10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2015

OR

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

For the transition period from__________ to __________

XFit Brands, Inc.

(Exact Name of Registrant as Specified in Charter)

Nevada	000-55372	47-1858485
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

25731 Commercentre Drive, Lake Forest, CA 92630	(949) 916-9680
(Address of Principal Executive Offices)	(Registrant’s Telephone Number)

(Former name and address, if changed since last report)

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 to Rule 405 of Regulation S-T 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 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 [  ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of February 16, 2016 there were 4,098,500 shares of the issuer’s common stock, $0.0001 par value per share, outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1	Financial Statements:
	Condensed Consolidated Balance Sheets as of December 31, 2015 (Unaudited) and June 30, 2015	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six month periods ended December 31, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six month periods ended December 31, 2015 and 2014,	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3	Quantitative and Qualitative Disclosure about Market Risks	17
Item 4	Controls and Procedures	17
PART II	OTHER INFORMATION
Item 1	Legal proceedings	18
Item 1A	Risk Factors	18
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3	Defaults upon Senior Securities	18
Item 4	Mine safety disclosures	18
Item 5	Other information	18

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

XFit Brands, Inc.

Condensed Consolidated Balance Sheets

	December 31, 2015			June 30, 2015
	(Unaudited)
ASSETS
Current Assets
Cash	$	139,666		$	51,016
Accounts receivable		208,888			92,823
Royalties receivable		65,413			75,000
Inventory		253,452			169,292
Prepaid expenses		206,235			333,572
Total Current Assets		873,654			721,703
Long Term Assets
Property and equipment, net		37,652			42,292
Other assets
Deposits		27,480			27,480
Intangible assets, net		37,472			52,264
TOTAL ASSETS	$	976,258		$	843,739
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	604,104		$	446,063
Related party payable		95,620			95,620
Accrued expenses and interest		67,507			129,182
Customer deposits		210,100			158,467
Line of credit		34,197			—
Total Current Liabilities		1,011,528			829,332
Note payable, net		2,307,960			1,705,417
Total Liabilities		3,319,488			2,534,749
Commitments and contingencies (Note 8)		—			—
Stockholders’ Deficit
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2015 and June 30, 2015		—			—
Common stock, $0.0001 par value, 250,000,000 shares authorized, 4,098,500 and 4,073,500 shares issued and outstanding as of December 31, 2015 and June 30, 2015, respectively		409			407
Additional paid in capital		4,444,505			4,319,074
Accumulated deficit		(6,788,144	)		(6,010,491	)
Total Stockholders’ Deficit		(2,343,230	)		(1,691,010	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	976,258		$	843,739

See accompanying notes to the condensed consolidated financial statements.

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XFit Brands, Inc.

Condensed Consolidated Statements of Operations

For the three and six month periods ended December 31, 2015 and 2014 (Unaudited)

	For the Three Months Ended December 31,						For the Six Months Ended December 31,
	2015			2014			2015			2014
Revenues:
Product sales	$	659,262		$	542,118		$	1,132,518		$	773,321
Royalties		15,413			67,492			15,413			130,440
Net revenues		674,675			609,610			1,147,931			903,761
Cost of revenues		386,487			397,708			645,331			605,759
Gross Profit		288,188			211,902			502,600			298,002
Operating expenses
General and administrative		402,575			563,271			847,505			877,355
Sales and marketing		84,302			55,428			174,196			101,720
Total operating expenses		486,877			618,699			1,021,701			979,075
(Loss) Income from operations		(198,689	)		(406,797	)		(519,101	)		(681,073	)
Interest expense		(142,279	)		(94,304	)		(258,556	)		(171,912	)
Other income		—			12,758			—			14,757
Net (Loss) Income	$	(340,968	)	$	(488,343	)	$	(777,657	)	$	(838,228	)
Loss per common share - basic and diluted	$	(0.09	)	$	(0.12	)	$	(0.19	)	$	(0.21	)
Weighted average shares outstanding - basic and diluted		4,098,500			4,000,000			4,098,500			4,000,000

See accompanying notes to the condensed consolidated financial statements.

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XFit Brands, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the six month periods ended December 31, 2015 and 2014

	Six Month Periods Ended December 31,
	2015			2014
Cash flows from operating activities
Net loss	$	(777,657	)	$	(838,228	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		29,942			4,200
Amortization of debt issuance costs and loan discount		91,905			69,020
Stock based compensation		75,000			232,314
Value of options issued to employees		433			—
Changes in operating assets and liabilities:
Accounts receivable		(116,065	)		(81,547	)
Royalties receivable		9,587			18,133
Prepaid expenses		127,337			—
Inventory		(84,160	)		(125,127	)
Accounts payable		158,044			239,545
Accrued expenses and interest		(1,036	)		71,151
Customer deposits		51,633			268,161
Net cash used in operating activities		(435,037	)		(142,378	)
Cash flows from investing activities
Acquisition of intangible assets		(8,999	)		(3,596	)
Purchase of property and equipment		(1,511	)		(33,634	)
Net cash used in investing activities		(10,510	)		(37,230	)
Cash flows from financing activities
Payoff of line of credit		(19,224	)		—
Proceeds from line of credit		53,421			—
Proceeds from increase in PIMCO note payable		500,000			—
Net cash provided by financing activities		534,197			—
Net increase (decrease) in cash		88,650			(179,608	)
Cash at beginning of period		51,016			360,323
Cash at end of period	$	139,666		$	180,715
Supplemental cash flow information:
Cash paid for interest	$	103,305		$	65,233
Non-cash investing and financing activities:
Value of common shares issued as a loan fee	$	50,000		$	—
Distribution	$	—		$	100,000
Issuance of common stock in exchange for LLC interests	$	—		$	400

See accompanying notes to the condensed consolidated financial statements.

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XFit Brands, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

History of the Company

XFit Brands, Inc. (“XFit” or the “Company”) was incorporated on September 16, 2014 under the laws of the State of Nevada. The fiscal year of the Company is June 30. XFit’s principal business activity is the design, development, and worldwide marketing and selling of functional equipment, training gear, apparel and accessories for the impact sports market and fitness industry. Products are marketed and sold under the “Throwdown®” brand name to gyms, fitness facilities and directly to consumers via an internet website and through third party catalogues through a mix of independent distributors and licensees throughout the world.

These financial statements represent the condensed consolidated financial statements of XFit and its wholly owned operating subsidiaries Throwdown Industries Holdings, LLC (“Holdings”), Throwdown Holdings, LLC (“TDLLC”), and Throwdown Industries, Inc. (“TDINC”). On September 26, 2014, XFit entered into a Contribution and Exchange Agreement with TD Legacy, LLC (“TD Legacy”) and Holdings under which TD Legacy contributed all of its membership interest in Holdings to XFit in exchange for the issuance by XFit of 4,000,000 shares of common stock to TD Legacy. The result of this transaction was that Holdings became a wholly owned subsidiary of XFit.

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes as of and for the years ended June 30, 2015 and 2014, which were filed with the Company’s annual report form 10K on September 28, 2015. The results of operations for the six months ended December 31, 2015 are not necessarily indicative of results that may be expected for the year ending June 30, 2016, or for any other interim period.

Basis of Consolidation

The condensed consolidated financial statements include the accounts of XFit, Holdings and TDINC. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also consolidates any variable interest entities (“VIEs”), of which it is the primary beneficiary, as defined within Accounting Standards Codification (“ASC”) 810. The Company does not have any VIEs that are required to be consolidated as of December 31, 2015 or June 30, 2015.

Recent Accounting Pronouncements

The Company has implemented all new accounting standards and does not believe that there are any other new accounting pronouncements that have been issued that may have a material impact on the consolidated financial statements.

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU-2015-03”). ASU 2015-03 requires companies to present debt issuance costs as a direct deduction from the carrying value of that debt liability. ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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Income (Loss) per Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of December 31, 2015 and June 30, 2015, the Company had 453,723 and 452,612, respectively, of potential shares exercisable that are attributable to the PIMCO warrant, which have been excluded as their effect is anti-dilutive.

Use of Estimates

Condensed consolidated financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long-lived assets, and equity instruments issued for financing. Actual results could differ from those estimates.

Loan Discounts and Loan Fees

The Company amortizes loan discounts over the term of the loan using the effective interest method. Costs associated with obtaining financing are capitalized and amortized over the term of the related loans using the effective interest method. As of December 31, 2015 and June 30, 2015, the Company had total gross debt issuance costs of $199,632 and $149,632, respectively. Amortization of the debt issuance costs was $32,947 and $19,611 for the six month periods ended December 31, 2015 and 2014, respectively, which was recorded as a component of interest expense on the condensed consolidated statements of operations.

Subsequent Events

In accordance with ASC 855, the Company evaluated subsequent events through February 16, 2016, which was the date the consolidated financial statements were available for issue.

NOTE 2 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Office furniture and equipment	$	48,193		$	46,233
Warehouse equipment		15,254			13,254
Molds and dies		4,200			6,650
Total, cost		67,647			66,137
Accumulated Depreciation		(29,995	)		(23,845	)
Property and equipment, net	$	37,652		$	42,292

Depreciation expense for the six month periods ended December 31, 2015 and 2014 was $6,151 and $4,200, respectively.

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NOTE 3 – INTANGIBLE ASSETS, NET

Intangible assets consisted of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Transformations exercise fitness program	$	62,500		$	62,500
Trademark and patent		7,811			4,396
Computer software		5,584			—
Total, cost		75,895			66,896
Accumulated amortization		(38,423	)		(14,622	)
Intangible assets, net	$	37,472		$	52,264

Amortization expense for the six months ended December 31, 2015 and 2014 was $23,791 and $270, respectively.

NOTE 4 – NOTE PAYABLE

The note payable is comprised of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Note payable	$	2,620,098		$	2,085,128
Add: accrued interest added to note principal		25,670			—
Less: unamortized loan discount		(218,113	)		(277,070	)
Less: unamortized debt issuance costs		(119,695	)		(102,641	)
Total note payable, net	$	2,307,960		$	1,705,417

On June 10, 2014, the Company entered into a Note Purchase Agreement with Pacific Investment Management Company (“PIMCO”) that authorized the issuance of up to $2,500,000. On June 12, 2014, the Company entered into a Senior Secured Note (“Note”) whereby the Company drew $1,500,000. The note bears interest at 14% and an effective interest rate of 21%. This Note is collateralized by all of the assets of the Company.

On February 6, 2015, the Company drew down an additional $500,000 of funds on the PIMCO Note Payable. Following the February 6, 2015 draw, the principal balance payable (including accrued interest added to the principal amount) on the PIMCO note was $2,044,300, and the Company had an additional $500,000 available to draw on this loan facility. The full principal balance outstanding related to this note is due in June 2017.

The Note includes various covenants, including but not limited to, having annual audited financial statements within 90 days of the end of the fiscal year. At December 31, 2015, the Company is in compliance with all covenants.

In connection with the Note, the Company granted warrants to acquire up to 10% of the Company’s capital stock based on an aggregate enterprise fair market value of $15.0 million. The Company valued the warrants using the Black-Scholes option pricing model with the following variables: annual dividend yield of 0%; expected life of 10 years; risk free rate of return of 2.92%; and expected volatility of 0%. The Company estimated the value of the warrants to be $377,480, which is recorded as a loan discount and is being amortized under the effective interest method to interest expense over the term of the loan.

On September 30, 2015, in consideration of the draw-down of the remaining $500,000 available on the PIMCO Note Payable, the Company issued 10,000 shares of its common stock at a fair value of $50,000 as determined by the Company’s board of directors. This amount was recorded as a loan fee to be amortized over the remaining term of the PIMCO Note Payable.

On October 20, 2015, the Company drew the remaining $500,000 available under its delayed draw note facility with PIMCO to increase the principal amount under this note (including the accrued interest added to the principal amount) to $2,620,098. A replacement note was issued on this date to reflect the note increase.

During the six month periods ended December 31, 2015 and 2014, the Company amortized $91,905 and $69,020, respectively, of the loan fees and discount which is recorded as a component of interest expense on the consolidated statements of operations.

NOTE 5 – BANK LINE OF CREDIT

On July 24, 2015, the Company entered into an unsecured line of credit with Wells Fargo Bank for up to $35,000. The line of credit bears interest at prime plus 4% and is personally guaranteed by the Company’s chief executive officer. As of September 30, 2015, the balance payable on the line of credit was $19,224, which amount was repaid on October 23, 2015. After October 23, 2015, the Company borrowed an additional $34,197 from this line of credit and has an unpaid balance on the line of credit of $34,197 as of December 31, 2015.

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NOTE 6 – RELATED PARTY TRANSACTIONS

Related Party Payable

As of December 31, 2015 and June 30, 2015, the Company has $95,620 of salaries and bonuses payable to four of its officers and membership interest holders. These bonuses were to cover income taxes relating to bonuses issued during 2009.

NOTE 7 – STOCKHOLDERS’ DEFICIT

On July 1, 2015, the Company issued 15,000 shares of its common stock valued at $75,000 to an employee as a signing bonus.

On July 15, 2015, the board of directors approved the issuance of 63,500 stock options to employees to be utilized on a performance and retention basis.

On September 30, 2015, the Company issued 10,000 shares of its common stock valued by the Company’s board of directors at $50,000 to PIMCO as a loan fee in consideration of the additional $500,000 draw-down on the PIMCO Note Payable that was funded on October 20, 2015. (See Note 4—Note Payable).

On November 17, 2015, the Company issued options to purchase 43,000 shares of stock to six employees for services rendered. (See Note 8—Commitments and Contingencies—Stock Incentive Plan)

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Lease Commitments

In June 2015, the Company entered into a lease agreement for approximately 25,788 square feet of warehouse and office space under a 38 month operating lease that commenced on October 1, 2015 and expires on October 31, 2018. The lease has monthly payments starting at $8,252 for the period October 1, 2015 through February 28, 2016. Thereafter with monthly payments ranging $16,504 to $17,509 over the term of the lease. The Company previously leased office and warehouse facilities under a lease which expired on November 30, 2015 pursuant to which it paid $4,865 per month which included operating expenses, insurance and property taxes

In June 2015, the Company entered into a sublease of a portion of the premises for the period October 1, 2015 through August 31, 2016, at a monthly rental rate of $5,000.

Rent expense for the six month periods ended December 31, 2015 and 2014, were $67,937 and $29,383, respectively.

Litigation

From time-to-time, the Company is subject to various litigation and other claims in the normal course of business. The Company establishes liabilities in connection with legal actions that management deems to be probable and estimable. No amounts have been accrued in the condensed consolidated financial statements with respect to any matters.

Stock Incentive Plan

On October 21, 2014, the Board of Directors and the Company’s sole stockholder adopted the 2014 Stock Incentive Plan. The purpose of the 2014 Stock Incentive Plan is to advance the best interests of the Company by providing those persons who have a substantial responsibility for management and growth of the Company with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. Further, the availability and offering of stock options and common stock under the plan supports and increases the Company’s ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which the Company depends. The total number of shares available for the grant of either stock options or compensation stock under the plan is 600,000 shares of common stock, subject to adjustment. The Board of Directors administers the plan and has full power to grant stock options.

9

At December 31, 2015, the Company had not issued any shares under the plan and had granted options to purchase 43,000 shares under the plan.

On November 17, 2015, the Company granted 43,000 aggregate stock options to six employees. The value of the shares granted was determined to be $17,742 utilizing the Black-Scholes valuation model based on stock value of $5.00 at the date of issuance, a 5 year life of the options, a discount rate of 1.73%, and a zero percent stock volatility rate. For the six months ended December 31, 2015, the value of the stock options was $433 and was recorded as stock based compensation expense on the statement of operations.

Equity Purchase Agreement

On December 17, 2014, the Company entered into an Equity Purchase Agreement with Kodiak Capital LLC. The Equity Purchase Agreement provides the Company with financing whereby the Company can issue and sell to Kodiak, from time to time, shares of common stock (the “Put Shares”) up to an aggregate purchase price of $5.0 million (the “Maximum Commitment Amount”) during the commitment period. The commitment period is defined as the period beginning on the trading day immediately following the effectiveness of the registration statement and ending December 31, 2016. In addition, in no event shall Kodiak be entitled to purchase that number of Put Shares which when added to the sum of the number of shares of common stock already beneficially owned by Kodiak would exceed 9.99% of the number of shares of common stock outstanding on the applicable closing date.

The Equity Purchase Agreement will terminate when any of the following events occur: (i) Kodiak has purchased an aggregate of $5.0 million of the Company’s common stock, (ii) on December 31, 2016 or (iii) upon written notice from the Company to Kodiak.

Registration Rights Agreement

On December 17, 2014, the Company entered into a registration rights agreement with Kodiak Capital, LLC under which the Company is obligated to register the shares to be acquired by Kodiak pursuant to that certain Equity Purchase Agreement dated December 17, 2014, under which Kodiak agreed to purchase up to $5 million of XFit common stock, subject to certain conditions.

Asset Purchase Agreement

On February 26, 2015, the Company entered into an Asset Purchase Agreement to acquire the exclusive rights, title, and interest in the Transformations exercise and fitness program. The purchase price was $62,500 which comprised of a $7,500 cash payment and eleven thousand (11,000) shares of the Company’s common stock that was valued at $55,000. The agreement also has a performance based earn out for a period of eighteen (18) months that is based on fifty percent (50%) of all programming services gross revenues derived from the Transformations program, up to a maximum earn out of $187,500. The earn out is payable in tranches and none of the tranches were met as of December 31, 2015.

Vendor Credit Agreements

On June 18 2015, the Company entered into a Stock Purchase Agreement with Ever Blooming Industrial Limited, whereby the Company issued 20,000 shares of its common stock at $5.00 per share. The purchase price is in the form of a manufacturing credit totaling $100,000 to use for future inventory purchases (the “Vendor Credit”). The Company can use all or part of the Vendor Credit over the next 12 months until the Vendor Credit is exhausted. As of December 31, 2015 and June 30, 2015, the Company had none and $100,000, respectively, of Vendor Credit included in prepaid expenses on the condensed consolidated balance sheets.

On June 26 2015, the Company entered into a Stock Purchase Agreement with Yayu General Machinery Co., LTD, whereby the Company issued 40,000 shares of its common stock at $5.00 per share. The purchase price is in the form of a manufacturing credit of $200,000 to use for future inventory purchases (the “Vendor Credit”). The Company can use all or part of the Vendor Credit over the next 12 months until the Vendor Credit is exhausted. As of Deceember 31, 2015 and June 30, 2015, the Company had $191,549 and $200,000, respectively, of Vendor Credit included in prepaid expenses in the condensed consolidated balance sheets.

NOTE 9 – SUBSEQUENT EVENTS

None

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING INFORMATION

The following information should be read in conjunction with XFit Brands, Inc. and its subsidiaries (“we”, “us”, “our”, or the “Company”) condensed consolidated unaudited financial statements and the notes thereto contained elsewhere in this report. Information in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-Q that does not consist of historical facts, are “forward-looking statements.” Statements accompanied or qualified by, or containing words such as “may,” “will,” “should,” “believes,” “expects,” “intends,” “plans,” “projects,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume,” and “assume” constitute forward-looking statements, and as such, are not a guarantee of future performance.

Forward-looking statements are subject to risks and uncertainties, certain of which are beyond our control. Actual results could differ materially from those anticipated as a result of the factors described in the “Risk Factors” and detailed in our other Securities and Exchange Commission filings. Risks and uncertainties can include, among others, fluctuations in general business cycles and changing economic conditions; changing product demand and industry capacity; increased competition and pricing pressures; and advances in technology that can reduce the demand for the Company’s products. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results.

Because of these risks and uncertainties, the forward-looking events and circumstances discussed in this report or incorporated by reference might not transpire. Factors that cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described elsewhere in this report and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended June, 30, 2015.

The Company disclaims any obligation to update the forward-looking statements in this report.

Overview

XFit Brands, Inc. was incorporated in September 2014 under the laws of the State of Nevada. As used herein, the terms “we,” “us,” “XFIT,” and the “Company” refer to XFit Brands, Inc. and its predecessors, subsidiaries, and affiliates, collectively, unless the context indicates otherwise. Our fiscal year end is June 30. Our principal office address is 25731 Commercentre Drive, Lake Forest, CA 92630. Our telephone number is (949) 916-9680. As of February 16, 2016 we had 8 employees.

Our principal business activity is the design, development, and worldwide marketing and selling of functional equipment, training gear, apparel, and accessories for the impact sports market and fitness industry. Our products are marketed and sold under our Throwdown®, XFit Brands®, and Transformations™ brand names to gyms, fitness facilities, and directly to consumers via our internet website and through third party catalogues (which we refer to as our “Direct to Consumer” operations) through a mix of independent distributors and licensees throughout the world. All of our products are manufactured by independent contractors. Our equipment and apparel products are produced both in the United States and abroad.

We are an “emerging growth company” within the meaning of the federal securities laws. For as long as we are an emerging growth company, we will not be required to comply with the 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, the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and the 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 intend to take advantage of these reporting exemptions until we are no longer an emerging growth company.

Results of Operations

For the next twelve months, our current operating plan is focused on the development and sale of training and competition cages, training and protective gear for the Mixed Martial Arts (“MMA”), fitness, training, and exercise industry.

Our long term growth strategy includes expanding our presence in the fitness, training, and exercise community; leveraging our MMA core credibility and heritage; developing strategic alliances; and acquiring other companies in the fitness, training, and exercise industry to leverage our asset base, manufacturing infrastructure, market presence, and experienced personnel.

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As is discussed further in the Liquidity and Capital Resources section below, we have limited funds to support our operations. Our continuation as a going concern subsequent to the year ended June 30, 2015 is dependent on our ability to obtain additional financing to fund the continued operation of our business model for a long enough period to achieve profitable operations. Based on our current business plan, we currently estimate we will need up to an additional $643,000 of financing to execute our business plan over the next twelve months. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern.

Three months ended December 31, 2015 Compared to the Three Months Ended December 31, 2014

Our revenue, operating expenses, and net income (loss) from operations for the three month period ended December 31, 2015 as compared to the three month period ended December 31, 2014 are set forth below.

	Three Months Ended December 31:
	2015			2014			Change			% Change Increase (Decrease)
REVENUES
Product sales	$	659,262		$	542,118		$	117,144			21.6	%
Royalties		15,413			67,492			(52,079	)		(77.2	)%
Net revenues		674,675			609,610			65,065			10.7	%
COST OF REVENUES		386,487			397,708			(11,221	)		(2.8	)%
Gross profit		288,188			211,902			76,286			36.0	%
OPERATING EXPENSES:
General and administrative		402,575			563,271			(160,696	)		(28.5	)%
Sales and marketing		84,302			55,428			28,874			52.1	%
Total operating expenses		486,877			618,699			(131,822	)		(21.3	)%
(Loss) income from operations		(198,689	)		(406,797	)		208,108			51.2	%
Interest expense		(142,279	)		(94,304	)		(47,975	)		50.9	%
Other income		—			12,758			12,758			100.0	%
Net loss	$	(340,968	)	$	(488,343	)	$	147,375			30.2	%

Revenues. Revenues consist of product sales and royalties. Total revenues for the three months ended December 31, 2015 were $674,675, an increase of $65,065, or 10.7%, from $609,610 of total revenues for the three months ended December 31, 2014. Product sales increased $117,144, or 21.6%, to $659,262 for the three months ended December 31, 2015 from $542,118 for the three months ended December 31, 2014. The increase in product sales is attributable to increased selling efforts and momentum during the three months ended December 31, 2015. Royalties from international distributors were $15,413 and $67,492 for the three months ended December 31, 2015 and 2014, respectively. The decrease in royalties is attributable to a lack of royalties from our Brazilian partner due to the current economic climate in Brazil.

Cost of Revenues. Total cost of revenues for the three months ended December 31, 2015 were $386,487, a decrease of $11,221, or 2.8%, from $397,708 for the three months ended December 31, 2014. Cost of product sales during the three months ended December 31, 2015 were 58.6% as compared to 73.4% during the three months ended December 31, 2014. The decrease in cost of revenues is attributable to the decrease in product sales costs as a percentage of revenues form 73.4% during the three months ended December 31, 2014 as compared to 58.6% during the three months ended December 31, 2015.

Gross Profit. Gross profit increased $76,286 to $288,188 for the three months ended December 31, 2015, from a gross profit of $211,902 for the three months ended December 31, 2014. The increase in gross profit reflects the decrease in product cost of sales, and the $15,413 in royalties during the three months ended December 31, 2014. During the three months ended December 31, 2014, we realized a 26.6% gross profit on our product sales as compared to a 41.4% gross profit on product sales during the three months ended December 31, 2015.

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General and Administrative Expenses. General and administrative expenses decreased by $160,696, or 28.5%, to $402,575 for the three months ended December 31, 2015 from $563,271 for the three months ended December 31, 2014. General and administrative expenses for the three months ended December 31, 2015 are comprised of salaries and wages of $40,436, office expenses of $614, insurance of $27,776, rent of $34,883, professional fees of $72,853, travel of $12,138, stock-based compensation of $75,433, SEC financial reporting expenses of $60,380, and other of $78,061. General and administrative expenses for the three months ended December 31, 2014 are comprised of salaries and wages of $93,336, professional fees of $50,244, office expenses of $5,055, insurance of $10,302, rent of $14,789, SEC registration expenses, (including accounting, legal, audit and filing fees) of $141,998, a decrease in capital commitment fee of $197,314, travel of $549, and other of $49,684. The decrease in general and administrative expenses during the three months ended December 31, 2015 is comprised of a decrease in salaries and wages of $52,900, increase in professional fees of $22,609, a decrease in office expenses of $4,441, an increases in insurance expense of $17,474 an increase of $20,094 of rent expense, an increase in travel of $11,589, an increase in stock based compensation of $75,433, a decrease in IPO expenses of $141,998 decrease in capital commitment fee of $197,314, and a net $28,377 increase in other general and administrative expenses. The overall decrease in general and administrative expenses is attributable to decreased expenses for SEC registration fees, increased expenses for stock based compensation, net of a decrease in capital commitment fees and decrease in other general and administrative expenses.

Sales and Marketing Expense. Sales and marketing expense increased $28,874, or 52.1%, to $84,302 for the three months ended December 31, 2015 from $55,428 for the three months ended December 31, 2014. This increase in sales and marketing expenses is commensurate with a net 10.7% increase in our product sales during the three months ended December 31, 2015 and the added salary cost of a sales manager.

Interest Expense. Interest expense increased by $47,975 to $142,279 for the three months ended December 31, 2015 from $94,304 for the three months ended December 31, 2014. The increase is largely due to the increased interest expense on the increased balance of the delayed draw note with the PIMCO Fund during the three months ended December 31, 2015 and the amortization of loan discounts and loan fees.

Other Income. During the three months ended December 31, 2014, we realized $12,758 of other income while during the three months ended December 31, 2015 we realized zero of other income.

Net Loss. Net loss decreased by $147,375 or 30.2% to a net loss of $340,968 for the three months ended December 31, 2015 from a net loss of $488,343 for the three months ended December 31, 2014. This increase in our net loss is attributable to the increased revenues and decreased expenses, as explained herein.

Six months ended December 31, 2015 Compared to the Six Months Ended December 31, 2014

Our revenue, operating expenses, and net (loss) income from operations for the six month period ended December 31, 2015 as compared to the six month period ended December 31, 2014 are set forth below.

	Six Months Ended December 31:
	2015			2014			Change			% Change Increase (Decrease)
REVENUES
Product sales	$	1,132,518		$	773,321		$	359,197			46.4	%
Royalties		15,413			130,440			(115,027	)		(88.2	)%
NET REVENUES		1,147,931			903,761			244,170			27.0	%
COST OF REVENUES		645,331			605,759			39,572			6.5	%
Gross profit		502,600			298,002			204,598			68.7	%
OPERATING EXPENSES:
General and administrative		847,505			877,355			(29,850	)		(3.42	)%
Sales and marketing		174,196			101,720			72,476			71.3	%
Total operating expenses		1,021,701			979,075			42,626			4.4	%
(Loss) income from operations		(519,101	)		(681,073	)		161,972			23.8	%
Interest expense		(258,556	)		(171,912	)		(86,644	)		(50.4	)%
Other income		—		$	14,757			(14,757	)		(100.0	)%
Net (loss) income	$	(777,657	)	$	(838,228	)	$	60,571			7.2	%

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Revenues. Total revenues for the six months ended December 31, 2015 were $1,147,931, an increase of $244,170, or 27.0%, from $903,761 of total revenues for the six months ended December 31, 2014. Product sales increased $359,197, or 46.4%, to $1,132,518 for the six months ended December 31, 2015 from $773,321 for the six months ended December 31, 2014. The increase in product sales is attributable to the active sales and marketing program launched during 2015. Royalties from international distributors were $15,413, a decrease by $115,027 for the six months ended December 31, 2015, as compared to $130,440 of royalties for the six months ended December 31, 2014. The decrease in royalties is attributable to the economic downturn in Brazil which severely impeded our Brazilian partner to sell product and pay royalties.

Cost of Revenues. Total cost of revenues for the six months ended December 31, 2015 were $645,331, an increase of $39,572, or 6.5%, from $605,759 for the six months ended December 31, 2014. Cost of product sales during the six months ended December 31, 2015 were 57.0% as compared to 78.3% during the six months ended December 31, 2014. The increase in costs of revenues is attributable to the increased product and the improved product cost of sales percentages during the six months ended December 31, 2015.

Gross Profit. Gross profit increased $204,598 to $502,600 for the six months ended December 31, 2015, from a gross profit of $298,002 for the six months ended December 31, 2014. The increase in gross profit reflects the increase in product sales and the improved gross profit margin on product sales during the six months ended December 31, 2015. During the six months ended December 31, 2015, we realized a 43.0% gross profit on our product sales as compared to a 21.7% gross profit realized on product sales during the six months ended December 31, 2014.

General and Administrative Expenses. General and administrative expenses decreased by $29,850, or 3.7%, to $847,505 for the six months ended December 31, 2015 from $877,355 for the six months ended December 31, 2014. General and administrative expenses for the six months ended December 31, 2015 are comprised of salaries and wages of $219,014, professional fees of $151,866, office expenses of $1,752, insurance of $47,451, rent of $67,937, SEC financial reporting expenses, (including accounting, legal, audit and edgar/XBRL filing service fees) of $163,218, travel of $23,704, stock based compensation of $75,433, and other of $97,130. General and administrative expenses for the six months ended December 31, 2014 are comprised of salaries and wages of $146,072, professional fees of $101,536, expenses associated with our initial public offering of $291,824, insurance of $21,268, rent of $29,383, office expenses of $8,718, capital commitment fee of $197,314, travel of $29,445, and other of $51,795. The decrease in general and administrative expenses during the six months ended December 31, 2015 is comprised of an increase in salaries and wages of $72,942, a decrease in SEC financial reporting expenses of $291,824, an increase in expenses associated with our initial public offering of $163,218, a decrease in office expenses of $6,966, an increase in professional fees of $50,330 a decrease in capital commitment fee of $197,314, an increase of $26,183 in insurance expense, an increase of $38,554 in rent expense, a decrease in travel of $5,741, an increase in stock based compensation of $75,433, and a net $45,335 increase in other general and administrative expenses. The overall decrease in general and administrative expenses is attributable to decreased expenses for professional fees relating to the audit, accounting, legal fees capital commitment fees associated with the initial public offering of our securities, offset by an increase in stock based compensation.

Sales and Marketing Expense. Sales and marketing expense increased $72,476, or 71.3%, to $174,196 for the six months ended December 31, 2015 from $101,720 for the six months ended December 31, 2014. This increase in sales and marketing expenses is attributable to increased sales and marketing personnel that were employed during the six months ended December 31, 2015 and increased sales commissions due to a 46.4% increase in sales.

Interest Expense. Interest expense increased by $86,644 to $258,556 for the six months ended December 31, 2015 from $171,912 for the six months ended December 31, 2014. The increase is largely due to the increased interest expense on the delayed draw note with the PIMCO Fund during the six months ended December 31, 2015 and the amortization of $92,905 of loan fees and discounts during the six months ended December 31, 2015.

Other Income. During the six months ended December 31, 2014, we realized $14,757 of other income while during the six months ended December 31, 2015 we did not realize comparable other income.

Net Loss. Net loss decreased by $60,571 or 7.2% to a net loss of $777,657 for the six months ended December 31, 2015 from net loss of $838,228 for the six months ended December 31, 2014. This increase in our net loss is attributable to the increased revenues and increased expenses, as explained herein.

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Liquidity and Capital Resources

Our condensed consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As presented in the condensed consolidated financial statements, we incurred a net loss of $777,657 during the six months ended December 31, 2015, and losses are expected to continue in the near term. The accumulated deficit since inception is $6,788,144 at December 31, 2015. We have been funding our operations through private loans and the sale of equity interests in private placement transactions. See our discussion of our Credit Facility with PIMCO and our Equity Purchase Agreement with Kodiak Capital below. Our cash resources are insufficient to meet our planned business objectives without additional financing. The accompanying condensed 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 our company to continue as a going concern.

Management anticipates that significant additional expenditures will be necessary to further develop our product lines and licensing relationships to expand product sales and royalty revenues before significant positive operating cash flows can be achieved. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately achieve sustainable revenues and profitable operations. At December 31, 2015, we had $139,666 of cash on hand. We anticipate that our existing cash and cash equivalents, together with our cash from operating activities will not be sufficient to fund operations and expected growth through at least the next twelve months. These funds are insufficient to complete our business plan and as a consequence, we will need to seek additional funds, primarily through the issuance of debt or equity securities for cash to operate our business. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing.

Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) raising additional capital and/or obtaining financing; (b) executing contracts with international licensees; and (c) controlling overhead and expenses. There can be no assurance that we can successfully accomplish these steps and it is uncertain that we will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to us on satisfactory terms and conditions, if at all.

In the event we are unable to continue as a going concern, we may elect or be required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.

The success of our ability to continue as a going concern is dependent upon obtaining new customers for our products and new licensees to generate royalty revenues, and maintaining a break even or profitable level of operations. We have incurred operating losses since inception, and this is likely to continue in the near future. We believe that we are able to fund our immediate operations, working capital requirements, and debt service requirements with existing working capital, cash flows generated from operations, and if available, under our equity purchase agreement with Kodiak.

Our financial requirements will be dependent upon the financial support through credit facilities and additional sales of our equity securities. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

The downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock or the debt securities may cause us to be subject to restrictive covenants. If additional financing is not available or is not available on acceptable terms, we may have to curtail our operations.

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Cash, total current assets, total assets, total current liabilities and total liabilities as of September 30, 2015 and June 30, 2015, were as follows:

	December 31, 2015		June 30, 2015
Cash	$	139,666	$	51,016
Total current assets	$	873,654	$	721,703
Total assets	$	976,258	$	843,739
Total current liabilities	$	1,011,528	$	829,332
Total liabilities	$	3,319,488	$	2,534,749

At December 31, 2015, we had a working capital deficit of $137,874 compared to a working capital deficit of $107,629 at June 30, 2015. Current liabilities increased to $1,011,528 at December 31, 2015 from $829,332 at June 30, 2015, primarily as a result of increases in accounts payable, customer deposits, and the bank line of credit.

Our operating activities used net cash of $435,037 for the six months ended December 31, 2015 compared to net cash used in operations of $142,378 for the six months ended December 31, 2014. The net cash used in operations for the six months ended December 31, 2015, reflects a net loss of $777,657, decreased by $197,280 in non-cash charges and by $145,340 net increase in the working capital accounts. The net cash used in operations for the six months ended December 31, 2014 reflects a net loss of $838,228, decreased by $305,534 in non-cash charges and by $390,316 net increase in the working capital accounts.

Our net cash used in investing activities was $10,510 for the six months ended December 31, 2015, comprised of $8,999 of intangible asset acquisitions and $1,511 of equipment acquisitions. Our cash used in investing activities for the six months ended December 31, 2014, was $37,230 that included $33,634 in purchases of equipment and $3,596 of intangible asset acquisition costs.

Our net cash provided by financing activities for the six months ended December 31, 2015 was $534,197, which consisted of $500,000 in cash proceeds from our October 2015 draw-down on the PIMCO Note Payable, $53,421 in proceeds from the Well Fargo Bank line of credit, offset by payment of $19,224 on the Wells Fargo Bank line of credit. We did not have any cash proceeds related to financing activities in the six months ended December 31, 2014.

Credit Facility

On June 10, 2014, we entered into a Note Purchase Agreement (“Agreement”) with PIMCO Funds: Private Account Portfolio Series: PIMCO High Yield Portfolio, a separate investment portfolio of PIMCO Funds, a Massachusetts business trust (“PIMCO”) that authorized the issuance of up to $2,500,000. On June 12, 2014, we entered into a Senior Secured Note (“Note”) whereby we drew $1,500,000. The note bears interest at 14% and matures on June 12, 2017. Interest is payable monthly in arrears, provided that if no event of default has occurred, Obligor can elect to pay cash interest on each payment date at 9%, with the additional unpaid interest due on such dates added to the principal balance, The note bears an effective interest rate of 21%. This Note is collateralized by all of our assets. The Note includes various covenants, including but not limited to, having annual audited financial statements within 90 days of the end of the fiscal year.

On February 6, 2015, we drew an additional $500,000 under this facility to increase the principal amount payable (including the accrued interest added to the principal amount) under this note to $2,044,300 and on October 20, 2015, we drew the remaining $500,000 available under this facility to increase the amount payable under this note (with accrued interest) to $2,620,098. We issued 10,000 shares of our common stock to PIMCO as a loan fee in consideration of the October 2015 draw down. A replacement note was issued on each draw down date to reflect the note increase.

Equity Purchase Agreement with Kodiak Capital LLC

On December 17, 2014, we entered into an Equity Purchase Agreement (“Equity Purchase Agreement”) with Kodiak Capital LLC. The Equity Purchase Agreement provides us with a financing (the “Financing”) whereby the registrant can issue and sell to Kodiak, from time to time, shares of our common stock (the “Put Shares” ) up to an aggregate purchase price of $5.0 million (the “Maximum Commitment Amount”) during the Commitment Period (as defined below). Under the terms of the Equity Purchase Agreement, we have the right to deliver from time to time a Put Notice to Kodiak stating the dollar amount of Put Shares (up to $500,000 under any individual Put Notice) that we intend to sell to Kodiak with the price per share based on the following formula: seventy-five percent (75%) of the lowest closing bid price of our common stock during the period beginning on the date of the Put Notice and ending five (5) days thereafter. Under the Equity Purchase Agreement, we may not deliver the Put Notice until after the resale of the Put Shares has been registered pursuant to a registration statement filed with the Securities and Exchange Commission. Additionally, provided that the Equity Purchase Agreement does not terminate earlier, during the period beginning on the trading day immediately following the effectiveness of the registration statement and ending December 31, 2016, we may deliver the Put Notice or Notices (up to the Maximum Commitment Amount) to Kodiak (the “Commitment Period”). In addition, in no event shall Kodiak be entitled to purchase that number of Put Shares which when added to the sum of the number of shares of common stock already beneficially owned by Kodiak would exceed 9.99% of the number of shares of common stock outstanding on the applicable closing date.

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The Equity Purchase Agreement also provides that we are not entitled to deliver a Put Notice, and Kodiak shall not be obligated to purchase any Put Shares, unless each of the following conditions are satisfied: (i) a registration statement has been declared effective and remains effective for the resale of the Put Shares until the closing with respect to the subject Put Notice; (ii) at all times during the period beginning on the date of the Put Notice and ending on the date of the related closing, our common stock has been listed on the Principal Market as defined in the Equity Purchase Agreement (which includes, among others, the Over-the-Counter Bulletin Board and the OTC Market Group’s OTC Link quotation system) and shall not have been suspended from trading thereon; (iii) we have complied with its obligations and is otherwise not in breach of or in default under the Equity Purchase Agreement, the Registration Rights Agreement or any other agreement executed in connection therewith; (iv) no injunction has been issued and remains in force, and no action has been commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Put Shares; and (v) the issuance of the Put Shares will not violate any shareholder approval requirements of the market or exchange on which our common stock are principally listed.

The Equity Purchase Agreement will terminate when any of the following events occur: (i) Kodiak has purchased an aggregate of $5.0 million of our common stock, (ii) on December 31, 2016 or (iii) upon written notice from us to Kodiak.

The proceeds from the agreement with Kodiak would primarily be used for working capital and general corporate purposes. However, Kodiak is not required to provide funding until certain conditions are met, as described above. There can be no assurance that we will meet the conditions under which Kodiak will be required to provide the equity capital.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of our last fiscal quarter ended December 31, 2015, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon those evaluations, management concluded that our disclosure controls and procedures were effective as of December 31, 2015, to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Going forward from this filing, the Company intends to improve its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

During the quarter covered by this Report, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may become a party to litigation or other legal proceedings that it considers to be a part of the ordinary course of its business. The Company is not involved currently in legal proceedings that could reasonably be expected to have a material adverse effect on its business, prospects, financial condition or results of operations. The Company may become involved in other material legal proceedings in the future.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item. Please refer to “Risk Factors” contained in our Annual Report on Form 10-K for the year ended June 30, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

1.	See our Current Report on Form 8-K dated October 20, 2015 and filed on October 21, 2015.
2.	On November 17, 2015, we issued options to purchase 43,000 shares of our common stock to six (6) employees in consideration of services rendered at an exercise price of $5.00 per share. The issuances were exempt under Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

On December 26, 2015, we terminated our previously announced $2 million common stock offering. We did not sell any shares of common stock under this offering. We also terminated our engagement agreement with Carrolton Capital Partners, LLC dba Offerboard Securities, the placement agent for such terminated offering, on this date.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit No.	Description
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to U.S.C. Section 1350 As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema Linkbase Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document
101.LAB	XBRL Taxonomy Labels Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document

19

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized

	XFIT BRANDS, INC
	(Registrant)
Date: February 16, 2016	By:	/s/ David E. Vautrin
		David E. Vautrin
		Chief Executive Officer (Principal Executive Officer)
Date: February 16, 2016	By:	/s/ Robert J. Miranda
		Robert J. Miranda
		Chief Financial Officer (Principal Accounting Officer)

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EX-31.1

Exhibit 31.1

Chief Executive Officer Certification (Section 302)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David E. Vautrin, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of XFit Brands, Inc., (Registrant).

(2) Based on my knowledge, this quarterly 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 quarterly report;

(3) Based on my knowledge, the financial statements and other financial information included in this quarterly 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 quarterly report;

(4) The registrants other certifying officers 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)) 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 quarterly report is being prepared;

(b) evaluated the effectiveness of the registrants 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

(c) disclosed in this report any changes 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 quarterly 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 officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of 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 registrants 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 registrants internal control over financial reporting.

Date: February 16, 2016

By:	/s/ David E. Vautrin
	David E. Vautrin
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Chief Financial Officer Certification (Section 302)

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Miranda, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of XFit Brands, Inc., (Registrant).

(2) Based on my knowledge, this quarterly 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 quarterly report;

(3) Based on my knowledge, the financial statements and other financial information included in this quarterly 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 quarterly report;

(4) The registrants other certifying officers 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)) 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 quarterly report is being prepared;

(b) evaluated the effectiveness of the registrants 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

(c) disclosed in this report any changes 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 quarterly 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 officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of 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 registrants 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 registrants internal control over financial reporting.

Date: February 16, 2016

By:	/s/ Robert J. Miranda
	Robert J. Miranda
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF DISCLOSURE 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 Quarterly Report of XFit Brands, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, David E. Vautrin, Chief Executive Officer of the Company, certify, pursuant to 18 USC section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(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.

Dated: February 16, 2016

By:	/s/ David E. Vautrin
	David E. Vautrin,
	Chief Executive Officer
	Principal Executive Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION OF DISCLOSURE 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 Quarterly Report of XFit Brands, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) I, Robert J. Miranda, Chief Financial Officer of the Company, certify, pursuant to 18 USC section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(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.

Dated: February 16, 2016

By:	/s/ Robert J. Miranda
	Robert J. Miranda,
	Chief Financial Officer
	Principal Financial Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Document And Entity Information - shares	6 Months Ended
	Dec. 31, 2015	Feb. 16, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	XFIT BRANDS, INC.
Entity Central Index Key	0001623554
Document Type	10-Q
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		4,098,500
Trading Symbol	XFTB
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016

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Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Current Assets
Cash	$ 139,666	$ 51,016
Accounts receivable	208,888	92,823
Royalties receivable	65,413	75,000
Inventory	253,452	169,292
Prepaid expenses	206,235	333,572
Total Current Assets	873,654	721,703
Long Term Assets
Property and equipment, net	37,652	42,292
Other assets
Deposits	27,480	27,480
Intangible assets, net	37,472	52,264
TOTAL ASSETS	976,258	843,739
Current Liabilities
Accounts payable	604,104	446,063
Related party payable	95,620	95,620
Accrued expenses and interest	67,507	129,182
Customer deposits	210,100	$ 158,467
Line of credit	34,197
Total Current Liabilities	1,011,528	$ 829,332
Note payable, net	2,307,960	1,705,417
Total Liabilities	$ 3,319,488	$ 2,534,749
Commitments and contingencies (Note 8)
Stockholders' Deficit
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2015 and June 30, 2015
Common stock, $0.0001 par value, 250,000,000 shares authorized, 4,098,500 and 4,073, 500 shares issued and outstanding as of December 31, 2015 and June 30, 2015, respectively	$ 409	$ 407
Additional paid in capital	4,444,505	4,319,074
Accumulated deficit	(6,788,144)	(6,010,491)
Total Stockholders' Deficit	(2,343,230)	(1,691,010)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 976,258	$ 843,739

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2015	Jun. 30, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	4,098,500	4,073,500
Common stock, shares outstanding	4,098,500	4,073,500

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Revenues:
Product sales	$ 659,262	$ 542,118	$ 1,132,518	$ 773,321
Royalties	15,413	67,492	15,413	130,440
Net revenues	674,675	609,610	1,147,931	903,761
Cost of revenues	386,487	397,708	645,331	605,759
Gross Profit	288,188	211,902	502,600	298,002
Operating expenses
General and administrative	402,575	563,271	847,505	877,355
Sales and marketing	84,302	55,428	174,196	101,720
Total operating expenses	486,877	618,699	1,021,701	979,075
(Loss) Income from operations	(198,689)	(406,797)	(519,101)	(681,073)
Interest expense	$ (142,279)	(94,304)	$ (258,556)	(171,912)
Other income		12,758		14,757
Net (Loss) Income	$ (340,968)	$ (488,343)	$ (777,657)	$ (838,228)
Loss per common share - basic and diluted	$ (0.09)	$ (0.12)	$ (0.19)	$ (0.21)
Weighted average shares outstanding - basic and diluted	4,098,500	4,000,000	4,098,500	4,000,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities
Net loss	$ (777,657)	$ (838,228)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	29,942	4,200
Amortization of debt issuance costs and loan discount	91,905	69,020
Stock based compensation	75,000	$ 232,314
Value of options issued to employees	433
Changes in operating assets and liabilities:
Accounts receivable	(116,065)	$ (81,547)
Royalties receivable	9,587	$ 18,133
Prepaid expenses	127,337
Inventory	(84,160)	$ (125,127)
Accounts payable	158,044	239,545
Accrued expenses and interest	(1,036)	71,151
Customer deposits	51,633	268,161
Net cash used in operating activities	(435,037)	(142,378)
Cash flows from investing activities
Acquisition of intangible assets	(8,999)	(3,596)
Purchase of property and equipment	(1,511)	(33,634)
Net cash used in investing activities	(10,510)	$ (37,230)
Cash flows from financing activities
Payoff of line of credit	(19,224)
Proceeds from line of credit	53,421
Proceeds from increase in PIMCO note payable	500,000
Net cash provided by financing activities	534,197
Net increase (decrease) in cash	88,650	$ (179,608)
Cash at beginning of period	51,016	360,323
Cash at end of period	139,666	180,715
Supplemental cash flow information:
Cash paid for interest	103,305	$ 65,233
Non-cash investing and financing activities:
Value of common shares issued as a loan fee	$ 50,000
Distribution		$ 100,000
Issuance of common stock in exchange for LLC interests		$ 400

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Nature of the Business and Significant Accounting Policies

6 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Nature of the Business and Significant Accounting Policies

NOTE 1 – NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

History of the Company

XFit Brands, Inc. (“XFit” or the “Company”) was incorporated on September 16, 2014 under the laws of the State of Nevada. The fiscal year of the Company is June 30. XFit’s principal business activity is the design, development, and worldwide marketing and selling of functional equipment, training gear, apparel and accessories for the impact sports market and fitness industry. Products are marketed and sold under the “Throwdown®” brand name to gyms, fitness facilities and directly to consumers via an internet website and through third party catalogues through a mix of independent distributors and licensees throughout the world.

These financial statements represent the condensed consolidated financial statements of XFit and its wholly owned operating subsidiaries Throwdown Industries Holdings, LLC (“Holdings”), Throwdown Holdings, LLC (“TDLLC”), and Throwdown Industries, Inc. (“TDINC”). On September 26, 2014, XFit entered into a Contribution and Exchange Agreement with TD Legacy, LLC (“TD Legacy”) and Holdings under which TD Legacy contributed all of its membership interest in Holdings to XFit in exchange for the issuance by XFit of 4,000,000 shares of common stock to TD Legacy. The result of this transaction was that Holdings became a wholly owned subsidiary of XFit.

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes as of and for the years ended June 30, 2015 and 2014, which were filed with the Company’s annual report form 10K on September 28, 2015. The results of operations for the six months ended December 31, 2015 are not necessarily indicative of results that may be expected for the year ending June 30, 2016, or for any other interim period.

Basis of Consolidation

The condensed consolidated financial statements include the accounts of XFit, Holdings and TDINC. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also consolidates any variable interest entities (“VIEs”), of which it is the primary beneficiary, as defined within Accounting Standards Codification (“ASC”) 810. The Company does not have any VIEs that are required to be consolidated as of December 31, 2015 or June 30, 2015.

Recent Accounting Pronouncements

The Company has implemented all new accounting standards and does not believe that there are any other new accounting pronouncements that have been issued that may have a material impact on the consolidated financial statements.

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU-2015-03”). ASU 2015-03 requires companies to present debt issuance costs as a direct deduction from the carrying value of that debt liability. ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Income (Loss) per Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of December 31, 2015 and June 30, 2015, the Company had 453,723 and 452,612, respectively, of potential shares exercisable that are attributable to the PIMCO warrant, which have been excluded as their effect is anti-dilutive.

Use of Estimates

Condensed consolidated financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long-lived assets, and equity instruments issued for financing. Actual results could differ from those estimates.

Loan Discounts and Loan Fees

The Company amortizes loan discounts over the term of the loan using the effective interest method. Costs associated with obtaining financing are capitalized and amortized over the term of the related loans using the effective interest method. As of December 31, 2015 and June 30, 2015, the Company had total gross debt issuance costs of $199,632 and $149,632, respectively. Amortization of the debt issuance costs was $32,947 and $19,611 for the six month periods ended December 31, 2015 and 2014, respectively, which was recorded as a component of interest expense on the condensed consolidated statements of operations.

Subsequent Events

In accordance with ASC 855, the Company evaluated subsequent events through February 16, 2016, which was the date the consolidated financial statements were available for issue.

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Property and Equipment, Net

6 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

NOTE 2 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Office furniture and equipment	$	48,193		$	46,233
Warehouse equipment		15,254			13,254
Molds and dies		4,200			6,650
Total, cost		67,647			66,137
Accumulated Depreciation		(29,995	)		(23,845	)
Property and equipment, net	$	37,652		$	42,292

Depreciation expense for the six month periods ended December 31, 2015 and 2014 was $6,151 and $4,200, respectively.

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Intangible Assets, Net

6 Months Ended

Dec. 31, 2015

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets, Net

NOTE 3 – INTANGIBLE ASSETS, NET

Intangible assets consisted of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Transformations exercise fitness program	$	62,500		$	62,500
Trademark and patent		7,811			4,396
Computer software		5,584			—
Total, cost		75,895			66,896
Accumulated amortization		(38,423	)		(14,622	)
Intangible assets, net	$	37,472		$	52,264

Amortization expense for the six months ended December 31, 2015 and 2014 was $23,791 and $270, respectively.

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Note Payable

6 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Note Payable

NOTE 4 – NOTE PAYABLE

The note payable is comprised of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Note payable	$	2,620,098		$	2,085,128
Add: accrued interest added to note principal		25,670			—
Less: unamortized loan discount		(218,113	)		(277,070	)
Less: unamortized debt issuance costs		(119,695	)		(102,641	)
Total note payable, net	$	2,307,960		$	1,705,417

On June 10, 2014, the Company entered into a Note Purchase Agreement with Pacific Investment Management Company (“PIMCO”) that authorized the issuance of up to $2,500,000. On June 12, 2014, the Company entered into a Senior Secured Note (“Note”) whereby the Company drew $1,500,000. The note bears interest at 14% and an effective interest rate of 21%. This Note is collateralized by all of the assets of the Company.

On February 6, 2015, the Company drew down an additional $500,000 of funds on the PIMCO Note Payable. Following the February 6, 2015 draw, the principal balance payable (including accrued interest added to the principal amount) on the PIMCO note was $2,044,300, and the Company had an additional $500,000 available to draw on this loan facility. The full principal balance outstanding related to this note is due in June 2017.

The Note includes various covenants, including but not limited to, having annual audited financial statements within 90 days of the end of the fiscal year. At December 31, 2015, the Company is in compliance with all covenants.

In connection with the Note, the Company granted warrants to acquire up to 10% of the Company’s capital stock based on an aggregate enterprise fair market value of $15.0 million. The Company valued the warrants using the Black-Scholes option pricing model with the following variables: annual dividend yield of 0%; expected life of 10 years; risk free rate of return of 2.92%; and expected volatility of 0%. The Company estimated the value of the warrants to be $377,480, which is recorded as a loan discount and is being amortized under the effective interest method to interest expense over the term of the loan.

On September 30, 2015, in consideration of the draw-down of the remaining $500,000 available on the PIMCO Note Payable, the Company issued 10,000 shares of its common stock at a fair value of $50,000 as determined by the Company’s board of directors. This amount was recorded as a loan fee to be amortized over the remaining term of the PIMCO Note Payable.

On October 20, 2015, the Company drew the remaining $500,000 available under its delayed draw note facility with PIMCO to increase the principal amount under this note (including the accrued interest added to the principal amount) to $2,620,098. A replacement note was issued on this date to reflect the note increase.

During the six month periods ended December 31, 2015 and 2014, the Company amortized $91,905 and $69,020, respectively, of the loan fees and discount which is recorded as a component of interest expense on the consolidated statements of operations.

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Bank Line of Credit

6 Months Ended

Dec. 31, 2015

Line of Credit Facility [Abstract]

Bank Line of Credit

NOTE 5 – BANK LINE OF CREDIT

On July 24, 2015, the Company entered into an unsecured line of credit with Wells Fargo Bank for up to $35,000. The line of credit bears interest at prime plus 4% and is personally guaranteed by the Company’s chief executive officer. As of September 30, 2015, the balance payable on the line of credit was $19,224, which amount was repaid on October 23, 2015. After October 23, 2015, the Company borrowed an additional $34,197 from this line of credit and has an unpaid balance on the line of credit of $34,197 as of December 31, 2015.

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Related Party Transactions

6 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 6 – RELATED PARTY TRANSACTIONS

Related Party Payable

As of December 31, 2015 and June 30, 2015, the Company has $95,620 of salaries and bonuses payable to four of its officers and membership interest holders. These bonuses were to cover income taxes relating to bonuses issued during 2009.

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Stockholders' Deficit

6 Months Ended

Dec. 31, 2015

Equity [Abstract]

Stockholders' Deficit

NOTE 7 – STOCKHOLDERS’ DEFICIT

On July 1, 2015, the Company issued 15,000 shares of its common stock valued at $75,000 to an employee as a signing bonus.

On July 15, 2015, the board of directors approved the issuance of 63,500 stock options to employees to be utilized on a performance and retention basis.

On September 30, 2015, the Company issued 10,000 shares of its common stock valued by the Company’s board of directors at $50,000 to PIMCO as a loan fee in consideration of the additional $500,000 draw-down on the PIMCO Note Payable that was funded on October 20, 2015. (See Note 4—Note Payable).

On November 17, 2015, the Company issued options to purchase 43,000 shares of stock to six employees for services rendered. (See Note 8—Commitments and Contingencies—Stock Incentive Plan)

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Commitments and Contingencies

6 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Lease Commitments

In June 2015, the Company entered into a lease agreement for approximately 25,788 square feet of warehouse and office space under a 38 month operating lease that commenced on October 1, 2015 and expires on October 31, 2018. The lease has monthly payments starting at $8,252 for the period October 1, 2015 through February 28, 2016. Thereafter with monthly payments ranging $16,504 to $17,509 over the term of the lease. The Company previously leased office and warehouse facilities under a lease which expired on November 30, 2015 pursuant to which it paid $4,865 per month which included operating expenses, insurance and property taxes

In June 2015, the Company entered into a sublease of a portion of the premises for the period October 1, 2015 through August 31, 2016, at a monthly rental rate of $5,000.

Rent expense for the six month periods ended December 31, 2015 and 2014, were $67,937 and $29,383, respectively.

Litigation

From time-to-time, the Company is subject to various litigation and other claims in the normal course of business. The Company establishes liabilities in connection with legal actions that management deems to be probable and estimable. No amounts have been accrued in the condensed consolidated financial statements with respect to any matters.

Stock Incentive Plan

On October 21, 2014, the Board of Directors and the Company’s sole stockholder adopted the 2014 Stock Incentive Plan. The purpose of the 2014 Stock Incentive Plan is to advance the best interests of the Company by providing those persons who have a substantial responsibility for management and growth of the Company with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. Further, the availability and offering of stock options and common stock under the plan supports and increases the Company’s ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability which the Company depends. The total number of shares available for the grant of either stock options or compensation stock under the plan is 600,000 shares of common stock, subject to adjustment. The Board of Directors administers the plan and has full power to grant stock options.

At December 31, 2015, the Company had not issued any shares under the plan and had granted options to purchase 43,000 shares under the plan.

On November 17, 2015, the Company granted 43,000 aggregate stock options to six employees. The value of the shares granted was determined to be $17,742 utilizing the Black-Scholes valuation model based on stock value of $5.00 at the date of issuance, a 5 year life of the options, a discount rate of 1.73%, and a zero percent stock volatility rate. For the six months ended December 31, 2015, the value of the stock options was $433 and was recorded as stock based compensation expense on the statement of operations.

Equity Purchase Agreement

On December 17, 2014, the Company entered into an Equity Purchase Agreement with Kodiak Capital LLC. The Equity Purchase Agreement provides the Company with financing whereby the Company can issue and sell to Kodiak, from time to time, shares of common stock (the “Put Shares”) up to an aggregate purchase price of $5.0 million (the “Maximum Commitment Amount”) during the commitment period. The commitment period is defined as the period beginning on the trading day immediately following the effectiveness of the registration statement and ending December 31, 2016. In addition, in no event shall Kodiak be entitled to purchase that number of Put Shares which when added to the sum of the number of shares of common stock already beneficially owned by Kodiak would exceed 9.99% of the number of shares of common stock outstanding on the applicable closing date.

The Equity Purchase Agreement will terminate when any of the following events occur: (i) Kodiak has purchased an aggregate of $5.0 million of the Company’s common stock, (ii) on December 31, 2016 or (iii) upon written notice from the Company to Kodiak.

Registration Rights Agreement

On December 17, 2014, the Company entered into a registration rights agreement with Kodiak Capital, LLC under which the Company is obligated to register the shares to be acquired by Kodiak pursuant to that certain Equity Purchase Agreement dated December 17, 2014, under which Kodiak agreed to purchase up to $5 million of XFit common stock, subject to certain conditions.

Asset Purchase Agreement

On February 26, 2015, the Company entered into an Asset Purchase Agreement to acquire the exclusive rights, title, and interest in the Transformations exercise and fitness program. The purchase price was $62,500 which comprised of a $7,500 cash payment and eleven thousand (11,000) shares of the Company’s common stock that was valued at $55,000. The agreement also has a performance based earn out for a period of eighteen (18) months that is based on fifty percent (50%) of all programming services gross revenues derived from the Transformations program, up to a maximum earn out of $187,500. The earn out is payable in tranches and none of the tranches were met as of December 31, 2015.

Vendor Credit Agreements

On June 18 2015, the Company entered into a Stock Purchase Agreement with Ever Blooming Industrial Limited, whereby the Company issued 20,000 shares of its common stock at $5.00 per share. The purchase price is in the form of a manufacturing credit totaling $100,000 to use for future inventory purchases (the “Vendor Credit”). The Company can use all or part of the Vendor Credit over the next 12 months until the Vendor Credit is exhausted. As of December 31, 2015 and June 30, 2015, the Company had none and $100,000, respectively, of Vendor Credit included in prepaid expenses on the condensed consolidated balance sheets.

On June 26 2015, the Company entered into a Stock Purchase Agreement with Yayu General Machinery Co., LTD, whereby the Company issued 40,000 shares of its common stock at $5.00 per share. The purchase price is in the form of a manufacturing credit of $200,000 to use for future inventory purchases (the “Vendor Credit”). The Company can use all or part of the Vendor Credit over the next 12 months until the Vendor Credit is exhausted. As of Deceember 31, 2015 and June 30, 2015, the Company had $191,549 and $200,000, respectively, of Vendor Credit included in prepaid expenses in the condensed consolidated balance sheets.

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Subsequent Events

6 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events

NOTE 9 – SUBSEQUENT EVENTS

None

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Nature of the Business and Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited, but in the opinion of management, reflect all adjustments necessary to fairly state the Company’s financial position, results of operations, and cash flows as of and for the dates and periods presented. The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes as of and for the years ended June 30, 2015 and 2014, which were filed with the Company’s annual report form 10K on September 28, 2015. The results of operations for the six months ended December 31, 2015 are not necessarily indicative of results that may be expected for the year ending June 30, 2016, or for any other interim period.

Basis of Consolidation

Basis of Consolidation

The condensed consolidated financial statements include the accounts of XFit, Holdings and TDINC. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company also consolidates any variable interest entities (“VIEs”), of which it is the primary beneficiary, as defined within Accounting Standards Codification (“ASC”) 810. The Company does not have any VIEs that are required to be consolidated as of December 31, 2015 or June 30, 2015.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company has implemented all new accounting standards and does not believe that there are any other new accounting pronouncements that have been issued that may have a material impact on the consolidated financial statements.

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU-2015-03”). ASU 2015-03 requires companies to present debt issuance costs as a direct deduction from the carrying value of that debt liability. ASU 2015-03 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Income (Loss) per Share

Income (Loss) per Share

The basic loss per share is calculated by dividing the Company’s net loss available to common shareholders by the weighted average number of common shares during the period. The diluted net loss per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted net loss per share is the same as basic net loss per share due to the lack of dilutive items. As of December 31, 2015 and June 30, 2015, the Company had 453,723 and 452,612, respectively, of potential shares exercisable that are attributable to the PIMCO warrant, which have been excluded as their effect is anti-dilutive.

Use of Estimates

Use of Estimates

Condensed consolidated financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Among other things, management has estimated the collectability of its accounts receivable, the valuation of long-lived assets, and equity instruments issued for financing. Actual results could differ from those estimates.

Loan Discounts and Loan Fees

Loan Discounts and Loan Fees

The Company amortizes loan discounts over the term of the loan using the effective interest method. Costs associated with obtaining financing are capitalized and amortized over the term of the related loans using the effective interest method. As of December 31, 2015 and June 30, 2015, the Company had total gross debt issuance costs of $199,632 and $149,632, respectively. Amortization of the debt issuance costs was $32,947 and $19,611 for the six month periods ended December 31, 2015 and 2014, respectively, which was recorded as a component of interest expense on the condensed consolidated statements of operations.

Subsequent Events

Subsequent Events

In accordance with ASC 855, the Company evaluated subsequent events through February 16, 2016, which was the date the consolidated financial statements were available for issue.

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Property and Equipment, Net (Tables)

6 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

Property and equipment consisted of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Office furniture and equipment	$	48,193		$	46,233
Warehouse equipment		15,254			13,254
Molds and dies		4,200			6,650
Total, cost		67,647			66,137
Accumulated Depreciation		(29,995	)		(23,845	)
Property and equipment, net	$	37,652		$	42,292

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Intangible Assets, Net (Tables)

6 Months Ended

Dec. 31, 2015

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Summary of Intangible Assets

Intangible assets consisted of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Transformations exercise fitness program	$	62,500		$	62,500
Trademark and patent		7,811			4,396
Computer software		5,584			—
Total, cost		75,895			66,896
Accumulated amortization		(38,423	)		(14,622	)
Intangible assets, net	$	37,472		$	52,264

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Note Payable (Tables)

6 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Schedule of Note Payable

The note payable is comprised of the following at:

	December 31, 2015			June 30, 2015
	(Unaudited)
Note payable	$	2,620,098		$	2,085,128
Add: accrued interest added to note principal		25,670			—
Less: unamortized loan discount		(218,113	)		(277,070	)
Less: unamortized debt issuance costs		(119,695	)		(102,641	)
Total note payable, net	$	2,307,960		$	1,705,417

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Nature of the Business and Significant Accounting Policies (Details Narrative) - USD ($)		6 Months Ended		12 Months Ended
	Sep. 26, 2014	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015
Financing Receivable, Impaired [Line Items]
Net loss per share due to dilutive shares		$ 453,723		$ 452,612
Gross debt issuance costs		199,632		$ 149,632
Amortization of the debt issuance costs		$ 32,947	$ 19,611
TD Legacy [Member]
Financing Receivable, Impaired [Line Items]
Stock issued during period, shares	4,000,000

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Property and Equipment, Net (Details Narrative) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 6,151	$ 4,200

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Property and Equipment, Net - Summary of Property and Equipment (Details) - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 67,647	$ 66,137
Less: Accumulated depreciation	(29,995)	(23,845)
Total Property and equipment, net	37,652	42,292
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	48,193	46,233
Warehouse Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	15,254	13,254
Molds and Dies [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 4,200	$ 6,650

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Intangible Assets, Net (Disclosure Narrative) - USD ($)	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Amortization expense	$ 23,791	$ 270

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Intangible Assets, Net - Summary of Intangible Assets (Deatils) - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Total, cost	$ 75,895	$ 66,896
Accumulated Amortization	(38,423)	(14,622)
Intangible assets, net	37,472	52,264
Transformations Exercise Fitness Program [Member]
Total, cost	62,500	62,500
Trademark and Patent [Member]
Total, cost	7,811	$ 4,396
Computer Software [Member]
Total, cost	$ 5,584

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Note Payable (Details Narrative) - USD ($)					6 Months Ended
	Oct. 20, 2015	Sep. 30, 2015	Feb. 06, 2015	Feb. 06, 2015	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015	Jun. 12, 2014	Jun. 10, 2014
Debt Instrument [Line Items]
Note payable					$ 2,620,098		$ 2,085,128
Fair value of common stock on note payable					50,000
Debt issuance costs and loan discount					$ 91,905	$ 69,020
Warrant [Member]
Debt Instrument [Line Items]
Percentage of granted warrants acquire					10.00%
Note payable fair market value					$ 15,000,000
Dividend yield					0.00%
Expected life					10 years
Risk free rate of return					2.92%
Expected volatility					0.00%
Estimated value of warrants					$ 377,480
PIMCO Note Payable [Member]
Debt Instrument [Line Items]
Company drew an additional funds				$ 500,000
Note due date			Jun. 30, 2017
PIMCO Note Payable [Member] | Delayed Draw Note Facility [Member]
Debt Instrument [Line Items]
Company drew an additional funds				500,000
Note payable to the PIMCO Funds ("PIMCO")			$ 2,044,300	$ 2,044,300
PIMCO [Member]
Debt Instrument [Line Items]
Note payable	$ 2,620,098
Company drew an additional funds	500,000
Drew down remaining available amount	$ 500,000	$ 500,000
Common stock shares issued on note payable		10,000
Fair value of common stock on note payable		$ 50,000
Note Purchase Agreement [Member] | PIMCO [Member]
Debt Instrument [Line Items]
Note payable issuance									$ 2,500,000
Note Purchase Agreement [Member] | PIMCO [Member] | Senior Secured Note [Member]
Debt Instrument [Line Items]
Note payable								$ 1,500,000
Note bears interest rate								14.00%
Note effective interest rate								21.00%

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Note Payable - Schedule of Note Payable (Details) - USD ($)	Dec. 31, 2015	Jun. 30, 2015
Debt Disclosure [Abstract]
Note payable	$ 2,620,098	$ 2,085,128
Add: accrued interest added to note principal	25,670
Less: unamortized loan discount	(218,113)	$ (277,070)
Less: unamortized debt issuance costs	(119,695)	(102,641)
Total note payable, net	$ 2,307,960	$ 1,705,417

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Bank Line of Credit (Details Narrative) - USD ($)			6 Months Ended
	Oct. 23, 2015	Jul. 24, 2015	Dec. 31, 2015	Dec. 31, 2014	Sep. 30, 2015	Jun. 30, 2015
Line of credit			$ 34,197		$ 19,224
Line of credit and borrowed additional amount	$ 34,197		$ 53,421
Wells Fargo Bank [Member]
Line of credit		$ 35,000
Lineof credit amount repayment date		Oct. 23, 2015
Wells Fargo Bank [Member] | Prime Rate [Member]
Line of credit interest rate		4.00%

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Related Party Transactions (Details Narrative)	6 Months Ended
	Dec. 31, 2015 USD ($) Officers	Jun. 30, 2015 USD ($)
Related Party Transactions [Abstract]
Salaries and bonuses payable | $	$ 95,620	$ 95,620
Number of officers and membership holders | Officers	4

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Stockholders' Deficit (Details Narrative) - USD ($)						6 Months Ended
	Nov. 17, 2015	Oct. 20, 2015	Sep. 30, 2015	Jul. 15, 2015	Jul. 02, 2015	Dec. 31, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Number of common stock shares issued for employee as performance bonus				63,500
Fair value of common stock on note payable as loan fee in consideration						$ 50,000
Six Employees [Member]
Class of Stock [Line Items]
Number of stock options issued	43,000
PIMCO [Member]
Class of Stock [Line Items]
Common stock shares issued as loan fee in consideration			10,000
Fair value of common stock on note payable as loan fee in consideration			$ 50,000
Company drew an additional funds		$ 500,000
Signing Bonus [Member]
Class of Stock [Line Items]
Number of common stock shares issued					15,000
Number of common stock value issued					$ 75,000

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Commitments and Contingencies (Details Narrative)						1 Months Ended	6 Months Ended
	Nov. 17, 2015 USD ($) $ / shares shares	Jun. 26, 2015 USD ($) $ / shares shares	Jun. 18, 2015 USD ($) $ / shares shares	Feb. 26, 2015 USD ($) shares	Dec. 17, 2014 USD ($)	Jun. 30, 2015 USD ($) ft²	Dec. 31, 2015 USD ($) shares	Dec. 31, 2014 USD ($)
Other Commitments [Line Items]
Rent expense							$ 67,937	$ 29,383
Value of options issued to employees							433
Cash payment of purchase price							8,999	$ 3,596
Equity Purchase Agreement [Member] | Kodiak Capital LLC [Member]
Other Commitments [Line Items]
Long-term purchase commitment, amount					$ 5,000,000		$ 5,000,000
Noncontrolling interest, ownership percentage by non-controlling owners					9.99%
Purchase agreement termination closing date					Dec. 31, 2016		Dec. 31, 2016
Registration Rights Agreement [Member] | Kodiak Capital LLC [Member]
Other Commitments [Line Items]
Registration payment arrangement, maximum potential consideration					$ 5,000,000
Asset Purchase Agreement [Member]
Other Commitments [Line Items]
Total purchase price				$ 62,500
Cash payment of purchase price				$ 7,500
Number of common stock shares issued for purchases of assets | shares				11,000
Number of common stock value issued for purchases of assets				$ 55,000
Performance based earn out period				18 months
Performance percentage				50.00%
Maximum earn out amount				$ 187,500
Stock Purchase Agreement [Member] | Ever Blooming Industrial Limited [Member]
Other Commitments [Line Items]
Number of common stock shares issued for consideration of future inventory purchases | shares			20,000
Common stock price per share | $ / shares			$ 5.00
Number of common stock value issued for consideration of future inventory purchases			$ 100,000
Vendor credit period			12 months
Prepaid expenses							$ 0
Stock Purchase Agreement [Member] | Yayu General Machinery Co., LTD[Member]
Other Commitments [Line Items]
Number of common stock shares issued for consideration of future inventory purchases | shares		40,000
Common stock price per share | $ / shares		$ 5.00
Number of common stock value issued for consideration of future inventory purchases		$ 200,000
Vendor credit period		12 months
Vendor Credit Agreements [Member] | Ever Blooming Industrial Limited [Member]
Other Commitments [Line Items]
Prepaid expenses						$ 100,000
Vendor Credit Agreements [Member] | Yayu General Machinery Co., LTD[Member]
Other Commitments [Line Items]
Prepaid expenses						$ 200,000	$ 191,549
Six Employees [Member]
Other Commitments [Line Items]
Number of stock options issued | shares	43,000
Fair value of shares issued	$ 17,742
Stock price per share | $ / shares	$ 5.00
Stock options life	5 years
Stock option discount rate	1.73%
Stock option volatility rate	0.00%
2014 Stock Incentive Plan [Member]
Other Commitments [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares available for grant | shares							600,000
Number of options issued to purchase shares of common stock | shares							43,000
Warehouse Facilities [Member]
Other Commitments [Line Items]
Lease expiration date						Nov. 30, 2015
Operating leases rent expense						$ 4,865
October 1, 2015 Through August 31, 2016 [Member] | Premises [Member]
Other Commitments [Line Items]
Sublease rent expense						$ 5,000
Lease Agreement [Member]
Other Commitments [Line Items]
Area of square feet | ft²						25,788
Operating lease period						38 months
Lease expiration date						Oct. 31, 2018
Lease Agreement [Member] | Minimum [Member]
Other Commitments [Line Items]
Operating leases rent expense						$ 16,504
Lease Agreement [Member] | Maximum [Member]
Other Commitments [Line Items]
Operating leases rent expense						17,509
Lease Agreement [Member] | October 1, 2015 Through February 28, 2016 [Member]
Other Commitments [Line Items]
Operating leases rent expense						$ 8,252