DELAWARE
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23-2517953
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☒
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AFTERMASTER, INC.
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INDEX
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PART I - FINANCIAL INFORMATION
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PAGE NUMBER
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Item 1.
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Financial Statements
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3
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Condensed Consolidated Balance Sheets – December 31, 2017
(unaudited) and June 30, 2017
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3
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Condensed Consolidated Statements of Operations - For the three and
six months ended December 31, 2017 and 2016
(unaudited)
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4
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Condensed Consolidated Statements of Cash Flows - For the six
months ended December 31, 2017 and 2016 (unaudited)
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5
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Notes to Condensed Consolidated Financial Statements
(unaudited)
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6
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Item 2.
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Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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27
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Item 3.
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Quantitative and Qualitative Disclosure About Market
Risks
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36
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Item 4T.
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Controls and Procedures
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37
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PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
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37
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Item 1A.
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Risk Factors
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37
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Item 2.
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Unregistered Sales of Equity Securities and Use of
Proceeds
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37
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Item 3.
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Defaults Upon Senior Securities
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37
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Item 4.
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Submission of Matters to a Vote of Security Holders
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37
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Item 5.
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Other Information
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37
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Item 6.
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Exhibits
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38
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SIGNATURES
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39
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AFTERMASTER, INC.
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Consolidated Balance Sheets
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December
31,
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June
30,
|
|
2017
|
2017
|
|
(Restated and
unaudited)
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ASSETS
|
|
|
|
|
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Current
Assets
|
|
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Cash
|
$161,699
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$250,728
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Accounts
receivable
|
69,714
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97,103
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Inventory,
net
|
340,389
|
104,891
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Available
for sale securities
|
58,800
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123,600
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Prepaid
expenses
|
447,123
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507,254
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Total
Current Assets
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1,077,725
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1,083,576
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Property
and equipment, net
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203,264
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266,040
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Intangible
assets, net
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90,085
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102,243
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Deposits
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29,263
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33,363
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Prepaid
expenses, net of current
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-
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9,104
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|
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Total
Assets
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$1,400,337
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$1,494,326
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current
Liabilities
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Accounts
payable and other accrued expenses
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$602,799
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$459,975
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Accrued
interest
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490,657
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185,509
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Deferred
revenue
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186,752
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270,623
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Accrued
consulting services - related party
|
32,419
|
22,064
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Lease
payable
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-
|
1,937
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Derivative
Liability
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2,461,034
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2,145,065
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Notes
payable - related party
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633,000
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610,000
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Notes
payable, net of discount of $15,319 and $0,
respectively
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449,169
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40,488
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Convertible
notes payable - related party, net of discount of $3,750 and $0,
respectively
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3,990,000
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3,951,182
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Convertible
notes payable, net of discount of $790,455 and $549,737,
respectively
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2,877,295
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2,267,845
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Total
Current Liabilities
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11,723,125
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9,954,688
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Total
Liabilities
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11,723,125
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9,954,688
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Stockholders'
Deficit
|
|
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Convertible
preferred stock, Series A; $0.001 par value; 100,000 shares
authorized, 15,500 shares issued and
outstanding
|
16
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16
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Convertible
preferred stock, Series A-1; $0.001 par value; 3,000,000 shares
authorized 2,585,000 shares issued and outstanding,
respectively
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2,585
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2,585
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Convertible
preferred stock, Series B; $0.001 par value; 200,000 shares
authorized, 3,500 shares issued and outstanding
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3
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3
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Convertible
preferred stock, Series C; $0.001 par value; 1,000,000 shares
authorized, 13,404 shares issued and
outstanding
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13
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13
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Convertible
preferred stock, Series D; $0.001 par value; 375,000 shares
authorized, 130,000 shares issued and
outstanding
|
130
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130
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Convertible
preferred stock, Series E; $0.001 par value; 1,000,000 shares
authorized, 275,000 shares issued and
outstanding
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275
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275
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Convertible
preferred stock, Series P; $0.001 par value; 600,000 shares
authorized, 86,640 shares issued and
outstanding
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87
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87
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Convertible
preferred stock, Series S; $0.001 par value; 50,000 shares
authorized, -0- shares issued and outstanding
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-
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-
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Common
stock, authorized 250,000,000 shares,
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par
value $0.001, 126,900,921 and 118,486,728 shares
issued
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and
outstanding, respectively
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126,909
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118,493
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Additional
paid In capital
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64,675,454
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63,627,987
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Accumulated
other comprehensive income
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28,800
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93,600
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Accumulated
Deficit
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(75,157,060)
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(72,303,551)
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Total
Stockholders' Deficit
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(10,322,788)
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(8,460,362)
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Total
Liabilities and Stockholders' Deficit
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$1,400,337
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$1,494,326
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AFTERMASTER, INC.
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||||
Consolidated
Statements of Operations and Comprehensive Loss
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||||
(Unaudited)
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||||
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For the
Three Months Ended
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For the
Six Months Ended
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December
31,
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December
31,
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2017
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2016
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2017
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2016
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(Restated
and
unaudited)
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(Unaudited)
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(Restated
and
unaudited)
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(Unaudited)
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REVENUES
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AfterMaster
Revenues
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$ 118,904
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$ 48,739
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$ 239,619
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$ 103,225
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Product
Revenues
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216,162
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-
|
710,843
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-
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Total
Revenues
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335,066
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48,739
|
950,462
|
103,225
|
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COSTS
AND EXPENSES
|
|
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Cost
of Revenues (Exclusive of Depreciation and
Amortization)
|
445,012
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157,680
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1,001,340
|
319,775
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Depreciation
and Amortization Expense
|
44,538
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45,015
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83,507
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85,554
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Research
and Development
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-
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26,020
|
2,194
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93,015
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Advertising
and Promotion Expense
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16,649
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2,565
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18,665
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17,644
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Legal
and Professional Expense
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23,000
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30,804
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37,190
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55,070
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Non-Cash
Consulting Expense
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15,597
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659,938
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92,035
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1,531,909
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General
and Administrative Expenses
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818,042
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915,206
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1,605,032
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1,628,042
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Total
Costs and Expenses
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1,362,838
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1,837,228
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2,839,963
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3,731,009
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|
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Loss
from Operations
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(1,027,772)
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(1,788,489)
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(1,889,501)
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(3,627,784)
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Other
Expense
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|
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Interest
Expense
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(601,426)
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(378,522)
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(1,476,739)
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(747,595)
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Derivative
Expense
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(177,451)
|
-
|
(345,133)
|
-
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Change
in Fair Value of Derivative
|
963,041
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(463)
|
767,822
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(574)
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Gain
on Extinguishment of Debt
|
-
|
9,236
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90,042
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9,236
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|
|
|
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Total
Other Expense
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184,164
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(369,749)
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(964,008)
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(738,933)
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Loss
Before Income Taxes
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(843,608)
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(2,158,238)
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(2,853,509)
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(4,366,717)
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Income
Tax Expense
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-
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-
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-
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-
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NET
LOSS
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$ (843,608)
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$ (2,158,238)
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$ (2,853,509)
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$ (4,366,717)
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|
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Preferred
Stock Accretion and Dividends
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(56,367)
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(45,620)
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(112,734)
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(87,858)
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NET
LOSS AVAILABLE TO COMMON SHAREHOLDERS
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$ (899,975)
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$ (2,203,858)
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$ (2,966,243)
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$ (4,454,575)
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|
|
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|
Basic
and diluted Loss Per Share of Common Stock
|
$ (0.01)
|
$ (0.02)
|
$ (0.02)
|
$ (0.04)
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|
|
|
|
|
Basic
and Diluted -Weighted Average Number of Shares
Outstanding
|
124,080,046
|
104,726,332
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121,773,934
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104,045,562
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|
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Other
Comprehensive Income, net of tax
|
|
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NET
LOSS AVAILABLE TO COMMON SHAREHOLDERS
|
(899,975)
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(2,203,858)
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(2,966,243)
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(4,454,575)
|
Unrealized
gain loss on AFS Securities
|
10,860
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(39,000)
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(64,800)
|
(15,600)
|
COMPREHENSIVE
LOSS
|
$ (889,115)
|
$ (2,242,858)
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$ (3,031,043)
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$ (4,470,175)
|
|
|
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The
accompanying notes are an integral part of these consolidated
financial statements.
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AFTERMASTER, INC.
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||
Consolidated Statements of Cash Flows
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||
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|
|
|
|
|
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For the
Six Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
|
(Restated and
unaudited)
|
(Unaudited)
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
Net
Loss
|
$(2,853,509)
|
$(4,366,717)
|
Adjustments
to reconcile net loss to cash from operating
activities:
|
|
|
Depreciation
and amortization
|
83,508
|
85,554
|
Share-based
compensation - Common Stock
|
187,623
|
218,538
|
Share-based
compensation - warrants and options
|
-
|
23,976
|
Share-based
compensation - warrants
|
-
|
13,204
|
Common
stock issued for services and rent
|
-
|
18,897
|
Common
stock issued as incentive with convertible debt
|
16,897
|
-
|
Common
stock issued to extend the maturity dates on
debt
|
-
|
120,000
|
Amortization
of debt discount and issuance costs
|
885,633
|
152,513
|
(Gain)/Loss
on extinguishment of debt
|
(90,042)
|
(9,236)
|
Derivative
expense
|
345,133
|
-
|
(Gain)/Loss
remeasurement of derivative
|
(767,823)
|
574
|
Changes
in Operating Assets and Liabilities:
|
|
|
Accounts
receivables
|
27,389
|
(5,809)
|
Inventory
|
(235,498)
|
(330,077)
|
Other
assets
|
96,135
|
1,086,909
|
Accounts
payable and accrued expenses
|
273,241
|
19,068
|
Accrued
interest
|
677,525
|
437,950
|
Deferred
revenue
|
(83,871)
|
22,458
|
Accrued
consulting services - related party
|
10,355
|
18,505
|
|
|
|
Net
Cash Used in Operating Activities
|
(1,427,304)
|
(2,493,693)
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
Purchase
of property and equipment
|
(5,424)
|
(96,029)
|
Purchase
of intangible assets
|
(3,150)
|
(31,800)
|
|
|
|
Net
Cash Used in Investing Activities
|
(8,574)
|
(127,829)
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
Common
Stock issued for cash
|
222,750
|
906,224
|
A-1
Preferred Stock issued for cash
|
-
|
373,541
|
Proceeds
from notes payable
|
425,000
|
-
|
Repayments
of notes payable
|
(16,000)
|
-
|
Proceeds
from notes payable - related party
|
68,000
|
17,500
|
Repayments
of notes payable - related party
|
(45,000)
|
(12,500)
|
Proceeds
from convertible notes payable
|
1,147,036
|
1,160,000
|
Repayments
of convertible notes payable
|
(453,000)
|
(15,000)
|
Lease
Payable
|
(1,937)
|
21,552
|
Net
Cash Provided by Financing Activities
|
1,346,849
|
2,451,317
|
|
|
|
NET
CHANGE IN CASH
|
(89,029)
|
(170,205)
|
CASH
AT BEGINNING OF PERIOD
|
250,728
|
394,325
|
|
|
|
CASH
AT END OF PERIOD
|
$161,699
|
$224,120
|
|
|
|
|
December 31,
2017
|
|||||
|
Amortized cost
|
Gross unrealized (losses)
|
Gross unrealized losses
|
Gross realized gains
|
Gross realized losses
|
Fair value
|
|
|
|
|
|
|
|
Equity securities
|
$ 123,600
|
$(64,800)
|
$-
|
$-
|
$-
|
$58,800
|
|
|
|
|
|
|
|
|
June
30, 2017
|
|||||
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Gross realized gains
|
Gross realized losses
|
Fair value
|
|
|
|
|
|
|
|
Equity securities
|
$ 63,600
|
$60,000
|
$-
|
$-
|
$-
|
$123,600
|
Convertible Notes Payable
– Related Parties
|
|
|
|
December
31,
|
June
30,
|
|
2017
|
2017
|
|
|
|
Various term notes
with total face value of $3,925,000 issued from February 2010 to
April 2013, interest rates range from 10% to 15%, net of
unamortized discount of $0 as of December 31, 2017 and June 30,
2017.
|
$3,925,000
|
$3,925,000
|
$30,000
face value, issued in August 2016, interest rate of 0%, matures
January 2017, a gain on extinguishment of debt was recorded
totaling $3,818 net unamortized discount of $0 as of December 31,
2017 and June 30, 2017.
|
30,000
|
26,182
|
$10,000
face value, issued in November 2017, interest rate of 0%, matures
November 2018,net amortized discount of $0 as of December 31,
2017.
|
10,000
|
-
|
$25,000
face value, issued in December 2017, interest rate of 0%, matures
December 2018, net amortized discount of $3,750 as of December 31,
2017.
|
21,250
|
-
|
Total convertible
notes payable – related parties
|
3,986,250
|
3,951,182
|
Less current
portion
|
3,986,250
|
3,951,182
|
Convertible notes
payable – related parties, long-term
|
$-
|
$-
|
Convertible Notes Payable - Non-Related Parties
|
|
|
|
December
31,
|
June
30,
|
|
2017
|
2017
|
$7,000
face value, issued in July 2014, interest rate of 6%, matures
October 2017, net unamortized discount of $0 as of December 31,
2017 and June 30, 2017, respectively.
|
$7,000
|
$7,000
|
$600,000
face value, issued in November 2015, interest rate of 0%, an OID of
$190,000, matures January 2018, net unamortized discount of $0 of J
December 31, 2017 and June 30, 2017, respectively, of which
$260,000 has been paid.
|
430,000
|
430,000
|
$100,000
face value, issued in February 2016, interest rate of 10%, matures
March 2018, net unamortized discount of $0 as of December 31, 2017
and June 30, 2017, respectively.
|
100,000
|
100,000
|
$25,000
face value, issued in February 2016, interest rate of 10%, matures
February 2017, net unamortized discount of $0 as of December 31,
2017 and June 30, 2017, respectively.
|
25,000
|
25,000
|
$100,000
face value, issued in March 2016, interest rate of 10%, matures
June2017, net unamortized discount of $0 as of December 31, 2017
and June 30, 2017, respectively.
|
100,000
|
100,000
|
$10,000
face value, issued in March 2016, interest rate of 10%, matures
March 2018, net unamortized discount $0 of December 31, 2017 and
June 30, 2017, respectively.
|
10,000
|
10,000
|
$50,000
face value, issued in July 2016, interest rate of 0%, matures
October 2017, net unamortized discount of $0 of December 31, 2017
and June 30, 2017, respectively.
|
50,000
|
50,000
|
$50,000
face value, issued in August 2016, interest rate of 0%, matures
September which was amended to January 2018, net unamortized
discount of $1,403 and $5,418 of December 31, 2017 and June 30,
2017, respectively.
|
48,597
|
44,582
|
$1,000,000
face value, issued in September 2016, interest rate of 10%, matures
June 2018, net unamortized discount of $0 as of December 31, 2017
and June 30, 2017, respectively.
|
1,000,000
|
1,000,000
|
$149,000
face value, issued in February 2017, interest rate of 10%, matures
November 2017, net amortized discount of $0 and $59,740 as of
December 31, 2017 and June 30, 2017, respectively, of which $20,000
has been paid.
|
129,000
|
89,260
|
$224,000
face value, issued in February 2017, interest rate of 10%, matures
November 2017, net amortized discount of $32,452 and $119,795 as of
December 31, 2017 and June 30, 2017, respectively, of which $30,000
has been paid.
|
194,000
|
104,205
|
$258,000
face value, issued in February 2017, interest rate of 12%, matures
August 2017, net amortized discount of $0 and $48,464 as of
December 31, 2017 and June 30, 2017, respectively, of which
$258,000 has been paid.
|
-
|
209,536
|
$55,000
face value, issued in June 2017, interest rate of 10%, matures
January 2018, net amortized discount of $3,341 and $50,631 as of
December 31, 2017 and June 30, 2017, respectively.
|
51,659
|
4,369
|
$100,000
face value, issued in June 2017, interest rate of 7%, matures June
2018, net amortized discount of $25,943 and $52,317 as of December
31, 2017 and June 30, 2017, respectively.
|
74,057
|
47,683
|
$265,000
face value, issued in May 2017, interest rate of 10%, matures
February 2018, net amortized discount of $45,267 and $218,790 as of
December 31, 2017 and June 30, 2017, respectively, of which $25,000
has been paid.
|
194,733
|
46,210
|
$78,000
face value, issued in July 2017, interest rate of 12%, matures May
2018, net amortized discount of $35,830 as of December 31,
2017.
|
42,170
|
-
|
$50,000
face value, issued in August 2017, interest rate of 0%, matures
October 2017, net amortized discount of $0 as of December 31, 2017,
of which $34,000 has been converted and $16,000 was transferred to
a new note
|
-
|
-
|
$60,500
face value, issued in August 2017, interest rate of 12%, matures
August 2018, net amortized discount of $35,471 as of December 31,
2017.
|
25,029
|
-
|
$10,000
face value, issued in August 2017, interest rate of 0%, matures
August 2018, net amortized discount of $4,499 as of December 31,
2017.
|
5,501
|
-
|
$82,250 face value,
issued in August 2017, interest rate of 12%, matures May 2018, net
amortized discount of $41,125 as of December 31, 2017.
|
41,125
|
-
|
$53,000 face value,
issued in August 2017, interest rate of 12%, matures June 2018, net
amortized discount of 29,115 as of December 31, 2017.
|
23,885
|
-
|
$65,000 face value,
issued in September 2017, interest rate of 12%, matures March 2018,
net amortized discount of $24,061 as of December 31,
2017.
|
40,939
|
-
|
$10,000 face value,
issued in September 2017, interest rate of 10%, matures September
2018, net amortized discount of $6,959 as of December 31,
2017.
|
3,041
|
-
|
$5,000 face value,
issued in September 2017, interest rate of 0%, matures March 2018,
net amortized discount of $2,092 as of December 31,
2017.
|
2,908
|
-
|
$50,000 face value,
issued in September 2017, interest rate of 0%, matures November
2017, net amortized discount of $0 as of December 31, 2017, of
which $50,000 was transferred to a new note.
|
-
|
-
|
$110,000 face
value, issued in October 2017, interest rate of 10%, matures July
2018, net amortized discount of $79,377 as of December 31,
2017.
|
30,623
|
-
|
$100,000 face
value, issued in October 2017, interest rate of 10%, matures
October 2018, net amortized discount of $55,740 as of December 31,
2017.
|
44,260
|
-
|
$115,000 face
value, issued in November 2017, interest rate of 10%, matures
August 2018, net amortized discount of $106,110 as of December 31,
2017.
|
8,890
|
-
|
$50,000 face value,
issued in November 2017, interest rate of 10%, matures January
2018, net amortized discount of $3,190 as of December 31,
2017.
|
46,810
|
-
|
$66,000 face value,
issued in November 2017, interest rate of 10%, matures November
2018, net amortized discount of $39,173 as of December 31,
2017.
|
26,827
|
-
|
$100,000 face
value, issued in November 2017, interest rate of 10%, matures
November 2018, net amortized discount of $89,041 as of December 31,
2017.
|
10,959
|
-
|
$5,000 face value,
issued in November 2017, interest rate of 10%, matures November
2018, net amortized discount of $4,310 as of December 31,
2017.
|
690
|
-
|
$53,000 face value,
issued in November 2017, interest rate of 12%, matures July 2018,
net amortized discount of $45,396 as of December 31,
2017.
|
7,604
|
-
|
$100,000 face
value, issued in December 2017, interest rate of 10%, matures
December 2018, net amortized discount of $41,451 as of December 31,
2017.
|
58,549
|
-
|
$20,000 face value,
issued in December 2017, interest rate of 10%, matures December
2018, net amortized discount of $9,567 as of December 31,
2017.
|
10,433
|
-
|
$75,000 face value,
issued in December 2017, interest rate of 10%, matures December
2018, net amortized discount of $45,982 as of December 31,
2017.
|
29,018
|
-
|
$20,000 face value,
issued in December 2017, interest rate of 10%, matures December
2018, net amortized discount of $12,262 as of December 31,
2017.
|
7,738
|
-
|
Total convertible
notes payable – non-related parties
|
2,881,045
|
2,267,845
|
Less current
portion
|
2,881,045
|
2,267,845
|
Convertible notes
payable – non-related parties, long-term
|
$-
|
$-
|
Notes Payable –
Related Parties
|
|
|
|
|
|
|
December
31,
|
June
30,
|
|
2017
|
2017
|
|
|
|
Various
term notes with total face value of $627,500 issued from April 11
to June 17, interest rates range from 0% to 15%, net of unamortized
discount of $0 as of December 31, 2017 and June 30, 2017,
respectively, of which $45,000 has been paid.
|
$600,000
|
$610,000
|
$18,000
face value, issued in September 2017, interest rate of 0%, matures
November 2017.
|
18,000
|
-
|
$15,000
face value, issued in October 2017, interest rate of 0%, matures
October 2018.
|
15,000
|
-
|
$35,000
face value, issued in December 2017, interest rate of 0%, matures
December 2018, of which $35,000 has been paid.
|
-
|
-
|
Total
notes payable – related parties
|
633,000
|
610,000
|
Less
current portion
|
633,000
|
610,000
|
Notes
payable - related parties, long term
|
$-
|
$-
|
|
|
|
Notes
Payable – Non-Related Parties
|
|
|
|
December
31,
|
June
30,
|
|
2017
|
2017
|
Various term notes
with total face value of $40,488 due upon demand, interest rates
range from 0% to 14%.
|
$40,488
|
$40,488
|
$52,000
face value, issued in August 2017, interest rate of 0%, matures
October 2017 net of unamortized discount of $7,227 as of December
31, 2017.
|
52,000
|
-
|
$52,000
face value, issued in August 2017, interest rate of 0%, matures
October 2017 net of unamortized discount of $6,019 as of December
31, 2017.
|
45,981
|
-
|
$81,000
face value, issued in September 2017, interest rate of 8% per
month, matures March 2018 net of unamortized discount of $6,842 as
of December 31, 2017, of which $12,000 has been paid.
|
62,158
|
-
|
$255,000
face value, issued in October 2017, interest rate of 2.5% per
month, matures February 2018 net of unamortized discount of $2,458
as of December 31, 2017, of which $4,000 has been
paid.
|
248,542
|
-
|
Total note payable
– non-related parties
|
449,169
|
40,488
|
Less current
portion
|
449,169
|
40,488
|
Notes payable
– non-related parties, long-term
|
$-
|
$-
|
|
Shares
|
Shares
|
Liquidation
|
|
Allocated
|
Outstanding
|
Preference
|
Series
A Convertible Preferred
|
100,000
|
15,500
|
-
|
Series
A-1 Convertible Preferred
|
3,000,000
|
2,735,000
|
3,789,815
|
Series
B Convertible Preferred
|
200,000
|
3,500
|
35,000
|
Series
C Convertible Preferred
|
1,000,000
|
13,404
|
-
|
Series
D Convertible Preferred
|
375,000
|
130,000
|
-
|
Series
E Convertible Preferred
|
1,000,000
|
275,000
|
-
|
Series
P Convertible Preferred
|
600,000
|
86,640
|
-
|
Series
S Convertible Preferred
|
50,000
|
-
|
-
|
Total
Preferred Stock
|
6,325,000
|
3,259,044
|
$3,824,815
|
Date
Issued
|
Number
of Options
|
Weighted
Average Exercise Price
|
Weighted
Average Grant Date Fair Value
|
Expiration
Date (yrs)
|
Value
if Exercised
|
Balance
June 30, 2017
|
525,000
|
$0.18
|
$0.16
|
4.81
|
$93,750
|
Granted
|
-
|
-
|
-
|
-
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
-
|
Cancelled/Expired
|
-
|
-
|
-
|
-
|
-
|
Outstanding
as of December 31, 2017
|
525,000
|
$0.18
|
$0.20
|
4.31
|
$93,750
|
|
|
December 31, 2017
|
|
June 30, 2017
|
Expected volatility
|
|
105-190%
|
|
92-126%
|
Expected dividends
|
|
0%
|
|
0%
|
Expected term
|
|
0-5 Years
|
|
0-5 Years
|
Risk-free interest rate
|
|
0.96-2.09%
|
|
0.74-1.89%
|
|
Number
of Warrants
|
Weighted
Average Exercise Price
|
Weighted
Average Grant Date Fair Value
|
Expiration
Date (yrs)
|
Value
if Exercised
|
Outstanding
as of June 30, 2017
|
39,927,097
|
$0.38
|
$0.45
|
3.38
|
$15,144,835
|
Granted
|
1,025,000
|
0.17
|
0.07
|
3.26
|
176,250
|
Exercised
|
-
|
-
|
-
|
-
|
-
|
Cancelled/Expired
|
(177,500)
|
0.48
|
-
|
-
|
(85,000)
|
Outstanding
as of December 31, 2017
|
40,774,597
|
$0.37
|
$0.40
|
2.94
|
$15,236,085
|
●
|
Level
one — Quoted market prices in active markets for identical
assets or liabilities;
|
|
|
●
|
Level
two — Inputs other than level one inputs that are either
directly or indirectly observable; and
|
|
|
●
|
Level
three — Unobservable inputs developed using estimates and
assumptions, which are developed by the reporting entity and
reflect those assumptions that a market participant would
use.
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Fair
value of derivatives
|
$-
|
$-
|
$2,461,034
|
$2,461,034
|
Securities
available-for-sale
|
$58,800
|
$-
|
$-
|
$58,800
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Fair
value of derivatives
|
$-
|
$-
|
$2,145,065
|
$2,145,065
|
Securities
available-for-sale
|
$123,600
|
$-
|
$-
|
$123,600
|
Year
|
Lease
Payments
|
2018
|
72,672
|
2019
|
141,464
|
2020
|
131,475
|
2021
|
87,287
|
2022
|
-
|
Total
|
$445,266
|
|
December 31, 2017
|
June 30, 2017
|
|
|
|
Components
|
$ 340,389
|
$ 159,017
|
Finished
Goods
|
-
|
-
|
Allowance
/ Reserve
|
-
|
(54,126)
|
Totals
|
$ 340,389
|
$ 104,891
|
AFTERMASTER,
INC.
|
|||
Consolidated Balance
Sheets
|
|||
|
|
|
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2017
|
|
As
Reported
|
Correction
|
As
Restated
|
Accounts
receivable
|
559,714
|
(490,000)
|
69,714
|
Inventory,
net
|
-
|
340,389
|
340,389
|
Total Current
Assets
|
1,227,336
|
(149,611)
|
1,077,725
|
Total
Assets
|
$ 1,549,948
|
$ (149,611)
|
$ 1,400,337
|
Accounts payable
and other accrued expenses
|
$ 1,019,799
|
$ (417,000)
|
$ 602,799
|
Total Current
Liabilities
|
12,140,125
|
(417,000)
|
11,723,125
|
Total
Liabilities
|
12,140,125
|
(417,000)
|
11,723,125
|
Accumulated
Deficit
|
(75,424,449)
|
267,389
|
(75,157,060)
|
Total Stockholders'
Deficit
|
(10,590,177)
|
267,389
|
(10,322,788)
|
Total Liabilities
and Stockholders' Deficit
|
$ 1,549,948
|
$ (149,611)
|
$ 1,400,337
|
AFTERMASTER,
INC.
|
|||
Consolidated
Statements of Operations (Unaudited)
|
|||
|
|
|
|
|
For
the Three
|
|
For
the Three
|
|
Months
Ended
|
|
Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2017
|
As
Reported
|
As
Reported
|
Correction
|
As
Restated
|
Cost of Revenues
(Exclusive of Depreciation and Amortization)
|
987,401
|
(542,389)
|
445,012
|
Total Costs and
Expenses
|
1,905,227
|
(542,389)
|
1,362,838
|
Loss from
Operations
|
(1,570,161)
|
542,389
|
(1,027,772)
|
Gain on
Extinguishment of Debt
|
-
|
-
|
-
|
Total Other
Expense
|
163,954
|
20,210
|
184,164
|
Loss Before Income
Taxes
|
(1,406,207)
|
562,599
|
(843,608)
|
NET
LOSS
|
$ (1,406,207)
|
$ 562,599
|
$ (843,608)
|
NET LOSS AVAILABLE
TO COMMON SHAREHOLDERS
|
$ (1,462,574)
|
$ 562,599
|
$ (899,975)
|
Basic and diluted
Loss Per Share of Common Stock
|
$ (0.01)
|
$ 0.00
|
$ (0.01)
|
NET LOSS AVAILABLE
TO COMMON SHAREHOLDERS
|
(1,462,574)
|
562,599
|
(899,975)
|
COMPREHENSIVE
LOSS
|
$ (1,541,714)
|
$ 652,599
|
$ (889,115)
|
|
For
the Six
|
|
For
the Six
|
|
Months
Ended
|
|
Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2017
|
|
As
Reported
|
Correction
|
As
Restated
|
Cost of Revenues
(Exclusive of Depreciation and Amortization)
|
1,143,729
|
(142,389)
|
1,001,340
|
Total Costs and
Expenses
|
2,982,352
|
(142,389)
|
2,839,963
|
Loss from
Operations
|
(2,031,890)
|
142,389
|
(1,889,501)
|
Gain on
Extinguishment of Debt
|
(34,958)
|
125,000
|
90,042
|
Total Other
Expense
|
(1,089,008)
|
125,000
|
(964,008)
|
Loss Before Income
Taxes
|
(3,120,898)
|
267,389
|
(2,853,509)
|
NET
LOSS
|
$ (3,120,898)
|
$ 267,389
|
$ (2,853,509)
|
NET LOSS AVAILABLE
TO COMMON SHAREHOLDERS
|
$ (3,233,632)
|
$ 267,389
|
$ (2,966,243)
|
Basic and diluted
Loss Per Share of Common Stock
|
$ (0.03)
|
$ 0.01
|
$ (0.02)
|
NET LOSS AVAILABLE
TO COMMON SHAREHOLDERS
|
(3,233,632)
|
267,389
|
(2,966,243)
|
COMPREHENSIVE
LOSS
|
$ (3,298,432)
|
$ 267,389
|
$ (3,031,043)
|
AFTERMASTER,
INC.
|
|||
Consolidated
Statements of Cash Flows (Unaudited)
|
|||
|
|
|
|
|
For
the Six
|
|
For
the Six
|
|
Months
Ended
|
|
Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2017
|
|
As
Reported
|
Correction
|
As
Restated
|
Net
Loss
|
$ (3,120,890)
|
$ 267,381
|
$ (2,853,509)
|
(Gain)/Loss on
extinguishment of debt
|
34,958
|
(125,000)
|
(90,042)
|
Accounts
receivables
|
(462,611)
|
490,000
|
27,389
|
Inventory
|
104,891
|
(340,389)
|
(235,498)
|
Accounts payable
and accrued expenses
|
565,241
|
(292,000)
|
273,241
|
Net Cash Used in
Operating Activities
|
(1,427,304)
|
-
|
(1,427,304)
|
|
●
|
the sufficiency of existing capital resources and our ability to
raise additional capital to fund cash requirements
for future
operations;
|
|
●
|
uncertainties involved in growth and growth rate of our operations,
business, revenues, operating margins, costs, expenses and acceptance of
any products or services;
|
|
●
|
uncertainties involved in growth and growth rate of our operations,
business, revenues, operating margins, costs, expenses and acceptance of
any products or services;
|
|
●
|
volatility of the stock market, particularly within the technology
sector;
|
|
●
|
our dilution related to all equity grants to employees and
non-employees;
|
|
●
|
that we will continue to make significant capital expenditure
investments;
|
|
●
|
that we will continue to make investments and
acquisitions;
|
|
●
|
the sufficiency of our existing cash and cash generated from
operations;
|
|
●
|
the increase of sales and marketing and general and administrative
expenses in the future;
|
|
●
|
the growth in advertising revenues from our websites and studios
will be achievable and sustainable;
|
|
●
|
that seasonal fluctuations in Internet usage and traditional
advertising seasonality are likely to affect our business;
and
|
|
●
|
general economic conditions.
|
Revenues
|
|
|
|
For the
Six Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
AfterMaster
Revenues
|
$239,619
|
$103,225
|
Product
Revenues
|
710,843
|
-
|
Total
Revenues
|
$950,462
|
$103,225
|
RESULTS OF OPERATIONS
|
|
|
|
|
|
Revenues
|
|
|
|
For the
Three Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
AfterMaster
Revenues
|
$118,904
|
$48,739
|
Product
Revenues
|
216,162
|
-
|
Total
Revenues
|
$335,066
|
$48,739
|
Cost of Revenues
|
|
|
|
For the
Three Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Cost of
Revenues (excluding depreciation and
amortization)
|
$ 445,012
|
$157,680
|
Cost of Revenues
|
|
|
|
For the
Six Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Cost of
Revenues (excluding depreciation and
amortization)
|
$ 1,001,340
|
$319,775
|
Other Operating Expenses
|
|
|
|
For the
Three Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Depreciation
and Amortization Expense
|
$44,538
|
$45,015
|
Research
and Development
|
-
|
26,020
|
Advertising
and Promotion Expense
|
16,649
|
2,565
|
Legal
and Professional Expense
|
23,000
|
30,804
|
Non-Cash
Consulting Expense
|
15,597
|
659,938
|
General
and Administrative Expenses
|
818,042
|
915,206
|
Total
|
$917,826
|
$1,679,548
|
Other Operating Expenses
|
|
|
|
|
|
|
For the
Six Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Depreciation
and Amortization Expense
|
$83,507
|
$85,554
|
Research
and Development
|
2,194
|
93,015
|
Advertising
and Promotion Expense
|
18,665
|
17,644
|
Legal
and Professional Expense
|
37,190
|
55,070
|
Non-Cash
Consulting Expense
|
92,035
|
1,531,909
|
General
and Administrative Expenses
|
1,605,032
|
1,628,042
|
Total
|
$1,838,623
|
$3,411,234
|
Other Income (Expense)
|
|
|
|
For the Three Months Ended
|
|
|
December 31,
|
|
|
2017
|
2016
|
Interest
Expense
|
$(601,426)
|
$(378,522)
|
Derivative
Expense
|
(211,481)
|
-
|
Change in Fair
Value of Derivative
|
976,861
|
(463)
|
Loss
on Extinguishment of Debt
|
-
|
9,236
|
Total
|
$163,954
|
$(369,749)
|
Other Expense
|
|
|
|
For the
Six Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Interest
Expense
|
$(1,476,739)
|
$(747,595)
|
Derivative
Expense
|
(345,133)
|
-
|
Change in Fair
Value of Derivative
|
767,822
|
(574)
|
Loss
on Extinguishment of Debt
|
(90,042)
|
9,236
|
Total
|
$(964,008)
|
$(738,933)
|
Net Income (Loss)
|
|
|
|
For the
Three Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Net
Income (Loss)
|
$ (1,613,601)
|
$(2,158,238)
|
Net Loss
|
|
|
|
For the
Six Months Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Net
Loss
|
$ (3,184,163)
|
$(4,366,717)
|
NO.
|
TITLE
|
101.INS*
|
XBRL Instance Document
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
AFTERMASTER, INC.
|
|
|
|
|
Date: May 16, 2018
|
By:
|
/s/ Larry Ryckman
|
|
Larry Ryckman,
|
|
|
Title: President and Chief Executive Officer
|
|
|
|
|
AFTERMASTER, INC.
|
|
|
|
|
Date: May 16, 2018
|
By:
|
/s/ Larry Ryckman
|
|
Larry Ryckman,
|
|
|
Title: Director, President, Chief Executive Officer
|
|
|
|
|
AFTERMASTER, INC.
|
|
|
|
|
Date: May 16, 2018
|
By:
|
/s/ Mirella Chavez
|
|
Mirella Chavez
|
|
|
Title: Chief Financial Officer, Secretary
|
1.
|
I have reviewed
this quarterly report on Form 10-Q/A
of AfterMaster, Inc.;
|
2.
|
Based on my
knowledge, this Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this Report;
|
3.
|
Based on my
knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in
this Report;
|
4.
|
The
Registrant’s other Certifying Officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have:
|
|
a.
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this Report is being prepared;
|
|
b.
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c.
|
Evaluated the
effectiveness of the Registrant’s disclosure controls and
procedures and presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this Report based on such evaluation;
and
|
|
d.
|
Disclosed in this
Report any change in the Registrant’s internal control over
financial reporting that occurred during the Registrant’s
most recent fiscal quarter (the Registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting;
and
|
5.
|
The
Registrant’s other Certifying Officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the Registrant’s auditors and the
audit committee of the Registrant’s Board of Directors (or
persons performing the equivalent functions):
|
|
a.
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the Registrant’s ability to
record, process, summarize and report financial information;
and
|
|
b.
|
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the Registrant’s internal control
over financial reporting.
|
1.
|
I have reviewed
this quarterly report on Form 10-Q/A for
AfterMaster, Inc.;
|
2.
|
Based on my
knowledge, this Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this Report;
|
3.
|
Based on my
knowledge, the financial statements, and other financial
information included in this Report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in
this Report;
|
4.
|
The
Registrant’s other Certifying Officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and
have:
|
|
a.
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this Report is being prepared;
|
|
b.
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c.
|
Evaluated the
effectiveness of the Registrant’s disclosure controls and
procedures and presented in this Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this Report based on such evaluation;
and
|
|
d.
|
Disclosed in this
Report any change in the Registrant’s internal control over
financial reporting that occurred during the Registrant’s
most recent fiscal quarter (the Registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting;
and
|
5.
|
The
Registrant’s other Certifying Officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the Registrant's auditors and the audit
committee of the Registrant’s Board of Directors (or persons
performing the equivalent functions):
|
|
a.
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the Registrant’s ability to
record, process, summarize and report financial information;
and
|
|
b.
|
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the Registrant’s internal control
over financial reporting.
|
(1)
|
The Quarterly
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 Quarterly Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
|
|
|
|
|
AFTERMASTER,
INC.
|
|
|
|
|
Date: May
16, 2018
|
By:
|
/s/
Larry Ryckman
|
|
Larry
Ryckman
|
|
|
President and Chief
Executive Officer
|
|
|
|
|
AFTERMASTER,
INC.
|
|
|
|
|
Date: May 16,
2018
|
By:
|
/s/
Mirella Chavez
|
|
Mirella
Chavez
|
|
|
Chief Financial
Officer and Chief Accounting Officer
|
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end
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Feb. 14, 2018 |
|
Document And Entity Information | ||
Entity Registrant Name | AFTERMASTER, INC. | |
Entity Central Index Key | 0000836809 | |
Document Type | 10-Q/A | |
Document Period End Date | Dec. 31, 2017 | |
Amendment Flag | true | |
Amendment Description | On May 10, 2018 2018, the Board of Directors (the “Board”) of Aftermaster, Inc. (the “Company”), upon the recommendation of management, determined that the consolidated financial statements (the "Previously Issued Financial Statements") presented in the Company's transitional report for the quarterly period ended December 31, 2017, as set forth in the Company's previously filed quarterly report on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”) on February 14, 2018 (the “Revised Period”), should no longer be relied upon.
Specifically, the Company is filing this Amendment on Form 10-Q/A to recognize cost of sales related to the sale of 4,000 units for a total cost of $400,000 to its manufacturer that was recorded in the three-month ended December 31, 2017. The sales of the 4,000 units took place during the quarter ending September 30, 2017 therefore the cost of sales should have been recorded in the same period. (ii) As part of the 4,000 units transaction the manufacture agreed to extinguish $525,000 of accounts payable, for the relief of the $400,000 in accounts receivable, which resulted in a gain of $125,000.
In the quarter ending December 31, 2017, the company sold an additional 1,000 units for a total sale of $120,000 to the same manufacture as the September 30, 2017 transaction referenced above. The transaction eliminated $90,000 in accounts receivable and accounts payable, resulting in a net gain of $30,000. (ii) as part of the 1,000 units transaction the company transferred consigned inventory in the amount of $142,389 which the company mistakenly wrote off the inventory to cost of good sold, in the December 30, 2017 amendment the company corrected the removal of the inventory and the overstatement of cost of good sold. (iii) The manufacture also had inventory in the amount of $198,000 that the company did not account for in the original filed 10Q.
The Company financial statements have been restated conform to the current period presentation. These reclassifications had an effect on reported losses.
No other changes have been made to the Quarterly Report except as noted above. This Amendment to the Quarterly Report speaks as of the original filing date of the Quarterly Report, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Quarterly Report except that changes have been made to the cover page, NOTE 2 – Going Concern and NOTE 12 - Inventories. In addition, in connection with the restatement, this Amendment reflects the revisions to Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I. Otherwise, the Originally Filed Form 10-Q is restated herein in its entirety and no other information in the Originally Form Filed 10-Q is amended hereby. Disclosures and forward-looking information in this Amendment continue to speak as of the date of the Originally Filed Form 10-Q, and do not reflect events occurring after the filing of the Originally Filed Form 10-Q. Accordingly, this Amendment should be read in conjunction with our other filings made with the SEC after the filing of the Originally Filed Form 10-Q, including any amendments to those filings.
A description of the restatement is presented in Note 14, under the caption Restatement of Prior Period Financial Statements.
The Company’s management has discussed the revisions and corrections discussed above with the Company’s independent public accounting firm and believes that the issues are related to and arose in connection with the sale of 5,000 units between the Company one of its manufacturers. Because that transaction has been concluded, management does not believe that any continuing errors will result, although management will continue to review the financial statements and components to determine if any other miscommunications have occurred. |
|
Current Fiscal Year End Date | --06-30 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 126,900,921 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2018 |
Consolidated Statements of Operations - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
REVENUES | ||||
AfterMaster Revenues | $ 118,904 | $ 48,739 | $ 239,619 | $ 103,225 |
Product Revenues | 216,162 | 0 | 710,843 | 0 |
Total Revenues | 335,066 | 48,739 | 950,462 | 103,225 |
COSTS AND EXPENSES | ||||
Cost of Revenues (Exclusive of Depreciation and Amortization) | 445,012 | 157,680 | 1,001,340 | 319,775 |
Depreciation and Amortization Expense | 44,538 | 45,015 | 83,507 | 85,554 |
Research and Development | 0 | 26,020 | 2,194 | 93,015 |
Advertising and Promotion Expense | 16,649 | 2,565 | 18,665 | 17,644 |
Legal and Professional Expense | 23,000 | 30,804 | 37,190 | 55,070 |
Non-Cash Consulting Expense | 15,597 | 659,938 | 92,035 | 1,531,909 |
General and Administrative Expenses | 818,042 | 915,206 | 1,605,032 | 1,628,042 |
Total Costs and Expenses | 1,362,838 | 1,837,228 | 2,839,963 | 3,731,009 |
Loss from Operations | (1,027,772) | (1,788,489) | (1,889,501) | (3,627,784) |
Other Expense | ||||
Interest Expense | (601,426) | (378,522) | (1,476,739) | (747,595) |
Derivative Expense | (177,451) | 0 | (345,133) | 0 |
Change in Fair Value of Derivative | 963,041 | (463) | 767,822 | (574) |
Gain Loss on Extinguishment of Debt | 0 | 9,236 | 90,042 | 9,236 |
Total Other Expense | 184,164 | (369,749) | (964,008) | (738,933) |
Loss Before Income Taxes | (843,608) | (2,158,238) | (2,853,509) | (4,366,717) |
Income Tax Expense | 0 | 0 | 0 | 0 |
NET LOSS | (843,608) | (2,158,238) | (2,853,509) | (4,366,717) |
Preferred Stock Accretion and Dividends | (56,367) | (45,620) | (112,734) | (87,858) |
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (899,975) | $ (2,203,858) | $ (2,966,243) | $ (4,454,575) |
Basic and diluted Loss Per Share of Common Stock | $ (0.01) | $ (0.02) | $ (0.02) | $ (0.04) |
Basic and Diluted -Weighted Average Number of Shares Outstanding | 124,080,046 | 104,726,332 | 121,773,934 | 104,045,562 |
Other Comprehensive Income, net of tax | ||||
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (899,975) | $ (2,203,858) | $ (2,966,243) | $ (4,454,575) |
Unrealized gain on AFS Securities | 10,860 | (39,000) | (64,800) | (15,600) |
COMPREHENSIVE LOSS | $ (889,115) | $ (2,242,858) | $ (3,031,043) | $ (4,470,175) |
1. CONDENSED FINANCIAL STATEMENTS |
6 Months Ended |
---|---|
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. CONDENSED FINANCIAL STATEMENTS | The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at December 31, 2017, and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 2017 audited financial statements. The results of operations for the periods ended December 31, 2017 and 2016 are not necessarily indicative of the operating results for the full years. |
2. GOING CONCERN |
6 Months Ended |
---|---|
Dec. 31, 2017 | |
Text Block [Abstract] | |
2. GOING CONCERN | The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an accumulated deficit of $75,157,060, negative working capital of $10,645,400, and currently has revenues which are insufficient to cover its operating costs, which raises substantial doubt about its ability to continue as a going concern. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.
The future of the Company as an operating business will depend on its ability to (1) obtain sufficient capital contributions and/or financing as may be required to sustain its operations and (2) to achieve adequate revenues from its ProMaster and AfterMaster businesses. Management's plan to address these issues includes, (a) continued exercise of tight cost controls to conserve cash, (b) obtaining additional financing, (c) more widely commercializing the AfterMaster and ProMaster products, and (d) identifying and executing on additional revenue generating opportunities.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations. |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended |
---|---|
Dec. 31, 2017 | |
Notes to Financial Statements | |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments.
Principles of Consolidation The consolidated financial statements include the accounts of AfterMaster, Inc. and its subsidiaries. All significant inter-Company accounts and transactions have been eliminated.
Investments Our available for securities are considered Level 1. Realized gains and losses on these securities are included in “Other income (expense) – net” in the consolidated statements of operations using the specific identification method. Unrealized gains and losses, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCI). Unrealized losses that are considered other than temporary are recorded in other income (expense) – net, with the corresponding reduction to the carrying basis of the investment.
Our short-term investments are recorded at amortized cost, and the respective carrying amounts approximate fair values. Our available for securities maturing within one year are recorded in “Other current assets,” on the balance sheets.
Accounts Receivables Accounts receivables are stated at amounts management expects to collect. An allowance for doubtful accounts is provided for uncollectible receivables based upon management's evaluation of outstanding accounts receivable at each reporting period considering historical experience and customer credit quality and delinquency status. Delinquency status is determined by contractual terms. Bad debts are written off against the allowance when identified.
Fair Value Instruments Cash is the Company’s only financial asset or liability required to be recognized at fair value and is measured using quoted prices for active markets for identical assets (Level 1 fair value hierarchy). The carrying amounts reported in the balance sheets for notes receivable and accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.
Market prices are not available for the Company’s loans due to related parties or its other notes payable, nor are market prices of similar loans available. The Company determined that the fair value of the notes payable based on its amortized cost basis due to the short-term nature and current borrowing terms available to the Company for these instruments.
Derivative Liabilities The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares.
Using this sequencing policy, the Company used this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to July 5, 2016 until the note was converted on the same day were derivative liabilities. The Company again used this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to August 19, 2016 until the note was converted on August 22, 2016 were derivative liabilities.
The Company entered into multiple amendments to a note payable to extend the maturity date (the Amendments). The Company agreed to additional $30,000 extension fees which were converted at a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. This creates a situation where the Company no longer has shares enough available to “cover” all potential equity issuance obligations during the period of issuance until conversion.
On February 3, 2017, the company entered into a note payable with an unrelated party at a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. Accordingly, all convertible instruments issued after February 3, 2017 are considered derivatives according to the Company’s sequencing policy.
The Company values these convertible notes payable using the multinomial lattice method that values the derivative liability within the notes based on a probability weighted discounted cash flow model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations.
Income Taxes There is no income tax provision for the three and six months ended December 31, 2017 and 2016 due to net operating losses for which there is no benefit currently available.
At December 31, 2017, the Company had deferred tax assets associated with state and federal net operating losses. The Company has recorded a corresponding full valuation allowance as it is more likely than not that some portion of all of the deferred tax assets will not be realized.
Revenue Recognition The Company applies the provisions of FASB ASC 605, Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.
The Company's revenues are generated from AfterMaster products and services, AfterMaster Pro, sessions revenue, and remastering. Revenues related to AfterMaster Pro sells through consumer retail distribution channels and through our website. For sales through consumer retail distribution channels, revenue recognition occurs when title and risk of loss have transferred to the customer which usually occurs upon shipment to the customers. We established allowances for expected product returns and these allowances are recorded as a direct reduction to revenue. Return allowances are based on our historical experience. Revenues related to sessions and remastering are recognized when the event occurred.
Cost of Revenues The Company’s cost of revenues includes employee costs, and other nominal amounts. Costs associated with products are recognized at the time of the sale and when the inventory is shipped. Costs incurred to provide services are recognized as cost of sales as incurred. Depreciation is not included within cost of revenues.
Loss Per Share Basic loss per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. The losses attributable to Common shareholders was increased for accrued and deemed dividends on Preferred Stock during the six months ended December 31, 2017 and 2016 of $112,734 and $87,858, respectively.
Diluted earnings per Common Share is computed by dividing net loss attributable to Common shareholders by the weighted-average number of Shares of Common Stock outstanding during the period increased to include the number of additional Shares of Common Stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding convertible Preferred Stock, stock options, warrants, and convertible debt. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities.
For the six months ended December 31, 2017 and 2016, all of the Company’s potentially dilutive securities (warrants, options, convertible preferred stock, and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total number of potentially dilutive Common Shares that were excluded were 90,410,737 and 26,336,572 at December 31, 2017 and 2016, respectively.
Recent Accounting Pronouncements Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements. |
4. SECURITIES AVAILABLE-FOR-SALE |
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4. SECURITIES AVAILABLE-FOR-SALE | On November 10, 2014, the Company received 600,000 shares of b Booth stock as part of an Asset License agreement with b Booth. The following table presents the amortized cost, gross unrealized gains, gross unrealized losses, and fair market value of available-for-sale equity securities, nearly all of which are attributable to the Company's investment in b Booth stock, as follows:
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5. NOTES PAYABLE |
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5. NOTES PAYABLE | Convertible Notes Payable In accounting for its convertible notes payable, proceeds from the sale of a convertible debt instrument with Common Stock purchase warrants are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portions of the proceeds allocated to the warrants are accounted for as paid-in capital with an offset to debt discount. The remainder of the proceeds are allocated to the debt instrument portion of the transaction as prescribed by ASC 470-25-20. The Company then calculates the effective conversion price of the note based on the relative fair value allocated to the debt instrument to determine the fair value of any beneficial conversion feature (“BCF”) associated with the convertible note in accordance with ASC 470-20-30. The BCF is recorded to additional paid-in capital with an offset to debt discount. Both the debt discount related to the issuance of warrants and related to a BCF is amortized over the life of the note.
Convertible Notes Payable – Related Parties Convertible notes payable due to related parties consisted of the following as of December 31, 2017 and June 30, 2017, respectively:
On November 1, 2017, the Company issued a note to a related party for $10,000 that matures on November 1, 2018. The note bears 0% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share.
On December 30, 2017, the Company issued a note to a related party for $25,000 that matures on December 30, 2018. The note bears 0% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. The Company valued a BCF related to the note valued at $3,750.
Convertible Notes Payable - Non-Related Parties Convertible notes payable due to non-related parties consisted of the following as of December 31, 2017 and June 30, 2017, respectively:
On November 20, 2015, the Company issued a convertible note to an unrelated company for $600,000 that matures on May 20, 2016. The company paid $200,000 in principle balance leaving a remain balance of $430,000 including the extension fees and is not convertible unless the borrower defaults under the amendment agreement dated January 1, 2017. The note bears 0% interest and had an original issue discount (OID) of $100,000. This note is not convertible unless there is a default event. Per the terms of the note there are no derivatives until it becomes convertible on the original note, however the $30,000 extensions are to be considered derivatives. The Lender released a clarification of amendments to convertible promissory notes that explained the $30,000 extension fees are the only portion that is to be considered as convertible and converts within 2 days of issuance. The intent of the amendment agreements were to insure the original note dated November 20, 2015 in the amount of $600,000. Because the terms do not dictate a maximum numbers of convertible shares, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability Under ASC 815-40. The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. During the extension and conversion day period no additional convertible instruments were issued, therefore on the extension was considered in the derivative calculation. The Company extended the maturity date seven times since February 27, 2017 for a total of $210,000, of which, the Company paid $120,000 in the six months ended December 31, 2017. The Company latest and fourteenth extension with consideration of $30,000 was on December 18, 2017 to extending the maturity date to January 31, 2018. The Company evaluated the amendments under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On February 15, 2016, the Company issued a convertible note to an unrelated individual for $25,000 that matures on February 15, 2017. The note was amended subsequently in September 28, 2017 to extend the maturity date to October 15, 2017. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On September 15, 2016, the Company issued a convertible note to an unrelated individual for $1,000,000 that matures on June 30, 2017. The note was amended subsequently on June 30, 2017 to extend the maturity date to June 30, 2018. The Company evaluated amendment under ASC 47050, "Debt Modification and Extinguishment", and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On February 23, 2017, the Company issued a convertible note to an unrelated company for $149,000 that matures on November 23, 2017. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids 20 days prior to the conversion date. Additionally, the note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, that this percentage discount (variable) exercise price indicates is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. The Company extended the possibility to convert date by issuing 60,000 warrants valued at $7,813 on September 8, 2017 to November 2, 2017. The Company extended the possibility to convert date by issuing 60,000 warrants valued at $7,813 on September 8, 2017 to November 2, 2017. The Company extended the possibility to convert date by paying $10,000 of principal and $1,400 of accrued interest on October 23, 2017 to November 24, 2017 and extend the maturity date to February 21, 2018. . The Company extended the possibility to convert date by paying $10,000 of principal and $4,000 of accrued interest on November 29, 2017 to December 22, 2017. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On February 23, 2017, the Company issued a convertible note to an unrelated company for $224,000 that matures on November 23, 2017. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids 20 days prior to the conversion date. Additionally, the note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. The Company extended the possibility to convert date by issuing 90,000 warrants valued at $11,720 on September 8, 2017 to November 2, 2017. The Company extended the possibility to convert date by paying $10,000 of principal and $2,100 of accrued interest on October 23, 2017 to November 24, 2017 and extend the maturity date to February 21, 2018. The Company extended the possibility to convert date by paying $20,000 of principal and $6,000 of accrued interest on November 29, 2017 to December 22, 2017. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On August 26, 2016, the Company issued a convertible note to an unrelated individual for $50,000 that matures on August 26, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share. The note was amended on June 30, 2017 to extend the maturity date to October 1, 2017. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt. The note was amended again on September 28, 2017 to extend the maturity date to January 1, 2018. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension resulted in significant and consequential changes to the economic substance of the debt and thus resulted in a extinguishment of the debt. The Company recorded a debt discount of $30,000 as a result of the extinguishment.
On March 7, 2016, the Company issued a convertible note to an unrelated individual for $100,000 that matures on March 7, 2017. The note bears interest rate of 10% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share. The Company valued a BCF related to the note valued at $24,269 and debt discount related to the 10,000 shares of common stock issued with the note at a relative fair value of $4,569. The note was amended again on September 28, 2017 to extend the maturity date to January 15, 2018, as additional consideration the Company issued 25,000 shares of common stock valued at $3,998. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On July 26, 2016, the Company issued a convertible note to an unrelated individual for $50,000 that matures on September 26, 2016. The note bears interest rate of 0% per annum and is convertible into shares of the Company’s Common stock at $0.40 per share, as part of the note the company issued warrants to purchase 35,000 shares of 144 restricted common stock at an exercise price $0.30 for a two-year period. The note was amended on September 28, 2017 to extend the maturity date to January 15, 2018, as additional consideration the Company issued 15,000 shares of common stock valued at $2,399. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On July 31, 2017, the Company issued a convertible note to an unrelated company for $78,000, which included $75,000 in proceeds and $3,000 in legal fees, that matures on April 10, 2018. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 61% of the lowest two trading prices during the fifteen (15) trading day period ending to the date of conversion. The note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On August 2, 2017, the Company issued a convertible note to an unrelated party for $50,000 that matures on August 24, 2017. The note bears 0% interest per annum, in lieu of interest the Company issued 12,000 shares of common stock on August 4, 2017. The note is convertible into shares of the Company’s common stock at $0.10 per share. The Company valued a BCF related to the note valued at $31,287 and debt discount related to the 12,000 shares of common stock issued with the note at a relative fair value of $1,837. The note was amended on September 15, 2017, to extend the maturity date to October 15, 2017. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt. On September 15, 2017, the note converted the principal of $34,000 for $340,000 shares of common stock. On November 17, 2017, the company transferred the remaining balance to a new note, see below.
On August 2, 2017, the Company issued a convertible note to an unrelated company for $60,500, which includes proceeds of $55,000, and $5,500 in OID, that matures on August 2, 2018. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 61% of the lowest two trading prices during the fifteen (15) trading day period ending to the date of conversion. The note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On August 4, 2017, the Company issued a convertible note to an unrelated party for $10,000 that matures on August 4, 2018. The note bears 0% interest per annum, in lieu of interest the Company issued 3,500 shares of common stock on August 7, 2017. The note is convertible into shares of the Company’s common stock at $0.10 per share. The Company valued a BCF related to the note valued at $7,056 and debt discount related to the 3,500 shares of common stock issued with the note at a relative fair value of $546.
On August 15, 2017, the Company issued a convertible note to an unrelated company for $82,250, which included $75,000 in proceeds and $7,250 in legal and other fees, that matures on April 18, 2018. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 60% the lowest trading price during the previous twenty (2) days to the date of conversion. The note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On August 16, 2017, the Company issued a convertible note to an unrelated company for $53,000, which included $50,000 in proceeds and $3,000 in legal fees, that matures on June 16, 2018. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 61% of the lowest two trading prices during the fifteen (15) trading day period ending to the date of conversion. The note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On September 8, 2017, the Company issued a convertible note to an unrelated company for $65,000, which included $58,500 in proceeds and $6,500 in OID, that matures on March 8, 2018. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 55% of either the lowest sales price for common stock on principal market during the twenty-five consecutive trading days including the immediately preceding the conversion date. The note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On September 11, 2017, the Company issued a convertible note to an unrelated party for $10,000 that matures on September 11, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. Due to sequencing on February 2, 2017, the Company determined under ASC 815, the Company has determined that the note is to be treated as an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On September 27, 2017, the Company issued a convertible note to an unrelated party for $5,000 that matures on March 31, 2018. The note bears 0% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. The Company valued a BCF related to the note valued at $2,995.
On September 28, 2017, the Company issued a convertible note to an unrelated party for $50,000 that matures on November 28, 2017. The note bears 0% interest per annum, in lieu of interest the Company issued 25,000 shares of common stock. The note is convertible into shares of the Company’s common stock at $0.10 per share. The Company valued a BCF related to the note valued at $33,397 and debt discount related to the 25,000 shares of common stock issued with the note at a relative fair value of $3,702. On November 17, 2017, the company transferred the remaining balance to a new note, see below.
On October 16, 2017, the Company issued a convertible note to an unrelated company for $110,000 that matures on July 16, 2018. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at 57.5% of the lowest closing bid 30 days prior to the conversion date. Additionally, the note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates that these shares, if issued, are not indexed to the Company’s own stock and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
The Company extended the possibility to convert date by issuing 60,000 warrants valued at $7,813 on September 8, 2017 to November 2, 2017. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model. The Company extended the possibility to convert date by paying $164,469 in principal on October 23, 2017 to February 21, 2018. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On October 29, 2017, the Company issued a convertible note to an unrelated party for $100,000 that matures October 29, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 750,002 shares of common stock. The Company valued a BCF related to the note valued at $20,000 and debt discount related to the 750,002 shares of common stock issued with the note at a relative fair value of $47,368.
On November 13, 2017, the Company issued a convertible note to an unrelated party for $115,000 that matures on August 13, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at 57.5% of the lowest closing bids 30 days prior to the conversion per share. Due to sequencing on February 2, 2017, the Company determined under ASC 815, the Company has determined that the note is to be treated as an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. As additional consideration the Company also issued 150,000 warrants valued at $12,570. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model.
On November 13, 2017, the Company issued a convertible note to an unrelated party for $50,000 that matures January 10, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. The Company valued a BCF related to the note valued at $18,500.
The note was amended on October 30, 2017, to extend the conversion rights from 180 days to 225 days, in consideration of the extension the Company paid $25,000 and issued 150,000 valued at $6,691. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did result in significant and consequential changes to the economic substance of the debt and thus resulted in an extinguishment of the debt.
On November 17, 2017, the Company issued a convertible note to an unrelated party for $66,000 that matures November 17, 2018 in exchange for two existing notes for $16,000 issued on August 2, 2017 and $50,000 on September 28, 2017. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 495,001. The Company valued a BCF related to the note valued at $13,266 and debt discount related to the 495,001shares of common stock issued with the note at a relative fair value of $31,277.
On November 21, 2017, the Company issued a convertible note to an unrelated party for $100,000 that matures on November 21, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at 57.5% of the lowest closing bids 20 days prior to the conversion per share. Due to sequencing on February 2, 2017, the Company determined under ASC 815, the Company has determined that the note is to be treated as an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On November 24, 2017, the Company issued a convertible note to an unrelated party for $5,000 that matures November 24, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 37,500. The Company valued a BCF related to the note valued at $2,200 and debt discount related to the 37,500 shares of common stock issued with the note at a relative fair value of $2,596.
On November 28, 2017, the Company issued a convertible note to an unrelated party for $53,000 that matures on July 16, 2018. The note bears 12% interest per annum. The note is convertible into shares of the Company’s common stock at 61% of the lowest closing bids 15 days prior to the conversion per share. Due to sequencing on February 2, 2017, the Company determined under ASC 815, the Company has determined that the note is to be treated as an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
On December 18, 2017, the Company issued a convertible note to an unrelated party for $100,000 that matures December 18, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 750,002. The Company valued a BCF related to the note valued at $100 and debt discount related to the 750,002 shares of common stock issued with the note at a relative fair value of $42,882.
On December 21, 2017, the Company issued a convertible note to an unrelated party for $20,000 that matures December 21, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 150,000 The Company valued a BCF related to the note valued at $1,020 and debt discount related to the 150,000 shares of common stock issued with the note at a relative fair value of $8,816.
On December 31, 2017, the Company issued a convertible note to an unrelated party for $75,000 that matures December 31, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 150,000. The Company valued a BCF related to the note valued at $11,250 and debt discount related to the 150,000 shares of common stock issued with the note at a relative fair value of $34,732.
On December 31, 2017, the Company issued a convertible note to an unrelated party for $20,000 that matures December 31, 2018. The note bears 10% interest per annum. The note is convertible into shares of the Company’s common stock at $0.10 per share. As additional consideration the Company is to issue shares of common stock as initial interest payment in kind calculated by dividing the principal by $0133333 per share totaling 562,501. The Company valued a BCF related to the note valued at $3,000 and debt discount related to the 562,501 shares of common stock issued with the note at a relative fair value of $9,262.
Notes Payable – Related Parties Notes payable due to related parties consisted of the following as of December 31, 2017 and June 30, 2017, respectively:
On September 28, 2017, the Company issued a note to an unrelated party for $18,000 that matures on November 28, 2017. The note bears 0% interest per annum.
On October 16, 2017, the Company issued a note to an unrelated party for $15,000 that matures on October 16, 2018. The note bears 0% interest per annum.
On December 14, 2017, the Company issued a note to an unrelated party for $35,000 that matures on December 14, 2018. The note bears 0% interest per annum. The note has been paid in full.
Notes Payable – Non-Related Parties Notes payable due to non-related parties consisted of the following as of December 31, 2017 and June 30, 2017, respectively:
On August 25, 2017, the Company issued a note to an unrelated party for $52,000 as part of an Accounts Receivable Financing Agreement, which included $50,000 in proceeds and an OID of $2,000, that matures on October 25, 2017. The note bears 0% interest per annum. As additional consideration the Company also issued 50,000 warrants valued at $6,625. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model.
On August 31, 2017, the Company issued a note to an unrelated party for $52,000 as part of an Accounts Receivable Financing Agreement, which included $50,000 in proceeds and an OID of $2,000, that matures on October 31, 2017. The note bears 0% interest per annum. As additional consideration the Company also issued 50,000 warrants valued at $6,773. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model.
On September 19, 2017, the Company issued a note to an unrelated party for $81,000 which included $74,504 in proceeds, $6,000 in OID, and $496 in other fees, that matures on March 19, 2018. The note bears 8% interest per month. As additional consideration the Company is to issue 75,000 shares of common stock within 10 days.
On October 31, 2017, the Company issued a secured promissory note to an unrelated party for $255,000, that matures on February 28, 2018. The note bears 2.5% interest per month. The note is to be paid back the greater of $1,000 per day and $75 per unit sold commencing 31 days after closing, the greater of $1,500 per day and $75 per unit sold commencing 61 days after closing, the greater of $2,000 per day and $75 per unit sold commencing 91 days after closing.
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6. CONVERTIBLE PREFERRED STOCK |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6. CONVERTIBLE PREFERRED STOCK | The Company has authorized 10,000,000 shares of $0.001 par value per share Preferred Stock, of which the following were issued outstanding:
The Company's Series A Convertible Preferred Stock ("Series A Preferred") is convertible into Common Stock at the rate of 0.025 share of Common stock for each share of the Series A Preferred. Dividends of $0.50 per share annually from date of issue, are payable from retained earnings, but have not been declared or paid.
The Company’s Series A-1 Senior Convertible Redeemable Preferred Stock (“Series A-1 Preferred”) is convertible at the rate of 2 shares of Common Stock per share of Series A-1 Preferred. The dividend rate of the Series A-1 Senior Convertible Redeemable Preferred Stock is 6% per share per annum in cash, or commencing on June 30, 2009 in shares of the Company’s Common Stock (at the option of the Company).
Due to the fact that the Series A-1 Preferred has certain features of debt and is redeemable, the Company analyzed the Series A-1 Preferred in accordance with ASC 480 and ASC 815 to determine if classification within permanent equity was appropriate. Based on the fact that the redeemable nature of the stock and all cash payments are at the option of the Company, it is assumed that payments will be made in shares of the Company’s Common Stock and therefore, the instruments are afforded permanent equity treatment.
The Company's Series B Convertible 8% Preferred Stock ("Series B Preferred") is convertible at the rate of 0.067 share of Common Stock for each share of Series B Preferred. Dividends from date of issue are payable on June 30 from retained earnings at the rate of 8% per annum but have not been declared or paid.
The Company's Series C Convertible Preferred Stock ("Series C Preferred") is convertible at a rate of 0.007 share of Common Stock per share of Series C Preferred. Holders are entitled to dividends only to the extent of the holders of the Company’s Common Stock receive dividends.
The Company's Series D Convertible Preferred Stock ("Series D Preferred") is convertible at a rate of 0.034 share of Common Stock per share of Series D Preferred. Holders are entitled to a proportionate share of any dividends paid as though they were holders of the number of shares of Common Stock of the Company into which their shares of are convertible as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.
The Company's Series E Convertible Preferred Stock ("Series E Preferred") is convertible at a rate of 0.034 share of Common Stock per share of Series E Preferred. Holders are entitled to a proportionate share of any dividends paid as though they were holders of the number of shares of Common Stock of the Company into which their shares of are convertible as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.
The Company's Series P Convertible Preferred Stock ("Series P Preferred") is convertible at a rate of 0.007 share of Common Stock for each share of Series P Preferred. Holders are entitled to dividends only to the extent of the holders of the Company’s Common Stock receive dividends.
In the event of a liquidation, dissolution or winding up of the affairs of the Company, holders of Series A Preferred Stock, Series P Convertible Preferred Stock, Series C Convertible Preferred Stock have no liquidation preference over holders of the Company’s Common Stock. Holders of Second Series B Preferred Stock have a liquidation preference over holders of the Company’s Common Stock and the Company’s Series A Preferred Stock. Holders of Series D Preferred Stock are entitled to receive, before any distribution is made with respect to the Company’s Common Stock, a preferential payment at a rate per each whole share of Series D Preferred Stock equal to $1.00. Holders of Series E Preferred Stock are entitled to receive, after the preferential payment in full to holders of outstanding shares of Series D Preferred Stock but before any distribution is made with respect to the Company’s Common Stock, a preferential payment at a rate per each whole share of Series E Preferred Stock equal to $1.00. Holders of Series A-1 Preferred Stock are superior in rank to the Company’s Common Stock and to all other series of Preferred Stock heretofore designated with respect to dividends and liquidation.
The activity surrounding the issuances of the Preferred Stock is as follows:
During the three and six months ended December 31, 2017 the Company did not issue shares of Series A-1 Preferred.
During the fiscal year ended June 30, 2017 the Company issued 550,000 shares of Series A-1 Preferred Stock for $550,000 in cash and paid $196,853 in cash offering costs. The Company had one conversion of 150,000 shares of Series A-1 Preferred Stock for 300,000 shares of Common Stock, and issued 15,682 shares of Common Stock of payment of $7,481 in accrued dividends.
During the three and six months ended December 31, 2017 and 2016, the outstanding Preferred Stock accumulated $112,734 and $87,858 in dividends on outstanding Preferred Stock. The cumulative dividends in arrears as of December 31, 2017 were approximately $1,021,672.
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7. COMMON STOCK |
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Dec. 31, 2017 | |
Text Block [Abstract] | |
7. COMMON STOCK | The Company has authorized 250,000,000 shares of $0.001 par value per share Common Stock, of which 126,900,921 and 118,486,728 were issued outstanding as of December 31, 2017 and June 30, 2017, respectively. The activity surrounding the issuances of the Common Stock is as follows:
For the six months Ended December 31, 2017
The Company issued 2,200,000 shares of Common Stock for $222,750 in cash as part of a private placement, net of $4,750 of issuance costs, respectively.
The Company issued 340,000 shares of Common Stock for the conversion of notes and accrued interest valued at $34,000.
The Company issued 3,010,506 shares of Common Stock as incentive with convertible notes valued at $192,896.
The Company issued 120,000 shares of Common Stock for the prepaid consulting services and rent valued at $22,800.
The Company issued 115,000 shares of Common Stock for the extension of two convertible notes valued at $16,897.
As share-based compensation to employees and non-employees, the Company issued 1,348,525 shares of common stock valued at $187,623, based on the market price of the stock on the date of issuance.
As interest expense on outstanding notes payable, the Company issued 1,280,162 shares of common stock valued at $217,628 based on the market price on the date of issuance.
For the Six Months Ended December 31, 2016
The Company issued 848,755 shares of Common Stock for the conversion of notes and accrued interest valued at $190,164.
The Company also issued 100,000 shares of Common Stock as incentive to notes valued at $33,349 and recorded $30,519 in beneficial conversion features related to new issuances of debt.
The Company issued 1,149,860 shares of Common Stock as payment for services and rent valued at $451,130.
The Company issued 3,020,750 shares of Common Stock for the conversion warrants valued at $906,225.
As share-based compensation to employees and non-employees, the Company issued 575,951 shares of common stock valued at $218,538, based on the market price of the stock on the date of issuance. As interest expense on outstanding notes payable, the Company issued 1,025,888, shares of common stock valued at $390,073 based on the market price on the date of issuance.
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8. STOCK PURCHASE OPTIONS AND WARRANTS |
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8. STOCK PURCHASE OPTIONS AND WARRANTS | The Board of Directors on June 10, 2009 approved the 2009 Long-Term Stock Incentive Plan. The purpose of the 2009 Long-term Stock Incentive Plan is to advance the interests of the Company by encouraging and enabling acquisition of a financial interest in the Company by employees and other key individuals. The 2009 Long-Term Stock Incentive Plan is intended to aid the Company in attracting and retaining key employees, to stimulate the efforts of such individuals and to strengthen their desire to remain with the Company. A maximum of 1,500,000 shares of the Company's Common Stock is reserved for issuance under stock options to be issued under the 2009 Long-Term Stock Incentive Plan. The Plan permits the grant of incentive stock options, nonstatutory stock options and restricted stock awards. The 2009 Long-Term Stock Incentive Plan is administered by the Board of Directors or, at its direction, a Compensation Committee comprised of officers of the Company.
Stock Purchase Options
During the six months ended December 31, 2017, the Company did not issue any stock purchase options.
During the fiscal year ended June 30, 2017, the Company issued 500,000 stock purchase options.
The following table summarizes the changes in options outstanding of the Company during the six months ended December 31, 2017.
Stock Purchase Warrants
During the three and six months ended December 31, 2017, the Company issued warrants to purchase a total of 1,025,000, consisting of 75,000 warrants as part of a private placement valued at $6,019, 100,000 warrants as part of two AR financing agreements executed on August 2017 valued at $13,398, 150,000 warrants as part additional consideration of a promissory note on November 2017 valued at $12,560 and an additional 150,000 warrants to modify the note later in November 2017 valued at $12,570, and 550,000 warrants in conjunction with extension of three promissory notes valued at $54,491. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model.
The following table presents the assumptions used to estimate the fair values of the stock warrants and options granted:
The following table summarizes the changes in warrants outstanding issued to employees and non-employees of the Company during the three and six months ended December 31, 2017.
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9. FINANCIAL INSTRUMENTS |
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Dec. 31, 2017 | |
Financial Instruments | |
9. FINANCIAL INSTRUMENTS | The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures and associated warrants using a multinomial lattice model as of December 31, 2017 and June 30, 2017. The fair values of the derivative instruments are measured each quarter, which resulted in a loss of $767,822 and $(574), and derivative expense of $345,133 and $0 during the three and six months ended December 31, 2017 and 2016, respectively. As of December 31, 2017, and June 30, 2017, the fair market value of the derivatives aggregated $2,461,034 and $2,145,065, respectively, using the following assumptions: estimated 5-0 year term, estimated volatility of 189.87 -104.82%, and a discount rate of 2.09-0.96%. |
10. FAIR VALUE MEASUREMENTS |
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10. FAIR VALUE MEASUREMENTS | For asset and liabilities measured at fair value, the Company uses the following hierarchy of inputs:
Liabilities measured at fair value on a recurring basis at December 31, 2017, are summarized as follows:
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11. COMMITMENTS AND CONTINGENCIES |
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11. COMMITMENTS AND CONTINGENCIES | Legal Proceedings
The Company may become involved in certain legal proceedings and claims which arise in the normal course of business. The Company is not a party to any litigation. To the best of the knowledge of our management, there are no material litigation matters pending or threatened against us.
Lease Agreements
We lease offices in Hollywood, California (located at 6671 Sunset Blvd., Suite 1520, 1518 and 1550, Hollywood, California, 90028) for corporate, research, engineering and mastering services. The lease expires on December 31, 2017. The total lease expense for the facility is approximately $17,220 per month, and the total remaining obligations under these leases at December 31, 2017, were approximately $52,722.
We lease a warehouse space located at 8260 E Gelding Drive, Suite 102, Scottsdale, Arizona, 85260. The lease expires on February 28, 2019. The total lease expense for the facility is approximately $1,888 per month, and the total remaining obligations under this leases at December 31, 2017, were approximately $26,432.
We lease corporate offices located at 7825 E Gelding Drive, Suite 101, Scottsdale, Arizona, 85260. The lease expires on April 30, 2021. The total lease expense for the facility is approximately $7,224 per month, and the total remaining obligations under this leases at December 31, 2017, were approximately $288,960.
We lease corporate offices located at 7825 E Gelding Drive, Suite 103, Scottsdale, Arizona, 85260. The lease expires on April 30, 2021. The total lease expense for the facility is approximately $3,000 per month, and the total remaining obligations under this leases at December 31, 2017, were approximately $117,000.
Below is a table summarizing the annual operating lease obligations over the next 5 years:
Other
The Company has not declared dividends on Series A or B Convertible Preferred Stock or its Series A-1 Convertible Preferred Stock. The cumulative dividends in arrears through December 31, 2017 were approximately $1,021,672.
As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2015, 2016, and 2017.
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12. INVENTORIES |
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12. INVENTORIES | Inventories are stated at the first in first out and consisted of the following:
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13. SUBSEQUENT EVENTS |
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Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
13. SUBSEQUENT EVENTS | In accordance with ASC 855, Company’s management reviewed all material events through the date of this filing and determined that there were the following material subsequent events to report:
On January 10, 2018, the Company issued a convertible note to an unrelated company for $115,000 that matures on October 10, 2018. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at the lesser of $0.12 or 57.5% of the lowest closing bid 30 days prior to the conversion date. Additionally, the note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates that these shares, if issued, are not indexed to the Company’s own stock and, therefore, is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. As additional consideration the Company also issued 150,000 three year warrants with an exercise price of $0.12 per share valued at $11,455. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model.
On October 31, 2017, the Company issued a secured promissory note to an unrelated party for $255,000, that matures on February 28, 2018. The note bears 2.5% interest per month. The note is to be paid back the greater of $1,000 per day and $75 per unit sold commencing 31 days after closing, the greater of $1,500 per day and $75 per unit sold commencing 61 days after closing, the greater of $2,000 per day and $75 per unit sold commencing 91 days after closing.
The note was amended on January 2, 2018, to allow the Company to redeem 80% of the principal and accrued interest as well as the orderly sale of shares of common stock to extend the conversion rights from 225 days to 275 days, in consideration of the extension the Company paid $26,500 The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did result in significant and consequential changes to the economic substance of the debt and thus resulted in an extinguishment of the debt.
On February 23, 2017, the Company issued a convertible note to an unrelated company for $149,000 that matures on November 23, 2017. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids 20 days prior to the conversion date. Additionally, the note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, that this percentage discount (variable) exercise price indicates is an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. The Company extended the possibility to convert date by issuing 60,000 warrants valued at $7,813 on September 8, 2017 to November 2, 2017. The Company extended the possibility to convert date by issuing 60,000 warrants valued at $7,813 on September 8, 2017 to November 2, 2017. The Company extended the possibility to convert date by paying $10,000 of principal and $1,400 of accrued interest on October 23, 2017 to November 24, 2017 and extend the maturity date to February 21, 2018. The Company extended the possibility to convert date by paying $10,000 of principal and $4,000 of accrued interest on November 29, 2017 to December 22, 2017. The Company extended the possibility to convert date by paying $10,000 of principal on December 21, 2017 to January 16, 2018. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On February 23, 2017, the Company issued a convertible note to an unrelated company for $224,000 that matures on November 23, 2017. The note bears 10% interest per annum and is convertible into shares of the Company’s common stock at lesser of 40% of the average three lowest closing bids 20 days prior to the conversion date. Additionally, the note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. The Company extended the possibility to convert date by issuing 90,000 warrants valued at $11,720 on September 8, 2017 to November 2, 2017. The Company extended the possibility to convert date by paying $10,000 of principal and $2,100 of accrued interest on October 23, 2017 to November 24, 2017 and extend the maturity date to February 21, 2018. The Company extended the possibility to convert date by paying $20,000 of principal and $6,000 of accrued interest on November 29, 2017 to December 22, 2017. The Company extended the possibility to convert date by paying $15,000 of principal on December 21, 2017 to January 16, 2018. The warrants are considered derivative liabilities under ASC 815-40 under the Company’s sequencing policy and were valued using the multinomial lattice model. The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.
On August 2, 2017, the Company issued a convertible note to an unrelated company for $60,500, which includes proceeds of $55,000, and $5,500 in OID, that matures on August 2, 2018. The note bears 12% interest per annum and is convertible into shares of the Company’s common stock at 61% of the lowest two trading prices during the fifteen (15) trading day period ending to the date of conversion. The note contains a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. The Company determined under ASC 815, the Company has determined that this percentage discount (variable) exercise price indicates an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value. On January 4, 2018, the Company paid the entire principal balance of $60,500 and $12,640 in accrued interest.
On January 4, 2018, the Company issued a convertible note to an unrelated party for $53,000 that matures on July 16, 2018. The note bears 12% interest per annum. The note is convertible into shares of the Company’s common stock at 61% of the lowest closing bids 15 days prior to the conversion per share. Due to sequencing on February 2, 2017, the Company determined under ASC 815, the Company has determined that the note is to be treated as an embedded derivative financial liability, which requires bifurcation and to be separately accounted for. At each reporting period, the Company will mark this derivative financial instrument to its estimated fair value.
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14. RESTATEMENT OF INTERIM CONDENSED FINANCIAL STATEMENTS |
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14. CORRECTION OF INTERIM CONDENSED FINANCIAL STATEMENTS | This Amendment No. 1 to recognize cost of sales related to the sale of 4,000 units for a total cost of $400,000 to its manufacturer that was recorded in the three-month ended December 31, 2017. The sales of the 4,000 units took place during the quarter ending September 30, 2017 therefore the cost of sales should have been recorded in the same period. (ii) As part of the 4,000 units transaction the manufacture agreed to extinguish $525,000 of accounts payable, for the relief of the $400,000 in accounts receivable, which resulted in a gain of $125,000.
In the quarter ending December 31, 2017, the company sold an additional 1,000 units for a total sale of $120,000 to the same manufacture as the September 30, 2017 transaction referenced above. The transaction eliminated $90,000 in accounts receivable and accounts payable, resulting in a net gain of $30,000. (ii) as part of the 1,000 units transaction the company transferred consigned inventory in the amount of $142,389 which the company mistakenly wrote off the inventory to cost of good sold, in the December 30, 2017 amendment the company corrected the removal of the inventory and the overstatement of cost of good sold. (iii) The manufacture also had inventory in the amount of $198,000 that the company did not account for in the original filed 10Q.
The effects of these corrections on the interim consolidated financial statements were:
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Dec. 31, 2017 | |
Notes to Financial Statements | |
Use of Estimates | The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments. |
Principles of Consolidation | The consolidated financial statements include the accounts of AfterMaster, Inc. and its subsidiaries. All significant inter-Company accounts and transactions have been eliminated.
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Investments | Our available for securities are considered Level 1. Realized gains and losses on these securities are included in “Other income (expense) – net” in the consolidated statements of operations using the specific identification method. Unrealized gains and losses, on available-for-sale securities are recorded in accumulated other comprehensive income (accumulated OCI). Unrealized losses that are considered other than temporary are recorded in other income (expense) – net, with the corresponding reduction to the carrying basis of the investment.
Our short-term investments are recorded at amortized cost, and the respective carrying amounts approximate fair values. Our available for securities maturing within one year are recorded in “Other current assets,” on the balance sheets.
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Accounts Receivables | Accounts receivables are stated at amounts management expects to collect. An allowance for doubtful accounts is provided for uncollectible receivables based upon management's evaluation of outstanding accounts receivable at each reporting period considering historical experience and customer credit quality and delinquency status. Delinquency status is determined by contractual terms. Bad debts are written off against the allowance when identified.
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Fair Value Instruments | Cash is the Company’s only financial asset or liability required to be recognized at fair value and is measured using quoted prices for active markets for identical assets (Level 1 fair value hierarchy). The carrying amounts reported in the balance sheets for notes receivable and accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.
Market prices are not available for the Company’s loans due to related parties or its other notes payable, nor are market prices of similar loans available. The Company determined that the fair value of the notes payable based on its amortized cost basis due to the short-term nature and current borrowing terms available to the Company for these instruments. |
Derivative Liabilities | The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares.
Using this sequencing policy, the Company used this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to July 5, 2016 until the note was converted on the same day were derivative liabilities. The Company again used this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to August 19, 2016 until the note was converted on August 22, 2016 were derivative liabilities.
The Company entered into multiple amendments to a note payable to extend the maturity date (the Amendments). The Company agreed to additional $30,000 extension fees which were converted at a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. This creates a situation where the Company no longer has shares enough available to “cover” all potential equity issuance obligations during the period of issuance until conversion.
On February 3, 2017, the company entered into a note payable with an unrelated party at a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. Accordingly, all convertible instruments issued after February 3, 2017 are considered derivatives according to the Company’s sequencing policy.
The Company values these convertible notes payable using the multinomial lattice method that values the derivative liability within the notes based on a probability weighted discounted cash flow model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations.
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Income Taxes | There is no income tax provision for the three and six months ended December 31, 2017 and 2016 due to net operating losses for which there is no benefit currently available.
At December 31, 2017, the Company had deferred tax assets associated with state and federal net operating losses. The Company has recorded a corresponding full valuation allowance as it is more likely than not that some portion of all of the deferred tax assets will not be realized.
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Revenue Recognition | The Company applies the provisions of FASB ASC 605, Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured.
The Company's revenues are generated from AfterMaster products and services, AfterMaster Pro, sessions revenue, and remastering. Revenues related to AfterMaster Pro sells through consumer retail distribution channels and through our website. For sales through consumer retail distribution channels, revenue recognition occurs when title and risk of loss have transferred to the customer which usually occurs upon shipment to the customers. We established allowances for expected product returns and these allowances are recorded as a direct reduction to revenue. Return allowances are based on our historical experience. Revenues related to sessions and remastering are recognized when the event occurred.
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Cost of Revenues | The Company’s cost of revenues includes employee costs, and other nominal amounts. Costs associated with products are recognized at the time of the sale and when the inventory is shipped. Costs incurred to provide services are recognized as cost of sales as incurred. Depreciation is not included within cost of revenues. |
Loss Per Share | Basic loss per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. The losses attributable to Common shareholders was increased for accrued and deemed dividends on Preferred Stock during the six months ended December 31, 2017 and 2016 of $112,734 and $87,858, respectively.
Diluted earnings per Common Share is computed by dividing net loss attributable to Common shareholders by the weighted-average number of Shares of Common Stock outstanding during the period increased to include the number of additional Shares of Common Stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding convertible Preferred Stock, stock options, warrants, and convertible debt. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities.
For the six months ended December 31, 2017 and 2016, all of the Company’s potentially dilutive securities (warrants, options, convertible preferred stock, and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total number of potentially dilutive Common Shares that were excluded were 90,410,737 and 26,336,572 at December 31, 2017 and 2016, respectively.
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Recent Accounting Pronouncements | Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.
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4. SECURITIES AVAILABLE-FOR-SALE (Tables) |
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5. NOTES PAYABLE (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Convertible Notes Payable-Related Parties |
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Schedule of Convertible Notes Payable-Non-Related Parties |
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Schedule of Non-Convertible Notes Payable-Related Parties |
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Schedule of Non-Convertible Notes Payable-Non-Related Parties |
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6. CONVERTIBLE PREFERRED STOCK (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Preferred Stock |
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8. STOCK PURCHASE OPTIONS AND WARRANTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of options activity |
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Schedule of Assumptions Used to Estimate Fair Value |
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Schedule of Warrants |
|
10. FAIR VALUE MEASUREMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule or fair value measurements |
|
11. COMMITMENTS AND CONTINGENCIES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
Annual operating lease obligations |
|
12. INVENTORIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
|
14. RESTATEMENT OF INTERIM CONDENSED FINANCIAL STATEMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement Of Interim Condensed Financial Statements Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of corrections |
|
2. GOING CONCERN (Details Narrative) - USD ($) |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|
Going Concern Details Narrative | ||
Accumulated deficit | $ (75,157,060) | $ (72,303,551) |
Working capital | $ (10,912,789) |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Summary Of Significant Accounting Policies Details Narrative | ||||
Preferred Stock Accretion and Dividends | $ (56,367) | $ (45,620) | $ (112,734) | $ (87,858) |
Potentially dilutive common shares excluded | 90,410,737 | 26,336,572 | 90,410,737 | 26,336,572 |
4. SECURITIES AVAILABLE-FOR-SALE (Details) - USD ($) |
6 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2017 |
Jun. 30, 2017 |
|
Fair value | $ 58,800 | $ 123,600 |
Securities Available-for-sale | ||
Amortized cost | 123,600 | 63,600 |
Gross unrealized gains | 0 | 60,000 |
Gross unrealized losses | (64,800) | 0 |
Gross realized gains | 0 | 0 |
Gross realized losses | 0 | 0 |
Fair value | $ 58,800 | $ 123,600 |
5. NOTES PAYABLE (Details) - USD ($) |
Dec. 31, 2017 |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Total convertible notes payable - related parties | $ 3,986,250 | $ 3,951,182 | |
Less current portion | 3,990,000 | 3,951,182 | |
Convertible related party notes payable, net of current portion | 0 | 0 | |
Convertible Notes Payable One [Member] | |||
Total convertible notes payable - related parties | 3,925,000 | 3,925,000 | |
Convertible Notes Payable Two [Member] | |||
Total convertible notes payable - related parties | 30,000 | $ 26,182 | |
Convertible Notes Payable Three [Member] | |||
Total convertible notes payable - related parties | 10,000 | $ 0 | |
Convertible Notes Payable Four [Member] | |||
Total convertible notes payable - related parties | $ 21,250 | $ 0 |
5. NOTES PAYABLE (Details 2) - USD ($) |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|
Notes payable - related parties | $ 633,000 | $ 610,000 |
Less current portion | 633,000 | 610,000 |
Notes payable - related parties, long term | 0 | 0 |
Convertible Notes Payable One [Member] | ||
Notes payable - related parties | 600,000 | 610,000 |
Convertible Notes Payable Two [Member] | ||
Notes payable - related parties | 18,000 | 0 |
Convertible Notes Payable Three [Member] | ||
Notes payable - related parties | 15,000 | 0 |
Convertible Notes Payable Four [Member] | ||
Notes payable - related parties | $ 0 | $ 0 |
5. NOTES PAYABLE (Details 3) - USD ($) |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|
Note payable - non-related parties | $ 449,169 | $ 40,488 |
Less current portion | 449,169 | 40,488 |
Notes payable - non-related parties, long-term | 0 | 0 |
Convertible Notes Payable One [Member] | ||
Note payable - non-related parties | 40,488 | 40,488 |
Convertible Notes Payable Two [Member] | ||
Note payable - non-related parties | 52,000 | 0 |
Convertible Notes Payable Three [Member] | ||
Note payable - non-related parties | 45,981 | 0 |
Convertible Notes Payable Four [Member] | ||
Note payable - non-related parties | 62,158 | 0 |
Convertible Notes Payable Five [Member] | ||
Note payable - non-related parties | $ 248,543 | $ 0 |
6. CONVERTIBLE PREFERRED STOCK (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Equity [Abstract] | ||||
Dividends on preferred stock | $ 112,734 | $ 87,858 | $ 112,734 | $ 87,858 |
Dividends in arrears | $ 1,021,672 |
8. STOCK PURCHASE OPTIONS AND WARRANTS (Details 1) |
6 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2017 |
Jun. 30, 2017 |
|
Stock Purchase Options And Warrants Details 1 | ||
Expected volatility, minimum | 105.00% | 92.00% |
Expected volatility, maximum | 190.00% | 126.00% |
Expected dividends | 0.00% | 0.00% |
Expected term, minimum | 0 years | 0 years |
Expected term, maximum | 5 years | 5 years |
Risk-free interest rate, minimum | 0.96% | 0.74% |
Risk-free interest rate, maximum | 2.09% | 1.89% |
8. STOCK PURCHASE OPTIONS AND WARRANTS (Details Narrative) - shares |
6 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2017 |
Jun. 30, 2017 |
|
Notes to Financial Statements | ||
Stock purchase options issued | 0 | 500,000 |
9. FINANCIAL INSTRUMENTS (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Jun. 30, 2017 |
|
Gain (loss) from derivative instruments | $ 767,822 | $ (574) | $ 767,822 | $ (574) | |
Derivative expense | 345,133 | $ 0 | 345,133 | $ 0 | |
Fair market value of the derivatives | $ 2,145,065 | $ 2,145,065 | $ 2,145,065 | ||
Minimum [Member] | |||||
Estimated term | 0 years | ||||
Estimated volatility | 104.82% | ||||
Discount rate | 0.96% | ||||
Maximum [Member] | |||||
Estimated term | 5 years | ||||
Estimated volatility | 189.87% | ||||
Discount rate | 2.09% |
10. FAIR VALUE MEASUREMENTS (Details) - USD ($) |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|
Fair value of derivatives | $ 2,461,034 | $ 2,145,065 |
Securities available-for-sale | 58,800 | 123,600 |
Level 1 [Member] | ||
Fair value of derivatives | 0 | 0 |
Securities available-for-sale | 58,800 | 123,600 |
Level 2 [Member] | ||
Fair value of derivatives | 0 | 0 |
Securities available-for-sale | 0 | 0 |
Level 3 [Member] | ||
Fair value of derivatives | 2,461,034 | 2,145,065 |
Securities available-for-sale | $ 0 | $ 0 |
11. COMMITMENTS AND CONTINGENCIES (Details) |
Dec. 31, 2017
USD ($)
|
---|---|
Commitments And Contingencies Details | |
2018 | $ 72,672 |
2019 | 141,464 |
2020 | 131,475 |
2021 | 87,287 |
2022 | 0 |
Total | $ 445,266 |
12. INVENTORIES (Details) - USD ($) |
Dec. 31, 2017 |
Jun. 30, 2017 |
---|---|---|
Inventories Details | ||
Components | $ 340,389 | $ 159,017 |
Finished Goods | 0 | 0 |
Allowance / Reserve | 0 | (54,126) |
Inventory, net | $ 340,389 | $ 104,891 |
14. RESTATEMENT OF INTERIM CONDENSED FINANCIAL STATEMENTS (Details 1) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Cost of Revenues (Exclusive of Depreciation and Amortization) | $ 445,012 | $ 157,680 | $ 1,001,340 | $ 319,775 |
Total Costs and Expenses | 1,362,838 | 1,837,228 | 2,839,963 | 3,731,009 |
Loss from Operations | (1,027,772) | (1,788,489) | (1,889,501) | (3,627,784) |
Gain Loss on Extinguishment of Debt | 0 | 9,236 | 90,042 | 9,236 |
Total Other Expense | 184,164 | (369,749) | (964,008) | (738,933) |
Loss Before Income Taxes | (843,608) | (2,158,238) | (2,853,509) | (4,366,717) |
NET LOSS | (843,608) | (2,158,238) | (2,853,509) | (4,366,717) |
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (899,975) | $ (2,203,858) | $ (2,966,243) | $ (4,454,575) |
Basic and diluted Loss Per Share of Common Stock | $ (0.01) | $ (0.02) | $ (0.02) | $ (0.04) |
COMPREHENSIVE LOSS | $ (889,115) | $ (2,242,858) | $ (3,031,043) | $ (4,470,175) |
As Reported | ||||
Cost of Revenues (Exclusive of Depreciation and Amortization) | 987,401 | 1,143,729 | ||
Total Costs and Expenses | 1,905,227 | 2,982,352 | ||
Loss from Operations | (1,570,161) | (2,031,890) | ||
Gain Loss on Extinguishment of Debt | 0 | (34,958) | ||
Total Other Expense | 163,954 | (1,089,008) | ||
Loss Before Income Taxes | (1,406,207) | (3,120,898) | ||
NET LOSS | (1,406,207) | (3,120,898) | ||
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ (1,462,574) | $ (3,233,632) | ||
Basic and diluted Loss Per Share of Common Stock | $ (0.01) | $ (0.03) | ||
COMPREHENSIVE LOSS | $ (1,541,714) | $ (3,298,432) | ||
Correction | ||||
Cost of Revenues (Exclusive of Depreciation and Amortization) | (542,389) | (142,389) | ||
Total Costs and Expenses | (542,389) | (142,389) | ||
Loss from Operations | 542,389 | 142,389 | ||
Gain Loss on Extinguishment of Debt | 0 | 125,000 | ||
Total Other Expense | 20,210 | 125,000 | ||
Loss Before Income Taxes | 562,599 | 267,389 | ||
NET LOSS | 562,599 | 267,389 | ||
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ 562,599 | $ 267,389 | ||
Basic and diluted Loss Per Share of Common Stock | $ 0 | $ 0.01 | ||
COMPREHENSIVE LOSS | $ 652,599 | $ 267,389 |
14. RESTATEMENT OF INTERIM CONDENSED FINANCIAL STATEMENTS (Details 2) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Net Loss | $ (843,608) | $ (2,158,238) | $ (2,853,509) | $ (4,366,717) |
(Gain)/Loss on extinguishment of debt | (90,042) | (9,236) | ||
Accounts receivable | 27,389 | (5,809) | ||
Inventory | (235,498) | (330,077) | ||
Accounts payable and accrued expenses | 273,241 | 19,068 | ||
Net Cash Used in Operating Activities | (1,427,304) | $ (2,493,693) | ||
As Reported | ||||
Net Loss | (1,406,207) | (3,120,898) | ||
(Gain)/Loss on extinguishment of debt | 34,958 | |||
Accounts receivable | (462,611) | |||
Inventory | 104,891 | |||
Accounts payable and accrued expenses | 565,241 | |||
Net Cash Used in Operating Activities | (1,427,304) | |||
Correction | ||||
Net Loss | $ 562,599 | 267,389 | ||
(Gain)/Loss on extinguishment of debt | (125,000) | |||
Accounts receivable | 490,000 | |||
Inventory | (340,389) | |||
Accounts payable and accrued expenses | (292,000) | |||
Net Cash Used in Operating Activities | $ 0 |
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