10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended June 30, 2015

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____ to _____

Commission file number   333-173438

VAPOR HUB INTERNATIONAL INC.

(Exact Name of Registrant as Specified in Charter)

Nevada	27-3191889
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1871 Tapo Street Simi Valley, CA	93063
(Address of Principal Executive Offices)	(Zip Code)

(805) 309-0530

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.                                                                                                                                                                                 [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

[  ]

Accelerated Filer

         [  ]

Non-accelerated Filer

[  ] (Do not check if smaller reporting company)

Smaller Reporting Company      [X]

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Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $676,350, based on an adjusted closing price of $0.0225 on December 31, 2014.  

At October 13, 2015, the registrant had 72,455,606 shares of common stock, $0.001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

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VAPOR HUB INTERNATIONAL INC.

FORM 10-K

For The Fiscal Year Ended June 30, 2015

INDEX

		Page
PART I
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	14
ITEM 1B.	Unresolved Staff Comments	29
ITEM 2.	Properties	29
ITEM 3.	Legal Proceedings	30
ITEM 4.	Mine Safety Disclosures	30
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
ITEM 6.	Selected Financial Data	31
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	40
ITEM 8.	Financial Statements and Supplementary Data	41
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66
ITEM 9A.	Controls and Procedures	66
ITEM 9B.	Other Information	67
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	68
ITEM 11.	Executive Compensation	72
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	74
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	76
ITEM 14.	Principal Accounting Fees and Services	78
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules	79

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PART I

Item 1.  Business

As used in this annual report, the terms “we”, “us”, “our” and “our company” mean Vapor Hub International Inc. (formerly known as DogInn, Inc.), unless otherwise indicated.

Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements. Such statements contain words such as “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “may,” “will,” “might,” “should,” “could,” “would,” “seek,” “pursue,” and “anticipate” or the negative or other variation of these or similar words, or may include discussions of strategy or risks and uncertainties. Forward-looking statements in this Annual Report include, among other things, statements concerning:

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expectations regarding our business, results of operations and prospects for future development;

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expenses and our ability to operate efficiently;

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expectations regarding trends that will affect our market and the electronic cigarette industry generally and the impact of those trends on our business and results of operations; and

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the potential impact of governmental regulation on our industry.

Any forward-looking statement is based upon a number of estimates and assumptions that, while considered reasonable by us, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, and are subject to change. Actual results of operations may vary materially from any forward-looking statement made herein. Forward-looking statements should not be regarded as a representation by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. Some of the contingencies and uncertainties to which any forward-looking statement contained herein is subject include, but are not limited to, the following:

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the risk that we will not be able to fund our operations and continue as a going concern;

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the potential impact of governmental regulation on our ability to operate our business;

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the effects of intense competition that exists in the electronic cigarette industry;

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general economic and business conditions including changes in customer demand; and

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adverse outcomes of legal proceedings.

For additional contingencies and uncertainties, see Item 1A. Risk Factors.

Given these risks and uncertainties, we can give no assurances that results contemplated by any forward-looking statements will in fact occur and therefore caution investors not to place undue reliance on them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report might not occur.

Market and Industry Data

Some of the market and industry data contained in this Annual Report are based on independent industry publications or other publicly available information. Although we believe that these independent sources are reliable, we have not independently verified and cannot assure you as to the accuracy or completeness of this information. As a result, you should be aware that the market and industry data contained herein, and our beliefs and estimates based on such data, may not be reliable.

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Overview

We design, source, market and sell the next generation of smokeless electronic cigarettes which are popularly known as “vaping” devices.  We provide a selection of vaping devices and related accessories which we design and source, including our popular “AR Mechanical Mods” and “Limitless Mods”, and we also purchase vaping devices and related accessories from third parties for resale.  We distribute our products nationally and internationally to wholesale customers and retail customers, including through our websites www.vapor-hub.com and www.smokelessdelite.com.  We also market and sell our products through our two retail locations located in southern California.

History of the Company

Vapor Hub International Inc. was incorporated in the State of Nevada on July 15, 2010 under the name DogInn, Inc. to become a resource for travelers seeking information and resources regarding pet friendly accommodation, services, and products.  Our intention was to improve upon the small number of existing internet offerings in the pet friendly travel space. Unfortunately, we were not able to raise sufficient capital to fund our business development and consequently our management began considering alternative strategies, such as business combinations or acquisitions to create value for our shareholders.

On February 14, 2014, we 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”).  Pursuant to the terms of Exchange Agreement, we agreed to acquire all 30,000 of the issued and outstanding shares of Vapor’s common stock, as well as all 30,000 of the issued and outstanding shares of Delite’s common stock in exchange for the issuance by us of 38,000,001 shares of our common stock to the shareholders of both companies.  On March 14, 2014, we completed the acquisition of Vapor and issued all of the 38,000,001 shares to the shareholders of Vapor, who were also the shareholders of Delite.  On March 26, 2014, we completed the acquisition of Delite.

As a result of the closing of the transactions contemplated by the Exchange Agreement, Vapor and Delite became our wholly owned subsidiaries and we now carry on the business of developing, producing, marketing and selling vaping devices and related accessories.  The transaction with Vapor was accounted for as a reverse acquisition (recapitalization) and Vapor was deemed to be the accounting acquirer and us the legal acquirer. The transaction with Delite was accounted for as a business acquisition and we assumed the assets and liabilities of Delite at historical basis as of March 26, 2014 and the activity of Delite was included from that date forward.  In connection with the acquisition of Vapor, we changed our corporate name from Doginn, Inc. to Vapor Hub International Inc. and our stock symbol changed from “DOGI” to “VHUB.”  Upon our acquisition of Vapor, Robin Looban resigned as our sole director, president, secretary, treasurer, Chief Financial Officer and Chairman of the Board of Directors and management members from Vapor were appointed to serve as directors and officers of the Company.  On May 18, 2015, Vapor and Delite were merged with and into the Company, ending the separate existences of Vapor and Delite. Prior to our acquisition of Vapor, we existed as a “shell company” with nominal assets whose sole business was to identify, evaluate and investigate various companies to acquire or with which to merge.

Our principal executive office is located at 1871 Tapo Street, Simi Valley CA 93063.  The telephone number at our principal executive office is (805) 309-0530.  

Our Products - Vaping Devices

We market our vaping devices as an alternative to traditional tobacco cigarettes.  Vaping devices (as well as electronic cigarettes, also known as e-cigarettes) are battery-powered products that allow users to inhale water vapor instead of the smoke, ash, tar and carbon monoxide associated with traditional cigarettes.  In contrast to e-cigarettes, vaping devices are often precision manufactured from metallic materials and do not look like traditional cigarettes.  Vaping devices, as compared to e-cigarettes, also offer a unique user experience as a result of greater vapor production, enriched taste, and an ability to highly customize a device with different mechanical components and fashionable accessories, including different colors and finishes.  Vaping devices generally consist of three primary components: a battery unit, an atomizer (which includes a heating element), and a tank filled with an “e-liquid,” which e-liquids are available with or without nicotine and in a myriad of flavors.  

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Battery

Most vaping devices are powered by a lithium-ion rechargeable battery. The housing for the battery and electronic circuitry is usually the largest component of a vaping device. It is generally referred to simply as the battery. This unit may contain an electronic airflow sensor for automated operation, or a button for manual operation. A timed cutoff switch (to prevent overheating) and/or a colored LED may also be included. To recharge the batteries, many different types of battery chargers such as AC outlet, car, and USB adaptors are usually available. Some manufacturers also offer a “Portable Charging Case,” or “PCC”, which contains a large rechargeable battery that is then used to charge a smaller battery within the individual vaping device.

Atomizer

The atomizer is a heating element that serves to vaporize the e-liquid so it can be inhaled.  The atomizer contains a filament that degrades over time due to a buildup of sediment, or "burns out" entirely, requiring periodic replacement.  To address atomizer degradation, manufacturers introduced swappable replacement parts.

Tank

The tank is a small, sometimes disposable, plastic container with openings on each end. It generally houses an absorbent, sponge-like material saturated with the e-liquid solution to be vaporized. The mouthpiece is constructed so that the vapor produced can flow past the solution container to reach the user's mouth. When the e-liquid in the tank has been depleted, the user can refill the tank with an e-liquid of their choice.

E-Liquid

Liquids used to produce vapor in vaping devices are sold separately for use in refillable tanks.  Liquids may or may not contain nicotine and are available in differing nicotine concentrations to suit user preferences.  Liquids are available in a myriad of flavors and we offer flavors such as blackberry, krazy kola, blueberry, churro, lemonade, menthol, root beer float and watermelon, as well as proprietary blends we have innovated.  Liquid solution consists of flavoring and/or nicotine dissolved in one or several hygroscopic components, which turns the water in the solution into the smoke-like vapor when heated. The most commonly used hygroscopic components are propylene glycol, vegetable glycerin or polyethylene glycol 400.  Our proprietary brands of E-liquids are sourced from an ISO Class 7 certified manufacturer in the USA, which helps ensure their purity and quality.

Device Operation

The above-described components may work in conjunction in an assembled vaping device as follows:

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User presses button to activate the lithium ion battery.

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User draws on the vaping device through a mouth piece.

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The battery charges the atomizer.

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The atomizer vaporizes the e-liquid.

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User gets the smoking experience, which includes water vapor in place of smoke.

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Product Examples

The following are examples of some of the products that we market and distribute:

EGO Starter Kit For E-Liquid Atomizers:  Our vaping devices are available in kits that contain everything a user needs to begin enjoying their “vaping” experience.   For example, our EGO Starter Kit (pictured below) comes with 2 rechargeable batteries, 2 CE4 atomizers, a tank system, a free carrying case, a USB charger, and a wall charger and is designed for a novice vaping customer.

AR Mechanical Mods:  Our patent pending AR Mod (pictured below) replicates the barrel of a traditional AR-15 assault rifle and is targeted to consumers who demand high end technical devices.

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Limitless Mechanical Mods:  Our Limitless Mechanical Mod (pictured below) was developed in August 2014 by our CEO Kyle Winther and our President Jake Perlingos. The Limitless Mechanical Mod allows a consumer to change the look and feel of their device by interchanging sleeves and is available in aluminum, brass, copper, black rhodium plated aluminum and gold plated brass finishes to accommodate market demand.  We market and sell our Limitless Mechanical Mods directly to consumers at prices ranging from $99 to $180 and also sell our Limitless Mechanical Mods through our wholesale distribution channels at prices ranging from $45 to $135.  

Binary Premium E-Liquid:  Our Binary Premium e-liquid (pictured below) was developed internally over a period of approximately six months and is currently available in five flavors at a retail price point of approximately $12 per bottle.  To provide consumers with alternatives when reducing nicotine levels, we offer our Binary Premium e-liquid with 0mg, 2.5mg, 5.0mg, 7.5mg, or 10mg of nicotine per bottle. In contrast, it is typical for bottles of e-liquid to be available with the following nicotine levels per bottle:  0mg, 3mg, 6mg, 12mg, and 18mg. To help ensure quality, our Binary Premium e-liquid is manufactured by a third party supplier in an ISO and GMP certified lab with a manufacturing capacity of over 13 million bottles per month.  

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In addition to kits, Mods and E-Liquids, we sell replacement parts including batteries, atomizers, refill cartridges or cartomizers and tanks. We also sell accessories such as charging devices and carrying cases and branded apparel.

Our Business

Sourcing

We use third party contract manufacturers to produce and finish our Mods from facilities primarily located in Southern California.  Our Mods, which are made from a metallic material such as steel, brass or copper, are custom machined to meet our design specifications.  Once machined, unfinished products are delivered to our location in Simi Valley or to a third party service provider to be buffed, polished and to add various treatments and embellishments, such as paint and dog tags.  Finished products are then held in inventory for distribution and sale. In our fiscal year ended June 30, 2015, we relied on one manufacturer to machine all of our Mods.  Although we relied on one manufacturer to machine our Mods during our last fiscal year, we believe manufacturing capacity is readily available to meet our current and planned needs. We do not currently have any long term agreements in place for the manufacture of our Mods.  

With respect to our vaping accessories, we purchase our batteries from suppliers in China and our atomizers from suppliers in the United States, Austria, the Philippines and China.  We believe that suppliers for accessories are readily available to meet our current and planned needs.  

We source our proprietary E-liquids (such as our Binary Premium E-Liquid) from an ISO Class 7 certified manufacturer in the USA, which helps ensure their purity and quality.  In addition to sourcing our own e-liquids, we also purchase e-liquid from other reputable American suppliers for resale through our distribution channels.  

Distribution to Retail Stores

We market and sell our vaping devices and related products to end customers through our websites www.vapor-hub.com and www.smokelessdelite.com, to retail stores through direct sales primarily in the United States but also internationally, and through third party wholesalers who then resell our products to retailers in their territory.  Retailers of our products include vaping shops throughout the United States as well as convenience stores and several gas stations.  Products distributed by the Company include vaping devices and related accessories purchased from third parties for resale as well as our own vaping devices and related accessories, which we design and source, including our popular “AR Mechanical Mods”, newly released and popular “Limitless Mechanical Mods”, as well as “Binary Premium e-Liquid”.

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Operation of Retail Stores

We also sell our products and those of third parties to end consumers directly through our two retail locations located in Southern California.  Our first retail location in Simi Valley, CA was 725 square feet and was the first vapor lounge in Simi Valley. On April 1, 2015, the Company moved its Simi Valley retail location to a larger 1,500 square foot facility. Our second location is located in Chatsworth, CA and measures 1,200 square feet.  Through our retail locations, we sell and market vaping devices as well as e-liquid, accessories, and supplies relating to vaping devices to both novice users as well as consumers who demand high end technical devices.  

We opened our retail locations in order to create brand recognition for our products and also to enable us to gather information about user preferences in the rapidly evolving vaping industry.  By learning about user preferences, we believe we are better able to design and source products to meet market demand.  

The format of the retail establishments is to provide a “lounge” atmosphere where “vaping” can be enjoyed by the customer in a congenial environment.  The design of our locations is modern, industrial and open. Bar stools are provided for clients to sit and enjoy the tasting experience. A few bar tables are available for customers to try flavors on their own.  Inventory is located behind the bar and in cabinets and showcases along the wall. There are TVs located along the wall to drive eyes to the showcases, as well as provide interactive advertising. Additional amenities include servers attending to customers’ needs, as well as free WiFi and electrical charging stations for electronic devices.  

Currently, we do not have any plans to open additional stores.

Marketing

We advertise our products primarily through our websites, through email marketing campaigns, at industry trade shows and through point of sale materials and displays at our retail locations. We also attempt to build brand awareness through innovative social media marketing activities on Facebook, Instagram and Twitter, through in-store and on-premise promotions and through public relation initiatives, such as radio interviews and press releases. We intend to strategically expand our advertising activities in fiscal year 2016 and also increase our public relations campaigns to gain editorial coverage for our products.  

Competition

Our industry is extremely competitive and there are low barriers to entry.  We compete with numerous regional, national and international electronic cigarette companies, and several large tobacco companies offer or are in the process of developing electronic cigarette products.  We also compete to some extent with traditional tobacco products for customers, and to a lesser extent, we compete with companies that offer smoking cessation aids.

Most of our competitors are larger than we are, have been in operation longer than us and have greater financial and operational resources than we do, which gives them an advantage in marketing their products, securing components, materials and labor at lower prices and delivering their products more quickly and at more favorable prices.  In addition, our competitors may be able to provide more competitive products than we can and generally be able to respond more quickly to new or emerging technologies and changes in legislation and regulations relating to the industry. Additionally, our competitors may devote greater resources to the development, promotion and sale of their products or services than we do.  

We compete for customers based on a variety of factors, including the design and quality of our products, price and customer service.  We believe that we compete effectively in our industry as a result of, among other reasons, our innovative products, our retail stores, our team of experienced industry professionals and the reputation of our brands.  At a retail price point of $99 to $250, we also believe that our Mods are competitively priced in our target markets.

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Markets

According to estimates released by Euromonitor International, the e-cigarette market reached the $6 billion USD mark in 2014.  Euromonitor International further reports that the United States is the largest market for vaping products, accounting for nearly half of global sales in 2014 at just over $2.8 billion USD.  In 2014, the UK became the second largest market for electronic cigarettes, followed by Italy, Poland and France. Euromonitor International forecasts that the e-cigarette sector will grow 29.3% compound annual growth rate to reach $23.4 billion USD in 2019 and $50 billion USD by 2030, if the current regulatory environment remains unchanged.  According to Euromonitor International, there has been a shift from e-cigarettes (which look like traditional cigarettes) to open tank systems which enable users to customize their e-liquid intake, with estimated global sales for tanks and e-liquids of $2.0 billion in 2014.

We believe a portion of electronic cigarette users are people trying to switch from regular cigarettes. In 2013, worldwide cigarette sales were estimated at approximately $720 billion and domestic sales in the United States were estimated at just over $91 billion. While sales of traditional cigarettes and other tobacco products are widely expected to decline in the United States, some analysts predict that by 2020, electronic cigarettes could out-sell traditional cigarette products in the United States.  According to the Centers for Disease Control and Prevention, 68.8% of US adult cigarette smokers report that they want to quit smoking, which we believe presents an opportunity for the electronic cigarette industry.

There can be no assurances, however, that such predictions regarding the global or United States markets will manifest.  Additionally, proposed governmental regulations could severely impact the growth of the electronic cigarette market both in the United States and internationally.  

Intellectual Property

We are the registered owner of the federal trademarks for “Vapor Hub”, “Tac Mods USA” and “T TAC MODS USA MADE IN USA” and design.  We also own the pending trademark application for “Vamped Vapor Cells,” which has been approved and allowed by the United States Patent and Trademark Office. 

On December 13, 2013, we filed a patent application titled AR MODS with the United States Patent & Trademark Office (Patent Application Number 61/915,919).

We plan to continue to expand our brand names and our proprietary trademarks, designs and patents worldwide as our business grows.

Government Regulation

The regulatory landscape confronting the electronic cigarette industry is difficult to accurately predict both in the US and internationally.  However, as described in further detail below, the United States Food and Drug Administration (the “FDA”) may impose significant regulations on our industry under the Family Smoking Prevention and Tobacco Control Act of 2009 (the “Tobacco Control Act”) and international agencies may seek to impose additional regulations on our industry under the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”).  

Proposed FDA Regulation

Based on the December 2010 U.S. Court of Appeals for the D.C. Circuit’s decision in Sottera, Inc. v. Food & Drug Administration, 627 F.3d 891 (D.C. Cir. 2010), the FDA is permitted to regulate electronic cigarettes as “tobacco products” under the Tobacco Control Act.  The Tobacco Control Act grants the FDA broad authority over the manufacture, sale, marketing and packaging of tobacco products, although the FDA is prohibited from issuing regulations banning all cigarettes or all smokeless tobacco products, or requiring the reduction of nicotine yields of a tobacco product to zero.

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The Tobacco Control Act imposes significant restrictions on the advertising and promotion of tobacco products. These regulations significantly limit the ability of manufacturers, distributors and retailers to advertise and promote tobacco products, by, for example, restricting the use of color, graphics and sound effects in advertising, limiting the use of outdoor advertising, restricting the sale and distribution of non-tobacco items and services, gifts, and sponsorship of events and imposing restrictions on the use for cigarette or smokeless tobacco products of trade or brand names that are used for non-tobacco products. The law also requires the FDA to issue future regulations regarding the promotion and marketing of tobacco products sold or distributed over the internet, by mail order or through other non-face-to-face transactions in order to prevent the sale of tobacco products to minors.  It is likely that the Tobacco Control Act could result in a decrease in tobacco product sales in the United States, including sales of our electronic cigarettes.

While the FDA has not yet mandated electronic cigarettes be regulated as tobacco products, in April 2014, the FDA proposed a new rule that would deem electronic cigarettes to be included under the definition of a “tobacco product” under the Tobacco Control Act and thus subject to the FDA’s jurisdiction.

Consistent with currently regulated tobacco products, under the proposed rule, makers of electronic cigarettes would, among other requirements:

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Register with the FDA and report product and ingredient listings;

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Only market new tobacco products after FDA review;

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Only make direct and implied claims of reduced risk if the FDA confirms that scientific evidence supports the claim and that marketing the product will benefit public health as a whole; and

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Not distribute free samples.

In addition, under the proposed rule, the following provisions would apply to electronic cigarettes:

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Minimum age and identification restrictions to prevent sales to underage youth;

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Requirements to include health warnings; and

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Prohibition of vending machine sales, unless in a facility that never admits youth.

In the comment period following the FDA’s announcement of the proposed rule, the FDA received in excess of 72,000 comments.  In light of the high volume of comments and considering the typical timeline associated with the federal rule-making process, it is very difficult to predict when final rules, if any, will be enacted.  In June 2015, the FDA issued an advance notice of proposed rulemaking to seek public comment related to warnings and child-resistant packaging for liquid nicotine.  However, the FDA did not at such time indicate the timing or scope of future regulations.  Consequently, it is very difficult to anticipate the impact such rules and regulations will have on our company or the industry at large.  In this regard, total compliance and related costs are not possible to predict and depend substantially on the future requirements imposed by regulatory authorities.  Costs, however, could be substantial and could have a material adverse effect on our business, results of operations and financial condition and ability to market and sell our products. In addition, failure to comply with any of the rules promulgated in accordance with any applicable law could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations.

Other Federal Regulations

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

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State and Local Regulations

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

International Regulations

The tobacco industry expects significant regulatory developments to take place over the next few years, driven principally by the WHO Framework Convention on Tobacco Control (FCTC).  The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. Regulatory initiatives that have been proposed, introduced or enacted include:

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the levying of substantial and increasing tax and duty charges;

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restrictions or bans on advertising, marketing and sponsorship;

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the display of larger health warnings, graphic health warnings and other labeling requirements;

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restrictions on packaging design, including the use of colors and generic packaging;

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restrictions or bans on the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

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requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents levels;

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requirements regarding testing, disclosure and use of tobacco product ingredients;

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increased restrictions on smoking in public and work places and, in some instances, in private places and outdoors;

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elimination of duty free allowances for travelers; and

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encouraging litigation against tobacco companies.

Research and Development Expenditures

We do not have a formal research and development department.  However, an in-house team of approximately four employees is responsible for the design and development of our Mods and related accessories, including e-liquid and batteries.  

Employees

As of October 8, 2015, we had 24 full-time employees and 3 part-time employees in general and administrative, operations, engineering, research and development, business development, sales and marketing, and finance.  

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Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”).  As an "emerging growth company," we are able to take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies.

The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.  Additionally, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies." These provisions include, among other matters:

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the ability to provide fewer years of financial statements and other financial data in an initial public offering registration statement;

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an exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting;

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the ability to omit the compensation discussion and analysis and reduce compensation disclosure in our periodic reports and proxy statements; and

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no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements.

We intend to take advantage of these exemptions as long as we qualify as an emerging growth company. We will remain an emerging growth company until the earliest of:

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the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement;

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the last day of the fiscal year in which we have annual gross revenues of $1.0 billion or more;

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the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and

•  

the date on which we are deemed to be a "large accelerated filer," which will occur at such time as we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Securities Exchange Act of 1934, or the Exchange Act, for a period of at least 12 months, and (c) have filed at least one annual report pursuant to the Exchange Act.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this annual report before purchasing shares of our common stock. If any of the following risks occur, our business, financial condition and/or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.

Risks Related to Our Business and Our Industry

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

As of June 30, 2015, we had an accumulated deficit of $1,037,603 due to our continuing losses from operations.  For the year ended June 30, 2015, we had net loss of $613,997.  We cannot assure you that we will generate operating profits on a sustainable basis as we continue to expand our infrastructure, further develop our marketing efforts and otherwise implement our business initiatives.  

14

There is doubt about our ability to continue as a going concern due to insufficient cash resources to meet our business objectives.

Our continuation as a going concern is dependent on our ability to generate sufficient cash flows from operations to meet our obligations, which we have not been able to accomplish to date, and/or obtain additional financing from equity financings, debt financings, or from other sources.  The extent of our future capital requirements will depend on many factors, including results of operations and the growth rate of our business.  At June 30, 2015, we had a working capital deficit of $539,496 and we currently face liquidity and capital resources constraints.

Our near term objective is to raise debt or equity capital to fund our immediate cash needs and to finance our longer term growth and to pursue various means to reduce operating costs and increase cash.  We cannot provide assurance that we will be able to achieve cost reductions in our operations or raise additional debt or equity capital, and if we are unsuccessful, we may not be able to grow our operations as planned, may not be able to meet our other obligations as they become due and may even need to cease our operations. If we are successfully able to raise capital, the issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders and if capital is raised through debt facilities, such facilities will increase our liabilities and future cash commitments, and may also impose restrictive covenants relating to the operation of our business. We presently do not have any finalized arrangements for additional financing and we continue to evaluate various financing strategies to support our current operations and fund our future growth.

Our Convertible Note financing may result in significant dilution to existing stockholders and could cause us to incur significant financial penalties

On November 4, 2014, we entered into a securities purchase agreement with Typenex Co-Investment, LLC, a Utah limited liability company (the “Investor”), pursuant to which we concurrently issued to Investor a Secured Convertible Promissory Note in a principal amount of $1,687,500 (the “Company Note”).  Beginning on May 4, 2015, we are required to repay the outstanding balance on the Company Note in monthly installments of approximately $35,000 per month plus all unpaid interest and other costs, fees or charges under the Company Note.  Although we intend to repay the note in cash, if we are unable to repay the borrowings from the Investor in cash when they become due and issue shares of common stock to pay an installment, our existing stockholders will likely be significantly diluted pursuant to the terms of the Company Notes and our shares may significantly decline in value or become worthless.  On February 5, 2015, we filed Amended and Restated Articles with the Secretary of State of the State of Nevada which increases the authorized number of shares of common stock, par value $0.001, of the Company from 140,000,000 shares to 1,010,000,000 to comply with covenants contained in our debt facility with the Investor and to ensure that we have sufficient shares available for issuance in the event the Company Note is fully or partially converted into common stock.

In addition, if we fail to repay the Company Note when due, or if we are otherwise in default under the Company Note, at the option of Investor a default interest rate of 22% per annum will apply on all portions of the Company Note that are then eligible to be converted into our common stock while the default continues.  In the event we are in default under the Company Note, the Investor also has the option to accelerate the note with the outstanding balance becoming immediately due and payable or increase the outstanding balance of the note by an amount of 5% or 15% depending on the particular default.  In addition, if we fail to issue stock to the Investor within three trading days of receipt of a notice of conversion, we must pay a penalty equal to the greater of (i) $500 per day; or (ii) 2% of the product of (A) the number of shares to which Investor was entitled that were not issued on a timely basis; and (B) the closing sale price of the common stock on the trading day immediately preceding the last day for us to timely issue the shares.  In the event that any of the foregoing circumstances occur, our results of operations may be materially adversely effected, and our stock price may fall. As of June 30, 2015, the Company elected to deduct and offset the principal amount of $1,300,000 and all accrued interest thereon owing by the Investor under the remaining nine investor Notes from the amount owed by the Company under the Company Note. As of October 1, 2015 the aggregate outstanding balance under the Company Note is approximately $158,000.

15

If we default under our facility with B of I Federal Bank, we may lose all of our assets and intellectual property

On June 2, 2015, we entered into a Business Loan and Security Agreement with BofI Federal Bank (the “Bank”).  Payments of the principal and interest under our agreement with B of I Federal Bank are secured by first priority liens on, and security interests in, substantially all of our present and after-acquired assets and are also personally guaranteed by Lori Winther, our Chief Financial Officer and a director of the Company, Kyle Winther, our Chief Executive Officer and a director of the Company, and Gary Perlingos, our President and a director of the Company.  If an event of default occurs under the agreement, all obligations owing by us to the Bank under the agreement will, at the Bank’s election, become immediately due and payable and the Bank may exercise its rights as a secured creditor and obtain our assets.   If we lose all or a substantial portion of our assets, our shares will likely significantly decline in value or become worthless.  As of October 1, 2015 the aggregate outstanding balance under the Company Note is $71,750.

Our lenders have rights that are senior to those of our common stockholders

On June 4, 2015, we entered into a Note Purchase Agreement with Typenex Co-Investment, LLC, a Utah limited partnership, pursuant to which we concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “June Note”).  As further described under the heading “Liquidity and Capital Resources”, the June Note matures and is payable in full on December 4, 2015.

Similarly, on August 12, 2015, we entered into a Note Purchase Agreement with Iliad Research and Trading, a Utah limited liability company, pursuant to which we concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “August Note”).  As further described under the heading “Liquidity and Capital Resources”, the August Note matures and is payable in full on February 12, 2016.

Upon the occurrence of an event of default under a note, the outstanding balance of the applicable note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under a note, the applicable investor may declare all unpaid principal, plus all accrued interest and other amounts due under the applicable note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the applicable note as of the date of the event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter.    

Our ability to pay interest and principal on our indebtedness (including the June Note, the August Note, the November 4, 2014 note and under our facility with B of I Federal Bank) and to satisfy our other obligations will depend upon, among other things, our future financial and operating performance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We may be unable to effect any of these actions on satisfactory terms, or at all. In the event we issue common stock or other equity securities to satisfy our debt obligations, our existing stockholders may suffer significant dilution.  Furthermore, any proceeds that we could realize from any financings or the disposition of assets may not be adequate to meet our debt service or other obligations then due, which would have an immediate material adverse effect on our business, results of operations and financial condition.  In the event of our bankruptcy, dissolution or liquidation, the claims of our lenders (including B of I, Typenex and Iliad) must be satisfied before any distributions can be made on our common stock. As a result, our common stockholders would receive distributions only after priority distributions to our lenders are satisfied and may receive nothing in the event of our bankruptcy, dissolution or liquidation.

16

We operate a developing business, and it is difficult to accurately predict our future sales and appropriately budget expenses.

Because our business is evolving, it is difficult to accurately predict our future sales and appropriately budget our expenses.  Our operations will be subject to risks inherent in the establishment of a developing business, including, among other things, efficiently deploying our capital, developing our products, developing and implementing our marketing campaigns and strategies and developing brand awareness and acceptance of our products. Our ability to generate future sales will be dependent on a number of factors, many of which are beyond our control, including the pricing of competing products, overall demand for our products, changes in consumer preferences, market competition and government regulation. While we believe that we have the opportunity to be successful in the electronic cigarette industry, there can be no assurance that we will be successful in accomplishing our business initiatives, or that we will be able to achieve any significant levels of revenues or net income, from the sale of our products.  

The market for our products is uncertain and is still evolving.

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

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

We face intense competition from direct and indirect competitors, including tobacco companies, other known and established or yet to be formed electronic cigarette companies, and pharmaceutical companies that market smoking cessation aids and alternative nicotine delivery products, each of whom pose a competitive threat to our current business and future prospects. We are subject to highly competitive conditions in all aspects of our business, and barriers to entry into our business are low.  We expect competition to intensify in the future.

We compete primarily on the basis of product quality, brand recognition, brand loyalty, service, marketing, advertising and price. Some tobacco companies currently offer traditional tobacco products and may introduce new tobacco based cigarettes and smoking devices.  Because of their well-established sales and distribution channels, marketing expertise and significant resources, large tobacco companies are better positioned than small competitors to capture a larger share of the electronic cigarette market.  We also face competition from smaller tobacco companies that are much larger, better funded, and more established than us.   

There can be no assurance that we will be able to compete successfully against any of the aforementioned competitors and our inability to successfully compete against these or any of our competitors will have a material adverse effect our business, results of operations and financial condition.

17

Our products may become obsolete and unmarketable if we are unable to respond adequately to rapidly changing technology and customer demands.

Our industry is characterized by rapid changes in technology and customer demands. As a result, our products and services may quickly become obsolete and unmarketable. Our future success will depend on our ability to adapt to technological advances, anticipate customer demands, develop new products and enhance our current products on a timely and cost-effective basis. Further, our products must remain competitive with those of other companies with substantially greater resources. We may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products or enhanced versions of existing products. Also, we may not be able to adapt new or enhanced services to emerging industry standards, and our new products may not be favorably received.  If we are unable to meet the changing demands of our customers, our business and financial condition will be materially adversely affected.

We must attract and maintain key personnel or our business could be materially adversely affected.

We must attract and retain key personnel in order to successfully operate our business. We compete with other companies both within and outside the tobacco/ electronic Cigarette industry to recruit and retain competent employees.  If we cannot retain qualified employees to meet the needs of our anticipated growth, our business and financial condition could be materially adversely affected.

If we are not able to adequately protect our intellectual property, then we may not be able to compete effectively and we may not be profitable.

Our commercial success may depend, in part, on obtaining and maintaining patent protection, trade secret protection and regulatory protection of our technologies and product candidates as well as successfully defending third-party challenges to such technologies and candidates.  We also consider our trademarks invaluable to our ability to continue to develop and maintain the goodwill and recognition associated with our brand.

With respect to our patented technology, the enforceability of a patent is often uncertain and determining whether a patent is enforceable involves complex legal and factual questions. Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property. Accordingly, we cannot predict with any certainty the range of claims that may be allowed or enforced concerning our patents.

We may also rely on trade secrets to protect our technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. While we seek to protect confidential information, in part, through confidentiality agreements with our consultants and scientific and other advisors, they may unintentionally or willfully disclose our information to competitors. Enforcing a claim against a third party related to the illegal acquisition and use of trade secrets can be expensive and time consuming, and the outcome is often unpredictable.

If we are not able to maintain patent or trade secret protection on our technologies and product candidates, then we may not be able to exclude competitors from developing or marketing competing products, and we may not be able to operate profitability.

18

We could lose our competitive advantages if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation could be time-consuming and costly.

We may need to bring legal claims to enforce or protect our intellectual property rights. Any litigation, whether successful or unsuccessful, could result in substantial costs and diversions of resources. In addition, notwithstanding any rights we have secured in our intellectual property, other persons may bring claims against us that we have infringed on their intellectual property rights and such parties may further argue that our intellectual property rights are not valid. Any claims against us, with or without merit, could be time consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our service marks or require us to make changes to our website or other of our technologies, all of which could negatively impact our stock price.

If we are the subject of an intellectual property infringement claim, the cost of participating in any litigation could materially adversely affect our business.

There has been, and we believe that there will continue to be, significant litigation and demands for licenses in our industry regarding patent and other intellectual property rights. Although we anticipate having a valid defense to any allegation that our current products, production methods and other activities infringe the valid and enforceable intellectual property rights of any third parties, we cannot be certain that a third party will not challenge our position in the future. Other parties may own patent rights that we might infringe with our products or other activities, and our competitors or other patent holders may assert that our products and the methods we employ are covered by their patents. These parties could bring claims against us that would cause us to incur substantial litigation expenses and, if successful, may require us to pay substantial damages. Some of our potential competitors may be better able to sustain the costs of complex patent litigation, and depending on the circumstances, we could be forced to stop or delay our research, development, manufacturing or sales activities. Any of these costs could cause us to go out of business.

If we fail to effectively manage our growth, our future business results could be harmed and our managerial and operational resources may be strained.

We expect to experience significant and rapid growth in the scope and complexity of our business in the coming years. We anticipate that we will need to hire a broad range of additional personnel in order to successfully advance our operations, including staff to help source our products, manage operations, increase our sales and marketing efforts and perform finance and accounting functions. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively, could have a materially adverse effect on our business and financial condition.

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

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

19

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

According to the FDA, electronic cigarettes may contain ingredients that are known to be toxic to humans and may contain other ingredients that may not be safe. Additionally, electronic cigarettes may be attractive to young people and may lead them to try other tobacco products, including conventional cigarettes that are known to cause disease. Because clinical studies about the safety and efficacy of electronic cigarettes have not been submitted to the FDA, consumers currently have no way of knowing whether electronic cigarettes are safe before their intended use; what types or concentrations of potentially harmful chemicals are found in these products; or how much nicotine is being inhaled. In addition, there have been instances of electronic cigarettes exploding, especially during charging.  Consequently there is a risk that an electronic cigarette can cause disease and/or serious bodily injury and the publicity from such instances of disease or injury could dramatically slow the growth of the market for electronic cigarettes.

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

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

Electronic cigarettes may become subject to regulation by the FDA.

The FDA did not appeal the decision of the U.S. Court of Appeals for the D.C. Circuit in Sottera, Inc. v. Food & Drug Administration (2010) which held that electronic cigarettes and other nicotine-containing products are not drugs or devices unless they are marketed for therapeutic purposes.  The Court held further that electronic cigarettes and other nicotine-containing products can be regulated as “tobacco products” under the Food, Drug and Cosmetic Act. Consequently, the FDA may choose to develop regulations governing the manufacture, marketing and sale of electronic cigarettes.

Potential FDA regulations, or significant costs to comply with potential FDA regulations, could have a materially adverse effect on our company’s operations and profitability. Failure to comply with FDA regulatory requirements could result in significant financial penalties and could have a material adverse effect on our business, financial condition and results of operations and ability to market and sell our products.

On August 23, 2013, the Wall Street Journal reported that the FDA is considering a ban on online sales of electronic cigarettes. If the FDA implements such a ban or otherwise implements regulations that have the effect of reducing our sales, our financial results would be materially adversely affected and we may ultimately be forced to cease our operations.

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

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

·

liabilities that substantially exceed our product liability insurance, which we would then be required to pay from other sources, if available;

·

an increase of our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, or at all;

·

damage to our reputation and the reputation of our products, resulting in lower sales;

·

regulatory investigations that could require costly recalls or product modifications;

·

litigation costs; and

·

the diversion of management’s attention from managing our business.

20

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

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

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

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

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

Moreover, if the FDA asserts we are a tobacco product, we may be required to follow federal and state tobacco labeling laws, and could face potential fines, sanctions, administrative actions, penalties and other liability, either civil and or criminal, for any violations thereof.

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

New products face intense media attention and public pressure.

E-Cigarettes are new to the marketplace and since their introduction certain members of the media, politicians, government regulators and advocate groups, including independent doctors have called for an outright ban of all electronic cigarettes, pending regulatory review and a demonstration of safety. A ban of this type would likely have the effect of terminating our United States’ sales and marketing efforts of certain products which we currently market or have plans to market in the future. Such a ban would also likely cause public confusion as to which products are the subject of the ban and which are not and would have a material adverse effect on our business, financial condition and performance.

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

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

21

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

Presently our products are not taxed like cigarettes or other tobacco products, all of which have faced significant increases in the amount of taxes collected on the sale of their products. Should state and federal governments and or taxing authorities impose taxes similar to those levied against cigarettes and tobacco products on our products, it may have a material adverse effect on the demand for our products. Moreover we may be unable to establish the systems and processes needed to track and submit the taxes we collect through internet sales, which would limit our ability to market our products through our websites which would have a material adverse effect on our revenues, operation and financial condition.

States including New York, Hawaii, Rhode Island, Georgia and North Carolina have begun collecting taxes on Internet sales where companies have used independent contractors in such states to solicit sales from residents of those states. The requirement to collect, track and remit taxes based on independent affiliate sales may require us to increase our prices, which may affect demand for our products or conversely reduce our net profit margin; either of which could have a material adverse effect on our revenues, financial condition and operating results.

Our success is dependent upon our marketing efforts.

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

We rely, in part, on the efforts of our independent sales distributors and outside broker/dealer network to augment our internal sales efforts and distribute our product to wholesalers and or retailers to generate revenues. No single distributor currently accounts for a material percentage of our revenues and we believe that should any of these relationships terminate we would be able to find suitable replacements.  However any change in distributors or our ability to timely replace any given distributor could have a material adverse effect on our business, prospects, financial condition and results of operations.

We depend on a small number of third party suppliers and manufacturers for critical raw materials, components and certain of our electronic cigarette products.

We depend on a small number of third-party suppliers and manufacturers for critical raw materials, components and certain of our electronic cigarette products.  We depend on such suppliers to supply materials, components and products in a timely manner, in adequate quantities, consistent quality and at reasonable costs.  An interruption in supply and or consistency of our products may harm our relationships and goodwill with customers, and have a materially adverse effect on our cash flow and our operations.  

Although we believe that several alternative and redundant sources for our products are available, any failure to obtain the components, chemical constituents and manufacturing services necessary for the production of our products could have a material adverse effect on our business and prevent us from timely execution of our business plan and may result in additional expenditures of time and money in seeking viable new sources of supply and manufacturer alternatives.

22

Our financial results may vary significantly from period-to-period due to unpredictable sales cycles in certain of the markets into which we sell our products, and changes in the mix of products we sell during a period, which may lead to volatility in our stock price.

The size and timing of our potential revenue from sales to our customers is difficult to predict and is market-dependent. Our sales efforts will often require us to educate our customers about the use and benefits of our products, including their technical and performance characteristics. We intend to spend substantial amounts of time and money on our sales efforts and there is no assurance that these investments will produce any sales within expected time frames or at all. Given the potentially large size of purchase orders for our products, particularly by distributors who resell into retail channels, the loss of or delay in the signing of a customer order could significantly reduce our revenue in any period. Our revenues in each period may also vary significantly as a result of purchases, or lack thereof, by significant retail customers.

Our profitability from period-to-period may also vary significantly due to the mix of products that we may sell in different periods. Consequently, sales of individual products may not necessarily be consistent across periods, which could affect product mix and cause gross and operating profits to vary significantly. As a result of these factors, we believe that quarter-to-quarter comparisons of our operating results cannot necessarily be relied upon to be meaningful and that these comparisons cannot be relied upon as indicators of future performance.

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

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

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

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

Internet security poses a risk to our e-commerce sales.

At present, we generate revenues through the sale of our products through our websites. We manage our websites and e-commerce platform internally and as a result any compromise of our security or misappropriation of proprietary information could have a material adverse effect on our business, prospects, financial condition and results of operations. We rely on encryption and authentication technology licensed from other companies to provide the security and authentication necessary to effect secure Internet transmission of confidential information, such as credit and other proprietary information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the technology used by us to protect client transaction data. Anyone who is able to circumvent our security measures could misappropriate proprietary information or cause material interruptions in our operations. We may be required to expend significant capital and other resources to protect against security breaches or to minimize problems caused by security breaches. To the extent that our activities or the activities of others involve the storage and transmission of proprietary information, security breaches could damage our reputation and expose us to a risk of loss or litigation, government sanction, and possible liability. Our failure to prevent these security breaches may further result in consumer distrust and may also adversely affect our business, results of operations and financial condition.

23

We may incur losses that are not adequately covered by insurance, which may harm our results of operations. In addition, our insurance costs may increase and we may not be able to obtain similar insurance coverage in the future.

Although we believe we maintain insurance that is customary and appropriate for our business and its size, each of our insurance policies is subject to certain exclusions. The lack of adequate insurance for certain types or levels of risk could expose us to significant losses in the event that a catastrophe occurred for which we are underinsured. In addition to the damage caused to our properties by a casualty loss, we may suffer business disruption as a result of the casualty event or be subject to claims by third parties that may be injured or harmed. While we carry general liability insurance and business interruption insurance, there can be no assurance that insurance will be available or adequate to cover all loss and damage to which our business or our assets might be subjected. In addition, certain casualty events, such as labor strikes, nuclear events, loss of income due to terrorism, deterioration or corrosion, insect or animal damage and pollution, may not be covered under our policies. Any losses we incur that are not adequately covered by insurance may decrease our future operating income, require us to fund replacements or repairs for destroyed property and reduce the funds available for payments of our obligations.

We renew our insurance policies on an annual basis. To the extent that the cost of insurance coverage increases, we may be required to reduce our policy limits or agree to exclusions from our coverage.

We are subject to litigation in the ordinary course of our business. An adverse determination with respect to any such disputed matter could result in substantial losses.

We are, from time to time, during the ordinary course of operating our businesses, subject to various litigation claims and legal disputes, including contract, lease, employment and regulatory claims as well as claims made by visitors to our retail locations. Certain litigation claims may not be covered entirely or at all by our insurance policies or our insurance carriers may seek to deny coverage. In addition, litigation claims can be expensive to defend and may divert our attention from the operations of our businesses. Further, litigation, even if without merit, can attract adverse media attention. As a result, litigation can have a material adverse effect on our businesses and, because we cannot predict the outcome of any action, it is possible that adverse judgments or settlements could significantly reduce our earnings or result in losses.

Risks Relating to Ownership of Our Securities

Our stock price may be volatile, which may result in losses to our shareholders.

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies listed on the Over-the-counter Bulletin Board quotation system in which shares of our common stock are listed, have been volatile in the past and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including the following, some of which are beyond our control:

·

variations in our operating results;

·

changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;

·

changes in operating and stock price performance of other companies in our industry;

·

additions or departures of key personnel; and

·

future sales of our common stock.

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may also adversely affect the price of our common stock.  

24

Our common shares may become thinly traded and you may be unable to sell at or near ask prices, or at all.

We cannot predict the extent to which an active public market for trading our common stock will be sustained. Our common stock has historically been sporadically or “thinly-traded,” meaning that the number of persons interested in purchasing our common shares at or near bid prices at certain given time may be relatively small or non-existent.

This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume.  Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained.

Our stock is a penny stock, which may subject our common stock to abuse.

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

Because our common stock is a “penny stock,” trading therein will be subject to regulatory restrictions.

Our common stock is currently, and in the near future will likely continue to be, considered a “penny stock.” The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and any salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure and other requirements may adversely affect the trading activity in the secondary market for our common stock.

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We do not anticipate paying any cash dividends to our common shareholders.

We presently do not anticipate that we will pay any cash dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any cash dividends will be within the discretion of our Board of Directors, but subject to the terms of restrictive covenants that may be present in our contractual arrangements. We presently intend to retain all earnings to implement our business plan; accordingly, we do not anticipate the declaration of any cash dividends in the foreseeable future.

Volatility in our common share price may subject us to securities litigation.

The market for our common stock is characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.

The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights of our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.

Our Articles of Incorporation include a specific provision to eliminate the liability of our directors and officers for monetary damages to our company and shareholders to the maximum extent provided for by Nevada law. We may also adopt contractual indemnification obligations under employment agreements that we may enter into with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.

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

We are currently authorized to issue up to 1,010,000,000 shares of common stock, of which 72,455,606 shares are currently issued and outstanding and up to 10,000,000 shares of preferred stock, none of which are issued and outstanding.  Additional shares of our common stock or preferred stock may be issued by our board of directors for such consideration as they may consider sufficient without seeking stockholder approval. The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current stockholders and the issuance of preferred stock may also have a similar impact.

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Provisions in our organizational documents and Nevada law will make it more difficult for someone to acquire control of us.

Our amended and restated articles of incorporation, amended and restated bylaws and Nevada law contain provisions that could discourage, delay or prevent a third party from acquiring our company, even if doing so may be beneficial to our stockholders. As an example, our restated articles of incorporation and amended and restated bylaws provide:

·

The ability to our board of directors to issue shares of our preferred stock in one or more series without further authorization of our stockholders;

·

A prohibition on stockholder action by written consent; and

·

A requirement that stockholders provide advance notice of any stockholder nominations of directors or any proposal of new business to be considered at any meeting of stockholders.

In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our Common Stock.  

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

Our board is composed of five directors, none of whom are independent based on the NASDAQ listing rules.  Without a majority of independent directors on our board, our ability to establish effective corporate governance procedures to oversee functions such as audit, compensation and corporate governance is limited.  Furthermore, a majority of our directors are also executive officers of the Company.  This structure gives our executive officers significant control over all corporate issues and decisions.

In the absence of a majority of independent directors, our executive officers, most of whom are also principal stockholders and directors, could establish policies and enter into transactions without independent review and approval.  This could present the potential for a conflict of interest between us and our shareholders generally and the controlling officers, shareholders or directors.  Although we anticipate seeking independent directors in the future, there can be no assurance as to whether or when we will be successful in appointing any new directors.

We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act (which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30.

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Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with public company effective dates.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.  This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.  As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.  Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.

If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry and markets or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock will depend in part on the research and reports that third-party securities analysts publish about our company and our industry and markets. One or more analysts could downgrade our common stock or issue other negative commentary about our company or our industry or markets. In addition, we may be unable or slow to attract sufficient research coverage. Alternatively, if one or more of these analysts cease coverage of our company, we could lose visibility in the market. As a result of one or more of these factors, the trading price and volume of our common stock could decline.

Our officers, directors and principal stockholders can exert significant influence over our business and may make decisions that are not in the best interests of all stockholders.

Our officers, directors and principal stockholders (greater than 5% stockholders) collectively own approximately 52.4% of our issued and outstanding common stock.  As a result of such ownership, these stockholders will be able to affect the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the election and removal of directors and any change in control. In particular, this concentration of ownership of our common stock could have the effect of delaying or preventing a change of control of our company or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of our company. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of our common stock.

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The requirements of being a public company, including compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, and the requirements of the Sarbanes-Oxley Act of 2002, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, we need to comply with laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC, and requirements of the principal trading market upon which our common stock may trade, with which we are not required to comply as a private company. As a result, we will incur significant legal, accounting and other expenses that a private company would not incur. Complying with these statutes, regulations and requirements will occupy a significant amount of the time of our board of directors and management, will require us to have additional finance and accounting staff, may make it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on the audit committee (upon its formation), and may make some activities more difficult, time consuming and costly. We will need to:

·

institute a more comprehensive compliance function;

·

maintain internal policies, such as those relating to disclosure controls and procedures and insider trading;

·

design, establish, evaluate and maintain a system of internal control over financial reporting in compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

·

prepare and distribute periodic reports in compliance with our obligations under the federal securities laws including the Securities Exchange Act of 1934, as amended (the “Exchange Act”);

·

involve and retain to a greater degree outside counsel and accountants in the above activities; and

·

establish an investor relations function.

If we are unable to accomplish these objectives in a timely and effective fashion for our business, our ability to comply with financial reporting requirements and other rules that apply to reporting companies could be impaired. If our finance and accounting personnel insufficiently support our business in fulfilling these public-company compliance obligations, or if we are unable to hire adequate finance and accounting personnel, we could face significant legal liability, which could have a material adverse effect on our financial condition and results of operations. Furthermore, if we identify any issues in complying with those requirements (for example, if our company or the independent registered public accountants identified a material weakness or significant deficiency in our company’s internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of our company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal corporate office and warehouse is located at 1871 Tapo Street, Simi Valley CA 93063.  Our corporate office is a leased facility comprised of approximately 5,000 square feet of office space. We also operate two retail locations from leased premises located at 665 E. Los Angeles Ave, Simi Valley, CA 93065 and 9911 Topanga Canyon Blvd., Chatsworth, CA 91311, respectively.  Our Simi Valley retail location measures approximately 1,600 square feet and our Chatsworth store measures approximately 1,200 square feet.  Our aggregate monthly rent for the above-described three properties as well as an 1,800 square ft. storage facility is approximately $12,800.  We believe our facilities are adequate to meet our current and near-term needs.  Our telephone number is (805) 309-0530.

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ITEM 3. LEGAL PROCEEDINGS

We know of no material existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.  

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is currently quoted on the OTC Pink under the Symbol “VHUB”. Our common stock was originally listed for quotation on August 15, 2011 under the symbol “DOGI”.

The following table reflects the high and low bid information for our common stock and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.  On October 8, 2015, the closing sales price of our common stock as reported on the Over-The-Counter Bulletin Board was $0.04 per share.  

	High	Low
Year Ended June 30, 2014
First Quarter (1)	-	-
Second Quarter (1)	-	-
Third Quarter	1.25	0.28
Fourth Quarter	0.83	0.16
Year Ended June 30, 2015
First Quarter	0.16	0.01
Second Quarter	0.02	0.01
Third Quarter	0.05	0.01
Fourth Quarter	0.04	0.02

(1)

No trades during this period.

Stockholders of Record

As of September 25, 2015, an aggregate of 72,455,606 shares of our common stock were issued and outstanding and were owned by 6 stockholders of record.  Island Stock Transfer Inc., Roosevelt Office Center, 15500 Roosevelt Boulevard, Suite 301, Clearwater, Florida 33760 (Telephone: 727.289.0010) is the registrar and transfer agent for our common shares.

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Dividends

We have not paid any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.  We currently intend to retain all earnings, if and when generated, to finance our operations. The declaration of cash dividends in the future will be determined by our Board in its discretion based upon our earnings, financial condition, capital requirements, contractual obligations which may prohibit the payment of dividends, including our current or any future indebtedness, and other relevant factors, including restrictions imposed under Nevada statutes.  

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

We did not sell any equity securities which were not registered under the Securities Act during the year ended June 30, 2015 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports on Form 8-K filed during the year ended June 30, 2015.  

ITEM 6. SELECTED FINANCIAL DATA

As a “smaller reporting company”, we are not required to provide the information required by this Item.

ITEM 7. MANAGEMENTS’ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion summarizes the significant factors affecting the operating results, financial condition and liquidity and cash flows of our company for the year ended June 30, 2015 and for the period from our inception (July 12, 2013) to June 30, 2014.  You should read this discussion together with the consolidated financial statements, related notes and other financial information included in this Annual Report.  Except for historical information, the matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward looking statements that involve risks and uncertainties, including those discussed under Part I, Item 1A—”Risk Factors” and elsewhere in this Annual Report, and are based upon judgments concerning various factors that are beyond our control. These risks could cause our actual results to differ materially from any future performance suggested below.

General Overview

On February 14, 2014, we 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”).  Pursuant to the terms of Exchange Agreement, we agreed to acquire all 30,000 of the issued and outstanding shares of Vapor’s common stock, as well as all 30,000 of the issued and outstanding shares of Delite’s common stock in exchange for the issuance by our company of 38,000,001 shares of our common stock to the shareholders of both companies.  On March 14, 2014, we completed the acquisition of Vapor and issued all of the 38,000,001 shares of our stock to the shareholders of Vapor, who are also the shareholders of Delite.  On March 26, 2014, we completed the acquisition of Delite.  As a result of the closing of the transactions contemplated by the Exchange Agreement, Vapor and Delite became our wholly owned subsidiaries and we now carry on the business of developing, producing, marketing and selling vaping devices and related accessories.  The transaction with Vapor was accounted for as a reverse acquisition (recapitalization) where Vapor was deemed to be the accounting acquirer, and us the legal acquirer. The transaction with Delite was accounted for as a business acquisition and we assumed the assets and liabilities of Delite at historical basis as of March 26, 2014 and the activity of Delite was included from that date forward. Prior to our acquisition of Vapor, we existed as a “shell company” with nominal assets whose sole business was to identify, evaluate and investigate various companies to acquire or with which to merge.  On May 18, 2015, Vapor and Delite were merged with and into the Company, ending the separate existences of Vapor and Delite. This had no impact on the historical consolidated financial statements

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Upon our acquisition of Vapor, Robin Looban resigned as our sole director, president, secretary, treasurer, Chief Financial Officer and Chairman of the Board of Directors and management members from Vapor and Delite were appointed to serve as directors and officers of our company.  To reflect our acquisition of Vapor, on March 14, 2014 we changed our corporate name from Doginn, Inc. to Vapor Hub International Inc., and our stock symbol from “DOGI” to “VHUB”.  We also changed our fiscal year end from December 31 to June 30.  

Going Concern

Our capital requirements for the next twelve months will not be able to be funded in their entirety from our operating cash flows.  As of June 30, 2015, we had a cash balance of $351,081.  We believe it will be necessary to raise additional funds to finance our operations, and intend to do so through equity financings, debt financings, or from other sources.  The extent of our future capital requirements will depend on many factors, including results of operations and the growth rate of our business.  

Our consolidated financial statements have been presented on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our cash balance as of June 30, 2015 along with other factors including our loss from operations raises doubt about our ability to continue as a going concern. The accompanying 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.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. Please refer to Note 3 “BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” for further discussion.

Recently Issued Accounting Pronouncements

In August 2014, FASB issued Accounting Standards Update (ASU)  No. 2014-15 Preparation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s  Ability to Continue as a Going Concern. Under generally accepted accounting principles (GAAP), continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity’s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements—Liquidation Basis of Accounting. Even when an entity’s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in the update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, at the current period, management does not believe that it has met conditions which would subject the company’s consolidated financial statements to additional disclosure.

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On April 7, 2015, the FASB issued ASU 2015-03 Interest – Imputations of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, to simplify presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. We are evaluating the effect, if any, on its financial statements of the amendment.

We have reviewed other recent accounting pronouncements issued prior to the date of issuance of our financial statements included in this report, and do not believe any of these pronouncements will have a material impact on the Company’s consolidated financial statements.

Result of Operations for Year Ended June 30, 2015 and for the period from Inception (July 12, 2013) to June 30, 2014

The following table sets forth, for the periods indicated, consolidated statements of operations information:

	Year Ended June 30, 2015	From Inception (July 12, 2013) to June 30, 2014	Change (Dollars)	Change (Percentage)
Revenue	$ 5,296,342	$ 1,202,663	$ 4,093,679	340.38
Cost of revenue	3,202,067	647,287	2,554,780	394.69
Gross Profit	2,094,275	555,376	1,538,899	277.09
General and administrative expenses	2,510,360	984,776	1,525,584	154.92
Net Loss from Operations	(416,085)	(429,400)	13,315	(3.10)
Other income (expense)	(195,512)	12,873	(208,385)	(1618.78)
Net Loss	(613,997)	(423,606)	(190,391)	44.95

Revenues:

Revenues are comprised of gross sales less returns and discounts.  In the year ended June 30, 2015, we generated revenues of $5,296,342 (net of returns and discounts of $133,500) and from the period from our inception on July 12, 2013 to June 30, 2014, we generated revenues of $1,202,663 (net of returns and discounts of $23,740).  The increase in revenues compared to the prior year period primarily results from growth of our wholesale distribution and direct distribution to retail store sales.   We expect revenues derived from our wholesale distribution, direct distribution to retail stores and sales through our websites, which collectively account for approximately 90% of our revenue, to increase as we increase our marketing initiatives.  We also expect our sales growth to be driven by sales of our new Limitless Mods and our Binary Premium e-Liquid line, which have been well received in the marketplace and collectively account for a majority of our sales.  We anticipate that retail sales will remain relatively flat in subsequent periods.   

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Cost of Revenue:

Our cost of revenue primarily represents the cost of our outsourced manufacturing of our products and also the cost of purchasing products from third parties for resale.  Generally, our cost of revenue is lower on products that we directly source and is higher when we purchase products for resale from third parties. Our cost of revenue for the year ended June 30, 2015 was $3,202,067 and for the period from our inception (July 12, 2013) to June 30, 2014 was $647,287.  The increase in cost of revenues during the year ended June 30, 2015 compared to the prior year period is primarily attributable to the period-over-period increase in our revenues. In addition, for the year ended June 30, 2015, our directly sourced products comprised approximately 60% of our sales, which is approximately a 15% decrease from the previous fiscal year.

Gross Profit:  Gross profit represents revenue less the cost of revenue.  During the year ended June 30, 2015, our gross profit was $2,094,275 and for the period from our inception to June 30, 2014 our gross profit was $555,376.  The increase in gross profit during the year ended June 30, 2015 compared to the prior year period is primarily attributable to the period-over-period increase in our revenues.  Our gross margin (which is gross profit as a percentage of revenue) for the year ended June 30, 2015 was 39.5% compared to 46.2 % for the prior year period.  The decrease in our gross profit during our year ended June 30, 2015 results primarily from the sale of a greater percentage of third party products in our fiscal year ended June 30, 2015 compared to the prior year period, as described in the previous paragraph.  We expect our gross profit and profit margins to increase in subsequent periods as we sell more of our proprietary products, including, without limitation our Limitless Mods and Binary Premium e-Liquids and our newly launched Limitless Atomizer, which have higher margins than products we purchase for resale.

General and Administrative Expense:   General and administrative expenses consist primarily of payroll and related costs, sales and marketing costs, infrastructure costs and costs associated with being a public reporting company.  During the year ended June 30, 2015, we incurred general and administrative expenses of $2,510,360 and in the comparable prior year period ending June 30, 2014 we incurred general and administrative expenses of $984,776.  The increase in general and administrative expense during the year ended June 30, 2015 compared to the prior year period is attributable to increased sales and marketing costs, the hiring of 10 additional employees and costs associated with being a public reporting company.   Although our general and administrative expenses as a percentage of sales decreased to 47.4% for the year ended June 30, 2015 compared to 81.9% for the prior year period, we are continuing to evaluate our general and administrative expenses in an effort to reduce costs and improve our future profitability and cash flow.  In October of 2015, we took steps to lower our general and administrative expenses by dismissing 4 full time and 2 part time employees.

Other Income: Other Income (expense) for the year ended June 30, 2015 was $195,512 and primarily consists of interest expense of $163,016 incurred in connection with our credit facilities and an increase in derivative liability of $19,609 associated with our credit facility with Typenex Co-Investment, LLC.   For the period from our inception to June 30, 2014, we had other income of $12,873.

Net Loss: Net loss was $613,997 for the year ended June 30, 2015 and $423,606 for the period from our inception to June 30, 2014.  The increase in net loss from the prior year period primarily results from lower gross margins and higher general and administrative expenses and other expenses.  

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations and we do not anticipate this changing.

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Liquidity and Capital Resources

As of June 30, 2015, we had cash and cash equivalents of $351,081 and a working capital deficit of $539,496.  On June 30, 2014, we had cash and cash equivalents of $307,567 and a working capital deficit of $520,396.  We depend on cash from financing activities to fund our operating and investing activities, and we expect this trend to continue as we continue to grow our operations.  A summary of our net working capital as of June 30, 2015 and 2014 and our cash flows for the year ended June 30, 2015 and the period from our inception to June 30, 2014 from our operating, investing and financing activities are summarized in the following tables:

Net Working Capital
		As of  June 30, 2015	As of June 30, 2014
Current Assets	$	794,377	667,973
Current Liabilities		1,333,873	1,188,369
Net Working Capital (deficit)	$	(539,496)	(520,396)

Cash Flows
		Year Ended June 30, 2015		From Inception (July 12, 2013) to June 30, 2014
Net cash used in Operating Activities	$	(437,359)	$	(207,111)
Net cash used in Investing Activities		(39,890)		(130,684)
Net cash provided by Financing Activities		520,763		645,362
Increase (Decrease) in Cash during the Year		43,514		307,567
Cash, Beginning of Period		307,567		0
Cash, End of Year		351,081		307,567

Operating Activities

Net cash used in operating activities was $437,359 for the year ended June 30, 2015 compared to $207,111 for the period from our inception to June 30, 2014.  For the year ended June 30, 2015, net operating cash used in operations primarily results from our net loss, increases in inventory and a decrease in deferred income offset by an increase in accounts payable and accrued expenses.  For the period from our inception to June 30, 2014, net cash used in operations primarily results from our net loss, costs incurred to purchase inventory and prepaid expenses, offset by increased accounts payable and deferred income.

Investing Activities

Net cash used in investing activities was $39,890 for the year ended June 30, 2015 compared to $130,684 for the period from our inception to June 30, 2014.  For the year ended June 30, 2015, net cash used in investing activities consists of the purchase of equipment.  For the period from our inception to June 30, 2014, net cash used in investing activities consists of the purchase of equipment for approximately $118,522 and approximately $12,162 paid as a security deposit in relation to one of our leased properties.

Financing Activities

Net cash provided by financing activities was $520,763 for the year ended June 30, 2015 and $645,362 for the period from our inception to June 30, 2014.  For the year ended June 30, 2015, net cash provided by financing activities includes proceeds from convertible promissory notes payable of $272,008, proceeds from short term notes payable of $483,071, proceeds from affiliate loans of $80,543 offset by payments on affiliate loans of $85,608, payments on convertible notes payable of $70,313 and payments on short term notes payable of $152,291.

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For the period from our inception to June 30, 2014, net cash provided by financing activities includes proceeds of approximately $101,378 from affiliate loans and proceeds of $534,881 from the sale of convertible promissory notes.

As of June 30, 2015, we had a balance of approximately $96,312 outstanding as related party loans from Kyle Winther, our CEO, Lori Winther, our CFO and Winther & Company (an entity owned by Lori Winther and her husband, Niels Winther, who is a director of the company). The outstanding balances are non-interest bearing and repayable upon demand.  

First Facility with Typenex Co-Investment, LLC

On November 4, 2014, we entered into a securities purchase agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company (the “Investor”), pursuant to which we concurrently issued to Investor a Secured Convertible Promissory Note in a principal amount of $1,687,500 (the “Company Note”).  The principal amount includes an original issue discount of $80,000 plus an additional $7,500 to cover Investor's due diligence and legal fees in connection with the transaction.  In consideration for the Company Note, Investor paid an aggregate purchase price of $1,600,000 (the “Purchase Price”), consisting of an initial cash purchase price of $200,000 and the issuance to us of ten promissory notes, the first two promissory notes in a principal amount of $100,000 and the remaining eight promissory notes in a principal amount of $150,000 (each an “Investor Note” and collectively, the “Investor Notes”). The Company Note and the Investor Notes each bear interest at the rate of 10% per annum and mature on April 4, 2019 and our obligations under the Company Note are secured by liens on the Investor Notes pursuant to the terms of a Security Agreement entered into by us in favor of the Investor.  Subject to certain conditions, we may prepay the Company Note by making a payment equal to 125% of the then outstanding balance (including interest and other fees and amounts due).  Each of the Investor Notes may be prepaid only upon the mutual agreement of the parties.

On January 16, 2015, upon the mutual agreement of the parties, Typenex paid to us the sum of $102,028 as a prepayment of all of its obligations owed to us under the first Investor Note in the original principal amount of $100,000 dated November 4, 2014, issued by Typenex in favor of the company.  

Beginning on May 4, 2015, we are required to repay the outstanding balance on the Note in monthly installments of approximately $35,000 per month plus all unpaid interest and other costs, fees or charges under the Company Note. Payment may be made in cash or, subject to certain conditions, in shares of our common stock or any combination of cash and shares. If payments are made in shares, such installments or portions thereof are, subject to certain conditions, convertible into shares of our common stock at the lesser of (i) a conversion price of $0.10, subject to adjustment or (ii) a price that is equal to 70% of the average of the three lowest closing bid prices of our common stock in the twenty trading days immediately preceding such conversion, subject to a floor of $0.01.  In addition, on the date that is twenty trading days from the date we deliver installment shares to Investor, there is a true-up where we are required to deliver additional shares if the installment conversion price as of the true-up date is less than the installment conversion price used to deliver the initial shares.

36

Beginning on May 4, 2015, all or any amount of a conversion eligible tranche (as described below) under the Company Note is convertible, at the option of the Investor, into shares of our common stock at a conversion price of $0.10 per share, subject to customary anti-dilution adjustments and other adjustments described in the Company Note (the “Conversion Price”).  The Company Note is convertible into shares of our common stock by Investor in eleven tranches consisting of an initial tranche of $217,500 plus interest and other amounts due which may be converted into shares of our common stock at the Conversion Price at any time on or after May 4, 2015 and ten additional tranches (each a “Subsequent Tranche”), two of which are in the amount of $105,000 plus interest and other amounts due and eight of which are in the amount of $157,500 plus interest and other amounts due.  Each Subsequent Tranche may not be converted into shares of our common stock unless the Investor has paid in full the Investor Note corresponding to such tranche, which payment requires our consent.  On January 16, 2015, the Investor paid to the Company the sum of $102,028 as a prepayment of all of its obligations owed to the Company under the first Investor Note and consequently the first Subsequent Tranche of $105,000 plus interest and other amounts due may be converted into shares of the Company’s common stock at the Conversion Price at the option of the Investor at any time on or after May 4, 2015. Subject to certain conditions based on the trading volume and trading price of our common stock, we may also elect to convert the entire outstanding balance under the Company Note into shares of our common stock at the Conversion Price.  

If we fail to repay the Company Note when due, or if we are otherwise in default under the Company Note, at the option of Investor a default interest rate of 22% per annum will apply on all conversion eligible portions of the Company Note while the default continues.  In the event we are in default under the Company Note, the Investor also has the option to accelerate the note with the outstanding balance becoming immediately due and payable or increase the outstanding balance of the note by an amount of 5% or 15% depending on the particular default.  In addition, if we fail to issue stock to the Investor within three trading days of receipt of a notice of conversion, we must pay a penalty equal to the greater of (i) $500 per day; or (ii) 2% of the product of (A) the number of shares to which Investor was entitled that were not issued on a timely basis; and (B) the closing sale price of the common stock on the trading day immediately preceding the last day for us to timely issue the shares.

The Company Note provides that the Investor maintains a right of offset that, under certain circumstances, permits the Investor to deduct amounts owed by us under the Company Note from amounts otherwise owed by Investor under the Investor Notes.  In addition, we are permitted at any time to deduct and offset any amount owing by the Investor under the Investor Notes from any amount owed by us under the Company Note.

On June 30, 2015 pursuant to the terms of the Company Note, the Company elected to deduct and offset the principal amount of $1,300,000 and all accrued interest thereon owing by the Investor under the remaining nine Investor Notes from the amount owed by the Company under the Company Note, leaving an outstanding balance of approximately $252,000 under the Company Note as of June 30, 2015 and approximately $158,000 as of October 1, 2015.

The Company Note provides that Investor may not convert the Company Note in an amount which would cause Investor to own more than 4.99%, or if our market capitalization (as defined in the Company Note) is less than $10,000,000, more than 9.99%, of our outstanding common stock.

In connection with the first and second closings of the financing, we paid Pyrenees Investments $20,000 and $10,020, respectively, as a finder’s fee (equal to 10% of the gross proceeds).

The foregoing descriptions of the Purchase Agreement, the Company Note, the Investor Notes and the Security Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the documents, which are filed as exhibits to our Current Report on Form 8-K filed on November 10, 2014 with the Securities and Exchange Commission.

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Second Facility with Typenex Co-Investment, LLC

On June 4, 2015, we entered into a Note Purchase Agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company, pursuant to which we concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “June Note”).  The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover the investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction.  In consideration for the June Note, the investor paid an aggregate cash purchase price of $200,000, computed as follows: $245,000 original principal balance, less the original issue discount of $40,000, and less the transaction costs.  The June Note matures on December 4, 2015.  We may prepay all or a portion of the amount owed earlier than it is due without penalty.

Interest does not accrue on the unpaid principal balance of the June Note unless an event of default occurs.  Upon the occurrence of an event of default, the outstanding balance of the June Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under the June Note, the investor may declare all unpaid principal, plus all accrued interest and other amounts due under the June Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the June Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter.  

We paid MSC-BD, LLC $16,000 as a finder’s fee (equal to 8% of the net proceeds) in connection with financing from the investor.

Iliad Research and Trading Note

On August 12, 2015, we entered into a Note Purchase Agreement with Iliad Research and Trading, L.P., a Utah limited partnership (“Iliad”) and an affiliate of Typenex Co-Investment, LLC., pursuant to which we concurrently issued to Iliad a Promissory Note in a principal amount of $245,000 (the “August Note”).  The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover Iliad’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction.  In consideration for the August Note, Iliad 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 August Note matures on February 12, 2016.  We may prepay all or a portion of the amount owed earlier than it is due without penalty and if we prepay $225,000 on or before November 9, 2015, the August Note will be deemed paid in full.

Interest does not accrue on the unpaid principal balance of the August Note unless an event of default occurs.  Upon the occurrence of an event of default, the outstanding balance of the August Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under the August Note, Iliad may declare all unpaid principal, plus all accrued interest and other amounts due under the August Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the August Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter.  

Facilities with B of I Federal Bank

On January 2, 2015, we entered into a Business Loan and Security Agreement with B of I Federal Bank (the “Bank”).  Pursuant to the agreement, we borrowed $200,000 USD from the Bank and received net proceeds of $195,000 USD after deducting an origination fee of $5,000 USD.  The loan was payable in 147 payments of $1,728 due each business day beginning on and after January 5, 2015, with the initial total repayment amount (subject to certain exceptions) being equal to $254,000 USD.

38

On June 2, 2015, we entered into a new Business Loan and Security Agreement with BofI Federal Bank.  Pursuant to the agreement, we borrowed $175,000 from the Bank and received net proceeds of $104,071 after deducting an origination fee of $1,875 and the repayment of $69,054 in full satisfaction of the Company’s remaining obligations under that certain Business Loan and Security Agreement entered into with the Bank on January 2, 2015.  The new loan is payable in 126 payments of $1,708.33 due each business day beginning on June 3, 2015, with the total repayment amount (subject to certain exceptions) being equal to $215,249.58 (the “Total Repayment Amount”).

The new loan may be prepaid in whole by the Company at any time by paying the Bank an amount equal to the Total Repayment Amount (subject to certain fees) less (i) the amount of any loan payments made prior to such prepayment and (ii) the product of 0.25 and the aggregate amount of unpaid interest remaining on the loan as of the prepayment date.

The new loan is secured by all personal property of the Company and is also personally guaranteed by Lori Winther, our Chief Financial Officer and a director of the Company, Kyle Winther, our Chief Executive Officer and a director of the Company, and Gary Perlingos, our President and a director of the Company.  If an event of default occurs under the agreement, all obligations owing by us to the Bank under the agreement will, at the Bank’s election, become immediately due and payable and the Bank may exercise its rights as a secured creditor.

The foregoing description of the Business Loan and Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the document, which is filed as Exhibit 10.1 to our Current Report on Form 8-K filed on June 8, 2015 with the Securities and Exchange Commission.

Conversion of Gotama Capital S.A. Debt into Common Stock

On June 30, 2015, we converted $614,340, representing the entire principal amount of each of the following promissory notes (collectively, the “Notes”) and all accrued interest thereon into an aggregate of 4,095,605 shares of our common stock, par value $0.001 per share (the “Conversion Shares”):

(i)

that certain convertible promissory note issued to Gotama Capital S.A. (“Gotama”) on March 14, 2014 in the principal amount of $185,000;

(ii)

that certain convertible promissory note issued to Gotama on April 10, 2014 in the principal amount of $200,000; and

(iii)

that certain convertible promissory note issued to Gotama on May 19, 2014 in the original principal amount of $175,000.  

Pursuant to the terms of the Notes, at our election, the principal amount of each of the Notes and all accrued interest thereon was converted into Conversion Shares at a price of $0.15 per share.  

Future Capital Requirements

Our capital requirements for the next twelve months will not be able to be funded in their entirety from our operating cash flows.  We believe it will be necessary to raise additional funds to finance our operations, and intend to do so through equity financings, debt financings, or from other sources.  The extent of our future capital requirements will depend on many factors, including results of operations and the growth rate of our business.

Although we intend to raise capital to finance our operations, there can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain additional financing on a timely basis, we may not be able to grow our operations as planned, may not be able to meet our other obligations as they become due and may ultimately be forced to restructure our operations.

39

If we are successfully able to raise capital, the issuance of additional equity securities by us could result in significant dilution in the equity interests of our current stockholders and if capital is raised through debt facilities, such facilities will increase our liabilities and future cash commitments, and may also impose restrictive covenants relating to the operation of our business.

We presently do not have any finalized arrangements for additional financing and will continue to evaluate various financing strategies to support our current operations and fund our future growth.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company”, we are not required to provide the information required by this Item.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Audited Financial Statements:	Page
Report of Independent Registered Public Accounting Firm	42
Consolidated Balance Sheets at June 30, 2015 and 2014	43
Consolidated Statements of Operations for the Year Ended June 30, 2015 and the period from Inception (July 12, 2013) to June 30, 2014	44
Consolidated Statement of Stockholders’ Deficit for the Year Ended June 30, 2015 and the period from Inception (July 12, 2013) to June 30, 2014	45
Consolidated Statements of Cash Flows for the Year Ended June 30, 2015 and for the period from Inception (July 12, 2013) to June 30, 2014	46
Notes to Consolidated Financial Statements	47

41

Hartley Moore Accountancy Corporation

19781 Sky Park Circle, Suite H

Irvine, CA 92614

Tel: (949) 438-4730

www.hmcpa.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Vapor Hub International, Inc.

We have audited the accompanying consolidated balance sheets of Vapor Hub International, Inc. (the “Company”) as of June 30, 2015 and 2014, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year ended June 30, 2015 and the period from Inception (July 12, 2013) to June 30, 2014. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2015 and 2014, and the results of its consolidated operations and its cash flows for the year ended June 30, 2015 and the period from Inception (July 12, 2013) to June 30, 2014 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the consolidated financial statements, the Company has incurred losses from operations.  The Company requires additional funds to meet its working capital requirements.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in this regard are described in Note 3.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Hartley Moore Accountancy Corporation

Irvine, California

October 13, 2015

42

VAPOR HUB INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	June 30, 2015	June 30, 2014
Assets
Current assets
Cash	$ 351,081	$ 307,567
Account receivable	9,511	-
Inventory	323,784	196,163
Prepaid expenses and other current assets	61,269	152,081
Deferred finance costs	39,258	-
Other current assets	9,474	12,162
Total current assets	794,377	667,973
Fixed assets, net	159,546	104,731
Long term assets	6,895	-
Total assets	$ 960,818	$ 772,704
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable and accrued expenses	$ 509,618	$ 213,154
Deferred income	82,499	307,135
Income taxes payable	-	6,702
Convertible notes payable, net of unamortized debt discount	192,091	560,000
Notes payable, net of unamortized debt discount	384,769	-
Loans from related parties	96,312	101,378
Derivative liabilities	68,584	-
Total current liabilities	1,333,873	1,188,369
Long term liabilities
Equipment leases payable	5,440	9,212
Notes Payable	29,189	-
Long term liabilities	34,629	9,212
Total liabilities	1,368,502	1,197,581
Commitments and contingencies	-	-
Stockholders' deficit
Preferred stock, $0.001 par value, 10,000,000 authorized, 0 issued and outstanding as of June 30, 2015 and June 30, 2014	-	-
Common stock, $0.001 par value, 1,010,000,000 and 140,000,000 shares authorized, 72,455,606 and 68,060,001 issued and outstanding as of June 30, 2015 and June 30, 2014, respectively (Note 4)	72,456	68,060
Additional paid-in capital (1)	557,463	(69,331)
Accumulated deficit	(1,037,603)	(423,606)
Total stockholders' deficit	(407,684)	(424,877)
Total liabilities and stockholders' deficit	$ 960,818	$ 772,704

(1)

The capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the exchange transaction as further discussed in Note 2.

The accompanying notes are an integral part of these consolidated financial statements

43

VAPOR HUB INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Year Ended June 30, 2015	From Inception (July 12, 2013) to June 30, 2014
Revenue	$ 5,296,342	$ 1,202,663
Cost of revenue	3,202,067	647,287
Gross profit	2,094,275	555,376
General and administrative expenses	2,510,360	984,776
Net loss from operations	(416,085)	(429,400)
Other income (expense)
Other income	-	23,839
Interest expense	(163,016)	(10,966)
Finance fees	(6,762)	-
Interest expense- debt discount	(6,125)	-
Change in derivative liability	(19,609)	-
Other income (expense)	(195,512)	12,873
Loss before taxes	(611,597)	(416,527)
Income tax provision	2,400	7,079
Net loss	$ (613,997)	$ (423,606)
Net loss per share:
Basic	$ (0.01)	$ (0.01)
Diluted	$ (0.01)	$ (0.01)
Weighted average shares outstanding:
Basic (1)	68,164,099	68,060,001
Diluted (1)	68,164,099	68,060,001

(1)The capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the exchange transaction in determining the basic and diluted weighted average shares.

The accompanying notes are an integral part of these consolidated financial statements

44

VAPOR HUB INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Deficit

From Inception (July 12, 2013) to June 30, 2015

				Additional		Total
		Common Stock		Paid-In	Accumulated	Stockholders’
		Shares	Amount	Capital	Deficit	Deficit
Balance, July 12, 2013 (Inception) (1)		38,000,001	$ 38,000	$ (38,000)	$ -	$ -
	Recapitalization adjustment	80,988,984	80,989	(82,260)	-	(1,271)
	Cancelation of  DogInn shares	(50,928,984)	(50,929)	50,929	-	-
	Net loss	-	-	-	(423,606)	(423,606)
Balance, June 30, 2014		68,060,001	68,060	(69,331)	(423,606)	(424,877)
Stock issued for services		300,000	300	5,700	-	6,000
Stock options granted		-	-	10,850	-	10,850
Gotama note conversion		4,095,605	4,096	610,244	-	614,340
Net loss		-	-	-	(613,997)	(613,997)
Balance, June 30, 2015		72,455,606	$ 72,456	$ 557,463	$ (1,037,603)	$ (407,684)

(1)

 The capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the exchange transaction as further discussed in Note 2.

The accompanying notes are an integral part of these consolidated financial statements

45

VAPOR HUB INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Year Ended June 30, 2015	From Inception (July 12, 2013) to June 30, 2014
Operating Activities
Net loss	$ (613,997)	$ (423,606)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	22,051	7,443
Amortization of debt discount on convertible note	3,226	-
Amortization of debt discount on short term note	5,902	-
Amortization of deferred finance costs	6,762	-
Amortization of derivative debt discount	6,125	-
Change in derivative liability	19,609	-
Non cash finance fees	11,875	-
Non cash cost of revenue	-	48,786
Non cash interest for conversion of notes payable	54,341	-
Share based compensation for services- common stock	6,000	-
Share based compensation - options	10,850	-
Changes in operating assets and liabilities:
Accounts receivable	(9,511)	-
Inventory	(127,621)	(196,163)
Prepaid expenses and other current assets	96,638	(152,081)
Security deposit	5,267	-
Deferred income	(224,636)	307,135
Accounts payable and accrued expenses	289,760	201,375
Net cash used in operating activities	(437,359)	(207,111)
Investing Activities
Leasehold security deposit	-	(12,162)
Purchase of property and equipment	(39,890)	(118,522)
Net cash used in investing activities	(39,890)	(130,684)
Financing Activities
Payment on leased property loans	(3,772)	-
Proceeds from related party loans	80,543	101,378
Payments on related party loans	(85,608)	-
Net proceeds from convertible notes payable	272,008	534,881
Payments on convertible notes payable	(70,313)	-
Net proceeds from short term notes payable	483,071	-
Payments on short term notes payable	(152,291)	-
Payments on auto loan payable	(2,875)	-
Stock issued upon reverse acquisition	-	9,103
Net cash provided by financing activities	520,763	645,362
Net change in cash	43,514	307,567
Cash at beginning of period	307,567	-
Cash at end of period	$ 351,081	$ 307,567
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$ 106,738	$ 1,948
Income taxes	$ 2,400	$ -
Non-cash transactions:
Insurance premium financing	$ 13,001	$ -
Non cash assumption of vehicle note payable ($36,976 vehicle cost and $2,299 prepaid warranty)	$ 39,275	$ -
Common stock issued for convertible notes payable	$ 614,340	$ -
Non cash repayment and borrowings of short term note payable	$ 69,054	$ -
Original issue discount on notes payable	$ 60,000	$ -
Fixed assets under capital leases	$ -	$ 9,212
Inventories contributed by related party	$ -	$ 48,786
Derivative liability	$ 48,975	$ -

The accompanying notes are an integral part of these consolidated financial statements

46

VAPOR HUB INTERNATIONAL INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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”). Pursuant to the terms of Exchange Agreement, the Company agreed to acquire all 30,000 of the issued and outstanding shares of Vapor’s common stock, as well as all 30,000 of the issued and outstanding shares of Delite’s common stock in exchange for the issuance by the Company of 38,000,001 shares of common stock to the shareholders of both companies. On March 14, 2014, the Company completed the acquisition of Vapor and issued all of the 38,000,001 shares of its stock to the shareholders of Vapor, who are also the shareholders of Delite. On March 26, 2014, the Company completed the acquisition of Delite. As a result of the closing of the transactions contemplated by the Exchange Agreement, Vapor and Delite became the Company’s wholly owned subsidiaries and the Company now carries on the business of developing, producing, marketing and selling the next generation of electronic cigarettes, known as vaping devices, and related accessories, including e-liquids, batteries and atomizers. The transaction with Vapor was accounted for as a reverse acquisition (recapitalization) whereby Vapor was deemed to be the accounting acquirer (see Note 2), and the Company the legal acquirer. Prior to the Company’s acquisition of Vapor, the Company existed as a “shell company” with nominal assets whose sole business was to identify, evaluate and investigate various companies to acquire or with which to merge. The transaction with Delite was accounted for as a business acquisition and the Company assumed the assets and liabilities of Delite as of March 26, 2014 and the activity of Delite was included from that date forward.

Upon the Company’s acquisition of Vapor, Robin Looban resigned as the Company’s sole director, president, secretary, treasurer, Chief Financial Officer and Chairman of the Board of Directors and management members from Vapor were appointed to serve as directors and officers of the Company. As a condition of the closing of the acquisition of Vapor, the Company cancelled 50,928,984 outstanding common shares and retired them in treasury.

Business Overview

Product Description

Vaping devices (as well as electronic cigarettes, also known as e-cigarettes) are battery-powered products that allow users to inhale water vapor instead of the smoke, ash, tar and carbon monoxide associated with traditional cigarettes. In contrast to e-cigarettes, vaping devices are often precision manufactured from metallic materials and do not look like traditional cigarettes. Vaping devices, as compared to e-cigarettes, also offer a unique user experience as a result of greater vapor production, enriched taste, and an ability to highly customize a device with different mechanical components and fashionable accessories, including different colors and finishes.

Sourcing

The Company uses third party contract manufacturers to produce and finish its vaping devices from facilities primarily located in Southern California. The Company’s vaping devices (or Mods), which are made from a metallic material such as steel, brass or copper, are custom machined to meet the Company’s design specifications. Once machined, unfinished products are delivered to the Company’s location in Simi Valley or to a third party service provider to be buffed, polished and to add various treatments and embellishments, such as paint and dog tags. Finished products are then held in inventory for distribution and sale. In the fiscal year ended June 30, 2015, the Company relied on one manufacturer to machine all of its Mods.  Although the Company relied on one manufacturer to machine its Mods during the Company’s last fiscal year, the Company believes manufacturing capacity is readily available to meet its current and planned needs. The Company does not currently have any long term agreements in place for the manufacture of its Mods.

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With respect to the Company’s vaping accessories, the Company purchases batteries from suppliers in China and atomizers from suppliers in the United States, Austria, the Philippines and China. The Company believes that suppliers for accessories are readily available to meet the Company’s current and planned needs.

The Company sources its proprietary E-liquids from an ISO Class 7 certified manufacturer in the USA, which helps ensure their purity and quality. In addition to sourcing its own e-liquids, the Company also purchases e-liquid from other reputable American suppliers for resale through its distribution channels.  

Distribution to Retail Stores

The Company markets and sells its vaping devices and related products to end customers through its websites www.vapor-hub.com and www.smokelessdelite.com, to retail stores through direct sales primarily in the United States but also internationally, and through third party wholesalers who then resell the Company’s products to retailers in their territory. Retailers of the Company’s products include vaping shops throughout the United States as well as convenience stores and several gas stations. Products distributed by the Company include vaping devices and related accessories purchased from third parties for resale as well as the Company’s vaping devices and related accessories, which the Company designs and sources, including the Company’s popular “AR Mechanical Mods”, newly released and popular “Limitless Mechanical Mods”, as well as “Binary Premium e-Liquid”. Prior to its acquisition by the Company on March 26, 2014, the Company’s distribution business was operated by Delite.

Operation of Retail Stores

The Company also sells its products and those of third parties to end consumers directly through its two retail locations located in Southern California. The Company’s first retail location in Simi Valley, CA was 725 square feet and was the first vapor lounge in Simi Valley. On April 1, 2015, the Company moved its Simi Valley retail location to a larger 1,500 square foot facility. The Company’s second location is located in Chatsworth, CA and measures 1,200 square feet. Through its retail locations, the Company sells and markets vaping devices as well as e-liquid, accessories, and supplies relating to vaping devices to both novice users as well as consumers who demand high end technical devices.

The Company opened its retail locations in order to create brand recognition for its products and also to enable the Company to gather information about user preferences in the rapidly evolving vaping industry. By learning about user preferences, the Company believes it is better able to design and source products to meet market demand. Currently, the Company does not have any plans to open additional stores.

NOTE 2 – REVERSE ACQUISITION ACCOUNTING

Since former Vapor security holders owned, after the acquisition, the majority of the Company’s shares of common stock, and as a result of certain other factors, including that all members of the Company’s executive management are from Vapor, Vapor is deemed to be the acquiring company for accounting purposes and the acquisition of Vapor was accounted for as a reverse acquisition and a recapitalization in accordance with generally accepted accounting principles in the United States (“US GAAP”). These audited consolidated financial statements reflect the historical results of Vapor prior to the exchange transaction and that of the combined company following the exchange transaction, and do not include the historical financial results of Vapor Hub International prior to the completion of the exchange transaction. Common stock and the corresponding capital amounts of the Company pre-exchange transaction have been retroactively restated as capital stock shares reflecting the exchange ratio in the exchange transaction.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial statements.

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Basis of Presentation – Consolidation

The accompanying consolidated financial statements include the accounts of the Company and subsidiary. Intercompany accounts and transactions have been eliminated. The consolidated financial statements of the Company and the accompanying notes included in this Annual Report on Form 10-K are audited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The consolidated financial statements, and the accompanying notes, are prepared in accordance with US GAAP and pursuant to the instructions to Form 10-K of the Securities and Exchange Commission.  The Company’s fiscal year end is June 30.

The Company operates in one segment in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting. The Company’s Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280.

Fiscal Year End

Following the exchange transaction, the Company elected to adopt the June 30 year end of Vapor, the accounting acquirer. As such, the Company has presented activity since the inception of Vapor (July 12, 2013) and has presented the activity of Delite since its acquisition on March 26, 2014.

Going Concern

The Company’s consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s cash balance as of June 30, 2015 along with continued loss from operations and negative cash flow from operations, raise substantial doubt about its ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company continues to face liquidity and capital resources constraints and does not believe that the proceeds from its debt facilities (see Note 10) along with its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the Company’s future capital requirements will depend on many factors, including the Company’s results from operations and the growth rate of the Company’s business. The Company’s near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth. 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 options, useful life of fixed assets, inventory reserves, estimates of sales return and accrual for potential liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

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Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At June 30, 2015, the Company had no cash equivalents.

Concentration of Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash. The Company places its cash with high quality banking institutions.

The Company relied on one manufacturer to make all of the Company’s Mods during the year ended June 30, 2015.

Stock-Based Compensation

The Company accounts for employee and non-employee stock awards under ASC 718, Compensation – Stock Compensation, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to nonemployees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

Financial Instruments and Fair Value Measurement

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1- applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2- applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3- applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties, and derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Pursuant to ASC 820, the fair value of the Company’s derivative liability is determined based on “Level 3” inputs, which consist of unobservable inputs. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Revenue Recognition

The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.

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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 Income

The Company accrues deferred income when customer payments are received, but product has not yet shipped. As of June 30, 2014 and 2015, the Company had recorded $307,135 and $82,499, respectively for deferred income as a result of prepayments for product made by customers. Those prepayments are recognized into revenue at the point those prepaid products have subsequently shipped. The Company recognized the $307,135 into revenue during the year ended June 30, 2015. The Company expects to recognize the $82,499 into revenue during the following fiscal year.

Inventories

Inventories consist primarily of vaping devices, electronic cigarettes, e-liquid and related supplies and accessories and are stated at the lower of cost (first-in, first-out) or market value.

Property and Equipment

Property and equipment consists of computer equipment, furniture, facility equipment, and leasehold improvements which are carried at historical cost and are depreciated over the estimated useful lives of the related assets. Estimated useful lives are from 3 to 10 years. Much of the Company’s property and equipment was contributed by shareholders of the Company. Expenditures for maintenance and repairs are charged against operations. The modified accelerated cost recovery system (straight line) is used for federal income tax purposes and also for financial reporting as the difference between the two does not appear to be material.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense for the period from inception (July 12, 2013) to June 30, 2014 and the year ended June 30, 2015 was $59,822 and $140,771, respectively and are included in general and administrative expenses.

Accounting for Derivatives Liabilities

The Company evaluates contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity . The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date. See Note 10 for disclosure of derivatives and their valuation related to various convertible debt agreements.

Deferred Financing Costs, Net

Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized to interest expense over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful.

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Basic and Diluted Net Income per Share

The Company computes net income per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants or debentures. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2014 and 2015, there were no dilutive securities.

Income Taxes

The Company accounts for income taxes under the provisions of ASC Topic 740-10, Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined and income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes determined on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. As of June 30, 2014 and 2015, the Company has federal and state net operating loss carry forwards of approximately $109,000 and $463,000, respectively, which will begin to expire in 2030 unless utilized in earlier years.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2014 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2014 Fiscal Period and forward for various states.

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Stock Based Compensation

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instrument is fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instrument granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” the Company performs an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, the Company uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in the Company’s consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company’s financial statements. For the period from inception (July 12, 2013) to June 30, 2014 and the year ended June 30, 2015, the Company had $0 and $10,850, respectively, of stock based compensation to employees.

Non-Cash Equity Transactions

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to current market price.

Recent Accounting Pronouncements

On August 27, 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements-Going Concern. The amendments in this Update provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effect, if any, on its consolidated financial statements of the amendment.

On April 7, 2015, the FASB issued ASU 2015-03 Interest – Imputations of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs, to simplify presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is evaluating the effect, if any, on its consolidated financial statements of the amendment.

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In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurements of Inventory.” This ASU requires management to evaluate inventory at the lower of cost and net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted by all entities as of the beginning of an interim or annual reporting period. The Company is in the process of assessing the impact, if any, on its consolidated financial statements.

The Company has reviewed all other recent accounting pronouncements issued to date of the issuance of these consolidated financial statements, and does not believe any of those pronouncements will have a material impact on the Company’s consolidated financial statements.

NOTE 4 – CAPITAL STOCK

The Company is authorized to issue 1,010,000,000 shares of common stock and had 68,060,001 and 72,455,606 shares of common stock issued and outstanding as of June 30, 2014 and 2015, respectively. On February 2, 2015, the Board of Directors of the Company approved an Amended and Restated Articles of Incorporation of the Company (the “Amended and Restated Articles”) and the Amended and Restated Articles were filed by the Company with the Secretary of State of the State of Nevada on February 5, 2015. The Amended and Restated Articles increase the authorized number of shares of common stock, par value $0.001, of the Company from 140,000,000 shares to 1,010,000,000.

The Company is also authorized to issue 10,000,000 shares of preferred stock and had no shares of preferred stock issued and outstanding as of June 30, 2015. On February 2, 2015, the Company filed a Certificate of Withdrawal of Certificate of Designation (“Certificate of Withdrawal”) with the Secretary of State of the state of Nevada. The certificate withdraws the Certificate of Designation filed by the Company on January 9, 2014, which designated all of the Company’s preferred stock as “Series A Preferred Stock.” Following the filing of the Certificate of Withdrawal, the Company has 10,000,000 shares of undesignated preferred stock, par value $0.001, available for future designation by the Company’s Board of Directors.

On January 9, 2014, the Company authorized an increase of its share capital from 65,000,000 common shares to 140,000,000 common shares. Furthermore, the Company approved a forward stock split of its issued and outstanding common shares by way of a stock dividend, on a basis of 1:9, pursuant to which, the Company’s stockholders as at January 17, 2014 received eight (8) shares of common stock for each one (1) share of common stock currently held. The pay-out date as approved by the Company’s board of directors and Financial Industry Regulatory Authority was January 17, 2014. The effects of the forward split increased the Company’s issued and outstanding common shares from 8,998,776 common shares to 80,988,984 common shares on such date. The effects of the forward split have been applied on a retroactive basis.

On February 14, 2014, the Company entered into the Exchange Agreement whereby the Company acquired all of the issued and outstanding shares of Vapor and Delite in exchange for 38,000,001 common shares of the Company, which are the founders’ shares. The transaction was completed in two stages – with the acquisition of Vapor closing on March 14, 2014 and the acquisition of Delite closing on March 26, 2014. In connection with the acquisition of Vapor on March 14, 2014, the Company canceled 50,928,984 common shares and issued a convertible debenture of approximately $185,000 (see Note 10). Vapor was treated as the accounting acquirer and the equity accounts were retroactively recapitalized to the date of Vapor’s inception at July 12, 2013. In connection with this transaction the Company recorded the outstanding equity of the legal acquirer of 80,988,984 common shares and the concurrent cancelation of the 50,928,984 common shares.

On March 10, 2015 the Company entered into an independent contractor agreement with a service provider. Pursuant to the terms of the agreement, the Company agreed to grant the service provider 300,000 non-forfeitable, fully vested shares of its common stock, valued at $6,000 (based on the estimated fair market value of the shares on March 10, 2015, the date of grant) as partial consideration for the services provided to the Company pursuant to the terms of the agreement. The 300,000 shares were subsequently issued on May 11, 2015.

On June 30, 2015, the Company converted the Gotama Capital S.A. convertible promissory notes with an aggregate balance of $614,340 at a price of $0.15 per share, representing the entire principal amount and all accrued interest of the three convertible promissory notes issued to Gotama Capital S.A., into an aggregate of 4,095,605 shares of the Company’s common stock, par value $0.001 per share (the “Conversion Shares”).

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Stock-Option Plans

On February 2, 2015, the Board of Directors of the Company and holders of 55.8% of the Company’s outstanding common stock (or 38,000,001 shares of 68,060,001 issued and outstanding shares) acting by written consent approved the adoption of the Company’s 2015 Omnibus Incentive Plan (the “2015 Plan”).

The 2015 Plan provides for the grant of stock options (both incentive stock options and non-qualified stock options), restricted stock, restricted stock units, stock appreciation rights, performance-based awards, dividend equivalents, stock payments and deferred stock units to eligible participants. Eligible participants include officers, employees, non-employee directors and certain consultants and advisers. The aggregate number of shares of the Company’s common stock authorized for issuance under the 2015 Plan is 20,400,000, subject to adjustment as described in the 2015 Plan. The outstanding options (each of which were granted on June 30, 2015) each have an exercise price of $0.0419 per share of Common Stock.

The Company estimates the fair value of each option on the grant date using the Black-Scholes model.  The following assumptions were made in estimating the fair value:

	2015
Annual dividend yield	-
Expected life (years)	5
Risk-free interest rate	1.63	%
Expected volatility	121.10	%
Fair value of options granted	0.035

The expected volatility was estimated by calculating the standard deviation of daily price changes in the Company’s stock from the date of inception to the date of the grant and the five year constant maturity treasury rate on the date of the grant was used for the risk free rate. Stock-based compensation expense is recognized over the employees’ or service provider’s requisite service period, generally the vesting period of the award. Stock-based compensation expense included in the accompanying statements of operations for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 is $0 and $10,850, respectively.

Stock option awards vested immediately on the date of grant, as a result there is no unrecognized compensation as of June 30, 2015.

A summary of stock option activity is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at June 30, 2014	-	$	-
Granted	310,000		0.0419
Exercised	-		-
Forfeited	-		-
Outstanding at June 30, 2015	310,000	$	0.0419

All the 310,000 options outstanding at June 30, 2015 were fully vested on the grant date, have an exercise price of $0.0419, weighted average contractual life of 10 years, weighted average exercise price of $0.0419, a weighted average remaining life of 10 years, and an aggregate intrinsic value at $0.0419 price per share at June 30, 2015.   

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NOTE 5 – OFFICERS’ LOANS PAYABLE

As of June 30, 2014 and 2015, the Company had a balance of $101,378 and $96,312, respectively, outstanding as related party loans from Kyle Winther, the Company’s CEO, Lori Winther, the Company’s CFO and Winther & Company, CPAs (an entity owned by Lori Winther, and her husband, Niels Winther, CPA, who is a director of the Company), as well as Chase Bank Line of Credit (which was extended to the Company, though owed personally by Niels & Lori Winther). The outstanding balances are unsecured, non-interest bearing and repayable upon demand.

NOTE 6 – INVENTORIES

As of June 30, 2014 and 2015, the Company had a balance of $196,163 and $323,784, respectively, as inventories which consist of vaping devices, electronic cigarettes, e-liquid, related supplies, and accessories. There is no reserve for inventory obsolescence as of June 30, 2014 and 2015.

NOTE 7 – LEASE COMMITMENTS

The Company entered into a lease agreement with S. J. Real Estate Group, LLC to lease a retail space in Chatsworth, California, effective September 13, 2013. The lease term is for two years with a monthly lease payment of $2,214. The Company has a remaining commitment under this lease of $4,428 through August 30, 2015. The Company extended this lease for an additional two years effective October 1, 2015.

The Company also had a month-to-month rental agreement with Madera Development for a retail space in Simi Valley for $825, which was terminated in April 2015. 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 commitment under this lease of $66,990 and a security deposit of $6,380 was paid to the landlord in relation to this lease.

The Company entered into a lease agreement with S.B.P.W., LLC to lease warehouse and office space in Simi Valley, California effective August 5, 2013 which agreement was subsequently amended on February 20, 2014. The lease term extended through April 30, 2015 with a monthly lease payment of $2,035 which increased to $4,070 effective July 1, 2014. The Company terminated this lease in September 2015 (See Note 16).

Rent expense for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 was $39,847 and $92,185, respectively.

NOTE 8– OTHER INCOME

The Company received a fee of $30,000 in exchange for the right of an unaffiliated third party to share in 10% of the net profits derived from operations of the Chatsworth Vapor Hub lounge. The Company recognized the $30,000 as other income for the period from inception (July 12, 2013) to June 30, 2014. At June 30, 2014 and 2015, no amounts have been earned and no obligation is due under this profit sharing agreement.

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NOTE 9 – RELATED PARTIES

The Company entered into a Management Agreement with Kyle Winther and Gary “Jake” Perlingos who are each shareholders and officers of the Company related to operational supervision of the Vapor Hub Lounges in Simi Valley and Chatsworth. Each of them was to receive 2.5% each (for a total of 5%) of the monthly revenue generated from each respective lounge. The Agreement commenced September 1, 2013 and was scheduled to continue until terminated by agreement of the parties. Effective February 1, 2014, the parties agreed to terminate the Management Agreement. Prior to the termination of the agreement, each of Mr. Winther and Mr. Perlingos received approximately $6,400 pursuant to the terms of the Management Agreement. An additional Management Agreement was entered into between Delite and Vapor, which relates to the provision of administrative support to Vapor. Pursuant to the agreement, Delite received a fee of $10,000 per month from Vapor. The Agreement commenced October 1, 2013 and was scheduled to continue until terminated by agreement of the parties. Effective March 1, 2014, the parties agreed to terminate the Management Agreement.

Prior to the acquisition of Delite, Vapor purchased substantially all of its inventory, which is sold at its retail locations, from Delite. As of March 26, 2014, Delite became a wholly-owned subsidiary of the Company. As a result of the acquisition, all intercompany transactions subsequent to March 26, 2014 have been eliminated.

From time to time the Company will engage the services of Winther & Company an accounting firm owned by the husband of the Company’s CFO. Winther & Company provides bookkeeping, accounting and tax services to the Company. For the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 the Company incurred approximately $18,000 and $82,000, respectively in fees with Winther & Co. As of June 30, 2014 and 2015, the Company had Accounts Payable outstanding to related parties of $232 and $12,369, respectively.

NOTE 10 – CONVERTIBLE NOTES PAYABLE

Note Holder	Balance 6/30/2015	Unamortized Original Derivative Discount	Unamortized Original Issue Discount	Balance of Debt Discount	Balance, net of Discount 6/30/2015
Typenex Co-Investment, LLC	$163,131	$  (27,718)	$ (14,594)	$ (42,313)	$  120,819
Typenex Co-Investment, LLC	89,056	(15,132)	(2,652)	(17,784)	71,273
Total Convertible Notes Payable	$252,188	$  (42,850)	$ (17,246)	$ (60,096)	$  192,091

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Notes Issued to Gotama Capital S.A.

On March 14, 2014, the Company closed the first of three tranches of a financing transaction pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $185,000 to Gotama Capital S.A. in exchange for cash proceeds of $185,000. The note bears interest at a rate of 8% per annum, with interest being payable on May 15^th of each year that the note remains outstanding. The principal amount of the note is convertible at any time, in whole or in part, at the Company’s election or the election of the holder into shares of the Company’s common stock at a price equal to the greater of $0.15 or 90% of the average closing prices of the Company’s common stock for the ten trading days immediately preceding the applicable conversion date. Unless earlier converted or repaid, the principal amount of the note is due and payable on March 14, 2017. On April 10, 2014, the Company closed the second tranche of the financing contemplated pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $200,000 to the same investor in exchange for cash proceeds of $200,000. The note has the same terms as the note described above, except that unless earlier converted or repaid, the principal amount of the note is due and payable on April 10, 2017. On May 19, 2014, the Company closed the third tranche of the financing contemplated pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $175,000 to the same investor in exchange for cash proceeds of $149,881 and $25,000 of expenses paid on behalf of the Company, which the Company immediately recorded as its own expense. The note has the same terms as the notes described above, except that unless earlier converted or repaid, the principal amount of the note is due and payable on May 19, 2017. The Company may prepay the principal amount of the notes at any time, in whole or in part, without the prior written consent of the holder.

On June 30, 2015, the Company converted $614,340 at a price of $0.15 per share, representing the entire principal amount and all accrued interest of the three convertible promissory notes issued to Gotama Capital S.A., into an aggregate of 4,095,605 shares of the Company’s common stock, par value $0.001 per share (the “Conversion Shares”).  As a result of the conversion, the three notes issued to Gotama Capital are no longer outstanding.

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Note Issued to Typenex Co-Investment, LLC.

On November 4, 2014, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company concurrently issued to Investor a Secured Convertible Promissory Note in a principal amount of $1,687,500 (the “Company Note”). The principal amount includes an original issue discount of $80,000 plus an additional $7,500 to cover Investor's due diligence and legal fees in connection with the transaction. In consideration for the Company Note, Investor issued a series of promissory notes aggregating to the sum of $1,600,000 (the “Purchase Price”), consisting of an initial cash disbursement of $200,000 and the issuance to the Company of ten promissory notes, the first two promissory notes in a principal amount of $100,000 each and the remaining eight promissory notes in a principal amount of $150,000 (each an “Investor Note” and collectively, the “Investor Notes”). The Company Note and the Investor Notes each bear interest at the rate of 10% per annum and mature on April 4, 2019 and the Company’s obligations under the Company Note are secured by liens on the Investor Notes pursuant to the terms of a Security Agreement entered into by the Company in favor of the Investor. Subject to certain conditions, the Company may prepay the Company Note by making a payment equal to 125% of the then outstanding balance (including interest and other fees and amounts due). Each of the Investor Notes may be prepaid (and the Company may receive additional funds under the facility in excess of the initial $200,000 cash proceeds) only upon the mutual agreement of the parties.

On January 16, 2015, upon the mutual agreement of the parties, the Investor paid to the Company the sum of $102,028 as a prepayment of all of its obligations owed to the Company under the first Investor Note in the original principal amount of $100,000 dated November 4, 2014, issued by the Investor in favor of the Company.

The first two tranches were issued with an original issue discount of $20,472, of which $3,226 has been amortized to interest expense for the twelve months ended June 30, 2015, resulting in an unamortized balance of $17,246.

The Company recognized an additional debt discount of $48,975 on the first two tranches for the original fair value recognition of the derivative liability (discussed further below), of which $6,125 has been amortized to interest expense for the fiscal year ended June 30, 2015, resulting in an unamortized balance of $42,850.

Beginning on May 4, 2015, the Company is required to repay the outstanding balance on the Company Note in monthly installments of approximately $35,000 per month plus all unpaid interest and other costs, fees or charges under the Company Note. Payment may be made in cash or, subject to certain conditions, in shares of the Company’s common stock or any combination of cash and shares. If payments are made in shares (each, an “Installment Conversion”), such installments or portions thereof are, subject to certain conditions, convertible into shares of the Company’s common stock at the lesser of (i) a conversion price of $0.10, subject to adjustment or (ii) a price that is equal to 70% of the average of the three lowest closing bid prices of the Company’s common stock in the twenty trading days immediately preceding such conversion, subject to a floor of $0.01. In addition, on the date that is twenty trading days from the date the Company delivers installment shares to Investor, there is a true-up where the Company is required to deliver additional shares if the installment conversion price as of the true-up date is less than the installment conversion price used to deliver the initial shares.

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Beginning on May 4, 2015, all or any amount of a conversion eligible tranche (as described below) under the Company Note is convertible, at the option of the Investor (each, a “Lender Conversion”), into shares of the Company’s common stock at a conversion price of $0.10 per share, subject to customary anti-dilution adjustments and other adjustments described in the Company Note (the “Conversion Price”). The Company Note is convertible into shares of the Company’s common stock by Investor in eleven tranches consisting of an initial tranche of $217,500 plus interest and other amounts due which may be converted into shares of the Company’s common stock at the Conversion Price at any time on or after May 4, 2015 and ten additional tranches (each a “Subsequent Tranche”), two of which are in the amount of $105,000 plus interest and other amounts due and eight of which are in the amount of $157,500 plus interest and other amounts due. Each Subsequent Tranche may not be converted into shares of the Company’s common stock unless the Investor has paid in full the Investor Note corresponding to such tranche, which payment requires the Company’s consent. On January 16, 2015, the Investor paid to the Company the sum of $102,028 as a prepayment of all of its obligations owed to the Company under the first Investor Note and consequently the first Subsequent Tranche of $105,000 plus interest and other amounts due may be converted into shares of the Company’s common stock at the Conversion Price at the option of the Investor at any time on or after May 4, 2015. Subject to certain conditions based on the trading volume and trading price of the Company’s common stock, the Company may also elect to convert the entire outstanding balance under the Company Note into shares of the Company’s common stock at the Conversion Price.

If the Company fails to repay the Company Note when due, or if the Company is otherwise in default under the Company Note, at the option of Investor a default interest rate of 22% per annum will apply on all conversion eligible portions of the Company Note while the default continues. In the event the Company is in default under the Company Note, the Investor also has the option to accelerate the note with the outstanding balance becoming immediately due and payable or increase the outstanding balance of the note by an amount of 5% or 15% depending on the particular default. In addition, if the Company fails to issue stock to the Investor within three trading days of receipt of a notice of conversion, the Company must pay a penalty equal to the greater of (i) $500 per day; or (ii) 2% of the product of (A) the number of shares to which Investor was entitled that were not issued on a timely basis; and (B) the closing sale price of the common stock on the trading day immediately preceding the last day for us to timely issue the shares.

The Company Note provides that the Investor maintains a right of offset that, under certain circumstances, permits the Investor to deduct amounts owed by the Company under the Company Note from amounts otherwise owed by Investor under the Investor Notes. In addition, the Company is permitted at any time to deduct and offset any amount owing by the Investor under the Investor Notes from any amount owed by the Company under the Company Note. Since the Company Note and the Investor Notes may be offset against each other, they are recorded on a net basis in the Consolidated Balance Sheet.

On June 30, 2015 pursuant to the terms of the Company Note, the Company elected to deduct and offset the principal amount of $1,300,000 and all accrued interest thereon owing by the Investor under the remaining nine Investor Notes from the amount owed by the Company under the Company Note, leaving an outstanding balance of $252,188 under the Company Note as of June 30, 2015 and total unamortized debt discount of $60,096.

The Company Note provides that Investor may not convert the Company Note in an amount which would cause Investor to own more than 4.99%, or if the Company’s market capitalization (as defined in the Company Note) is less than $10,000,000, more than 9.99%, of the Company’s outstanding common stock.

The Company paid Pyrenees Investments $20,000 as a finder’s fee (equal to 10% of the gross proceeds) in connection with the first closing, $10,020 in connection with the second closing, and $16,000 as discussed in Note 11. The total finder’s fee of $46,020 was capitalized as deferred issuance costs and amortized over the term of the respective notes. As of June 30, 2015 unamortized deferred issuance costs were $39,258. Finance fees for the fiscal year ended June 30, 2015 were $6,762.

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The Company evaluated the Company Note under the requirements of ASC 480 “Distinguishing Liabilities from Equity” and concluded that the note does not fall within the scope of ASC 480.

The Company then evaluated the Company Note under the requirements of ASC 815 “Derivatives and Hedging”. Due to the existence of the anti-dilution provision which reduces the Lender Conversion Price in the event of subsequent dilutive issuances by the Company, the Company determined that the Lender Conversion feature does not meet the definition of “indexed to” the Company’s stock, and the scope exception to ASC 815’s derivative accounting provisions does not apply. The Company also determined that the Lender Conversion feature of the Company Note meets the definition of an embedded derivative that should be separated from the Company Note and accounted for as a derivative liability. The Company recorded an original valuation of $48,975 for the derivative liability. As of June 30, 2015, the Company had a derivative liability of $68,584 and reflected a change in derivative liability of $19,609 for the twelve month period ended June 30, 2015.

The Company further concluded that because of the conversion floor of $0.01 on Installment Conversions and because the Company has the right at any time to offset the Investor Notes from the Company Note, the following features of the Company Note do not meet the definition of an embedded derivative that should be separated from the Company Note and accounted for as a derivative liability: the Installment Conversion feature of the Company Note, the default and remedy provisions of the Company Note, the Company’s option to settle a Lender Conversion in cash in the event the Investor elects to convert subsequent to the occurrence of an event of default under the Company Note and the Company’s prepayment option under the Company Note.

Derivative Liabilities

The convertible notes discussed above contain conversion features that result in an embedded derivative. The Company has recorded the fair value of each derivative as described above as a current liability in the consolidated balance sheet as of June 30, 2015. The change in fair value was recorded as other expense in the consolidated statement of operations for the year ended June 30, 2015.

In arriving at fair-value estimates, the Company utilizes the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the fair value hierarchy, the fair-value measurement is characterized based upon the lowest level input. For the Company, recurring fair-value measurements are performed for the derivative liability.

The derivative liability is recognized in the consolidated balance sheet at fair value. Changes in the fair value of the derivative liability are reported in the consolidated statement of operations. The Company does not have any liabilities that reduce risk associated with hedging exposure and has not designated the derivative liability as a hedge instrument.

The Company did not have any derivatives valued using Level 1 and Level 2 inputs as of June 30, 2015. The Company categorized the derivative liability as Level 3 with a fair value of $68,584 as of June 30, 2015 using the Black-Scholes pricing model. The Company used the following input ranges: stock price $0.0099-$0.029; expected term 3.9-4.4 years; risk-free rate 0.26%-1.63%; and volatility 107.5%-245.7%. Unobservable inputs were the prevailing interest rates, the Company’s stock volatility and the expected term.

There have been no transfers between Level 1, Level 2, or Level 3 categories. Level 3 as of June 30, 2014 was $0; Level 3 additions for the twelve months ended June 30, 2015 were $48,975 for the initial recognition with $19,609 valuation adjustment at June 30, 2015 ; Level 3 at June 30, 2015  was $68,584.

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NOTE 11 –NOTES PAYABLE

Note Holder	Balance 6/30/2015	Unamortized Original Issue Discount	Balance, net of Discount 6/30/2015
Typenex Unsecured Short Term	$  245,000	$  (34,098)	$  210,902
B of I Bank	153,655	-	153,655
The Hartford	13,001	-	13,001
Bank of the West - short term portion	7,211	-	7,211
Total Short Term Notes Payable	$  418,867	$  (34,098)	$  384,769
Bank of the West - long term portion	$    29,189	$              -	$    29,189
Total Long Term Notes Payable	$    29,189	$              -	$    29,189

Bank of the West

On December 29, 2014, Kyle Winther, the Company’s CEO, entered into a vehicle financing agreement with the Bank of the West. Pursuant to the agreement, the amount financed was $39,275, payable in 48 monthly payments plus accrued interest at a rate of 3.9%. In January 2015, the Company agreed to assume the payments on this loan and capitalized the vehicle (see Note 15). As of June 30, 2015 the outstanding balance was $36,400, with $7,211 and $29,189 classified as short term and long term, respectively.

Facilities with B of I Federal Bank

On January 2, 2015, the Company entered into a Business Loan and Security Agreement with B of I Federal Bank (the “Bank”).  Pursuant to the agreement, the Company borrowed $200,000 from the Bank and received net proceeds of $195,000 USD after deducting an origination fee of $5,000.  The loan was payable in 147 payments of $1,728 due each business day beginning on and after January 5, 2015, with the initial total repayment amount (subject to certain exceptions) being equal to $254,000.

On June 2, 2015, the Company entered into a new Business Loan and Security Agreement with the Bank.  Pursuant to the agreement, the Company borrowed $175,000 from the Bank and received net proceeds of $104,071 after deducting an origination fee of $1,875 and the repayment of $69,054 in full satisfaction of the Company’s remaining obligations under that certain Business Loan and Security Agreement entered into with the Bank on January 2, 2015.  The new loan is payable in 126 payments of $1,708.33 due each business day beginning on June 3, 2015, with the total repayment amount (subject to certain exceptions) being equal to $215,249.58 (the “Total Repayment Amount”). As of June 30, 2015 the outstanding balance was $153,655.

The new loan may be prepaid in whole by the Company at any time by paying the Bank an amount equal to the Total Repayment Amount (subject to certain fees) less (i) the amount of any loan payments made prior to such prepayment and (ii) the product of 0.25 and the aggregate amount of unpaid interest remaining on the loan as of the prepayment date.

The new loan is secured by all personal property of the Company and is also personally guaranteed by Lori Winther, the Company’s Chief Financial Officer and a director of the Company, Kyle Winther, the Company’s Chief Executive Officer and a director of the Company, and Gary Perlingos, the Company’s President and a director of the Company.  If an event of default occurs under the agreement, all obligations owing by the Company to the Bank under the agreement will, at the Bank’s election, become immediately due and payable and the Bank may exercise its rights as a secured creditor.

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Typenex Co-Investment Note

On June 4, 2015, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company, pursuant to which the Company concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “June Note”).  The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover the investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction. The original issue discount was recorded as debt discount and amortized to interest expense over the life of the note.  In consideration for the June Note, the investor paid an aggregate cash purchase price of $200,000, computed as follows: $245,000 original principal balance, less the original issue discount of $40,000, and less the transaction costs.  The June Note matures on December 4, 2015.  The Company may prepay all or a portion of the amount owed earlier than it is due without penalty. As of June 30, 2015 the outstanding balance was $245,000.

Interest does not accrue on the unpaid principal balance of the June Note unless an event of default occurs.  Upon the occurrence of an event of default, the outstanding balance of the June Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under the June Note, the investor may declare all unpaid principal, plus all accrued interest and other amounts due under the June Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the June Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter.  

The Company paid MSC-BD, LLC $16,000 as a finder’s fee (equal to 8% of the net proceeds) in connection with financing from the investor.

Other short term facilities

Effective May 29, 2015, the Company entered into an Agreement to finance its annual Workers Compensation insurance coverage. The insurance coverage is provided through The Hartford. The amount of the policy is $18,871 with $18,871 being financed at 2.2% over 12 months with an initial payment of $4,425 and 10 monthly payments of $1,444. At June 30, 2015, the premium obligation due under the Agreement was $13,001.

Effective July 10, 2014, the Company entered into an Agreement to finance its annual General Liability insurance coverage. The insurance coverage is provided through Lloyds of London. The amount of the policy is $52,359 with $43,953 being financed at 11% over 10 months with a monthly payment of $4,619.93. At June 30, 2015, the remaining premium obligation due under the Agreement was $0.

Effective August 22, 2014, the Company entered into an Agreement to finance its annual Director’s and Officer’s insurance coverage. The insurance coverage is provided through Lloyds of London. The amount of the policy is $129,062.50 with $112,500.00 being financed at 5.35% over 9 months with a monthly payment of $12,780.30. At June 30, 2015, the remaining premium obligation due under the Agreement was $0.

NOTE 12 – DELITE ACQUISITION

As described in Note 4, the Company acquired Delite as part of the transactions contemplated by the Exchange Agreement on March 26, 2014. This transaction was a share exchange and was treated as a business acquisition. The balance sheet of Delite has been consolidated with the Company as of June 30, 2014 and the activity subsequent to acquisition has been consolidated with the Company’s operations. As June 30, 2014, Delite had total assets of $120,992, total liabilities of $303,837 and total equity of $(182,845). Delite balances were carried over at historical cost.

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Below is a summarized presentation of unaudited pro-form results of operations with Delite for the period from inception (July 12, 2013) to June 30, 2014:

	Delite	Vapor	Company	Elimination	Pro-Forma
Revenue	$ 1,446,749	$ 513,811	$ -	$ (346,077)	$ 1,614,483
Cost of revenue	858,128	280,181	-	(280,181)	858,128
Gross profit	588,621	233,630	-	(65,895)	756,355
General and administrative expense	992,090	259,558	25,149	(65,895)	1,210,902
Other income	-	29,999	9,019	-	39,018
Income tax provision	1,963	6,702	-	-	8,665
Net loss	$ (405,432)	$ (2,631)	$ (16,130)	$ -	$ (424,194)

NOTE 13 – INCOME TAX

The provision for income taxes was determined by applying the statutory federal income tax rate to net income before income taxes and is as follows for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015:

		2014		2015
Federal tax	$	3,751	$	-
State tax	$	3,328	$	2,400

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes were as follows:

	2014		2015
Statutory federal income tax rate	(34)	%	(34)	%
State taxes, net of federal benefit	10	%	( 3)	%
Other	22	%	( 2)	%
	(2)	%	(39)	%

NOTE 14 – LOSS PER COMMON SHARE

A summary of the net loss and shares used to compute net loss per share for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 is as follows:

		2014		2015
Net loss for computation of basic and dilutive net (loss) per share	$	(423,606)	$	(613,997)
Basic and dilutive net (loss) per share	$	(0.01)	$	(0.01)
Basic and dilutive weighted average shares outstanding	$	68,060,001	$	68,164,099

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NOTE 15 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

		June 30, 2014		June 30, 2015
Automobile	$	-	$	36,976
Computer		12,895		16,756
Furniture and equipment		97,300		106,568
Leasehold improvements		17,539		44,300
Accumulated depreciation		(23,003)		(45,054)
Property and equipment, net	$	104,731	$	159,546

NOTE 16 – SUBSEQUENT EVENTS

Note Payable

On August 12, 2015, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Investor”), pursuant to which the Company concurrently issued to the Investor a Promissory Note in a principal amount of $245,000 (the “Note”).  The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover the Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction (the “Transaction Costs”).  In consideration for the 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 Note matures on February 12, 2016.  The Company may prepay all or a portion of the amount owed earlier than it is due without penalty and if the Company prepays $225,000 on or before November 9, 2015, the Note will be deemed paid in full.

Interest does not accrue on the unpaid principal balance of the Note unless an event of default occurs.  Upon the occurrence of an event of default, the outstanding balance of the Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under the Note, the Investor may declare all unpaid principal, plus all accrued interest and other amounts due under the Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter.  

Iliad Research and Trading, L.P. is an affiliate of Typenex Co-Investment, LLC, a Utah limited liability company.  The Company is party to debt facilities with Typenex Co-Investment, LLC which were entered into on November 4, 2014 and June 4, 2015, respectively.

Lease Commitments

On September 1, 2015, the Company entered into a Commercial Lease Agreement with the Winther Family Trust, pursuant to which the Company will lease the 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. The Premises is replacing the Company’s prior facility located at 67 W. Easy Street, Unit 115, Simi Valley, CA 93065 and will serve as the Company’s primary office location. In addition to providing office space, the approximately 5,000 square foot facility will also be used for warehousing and shipping.

The lessor of the Premises, the Winther Family Trust, is controlled by Niels Winther and Lori Winther. Both Niels Winther and Lori Winther are Directors of the Company, and Lori Winther also serves as the Company’s Chief Financial Officer and Secretary.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

As previously disclosed in our Current Report on Form 8-K filed on April 3, 2015, our Board approved the engagement of Hartley Moore Accountancy Corporation as our independent registered public accounting firm effective March 30, 2015. There were no disagreements or reportable events related to the change in accountants requiring disclosure under Item 304(b) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, our management, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2015, the end of the period covered by this report.  Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Company’s disclosure controls are not effective due to limited accounting and reporting personnel and a lack of expertise and segregation of duties due to limited financial resources and the size of our company. We will need to adopt additional disclosure controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of management and directors of our company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements.

Our management believes that all internal control systems, no matter how well designed and operated, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls.  Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation.  Further, because of changes in conditions, the effectiveness of internal controls may vary over time. Our management believes that the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

A material weakness is a significant deficiency, or combination of significant deficiencies, that result in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

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Management has conducted, with the participation of our Chief Executive Officer and our Chief Financial Officer, an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2015 in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control — Integrated Framework.  Based on this assessment, management concluded that as of June 30, 2015, our Company’s internal control over financial reporting was not effective primarily due to the limited size of our staff and budget.

The Company's management has identified material weaknesses in its internal control over financial reporting related to the following matters:

·

A lack of sufficient segregation of duties. Specifically, this material weakness is such that the design over these areas relies primarily on defective controls and could be strengthened by adding preventative controls to properly safeguard Company assets.

·

A lack of sufficient personnel in the accounting function due to the Company's limited resources with appropriate skills, training and experience to perform certain tasks as it relates to financial reporting.

The Company's plan to remediate those material weaknesses is as follows:

To improve the effectiveness of the accounting group, the company uses the firm of Winther and Company CPA’s to augment existing resources, to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions.  The Company also recently hired a full-time accounting manager to maintain the Company’s books and records under the supervision of the CFO.  The Company plans to further mitigate its accounting deficiencies by hiring additional personnel in the accounting department once it generates significantly more revenue, or raises significant additional working capital.

The company is also in the process of adopting specific internal control mechanisms with its Board of Directors’ and executive officers’ collaboration to ensure effectiveness as the company grows. The company is presently engaging an outside consultant to assist in adopting new measures to improve upon its internal controls. Future controls, among other things, will include more checks and balances and communication strategies between the management and the Board of Directors to ensure efficient and effective oversight over company activities as well as more stringent accounting policies to track and update the company’s financial reporting.

This Annual Report does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only the management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

Other than as described above, there were no changes in our internal control over financial reporting during the year ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table sets forth the names, positions and ages of our current executive officers and directors. All directors serve until the next annual meeting of stockholders or until their successors are elected and qualified. Officers are appointed by our board of directors and their terms of office are at the discretion of our board of directors.

Name	Age	Position(s)
Kyle Winther	30		Chief Executive Officer and Director
Lori Winther	58		Chief Financial Officer, Treasurer, Secretary and Director
Gary Jacob Perlingos	34		President, Chief Technology Officer and Director
Niels Winther	59		Chairman of the Board
Justin Moreno	33		Chief Operating Officer, Director

Kyle Winther has served as a director of our company since March 14, 2014.  Mr. Winther also became our Chief Executive Officer on March 14, 2014 and served in such capacity until the appointment of Andrew Birnbaum as Chief Executive Officer on March 24, 2014, at which point in time Mr. Winther became our Chief Operating Officer.  Following Mr. Birnbaum’s resignation on July 8, 2014, Mr. Winther was re-appointed as our Chief Executive Officer and resigned from his position as our Chief Operating Officer in connection with the appointment of Justin Moreno to such position on August 8, 2014.  Mr. Winther is a founding shareholder of Delite Products, Inc., formed in 2008, and Vapor Hub, Inc., formed in 2013, each of which were our wholly owned subsidiaries until their merger into Vapor Hub International Inc. on May 18, 2015, and served as President and Chief Executive Officer of each of these companies since their respective dates of formation.  Since 2008, Mr. Winther has also been instrumental in the development of our products.  Mr. Winther is a graduate of Cal State University-Northridge where he earned a B.S. in Business Administration/Marketing.  We believe that Mr. Winther is qualified to sit on our board of directors due to his extensive experience in the vaping industry and because of his sales and marketing skills.  

Lori Winther became our Chief Financial Officer, Treasurer and Secretary and was appointed as a director of the company on March 14, 2014.  Ms. Winther is an original founder of each of our former subsidiaries, Vapor and Delite.  Prior to founding our subsidiaries, Ms. Winther served as the office manager for the Certified Public Accounting firm – Winther and Company CPA’s, Inc., as well as its affiliate, Winthco Wealth Management, acting for both since 1989.  Ms. Winther remains a Vice President of Winther and Company today.  Ms. Winther’s seasoned experience contributes to the administrative stability and financial solvency of the company.  Ms. Winther is a graduate of Moorpark Community College with a A.A. in Business Administration.  We believe that Ms. Winther is qualified to sit on our board of directors due to her extensive administration and human resources experience and financial expertise.

Gary Jacob Perlingos became our President and Chief Technology Officer and was appointed as a director of the company on March 14, 2014.  Mr. Perlingos joined our former subsidiary, Delite, in 2013.  Mr. Perlingos has held a variety of positions within his career, including acting as a freelance designer and developer of websites for a period of twelve years, serving as Director of Design Development at Homebase Learning Institute, a start-up on-line education company from 2010 to 2012 and serving as Senior Web Developer, performing web integrations for 4-Over, Inc., one of the largest trade printers in the United States from 2012 to 2013.  Prior to his position at Homebase Learning Institute, Mr. Perlingos was a partner at a boutique web design firm, Artifice Studios, from 2009 to 2012.  Mr. Perlingos began his career in the mortgage industry where he worked in various operational capacities from 2000 to 2009.  We believe that Mr. Perlingos is qualified to sit on our board of directors due to his entrepreneurial experience and his branding, marketing and operational expertise.  

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Niels Winther, CPA was appointed as a director of the company on March 14, 2014.  Mr. Winther has over three decades of experience in tax, financial, managerial, information and system consulting and currently directs and oversees Winther and Company CPA’s, Inc., a tax & accountancy and wealth management firm and Winthco Wealth Management in his capacity as President of each company.  Mr. Winther attended Cal State University-Northridge - Accounting and University of La Verne – School of Law.  We believe that Mr. Winther is qualified to serve on our Board of Directors because of his financial expertise acquired while operating his businesses.

Justin Moreno was appointed Chief Operating Office and a director of the company on August 8, 2014.  Prior to his promotion, Mr. Moreno served as our National Sales Director since April of 2014.  Mr. Moreno joined our team in March, 2014 after working with Southern Wine and Spirits as its lead sales manager in on premise alcohol and wine sales. In his capacity as sales manager, Mr. Moreno was responsible for maintaining high volume accounts with numerous quota items to sell each month. Mr. Moreno was also responsible for developing and maintaining relationships with customers and suppliers.  Mr. Moreno worked with Southern Wine and Spirits for over 4 years. Mr. Moreno joined Southern Wine and Spirits after working as a store sales manager for Mountain View Goodyear Tire Company.  At Mountain View Goodyear, Mr. Moreno was responsible for the growth of the company’s sales and marketing initiatives and also managing in excess of fifteen employees.  Before Mr. Moreno began his sales management position with Mountain View Goodyear, Mr. Moreno served in the United States Marine Corp., serving three tours in Iraq as part of Operation Iraqi Freedom.  Mr. Moreno was chosen to be a director of the Company for his expertise in sales and marketing.

A family relationship exists between Kyle Winther, Lori Winther, a director of the Company and the Company’s Chief Financial Officer and Secretary and Niels Winther, a director of the Company. Niels Winther and Lori Winther are married.  Kyle Winther is the adult son of Niels and Lori Winther.

Director Independence

Our board of directors currently consists of five members –Kyle Winther, Lori Winther, Niels Winther, Gary Jacob Perlingos and Justin Moreno– with no vacancies. Because our common stock is not currently listed on the NASDAQ Stock Market or New York Stock Exchange, we are not subject to their respective rules requiring independent directors and we currently do not have any independent directors, as the term “independent director” is defined by NASDAQ Listing Rule 5605(a)(2) or New York Stock Exchange Rule 303A.02.  We anticipate seeking independent directors in the future as we seek to establish effective corporate governance procedures to oversee our audit, compensation and nominating functions.  However, there can be no assurance as to whether or when we will be successful in appointing any independent directors.  Currently, our entire board of directors functions as our audit committee.  

We have determined that Niels Winther qualifies as an audit committee “financial expert” within the meaning of the rules and regulations of the SEC and that each of our other board members are able to read and understand financial statements.  

We do not have a nominating committee for persons to be proposed as directors for election to our board of directors. The duties and functions performed by such committee are performed by our board of directors. We do not have any restrictions on stockholder nominations under our articles of incorporation, however, our bylaws do contain advance notice requirements for stockholder nominations for directors. Other restrictions are those applicable generally under the Nevada Revised Statutes and the federal proxy rules. Currently, our entire board of directors decides on nominees, on the recommendation of one or more members of our board of directors. We are not a “listed issuer” under SEC rules and are therefore not required to have a nominating committee comprised of independent directors.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that our executive officers and directors, and beneficial owners of more than 10% of a registered class of our equity securities, file initial reports of beneficial ownership and reports of changes in beneficial ownership with the SEC. Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file.

Based solely on our review of the copies of such reports received by us and written representations from certain reporting persons that they have complied with the relevant Section 16(a) filing requirements, other than as follows the Company is not aware of any instances of noncompliance with the Section 16(a) filing requirements by any executive officer, director and or beneficial owner of more than 10% of a registered class of the Company’s equity securities during the year ended June 30, 2015:  one report on Form 3 was filed late by each of Lori Winther, Niels Winther, Kyler Winther, Gary Jacob Perlingos and Justin Moreno.

Indemnification

We are a Nevada corporation. The Nevada Revised Statutes and certain provisions of our articles of incorporation, as amended, and bylaws under certain circumstances provide for indemnification of our officers, directors and controlling persons against liabilities which they may incur in such capacities. A summary of the circumstances in which such indemnification is provided for is contained herein, but this description is qualified in its entirety by reference to our articles of incorporation and bylaws and to the statutory provisions.

In general, any officer, director, employee or agent may be indemnified against expenses, fines, settlements or judgments arising in connection with a legal proceeding to which such person is a party, if that person is not liable due to conduct that constituted a breach of his or her fiduciary duties and such breach involved intentional misconduct, fraud or a knowing violation of law, and that person’s actions were in good faith, were believed to be in our best interest, and were not unlawful. Indemnification may not be made for any claim as to which the person seeking indemnity has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable to our company unless the court in which the action or suit was brought or another court of competent jurisdiction determines that in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court deems proper. Unless such person is successful upon the merits in such an action, indemnification may be awarded only after a determination by independent decision of our board of directors, by legal counsel, or by a vote of our stockholders, that the applicable standard of conduct was met by the person to be indemnified. Under our articles of incorporation, as amended, and bylaws, we will advance expenses incurred by officers, directors, employees or agents who are parties to or are threatened to made parties to any threatened, pending or completed action by reason of the fact that such person was serving in such capacity, prior to the disposition of such action and promptly following request therefor, upon receipt of an undertaking by or on behalf of such person to repay such advances if it should be determined ultimately that such person is not entitled to indemnification. 

The circumstances under which indemnification is granted in connection with an action brought on our behalf is generally the same as those set forth above; however, with respect to such actions, indemnification is granted only with respect to expenses actually incurred in connection with the defense or settlement of the action. Indemnification may also be granted pursuant to the terms of agreements which may be entered in the future or pursuant to a vote of stockholders or directors. The Nevada Revised Statutes also grant us the power to purchase and maintain insurance which protects our officers and directors against any liabilities incurred in connection with their service in such a position, and we have obtained such a policy.

A stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding which indemnification by us is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Code of Ethics

We have adopted a Code of Ethics applicable to all of our Board members and to all of our employees and executive officers, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics constitutes a “code of ethics” as defined by applicable SEC rules.  Our Code of Ethics is filed as an exhibit to this Annual Report on Form 10-K and is posted on our Internet website located at www.vapor-hub.com in the section titled “Investors.” You may also request a copy of the Code of Ethics without charge by writing or calling us at:

Vapor Hub International Inc.

Attn: Investor Relations

1871 Tapo Street

Simi Valley, CA 93063

Tel.: (805) 309-0530

Any amendment or waiver of the Code of Ethics pertaining to a member of our Board or one of our executive officers will be disclosed on our website within four business days.

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ITEM 11. EXECUTIVE COMPENSATION

The following table and related footnotes show the compensation paid to each person who served as our principal executive officer and to each of our other two most highly compensated executive officers during our fiscal year ended June 30, 2015, and information concerning all compensation paid for services rendered to us in all capacities for such fiscal year.  

Name and Principal Position	Year	Salary ($)	Bonus ($)	Options ($)	All Other Compensation ($)	Total ($)
Kyle Winther,	2015	98,000	-	-	21,107 (1)	119,107
CEO, Director	2014	38,000	10,000	-	20,173 (1)	68,173
Lori Winther,	2015	98,000	-	-	17,462 (2)	115,462
CFO, Treasurer, Secretary, Director	2014	38,000	10,000	-	19,890 (2)	67,890
Gary Jacob Perlingos,	2015	98,000	-	-	16,947 (3)	114,947
President, Chief Technology Officer, Director	2014	38,000	10,000	-	19,048 (3)	67,048
Andrew Birnbaum(4),	2015	4,524	-	-	16,000	20,524
Former CEO, Former Director	2014	72,619	-	-	3,000	75,619
Justin Moreno(5),	2015	130,000	-	2,100	-	132,100
Chief Operating Officer, Director	2014	-	-	-	-	-

(1)

For the fiscal year ended June 30, 2015, this amount consists of an automobile allowance ($6,444), company owned or leased property for personal use ($7,680), and health benefits ($6,973). For the period from inception (July 12, 2013) to June 30, 2014, this amount consists of an automobile allowance ($8,202), company owned or leased property for personal use ($1,500), health benefits ($4,113) and management fees received from Vapor ($6,358).

(2)

For the fiscal year ended June 30, 2015, this amount consists of an automobile allowance ($6,642) and health benefits ($8,820). For the period from inception (July 12, 2013) to June 30, 2014, this amount consists of an automobile allowance ($9,570), company owned or leased property for personal use ($1,500) and health benefits ($8,820).

(3)

For the fiscal year ended June 30, 2015, this amount consists of health benefits ($16,947). For the period from inception (July 12, 2013) to June 30, 2014, this amount consists of health benefits ($12,690) and management fees received from Vapor ($6,358).

(4)

Mr. Birnbaum became our Chief Executive Officer and a director of the company on March 24, 2014, and resigned from his office and directorship on and effective July 8, 2014.  Mr. Birnbaum received an automobile allowance of $3,000 in the period ended June 30, 2014. In 2015, Mr. Birnbaum was paid $15,000 in connection with that certain Employee Separation and General Release Agreement with the Company dated October 8, 2014 which is further described below and also received $1,000 as an automobile allowance in the fiscal year ended June 30, 2015.

(5)

Mr. Moreno was granted an option to purchase 60,000 shares of our common stock at an exercise price per share of $0.0419 on June 30, 2015.  The option expires on June 30, 2025 and was fully exercisable upon grant.  The value of the option award in the above table represents the grant date fair value computed in accordance with FASB ASC Topic 718.  For the assumptions used in the valuation, please see Note 4 to our Consolidated Financial Statements.

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There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.  We did not grant bonuses to our executive officers in 2015 in an effort to preserve cash.

On February 2, 2015, our Board of Directors and holders of 55.8% of our outstanding common stock (or 38,000,001 shares of 68,060,001 issued and outstanding shares) acting by written consent approved the adoption of our 2015 Omnibus Incentive Plan (the “2015 Plan”).  The 2015 Plan provides for the grant of stock options (both incentive stock options and non-qualified stock options), restricted stock, restricted stock units, stock appreciation rights, performance-based awards, dividend equivalents, stock payments and deferred stock units to eligible participants. Eligible participants include officers, employees, non-employee directors and certain consultants and advisers. The aggregate number of shares of the Company’s common stock authorized for issuance under the 2015 Plan is 20,400,000, subject to adjustment as described in the 2015 Plan.  As of October 1, 2015, none of our executive officers other than Justin Moreno have received awards under our 2015 Stock Incentive Plan.

Employee Contracts

On March 24, 2014, we entered into an Interim Agreement for the Appointment of Chief Executive Officer with Andrew Birnbaum pursuant to which Mr. Birnbaum served as our Chief Executive Officer and as a director of the company.  The agreement was to remain effective until both parties executed a final agreement.  On July 8, 2014, Mr. Birnbaum resigned from his position as Chief Executive Officer and as a director of the company.

Pursuant to the interim agreement, Mr. Birnbaum received a monthly salary of $20,000 and a monthly vehicle allowance of $1,000.  The agreement also contemplated the issuance of 6,600,000 shares of common stock to Mr. Birnbaum, a bonus payment similar to any bonuses granted to other executives and a bonus of 15% of net profits received from certain internet related assets provided by Mr. Birnbaum to the company. No bonuses were earned by or paid to Mr. Birnbaum during his tenure with the company.

On October 8, 2014, but effective as of September 30, 2014, the Company and Mr. Birnbaum entered into an Employment Separation and General Release agreement (the “Release Agreement”) in connection with Mr. Birnbaum’s resignation from the Company on July 8, 2014.  The Release Agreement has the effect of terminating, effective as of July 8, 2014, the Interim Agreement for the Appointment of the Chief Executive Officer entered into between the Company and Mr. Birnbaum on March 24, 2014.  

The Release Agreement provides that all remaining rights and obligations of the Company and Mr. Birnbaum under the interim agreement are terminated as of July 8, 2014, including all rights of Mr. Birnbaum to receive 6,600,000 shares of the Company’s common stock.

Other than as described above, we have not entered into any employment agreements with our executive officers.

Outstanding Equity Awards at Fiscal Year-End

The following table provides information with respect to outstanding stock options and stock awards held by each of the named executive officers as of June 30, 2015.

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		Option Awards
		Number of Securities underlying Unexercised Options		Option Exercise Price ($)	Option Expiration Date
Name	Grant Date	(#) Exercisable	(#) Unexercisable
Justin Moreno	6/30/15	60,000(1)	-	$0.0419	6/30/25

(1)

These options were fully exercisable upon grant and are not subject to vesting.

None of the executive officers listed above exercised options during the fiscal year ended June 30, 2015.

Compensation of Directors

The following table presents information regarding compensation paid to our non-employee directors for our fiscal year ending June 30, 2015.  We do not pay management directors for Board service in addition to their regular employee compensation.

Name	Fees earned or paid in cash($)	Option Awards ($)	All other compensation ($)	Total($)
Niels Winther	-	$7,000(1)	-(2)	$7,000

(1)

Mr. Winther was granted options to purchase 200,000 shares of our common stock at an exercise price of $0.0419 per share on June 30, 2015.  The options expire on June 30, 2025.  The options were fully-exercisable upon grant and are not subject to vesting.  The amount represents the grant date fair value of the award calculated in accordance with ASC Topic 718. See Note 4 to our consolidated financial statements in this Form 10-K for details as to the assumptions used to determine the fair value of the awards.

(2)

Niels Winther is the President of Winther & Company, an accountancy corporation.  Winther & Company was paid $82,000 for services rendered to the company during our fiscal year ended June 30, 2015.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table presents information regarding the beneficial ownership of our common stock by:

·

each of the executive officers listed in the summary compensation table;

·

each of our directors;

·

all of our directors and executive officers as a group; and

·

each stockholder known to us to be the beneficial owner of more than 5% of our common stock.

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In general, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days, through the exercise of a warrant or stock option, conversion of a convertible security or otherwise. Unless otherwise indicated, each person in the table will have sole voting and investment power with respect to the shares shown. For purposes of this table, shares not outstanding which are subject to issuance on exercises of stock options or conversion of a note that are held by one or more person(s) are deemed to be outstanding for the purpose of computing the percentage(s) of outstanding shares beneficially owned by such person(s) but are not deemed to be outstanding for the purpose of computing the percentage for any other person. The table assumes a total of 72,455,606 shares of our common stock outstanding as of October 13, 2015.  Unless otherwise indicated, the address of each of the executive officers and directors and greater than 5% stockholders named below is c/o Vapor Hub International Inc., 1871 Tapo Street, Simi Valley, CA 93063.

Name of Beneficial Owner	Number of Shares Beneficially Owned	Percentage of Shares Outstanding
Executive Officers and Directors:
Kyle Winther	12,666,667	17.5%
(Chief Executive Officer and Director)
Lori Winther	12,666,667	17.5%
(Chief Financial Officer, Treasurer, Secretary and Director)
Gary Jacob Perlingos	12,666,667	17.5%
(President, Chief Technology Officer and Director)
Justin Moreno (1)	60,000	*
(Chief Operating Officer, Director)
Niels Winther (2)	200,000	*
(Chairman of the Board)
Andrew Birnbaum	-	-
(former Director and former Chief Executive Officer)(3)
All directors and executive officers as a group (six persons) (4)	38,260,001	52.6%
5% Stockholders
None

*less than 1%

(1) Consists of options to purchase 60,000 shares of common stock.

(2) Consists of options to purchase 200,000 shares of common stock.

(3) Mr. Birnbaum resigned from his position as Chief Executive Officer and as a Director of the company on July 8, 2014.  

(4)Consists of options to purchase 260,000 shares of common stock and 38,000,001 shares of common stock.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information regarding our equity compensation plans as of June 30, 2015.

Name	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants, and rights	Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders (1)	310,000	$0.0419	20,090,000
Equity compensation plans not approved by security holders	-	-	-

(1) Consists of shares underlying our 2015 Omnibus Incentive Plan, of which an aggregate of 20,400,000 shares have been reserved for issuance. All outstanding awards under the 2015 Omnibus Incentive Plan consist of stock options.

Changes in Control

We are unaware of any contract or other arrangement, the operation of which may at a subsequent date result in a change of control of our company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than the transactions described below, since July 12, 2013, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party:

·

in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years; and

·

in which any director, executive officer, stockholders who beneficially owns more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

As of June 30, 2014 and 2015, the Company had a balance of $101,378 and $96,312, respectively, outstanding as related party loans from Kyle Winther, the Company’s CEO, Lori Winther, the Company’s CFO and Winther & Company, CPAs (an entity owned by Lori Winther, and her husband, Niels Winther, CPA, who is a director of the Company), as well a Chase Bank Line of Credit (which was extended to the Company, though owed personally by Niels & Lori Winther). The outstanding balances are unsecured, non-interest bearing and repayable upon demand.  Each of Kyle Winther and Lori Winther also own in excess of 5% of our common stock.  

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From time to time the Company will engage the services of Winther & Company, CPAs to provide bookkeeping, accounting and tax services to the Company. For the year ended June 30, 2015 the Company incurred approximately $82,000 in fees with Winther & Company. As of June 30, 2014 and 2015 the Company had Accounts Payable outstanding to related parties of $232 and $12,369, respectively.

The Company entered into a Management Agreement with Kyle Winther and Gary “Jake” Perlingos who are each greater than 5% shareholders, directors and officers of the Company related to operational supervision of the company’s retail stores in Simi Valley and Chatsworth, CA.  Each of them was to receive 2.5% each (for a total of 5%) of the monthly revenue generated from each respective lounge.  The Agreement commenced September 1, 2013 and was scheduled to continue until terminated by agreement of the parties. Effective February 1, 2014, the parties agreed to terminate the Management Agreement.  Prior to the termination of the agreement, each of Mr. Winther and Mr. Perlingos received approximately $6,400 pursuant to the terms of the Management Agreement.  An additional Management Agreement was entered into between Delite and Vapor, which relates to the provision of administrative support to Vapor.  Pursuant to the agreement, Delite received a fee of $10,000 per month from Vapor. The Agreement commenced October 1, 2013 and was scheduled to continue until terminated by agreement of the parties. Effective March 1, 2014, the parties agreed to terminate the Management Agreement.  

On December 29, 2014, Kyle Winther 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%. In January 2015, the Company agreed to assume the payments on this loan and capitalized the vehicle (see Note 15). As of June 30, 2015 the outstanding balance was $36,400.

On January 2, 2015, the Company entered into a Business Loan and Security Agreement with B of I Federal Bank (the “Bank”).  Pursuant to the agreement, the Company borrowed $200,000 from the Bank and received net proceeds of $195,000 USD after deducting an origination fee of $5,000.  Prior to its repayment on June 2, 2015, this loan was secured by all personal property of the Company and was also personally guaranteed by Lori Winther, Kyle Winther and Gary Perlingos.  

On June 2, 2015, the Company entered into a new Business Loan and Security Agreement with the Bank.  Pursuant to the agreement, the Company borrowed $175,000 from the Bank and received net proceeds of $104,071 after deducting an origination fee of $1,875 and the repayment of $69,054 in full satisfaction of the Company’s remaining obligations under that certain Business Loan and Security Agreement entered into with the Bank on January 2, 2015.  The new loan is secured by all personal property of the Company and is also personally guaranteed by Lori Winther, Kyle Winther and Gary Perlingos.  

On September 1, 2015, the Company entered into a Commercial Lease Agreement with the Winther Family Trust, pursuant to which the Company will lease the 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. The Premises is replacing the Company’s prior facility located at 67 W. Easy Street, Unit 115, Simi Valley, CA 93065 and will serve as the Company’s primary office location. In addition to providing office space, the approximately 5,000 square foot facility will also be used for warehousing and shipping.  The lessor of the Premises, the Winther Family Trust, is controlled by Niels Winther and Lori Winther.

Director Independence

We currently do not have any independent directors, as the term “independent” is defined by NASDAQ Listing Rule 5605(a)(2).

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table presents the fees for professional audit services rendered by our principal accountants, Anton & Chia, LLP and Hartley Moore Accountancy Corporation for the audit of our annual consolidated financial statements for the years ended June 30, 2015 and for the period from inception (July 12, 2013) to June 30, 2014.  On March 30, 2015, our Board of Directors approved the engagement of Hartley Moore Accountancy Corporation as our new independent registered public accounting firm and, also on March 30, 2015, Anton & Chia, LLP was dismissed as our independent registered public accounting firm.  All services reflected in the following fee table were pre-approved, respectively, in accordance with the policy of our board of directors.

	From Inception (July 12, 2013) to June 30 2014	For the Fiscal Year Ended   June 30, 2015
Audit fees (1)	$85,694	$45,360
Audit-related fees	-	-
Tax fees	-	-
All other fees	-	-
Total	$85,684	$45,360

NOTES:

⁽¹⁾ Audit fees consist of audit and review services, consents and review of documents filed with the SEC.

Our board of directors pre-approves all audit (including audit-related) and permitted non-audit services to be performed by our independent auditors. Our board will annually approve the scope and fee estimates for the year-end audit to be performed by our independent auditors for the fiscal year. With respect to other permitted services, our board pre-approves specific engagements, projects and categories of services on a fiscal year basis, subject to individual project and annual maximums. To date, we have not engaged our auditors to perform any non-audit related services.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 (a)           Documents filed as part of this report

1. Financial Statements.

All financial statements are set forth under Item 8 of this report.

2. Financial Statement Schedules.

All financial statement schedules are omitted because the information is inapplicable or presented in the Notes to Financial Statements.

3. Exhibits. See Item 15(b) below.

(b) Exhibits. We have filed, or incorporated into this Form 10-K by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K.

(c) Financial Statement Schedule. See Item 15(a) above.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	VAPOR HUB INTERNATIONAL INC.
	a Nevada Corporation
Date: October 13, 2015	/s/ LORI WINTHER
	By: Lori Winther
	Its: Chief Financial Officer
	(Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lori Winther and Kyle Winther, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution for him, and in his name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/S/    KYLE WINTHER Kyle Winther	Chief Executive Officer and Director (Principal Executive Officer)	October 13, 2015
/S/    LORI WINTHER Lori Winther	Chief Financial Officer, Treasurer, Secretary and Director (Principal Financial and Accounting Officer)	October 13, 2015
/S/     Gary Jacob Perlingos        Gary Jacob Perlingos	President, Chief Technology Officer and Director	October 13, 2015
/S/     Justin Moreno        Justin Moreno	Chief Operating Officer and Director	October 13, 2015
/S/    NIELS WINTHER Niels Winther	Chairman of the Board	October 13, 2015

80

INDEX TO EXHIBITS

Exhibit		Incorporated by Reference				Filed
Number	Exhibit Description	Form	File Number	Exhibit	Filing Date	Herewith
3.1	Certificate of withdrawal of Certificate of Designation	8-K	000-55363	3.1	2/6/2015
3.2	Amended and Articles of Incorporation of the Registrant	8-K	000-55363	3.2	2/6/2015
3.3	Amended and Restated Bylaws of the Registrant	8-K	000-55363	3.3	2/6/2015
3.4	Articles of Merger filed with an effective date of March 14, 2014 with the Nevada Secretary of State on February 14, 2014	8-K	000-55363	3.1	3/6/2014
10.1	Share Exchange Agreement among the Registrant, Delite Products, Inc., Vapor Hub, Inc., and the Shareholders of Delite and Vapor Hub, Inc., dated February 14, 2014.	8-K	333-173438	10.1	2/18/2014
10.2	Form of Subscription Agreement for Note Purchases on March 14, 2014, April 10, 2014 and May 19, 2014	10-Q	333-173438	10.2	5/15/2014
10.3	Lease Agreement dated August 5, 2013 by and Between the Registrant and S.B.P.W., LLC, as amended by Amendment No. 1 and Amendment No. 2.	10-K	333-173438	10.3	9/29/2014
10.4*	Interim Agreement for Employment of Chief Executive Officer dated March 24, 2014, by and among the Registrant, Andrew Birnbaum and SmartCloud Technologies, Inc.	10-K	333-173438	10.4	9/29/2014
10.5	Securities Purchase Agreement, dated as of November 4, 2014, by and between the Registrant and Typenex Co-Investment, LLC	8-K	333-173438	10.1	11/10/2014
10.6	Secured Convertible Promissory Note, dated as of November 4, 2014, by the Registrant in favor of Typenex Co-Investment, LLC	8-K	333-173438	10.2	11/10/2014
10.7	Investor Note #1 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.3	11/10/2014
10.8	Investor Note #2 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.4	11/10/2014
10.9	Investor Note #3 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.5	11/10/2014
10.10	Investor Note #4 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.6	11/10/2014
10.11	Investor Note #5 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.7	11/10/2014
10.12	Investor Note #6 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.8	11/10/2014

81

10.13	Investor Note #7 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.9	11/10/2014
10.14	Investor Note #8 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.1	11/10/2014
10.15	Investor Note #9 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.11	11/10/2014
10.16	Investor Note #10 issued to the Registrant on November 4, 2014.	8-K	333-173438	10.12	11/10/2014
10.17	Security Agreement, dated as of November 4, 2014, by the Registrant in favor of Typenex Co-Investment, LLC	8-K	333-173438	10.13	11/10/2014
10.18	Business Loan and Security Agreement between B of I Federal Bank and the Registrant dated January 2, 2015.	10-Q	000-55363	10.14	2/17/2015
10.19*	Vapor Hub International Inc. 2015 Omnibus Incentive Plan.	8-K	000-55363	10.1	2/6/2015
10.20	Business Loan and Security Agreement, dated as of June 2, 2015, by and between the Company and BofI Federal Bank.	8-K	000-55363	10.1	6/8/2015
10.21	Note Purchase Agreement, dated as of June 4, 2015, by and between the Company and Typenex Co-Investment, LLC.	8-K	000-55363	10.2	6/8/2015
10.22	Form of Promissory Note issued to Typenex Co-Investment, LLC on June 4, 2015.	8-K	000-55363	10.3	6/8/2015
10.23	Note Purchase Agreement, dated as of August 12, 2015, by and between the Company and Iliad Research and Trading, L.P.	8-K	000-55363	10.1	8/18/2015
10.24	Promissory Note issued to Iliad Research and Trading, L.P. on August 12, 2015.	8-K	000-55363	10.2	8/18/2015
10.25	Triple Net Lease Agreement by and between the Winther Family Trust and the Registrant.					X
10.26*	Employment Separation and General Release Agreement, dated as of October 8, 2014, with Andrew Birnbaum	10-Q	333-173438	10.1	11/14/2014
14.1	Vapor Hub International Inc. Code of Ethical Conduct.	10-K	333-173438	14.1	9/29/2014
21.1	Subsidiaries of Vapor Hub International Inc.					X
23.1	Consent of Hartley Moore Accountancy Corporation, Independent Registered Public Accounting Firm.					X
24.1	Power of Attorney (included on the Signatures page of this Annual Report on Form 10-K).					X

82

31.1	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	#
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X

_________________________________________

#

Furnished herewith.

* Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this report on Form 10-K

83

EX-10.25

Winther Commercial Triple Net Lease Agreement (Net-Net-Net)

This Triple Net Lease Agreement ("Lease") is made and effective September 1, 2015, by and between Winther Family Trust ("Landlord") and Vapor Hub International, lnc. ("Tenant").

Landlord is the owner of land and improvements commonly known and numbered as 1871 Tapo Street, Simi Valley, CA 93363 and legally described as follows (the "Building"):

NOW, THEREFORE, in consideration of the mutual promises herein, contained and other good and valuable consideration, it is agreed:

1.

Term.

A.

Landlord hereby leases the Leased Premises to Tenant, and Tenant hereby leases the same from  Landlord,  for  an "Initial Term"  beginning September  1, 2015  and ending  August  31,  2020. Landlord shall use its best efforts to give Tenant possession as nearly as possible at the beginning of the Lease term. If Landlord is unable to timely provide the Leased Premises, rent shall abate for the period of delay, as agreed by the parties. Tenant shall make no other claim against landlord for any such delay.

2.

Rental.

A.

Tenant shall pay to Landlord during the Initial Term rental of $ 67,800 per year, payable in installments of $ 5,650 per month.  Each  installment  payment  shall  be due  in advance on the first day of each calendar month during the lease term to  Landlord  at  491 Valley  Gate Road, Simi Valley,  CA  93065 or at such other place designated by written notice from Landlord or Tenant. The rental payment amount  for  any  partial  calendar  months included  in the  lease  term  shall  be  prorated  on a daily basis.

3.

Use.

Tenant shall be allowed to utilize the leased premises for any commercially reasonable purpose. Notwithstanding the forgoing, Tenant shall not use the Leased Premises for the purposes of storing, manufacturing or selling any explosives, flammables or other inherently dangerous substance,   chemical, thing or device.

4.

Sublease and Assignment.

Tenant shall have the right without Landlord's consent, to assign  this  Lease  to  a corporation  with which Tenant may merge or consolidate, to any subsidiary of Tenant,  to  any  corporation  under common control with  Tenant,  or to  a purchaser  of  substantially  all of Tenant's  assets.  Except  as  set forth above, Tenant shall not sublease all or any part  of the  Leased  Premises,  or assign  this  Lease  in whole  or  in part without  Landlord's  consent;  such  consent  not to be unreasonably withheld  or delayed.

5.

Repairs.

During the Lease term, Tenant shall make, at Tenant's expense, all necessary repairs to the Leased Premises. Repairs shall include such items as routine repairs of floors, carpets, lights & light bulbs, walls, ceilings, common areas, and other parts of the Leased Premises damaged or worn through normal occupancy, except for major mechanical systems or the roof, subject to the obligations of the parties otherwise set forth in this Lease.

6.

Alterations and Improvements.

Tenant, at Tenant's expense. shall have the right following Landlord's  consent  to remodel, redecorate,  and make additions, improvements and replacements of and to all or any part of the Leased Premises  from time to time as Tenant may deem desirable, provided  the  same  are  made in a  workmanlike  manner and utilizing good quality materials. Tenant shall have the right to place and install personal property, trade fixtures, equipment and other temporary installations in and upon the Leased Premises, and fasten the same to the premises.  All  personal  property, equipment,  machinery,  trade  fixtures and  temporary  installations,  whether acquired  by Tenant  at the  commencement  of the  Lease  term or placed or installed on the  Leased  Premises  by Tenant thereafter shall remain Tenant's  property free and clear of any claim by Landlord. Tenant shall have the right to  remove  the  same  at any time during the term of this Lease provided that all evidence of  installation  or  damage  to  the Leased Premises  caused  by such  removal  shall  be  repaired  by Tenant  at Tenant's expense.

Should Tenant fail to remove any such alterations and/or improvements at the conclusions of the Lease term, Landlord shall have the right to cause the leasehold to be returned to its original condition, as was the case at the inception of the lease, and charge such repairs against any security deposit currently on hand. Should the security deposit be insufficient to cover the cost of repairs, then Landlord may, at its election, seek to recover those unrecompensed costs, including attorney's fees, through litigation in any court of competent jurisdiction.

7.

Property Taxes.

Tenant shall pay, prior to delinquency, its proportionate share of all general real estate taxes and installments of special assessments coming due during the Lease term on the Building and the underlying real property, and all personal property taxes with respect to Landlord's personal property,   if any, on the Leased Premises. Tenant shall be responsible for paying all personal property taxes with respect to Tenant's personal property at the Leased Premises.

8.

Insurance.

A.

If the Leased Premises or any other part of the Building is damaged by fire or other casualty resulting from any act or negligence of Tenant or any of Tenant's agents, employees or invitees, rent shall not be diminished or abated while such damages are under repair, and Tenant shall be responsible for the costs of repair not covered by insurance. Additionally, this Lease and its covenants and obligations, shall remain in full force and effect.

B.

Landlord shall maintain fire and extended coverage insurance on the Building and the Leased Premises in such amounts as Landlord shall deem appropriate. Tenant shall be responsible, at its expense, for its proportionate share of such fire and extended coverage insurance maintained by Landlord. Landlord shall notify and bill Tenant for such proportionate share which will be due with the next succeeding month's rent installment. Tenant shall be responsible, at its expense, for business interruption insurance as well as valuable papers, on all of its personal property, records, and removable trade fixtures located in the Leased Premises.

C.

Tenant shall, at its own expense, maintain a policy or policies of comprehensive general liability insurance with respect to its operative activities in the Building with the premiums thereon fully paid on or before due date, issued by and binding upon some insurance company approved by Landlord, such insurance to afford minimum protection of not less than $1,000,000 combined single limit coverage of bodily injury, property damage or combination thereof. Landlord shall be listed as an additional insured on Tenant's policy or policies of comprehensive general liability insurance, and Tenant shall provide Landlord with current Certificates of Insurance evidencing Tenant's compliance with this Paragraph.  Tenant shall obtain the agreement   of Tenant's insurers to notify Landlord that a policy is due to expire at least (10) days prior to such expiration. Landlord shall not be required to maintain insurance against thefts

within the Leased Premises or the Building.

9.

Utilities.

Tenant shall pay all charges for water, sewer, gas, electricity, telephone, intrusion alarm monitoring & service and other services and utilities used by Tenant on the Leased Premises during the term of this Lease unless otherwise expressly agreed in writing by Landlord.  In the event  that  any  utility  or service  provided to the Leased Premises is not separately metered, Landlord shall pay the amount  due and  separately  invoice  Tenant  for Tenant's  pro rata share  of the charges.  Tenant shall pay such amounts   within fifteen (15) days of invoice or with the next succeeding rent installment, which is sooner. Tenant acknowledges that the Leased Premises are designed to provide standard office use electrical facilities and standard office lighting. Tenant shall not use any equipment or devices that utilizes excessive electrical energy or which may, in Landlord's reasonable opinion, overload the wiring or interfere with electrical services to other tenants.

10.

Signs.

Following Landlord's consent, Tenant shall have the right to  place  on  the  Leased  Premises,  at locations selected by Tenant, any signs which are permitted by applicable  zoning  ordinances  and  private restrictions. Landlord may refuse consent to  any  proposed  signage  that  is  in  Landlord's opinion  too large, deceptive,  unattractive  or otherwise  inconsistent  with  or inappropriate  to the Leased Premises or use of any other tenant. Landlord  shall  assist  and  cooperate  with  Tenant  in obtaining  any  necessary   permission   from  governmental   authorities oradjoining  owners  and occupants for Tenant to place or construct the foregoing signs. Tenant shall  repair  all  damage  to the  Leased Premises  resulting  from  the  removal  of signs  installed  by Tenant.

11.

Entry.

Landlord shall have the  right  to enter  upon  the  Leased  Premises  at  reasonable  hours  to inspect the  same,  provided  Landlord  shall  not  thereby  unreasonably  interfere  with  Tenant's  business  on the  Leased  Premises.

12.

Parking.

During the term of this Lease, Tenant shall  have  the  non-exclusive  use  in common  with  Landlord, other tenants of the Building, their guests and  invitees,  of the  non-reserved  common  automobile parking   areas,   driveways,   and  footways,   subject   to  rules  and  regulations   for  the  use  thereof  as prescribed from time to time by Landlord. Landlord reserves the right to designate and placard certain parking spaces or areas adjacent to the Building or in reasonable proximity thereto, for parking by Tenant and Tenant's agents and employees. Parking by others in such designated parking spaces may result in such offending vehicle(s) being towed away and stored at the owner's expense.

13.

Building Rules

Tenant will comply with the rules of the Building adopted and altered by Landlord, from time to time, and will cause an of its agents, employees, invitees and visitors to do so; all changes to such rules will be sent by Landlord to Tenant in writing. The initial rules for the Building are attached hereto as Exhibit "A" and incorporated herein for all purposes.

14.

Damage and Destruction.

Subject to Section 8 A. above, if the Leased Premises or any part thereof or any appurtenance thereto  is so damaged by fire, casualty or structural defects, not caused or incurred as a result of negligence by Tenant,  and the same is  uninhabitable and cannot  be used for Tenant's  purposes,  then Tenant shall  have the  right within  ninety  (90) days following  damage  to elect, by notice  to  Landlord,  to terminate this

Lease as of the date of such damage. In the event of minor damage to any part of the Leased Premises and  if such  damage  does  not  render  the Leased Premises  unusable  for Tenant's   purposes, as reasonably determined by the Landlord, Landlord shall promptly repair such damage at the cost of the Landlord, ln making the repairs called for in this paragraph, Landlord shall not be liable for  any  delays resulting from strikes, governmental restrictions, inability to obtain necessary materials or labor or other matters which are beyond the reasonable control  of Landlord.  Tenant shall  be relieved from  paying rent  and other charges during  any  portion  of the  Lease  term  that  the Leased  Premises  are  inoperable  or unfit for  occupancy,  or  use,  in whole  or in part, for Tenant's purposes . Rentals and other charges paid in advance for any such periods shall be credited on the next ensuing payments, if any, but if no further payments are to be made, any such advance payments shall be refunded to Tenant.  The  provisions  of  this paragraph extend not only to the matters aforesaid, but also to  any  occurrence  which  is  beyond Tenant's reasonable control and which renders the Leased Premises, or any  appurtenance  thereto, inoperable  or unfit for occupancy or use, in whole or in part, for Tenant's purposes.

15.

Default.

If default shall at any time be made by Tenant in the payment of rent when due to Landlord as herein provided, and if said default shall continue for fifteen (15) days  after written  notice thereof shall  have been given to Tenant by Landlord, or if default shall be made in any  of  the  other  covenants  or conditions  to  be kept,  observed  and  performed  by Tenant,  and  such  default  shall continue  for thirty (30) days after notice thereof in writing to Tenant by Landlord without correction thereof then having  been commenced and thereafter diligently prosecuted, Landlord may declare the term of this Lease ended and terminated by giving Tenant written notice of such intention, and if possession of the Leased Premises is not surrendered, Landlord may reenter said premises. Landlord shall have, in addition to the remedy above provided, any other right or remedy available to Landlord on account of any Tenant default, either in law or equity. Landlord shall use reasonable efforts to mitigate its damages.

16.

Quiet Possession.

Landlord covenants and warrants that upon performance by Tenant of its obligations hereunder, Landlord will keep and maintain Tenant in exclusive, quiet, peaceable and undisturbed and uninterrupted   possession of the Leased Premises during the term of this Lease.

17.

Condemnation.

If any legally, constituted  authority  condemns  the  Building  or such  part thereof  which  shall  make the Leased Premises unsuitable  for  leasing,  this  Lease  shall  cease  when  the  public  authority  takes possession, and Landlord and Tenant shall account for rental as of that date. Such termination shall be without prejudice to the rights of either party to recover compensation from the condemning authority for any loss or damage caused by the condemnation.  Neither party shall have any rights in or to any award made to the other by the condemning authority.

18.

Subordination.

Tenant accepts this Lease subject and subordinate to any mortgage,  deed  of  trust  or  other  lien  presently existing or hereafter arising upon the Leased Premises, or upon the Building and to  any  renewals, refinancing and extensions thereof, but Tenant  agrees  that  any  such  mortgagee  shall have the right at any time to subordinate such mortgage,  deed  of trust  or other  lien to this  Lease  on such terms and subject to such conditions as such mortgagee may  deem  appropriate  in  its discretion.  Landlord is hereby irrevocably vested with full power and authority to subordinate this Lease to any mortgage, deed of trust or  other  lien  now  existing  or hereafter  placed  upon  the Leased  Premises  of the Building, and Tenant agrees, upon demand, to execute such further instruments subordinating this Lease or attorning  to the  holder  of any  such  liens  as  Landlord  may request.  In the event that Tenant should fail to execute any instrument of subordination herein required to be executed by Tenant promptly as requested, Tenant hereby irrevocably  constitutes  Landlord  as  its  attorney-in-fact to execute such instrument in Tenant's

name, place and stead, it being agreed that such power  is one coupled with an interest. Tenant agrees that it will from  time to time upon  request  by  Landlord  execute and deliver to such persons  as  Landlord  shall  request  a statement  in recordable  form  certifying  that this Lease  is unmodified  and  in full force and effect  (or if there  have been  modifications,  that  the same is in full force and effect as so modified), stating the dates  to which  rent  and  other  charges  payable under this  Lease  have been paid,  stating  that  Landlord  is not in default  hereunder (or if Tenant alleges a default stating the nature of such alleged default) and further stating such other matters  as Landlord  shall  reasonably require.

19.

Security Deposit.

The Security Deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant's covenants and obligations under this Lease, it being expressly understood that the Security Deposit shall not be considered an advance payment of rental or a measure of Landlord's damages in case of default by Tenant.  Unless  otherwise  provided  by mandatory non-waivable law or regulation, Landlord  may  commingle  the  Security  Deposit  with Landlord' s other funds.  Landlord  may,  from  time  to  time,  without  prejudice  to  any other  remedy, use the Security Deposit to the  extent  necessary  to  make  good  any  arrearages  of rent or to satisfy any other covenant or obligation of Tenant hereunder. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount.  If Tenant  is  not  in default  at the  termination  of this  Lease,  the balance of the Security Deposit remaining after  any  such  application  shall  be  returned  by Landlord to Tenant. If Landlord transfers its interest in the Premises during the term of this Lease, Landlord may assign the Security Deposit  to  the transferee  and  thereafter  shall  have  no  further liability  for  the  return  of such  Security  Deposit.

20.

Notice.

Any notice required or permitted under  this  Lease  shall  be deemed  sufficiently  given  or served  if sent  by  United  States  certified  mail,  return  receipt  requested,  addressed  as follows:

If to Landlord to:

Winther Family Trust - Niels & Lori Winther, trustees

491 Valley Gate Road, Simi Valley, CA 93065

If to Tenant to:

Vapor Hub International, Inc.

1871 Tapo Street, Simi Valley, CA 93063

Landlord and Tenant shall  each  have  the  right  from  time to time to change  the  place  notice  is to  be given  under  this  paragraph  by written  notice  thereof  to  the  other party.

21.

Brokers – Check One.

     X     Tenant  represents  that  Tenant  was  not shown  the  Premises  by any real estate  broker  or agent and that Tenant has not otherwise engaged in, any activity  which  could  form  the  basis  for a claim  for  real estate commission, brokerage fee, finder's  fee  or  other  similar  charge,  in  connection with  this Lease.

            Tenant was shown the property by_________________ who is a licensed real estate agent in the State of California from ______________________ Agency.   Landlord and Tenant agree to abide by the signing party's listing agreement and to pay the commission amount specified.

22.

Waiver.

No waiver of any default of Landlord or Tenant  hereunder  shall  be implied  from  any  omission  to take any action on account of such default if such default  persists  or  is repeated,  and  no express waiver  shall affect any default other than  the  default  specified  in the  express  waiver  and  that  only for  the time and to the extent therein stated. One or more waivers  by  Landlord  or  Tenant  shall  not be construed  as  a waiver  of a subsequent   breach  of the  same  covenant,  term  or condition.

23.

Memorandum of Lease.

The parties hereto contemplate  that  this Lease  should  not  and  shall  not  be filed  for  record,  but  in lieu thereof, at the request of either  party,  Landlord  and  Tenant  shall  execute  a  Memorandum  of Lease to be recorded for the purpose of giving record  notice  of  the  appropriate  provisions  of  this Lease.

24.

Headings.

The headings used in this Lease are for convenience of the parties only and shall not be considered in interpreting the meaning of any provision of this Lease.

25.

Successors.

The provisions of this Lease shall extend to and be binding upon Landlord and Tenant and their respective   legal representatives, successors and assigns.

26.

Consent.

Landlord shall not unreasonably withhold or delay its consent with respect to any matter for which Landlord's consent is required or desirable under this Lease.

27.

Performance.

If there is a default with respect to any of Landlord's covenants, warranties or representations under  this  Lease,  and  if the default  continues  more than fifteen  (15)  days  after notice in writing from Tenant to Landlord specifying the default, Tenant may, at its option and without affecting any other remedy hereunder, cure such default and deduct the cost thereof from the next accruing installment or installments of rent payable hereunder until Tenant shall have been fully reimbursed for such expenditures, together with interest thereon at a rate equal to the lessor of twelve  percent (12%) per annum or the then highest lawful rate. If this Lease terminates prior to Tenant's receiving full reimbursement, Landlord shall pay the unreimbursed balance plus accrued interest to Tenant on demand.

28.

Compliance with Law.

Tenant shall comply with all laws, orders, ordinances and other public requirements now or hereafter pertaining to Tenant's use of the Leased Premises. Landlord shall comply with all laws, orders, ordinances   and other public requirements now or hereafter affecting the Leased Premises.

29.

Final Agreement.

This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both parties.

30.

Governing Law.

This Agreement shall  be governed,  construed  and  interpreted  by, through  and under  the  Laws  of the  State  of California.

IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year first above written.

LANDLORD

_/s/ Niels Winther______/s/ Lori Winther____________

Signature

Niels C Winther                 Lori A Winther

Print Name

TENANT

By: /s/ Gary Jacob Perlingos

Signature

Vapor Hub International, Inc. – Gary J Perlingos, President

Print Name

TENANT

Signature

Print Name

AGENT/BROKER

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

To the Board of Directors

Vapor Hub International Inc.

Simi Valley, California

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (file No. 333-204897), pertaining to the registration of 20,400,000 shares of common stock of Vapor Hub International Inc., of our report dated October 13, 2015, relating to the consolidated financial statements and schedules of Vapor Hub International Inc. appearing in the entity’s Annual Report on Form 10-K for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015.

We also consent to the reference to us under the caption “Experts” in the Registration Statement.

/s/ Hartley Moore Accountancy Corporation

Irvine, California

October 13, 2015

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer Pursuant To

Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant To

Section 302 of Sarbanes-Oxley Act of 2002

I, Kyle Winther, certify that:

1. I have reviewed this annual report on Form 10-K of Vapor Hub International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: October 13, 2015

/s/ Kyle Winther

Kyle Winther

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer Pursuant To

Exchange Act Rules 13a-14(a) and 15d-14(a),

As Adopted Pursuant To

Section 302 of Sarbanes-Oxley Act of 2002

I, Lori Winther, certify that:

1. I have reviewed this annual report on Form 10-K of Vapor Hub International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: October 13, 2015

/s/ Lori Winther

Lori Winther

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certifications of Principal Executive Officer and Principal Financial Officer

Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Vapor Hub International Inc. (the “Company”) on Form 10-K for the year ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the knowledge of the undersigned:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 13, 2015

/s/ Kyle Winther

Kyle Winther

Chief Executive Officer

Date: October 13, 2015

/s/ Lori Winther

Lori Winther

Chief Financial Officer

EX-21.1

Converted by EDGARwiz

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Note 3 - Summary of Significant Accounting Policies: Income Taxes (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Income Taxes

Income Taxes

The Company accounts for income taxes under the provisions of ASC Topic 740-10, Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined and income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes determined on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. As of June 30, 2014 and 2015, the Company has federal and state net operating loss carry forwards of approximately $109,000 and $463,000, respectively, which will begin to expire in 2030 unless utilized in earlier years.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2014 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2014 Fiscal Period and forward for various states.

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Note 3 - Summary of Significant Accounting Policies: Advertising Expense (Details) - USD ($)	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Advertising Expense	$ 140,771	$ 59,822

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Note 13 - Income Tax: Schedule of Effective Income Tax Rate Reconciliation (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Effective Income Tax Rate Reconciliation

	2014	2015
Statutory federal income tax rate	(34)%	(34)%
State taxes, net of federal benefit	10%	(3)%
Other	22%	(2)%
	(2)%	(39)%

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Note 13 - Income Tax: Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Federal Tax
Income Taxes Receivable		$ 3,751
State Tax
Income Taxes Receivable	$ 2,400	$ 3,328

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Note 3 - Summary of Significant Accounting Policies: Income Taxes (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Details
Operating Loss Carryforwards	$ 463,000	$ 109,000

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Note 12 - Delite Acquisition: Schedule of Business Acquisitions, by Acquisition (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Business Acquisitions, by Acquisition

	Delite	Vapor	Company	Elimination	Pro-Forma
Revenue	$  1,446,749	$  513,811	$                   -	$    (346,077)	$   1,614,483
Cost of revenue	858,128	280,181	-	(280,181)	858,128
Gross profit	588,621	233,630	-	(65,895)	756,355
General and administrative expense	992,090	259,558	25,149	(65,895)	1,210,902
Other income	-	29,999	9,019	-	39,018
Income tax provision	1,963	6,702	-	-	8,665
Net income (loss)	$   (405,432)	$     (2,631)	$      (16,130)	-	$    (424,194)

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Note 3 - Summary of Significant Accounting Policies: Inventories (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Inventories

Inventories

Inventories consist primarily of vaping devices, electronic cigarettes, e-liquid and related supplies and accessories and are stated at the lower of cost (first-in, first-out) or market value.

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Note 15 - Property and Equipment: Note 14 - Property and Equipment (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Details
Property, Plant and Equipment, Other, Net	$ 36,976
Property, Plant and Equipment, Other, Gross	16,756	$ 12,895
Furniture and Fixtures, Gross	106,568	97,300
Leasehold Improvements, Gross	44,300	17,539
Property, Plant and Equipment, Other, Accumulated Depreciation	(45,054)	(23,003)
Property, Plant and Equipment, Net	$ 159,546	$ 104,731

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Note 4 - Capital Stock: Schedule of Stockholders Equity (Details)	12 Months Ended
	Jun. 30, 2015
Details
Fair Value Assumptions, Expected Term	5 years
Fair Value Assumptions, Risk Free Interest Rate	1.63%
Fair Value Assumptions, Expected Volatility Rate	121.10%

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Note 13 - Income Tax: Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)	12 Months Ended		60 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Sep. 01, 2020
Details
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	(34.00%)	(34.00%)
Effective Income Tax Rate Reconciliation, Tax Contingency, State and Local, Amount	$ (3)	$ 10
Effective Income Tax Rate Reconciliation, Deduction, Other, Amount	$ (2)	$ 22	$ 5,650

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Note 3 - Summary of Significant Accounting Policies: Going Concern (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Going Concern

Going Concern

The Company’s consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s cash balance as of June 30, 2015 along with continued loss from operations and negative cash flow from operations, raise substantial doubt about its ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company continues to face liquidity and capital resources constraints and does not believe that the proceeds from its debt facilities (see Note 10) along with its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the Company’s future capital requirements will depend on many factors, including the Company’s results from operations and the growth rate of the Company’s business. The Company’s near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth. 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.

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Note 15 - Property and Equipment: Note 14 - Property and Equipment (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Note 14 - Property and Equipment

		June 30, 2014		June 30, 2015
Automobile	$	-	$	36,976
Computer		12,895		16,756
Furniture and equipment		97,300		106,568
Leasehold improvements		17,539		44,300
Accumulated depreciation		(23,003)		(45,054)
Property and equipment, net	$	104,731	$	159,546

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Note 4 - Capital Stock: Schedule of Stockholders Equity (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Stockholders Equity

	2015
Annual dividend yield	-
Expected life (years)	5.0
Risk-free interest rate	1.63%
Expected volatility	121.10%
Fair value of options granted	0.035%

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Note 3 - Summary of Significant Accounting Policies: Deferred Financing Costs, Net (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Deferred Financing Costs, Net

Deferred Financing Costs, Net

Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized to interest expense over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful.

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Note 3 - Summary of Significant Accounting Policies: Stock-based Compensation (Details) - USD ($)	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Stock or Unit Option Plan Expense	$ 10,850	$ 0

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Note 11 - Notes Payable (Details) - USD ($)	Jun. 30, 2015	Jun. 02, 2015	May. 29, 2015	Jan. 02, 2015	Aug. 22, 2014	Jul. 10, 2014
Workers' Compensation Liability, Current	$ 13,001		$ 18,871
General Liability Insurance	0					$ 43,953
General Liability Insurance Coverage	$ 0				$ 112,500
B of I Federal Bank- Loan 1
Other Short-term Borrowings				$ 200,000
Net Proceeds				195,000
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums				5,000
Short-term Bank Loans and Notes Payable				$ 1,728
B of I Federal Bank- Loan 2
Other Short-term Borrowings		$ 175,000
Net Proceeds		104,071
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums		1,875
Short-term Bank Loans and Notes Payable		1,708.33
Typenex Co- Investment Note
Other Short-term Borrowings		$ 245,000

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Note 7 - Lease Commitments (Details) - USD ($)	10 Months Ended	11 Months Ended	12 Months Ended		25 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Aug. 30, 2015
S.J. Real Estate Group, LLC
Operating Leases, Rent Expense	$ 2,214		$ 4,428
S.B.P.W., LLC
Operating Leases, Rent Expense		$ 4,070			$ 2,035
Total
Operating Leases, Rent Expense			$ 92,185	$ 39,847

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Note 13 - Income Tax: Schedule of Components of Income Tax Expense (Benefit) (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Components of Income Tax Expense (Benefit)

		2014		2015
Federal tax	$	3,751	$	-
State tax	$	3,328	$	2,400

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Note 3 - Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2015

Notes

Note 3 - Summary of Significant Accounting Policies

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial statements.

Basis of Presentation – Consolidation

The accompanying consolidated financial statements include the accounts of the Company and subsidiary. Intercompany accounts and transactions have been eliminated. The consolidated financial statements of the Company and the accompanying notes included in this Annual Report on Form 10-K are audited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The consolidated financial statements, and the accompanying notes, are prepared in accordance with US GAAP and pursuant to the instructions to Form 10-K of the Securities and Exchange Commission.  The Company’s fiscal year end is June 30.

The Company operates in one segment in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting. The Company’s Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280.

Fiscal Year End

Following the exchange transaction, the Company elected to adopt the June 30 year end of Vapor, the accounting acquirer. As such, the Company has presented activity since the inception of Vapor (July 12, 2013) and has presented the activity of Delite since its acquisition on March 26, 2014.

Going Concern

The Company’s consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s cash balance as of June 30, 2015 along with continued loss from operations and negative cash flow from operations, raise substantial doubt about its ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company continues to face liquidity and capital resources constraints and does not believe that the proceeds from its debt facilities (see Note 10) along with its operating cash flows will be sufficient to meet its financing needs for the next twelve months. The extent of the Company’s future capital requirements will depend on many factors, including the Company’s results from operations and the growth rate of the Company’s business. The Company’s near term objective is to raise debt or equity capital to fund its immediate cash needs and to finance its longer term growth. 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 options, useful life of fixed assets, inventory reserves, estimates of sales return and accrual for potential liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At June 30, 2015, the Company had no cash equivalents.

Concentration of Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash. The Company places its cash with high quality banking institutions.

The Company relied on one manufacturer to make all of the Company’s Mods during the year ended June 30, 2015.

Stock-Based Compensation

The Company accounts for employee and non-employee stock awards under ASC 718, Compensation – Stock Compensation, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to nonemployees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instrument is fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instrument granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” the Company performs an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, the Company uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in the Company’s consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company’s financial statements. For the period from inception (July 12, 2013) to June 30, 2014 and the year ended June 30, 2015, the Company had $0 and $10,850, respectively, of stock based compensation to employees.

Financial Instruments and Fair Value Measurement

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1- applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2- applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3- applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties, and derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Pursuant to ASC 820, the fair value of the Company’s derivative liability is determined based on “Level 3” inputs, which consist of unobservable inputs. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Revenue Recognition

The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.

For retail transactions, revenue is recognized at the point of sale.  For wholesale and online transactions, revenue is recognized at the time goods are shipped.

Deferred Income

The Company accrues deferred income when customer payments are received, but product has not yet shipped. As of June 30, 2014 and 2015, the Company had recorded $307,135 and $82,499, respectively for deferred income as a result of prepayments for product made by customers. Those prepayments are recognized into revenue at the point those prepaid products have subsequently shipped. The Company recognized the $307,135 into revenue during the year ended June 30, 2015. The Company expects to recognize the $82,499 into revenue during the following fiscal year.

Inventories

Inventories consist primarily of vaping devices, electronic cigarettes, e-liquid and related supplies and accessories and are stated at the lower of cost (first-in, first-out) or market value.

Property and Equipment

Property and equipment consists of computer equipment, furniture, facility equipment, and leasehold improvements which are carried at historical cost and are depreciated over the estimated useful lives of the related assets. Estimated useful lives are from 3 to 10 years. Much of the Company’s property and equipment was contributed by shareholders of the Company. Expenditures for maintenance and repairs are charged against operations. The modified accelerated cost recovery system (straight line) is used for federal income tax purposes and also for financial reporting as the difference between the two does not appear to be material.

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense for the period from inception (July 12, 2013) to June 30, 2014 and the year ended June 30, 2015 was $59,822 and $140,771, respectively and are included in general and administrative expenses.

Accounting for Derivatives Liabilities

The Company evaluates contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date. See Note 10 for disclosure of derivatives and their valuation related to various convertible debt agreements.

Deferred Financing Costs, Net

Costs with respect to the issuance of common stock, warrants, stock options or debt instruments by the Company are initially deferred and ultimately offset against the proceeds from such equity transactions or amortized to interest expense over the term of any debt funding, if successful, or expensed if the proposed equity or debt transaction is unsuccessful.

Basic and Diluted Net Income per Share

The Company computes net income per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants or debentures. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2014 and 2015, there were no dilutive securities.

Income Taxes

The Company accounts for income taxes under the provisions of ASC Topic 740-10, Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined and income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes determined on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. As of June 30, 2014 and 2015, the Company has federal and state net operating loss carry forwards of approximately $109,000 and $463,000, respectively, which will begin to expire in 2030 unless utilized in earlier years.

When there are uncertainties related to potential income tax benefits, in order to qualify for recognition, the position the Company takes has to have at least a “more likely than not” chance of being sustained (based on the position’s technical merits) upon challenge by the respective authorities. The term “more likely than not” means a likelihood of more than 50 percent. Otherwise, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the “more likely than not” criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect our results of operations, financial position and cash flows.

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The tax years subject to examination by major tax jurisdictions include the 2014 Fiscal Period and forward by the U.S. Internal Revenue Service, and the 2014 Fiscal Period and forward for various states.

Non-Cash Equity Transactions

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to current market price.

Recent Accounting Pronouncements

On August 27, 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements-Going Concern. The amendments in this Update provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effect, if any, on its consolidated financial statements of the amendment.

On April 7, 2015, the FASB issued ASU 2015-03 Interest – Imputations of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs, to simplify presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is evaluating the effect, if any, on its consolidated financial statements of the amendment.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurements of Inventory.” This ASU requires management to evaluate inventory at the lower of cost and net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted by all entities as of the beginning of an interim or annual reporting period. The Company is in the process of assessing the impact, if any, on its consolidated financial statements.

The Company has reviewed all other recent accounting pronouncements issued to date of the issuance of these consolidated financial statements, and does not believe any of those pronouncements will have a material impact on the Company’s consolidated financial statements.

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Note 8- Other Income (Details)	12 Months Ended
	Jun. 30, 2015 USD ($)
Details
Other Operating Income	$ 30,000

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Note 4 - Capital Stock: Schedule of Share-based Compensation, Stock Options, Activity (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Share-based Compensation, Stock Options, Activity

	Number of Shares		Weighted Average Exercise Price
Outstanding at June 30, 2014	-	$	-
Granted	310,000		0.0419
Exercised	-		-
Forfeited	-		-
Outstanding at June 30, 2015	310,000	$	0.0419

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Note 3 - Summary of Significant Accounting Policies: Stock-based Compensation (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Stock-based Compensation

Stock-Based Compensation

The Company accounts for employee and non-employee stock awards under ASC 718, Compensation – Stock Compensation, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to nonemployees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

Issuances of the Company’s common stock for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instrument is fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instrument granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” the Company performs an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, the Company uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in the Company’s consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company’s financial statements. For the period from inception (July 12, 2013) to June 30, 2014 and the year ended June 30, 2015, the Company had $0 and $10,850, respectively, of stock based compensation to employees.

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Note 3 - Summary of Significant Accounting Policies: Concentration of Risk (Policies)

12 Months Ended

Jun. 30, 2015

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 relied on one manufacturer to make all of the Company’s Mods during the year ended June 30, 2015.

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Note 4 - Capital Stock (Details) - USD ($)		1 Months Ended
	Jan. 17, 2014	Mar. 14, 2014	Jun. 30, 2015	Mar. 10, 2015	Jun. 30, 2014	Feb. 14, 2014	Jan. 09, 2014
Common Stock, Shares Issued			72,455,606		68,060,001		140,000,000
Preferred Stock, Shares Authorized			10,000,000		10,000,000
Stock Issued During Period, Shares, Stock Splits	80,988,984
Common Stock, Shares Outstanding			72,455,606		68,060,001
Exchange Agreement
Common Stock, Shares Outstanding						38,000,001
Treasury Stock, Shares, Retired		50,928,984
Convertible Debt		$ 185,000
Service Provider
Common Stock, Shares Issued				300,000
Gotama Capital S.A.
Common Stock, Shares Issued			4,095,605

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Note 10 - Convertible Notes Payable: Schedule of Convertible Notes Payable Text Block (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Convertible Notes Payable Text Block

Note Holder	Balance 6/30/2015	Unamortized Original Derivative Discount	Unamortized Original Issue Discount	Balance of Debt Discount	Balance, net of Discount 6/30/2015
Typenex Co-Investment, LLC	$ 163,131	$ (27,718)	$ (14,594)	$  (42,313)	$ 120,819
Typenex Co-Investment, LLC	89,056	(15,132)	(2,652)	(17,784)	71,273
Total Convertible Notes Payable	$ 252,188	$ (42,850)	$ (17,246)	$  (60,096)	$ 192,091

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Note 3 - Summary of Significant Accounting Policies: Financial Instruments and Fair Value Measurement (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Financial Instruments and Fair Value Measurement

Financial Instruments and Fair Value Measurement

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1- applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2- applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3- applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties, and derivative liabilities and convertible notes payable. Pursuant to ASC 820, the fair value of the Company’s cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. Pursuant to ASC 820, the fair value of the Company’s derivative liability is determined based on “Level 3” inputs, which consist of unobservable inputs. The Company believes that the recorded values of all of its other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

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Note 3 - Summary of Significant Accounting Policies: Revenue Recognition (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Revenue Recognition

Revenue Recognition

The Company recognizes revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.

For retail transactions, revenue is recognized at the point of sale.  For wholesale and online transactions, revenue is recognized at the time goods are shipped.

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Note 2 - Reverse Acquisition Accounting

12 Months Ended

Jun. 30, 2015

Notes

Note 2 - Reverse Acquisition Accounting

NOTE 2 – REVERSE ACQUISITION ACCOUNTING

Since former Vapor security holders owned, after the acquisition, the majority of the Company’s shares of common stock, and as a result of certain other factors, including that all members of the Company’s executive management are from Vapor, Vapor is deemed to be the acquiring company for accounting purposes and the acquisition of Vapor was accounted for as a reverse acquisition and a recapitalization in accordance with generally accepted accounting principles in the United States (“US GAAP”). These audited consolidated financial statements reflect the historical results of Vapor prior to the exchange transaction and that of the combined company following the exchange transaction, and do not include the historical financial results of Vapor Hub International prior to the completion of the exchange transaction. Common stock and the corresponding capital amounts of the Company pre-exchange transaction have been retroactively restated as capital stock shares reflecting the exchange ratio in the exchange transaction.

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Note 3 - Summary of Significant Accounting Policies: Deferred Income (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Deferred Income

Deferred Income

The Company accrues deferred income when customer payments are received, but product has not yet shipped. As of June 30, 2014 and 2015, the Company had recorded $307,135 and $82,499, respectively for deferred income as a result of prepayments for product made by customers. Those prepayments are recognized into revenue at the point those prepaid products have subsequently shipped. The Company recognized the $307,135 into revenue during the year ended June 30, 2015. The Company expects to recognize the $82,499 into revenue during the following fiscal year.

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Note 3 - Summary of Significant Accounting Policies: Non-cash Equity Transactions (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Non-cash Equity Transactions

Non-Cash Equity Transactions

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to current market price.

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Note 3 - Summary of Significant Accounting Policies: Deferred Income (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Details
Deferred Revenue	$ 82,499	$ 307,135

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Note 14 - Loss Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($)	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Net loss for computation of basic and dilutive net (loss) per share	$ (613,997)	$ (423,606)
Earnings Per Share, Basic and Diluted	$ (0.01)	$ (0.01)
Weighted Average Number of Shares Outstanding, Basic and Diluted	68,164,099	68,060,001

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Vapor Hub International Inc. - Consolidated Balance Sheets - USD ($)		Jun. 30, 2015	Jun. 30, 2014
Current Assets:
Cash		$ 351,081	$ 307,567
Accounts receivable		9,511
Inventory		323,784	196,163
Prepaid expenses and other current assets		61,269	152,081
Deferred finance costs		39,258
Other current assets		9,474	12,162
Total Current Assets		794,377	667,973
Fixed assets, net		159,546	104,731
Long term assets		6,895
Total Assets		960,818	772,704
Current Liabilities:
Accounts payable and accrued expenses		509,617	213,154
Deferred income		82,499	307,135
Income taxes payable			6,702
Notes payable, net of unamortized debt discount		384,769
Convertible notes payable, net of unamortized debt discount		192,091	560,000
Loans from related parties		96,312	101,378
Derivative liabilities		68,584
Total Current Liabilities		1,333,873	1,188,369
Long Term Liabilities:
Equipment leases payable		5,440	9,212
Notes payable		29,189
Long term liabilities		34,629	9,212
TOTAL LIABILITIES		$ 1,368,502	$ 1,197,581
Stockholders' deficit
Preferred stock	[1]
Common stock	[2]	$ 72,456	$ 68,060
Additional paid-in capital	[3]	557,463	(69,331)
Accumulated deficit		(1,037,603)	(423,606)
Total Stockholders Deficit		(407,684)	(424,877)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$ 960,818	$ 772,704

[1] $0.001 par value, 10,000,000 authorized, 0 issued and outstanding as of June 30, 2015 and June 30, 2014

[2] $0.001 par value, 1,010,000,000 and 140,000,000 shares authorized, 72,455,606 and 68,060,001 issued, 72,455,606 and 68,060,001 outstanding as of June 30, 2015 and June 30, 2014, respectively (Note 4)

[3] The capital accounts of the Company have been retroactively restated to reflect the equivalent number of common shares based on the exchange ratio of the exchange transaction in determining the basic and diluted weighted average shares.

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Note 11 - Notes Payable: Schedule of Notes Payable Text Block (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Notes Payable Text Block

Note Holder	Balance 6/30/2015	Unamortized Original Issue Discount	Balance, net of Discount 6/30/2015
Typenex Unsecured Short Term	$  245,000	$  (34,098)	$  210,902
B of I Bank	153,655	-	153,655
The Hartford	13,001	-	13,001
Bank of the West - short term portion	7,211	-	7,211
Total Short Term Notes Payable	$  418,867	$  (34,098)	$  384,769
Bank of the West - long term portion	$    29,189	$              -	$    29,189
Total Long Term Notes Payable	$    29,189	$              -	$    29,189

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Vapor Hub International Inc. - Consolidated Statements of Cash Flows - USD ($)		12 Months Ended
		Jun. 30, 2015	Jun. 30, 2014
OPERATING ACTIVITIES:
Net income (loss)		$ (613,997)	$ (423,606)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		22,051	7,443
Amortization of debt discount on convertible note		3,226
Amortization of debt discount on short term loan		5,902
Amortization of deferred finance costs		6,762
Amortization of derivative debt discount		6,125
Change in derivative liability		19,609
Non cash finance fees		11,875
Non cash cost of revenue			48,786
Non cash interest for conversion of notes payable		54,341
Share based compensation for services- common stock		6,000
Share based compensation- options		10,850
Changes in operating assets and liabilities:
Accounts receivable, increase decrease		(9,511)
Inventory, increase decrease		(127,621)	(196,163)
Prepaid expenses and other current assets, increase decrease		96,638	(152,081)
Security deposit, increase decrease		5,267
Deferred income, increase decrease		(224,636)	307,135
Accounts payable and accrued expenses, increase decrease		289,760	201,375
Net cash used in operating activities		(437,359)	(207,111)
INVESTING ACTIVITIES:
Leasehold security deposit			(12,162)
Purchase of property and equipment		(39,890)	(118,522)
Net cash used in investing activities		(39,890)	(130,684)
FINANCING ACTIVITIES:
Payments on leased property loans		(3,772)
Proceeds from related party loans		80,543	101,378
Payments on related party loans		(85,608)
Net proceeds from convertible notes payable		272,008	534,881
Payments on convertible notes payable		(70,313)
Net proceeds from short term notes payable		483,071
Payments on short term notes payable		(152,291)
Payments on auto loan payable		(2,875)
Stock issued upon reverse acquisition			9,103
Net cash provided by financing activities		520,763	645,362
Net change in cash		43,514	307,567
Cash, beginning of period		307,567
Cash, end of period		351,081	307,567
Supplemental disclosure of cash flow information:
Cash paid for interest		106,738	$ 1,948
Cash paid for income taxes		2,400
Non-cash transactions:
Insurance premium financing		13,001
Non cash assumption of vehicle note payable	[1]	39,275
Common stock issued for convertible note payable		614,342
Non cash repayment and borrowings on short term note payable		69,054
Original issue discount on notes payable		60,000
Fixed assets under capital leases			$ 9,212
Inventories contributed by related party			$ 48,786
Derivative liability		$ 48,975

[1] $36,976 vehicle cost and $2,299 prepaid warranty

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Note 5 - Officers' Loans Payable (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Details
Related Party Loan Outstanding	$ 96,312	$ 101,378

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Note 3 - Summary of Significant Accounting Policies: Advertising Expense (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Advertising Expense

Advertising Expense

Advertising costs are expensed as incurred. Advertising expense for the period from inception (July 12, 2013) to June 30, 2014 and the year ended June 30, 2015 was $59,822 and $140,771, respectively and are included in general and administrative expenses.

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Note 10 - Convertible Notes Payable (Details) - USD ($)				12 Months Ended
	May. 15, 2014	Apr. 10, 2014	Mar. 14, 2014	Jun. 30, 2015	Jan. 16, 2015	Nov. 04, 2014
Amortization of Other Deferred Charges				$ 20,472
Interest Expense, Other				3,226
Unamortized Debt				17,246
Amortization of Financing Costs and Discounts				$ 48,975
Gotama Capital S.A.
Convertible Notes Payable	$ 175,000	$ 200,000	$ 185,000
Proceeds from Convertible Debt	$ 149,881	$ 200,000	$ 185,000
Short-term Debt, Percentage Bearing Fixed Interest Rate			8.00%
Typenex Co- Investment, LLC
Convertible Notes Payable						$ 1,687,500
Prepayment of Note Obligation					$ 102,028
Principal Amount of Note						$ 100,000

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Note 16 - Subsequent Events

12 Months Ended

Jun. 30, 2015

Notes

Note 16 - Subsequent Events

NOTE 16 – SUBSEQUENT EVENTS

Note Payable

On August 12, 2015, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with Iliad Research and Trading, L.P., a Utah limited partnership (the “Investor”), pursuant to which the Company concurrently issued to the Investor a Promissory Note in a principal amount of $245,000 (the “Note”).  The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover the Investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction (the “Transaction Costs”).  In consideration for the 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 Note matures on February 12, 2016.  The Company may prepay all or a portion of the amount owed earlier than it is due without penalty and if the Company prepays $225,000 on or before November 9, 2015, the Note will be deemed paid in full.

Interest does not accrue on the unpaid principal balance of the Note unless an event of default occurs.  Upon the occurrence of an event of default, the outstanding balance of the Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under the Note, the Investor may declare all unpaid principal, plus all accrued interest and other amounts due under the Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter. 

Iliad Research and Trading, L.P. is an affiliate of Typenex Co-Investment, LLC, a Utah limited liability company.  The Company is party to debt facilities with Typenex Co-Investment, LLC which were entered into on November 4, 2014 and June 4, 2015, respectively.

Lease Commitments

On September 1, 2015, the Company entered into a Commercial Lease Agreement with the Winther Family Trust, pursuant to which the Company will lease the 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. The Premises is replacing the Company’s prior facility located at 67 W. Easy Street, Unit 115, Simi Valley, CA 93065 and will serve as the Company’s primary office location. In addition to providing office space, the approximately 5,000 square foot facility will also be used for warehousing and shipping.

The lessor of the Premises, the Winther Family Trust, is controlled by Niels Winther and Lori Winther. Both Niels Winther and Lori Winther are Directors of the Company, and Lori Winther also serves as the Company’s Chief Financial Officer and Secretary.

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Note 3 - Summary of Significant Accounting Policies: Accounting For Derivatives Liabilities (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Accounting For Derivatives Liabilities

Accounting for Derivatives Liabilities

The Company evaluates contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date. See Note 10 for disclosure of derivatives and their valuation related to various convertible debt agreements.

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Note 3 - Summary of Significant Accounting Policies: Fiscal Year End (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Fiscal Year End

Fiscal Year End

Following the exchange transaction, the Company elected to adopt the June 30 year end of Vapor, the accounting acquirer. As such, the Company has presented activity since the inception of Vapor (July 12, 2013) and has presented the activity of Delite since its acquisition on March 26, 2014.

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Note 12 - Delite Acquisition (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Total Current Assets	$ 794,377	$ 667,973
TOTAL LIABILITIES	1,368,502	1,197,581
Total Stockholders Deficit	$ (407,684)	(424,877)
Delite
Total Current Assets		120,992
TOTAL LIABILITIES		303,837
Total Stockholders Deficit		$ (182,845)

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Note 1- Incorporation, Nature of Operations and Acquisition

12 Months Ended

Jun. 30, 2015

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”). Pursuant to the terms of Exchange Agreement, the Company agreed to acquire all 30,000 of the issued and outstanding shares of Vapor’s common stock, as well as all 30,000 of the issued and outstanding shares of Delite’s common stock in exchange for the issuance by the Company of 38,000,001 shares of common stock to the shareholders of both companies. On March 14, 2014, the Company completed the acquisition of Vapor and issued all of the 38,000,001 shares of its stock to the shareholders of Vapor, who are also the shareholders of Delite. On March 26, 2014, the Company completed the acquisition of Delite. As a result of the closing of the transactions contemplated by the Exchange Agreement, Vapor and Delite became the Company’s wholly owned subsidiaries and the Company now carries on the business of developing, producing, marketing and selling the next generation of electronic cigarettes, known as vaping devices, and related accessories, including e-liquids, batteries and atomizers. The transaction with Vapor was accounted for as a reverse acquisition (recapitalization) whereby Vapor was deemed to be the accounting acquirer (see Note 2), and the Company the legal acquirer. Prior to the Company’s acquisition of Vapor, the Company existed as a “shell company” with nominal assets whose sole business was to identify, evaluate and investigate various companies to acquire or with which to merge. The transaction with Delite was accounted for as a business acquisition and the Company assumed the assets and liabilities of Delite as of March 26, 2014 and the activity of Delite was included from that date forward.

Upon the Company’s acquisition of Vapor, Robin Looban resigned as the Company’s sole director, president, secretary, treasurer, Chief Financial Officer and Chairman of the Board of Directors and management members from Vapor were appointed to serve as directors and officers of the Company. As a condition of the closing of the acquisition of Vapor, the Company cancelled 50,928,984 outstanding common shares and retired them in treasury.

Business Overview

Product Description

Vaping devices (as well as electronic cigarettes, also known as e-cigarettes) are battery-powered products that allow users to inhale water vapor instead of the smoke, ash, tar and carbon monoxide associated with traditional cigarettes. In contrast to e-cigarettes, vaping devices are often precision manufactured from metallic materials and do not look like traditional cigarettes. Vaping devices, as compared to e-cigarettes, also offer a unique user experience as a result of greater vapor production, enriched taste, and an ability to highly customize a device with different mechanical components and fashionable accessories, including different colors and finishes.

Sourcing

The Company uses third party contract manufacturers to produce and finish its vaping devices from facilities primarily located in Southern California. The Company’s vaping devices (or Mods), which are made from a metallic material such as steel, brass or copper, are custom machined to meet the Company’s design specifications. Once machined, unfinished products are delivered to the Company’s location in Simi Valley or to a third party service provider to be buffed, polished and to add various treatments and embellishments, such as paint and dog tags. Finished products are then held in inventory for distribution and sale. In the fiscal year ended June 30, 2015, the Company relied on one manufacturer to machine all of its Mods.  Although the Company relied on one manufacturer to machine its Mods during the Company’s last fiscal year, the Company believes manufacturing capacity is readily available to meet its current and planned needs. The Company does not currently have any long term agreements in place for the manufacture of its Mods.

With respect to the Company’s vaping accessories, the Company purchases batteries from suppliers in China and atomizers from suppliers in the United States, Austria, the Philippines and China. The Company believes that suppliers for accessories are readily available to meet the Company’s current and planned needs.

The Company sources its proprietary E-liquids from an ISO Class 7 certified manufacturer in the USA, which helps ensure their purity and quality. In addition to sourcing its own e-liquids, the Company also purchases e-liquid from other reputable American suppliers for resale through its distribution channels. 

Distribution to Retail Stores

The Company markets and sells its vaping devices and related products to end customers through its websites www.vapor-hub.com and www.smokelessdelite.com, to retail stores through direct sales primarily in the United States but also internationally, and through third party wholesalers who then resell the Company’s products to retailers in their territory. Retailers of the Company’s products include vaping shops throughout the United States as well as convenience stores and several gas stations. Products distributed by the Company include vaping devices and related accessories purchased from third parties for resale as well as the Company’s vaping devices and related accessories, which the Company designs and sources, including the Company’s popular “AR Mechanical Mods”, newly released and popular “Limitless Mechanical Mods”, as well as “Binary Premium e-Liquid”. Prior to its acquisition by the Company on March 26, 2014, the Company’s distribution business was operated by Delite.

Operation of Retail Stores

The Company also sells its products and those of third parties to end consumers directly through its two retail locations located in Southern California. The Company’s first retail location in Simi Valley, CA was 725 square feet and was the first vapor lounge in Simi Valley. On April 1, 2015, the Company moved its Simi Valley retail location to a larger 1,500 square foot facility. The Company’s second location is located in Chatsworth, CA and measures 1,200 square feet. Through its retail locations, the Company sells and markets vaping devices as well as e-liquid, accessories, and supplies relating to vaping devices to both novice users as well as consumers who demand high end technical devices.

The Company opened its retail locations in order to create brand recognition for its products and also to enable the Company to gather information about user preferences in the rapidly evolving vaping industry. By learning about user preferences, the Company believes it is better able to design and source products to meet market demand. Currently, the Company does not have any plans to open additional stores.

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Statement of Financial Position - Parenthetical - $ / shares	Jun. 30, 2015	Jun. 30, 2014
Statement of Financial Position
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value	$ 0.001	$ 0.001
Common Stock, Shares Authorized	1,010,000,000	140,000,000
Common Stock, Shares Issued	72,455,606	68,060,001
Common Stock, Shares Outstanding	72,455,606	68,060,001

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Note 11 - Notes Payable

12 Months Ended

Jun. 30, 2015

Notes

Note 11 - Notes Payable

NOTE 11 – NOTES PAYABLE

Note Holder	Balance 6/30/2015	Unamortized Original Issue Discount	Balance, net of Discount 6/30/2015
Typenex Unsecured Short Term	$  245,000	$  (34,098)	$  210,902
B of I Bank	153,655	-	153,655
The Hartford	13,001	-	13,001
Bank of the West - short term portion	7,211	-	7,211
Total Short Term Notes Payable	$  418,867	$  (34,098)	$  384,769
Bank of the West - long term portion	$    29,189	$              -	$    29,189
Total Long Term Notes Payable	$    29,189	$              -	$    29,189

Bank of the West

On December 29, 2014, Kyle Winther, the Company’s CEO, entered into a vehicle financing agreement with the Bank of the West. Pursuant to the agreement, the amount financed was $39,275, payable in 48 monthly payments plus accrued interest at a rate of 3.9%. In January 2015, the Company agreed to assume the payments on this loan and capitalized the vehicle (see Note 15). As of June 30, 2015 the outstanding balance was $36,400, with $7,211 and $29,189 classified as short term and long term, respectively.

Facilities with B of I Federal Bank

On January 2, 2015, the Company entered into a Business Loan and Security Agreement with B of I Federal Bank (the “Bank”).  Pursuant to the agreement, the Company borrowed $200,000 from the Bank and received net proceeds of $195,000 USD after deducting an origination fee of $5,000.  The loan was payable in 147 payments of $1,728 due each business day beginning on and after January 5, 2015, with the initial total repayment amount (subject to certain exceptions) being equal to $254,000.

On June 2, 2015, the Company entered into a new Business Loan and Security Agreement with the Bank.  Pursuant to the agreement, the Company borrowed $175,000 from the Bank and received net proceeds of $104,071 after deducting an origination fee of $1,875 and the repayment of $69,054 in full satisfaction of the Company’s remaining obligations under that certain Business Loan and Security Agreement entered into with the Bank on January 2, 2015.  The new loan is payable in 126 payments of $1,708.33 due each business day beginning on June 3, 2015, with the total repayment amount (subject to certain exceptions) being equal to $215,249.58 (the “Total Repayment Amount”). As of June 30, 2015 the outstanding balance was $153,655.

The new loan may be prepaid in whole by the Company at any time by paying the Bank an amount equal to the Total Repayment Amount (subject to certain fees) less (i) the amount of any loan payments made prior to such prepayment and (ii) the product of 0.25 and the aggregate amount of unpaid interest remaining on the loan as of the prepayment date.

The new loan is secured by all personal property of the Company and is also personally guaranteed by Lori Winther, the Company’s Chief Financial Officer and a director of the Company, Kyle Winther, the Company’s Chief Executive Officer and a director of the Company, and Gary Perlingos, the Company’s President and a director of the Company.  If an event of default occurs under the agreement, all obligations owing by the Company to the Bank under the agreement will, at the Bank’s election, become immediately due and payable and the Bank may exercise its rights as a secured creditor.

Typenex Co-Investment Note

On June 4, 2015, the Company entered into a Note Purchase Agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company, pursuant to which the Company concurrently issued to the investor an unsecured non-convertible Promissory Note in a principal amount of $245,000 (the “June Note”).  The principal amount includes an original issue discount of $40,000 plus an additional $5,000 to cover the investor’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the transaction. The original issue discount was recorded as debt discount and amortized to interest expense over the life of the note.  In consideration for the June Note, the investor paid an aggregate cash purchase price of $200,000, computed as follows: $245,000 original principal balance, less the original issue discount of $40,000, and less the transaction costs.  The June Note matures on December 4, 2015.  The Company may prepay all or a portion of the amount owed earlier than it is due without penalty. As of June 30, 2015 the outstanding balance was $245,000.

Interest does not accrue on the unpaid principal balance of the June Note unless an event of default occurs.  Upon the occurrence of an event of default, the outstanding balance of the June Note will bear interest at the lesser of the rate of 18% per annum or the maximum rate permitted by applicable law.  In addition, if an event of default occurs under the June Note, the investor may declare all unpaid principal, plus all accrued interest and other amounts due under the June Note to be immediately due and payable at an amount equal to 115% of the outstanding balance of the June Note as of the date of the applicable event of default, plus all interest, fees and charges that may accrue on such outstanding balance thereafter. 

The Company paid MSC-BD, LLC $16,000 as a finder’s fee (equal to 8% of the net proceeds) in connection with financing from the investor.

Other short term facilities

Effective May 29, 2015, the Company entered into an Agreement to finance its annual Workers Compensation insurance coverage. The insurance coverage is provided through The Hartford. The amount of the policy is $18,871 with $18,871 being financed at 2.2% over 12 months with an initial payment of $4,425 and 10 monthly payments of $1,444. At June 30, 2015, the premium obligation due under the Agreement was $13,001.

Effective July 10, 2014, the Company entered into an Agreement to finance its annual General Liability insurance coverage. The insurance coverage is provided through Lloyds of London. The amount of the policy is $52,359 with $43,953 being financed at 11% over 10 months with a monthly payment of $4,619.93. At June 30, 2015, the remaining premium obligation due under the Agreement was $0.

Effective August 22, 2014, the Company entered into an Agreement to finance its annual Director’s and Officer’s insurance coverage. The insurance coverage is provided through Lloyds of London. The amount of the policy is $129,062.50 with $112,500 being financed at 5.35% over 9 months with a monthly payment of $12,780.30. At June 30, 2015, the remaining premium obligation due under the Agreement was $0.

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Document and Entity Information - USD ($)	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Document and Entity Information:
Entity Registrant Name	VAPOR HUB INTERNATIONAL INC.
Document Type	10-K
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Entity Central Index Key	0001515718
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding	72,455,606
Entity Public Float		$ 42,395,606
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	2015
Document Fiscal Period Focus	FY
Trading Symbol	vhub

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Note 12 - Delite Acquisition

12 Months Ended

Jun. 30, 2015

Notes

Note 12 - Delite Acquisition

NOTE 12 – DELITE ACQUISITION

As described in Note 4, the Company acquired Delite as part of the transactions contemplated by the Exchange Agreement on March 26, 2014. This transaction was a share exchange and was treated as a business acquisition. The balance sheet of Delite has been consolidated with the Company as of June 30, 2014 and the activity subsequent to acquisition has been consolidated with the Company’s operations. As June 30, 2014, Delite had total assets of $120,992, total liabilities of $303,837 and total equity of $ (182,845). Delite balances were carried over at historical cost.

Below is a summarized presentation of unaudited pro-form results of operations with Delite for the period from inception (July 12, 2013) to June 30, 2014:

	Delite	Vapor	Company	Elimination	Pro-Forma
Revenue	$  1,446,749	$  513,811	$                   -	$    (346,077)	$   1,614,483
Cost of revenue	858,128	280,181	-	(280,181)	858,128
Gross profit	588,621	233,630	-	(65,895)	756,355
General and administrative expense	992,090	259,558	25,149	(65,895)	1,210,902
Other income	-	29,999	9,019	-	39,018
Income tax provision	1,963	6,702	-	-	8,665
Net income (loss)	$   (405,432)	$     (2,631)	$      (16,130)	-	$    (424,194)

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Vapor Hub International Inc. - Consolidated Statements of Operations - USD ($)		12 Months Ended
		Jun. 30, 2015	Jun. 30, 2014
Income Statement
Revenue		$ 5,296,342	$ 1,202,663
Cost of revenue		3,202,067	647,287
Gross profit		2,094,275	555,376
General and administrative expenses		2,510,360	984,776
Net loss from operations		(416,085)	(429,400)
Other income (expense)
Other income			23,839
Interest expense		(163,016)	(10,966)
Finance fees		(6,762)
Interest expense- debt discount		(6,125)
Change in derivative liability		(19,609)	6,762
Total other income (expense)		(195,512)	12,873
Loss before taxes		(611,597)	(416,527)
Income tax provision		2,400	(7,079)
Net income (loss)		$ (613,997)	$ (423,606)
Net loss per share:
Net loss per share, basic		$ (0.01)	$ (0.01)
Net loss per share, diluted		$ (0.01)	$ (0.01)
Weighted average shares outstanding:
Weighted average shares outstanding, basic	[1]	68,164,099	68,060,001
Weighted average shares outstanding, diluted	[1]	68,164,099	68,060,001

[1] All common share amounts and per share amounts in these consolidated financial statements reflect the one-for-nine forward stock split by way of a stock dividend of issued and outstanding shares of common stock of the Company, effective January 19, 2014, including retroactive adjustment of common share amounts.

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Note 6 - Inventories

12 Months Ended

Jun. 30, 2015

Notes

Note 6 - Inventories

NOTE 6 – INVENTORIES

As of June 30, 2014 and 2015, the Company had a balance of $196,163 and $323,784, respectively, as inventories which consist of vaping devices, electronic cigarettes, e-liquid, related supplies, and accessories. There is no reserve for inventory obsolescence as of June 30, 2014 and 2015.

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Note 5 - Officers' Loans Payable

12 Months Ended

Jun. 30, 2015

Notes

Note 5 - Officers' Loans Payable

NOTE 5 – OFFICERS’ LOANS PAYABLE

As of June 30, 2014 and 2015, the Company had a balance of $101,378 and $96,312, respectively, outstanding as related party loans from Kyle Winther, the Company’s CEO, Lori Winther, the Company’s CFO and Winther & Company, CPAs (an entity owned by Lori Winther, and her husband, Niels Winther, CPA, who is a director of the Company), as well as Chase Bank Line of Credit (which was extended to the Company, though owed personally by Niels & Lori Winther). The outstanding balances are unsecured, non-interest bearing and repayable upon demand.

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Note 3 - Summary of Significant Accounting Policies: Basis of Presentation - Consolidation (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Basis of Presentation - Consolidation

Basis of Presentation – Consolidation

The accompanying consolidated financial statements include the accounts of the Company and subsidiary. Intercompany accounts and transactions have been eliminated. The consolidated financial statements of the Company and the accompanying notes included in this Annual Report on Form 10-K are audited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments are of a normal, recurring nature. The consolidated financial statements, and the accompanying notes, are prepared in accordance with US GAAP and pursuant to the instructions to Form 10-K of the Securities and Exchange Commission.  The Company’s fiscal year end is June 30.

The Company operates in one segment in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting. The Company’s Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280.

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Note 13 - Income Tax

12 Months Ended

Jun. 30, 2015

Notes

Note 13 - Income Tax

NOTE 13 – INCOME TAX

The provision for income taxes was determined by applying the statutory federal income tax rate to net income before income taxes and is as follows for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015:

		2014		2015
Federal tax	$	3,751	$	-
State tax	$	3,328	$	2,400

The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes were as follows:

	2014	2015
Statutory federal income tax rate	(34)%	(34)%
State taxes, net of federal benefit	10%	(3)%
Other	22%	(2)%
	(2)%	(39)%

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Note 9 - Related Parties

12 Months Ended

Jun. 30, 2015

Notes

Note 9 - Related Parties

NOTE 9 – RELATED PARTIES

The Company entered into a Management Agreement with Kyle Winther and Gary “Jake” Perlingos who are each shareholders and officers of the Company related to operational supervision of the Vapor Hub Lounges in Simi Valley and Chatsworth. Each of them was to receive 2.5% each (for a total of 5%) of the monthly revenue generated from each respective lounge. The Agreement commenced September 1, 2013 and was scheduled to continue until terminated by agreement of the parties. Effective February 1, 2014, the parties agreed to terminate the Management Agreement. Prior to the termination of the agreement, each of Mr. Winther and Mr. Perlingos received approximately $6,400 pursuant to the terms of the Management Agreement. An additional Management Agreement was entered into between Delite and Vapor, which relates to the provision of administrative support to Vapor. Pursuant to the agreement, Delite received a fee of $10,000 per month from Vapor. The Agreement commenced October 1, 2013 and was scheduled to continue until terminated by agreement of the parties. Effective March 1, 2014, the parties agreed to terminate the Management Agreement.

Prior to the acquisition of Delite, Vapor purchased substantially all of its inventory, which is sold at its retail locations, from Delite. As of March 26, 2014, Delite became a wholly-owned subsidiary of the Company. As a result of the acquisition, all intercompany transactions subsequent to March 26, 2014 have been eliminated.

From time to time the Company will engage the services of Winther & Company an accounting firm owned by the husband of the Company’s CFO. Winther & Company provides bookkeeping, accounting and tax services to the Company. For the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 the Company incurred approximately $18,000 and $82,000 , respectively in fees with Winther & Co. As of June 30, 2014 and 2015, the Company had Accounts Payable outstanding to related parties of $232 and $12,369, respectively.

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Note 6 - Inventories (Details) - USD ($)	Jun. 30, 2015	Jun. 30, 2014
Details
Inventory	$ 323,784	$ 196,163

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Note 7 - Lease Commitments

12 Months Ended

Jun. 30, 2015

Notes

Note 7 - Lease Commitments

NOTE 7 – LEASE COMMITMENTS 

The Company entered into a lease agreement with S. J. Real Estate Group, LLC to lease a retail space in Chatsworth, California, effective September 13, 2013. The lease term is for two years with a monthly lease payment of $2,214. The Company has a remaining commitment under this lease of $4,428 through August 30, 2015. The Company extended this lease for an additional two years effective October 1, 2015.

The Company also had a month-to-month rental agreement with Madera Development for a retail space in Simi Valley for $825, which was terminated in April 2015. 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 commitment under this lease of $66,990 and a security deposit of $6,380 was paid to the landlord in relation to this lease.

The Company entered into a lease agreement with S.B.P.W., LLC to lease warehouse and office space in Simi Valley, California effective August 5, 2013 which agreement was subsequently amended on February 20, 2014. The lease term extended through April 30, 2015 with a monthly lease payment of $2,035 which increased to $4,070 effective July 1, 2014. The Company terminated this lease in September 2015 (See Note 16).

Rent expense for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 was $39,847 and $92,185, respectively.

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Note 8- Other Income

12 Months Ended

Jun. 30, 2015

Notes

Note 8- Other Income

NOTE 8– OTHER INCOME

The Company received a fee of $30,000 in exchange for the right of an unaffiliated third party to share in 10% of the net profits derived from operations of the Chatsworth Vapor Hub lounge. The Company recognized the $30,000 as other income for the period from inception (July 12, 2013) to June 30, 2014. At June 30, 2014 and 2015, no amounts have been earned and no obligation is due under this profit sharing agreement.

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Note 10 - Convertible Notes Payable

12 Months Ended

Jun. 30, 2015

Notes

Note 10 - Convertible Notes Payable

NOTE 10 – CONVERTIBLE NOTES PAYABLE

Note Holder	Balance 6/30/2015	Unamortized Original Derivative Discount	Unamortized Original Issue Discount	Balance of Debt Discount	Balance, net of Discount 6/30/2015
Typenex Co-Investment, LLC	$ 163,131	$ (27,718)	$ (14,594)	$  (42,313)	$ 120,819
Typenex Co-Investment, LLC	89,056	(15,132)	(2,652)	(17,784)	71,273
Total Convertible Notes Payable	$ 252,188	$ (42,850)	$ (17,246)	$  (60,096)	$ 192,091

Notes Issued to Gotama Capital S.A.

On March 14, 2014, the Company closed the first of three tranches of a financing transaction pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $185,000 to Gotama Capital S.A. in exchange for cash proceeds of $185,000. The note bears interest at a rate of 8% per annum, with interest being payable on May 15^th of each year that the note remains outstanding. The principal amount of the note is convertible at any time, in whole or in part, at the Company’s election or the election of the holder into shares of the Company’s common stock at a price equal to the greater of $0.15 or 90% of the average closing prices of the Company’s common stock for the ten trading days immediately preceding the applicable conversion date. Unless earlier converted or repaid, the principal amount of the note is due and payable on March 14, 2017. On April 10, 2014, the Company closed the second tranche of the financing contemplated pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $200,000 to the same investor in exchange for cash proceeds of $200,000. The note has the same terms as the note described above, except that unless earlier converted or repaid, the principal amount of the note is due and payable on April 10, 2017. On May 19, 2014, the Company closed the third tranche of the financing contemplated pursuant to the terms of the Exchange Agreement. At the closing, the Company issued a convertible promissory note in the principal amount of $175,000 to the same investor in exchange for cash proceeds of $149,881 and $25,000 of expenses paid on behalf of the Company, which the Company immediately recorded as its own expense. The note has the same terms as the notes described above, except that unless earlier converted or repaid, the principal amount of the note is due and payable on May 19, 2017. The Company may prepay the principal amount of the notes at any time, in whole or in part, without the prior written consent of the holder.

On June 30, 2015, the Company converted $614,341 at a price of $0.15 per share, representing the entire principal amount and all accrued interest of the three convertible promissory notes issued to Gotama Capital S.A., into an aggregate of 4,095,605 shares of the Company’s common stock, par value $0.001 per share (the “Conversion Shares”).  As a result of the conversion, the three notes issued to Gotama Capital are no longer outstanding.

Note Issued to Typenex Co-Investment, LLC.

On November 4, 2014, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Typenex Co-Investment, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company concurrently issued to Investor a Secured Convertible Promissory Note in a principal amount of $1,687,500 (the “Company Note”). The principal amount includes an original issue discount of $80,000 plus an additional $7,500 to cover Investor's due diligence and legal fees in connection with the transaction. In consideration for the Company Note, Investor issued a series of promissory notes aggregating to the sum of $1,600,000 (the “Purchase Price”), consisting of an initial cash disbursement of $200,000 and the issuance to the Company of ten promissory notes, the first two promissory notes in a principal amount of $100,000 each and the remaining eight promissory notes in a principal amount of $150,000 (each an “Investor Note” and collectively, the “Investor Notes”). The Company Note and the Investor Notes each bear interest at the rate of 10% per annum and mature on April 4, 2019 and the Company’s obligations under the Company Note are secured by liens on the Investor Notes pursuant to the terms of a Security Agreement entered into by the Company in favor of the Investor. Subject to certain conditions, the Company may prepay the Company Note by making a payment equal to 125% of the then outstanding balance (including interest and other fees and amounts due). Each of the Investor Notes may be prepaid (and the Company may receive additional funds under the facility in excess of the initial $200,000 cash proceeds) only upon the mutual agreement of the parties.

On January 16, 2015, upon the mutual agreement of the parties, the Investor paid to the Company the sum of $102,028 as a prepayment of all of its obligations owed to the Company under the first Investor Note in the original principal amount of $100,000 dated November 4, 2014, issued by the Investor in favor of the Company.

The first two tranches were issued with an original issue discount of $20,472, of which $3,226 has been amortized to interest expense for the twelve months ended June 30, 2015, resulting in an unamortized balance of $17,246.

The Company recognized an additional debt discount of $48,975 on the first two tranches for the original fair value recognition of the derivative liability (discussed further below), of which $6,125 has been amortized to interest expense for the fiscal year ended June 30, 2015, resulting in an unamortized balance of $42,850.

Beginning on May 4, 2015, the Company is required to repay the outstanding balance on the Company Note in monthly installments of approximately $35,000 per month plus all unpaid interest and other costs, fees or charges under the Company Note. Payment may be made in cash or, subject to certain conditions, in shares of the Company’s common stock or any combination of cash and shares. If payments are made in shares (each, an “Installment Conversion”), such installments or portions thereof are, subject to certain conditions, convertible into shares of the Company’s common stock at the lesser of (i) a conversion price of $0.10, subject to adjustment or (ii) a price that is equal to 70% of the average of the three lowest closing bid prices of the Company’s common stock in the twenty trading days immediately preceding such conversion, subject to a floor of $0.01. In addition, on the date that is twenty trading days from the date the Company delivers installment shares to Investor, there is a true-up where the Company is required to deliver additional shares if the installment conversion price as of the true-up date is less than the installment conversion price used to deliver the initial shares.

Beginning on May 4, 2015, all or any amount of a conversion eligible tranche (as described below) under the Company Note is convertible, at the option of the Investor (each, a “Lender Conversion”), into shares of the Company’s common stock at a conversion price of $0.10 per share, subject to customary anti-dilution adjustments and other adjustments described in the Company Note (the “Conversion Price”). The Company Note is convertible into shares of the Company’s common stock by Investor in eleven tranches consisting of an initial tranche of $217,500 plus interest and other amounts due which may be converted into shares of the Company’s common stock at the Conversion Price at any time on or after May 4, 2015 and ten additional tranches (each a “Subsequent Tranche”), two of which are in the amount of $105,000 plus interest and other amounts due and eight of which are in the amount of $157,500 plus interest and other amounts due. Each Subsequent Tranche may not be converted into shares of the Company’s common stock unless the Investor has paid in full the Investor Note corresponding to such tranche, which payment requires the Company’s consent. On January 16, 2015, the Investor paid to the Company the sum of $102,028 as a prepayment of all of its obligations owed to the Company under the first Investor Note and consequently the first Subsequent Tranche of $105,000 plus interest and other amounts due may be converted into shares of the Company’s common stock at the Conversion Price at the option of the Investor at any time on or after May 4, 2015. Subject to certain conditions based on the trading volume and trading price of the Company’s common stock, the Company may also elect to convert the entire outstanding balance under the Company Note into shares of the Company’s common stock at the Conversion Price.

If the Company fails to repay the Company Note when due, or if the Company is otherwise in default under the Company Note, at the option of Investor a default interest rate of 22% per annum will apply on all conversion eligible portions of the Company Note while the default continues. In the event the Company is in default under the Company Note, the Investor also has the option to accelerate the note with the outstanding balance becoming immediately due and payable or increase the outstanding balance of the note by an amount of 5% or 15% depending on the particular default. In addition, if the Company fails to issue stock to the Investor within three trading days of receipt of a notice of conversion, the Company must pay a penalty equal to the greater of (i) $500 per day; or (ii) 2% of the product of (A) the number of shares to which Investor was entitled that were not issued on a timely basis; and (B) the closing sale price of the common stock on the trading day immediately preceding the last day for us to timely issue the shares.

The Company Note provides that the Investor maintains a right of offset that, under certain circumstances, permits the Investor to deduct amounts owed by the Company under the Company Note from amounts otherwise owed by Investor under the Investor Notes. In addition, the Company is permitted at any time to deduct and offset any amount owing by the Investor under the Investor Notes from any amount owed by the Company under the Company Note. Since the Company Note and the Investor Notes may be offset against each other, they are recorded on a net basis in the Consolidated Balance Sheet.

On June 30, 2015 pursuant to the terms of the Company Note, the Company elected to deduct and offset the principal amount of $1,300,000 and all accrued interest thereon owing by the Investor under the remaining nine Investor Notes from the amount owed by the Company under the Company Note, leaving an outstanding balance of $252,188 under the Company Note as of June 30, 2015 and total unamortized debt discount of $60,096.

The Company Note provides that Investor may not convert the Company Note in an amount which would cause Investor to own more than 4.99%, or if the Company’s market capitalization (as defined in the Company Note) is less than $10,000,000, more than 9.99%, of the Company’s outstanding common stock.

The Company paid Pyrenees Investments $20,000 as a finder’s fee (equal to 10% of the gross proceeds) in connection with the first closing, $10,020 in connection with the second closing, and $16,000 as discussed in Note 11. The total finder’s fee of $46,020 was capitalized as deferred issuance costs and amortized over the term of the respective notes. As of June 30, 2015 unamortized deferred issuance costs were $39,258. Finance fees for the fiscal year ended June 30, 2015 were $6,762.

The Company evaluated the Company Note under the requirements of ASC 480 “Distinguishing Liabilities from Equity” and concluded that the note does not fall within the scope of ASC 480.

The Company then evaluated the Company Note under the requirements of ASC 815 “Derivatives and Hedging”. Due to the existence of the anti-dilution provision which reduces the Lender Conversion Price in the event of subsequent dilutive issuances by the Company, the Company determined that the Lender Conversion feature does not meet the definition of “indexed to” the Company’s stock, and the scope exception to ASC 815’s derivative accounting provisions does not apply. The Company also determined that the Lender Conversion feature of the Company Note meets the definition of an embedded derivative that should be separated from the Company Note and accounted for as a derivative liability. The Company recorded an original valuation of $48,975 for the derivative liability. As of June 30, 2015, the Company had a derivative liability of $68,584 and reflected a change in derivative liability of $19,609 for the twelve month period ended June 30, 2015.

The Company further concluded that because of the conversion floor of $0.01 on Installment Conversions and because the Company has the right at any time to offset the Investor Notes from the Company Note, the following features of the Company Note do not meet the definition of an embedded derivative that should be separated from the Company Note and accounted for as a derivative liability: the Installment Conversion feature of the Company Note, the default and remedy provisions of the Company Note, the Company’s option to settle a Lender Conversion in cash in the event the Investor elects to convert subsequent to the occurrence of an event of default under the Company Note and the Company’s prepayment option under the Company Note.

Derivative Liabilities

The convertible notes discussed above contain conversion features that result in an embedded derivative. The Company has recorded the fair value of each derivative as described above as a current liability in the consolidated balance sheet as of June 30, 2015. The change in fair value was recorded as other expense in the consolidated statement of operations for the year ended June 30, 2015.

In arriving at fair-value estimates, the Company utilizes the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the fair value hierarchy, the fair-value measurement is characterized based upon the lowest level input. For the Company, recurring fair-value measurements are performed for the derivative liability.

The derivative liability is recognized in the consolidated balance sheet at fair value. Changes in the fair value of the derivative liability are reported in the consolidated statement of operations. The Company does not have any liabilities that reduce risk associated with hedging exposure and has not designated the derivative liability as a hedge instrument.

The Company did not have any derivatives valued using Level 1 and Level 2 inputs as of June 30, 2015. The Company categorized the derivative liability as Level 3 with a fair value of $68,584 as of June 30, 2015 using the Black-Scholes pricing model. The Company used the following input ranges: stock price $0.0099-$0.029; expected term 3.9-4.4 years; risk-free rate 0.26%-1.63%; and volatility 107.5%-245.7%. Unobservable inputs were the prevailing interest rates, the Company’s stock volatility and the expected term.

There have been no transfers between Level 1, Level 2, or Level 3 categories. Level 3 as of June 30, 2014 was $0; Level 3 additions for the twelve months ended June 30, 2015 were $48,975 for the initial recognition with $19,609 valuation adjustment at June 30, 2015; Level 3 at June 30, 2015 was $68,584.

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Note 10 - Convertible Notes Payable: Schedule of Convertible Notes Payable Text Block (Details)	Jun. 30, 2015 USD ($)
Typenex Co- Investment, LLC | Balance 6/30/2015
Convertible Notes Payable, Current	$ 163,131
Typenex Co- Investment, LLC | Unamortized Original Derivative Discount
Convertible Notes Payable, Current	(27,718)
Typenex Co- Investment, LLC | Unamortized Original Issue Discount
Convertible Notes Payable, Current	(14,594)
Typenex Co- Investment, LLC | Balance of Debt Discount
Convertible Notes Payable, Current	(42,313)
Typenex Co- Investment, LLC | Balance, net of Discount 6/30/2015
Convertible Notes Payable, Current	120,819
Typenex Co | Balance 6/30/2015
Convertible Notes Payable, Current	89,056
Typenex Co | Unamortized Original Derivative Discount
Convertible Notes Payable, Current	(15,132)
Typenex Co | Unamortized Original Issue Discount
Convertible Notes Payable, Current	(2,652)
Typenex Co | Balance of Debt Discount
Convertible Notes Payable, Current	(17,784)
Typenex Co | Balance, net of Discount 6/30/2015
Convertible Notes Payable, Current	71,273
Total Convertible Notes Payable | Balance 6/30/2015
Convertible Notes Payable, Current	252,188
Total Convertible Notes Payable | Unamortized Original Derivative Discount
Convertible Notes Payable, Current	(42,850)
Total Convertible Notes Payable | Unamortized Original Issue Discount
Convertible Notes Payable, Current	(17,246)
Total Convertible Notes Payable | Balance of Debt Discount
Convertible Notes Payable, Current	(60,096)
Total Convertible Notes Payable | Balance, net of Discount 6/30/2015
Convertible Notes Payable, Current	$ 192,091

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Note 11 - Notes Payable: Schedule of Notes Payable Text Block (Details)	Jun. 30, 2015 USD ($)
Typenex Unsecured Short Term | Balance 6/30/2015
Other Notes Payable	$ 245,000
Typenex Unsecured Short Term | Unamortized Original Issue Discount
Other Notes Payable	(34,098)
Typenex Unsecured Short Term | Balance, net of Discount 6/30/2015
Other Notes Payable	210,902
B of I Bank | Balance 6/30/2015
Other Notes Payable	153,655
B of I Bank | Balance, net of Discount 6/30/2015
Other Notes Payable	153,655
The Hartford | Balance 6/30/2015
Other Notes Payable	13,001
The Hartford | Balance, net of Discount 6/30/2015
Other Notes Payable	13,001
Bank of the West- short term portion | Balance 6/30/2015
Other Notes Payable	7,211
Bank of the West- short term portion | Balance, net of Discount 6/30/2015
Other Notes Payable	7,211
Total Short Term Notes Payable | Balance 6/30/2015
Other Notes Payable	418,867
Total Short Term Notes Payable | Unamortized Original Issue Discount
Other Notes Payable	(34,098)
Total Short Term Notes Payable | Balance, net of Discount 6/30/2015
Other Notes Payable	384,769
Bank of the West- long term portion | Balance 6/30/2015
Other Notes Payable, Noncurrent	29,189
Bank of the West- long term portion | Balance, net of Discount 6/30/2015
Other Notes Payable, Noncurrent	29,189
Total Long Term Notes Payable | Balance 6/30/2015
Other Notes Payable, Noncurrent	29,189
Total Long Term Notes Payable | Balance, net of Discount 6/30/2015
Other Notes Payable, Noncurrent	$ 29,189

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Note 9 - Related Parties (Details) - USD ($)	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Oct. 01, 2013
Professional Fees	$ 82,000	$ 18,000
Management Agreement
Due to Related Parties, Current			$ 10,000

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Note 3 - Summary of Significant Accounting Policies: Property and Equipment (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Property and Equipment

Property and Equipment

Property and equipment consists of computer equipment, furniture, facility equipment, and leasehold improvements which are carried at historical cost and are depreciated over the estimated useful lives of the related assets. Estimated useful lives are from 3 to 10 years. Much of the Company’s property and equipment was contributed by shareholders of the Company. Expenditures for maintenance and repairs are charged against operations. The modified accelerated cost recovery system (straight line) is used for federal income tax purposes and also for financial reporting as the difference between the two does not appear to be material.

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Note 1- Incorporation, Nature of Operations and Acquisition (Details) - shares	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Mar. 14, 2014	Feb. 14, 2014	Jan. 09, 2014
Common Stock, Shares Issued	72,455,606	68,060,001			140,000,000
Delite
Common Stock, Other Shares, Outstanding				30,000
Common Stock, Shares Issued			38,000,001
Treasury Stock, Shares, Retired	50,928,984

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Note 15 - Property and Equipment

12 Months Ended

Jun. 30, 2015

Notes

Note 15 - Property and Equipment

NOTE 15 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

		June 30, 2014		June 30, 2015
Automobile	$	-	$	36,976
Computer		12,895		16,756
Furniture and equipment		97,300		106,568
Leasehold improvements		17,539		44,300
Accumulated depreciation		(23,003)		(45,054)
Property and equipment, net	$	104,731	$	159,546

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Note 3 - Summary of Significant Accounting Policies: Use of Estimates (Policies)

12 Months Ended

Jun. 30, 2015

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 options, useful life of fixed assets, inventory reserves, estimates of sales return and accrual for potential liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

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Note 14 - Loss Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

12 Months Ended

Jun. 30, 2015

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

		2014		2015
Net loss for computation of basic and dilutive net (loss) per share	$	(423,606)	$	(613,997)
Basic and dilutive net (loss) per share	$	(0.01)	$	(0.01)
Basic and dilutive weighted average shares outstanding	$	68,060,001	$	68,164,099

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Note 3 - Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On August 27, 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements-Going Concern. The amendments in this Update provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effect, if any, on its consolidated financial statements of the amendment.

On April 7, 2015, the FASB issued ASU 2015-03 Interest – Imputations of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs, to simplify presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is evaluating the effect, if any, on its consolidated financial statements of the amendment.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurements of Inventory.” This ASU requires management to evaluate inventory at the lower of cost and net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted by all entities as of the beginning of an interim or annual reporting period. The Company is in the process of assessing the impact, if any, on its consolidated financial statements.

The Company has reviewed all other recent accounting pronouncements issued to date of the issuance of these consolidated financial statements, and does not believe any of those pronouncements will have a material impact on the Company’s consolidated financial statements.

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Vapor Hub International Inc. - Consolidated Statement of Changes in Stockholders' Equity (Deficit) - USD ($)	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Total
Balance, Value at Jul. 11, 2013	$ 38,000	$ (38,000)
Balance, Shares at Jul. 11, 2013	38,000,001
Recapitalization Adjustment, Value	$ 80,989	(82,260)		$ (1,271)
Recapitalization Adjustment, Shares	80,988,984
Cancellation of Shares, Value	$ (50,929)	50,929
Cancellation of Shares, Shares	(50,928,984)
Net income (loss)			$ (423,606)	(423,606)
Balance, Value at Jun. 30, 2014	$ 68,060	(69,331)	(423,606)	(424,877)
Balance, Shares at Jun. 30, 2014	68,060,001
Net income (loss)			(613,997)	(613,997)
Stock issued for services, Value	$ 300	5,700		6,000
Stock issued for services, Shares	300,000
Stock options granted		10,850		10,850
Gotama Note Conversion, Value	$ 4,096	610,244		614,340
Gotama Note Conversion, Shares	4,095,605
Balance, Value at Jun. 30, 2015	$ 72,456	$ 557,463	$ (1,037,603)	$ (407,684)
Balance, Shares at Jun. 30, 2015	72,455,606			310,000

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Note 4 - Capital Stock

12 Months Ended

Jun. 30, 2015

Notes

Note 4 - Capital Stock

NOTE 4 – CAPITAL STOCK

The Company is authorized to issue 1,010,000,000 shares of common stock and had 68,060,001 and 72,455,606 shares of common stock issued and outstanding as of June 30, 2014 and 2015, respectively. On February 2, 2015, the Board of Directors of the Company approved an Amended and Restated Articles of Incorporation of the Company (the “Amended and Restated Articles”) and the Amended and Restated Articles were filed by the Company with the Secretary of State of the State of Nevada on February 5, 2015. The Amended and Restated Articles increase the authorized number of shares of common stock, par value $0.001, of the Company from 140,000,000 shares to 1,010,000,000.

The Company is also authorized to issue 10,000,000 shares of preferred stock and had no shares of preferred stock issued and outstanding as of June 30, 2015. On February 2, 2015, the Company filed a Certificate of Withdrawal of Certificate of Designation (“Certificate of Withdrawal”) with the Secretary of State of the state of Nevada. The certificate withdraws the Certificate of Designation filed by the Company on January 9, 2014, which designated all of the Company’s preferred stock as “Series A Preferred Stock.” Following the filing of the Certificate of Withdrawal, the Company has 10,000,000 shares of undesignated preferred stock, par value $0.001, available for future designation by the Company’s Board of Directors.

On January 9, 2014, the Company authorized an increase of its share capital from 65,000,000 common shares to 140,000,000 common shares. Furthermore, the Company approved a forward stock split of its issued and outstanding common shares by way of a stock dividend, on a basis of 1:9, pursuant to which, the Company’s stockholders as at January 17, 2014 received eight (8) shares of common stock for each one (1) share of common stock currently held. The pay-out date as approved by the Company’s board of directors and Financial Industry Regulatory Authority was January 17, 2014. The effects of the forward split increased the Company’s issued and outstanding common shares from 8,998,776 common shares to 80,988,984 common shares on such date. The effects of the forward split have been applied on a retroactive basis.

On February 14, 2014, the Company entered into the Exchange Agreement whereby the Company acquired all of the issued and outstanding shares of Vapor and Delite in exchange for 38,000,001 common shares of the Company, which are the founders’ shares. The transaction was completed in two stages – with the acquisition of Vapor closing on March 14, 2014 and the acquisition of Delite closing on March 26, 2014. In connection with the acquisition of Vapor on March 14, 2014, the Company canceled 50,928,984 common shares and issued a convertible debenture of approximately $185,000 (see Note 10). Vapor was treated as the accounting acquirer and the equity accounts were retroactively recapitalized to the date of Vapor’s inception at July 12, 2013. In connection with this transaction the Company recorded the outstanding equity of the legal acquirer of 80,988,984 common shares and the concurrent cancelation of the 50,928,984 common shares.

On March 10, 2015 the Company entered into an independent contractor agreement with a service provider. Pursuant to the terms of the agreement, the Company agreed to grant the service provider 300,000 non-forfeitable, fully vested shares of its common stock, valued at $6,000 (based on the estimated fair market value of the shares on March 10, 2015, the date of grant) as partial consideration for the services provided to the Company pursuant to the terms of the agreement. The 300,000 shares were subsequently issued on May 11, 2015.

On June 30, 2015, the Company converted the Gotama Capital S.A. convertible promissory notes with an aggregate balance of $614,341 at a price of $0.15 per share, representing the entire principal amount and all accrued interest of the three convertible promissory notes issued to Gotama Capital S.A., into an aggregate of 4,095,605 shares of the Company’s common stock, par value $0.001 per share (the “Conversion Shares”).

Stock-Option Plans

On February 2, 2015, the Board of Directors of the Company and holders of 55.8% of the Company’s outstanding common stock (or 38,000,001 shares of 68,060,001 issued and outstanding shares) acting by written consent approved the adoption of the Company’s 2015 Omnibus Incentive Plan (the “2015 Plan”).

The 2015 Plan provides for the grant of stock options (both incentive stock options and non-qualified stock options), restricted stock, restricted stock units, stock appreciation rights, performance-based awards, dividend equivalents, stock payments and deferred stock units to eligible participants. Eligible participants include officers, employees, non-employee directors and certain consultants and advisers. The aggregate number of shares of the Company’s common stock authorized for issuance under the 2015 Plan is 20,400,000, subject to adjustment as described in the 2015 Plan. The outstanding options (each of which were granted on June 30, 2015) each have an exercise price of $0.0419 per share of Common Stock.

The Company estimates the fair value of each option on the grant date using the Black-Scholes model. The following assumptions were made in estimating the fair value:

	2015
Annual dividend yield	-
Expected life (years)	5.0
Risk-free interest rate	1.63%
Expected volatility	121.10%
Fair value of options granted	0.035%

The expected volatility was estimated by calculating the standard deviation of daily price changes in the Company’s stock from the date of inception to the date of the grant and the five year constant maturity treasury rate on the date of the grant was used for the risk free rate. Stock-based compensation expense is recognized over the employees’ or service provider’s requisite service period, generally the vesting period of the award. Stock-based compensation expense included in the accompanying statements of operations for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 is $0 and $10,850, respectively.

Stock option awards vested immediately on the date of grant, as a result there is no unrecognized compensation as of June 30, 2015.

A summary of stock option activity is as follows:

	Number of Shares		Weighted Average Exercise Price
Outstanding at June 30, 2014	-	$	-
Granted	310,000		0.0419
Exercised	-		-
Forfeited	-		-
Outstanding at June 30, 2015	310,000	$	0.0419

All the 310,000 options outstanding at June 30, 2015 were fully vested on the grant date, have an exercise price of $0.0419, weighted average contractual life of 10 years, weighted average exercise price of $0.0419, a weighted average remaining life of 10 years, and an aggregate intrinsic value at $0.0419 price per share at June 30, 2015.  

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Note 4 - Capital Stock: Schedule of Share-based Compensation, Stock Options, Activity (Details)	12 Months Ended
	Jun. 30, 2015 $ / shares shares
Details
Balance, Shares | shares	310,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 0.0419
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | shares	310,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 0.0419

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Note 12 - Delite Acquisition: Schedule of Business Acquisitions, by Acquisition (Details) - USD ($)	12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Revenue	$ 5,296,342	$ 1,202,663
Cost of revenue	3,202,067	647,287
Gross profit	2,094,275	555,376
General and administrative expenses	2,510,360	984,776
Other income		23,839
Income tax provision	2,400	(7,079)
Net income (loss)	$ (613,997)	(423,606)
Delite
Revenue		1,446,749
Cost of revenue		858,128
Gross profit		588,621
General and administrative expenses		992,090
Income tax provision		1,963
Net income (loss)		(405,432)
Vapor
Revenue		513,811
Cost of revenue		280,181
Gross profit		233,630
General and administrative expenses		259,558
Other income		29,999
Income tax provision		6,702
Net income (loss)		(2,631)
Company
General and administrative expenses		25,149
Other income		9,019
Net income (loss)		(16,130)
Elimination
Revenue		(346,077)
Cost of revenue		(280,181)
Gross profit		(65,895)
General and administrative expenses		(65,895)
Pro-Forma
Revenue		1,614,483
Cost of revenue		858,128
Gross profit		756,355
General and administrative expenses		1,210,902
Other income		39,018
Income tax provision		8,665
Net income (loss)		$ (424,194)

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Note 3 - Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies)

12 Months Ended

Jun. 30, 2015

Policies

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. At June 30, 2015, the Company had no cash equivalents.

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Note 16 - Subsequent Events (Details) - USD ($)	12 Months Ended		60 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Sep. 01, 2020	Aug. 12, 2015
Effective Income Tax Rate Reconciliation, Deduction, Other, Amount	$ (2)	$ 22	$ 5,650
Iliad Research and Trading, L.P
Promissory Note				$ 245,000

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Note 14 - Loss Per Common Share

12 Months Ended

Jun. 30, 2015

Notes

Note 14 - Loss Per Common Share

NOTE 14 – LOSS PER COMMON SHARE

A summary of the net loss and shares used to compute net loss per share for the period from inception (July 12, 2013) to June 30, 2014 and for the year ended June 30, 2015 is as follows:

		2014		2015
Net loss for computation of basic and dilutive net (loss) per share	$	(423,606)	$	(613,997)
Basic and dilutive net (loss) per share	$	(0.01)	$	(0.01)
Basic and dilutive weighted average shares outstanding	$	68,060,001	$	68,164,099