. 31, 2016 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Intangible Assets, Net | NOTE 4 – INTANGIBLE ASSETS, NET Intangible assets consisted of the following at: December 31, 2016 June 30, 2016 (Unaudited) Trademark and patent $ 17,177 $ 8,277 Transformations exercise fitness program 62,500 62,500 Computer Software 5,584 5,584 Total, cost 85,261 76,361 Accumulated Amortization (70,499 ) (62,721 ) Intangible assets, net $ 14,762 $ 13,640 Amortization expense for the six months ended December 31, 2016 and 2015 was $7,778 and $23,791, respectively. |
Short Term Financing
Short Term Financing | 6 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Short Term Financing | NOTE 5 – SHORT TERM FINANCING On May 3, 2016, the Company entered into a Securities Purchase Agreement (“SPA”) with a single accredited investor (“Investor”) under which it issued and sold to Investor a promissory note in the principal amount of $125,000 (the “Note”). The Note had a maturity date of December 31, 2016 and an original issue discount of $20,000. In addition, the Company paid the Investor’s expenses totaling $5,000. Accordingly, the Company received net proceeds from Investor of $100,000, which proceeds were used for investor relation services. This note was repaid as of December 31, 2016. |
Note Payable
Note Payable | 6 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Note Payable | NOTE 6 – NOTE PAYABLE The note payable is comprised of the following at: December 31, 2016 June 30, 2016 (Unaudited) Note payable $ 3,500,000 $ 2,712,787 Less: unamortized loan discount - (154,462 ) Less: unamortized debt issuance costs - (79,605 ) Total note payable, net $ 3,500,000 $ 2,478,720 On June 10, 2014, the Company entered into a Note Purchase Agreement (“Agreement”) with Pacific Investment Management Company (“PIMCO”) that authorized the issuance of up to $2,500,000. On June 12, 2014, the Company entered into a Senior Secured Note (“Note”) whereby the Company drew $1,500,000. On February 6, 2015, and October 20, 2015, the Company drew down an additional $500,000 on each date. On December 16, 2016, the Company entered into an Amended and Restated Note Purchase Agreement (the “PIMCO Amendment”) with PIMCO pursuant to which the Company issued a $3.5 million 9% Senior Secured Fixed Rate Note due July 12, 2020 (the “Note”). The Note refinanced our prior 14% Senior Secured Note in the principal amount of $2.5 million (the “Prior Note”), providing us with an additional $1 million in working capital. As with the Prior Note, the Note is secured by a lien on substantially all of our assets (other than those sold pursuant to our factoring agreement with Crown Financial). In connection with the PIMCO Amendment, (i) PIMCO converted $278,689 in accrued and unpaid interest into 1,990,639 shares of our common stock. In addition, the Company had previously issued PIMCO a warrant to purchase ten percent of its equity at an exercise price of $1.5 million. The Company amended the terms of the common stock purchase warrant previously issued to PIMCO to reduce the exercise price thereof to $350,000. The amended terms are considered significant and as such the Company is accounting for the PIMCO Amendment as an extinguishment of the prior note payable and the issuance of a new note payable. As a result, the Company recorded a loss on extinguishment of $175,575, which represents $83,465 of unamortized loan discount, $39,515 of unamortized debt issuance costs, and $52,595 of stock-based compensation paid PIMCO. The stock-based compensation is comprised of the incremental value provided by the warrant amendment and the amount by which the fair value of the common stock issued exceeded the amount of settled principal and accrued interest. The shares of common stock were fair valued using the Company’s traded stock price. The incremental fair value added to the warrant was determined by using the Black-Scholes option pricing model with the following variables: annual dividend yield of 0%; expected life of 7.5 years; risk free rate of return of 2.41%; and expected volatility of 158%. The Note includes various covenants, including, but not limited to, having annual audited financial statements within 90 days of the end of the fiscal year. At December 31, 2016, the Company was not in compliance with all covenants due to untimely filing of the second quarter 10Q. The Company received a waiver from PIMCO to alleviate the non-compliance. |
Bank Line of Credit
Bank Line of Credit | 6 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Bank Line of Credit | NOTE 7 – BANK LINE OF CREDIT On July 24, 2015, the Company entered into an unsecured line of credit with Wells Fargo Bank. The line of credit bears interest at prime plus 4% and is personally guaranteed by the Company’s chief executive officer. There is no maturity date. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 8 – RELATED PARTY TRANSACTIONS Related Party Payable As of December 31, 2016 and June 30, 2016, the Company has $95,620 of bonuses payable to four of its officers that also owns shares of common stock. These bonuses were to cover income taxes relating to bonuses issued during 2009. As of December 31, 2016, the Company has a salary and variable compensation payable to David E Vautrin, CEO and Charles Joiner, President of $14,061 and $14,061 respectively. |
Stockholders' Deficit
Stockholders' Deficit | 6 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 9 – STOCKHOLDERS’ DEFICIT Equity Purchase Agreement On December 17, 2014, the Company entered into an Equity Purchase Agreement with Kodiak Capital LLC (Kodiak). The Equity Purchase Agreement provides the Company with financing whereby the Company can issue and sell to Kodiak, from time to time, shares of common stock (the “Put Shares” Maximum Commitment Amount The Equity Purchase Agreement will terminate when any of the following events occur: (i) Kodiak has purchased an aggregate of $5.0 million of the Company’s common stock, (ii) on December 31, 2016 or (iii) upon written notice from the Company to Kodiak. During the six months ended December 31, 2016, The Company issued 2,725,000 shares to Kodiak and received $213,825. As of December 31, 2016, the Company has put 3,100,000 shares to Kodiak under the equity purchase agreement. Investment Agreement with GHS Investments, LLC On August 13, 2016 the Company entered into an Investment Agreement (the “Investment Agreement”) with GHS Investments, LLC (“GHS”). The Investment Agreement gives the Company the option to sell to GHS, up to $5,000,000 worth of its common stock (“Shares”), over the period following effectiveness of a registration statement covering the resale of the Shares (the “Effective Date”) and ending thirty-six (36) months after the Effective Date. Under the terms of the Investment Agreement, the Company has the right to deliver from time to time a Put Notice to GHS stating the dollar amount of Put Shares (up to $500,000 under any individual Put Notice)(the “Put Amount”) that it intends to sell to GHS with the price per share based on the following formula: the lesser of (a) the lowest sale price for the Common Stock on the date of the Put Notice (the “Put Notice Date”); or (b) the arithmetic average of the three (3) lowest trading prices for the Company’s Common Stock during the five trading days following the Put Notice Date. The maximum number of shares that can be put to GHS is two times the average daily trading volume during the ten trading days prior to the closing of a put (the “Closing Date”). If the amount of the tranche of its outstanding shares exceeds the volume limitation, additional tranches will be delivered until the entire Purchase Amount is delivered. Each tranche, including the initial tranche, will trigger a new purchase price, and will be priced according to the purchase price definition. There are a number of conditions to the Company effecting a put, including the effectiveness of the registration statement. As of December 31, 2016 the registration statement for the above Investment Agreement still needs to be amended to include recent financial statements. Therefore the Company has not placed any shares under this GHS agreement. Vendor Credit Agreements On June 26, 2015, the Company entered into a Stock Purchase Agreement with Yayu General Machinery Co., LTD, whereby the Company issued 200,000 shares of its common stock at $1.00 per share. The purchase price is in the form of a manufacturing credit of $200,000 to use for future inventory purchases (the “Vendor Credit”). The Company can use all or part of the Vendor Credit until the Vendor Credit is exhausted. As of December, 2016 and June 30, 2016, the Company had $54,635 and $105,096, respectfully, of Vendor Credit included in prepaid expenses in the condensed consolidated balance sheets. Stock Incentive Plan On October 21, 2014, the Board of Directors and the Company’s sole stockholder adopted the 2014 Stock Incentive Plan. The purpose of the 2014 Stock Incentive Plan is to advance the best interests of the Company by providing those persons who have a substantial responsibility for management and growth of the Company with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. Further, the availability and offering of stock options and common stock under the plan supports and increases the Company’s ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which the Company depends. The total number of shares available for the grant of either stock options or compensation stock under the plan is 3,000,000 shares of common stock, subject to adjustment. The Board of Directors administers the plan and has full power to grant stock options. On October 7, 2016, the Company issued 825,000 options to employees in accordance to the Stock Incentive Plan. Options generally vest over three years, expire after three years, and have an exercise price of $0.07 per share. The options granted were fair valued at $47,970 using the Black-Scholes option pricing model with the following variables: annual dividend yield of 0%; expected life of three years; risk free rate of return of 0.99%; and expected volatility of 158%. During the three-month period ended December 31, 2016, the Company recognized $3,724 of stock-based compensation, which is included in general and administrative expense. As of December 31, 2016, none of these options have vested. However, the Company does expect all options to vest. Acquisition of Assets of Glideboxx LLC On October 10, 2016 the Company acquired all of the rights, title, and interest to the GlideBoxx Product, USPTO # 7857734, and related training programs and marketing materials to the Company free and clear of any and all liens, encumbrances, and or liabilities for a purchase price of 100,000 shares of common stock and will also pay Glideboxx LLC 5% (five percent) in total of all net revenue derived from sales of the GlideBoxx for a period of 7 (seven) years in cash or kind. Net Revenue is defined as Gross revenue net discounts and returns. The shares issued were fair valued at $8,900 using the Company’s publicly traded stock price. Other Common Stock Issuances On November 11, 2016, the Company issued 869,565 shares of unregistered common stock to settle a payable obligation. The shares were fair valued at $126,087 using the Company’s publicly traded stock price. On November 9, 2016, and on December 26, 2016, the Company issued 28,879 and 250,000 shares of common stock, respectively, as consideration for services received. Using the Company’s publically traded stock price, the shares were fair valued at $53,468 and stock-based compensation expense was recognized, which is included in general and administrative expense. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 10 – COMMITMENTS AND CONTINGENCIES Lease Commitments On June 18, 2015, the Company entered into a lease agreement for approximately 25,788 square feet of warehouse and office space under a thirty-eight (38) month operating lease that commences on September 1, 2015 and expires on October 31, 2018. The lease has monthly payments of $16,504 with standard rent increases over the life of the lease scheduled in October of each year. On June 5, 2015, the Company entered into a sublease of a portion of the premises for the period September 1, 2015 through January 31, 2017, at a monthly rental rate of $5,000. Rent expense for the six-month periods ended December 31, 2016 and 2015, was $141,721 and $67,937, respectively. Litigation From time-to-time, the Company is subject to various litigation and other claims in the normal course of business. The Company establishes liabilities in connection with legal actions that management deems to be probable and estimable. No amounts have been accrued in the consolidated financial statements with respect to any matters. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 11 – SUBSEQUENT EVENTS On December 31, 2016 Mr. Vautrin, the Company’s Chief Executive Officer, informed the Company’s Board of Directors of his intention to resign as CEO to pursue other opportunities, effective as of March 1, 2017. Mr. Vautrin will remain on the Board of Directors. On February 15, 2017 the Board hired William Singer to serve as the Company’s CEO following Mr. Vautrin’s departure. |
Nature of the Business and Si17
Nature of the Business and Significant Accounting Policies (Policies) | 6 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
History of the Company | History of the Company XFit Brands, Inc. (“XFit” or the “Company”) was incorporated on September 16, 2014 under the laws of the State of Nevada. The fiscal year of the Company is June 30. XFit’s principal business activity is the design, development, and worldwide marketing and selling of functional equipment, training gear, apparel and accessories for the sports market and fitness industry. The Company provides a full portfolio of products and services spanning Mixed Martial Arts and other high and low impact fitness regimes and own the trademarks Throwdown®, EnviroTurf®, GlideBoxx® and Transformations. Products are sold to gyms, fitness facilities, universities, first responders and directly to consumers via website and through third-party catalogues through a mix of independent distributors and licensees. These financial statements represent the consolidated financial statements of XFit and its wholly owned operating subsidiaries Throwdown Industries Holdings, LLC (“Holdings”), Throwdown Industries, LLC (“TDLLC”), and Throwdown Industries, Inc. (“TDINC”). |
Forward Stock Split | Forward Stock Split On March 28, 2016, the Board of Directors approved a 1-for-5 forward split of its outstanding shares of common stock (and proportional increase of its authorized common stock from 250 million shares to 1.25 billion shares) with a record date of April 14, 2016 and an effective date of April 15, 2016. Prior to the split, the Company had 4,118,500 shares issued and outstanding and after the split, the Company had 20,592,500 shares issued and outstanding. All references to the number of shares and per-share amounts within these condensed consolidated financial statements, including the notes thereto, have been retroactively restated to reflect this stock split, unless explicitly stated otherwise. |
Basis of Presentation | Basis of presentation The accompanying condensed consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes as of and for the years ended June 30, 2016 and 2015, which were filed with the Company’s annual report Form 10-K on September 29, 2016. The results of operations for the six months ended December 31, 2016 are not necessarily indicative of results that may be expected for the year ending June 30, 2017 or for any other interim period. |
Basis of Consolidation | Basis of Consolidation The condensed consolidated financial statements include the accounts of XFit, Holdings and TDINC. All significant intercompany transactions and balances have been eliminated in consolidation. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company has implemented all applicable new accounting standards and does not believe that there are any other new accounting pronouncements that have been issued that may have a material impact on the condensed consolidated financial statements. In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs . |
Loss per Share | Loss per Share The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the period. To compute the diluted weighted average number of shares outstanding, the Company begins with the basic weighted average number of shares outstanding and adds any potentially dilutive securities that are convertible into shares of common stock. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. For the six months ended December 31, 2016 and 2015, the Company had warrants and options outstanding to acquire shares of common stock that totaled 2,999,281 and 2,268,615 shares, respectively, which were excluded as their effect would have been anti-dilutive. |
Reclassifications | Reclassifications Certain reclassifications were made to the prior period, condensed consolidated financial statements to conform to the current period presentation. There was no change to the previously reported net loss. |
Use of Estimates | Use of Estimates Condensed consolidated financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long-lived assets, and the fair value of equity instruments issued. Actual results could differ from those estimates. |
Loan Discounts and Loan Fees | Loan Discounts and Loan Fees The Company amortizes loan discounts over the term of the loan using the effective interest method. Costs associated with obtaining financing are capitalized and amortized over the term of the related loans using the effective interest method. Amortization of the debt issuance costs and loan discount was $127,753 and $91,905 for the six months ended December 31, 2016 and 2015, respectively, which was recorded as a component of interest expense on the condensed consolidated statements of operations. |
Acquisition of Environmental 18
Acquisition of Environmental Turf Services (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Business Combinations [Abstract] | |
Schedule of Purchase Consideration Allocated to the Assets Acquired and Liabilities Assumed | The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed as follows: Cash $ 15,740 Accounts receivable 247,097 Inventory 54,702 Property and equipment 24,696 Goodwill 33,695 Accrued expenses (3,163 ) Billing in excess of earnings (26,767 ) Total purchase consideration $ 346,000 |
Schedule of Business Acquisition, Pro Forma Unaudited Operating Results of EnviroTurf | Revenues $ 1,826,215 Net loss $ (1,101,947 ) Loss per common share – basic and dilutive $ (0.04 ) Weighted average shares outstanding – basic and dilutive 25,106,473 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Summary of Property and Equipment | Property and equipment consisted of the following at: December 31, 2016 June 30, 2016 (Unaudited) Office furniture and equipment $ 51,794 $ 51,794 Automobiles 24,696 - Warehouse equipment 15,254 15,254 Molds and dies 4,200 4,200 Leasehold Improvements 4,227 4,227 Total, cost 100,171 75,475 Accumulated Depreciation (48,230 ) (37,799 ) Property and equipment, net $ 51,941 $ 37,676 |
Intangible Assets, Net (Tables)
Intangible Assets, Net (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
Summary of Intangible Assets | Intangible assets consisted of the following at: December 31, 2016 June 30, 2016 (Unaudited) Trademark and patent $ 17,177 $ 8,277 Transformations exercise fitness program 62,500 62,500 Computer Software 5,584 5,584 Total, cost 85,261 76,361 Accumulated Amortization (70,499 ) (62,721 ) Intangible assets, net $ 14,762 $ 13,640 |
Note Payable (Tables)
Note Payable (Tables) | 6 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Note Payable | The note payable is comprised of the following at: December 31, 2016 June 30, 2016 (Unaudited) Note payable $ 3,500,000 $ 2,712,787 Less: unamortized loan discount - (154,462 ) Less: unamortized debt issuance costs - (79,605 ) Total note payable, net $ 3,500,000 $ 2,478,720 |
Nature of the Business and Si22
Nature of the Business and Significant Accounting Policies (Details Narrative) - USD ($) | Mar. 28, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Jun. 30, 2016 |
Financing Receivable, Impaired [Line Items] | ||||
Forward split stock description | 1-for-5 forward split | |||
Excess stock shares authorized | 250,000,000 | |||
Common stock, shares authorized | 1,250,000,000 | 1,250,000,000 | ||
Common stock, shares issued | 29,156,890 | 21,192,807 | ||
Common stock, shares outstanding | 29,156,890 | 21,192,807 | ||
Warrants outstanding to acquire shares of common stock | 2,999,281 | 2,268,615 | ||
Amortization of debt issuance costs | $ 127,753 | $ 91,905 | ||
Loan discount | $ 127,753 | $ 91,905 | ||
April 15, 2016 [Member] | ||||
Financing Receivable, Impaired [Line Items] | ||||
Common stock, shares issued | 4,118,500 | |||
Common stock, shares outstanding | 4,118,500 | |||
April 15, 2016 [Member] | Forward Stock Split [Member] | ||||
Financing Receivable, Impaired [Line Items] | ||||
Common stock, shares issued | 20,592,500 | |||
Common stock, shares outstanding | 20,592,500 |
Acquisition of Environmental 23
Acquisition of Environmental Turf Services (Details Narrative) - USD ($) | Oct. 10, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Jun. 30, 2016 |
Accounts payable | $ 491,928 | $ 491,928 | $ 730,026 | |||
Cost of revenues | 577,829 | $ 386,487 | 854,937 | $ 645,331 | ||
Operating expenses | $ 600,800 | $ 486,877 | $ 1,063,220 | $ 1,021,701 | ||
Purchase Agreement [Member] | Environmental Turf Services, LLC [Member] | ||||||
Purchase price | $ 346,000 | |||||
Accounts payable | $ 200,000 | |||||
Number of common stock shares issued for purchases of assets | 2,000,000 | |||||
Revenues | $ 201,240 | |||||
Cost of revenues | 159,367 | |||||
Operating expenses | $ 110,445 |
Acquisition of Environmental 24
Acquisition of Environmental Turf Services - Schedule of Purchase Consideration Allocated to the Assets Acquired and Liabilities Assumed (Details) - USD ($) | Dec. 31, 2016 | Oct. 14, 2016 | Jun. 30, 2016 |
Goodwill | $ 33,695 | ||
Environmental Turf Services, LLC [Member] | |||
Cash | $ 15,740 | ||
Accounts receivable | 247,097 | ||
Inventory | 54,702 | ||
Property and equipment | 24,696 | ||
Goodwill | 33,695 | ||
Accrued expenses | (3,163) | ||
Billing in excess of earnings | (26,767) | ||
Total purchase consideration | $ 346,000 |
Acquisition of Environmental 25
Acquisition of Environmental Turf Services - Schedule of Business Acquisition, Pro Forma Unaudited Operating Results of EnviroTurf (Details) | 6 Months Ended |
Dec. 31, 2016USD ($)$ / sharesshares | |
Business Combinations [Abstract] | |
Revenues | $ 1,826,215 |
Net loss | $ (1,101,947) |
Loss per common share - basic and dilutive | $ / shares | $ (0.04) |
Weighted average shares outstanding - basic and dilutive | shares | 25,106,473 |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 6 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 10,431 | $ 6,151 |
Property and Equipment, Net - S
Property and Equipment, Net - Summary of Property and Equipment (Details) - USD ($) | Dec. 31, 2016 | Jun. 30, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 100,171 | $ 75,475 |
Less: Accumulated depreciation | (48,230) | (37,799) |
Total Property and equipment, net | 51,941 | 37,676 |
Office Furniture and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 51,794 | 51,794 |
Automobiles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 24,696 | |
Warehouse Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 15,254 | 15,254 |
Molds and Dies [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 4,200 | 4,200 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 4,227 | $ 4,227 |
Intangible Assets, Net (Details
Intangible Assets, Net (Details Narrative) - USD ($) | 6 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Amortization expense | $ 7,778 | $ 23,791 |
Intangible Assets, Net - Summar
Intangible Assets, Net - Summary of Intangible Assets (Details) - USD ($) | Dec. 31, 2016 | Jun. 30, 2016 |
Total, cost | $ 85,261 | $ 76,361 |
Accumulated Amortization | (70,499) | (62,721) |
Intangible assets, net | 14,762 | 13,640 |
Trademark and Patent [Member] | ||
Total, cost | 17,177 | 8,277 |
Transformations Exercise Fitness Program [Member] | ||
Total, cost | 62,500 | 62,500 |
Computer Software [Member] | ||
Total, cost | $ 5,584 | $ 5,584 |
Short Term Financing (Details N
Short Term Financing (Details Narrative) - USD ($) | May 03, 2016 | Dec. 31, 2016 | Jun. 30, 2016 |
Original issue discount amount | $ 154,462 | ||
Securities Purchase Agreement [Member] | Single Accredited Investor [Member] | |||
Debt principal amount | $ 125,000 | ||
Debt maturity date | Dec. 31, 2016 | ||
Original issue discount amount | $ 20,000 | ||
Debt issued to pay related party debt expenses | 5,000 | ||
Proceeds from related party debt | $ 100,000 |
Note Payable (Details Narrative
Note Payable (Details Narrative) - USD ($) | Nov. 11, 2016 | Oct. 20, 2015 | Feb. 06, 2015 | Dec. 16, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Jun. 30, 2016 | Jun. 12, 2014 | Jun. 10, 2014 |
Debt Instrument [Line Items] | |||||||||||
Note payable | $ 3,500,000 | $ 3,500,000 | $ 2,712,787 | ||||||||
Principal and accrued interest settled with common stock | 278,689 | ||||||||||
Loss on extinguishment of debt | 175,575 | 175,575 | |||||||||
Debt unamortized loan discount | 83,465 | 83,465 | |||||||||
Debt unamortized issuance costs | 39,515 | 39,515 | |||||||||
Stock-based compensation | $ 53,468 | $ 3,724 | $ 57,192 | $ 75,433 | |||||||
Warrant [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Dividend yield | 0.00% | ||||||||||
Expected life | 7 years 6 months | ||||||||||
Risk free rate of return | 2.41% | ||||||||||
Expected volatility | 158.00% | ||||||||||
PIMCO Note Payable [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Principal and accrued interest settled with common stock | $ 278,689 | ||||||||||
Principal and accrued interest settled with common stock, shares | 1,990,639 | ||||||||||
Warrant to purchase, percentage | 10.00% | 10.00% | |||||||||
Warrant to purchase exercise price | $ 1,500,000 | $ 1,500,000 | |||||||||
Stock-based compensation | 52,595 | ||||||||||
PIMCO Note Payable [Member] | Minimum [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Warrant to purchase exercise price | $ 350,000 | $ 350,000 | |||||||||
PIMCO Note Payable [Member] | Delayed Draw Note Facility [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Company drew an additional funds | $ 500,000 | $ 500,000 | |||||||||
Note Purchase Agreement [Member] | PIMCO [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Note payable issuance | $ 3,500,000 | $ 2,500,000 | |||||||||
Note bears interest rate | 9.00% | ||||||||||
Note due date | Jul. 12, 2020 | ||||||||||
Working capital | $ 1,000,000 | ||||||||||
Note Purchase Agreement [Member] | PIMCO [Member] | Senior Secured Note [Member] | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Note payable issuance | $ 2,500,000 | ||||||||||
Note payable | $ 1,500,000 | ||||||||||
Note bears interest rate | 14.00% |
Note Payable - Schedule of Note
Note Payable - Schedule of Note Payable (Details) - USD ($) | Dec. 31, 2016 | Jun. 30, 2016 |
Debt Disclosure [Abstract] | ||
Note payable | $ 3,500,000 | $ 2,712,787 |
Less: unamortized loan discount | (154,462) | |
Less: unamortized debt issuance costs | (79,605) | |
Total note payable, net | $ 3,500,000 | $ 2,478,720 |
Bank Line of Credit (Details Na
Bank Line of Credit (Details Narrative) | Jul. 24, 2015 |
Chief Executive Officer [Member] | |
Percentage of line of credit bears interest at prime plus rate | 4.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 6 Months Ended | |
Dec. 31, 2016USD ($)Officers | Jun. 30, 2016USD ($) | |
Related Party Transaction [Line Items] | ||
Salaries and bonuses payable | $ 95,620 | $ 95,620 |
Number of officers and membership holders | Officers | 4 | |
David E Vautrin [Member] | ||
Related Party Transaction [Line Items] | ||
Salary and variable compensation payable | $ 14,061 | |
Charles Joiner [Member] | ||
Related Party Transaction [Line Items] | ||
Salary and variable compensation payable | $ 14,061 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Dec. 26, 2016 | Nov. 11, 2016 | Nov. 09, 2016 | Oct. 10, 2016 | Oct. 07, 2016 | Jun. 26, 2015 | Dec. 17, 2014 | Dec. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Aug. 13, 2016 | Jun. 30, 2016 |
Class of Stock [Line Items] | ||||||||||||
Number of common stock shares issued | 250,000 | 869,565 | 28,879 | |||||||||
Fair value of options granted | $ 126,087 | |||||||||||
Stock-based compensation | $ 53,468 | $ 3,724 | $ 57,192 | $ 75,433 | ||||||||
GlideBoxx LLC [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Fair value of options granted | $ 8,900 | |||||||||||
Number of common stock shares issued for purchases of assets | 100,000 | |||||||||||
Concentration risk, percentage | 5.00% | |||||||||||
Revenue of cash or kind period | 7 years | |||||||||||
2014 Stock Incentive Plan [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Share-based compensation arrangement by share-based payment award, number of shares available for grant | 3,000,000 | 3,000,000 | ||||||||||
Stock Incentive Plan [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Number of option to employees purchase plan, shares | 825,000 | |||||||||||
Option expiry term | 3 years | |||||||||||
Number of option exercise price, per share | $ 0.07 | |||||||||||
Fair value of options granted | $ 47,970 | |||||||||||
Dividend yield | 0.00% | |||||||||||
Expected life | 3 years | |||||||||||
Risk free rate | 0.99% | |||||||||||
Expected volatility | 158.00% | |||||||||||
Equity Purchase Agreement [Member] | Kodiak Capital LLC [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Long-term purchase commitment, amount | $ 5,000,000 | $ 5,000,000 | ||||||||||
Noncontrolling interest, ownership percentage by noncontrolling owners | 9.99% | |||||||||||
Purcahse agreement termination closing date | Dec. 31, 2016 | Dec. 31, 2016 | ||||||||||
Number of common stock shares issued | 2,725,000 | |||||||||||
Number of common stock value issued | $ 213,825 | |||||||||||
Number of common stock shares issued for services | 3,100,000 | |||||||||||
Investment Agreement [Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Maximum value of common stock authorized to sale | $ 5,000,000 | |||||||||||
Value of put option | $ 500,000 | |||||||||||
Stock Purchase Agreement [Member] | Yayu General Machinery Co., LTD[Member] | ||||||||||||
Class of Stock [Line Items] | ||||||||||||
Number of common stock shares issued for consideration of future inventory purchases | 200,000 | |||||||||||
Common stock price per share | $ 1 | |||||||||||
Number of common stock value issued for consideration of future inventory purchases | $ 200,000 | |||||||||||
Prepaid expenses | $ 54,635 | $ 54,635 | $ 105,096 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | Jun. 18, 2015USD ($)ft² | Jun. 05, 2015USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Other Commitments [Line Items] | ||||
Lease expiration date | Jan. 31, 2017 | |||
Sublease rent expense | $ 5,000 | |||
Rent expense | $ 141,721 | $ 67,937 | ||
Lease Agreement [Member] | ||||
Other Commitments [Line Items] | ||||
Area of square feet | ft² | 25,788 | |||
Operating lease period | 38 months | |||
Lease expiration date | Oct. 31, 2018 | |||
Operating leases rent expense | $ 16,504 |