Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2017 | Mar. 19, 2018 | Mar. 16, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Sugarmade, Inc. | ||
Entity Central Index Key | 919,175 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2017 | ||
Amendment Flag | false | ||
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 Public Float | $ 48,984,363 | ||
Entity Common Stock, Shares Outstanding | 247,395,774 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2017 | Jun. 30, 2016 |
Current assets: | ||
Cash | $ 101,880 | $ 911 |
Accounts receivable, net | 113,218 | 117,866 |
Inventory, net | 568,229 | 468,262 |
Loan receivables | 10,000 | 20,000 |
Other current assets | 190,338 | 84,504 |
Total current assets | 983,665 | 691,543 |
Equipment, net | 61,792 | 78,453 |
Intangible Asset | 73,125 | |
Other assets | 27,081 | 23,281 |
Total Assets | 1,145,663 | 793,277 |
Current liabilities: | ||
Checks issued in excess of cash | 28,377 | |
Note payable due to bank | 25,982 | 25,983 |
Accounts payable and accrued liabilities | 1,503,920 | 1,481,961 |
Accounts payable - related party | 23,086 | |
Customer deposits | 232,591 | 248,299 |
Unearned revenue | 63,304 | 93,522 |
Other payable | 223,482 | 296,259 |
Accrued interest | 116,236 | 272,708 |
Accrued compensation and personnel related payables | 11,403 | 11,403 |
Notes payable due to shareholder | 70,666 | 85,666 |
Loans payable | 192,801 | 108,620 |
Loans payable - related party | 228,412 | 318,960 |
Convertible notes payable, net | 1,502,023 | 394,167 |
Shares to be issued | 893,000 | |
Derivative liabilities | 1,134,000 | 697,000 |
Warrants liabilities | 25,250 | 4,000 |
Total current liabilities | 6,246,156 | 4,066,924 |
Total liabilities | 6,246,156 | 4,066,924 |
Stockholders' deficiency: | ||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding | ||
Common stock, $0.001 par value, 300,000,000 shares authorized, 226,734,372 and 178,685,388 shares issued and outstanding at June 30, 2017 and 2016 | 226,735 | 178,686 |
Additional paid-in capital | 20,768,185 | 17,151,379 |
Shares to be issued, preferred stock | 2,000,000 | 2,000,000 |
Shares to be issued, common stock | 467,996 | 1,246,000 |
Accumulated deficit | (28,563,409) | (23,849,712) |
Total stockholders' deficiency | (5,100,493) | (3,273,647) |
Totoal liabilities and stockholder's deficiency | $ 1,145,663 | $ 793,277 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2017 | Jun. 30, 2016 |
Condensed Consolidated Balance Sheets Parenthetical | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 226,734,372 | 178,685,388 |
Common stock, shares outstanding | 226,734,372 | 178,685,388 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Consolidated Statements Of Operations | ||
Revenues, net | $ 4,100,560 | $ 4,348,256 |
Cost of goods sold | 2,832,798 | 2,889,754 |
Gross profit | 1,267,762 | 1,458,502 |
Operating expenses: | ||
Selling, general and administrative expenses | 3,986,314 | 3,451,862 |
Loss from operations | (2,718,552) | (1,993,360) |
Non-operating income (expense): | ||
Interest expense | (352,300) | (18,789) |
Warrant expense | (25,250) | |
Change in fair value of derivative liabilities | (437,000) | (397,000) |
Realized loss on notes converted | (1,172,000) | |
Loss on extinguishment of debt | (55,498) | |
Commission | 3,395 | |
Other income | (8,595) | 3,082 |
Total non-operating income (expense) | (1,995,145) | (464,810) |
Net loss | $ (4,713,697) | $ (2,458,170) |
Basic net loss per share | $ (0.02) | $ (0.01) |
Diluted net loss per share | $ (0.02) | $ (0.01) |
Basic and diluted weighted average common shares outstanding used in computing net loss per share | 202,675,344 | 172,845,853 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows Statement - USD ($) | 9 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (2,458,170) | $ (4,713,697) |
Adjustments to reconcile net loss to cash flows from operating activities: | ||
Bad debt expense | 44,488 | (90,990) |
Inventory impairment loss | 70,332 | |
Loss on extinguishment of liability | 55,498 | |
Warrant expense | 25,250 | |
Change in fair value of derivative liability | 397,000 | 437,000 |
Realized loss on notes converted | 1,172,000 | |
Stock compensation expense | 1,246,000 | 1,257,261 |
Depreciation and amortization | 48,587 | 42,587 |
Changes in operating assets and liabilities | ||
Accounts receivable | (76,394) | 95,638 |
Inventory | 149,296 | (170,300) |
Other assets | 23,827 | (61,120) |
Checks issued in excess of cash | (36,866) | (28,377) |
Accounts payable and accrued liabilities | (595,605) | 123,560 |
Customer deposits | 5,212 | (1,938) |
Unearned revenue | 93,522 | (30,218) |
Accrued interest and other payables | 524,074 | (76,428) |
Net cash used in operating activities | (579,531) | (1,918,210) |
Cash flows from investing activities: | ||
Loan receivables | 79,050 | |
Payment for acquisition of property and equipment | (6,077) | (24,052) |
Net cash provided by (used in) investing activities | 72,973 | (24,052) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 230,000 | 125,000 |
Proceeds from shares to be issued | 125,000 | |
Proceeds from (repayments of) loan | (93,457) | (566,453) |
Proceeds from loans | 795,420 | |
Advance from related parties | 1,445,301 | |
Repayment of notes payable due to related parties | (1,650,560) | |
Payments for note payable | (187,334) | |
Proceeds from convertible notes | 1,769,523 | |
Proceeds from EB-Five investment | 500,000 | |
Net cash provided by (used in) financing activities | 449,209 | 2,043,231 |
Net increase (decrease) in cash | (57,349) | 100,969 |
Cash, beginning of period | 58,260 | 911 |
Cash, end of period | 911 | 101,880 |
Cash paid during the period for: | ||
Interest | 144,200 | |
Income taxes | 25,212 | |
Supplemental disclosure of non-cash financing activities: | ||
Debts settled through shares issuance | $ 35,206 | $ 620,965 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Shares to be issued, preferred shares | Shares to be issued, common shares | Accumulated Deficit | Total |
Balance at Beginning at Jun. 30, 2015 | $ 157,746 | $ 16,389,946 | $ 1,500,000 | $ 461,668 | $ (21,391,542) | $ (2,882,182) |
Balance at Beginning, Shares at Jun. 30, 2015 | 157,745,198 | |||||
Shares issued for debts settlement | $ 698 | 90,007 | 90,705 | |||
Shares issued for debts settlement, Shares | 697,730 | |||||
Shares issued for equity financing | $ 9,750 | 220,250 | 230,000 | |||
Shares issued for equity financing, Shares | 9,750,000 | |||||
Shares issued for compensation | $ 10,492 | 451,176 | 461,668 | |||
Shares issued for compensation, Shares | 10,492,460 | |||||
Shares to be issued | 500,000 | 784,332 | 1,284,332 | |||
Net loss | (2,458,170) | (2,458,170) | ||||
Balance at Ending at Jun. 30, 2016 | $ 178,686 | 17,151,379 | 2,000,000 | 1,246,000 | (23,849,712) | (3,273,647) |
Balance at Ending, Shares at Jun. 30, 2016 | 178,685,388 | |||||
Shares issued for debts settlement | $ 25,441 | 1,767,524 | 251,996 | 2,044,961 | ||
Shares issued for debts settlement, Shares | 25,441,007 | |||||
Shares issued for equity financing | $ 2,404 | 122,596 | 125,000 | 125,000 | ||
Shares issued for equity financing, Shares | 2,403,846 | |||||
Shares issued for compensation | $ 29,207 | 1,713,683 | (1,230,000) | 512,890 | ||
Shares issued for compensation, Shares | 29,207,131 | |||||
Shares issued for intangible asset | $ 75,000 | $ 75,000 | ||||
Warrants expired | 4,000 | 4,000 | ||||
Shares cancelled | $ (9,003) | $ 9,003 | ||||
Shares cancelled, Shares | (9,003,000) | |||||
Net loss | (4,713,697) | (4,713,697) | ||||
Balance at Ending at Jun. 30, 2017 | $ 226,735 | $ 20,768,185 | $ 2,000,000 | $ 467,996 | $ (28,563,409) | $ (5,100,493) |
Balance at Ending, Shares at Jun. 30, 2017 | 226,734,372 |
Nature of Business
Nature of Business | 12 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | 1. Nature of Business Sugarmade, Inc. (hereinafter referred to as “we”, “us” or “the/our Company”) is a publicly traded company incorporated in the state of Delaware. Our previous legal name was Diversified Opportunities, Inc. Our Company, Sugarmade, Inc. operates through our subsidiary, Sugarmade, Inc., a California corporation (“SWC Group, Inc., - CA”). As of the end of the reporting period, June 30, 2016, we were involved in several businesses including the supply of products to the quick service restaurant sub-sector of the restaurant industry and as a distributor of paper products derived from non-wood sources. We are headquartered in City of Industry, California, a suburb of Los Angeles, with two additional warehouse locations in Southern California. As of date of this filing, we employ 25 full and part-time workers and contractors. Our Board of Directors believes the legal cannabis-related supply sector could be highly lucrative for the Company, and thus we plan to pursue a strategy of expanding operations within this area. According to the State of Legal Marijuana Markets Report (4th Edition), published by Arc View Market Research and produced by New Frontier, California is the largest medical marijuana program in the country among states where medical marijuana is currently legal. The California market is fueled by the state's large size, longevity as the first-in-the-nation medical marijuana program, and low barriers to patient access. Even with California's newly passed recreational marijuana law, which will significantly tighten the program with new restrictions; the market is still projected to reach $2.6 billion in sales in 2020. That is nearly double Colorado's $1.5 billion, and over five times the size of the markets in Arizona, Oregon, and Michigan for that year. If legalized in 2016, the medical marijuana markets in Ohio and Pennsylvania will become two of the largest in the country by 2020. According to the data, a handful of states in the western U.S. project to command over 50% of the medical marijuana market by 2020. As more and more states legalize both medical and recreational cannabis, we believe our company can benefit from our Internet and e-commerce marketing activities. As of the date of this filing, our main business operation, CarryOutSuppies.com, is a producer and wholesaler of custom printed and generic supplies servicing more than 3,000 quick service restaurants. Our products include double poly paper cups for cold beverage; disposable, clear, plastic cold cups, paper coffee cups, yogurt cups, ice cream cups, cup lids, cup sleeves, food containers, soup containers, plastic spoons and many other similar products for this market sector. CarryOutSupplies.com was founded in 2009 when the founders gained first-hand experience within the restaurant industry of the difficulty for restaurant owners to acquire custom printed supplies at a reasonable cost. Many quick service restaurants wish to acquire custom printed products, such as those embossed with logos, but the minimum order size for such customization had been cost prohibitive. With that in mind, carry out supplies was founded to provide products to this underserved section of the market. Since that time, the company has become a key supplier to many popular U.S. franchises, particularly in the frozen dessert segments. The company estimates it holds approximately 40% market share of generic and printed products within the take out frozen yogurt and ice cream industries. We also hold a product supply and licensing agreement FreeHand® ThumbTray™ for the western part of the United States. We are also a distributor of paper made from 100% reclaimed sugarcane fiber, enhanced with bamboo. Sugarcane fiber, called bagasse, is a discarded byproduct of sugarcane production. Sugarmade, Inc. was founded in 2010. As is explained below, in 2014, CarryOutSupplies.com was acquired by Sugarmade, Inc., creating the Company as it is today. Relative to Sugarmade Paper, our third-party contract manufacturer uses bagasse and bamboo, as opposed to wood products significantly reducing its manufacturing carbon footprint, energy consumption, and attendant water pollution during the manufacture of its products. This allows us to offer our unique, exclusive, tree-free paper products at price-parity equal to or less than current recycled fiber products already on the market. Our products are unique and we believe offer an ideal solution for those consumers (both corporate and individual) seeking to meet their sustainability mandates or personal environmentally conscious goals, at a price that is equal to or less than current recycled products. Our primary focus for this business unit as of filing of this report is the organization and administration of fundraisers and paper drives for schools, non-profits and other institutions. During September of 2016, the Company completed negotiations for and signed a license agreement with HUY FONG FOODS, INC. (“HFFI”), the maker of Sriracha Hot Chili Sauce. Under the terms of the agreement, the Company is granted license to use the licensed marks of HFFI on and for products the Company is currently in process of designing and testing. Based on this agreement and a separate license agreement signed during 2015 with Seasoning Stixs International, LLC, the Company plans to introduce a new culinary seasoning product named Sriracha Seasoning Stixs. Sriracha Seasoning Stixs are encapsulated Huy Fong Sriracha Sauce and other seasonings in the form of a stick, which are inserted into meat, fish and poultry prior to cooking. Sriracha Seasoning Stixs are a hard solid at room temperature, but as heat is applied the sticks begin to liquefy allowing the meat fibers to act like a sponge absorbing the seasonings and flavors that had previously been encapsulated in the stick. The Company launched its SrirachaStix.com web platform using Shopify on October 1, 2017, and aggressive marketing tactic has been implemented via a nationwide advertising and social media campaign. As of the date of this filing, this newly built website had already generated over $150,000 in online revenue. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2017 | |
Summary Of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Principles of consolidation The consolidated financial statements include the accounts of our Company and its wholly-owned subsidiaries, Sugarmade-CA and SWC. All significant intercompany transactions and balances have been eliminated in consolidation. Going concern The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as may be required. Our consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Management is endeavoring to increase revenue-generating operations. While priority is on generating cash from operations through the sale of the Company’s products, management is also seeking to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to our Company, or which may not be available at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Revenue recognition We recognize revenue in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No. 605, Revenue Recognition. Revenue is recognized when an arrangement and a determinable fee occur, and when collection is considered to be probable and products are delivered, or title has been transferred. This generally occurs upon shipment of the merchandise, which is when legal transfer of title occurs. In the event that final acceptance of our product by the customer is uncertain, revenue is deferred until all acceptance criteria have been met. We currently have a consignment arrangement with two of our customers. We record revenue on consignment goods when the consigned goods are sold by the consignee and all other above-mentioned revenue recognition criteria have been satisfied. Cash deposits received in connection with the sales of our products prior to their being delivered or acceptance if applicable is recorded as deferred revenue. Cash Cash and cash equivalents consist of amounts held as bank deposits and highly liquid debt instruments purchased with an original maturity of three months or less. From time to time, we may maintain bank balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). We have not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash. Accounts receivable Accounts receivable are carried at their estimated collectible amounts, net of any estimated allowances for doubtful accounts. We grant unsecured credit to our customer’s deemed credit worthy. Ongoing credit evaluations are performed and potential credit losses estimated by management are charged to operations on a regular basis. At the time, any particular account receivable is deemed uncollectible, the balance is charged to the allowance for doubtful accounts. The Company had accounts receivable net allowances of $113,218 as of June 30, 2017 and of $117,866 as of June 30, 2016. Inventory Inventory consists of finished goods paper and paper-based products such as paper cups and food containers ready for sale and is stated at the lower of cost or market. We value our inventory using the weighted average costing method. Our Company's policy is to include as a part of inventory any freight incurred to ship the product from our contract manufacturers to our warehouses. Outbound freights costs related to shipping costs to our customers are considered period costs and reflected in selling, general and administrative expenses. We regularly review inventory and consider forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value of our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated market value. On a consolidated basis, as of June 30, 2017 and June 30, 2016, the balance for the inventory totaled $568,229 and $468,262, respectively. $70,332 were reserved for obsolescent inventory for the year ended June 30, 2017, and $72,974 were reserved for obsolescent inventory for the year ended June 30, 2016. Impairment of Long-Lived Assets Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of June 30, 2017, there was no significant impairment of its long-lived assets. Income taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspect of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of October 2, 2008, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as open tax years in these jurisdictions. We have identified the U.S. federal and California as our “major” tax jurisdictions and generally, we remain subject to Internal Revenue Service examination of our 2013 U.S. federal income tax returns. However, we have certain tax attribute carryforwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. We have not taken any uncertain positions that would necessitate recording of tax related liability as of June 30, 2017 and 2016. Stock based compensation Stock based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). We estimate the fair value of employee stock options granted using the Black-Scholes-Merton Option Pricing Model. Key assumptions used to estimate the fair value of stock options will include the exercise price of the award, the fair value of our common stock on the date of grant, the expected option term, the risk free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on our common stock. We use our company’s own data among other information to estimate the expected price volatility and the expected forfeiture rate. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. Loss per share We calculate basic earnings per share (“EPS”) by dividing our net loss by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive. Fair value of financial instruments ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - include other inputs that are directly or indirectly observable in the marketplace. Level 3 - unobservable inputs which are supported by little or no market activity. The Company used Level 2 inputs for its valuation methodology for the derivative liabilities for conversion feature of the convertible notes in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs: June 30, 2017 Annual dividend yield — Expected life (years) 0.74 Risk-free interest rate 1.68 % Expected volatility 161 % Carrying Value Fair Value Measurements at As of June 30, 2017 June 30, Using Fair Value Hierarchy 2017 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 1,134,000 $ — $ 1,134,000 $ — Total $ 1,134,000 $ — $ 1,134,000 $ — June 30, 2016 Annual dividend yield — Expected life (years) 0.99 Risk-free interest rate 0.27 % Expected volatility 377 % Carrying Value Fair Value Measurements at As of June 30, 2016 June 30, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 697,000 $ — $ 697,000 $ — Total $ 697,000 $ — $ 697,000 $ — Derivative instruments The fair value of derivative instruments is recorded and shown separately under liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense). Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. Segment Reporting FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. FASB ASC Topic 280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry segment – paper and paper-based products such as paper cups, cup lids, food containers, etc. New accounting pronouncements not yet adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. In May 2014, the FASB issued No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect that these ASUs will have on its consolidated financial statements and related disclosures. On March 30, 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. The Company adopted this new guidance on January 1, 2017 and this standard does not have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions or disposals of assets or businesses. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. Prior period reclassification Certain prior period balance sheet accounts have been reclassified in conformity with current period presentation including reclassification of $4,000 from derivative liability to warrant liability. The reclassification had no effect to the company’s consolidated statement of operations, statement of cash flow or statement of shareholder’s equity. |
Concentration
Concentration | 12 Months Ended |
Jun. 30, 2017 | |
Risks and Uncertainties [Abstract] | |
Concentration | 3. Concentration Customers For the year ended June 30, 2017, our Company earned net revenues of $4,100,560. The vast majority of these revenues for the year ended June 30, 2017 were derived from two (2) customers of the Company. These two (2) customers accounted for 78.55% of revenue for the year ended June 30, 2017. For the year ended June 30, 2016, our Company earned net revenues of $4,348,256. The vast majority of these revenues for the periods were derived from a large number of customers, with no customers accounted for over 10% of the Company’s total revenues in either period. Suppliers For the year ended June 30, 2017, we purchased products for sale by CarryOutSupplies from several contract manufacturers located in Asia and the U.S. A substantial portion of the Company’s inventory is purchased from three (3) suppliers. The three (3) suppliers accounted as follows: One supplier accounted for 59% and the remaining two (2) account for 39% and 32% of the Company’s total inventory purchase for the year ended June 30, 2017 respectively. For the year ended June 30, 2016, two (2) suppliers accounted for 60.7% and 14.9% of the Company’s total inventory purchase, respectively. |
Litigation
Litigation | 12 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | 4. Litigation From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. As of June 30, 2017, there were no legal claims pending or threatened against the Company; the opinion of our management would be likely to have a material adverse effect on our financial position, results of operations or cash flows. However, as of the date of this filing, we were involved in the following legal proceedings. On February 4, 2014, the Company filed suit in Contra Costa County, California, alleging breach of fiduciary duty, conspiracy to commit breach of fiduciary duty, fraud, conspiracy to commit fraud, conversion, breach of contract, and interference with contractual relations against, Diversified Products Group Inc. (DPG), Stephen Pinto, Lewis Cohen and Heidi Estiva, who were former sales agents for the Company. Stephen Pinto is the Company’s former Chairman of the board of directors. The Company plans to actively pursue this case. During November of 2014, the Company received notice that a cross complaint had been filed against the Company. The complaint alleges the parties were induced to make a series of investments in the Company by the material misrepresentations and omissions made by the Company. The Company believes the allegations are without merit. The Company plans to vigorously defend against such claims. No changes have occurred as of the filing date of this report. As of June 30, 2017, this matter is still pending. On May 24, 2014, the Labor Commissioner, State of California issued an Order, Decision or Award of the Labor Commissioner against the Company in the amount of $56,365. On October 28, 2014, the Company entered into a settlement agreement, which was effective October 28, 2014, to resolve a judgment against the Company via the issuance of 502,533 restricted shares and a $30,000 cash payment. On December 11, 2013, the Company was served with a complaint from two Convertible Note Holders and investors in the Company, Lovitt & Hannan, Inc. Salary Deferral Plan FBO J. Thomas Hannan, Attorney at Law 401K Plan and Trust, and Kevin M. Kearney. The Company’s former CEO, Scott Lantz, was also named in the suit. On February 21, 2017, the Company signed a settlement agreement with the plaintiff in the matter of Hannan vs Sugarmade. Under the terms of the settlement agreement, the Company agreed to pay the plaintiffs’ $227,000 to settle all claims against the Company, which included the payoff of the two notes outstanding within one (1) week. The parties had estimated the value of the notes at approximately $80,000. The Company agreed to pay the plaintiff $97,000 within one hundred and twenty (120) days of the settlement with the remaining balance of $50,000 due within one hundred and eighty (180) days of the settlement. Upon receipt of all payments, plaintiffs will surrender for cancellation 230,000 of the Company’s shares within ten (10) days. The parties agreed that all claims against the Company would be satisfied through such payments and that the matter would be fully resolved. As of June 30, 2017, third-parties had purchased two (2) notes of approximately $80,000, reducing the Company’s exposure by $80,000. As of the date of this filing the balance for accrued legal settlement for Hannan vs Sugarmade has been reduced to $227,000. There can be no assurances the ultimate liability relative to these law suits will not exceed what is outlined above. |
Other Current Assets
Other Current Assets | 12 Months Ended |
Jun. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Current Assets | 5. Other Current Assets As of June 30, 2017 and 2016, other current assets consisted of the following: For the years ended June 30, 2017 2016 Prepaid deposit $ 57,500 $ 45,000 Prepaid inventory 84,065 8,000 Employees advance 30,078 30,573 Prepaid expenses 4,894 — Others 13,801 931 Total $ 190,338 $ 84,504 |
Intangible Asset
Intangible Asset | 12 Months Ended |
Jun. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Asset | 6. Intangible Asset On April 1, 2017, the Company entered into a distribution and intellectual property assignment agreement with Wagner Bartosch, Inc. (“Wagner”) for use of their Divider™ used in frozen desserts and other related uses. In lieu of cash payment under the agreement, the Company was obliged to issue common shares of the Company valued at $75,000 for acquiring the use right of the distribution and intellectual property. The Company amortized this use right as intangible asset over ten years, and recorded $1,875 amortization expense for the year ended June 30, 2017. |
Convertible Notes
Convertible Notes | 12 Months Ended |
Jun. 30, 2017 | |
Convertible Notes | |
Convertible Notes | 7. Convertible Notes As of June 30, 2017 and 2016, the balance owing on convertible notes with term as describe below was $1,502,023 and $394,167, respectively. Convertible notes issued during the year ended June 30, 2017 were as follows: On October 18, 2016, the Company entered into a convertible promissory note with an accredited investor for $84,750. The note has a term of twelve (12) months with an interest rate of 10% and is convertible to common shares at a 50% discount. $43,297 of the note along with accrued interest of $4,365 was settled through issuance of 1,550,000 shares on May 22, 2017, $41,452.71 of the note was repaid by cash on May 25, 2017. On November 4, 2016, the Company entered into a convertible promissory note with an accredited investor for $84,750. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 50% discount. This note along with accrued interest of $30,768 was settled through issuance of 3,300,507 shares on May 23, 2017. On November 16, 2016, the Company entered into a convertible promissory note with an accredited investor for $110,000. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 45% discount. $80,478 of this note (including interest of $3,157) was settled in June 2017 through the issuance of 2,561,276 shares. On December 19, 2016, the Company entered into a convertible promissory note with an accredited investor for $20,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount. On December 20, 2016, the Company entered into a convertible promissory note with an accredited investor for $38,000. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 45% discount. This note along with accrued interest of $19,286 was repaid by cash through a direct repayment from the proceeds from a new lender of a new note entered in June 2017. On December 23, 2016, the Company entered into a convertible promissory note with an accredited investor for $55,000. The note has a term of nine (9) months with an interest rate of 8% and is convertible to common shares at a 42% discount. This note along with accrued interest of $21,251 was repaid by cash through a direct repayment from the proceeds from a new lender of a new note entered in June 2017. On January 17, 2017, the Company entered into a convertible promissory note with an accredited investor for $25,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On January 17, 2017, the Company entered into a convertible promissory note with an accredited investor for $20,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On January 20, 2017, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of seven (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On January 24, 2017, the Company entered into a convertible promissory note with an accredited investor for $43,000. The note has a term of twelve (12) months with an interest of 8% and is convertible to common shares at a 45% discount to the then current market price of our shares. On February 8, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On February 9, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On February 15, 2017, the Company entered into a convertible promissory note with an accredited investor for $63,000. The note has a term of nine (9) months with an interest rate of 8% and is convertible to common shares at 40% discount to the then current market price of our shares. On February 16, 2017, the Company entered into a convertible promissory note with an accredited investor for $30,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On February 24, 2017, the Company entered into a convertible promissory note with an accredited investor for $66,023. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On February 28, 2017, the Company entered into a convertible promissory note with an accredited investor for $75,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount. On March 1, 2017, the Company entered into a convertible promissory note with an accredited investor for $100,000. The note has a term of nine (9) months with an interest rate of 10% and is convertible to common shares at a 45% discount to the then current market price of our shares. On March 23, 2017, the Company entered into a convertible promissory note with an accredited investor for $70,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On March 31, 2017, the Company entered into a convertible promissory note with an accredited investor for $200,000. The note has a term of six (6) months with an interest rate of 8% and is convertible to common shares at a 40% discount to the then current market price of our shares. On May 17, 2017, the Company entered a convertible promissory note with an investor for a total amount of $1,375,000 (after $10,000 legal and due diligence fee) with an OID of $125,000, the note will be fulfilled through a series of funding. The note is due 12 months after each funding date and bear an interest rate of 10%. The conversion price for the note is 55% of the lowest closing bid for the 20 consecutive trading days prior to the conversion date. In connection with the note, the investor will also receive warrants and is calculated based on 15% of the maturity amount. The warrants have a life of four years with exercise price of $0.15 per share and have cashless exercise option. The Company received $460,000 (net with OID of $45,000) from this note during the year ended June 30, 2017. The fair value of the warrant was $40,400 at grant date. As of June 30, 2017, the Company had outstanding convertible note payable to this investor for $460,000 (net with OID of $45,000), the fair value of the warrant liability was $25,250. During the year ended June 30, 2017, the Company received net cash proceeds of $1,769,523 from issuance of convertible notes. As of June 30, 2017, the Company’s convertible notes consisted of following: As of June 30, 2017 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 6/19/2017 20,000 — 20,000 Convertible Note 7/17/2017 25,000 — 25,000 Convertible Note 7/17/2017 20,000 — 20,000 Convertible Note 1/24/2018 43,000 — 43,000 Convertible Note 8/8/2017 50,000 — 50,000 Convertible Note 7/20/2017 80,000 — 80,000 Convertible Note 8/24/2017 66,023 — 66,023 Convertible Note 8/9/2017 50,000 — 50,000 Convertible Note 8/31/2017 75,000 — 75,000 Convertible Note 12/1/2017 100,000 — 100,000 Convertible Note 9/23/2017 70,000 — 70,000 Convertible Note 11/20/2017 63,000 — 63,000 Convertible Note 8/16/2017 30,000 — 30,000 Convertible Note 9/30/2017 200,000 — 200,000 Convertible Note 5/11/2018 340,000 30,000 310,000 Convertible Note 6/11/2018 165,000 15,000 150,000 Total Convertible Promissory Notes $ 1,547,023 45,000 $ 1,502,023 As of June 30, 2016, the Company’s convertible notes consisted of following: As of June 30, 2016 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 40,000 — 40,000 Convertible Note 7/1/2016 50,000 — 50,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 7/1/2016 20,834 — 20,834 Convertible Note 7/1/2016 8,333 — 8,333 Total Convertible Promissory Notes $ 394,167 $ 394,167 |
Debt settlements
Debt settlements | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Debt settlements | 8. Debt settlements During the year ended June 30, 2017, the following debts were converted into 25,441,007 of the Company’s common shares: On October 3, 2016, $8,334 principal with $4,181 accrued interest were converted into 439,086 shares. On October 3, 2016, $20,833 principal with $9,515 accrued interest were converted into 1,064,841 shares. On November 3, 2016, $50,000 principal with $24,955 accrued interest were converted into 982,620 shares. On February 8, 2017, $25,000 principal with $15,225 accrued interest were converted into 8,045,000 shares. On May 1, 2017, $25,000 principal with $15,295 accrued interest were converted into 1,343,167 shares. On March 30, 2017, $25,000 principal with $12,482 accrued interest were converted into 1,070,943 shares. On March 30, 2017, $40,000 principal with $20,668 accrued interest were converted into 1,733,400 shares. On April 4, 2017, $25,000 principal with $15,505 accrued interest were converted into 1,350,167 shares. On May 5, 2017, $25,000 principal with $15,314 accrued interest were converted into 2,000,000 shares. On June 26, 2017, $115,518 principal and interest were converted into 3,300,507 shares. On May 30, 2017, $43,297 principal with accrued interest of $4,365 was converted into 1,550,000 shares. On May 31, 2017, $25,000 principal and interest were converted into 727,272 shares. On June 7, 2017, $25,000 principal and interest were converted into 826,446 shares. On June 15, 2017, $30,478 principal and interest were converted into 1,007,558 shares. During the year ended June 30, 2016, $25,000 convertible notes with $10,207 accrued interest were converted into 697,730 shares. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Jun. 30, 2017 | |
Derivative Liabilities | |
Derivative Liabilities [Text Block] | 9. Derivative liabilities The derivative liability was valued using the weighted-average Black-Scholes- Merton option pricing model using the assumptions detailed below. As June 30, 2017 and 2016, the derivative liability was $1,134,000 and $697,000, respectively. For the years ended June 30, 2017 and 2016, the Company recorded a $437,000 and $397,000 loss from changes in derivative liability, respectively. The Black-Scholes model with the following assumption inputs: Convertible Notes: June 30, 2017 Annual dividend yield — Expected life (years) 0.47 Risk-free interest rate 1.08 % Expected volatility 103 % Convertible Notes: June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % |
Stock warrants
Stock warrants | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Stock warrants | 10. Stock warrants In connection with the issuance of the promissory notes in 2012, the investors in the aggregate received two-year warrants to purchase up to a total of 50,000 shares of common stock at an exercise price of $0.50 per share, and two-year warrants purchasing up to a total of 81,250 shares of common stock at an exercise price of $0.01 per share. For purposes of accounting for the detachable warrants issued in connection with the convertible notes, the fair value of the warrants was estimated using the Black-Scholes-Merton option pricing formula. The value of all warrants granted at the date of issuance totaled $508,413 and was recorded as a discount to the notes payable. The amount was amortized over the nine (9) month term of the respective convertible note as additional interest expense. On various dates during June 2014 and December 2014 the Company and holders of certain convertible notes agreed to cancel warrants to purchase common shares in the Company and to extend the due dates on the Notes to July 1, 2016. $0.50 warrants and “Bonus Warrants” priced at $0.01, as defined in the original Convertible Note Purchase Agreements we cancelled pertaining to the Note and warrants acquired on the following dates for the following Convertible Notes and amounts. These warrants were expired on July 1, 2016. On May 17, 2017, the Company entered a promissory note with an investor for a total amount of $1,375,000 (after $10,000 legal and due diligence fee) with an OID of $125,000; the note will be fulfilled through a series of funding. In connection with the note, the investor will also receive warrants and is calculated based on 15% of the maturity amount. The warrants have a life of four years with an exercise price of $0.15 per share and have cashless exercise option. The fair value of the warrants at grant date was $40,400. As of June 30, 2017 and 2016, the fair value of the warrant liability was $25,250 and $4,000, respectively. The Black-Scholes model with the following assumption inputs: Warrants issued in May 2017: June 30, 2017 Annual dividend yield — Expected life (years) 3.86 Risk-free interest rate 1.89 % Expected volatility 440 % Warrants issued in 2012 with extension to July 1, 2016 June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % Below is the movement of warrants for the years ending June 30, 2017 and 2016: Number of Weighted Average Weighted Average Remaining contractual life Outstanding at June 30, 2015 131,250 $ 0.20 Granted — — Exercised — — Outstanding at June 30, 2016 131,250 0.20 Expired 131,250 0.20 Granted 505,000 $ 0.15 4 Outstanding at June 30, 2017 505,000 $ 0.15 3.86 |
Note payable
Note payable | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Note payable | 11. Note payable Note payable due to bank During October 2011, we entered into a revolving demand note (line of credit) arrangement with HSBC Bank USA, with a revolving borrowing limit of $150,000. The line of credit bears a variable interest rate of one quarter percent (0.25%) above the prime rate (3.25% as of September 30, 2013). In the event the deposit account is not established or minimum balance maintained, HSBC can charge a higher rate of interest of up to 4.0% above prime rate. As of June 30, 2017 and 2016, the loan principal balance was $25,982. Notes payable due to related parties On January 23, 2013, the Company entered into a promissory note with its former employee of the Company who owns less than 5% of the Company’s stock. The original principal amount was $40,000 and the note bore no interest. The note was payable upon demand. As of June 30, 2017 and 2016, this note had a balance of $18,000 and $23,000, respectively. On December 31, 2013, the Company entered into a promissory note with Kalvin Kwong (an employee of the Company, who owns less than 5% of the Company’s stock). The principal amount was $20,000 and the interest rate on the note was 10%. The note had a term of six (6) months. However, this note was now payable upon demand per the oral agreement with the lender. As of June 30, 2017 and 2016, this note had a balance of $20,000. On January 13, 2014, the Company entered into a promissory note with an employee (an employee of the Company, who owns less than 5% of the Company’s stock). The principal amount was $25,000 and the note bore no interest. The note had a term of twenty-four (24) months and was due on January 13, 2016, and became payable upon demand after January 13, 2016. As of June 30, 2017 and 2016, this note had a balance of $12,666. On January 14, 2015, the Company entered into a promissory note with Richard Ko (an employee of the Company, who owns less than 5% of the Company’s stock). The principle amount was $30,000 and the note bore no interest. The note had a term of one (1) year and was due on January 14, 2016, and became payable upon demand after January 14, 2016. As of June 30, 2017 and 2016, this note had a balance of $20,000 and $30,000, respectively. As of June 30, 2017, the Company has an outstanding balance of notes payable due to related parties of $70,666. During the year ended June 30, 2017, the Company repaid $15,000 cash for notes payable due to related parties. |
Shares issued for services
Shares issued for services | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Shares issued for services | 12. Shares issued for services Fiscal Year Ended June 30, 2017 On December 1, 2016, the Company agreed to issue 3,000,000 shares to a consultant for consulting service with service term from December 1, 2016 to March 31, 2017, these shares were vesting immediately, the fair value of 3,000,000 shares were $240,000 at grant date, and was recorded as stock compensation expense during the year ended June 30, 2017. On December 1, 2016, the Company entered a service contract with a company for 5,000,000 shares, vesting immediately, the fair value of 5,000,000 shares were $400,000 at grant date, and was recorded as stock compensation expense during the year ended June 30, 2017. Effective January 1, 2017, the Company agreed to issue 300,000 shares to a consultant for the services he provided, the fair value of 300,000 shares were $18,000 at grant date, and was recorded as stock compensation expense during the year ended June 30, 2017. On May 2, 2017, the Company issued 415,625 shares to a consultant for the services he provided, the fair value of 415,625 shares were $37,406, and was recorded as stock compensation expense during the year ended June 30, 2017. On May 5, 2017, the Company issued 127,550 shares to three consultants for the services they provided, the fair value of 127,550 shares were $11,480, and was recorded as stock compensation expense during the year ended June 30, 2017. Effective February 1, 2017, the Company entered into an agreement with PDCG, LLC (“PDCG”) to provide strategic marketing consulting services for a period from February 1, 2017 to April 30, 2017. PDCG has agreed to accept in lieu of cash, total of 750,000 of the Company’s common shares with title of these shares to be transferred to PDCG at effective date. The fair value of 750,000 shares were $52,500, and was recorded as stock compensation expense during the year ended June 30, 2017. On June 13, 2017, the Company prepaid 2,858,400 shares to certain consultants and employees. The fair value of 2,858,400 shares was $171,504; during the year ended June 30, 2017, the Company expensed $22,875 as stock compensation expense. As of June 30, 2017, the Company had $148,629 as the prepaid expense. On June 30, 2017, the Company agreed to issue 9,500,000 shares to certain employees as year-end bonus, the fair value of 9,500,000 shares were $475,000, and was recorded as stock compensation expense during the year ended June 30, 2017. Fiscal Year Ended June 30, 2016 On April 1, 2016, the Company granted a consulting agreement with Katherine Zuniga and/or K Marie Marketing, LLC, 8,000,000 restricted shares with fair value of $320,000 for marketing and sales related services. These shares were fully vested as of April 1, 2016. On June 30, 2016, the Company granted a consultant, Yang Zuo, 1,527,778 restricted shares with fair value of $50,000 for compensation for services provided to the Company. On June 30, 2016, the Company granted a consultant, Tony Thai, 1,527,778 restricted shares with fair value of $50,000 for compensation for services provided to the Company. On June 30, 2016, the Company granted a CEO, Jimmy Chan, 5,000,000 restricted shares with fair value of $450,000 in lieu of salary. On June 30, 2016, the Company granted Director, Waylon Huang, 3,000,000 restricted shares with fair value of $270,000 in lieu of salary. On June 30, 2016, the Company granted Director, Richard Ko, 3,000,000 restricted shares with fair value of $270,000 in lieu of salary. On April 1, 2016, the Company granted a consulting agreement with Katherine Zuniga and/or K Marie Marketing, LLC, 8,000,000 restricted shares with fair value of $320,000 for marketing and sales related services. These shares were fully vested as of April 1, 2016. |
Common shares issued for equity
Common shares issued for equity financing | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Common shares issued for equity financing | 13. Common shares issued for equity financing Fiscal Year Ended June 30, 2017 On September 26, 2016, the Company sold 250,000 shares to a company at $0.05 per share for $12,500. On September 28, 2016, the Company sold 250,000 shares to an individual at $0.05 per share for $12,500. This individual is the Company’s employee. On October 11, 2016, the Company sold 2,000,000 shares of restricted common stock at $0.05 per share to an accredited investors for $100,000. On March 31, 2017, the Company sold 1,923,077 shares to an individual at $0.052 per share for $100,000. On May 8, 2017, the Company sold 480,769 shares to an individual at $0.052 per share for $25,000. Fiscal Year Ended June 30, 2016 On July 14, 2015, the Company sold 1,666,667 shares of restricted common stock to an accredited investor for $50,000 pursuant to an exemption from registration relying on Section 4(a)(2) and Rule 506b On October 15, 2015, the Company sold 833,333 shares of restricted common stock to two accredited investors for $25,000 pursuant to an exemption from registration relying on Section 4(a)(2) and Rule 506b of Regulation D, under the Securities Act of 1933, as amended. On August 27, 2015, the Company sold 2,500,000 shares of restricted common stock to each of two accredited investors for $50,000 each pursuant to an exemption from registration relying on Section 4(a)(2) and Rule 506b On October 2, 2015, the Company sold 1,000,000 shares of restricted common stock to an accredited investor for $30,000 pursuant to an exemption from registration relying on Section 4(a)(2) and Rule 506b On October 7, 2015, the Company sold 1,250,000 shares of restricted common stock to an accredited investor for $25,000 pursuant to an exemption from registration relying on Section 4(a)(2) and Rule 506b |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions | |
Related Party Transactions | 14. Related party transactions Shares issued to related parties On June 30, 2016, the Company’s CEO and Chairman, Jimmy Chan, was awarded five (5) million shares of restricted common stock in the Company in lieu of salary, equivalent to $450,000. The shares were issued on September 7, 2016. On June 30, 2016, Director Waylon Huang, was awarded three (3) million shares of restricted common stock in the Company in lieu of salary, equivalent to $90,000. Mr. Huang is also the general manager of the CarryOutSupplies.com. The shares were issued on September 7, 2016 On June 30, 2016, Richard Ko, was awarded three (3) million shares of restricted common stock in the Company in lieu of salary, equivalent to $90,000 annually for services provided to the Company. The shares were issued on September 7, 2016 Loans payable – related parties As of June 30, 2017, the Company had loans payable to related parties of $228,412 as described below: On June 26, 2017, SGMD entered a straight promissory note with a company (whose major shareholder is the former director of the Company) for borrowing $150,820 with maturity date on December 31, 2017; the note bears an interest rate of 12%, commencing on October 31, 2017, and on the last day of each moth thereafter until the notes is paid in full, the Company shall make an interest payment. As of June 30, 2017, the outstanding balance under this note was $150,820 with $6,032.8 interest discount to loan payable. On July 7, 2016, SWC received a loan from the same employee indicated above. The amount of the loan bore no interest and amortized on a monthly basis over the life of the loan. As of June 30, 2017, the balance of the loan is $34,015. On November 21, 2016, SGMD received a loan from the Company’s director. The amount of the loan bore no interest and amortized on a monthly basis over the life of the loan. As of June 30, 2017, the balance of the loan is $3,960. In additional, SWC owes this director $9,287 at June 30, 2017. On December 1, 2016, SGMD received a loan from an employee for $12,500 with an interest charge of $12,500. This amount was recorded as interest owed to the loan payable amount and is to be amortized on a monthly basis over the life of the loan. The loan is due on December 1, 2017. As of June 30, 2017, the balance is $6,250. From time to time, SWC would receive short-term loans from LMK Capital, LLC (“LMK”) for its working capital needs. At June 30, 2017, the Company had outstanding balance $34,107 borrowed from LMK Capital., LLC, a company affiliated with CEO Chan. As of June 30, 2016, the Company had loans payable to related parties of $318,960 as described below: On June 30, 2016, the company had outstanding balance of $54,511 borrowed from shareholders. At June 30, 2016, the Company had outstanding balance of $264,449 borrowed from LMK Capital., LLC, a company affiliated with CEO Chan. |
Loans payable
Loans payable | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Loans payable | 15. Loans payable As of June 30, 2017, the Company had loans payable of $192,801 as described below: On January 25, 2017, SWC entered into an agreement with a lending company for $100,000 for its working capital needs. As of June 30, 2017, the Company has an outstanding balance of $10,036. During the year ended June 30, 2017, the Company entered a series of short-term loan agreements with Greater Asia Technology Limited (Greater Asia) for borrowing $375,000, with interest rate at 40% - 50% of the principal balance. As of June 30, 2017, the outstanding balance with Greater Asia loans were $140,125. On July 1, 2016, the Company entered into a repayment agreement with its employee for $20,280 at no interest. As of June 30, 2017, the Company has an outstanding balance of $8,780. Repayment on this loan will be repaid at a later date with no interest being accrued. On January 6, 2015, the Company entered into repayment agreement with its former employee for a loan of $9,500 at no interest. As of June 30, 2017, the Company has an outstanding balance of $4,076. On July 2, 2015, the Company entered into a repayment agreement with an individual for $22,583 at no interest. As of June 30, 2017, the Company has an outstanding balance of $17,583. On March 5, 2013, the Company entered an equipment loan agreement with Toyota financial services with maturity date of April 4, 2018. As of June 30, 2017, the balance under this loan is $4,308. On July 1, 2012, CarryOutSupplies entered an equipment loan agreement with a bank with maturity on June 1, 2017. The monthly payment is $255. At June 30, 2017, the outstanding balance under this loan was $261. As of June 30, 2017, the Company had an outstanding loan balance of $1,599 from one (1) vendor of the Company. As of June 30, 2016, the Company had loans payable of $108,620 as described below: On August 14, 2009, SWC entered a loan agreement with a bank for $50,000 with maturity on August 14, 2016. The loan had an annual interest rate of 7% with monthly payment of $755. At June 30, 2016, the outstanding balance under this loan was $1,709. On March 1, 2012, SWC entered an equipment loan agreement with a bank with maturity on January 1, 2017. The monthly payment is $435. At June 30, 2016, the outstanding balance under this loan was $3,053. On July 1, 2012, SWC entered an equipment loan agreement with a bank with maturity on June 1, 2017. The monthly payment is $255. At June 30, 2016, the outstanding balance under this loan was $3,087. On January 5, 2016, the Company received a loan for $100,000 from an investor. The note bears 0% annual interest and is due on December 31, 2017. As of June 30, 2016, the balance under this loan is $90,000. On March 5, 2013, the company entered an equipment loan agreement with Toyota financial services with maturity date of April 4, 2018. As of June 30, 2016, the balance under this loan is $10,771. |
Shares to be issued
Shares to be issued | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Shares to be issued | 16. Shares to be issued Preferred Shares As of June 30, 2017 and 2016, the Company was obligated to issue 2,000,000 shares of Series B Convertible Preferred Stock for four EB-5 investments with the total amount of $2,000,000. During the years ended June 30, 2016 and 2015, the Company completed a series of transactions and amended its Articles of Incorporation creating a series of preferred stock of 10,000,000 shares, which shall be designated Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). Series B will not be eligible for dividends. Five years from the date of issue (the “Conversion Date”), assuming the Series B investor is approved for l-526 under the U.S Government’s EB-5 Investment Program, each Preferred Share will automatically convert into that number of Common Shares having a “fair market value” of the Initial Investment plus a five (5) percent annualized return on Initial Investment. Fair market value will be determined by averaging the closing sale price of a Common Share for the 40 trading days immediately preceding the date of conversion on the U.S. stock exchange on which Common Shares are publicly traded. The offering was made pursuant to SEC Rule 506 and Section 4(2) of the Securities Act, which provides exemption from registration for transactions, which are not public offerings. The funds received were used for general working capital purposes and to accelerate order deliveries to customers. Common Shares As of June 30, 2017, the Company was obligated to issue 500,000 shares for $25,000 proceeds received through two separate private placements with 250,000 shares each. As of June 30, 2017, the Company was obligated to issue 2,000,000 restricted common shares for equity financing of $100,000, the fair market value of the 2,000,000 shares was $100,000. As of June 30, 2017, the Company was obligated to issue 1,485,586 restricted common shares for the settlement of outstanding accounts payable in the amount of $51,996. On April 1, 2017, the Company entered into a distribution and intellectual property assignment agreement with Wagner Bartosch, Inc. (“Wagner”) for use of their Divider™ used in frozen desserts and other related uses. In lieu of cash payment under the agreement, the Company was obliged to issue common shares of the Company valued at $75,000 for acquiring the use right of the distribution and intellectual property. On June 30, 2017, the Company was obligated to issue 5,681,818 shares to a lender to settle an outstanding loan with principal and interest of $200,000. As of June 30, 2017, the Company was obligated to issue 181,818 shares to the Company’s two officers with fair value of $16,000. On December 1, 2016, the Company modified its agreement with Bao Coc International Paper and BAO COC INTERNATIONAL PAPER AND PLASTIC COMPANY LIMITED ("Bao Cao"), of the Socialist Republic of Vietnam. Under the terms of the revised agreement, the Company shall purchase products manufactured by the current contract manufacturers and distribute such products to various quick service restaurant and institutions in the United States. Revenues from such products shall belong to Sugarmade. The price of these products will be determined from time to time in mutual agreement between the Parties. Sugarmade shall be responsible for compensating the contract manufacturer and collection of monies from the end customer with all revenues belonging to the Company. The company is obligated to issue 5,000,000 restricted common shares, the fair market value of the 5,000,000 shares was $400,000. As of June 30, 2017, these shares had yet to be issued and were recorded as a liability for stock to be issued – common shares. As of June 30, 2017, the Company was obligated to issue 300,000 restricted common shares for past services. The market value of the shares issued was $0.06 per share. The fair market value of the 300,000 shares was $18,000, and was recorded as a liability for stock to be issued – common shares. As of June 30, 2017, the Company was obligated to issue 9,500,000 shares to its employees as year-end bonus, the fair value of the 9,500,000 shares was $475,000, and was recorded as a liability for stock to be issued – common shares. At June 30, 2016, the Company was obligated to issue 1,527,778 restricted shares with fair value of $50,000 for compensation for services to each of two consultants; 5,000,000 restricted shares with fair value of $458,000 to the Company’s CEO in lieu of salary; 3,000,000 restricted shares with fair value of $90,000 to the one of the Company’s director in lieu of compensation; 3,000,000 restricted shares with fair value of $278,000 to the Company’s another director in lieu of compensation; and 8,000,000 restricted shares with fair value of $320,000 to a consulting company for marketing and sales related services. |
Cancellation of Common Shares
Cancellation of Common Shares | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Cancellation of Common Shares | 17. Cancellation of Common Shares On March 15, 2017, 2,000,000 common shares were surrendered to the Company for cancellation as a result of a litigation matter in which the Company and former CEO, Scott Lantz were named defendants. As part of the agreement with Mr. Lantz, the surrendered shares were used to fund and retain defense counsel on Mr. Lantz behalf. 7,003,000 common shares were also surrendered for cancellation by its previous management and consultant due to non-fulfillment of its contractual duties. On March 31, 2017, 432,000 common shares were cancelled and surrendered to the Company from a consultant due to non-performance of the service as a consultant. On April 18, 2017, 6,571,000 common shares were cancelled and surrendered to the Company due to non-performance of the service as a consultant. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 18. Income Taxes The NOL carryforwards will expire after 20 years beginning from the year it occurred if not utilized, for federal and state purposes and could be limited for use under IRC Section 382. We have recorded a valuation allowance against the entire net deferred tax asset balance due because we believe there exists a substantial doubt that we will be able to realize the benefits due to our lack of a history of earnings and due to possible limitations under IRC Section 382. We file income tax returns in the U.S. and in the state of California with varying statutes of limitations. Our policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes. There were no accrued interest and penalties associated with uncertain tax positions as of June 30, 2017 and 2016. All operations are in California and the Company believes it has no tax positions which could more-likely-than not be challenged by tax authorities. We have no unrecognized tax benefits and thus no interest or penalties included in the financial statements. Net deferred tax assets consist of the following components as of June 30, 2017 and 2016: 2017 2016 Deferred tax assets: NOL carryover $ 7,876,885 $ 9,999,512 Valuation allowance (7,876,885 ) (9,999,512 ) Net deferred tax asset $ — $ — The income tax provision is summarized as follows: 2017 2016 Federal income tax benefit, net of state $ (1,460,982 ) $ (621,834 ) State income tax benefit (416,691 ) (177,355 ) Permanent difference 650,822 — Valuation allowance 1,226,851 799,189 $ — $ — At June 30, 2017 and 2016, the Company had net operating loss carry forwards of approximately $26.40 million and $23.34 million, respectively, that may be offset against future taxable income through 2037. No tax benefit has been reported in the June 30, 2017 and 2016 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax position have been recorded pursuant to ASC 740. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2017 | |
Commitments And Contingencies | |
Commitments and Contingencies | 19. Commitments and contingencies On April 1, 2015, the Company entered into a lease for general office and warehouse in City of Industry, California with a lease term of one year. The monthly rent was $11,884. The Company renewed the lease to March 31, 2016, effective April 1, 2016 to March 31, 2017, increasing the rent from $11,884 to $13,238. On March 6, 2017, the Company executed a Fifth Amendment to the Lease, in which the Monthly rent increased from $13,238 to $15,043 effective from April 1, 2017 to March 31, 2018. As of June 30, 2017, the Monthly rent is $15,043. On Feb 23, 2018 the Company entered into lease agreement for a new office space as part of the plan to expand operation, the lease is set to commence Commencing March 1, 2018. The term of the lease is for a (5) Five Years with 1 month free on the 1 st st |
Subsequent Event
Subsequent Event | 12 Months Ended |
Jun. 30, 2017 | |
Subsequent Event | |
Subsequent Event | 20. Subsequent events Effective on July 1, 2017, the Company entered a consulting agreement with a consultant for integrating and improving the Company’s ERP system. The agreement will terminate on December 31, 2017. The Company shall pay 2,285,714 common shares to the consultant as consulting fee. The fair value of the 2,285,714 shares at grant date was $112,938. On July 17, 2017, the Company entered a convertible note agreement with a company for principal amount of $164,900 with maturity date on July 17, 2018. The note bears an interest rate of 8% per annum, and the Company is required to make interest payments commencing on October 31, 2017, and on the last day of each month thereafter, until the note is paid in full. On August 15, 2017, an individual converted a note (Originated on February 9, 2017) with principal amount of $50,000, into 2,390,805 common shares, at conversion price of $0.02175. On August 23, 2017, an individual converted a note (Originated on January 16, 2017) with principal amount of $30,000, into 1,500,010 common shares, at conversion price of $0.02103. On August 30, 2017, the Company issued 2,000,000 shares under the company’s 2017 employee benefit plan as compensation for legal services. The fair value of 2,000,000 shares at the grant date was $80,000. On September 7, 2017, the Company entered a consulting agreement with a consultant for Sriracha Stix and Seasoning Stix product launches. The service term is three months, and the Company will issue 2,763,158 common shares to the consultant as a consulting fee upon execution of the agreement. The fair value of the 2,763,158 shares at grant date was $110,526. On September 7, 2017, the Company entered a consulting agreement with a consultant for assisting and instructing the Company to develop and manufacture its new products. The service term is three months, the Company will issue 1,973,684 common shares to the consultant as a consulting fee upon execution of the agreement. The fair value of the 1,973,684 shares at grant date was $78,947. On September 20, 2017, a lender converted a portion of a note (Originated on March 1, 2017) with principal of $32,500, into 1,906,158 common shares, at conversion price of $0.01705. On September 27, 2017, an individual converted a note (Originated on December 19, 2016) with principal of $20,000, into 1,160,391 common shares, at conversion price of $0.0183. On September 27, 2017, an individual converted a note (Originated on January 17, 2017) with principal of $25,000, into 1,426,674 common shares, at conversion price of $0.0183. On October 1, 2017, the Company entered a consulting agreement with a consultant for services related in fulfillment and customer services in relation to Sriracha Seasoning stix project. The service term is twelve months, the company will issue 660,000 restricted common shares to the consultant in lieu of $21,120. The fair value of the 660,000 shares at grant date was $19,800. On October 1, 2017, the Company entered a consulting agreement with a consultant for services related to analytic of e-commerce sales and intelligent reports in relation to Sriracha Seasoning stix project. The service term is twelve months, the company will issue 1,200,000 restricted common shares to the consultant in lieu of $38,400. The fair value of the 1,200,000 shares at grant date was $36,000. On October 1, 2017, the Company entered into a promissory note agreement with principle of $100,000 and a fixed interest of $25,000. Amortized over nine months, the monthly principle and interest payment is $13,888.88. Maturity date of the note is June 30, 2018. On October 26, 2017, the Company was committed to issue 1,638,819 common shares from the company’s 2017 employee benefit plan to a consultant for e-commerce marketing and media production services, in relations to Sriracha Stix and Seasoning Stix project. The fair value of 1,638,819 common shares at grant date was $54,081. As of the date of this filing, these were have not been issued. On March 23, 2017, the Company entered into a convertible promissory note with an accredited investor for $70,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On October 26, 2017, the Company issued 4,046,872 common shares in exchange for the conversion of $70,000 of convertible debt and accrued interest of $3,329. On February 8, 2017, the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On October 26, 2017, the Company issued 2,931,188 common shares in exchange for the conversion of $50,000 of convertible debt and accrued interest of $2,849. On February 28, 2017, the Company entered into a convertible promissory note with an accredited investor for $75,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On October 26, 2017, the Company issued 4,378,547 common shares in exchange for the conversion of $75,000 of convertible debt and accrued interest of $3,945. On March 31, 2017, the Company entered into a convertible promissory note with an accredited investor for $200,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On November 1, 2017, the Company issued 11,557,652 common shares in exchange for the conversion of $200,000 of convertible debt and accrued interest of $9,424. On November 8, 2017, the Company received a notice from a convertible note holder informing the Company the note originally dated March 1, 2017 was in default due to the Company’s lack of timely reporting. The note began accruing interest on August 8, 2017, after it was exchanged in an agreement on that date. As a result of the default, the interest rate on the note was raised from 10% to the default rate of 22% per annum and the outstanding balance due increased by 15%. As of the date of the notice on November 8, 2017, and after the adjustments outlined herein, the balance on the note will increase by $9,461. On January 20, 2017, the Company entered into a convertible promissory note with an accredited investor for $80,000. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On November 14, 2017, the Company issued 4,530,846 common shares in exchange for the conversion of $80,000 of convertible debt and accrued interest of $5,225. On February 24, 2017, the Company entered into a convertible promissory note with an accredited investor for $66,023. The note has a term of six (6) months with an interest rate of 8% and is convertible into common shares at a 40% discount. On November 14, 2017, the Company issued 3,712,324 common shares in exchange for the conversion of $66,023 of convertible debt and accrued interest of $3,806. On November 14, 2017, the company sold 400,000 restricted common shares to an investor for $20,000, at a price per share equal $0.05. On November 30, 2017, the Company issued 737,748 common shares in exchange for the conversion of $20,000 of convertible debt and accrued interest of $1,394. On December 7, 2017 the Company entered into a convertible promissory note with an accredited investor for $50,000. The note has a term of twelve (12) months with an interest rate of 8% and is convertible into common shares at a fixed price per share equal to $0.05. On December 7, 2017, The Company received a notice from a convertible note holder informing the Company the note dated May 12, 2017 was in default due to the Company’s lack of timely reporting. As a result of the default, the interest rate on the note was raised from 10% to 22%. As a result of the late filing of the Company’s fiscal year ending June 30, 2017 on Form 10-K, the balance due on the note increased by 15%. As a result of the late filing of the Company’s fiscal quarter ending September 30, 2017 on Form 10-Q, the balance due on the note is increased by an additional 15%. After the accrual of interest and the increases outlined herein, the balance on the note may be increase by $86,876. On December 12, 2017, the Company entered a consulting agreement with a consultant for services related to audit procedures, tax consultant, identifying and consummation of strategic alliances, merger and acquisitions that benefit the company. The service term is twelve months, the company will issue 1,000,000 restricted common shares to the consultant in lieu of $40,000. The fair value of the 1,000,000 shares at grant date was $80,000. On December 12, 2017, the Company entered a consulting agreement with a consultant for services related to identifying and consummation of strategic alliances, merger and acquisitions that benefit the company. The service term is twelve months, the company will issue 5,000,000 restricted common shares to the consultant in lieu of $200,000. The fair value of the 5,000,000 shares at grant date was $400,000. On December 13, 2017, the company signed a definitive exclusive master marketing agreement with BizRight Hydroponics Inc. the term of the agreement for the period of 20 years. BizRight will be compensated with both cash and restricted common shares. Effective date of the contract Bizright will be compensated with 200,000,000 restricted common shares in lieu of first initial payment of $2,000,000 and $2,000,000 cash upon first major funding and $4,000,000 due upon second major funding, the maximum share earn out is 450,000,000 total based on monthly revenue of $2,500,000 or $30,000,000 annualized. The fair market value of 200,000,000 restricted common shares at grant date was $16,800,000. On December 14, 2017, the Company sold 1,000,000 restricted common shares to an investor for $50,000, at a price per share equal to $0.05. On December 21, 2017, the Company sold 5,000,000 restricted common shares to an accredited investor for $250,000, at a price per share equal to $0.05. On January 9, 2018 the Company sold 2,000,000 restricted common shares to an accredited investor for $100,000, at a price per share equal to $0.05 On January 9, 2018 the Company sold 1,000,000 restricted common shares to an accredited investor for $50,000, at a price per share equal to $0.05. On January 11, 2018 the Company sold 2,000,000 restricted common shares to an accredited investor for $100,000, at a price per share equal to $0.05. On January 13, 2018 the Company sold 1,200,000 restricted common shares to an accredited investor for $60,000, at a price per share equal to $0.05. On January 18, 2018 the Company sold 600,000 restricted common shares to an accredited investor for $30,000, at a price per share equal to $0.05. On January 13, 2018 the Company sold 750,000 restricted common shares to an accredited investor for $60,000, at a price per share equal to $0.08. On January 22, 2018 the Company sold 1,000,000 restricted common shares to an accredited investor for $50,000, at a price per share equal to $0.05. On January 23, 2018 the Company sold 1,000,000 restricted common shares to an accredited investor for $50,000, at a price per share equal to $0.05. On Feb 23, 2018 the Company entered into lease agreement for a new office space as part of the plan to expand operation, the lease is set to commence Commencing March 1, 2018. The term of the lease is for a (5) Five Years with 1 month free on the 1 st st On March 1, 2018 the Company sold 1,000,000 restricted common shares to an accredited investor for $50,000, at a price per share equal to $0.05. |
Summary of Significant Accoun27
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2017 | |
Summary Of Significant Accounting Policies Policies | |
Basis of presentation | Basis of presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. |
Principles of consolidation | Principles of consolidation The consolidated financial statements include the accounts of our Company and its wholly-owned subsidiaries, Sugarmade-CA and SWC. All significant intercompany transactions and balances have been eliminated in consolidation. |
Going concern | Going concern The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as may be required. Our consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern. Management is endeavoring to increase revenue-generating operations. While priority is on generating cash from operations through the sale of the Company’s products, management is also seeking to raise additional working capital through various financing sources, including the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to our Company, or which may not be available at all. If such financing is not available on satisfactory terms, we may be unable to continue our business as desired and our operating results will be adversely affected. In addition, any financing arrangement may have potentially adverse effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences or privileges senior to those of the current holders of our common stock. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. |
Revenue recognition | Revenue recognition We recognize revenue in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) No. 605, Revenue Recognition. Revenue is recognized when an arrangement and a determinable fee occur, and when collection is considered to be probable and products are delivered, or title has been transferred. This generally occurs upon shipment of the merchandise, which is when legal transfer of title occurs. In the event that final acceptance of our product by the customer is uncertain, revenue is deferred until all acceptance criteria have been met. We currently have a consignment arrangement with two of our customers. We record revenue on consignment goods when the consigned goods are sold by the consignee and all other above-mentioned revenue recognition criteria have been satisfied. Cash deposits received in connection with the sales of our products prior to their being delivered or acceptance if applicable is recorded as deferred revenue. |
Cash | Cash Cash and cash equivalents consist of amounts held as bank deposits and highly liquid debt instruments purchased with an original maturity of three months or less. From time to time, we may maintain bank balances in interest bearing accounts in excess of the $250,000 currently insured by the Federal Deposit Insurance Corporation for interest bearing accounts (there is currently no insurance limit for deposits in noninterest bearing accounts). We have not experienced any losses with respect to cash. Management believes our Company is not exposed to any significant credit risk with respect to its cash. |
Accounts receivable | Accounts receivable Accounts receivable are carried at their estimated collectible amounts, net of any estimated allowances for doubtful accounts. We grant unsecured credit to our customer’s deemed credit worthy. Ongoing credit evaluations are performed and potential credit losses estimated by management are charged to operations on a regular basis. At the time, any particular account receivable is deemed uncollectible, the balance is charged to the allowance for doubtful accounts. The Company had accounts receivable net allowances of $113,218 as of June 30, 2017 and of $117,866 as of June 30, 2016. |
Inventory | Inventory Inventory consists of finished goods paper and paper-based products such as paper cups and food containers ready for sale and is stated at the lower of cost or market. We value our inventory using the weighted average costing method. Our Company's policy is to include as a part of inventory any freight incurred to ship the product from our contract manufacturers to our warehouses. Outbound freights costs related to shipping costs to our customers are considered period costs and reflected in selling, general and administrative expenses. We regularly review inventory and consider forecasts of future demand, market conditions and product obsolescence. If the estimated realizable value of our inventory is less than cost, we make provisions in order to reduce its carrying value to its estimated market value. On a consolidated basis, as of June 30, 2017 and June 30, 2016, the balance for the inventory totaled $568,229 and $468,262, respectively. $70,332 were reserved for obsolescent inventory for the year ended June 30, 2017, and $72,974 were reserved for obsolescent inventory for the year ended June 30, 2016. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of June 30, 2017, there was no significant impairment of its long-lived assets. |
Income taxes | Income taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized. As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspect of the recognition and measurement related to accounting for income taxes. We adopted the provisions of ASC 740 as of October 2, 2008, and have analyzed filing positions in each of the federal and state jurisdictions where we are required to file income tax returns, as well as open tax years in these jurisdictions. We have identified the U.S. federal and California as our “major” tax jurisdictions and generally, we remain subject to Internal Revenue Service examination of our 2013 U.S. federal income tax returns. However, we have certain tax attribute carryforwards, which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, we did not record a cumulative effect adjustment related to the adoption of ASC 740. Our policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. We have not taken any uncertain positions that would necessitate recording of tax related liability as of June 30, 2017 and 2016. |
Stock based compensation | Stock based compensation Stock based compensation cost to employees is measured at the date of grant, based on the calculated fair value of the stock-based award, and will be recognized as expense over the employee’s requisite service period (generally the vesting period of the award). We estimate the fair value of employee stock options granted using the Black-Scholes-Merton Option Pricing Model. Key assumptions used to estimate the fair value of stock options will include the exercise price of the award, the fair value of our common stock on the date of grant, the expected option term, the risk free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on our common stock. We use our company’s own data among other information to estimate the expected price volatility and the expected forfeiture rate. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. |
Loss per share | Loss per share We calculate basic earnings per share (“EPS”) by dividing our net loss by the weighted average number of common shares outstanding for the period, without considering common stock equivalents. Diluted EPS is computed by dividing net income or net loss by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants. Options and warrants are only included in the calculation of diluted EPS when their effect is dilutive. |
Fair Value of Financial Instruments | Fair value of financial instruments ASC Topic 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - include other inputs that are directly or indirectly observable in the marketplace. Level 3 - unobservable inputs which are supported by little or no market activity. The Company used Level 2 inputs for its valuation methodology for the derivative liabilities for conversion feature of the convertible notes in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs: June 30, 2017 Annual dividend yield — Expected life (years) 0.74 Risk-free interest rate 1.68 % Expected volatility 161 % Carrying Value Fair Value Measurements at As of June 30, 2017 June 30, Using Fair Value Hierarchy 2017 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 1,134,000 $ — $ 1,134,000 $ — Total $ 1,134,000 $ — $ 1,134,000 $ — June 30, 2016 Annual dividend yield — Expected life (years) 0.99 Risk-free interest rate 0.27 % Expected volatility 377 % Carrying Value Fair Value Measurements at As of June 30, 2016 June 30, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 697,000 $ — $ 697,000 $ — Total $ 697,000 $ — $ 697,000 $ — |
Derivative Instruments | Derivative instruments The fair value of derivative instruments is recorded and shown separately under liabilities. Changes in the fair value of derivatives liability are recorded in the consolidated statement of operations under non-operating income (expense). Our Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. |
Segment Reporting | Segment Reporting FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the Company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. FASB ASC Topic 280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry segment – paper and paper-based products such as paper cups, cup lids, food containers, etc. |
New Accounting Pronouncements Not Yet Adopted | New accounting pronouncements not yet adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. In May 2014, the FASB issued No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect that these ASUs will have on its consolidated financial statements and related disclosures. On March 30, 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. The Company adopted this new guidance on January 1, 2017 and this standard does not have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the potential impact of ASU 2016-15 on its financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant impact on its consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions or disposals of assets or businesses. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. Prior period reclassification Certain prior period balance sheet accounts have been reclassified in conformity with current period presentation. The reclassification had no effect to the company’s consolidated statement of operations, statement of cash flow or statement of shareholder’s equity. |
Prior period reclassification | Prior period reclassification Certain prior period balance sheet accounts have been reclassified in conformity with current period presentation including reclassification of $4,000 from derivative liability to warrant liability. The reclassification had no effect to the company’s consolidated statement of operations, statement of cash flow or statement of shareholder’s equity. |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Summary Of Significant Accounting Policies Tables | |
Schedule of fair value of derivative liabilities | The Company used Level 2 inputs for its valuation methodology for the derivative liabilities in determining the fair value using the Black-Scholes option-pricing model with the following assumption inputs: June 30, 2017 Annual dividend yield — Expected life (years) 0.74 Risk-free interest rate 1.68 % Expected volatility 161 % Carrying Value Fair Value Measurements at As of June 30, 2017 June 30, Using Fair Value Hierarchy 2017 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 1,134,000 $ — $ 1,134,000 $ — Total $ 1,134,000 $ — $ 1,134,000 $ — June 30, 2016 Annual dividend yield — Expected life (years) 0.99 Risk-free interest rate 0.27 % Expected volatility 377 % Carrying Value Fair Value Measurements at As of June 30, 2016 June 30, Using Fair Value Hierarchy 2016 Level 1 Level 2 Level 3 Liabilities Derivative liabilities $ 697,000 $ — $ 697,000 $ — Total $ 697,000 $ — $ 697,000 $ — |
Other Current Assets (Tables)
Other Current Assets (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Other Current Assets | As of June 30, 2017 and 2016, other current assets consisted of the following: For the years ended June 30, 2017 2016 Prepaid deposit $ 57,500 $ 45,000 Prepaid inventory 84,065 8,000 Employees advance 30,078 30,573 Prepaid expenses 4,894 — Others 13,801 931 Total $ 190,338 $ 84,504 |
Convertible Notes (Tables)
Convertible Notes (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Convertible Notes Tables | |
Schedule of Promissory Notes | As of June 30, 2017, the Company’s convertible notes consisted of following: As of June 30, 2017 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 6/19/2017 20,000 — 20,000 Convertible Note 7/17/2017 25,000 — 25,000 Convertible Note 7/17/2017 20,000 — 20,000 Convertible Note 1/24/2018 43,000 — 43,000 Convertible Note 8/8/2017 50,000 — 50,000 Convertible Note 7/20/2017 80,000 — 80,000 Convertible Note 8/24/2017 66,023 — 66,023 Convertible Note 8/9/2017 50,000 — 50,000 Convertible Note 8/31/2017 75,000 — 75,000 Convertible Note 12/1/2017 100,000 — 100,000 Convertible Note 9/23/2017 70,000 — 70,000 Convertible Note 11/20/2017 63,000 — 63,000 Convertible Note 8/16/2017 30,000 — 30,000 Convertible Note 9/30/2017 200,000 — 200,000 Convertible Note 5/11/2018 340,000 30,000 310,000 Convertible Note 6/11/2018 165,000 15,000 150,000 Total Convertible Promissory Notes $ 1,547,023 45,000 $ 1,502,023 As of June 30, 2016, the Company’s convertible notes consisted of following: As of June 30, 2016 Note Type and Investor Due Date Balance Discount Carrying Value Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 40,000 — 40,000 Convertible Note 7/1/2016 50,000 — 50,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 25,000 — 25,000 Convertible Note 7/1/2016 100,000 — 100,000 Convertible Note 7/1/2016 20,834 — 20,834 Convertible Note 7/1/2016 8,333 — 8,333 Total Convertible Promissory Notes $ 394,167 $ 394,167 |
Derivative liabilities (Tables)
Derivative liabilities (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Derivative Liabilities Tables | |
Schedule of changes in derivative liability | Convertible Notes: June 30, 2017 Annual dividend yield — Expected life (years) 0.47 Risk-free interest rate 1.08 % Expected volatility 103 % Convertible Notes: June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % |
Stock warrants (Tables)
Stock warrants (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Notes to Financial Statements | |
Schedule of Warrants Outstanding | The Black-Scholes model with the following assumption inputs: Warrants issued in May 2017: June 30, 2017 Annual dividend yield — Expected life (years) 3.86 Risk-free interest rate 1.89 % Expected volatility 440 % Warrants issued in 2012 with extension to July 1, 2016 June 30, 2016 Annual dividend yield — Expected life (years) 0.01 Risk-free interest rate 0.21 % Expected volatility 449 % Below is the movement of warrants for the years ending June 30, 2017 and 2016: Number of Weighted Average Weighted Average Remaining contractual life Outstanding at June 30, 2015 131,250 $ 0.20 Granted — — Exercised — — Outstanding at June 30, 2016 131,250 0.20 Expired 131,250 0.20 Granted 505,000 $ 0.15 4 Outstanding at June 30, 2017 505,000 $ 0.15 3.86 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets | 2017 2016 Deferred tax assets: NOL carryover $ 7,876,885 $ 9,999,512 Valuation allowance (7,876,885 ) (9,999,512 ) Net deferred tax asset $ — $ — |
Schedule of income tax provision | The income tax provision is summarized as follows: 2017 2016 Federal income tax benefit, net of state $ (1,460,982 ) $ (621,834 ) State income tax benefit (416,691 ) (177,355 ) Permanent difference 650,822 — Valuation allowance 1,226,851 799,189 $ — $ — |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details) | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Summary Of Significant Accounting Policies Details | ||
Annual dividend yield | ||
Expected life (years) | 8 months 26 days | 11 months 26 days |
Risk-free interest rate | 1.38% | 0.90% |
Expected volatility | 161.00% | 146.00% |
Summary of Significant Accoun35
Summary of Significant Accounting Policies (Details 2) - USD ($) | Jun. 30, 2017 | Jun. 30, 2016 |
Derivative Liabilities | $ 1,134,000 | $ 697,000 |
Liabilities [Member] | ||
Derivative Liabilities | 1,134,000 | 697,000 |
Liabilities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Derivative Liabilities | ||
Liabilities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Derivative Liabilities | 1,134,000 | 697,000 |
Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Derivative Liabilities |
Summary of Significant Accoun36
Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended |
Jun. 30, 2017USD ($) | |
Summary Of Significant Accounting Policies Details Narrative | |
Cash issued to Federal Deposit Insurance Corporation | $ 250,000 |
Concentration (Details Narrativ
Concentration (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Risks and Uncertainties [Abstract] | ||
Net Revenue | $ 4,100,560 | $ 4,348,256 |
Litigation (Details Narrative)
Litigation (Details Narrative) - USD ($) | Feb. 21, 2017 | Oct. 28, 2014 | May 24, 2014 |
Commitments and Contingencies Disclosure [Abstract] | |||
Litigation Settlement, Amount | $ 227,000 | $ 56,365 | |
Restricted Shares Issued | 502,533 | ||
Litigation Cash Paid | $ 30,000 |
Other Current Assets (Details)
Other Current Assets (Details) - USD ($) | Jun. 30, 2017 | Jun. 30, 2016 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid deposit | $ 57,500 | $ 45,000 |
Prepaid inventory | 84,065 | 8,000 |
Employees advance | 30,078 | 30,573 |
Prepaid expenses | 4,894 | |
Others | 13,801 | 931 |
Total | $ 190,338 | $ 84,504 |
Convertible Notes (Details Narr
Convertible Notes (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Convertible Notes Payable | $ 25,982 | $ 25,983 |
Minimum [Member] | ||
Accured Interest Rate | 8.00% | |
Maximum [Member] | ||
Accured Interest Rate | 12.00% | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 25,000 | $ 25,000 |
Convertible Notes Due Date | Jul. 1, 2016 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 25,000 | $ 40,000 |
Convertible Notes Due Date | Jul. 1, 2016 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 100,000 | $ 50,000 |
Convertible Notes Due Date | Jul. 1, 2016 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 20,000 | $ 25,000 |
Convertible Notes Due Date | Jun. 19, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 25,000 | $ 25,000 |
Convertible Notes Due Date | Jul. 17, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 20,000 | $ 25,000 |
Convertible Notes Due Date | Jul. 17, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 43,000 | $ 25,000 |
Convertible Notes Due Date | Jan. 24, 2018 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 50,000 | $ 25,000 |
Convertible Notes Due Date | Aug. 8, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 80,000 | $ 25,000 |
Convertible Notes Due Date | Jul. 20, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 66,023 | $ 100,000 |
Convertible Notes Due Date | Aug. 24, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 50,000 | $ 20,834 |
Convertible Notes Due Date | Aug. 9, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 75,000 | $ 8,333 |
Convertible Notes Due Date | Aug. 31, 2017 | Jul. 1, 2016 |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 100,000 | |
Convertible Notes Due Date | Dec. 1, 2017 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 70,000 | |
Convertible Notes Due Date | Sep. 23, 2017 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 63,000 | |
Convertible Notes Due Date | Nov. 20, 2017 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 30,000 | |
Convertible Notes Due Date | Aug. 16, 2017 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 200,000 | |
Convertible Notes Due Date | Sep. 30, 2017 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 310,000 | |
Convertible Notes Due Date | May 11, 2018 | |
Convertible Discount Amount | $ 30,000 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | $ 150,000 | |
Convertible Notes Due Date | Jun. 11, 2018 | |
Convertible Discount Amount | $ 15,000 | |
Convertible Notes [Member] | ||
Convertible Notes Payable | 1,502,023 | $ 394,167 |
Convertible Discount Amount | $ 45,000 |
Derivative liabilities (Details
Derivative liabilities (Details) | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Annual dividend yield | ||
Expected life (years) | 8 months 26 days | 11 months 26 days |
Risk-free interest rate | 1.38% | 0.90% |
Expected volatility | 161.00% | 146.00% |
Convertible Notes [Member] | ||
Annual dividend yield | ||
Expected life (years) | 5 months 19 days | 4 days |
Risk-free interest rate | 1.08% | 0.21% |
Expected volatility | 103.00% | 449.00% |
Stock warrants (Details)
Stock warrants (Details) - Stock Warrant [Member] - $ / shares | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Number of Shares | ||
Outstanding | 131,250 | 131,250 |
Granted | 505,000 | |
Exercised | 131,250 | |
Outstanding | 505,000 | 131,250 |
Weighted Average Exercise Price | ||
Outstanding | $ 0.20 | $ .20 |
Granted | .15 | |
Exercised | 0.20 | |
Outstanding | $ .15 | $ 0.20 |
Weighted Average Remaining contractual life | ||
Granted | 4 years | |
Outstanding | 3 years 10 months 9 days |
Common shares issued for equi43
Common shares issued for equity financing (Details Narrative) | Oct. 11, 2016USD ($)shares |
Notes to Financial Statements | |
Restricted Common Shares Issued | shares | 2,000,000 |
Equity Financing | $ | $ 100,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Jun. 30, 2017 | Jun. 30, 2016 |
Deferred tax assets: | ||
NOL carryover | $ 7,876,885 | $ 9,999,512 |
Valuation allowance | (7,876,885) | (9,999,512) |
Net deferred tax asset |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax benefit, net of state | $ (1,460,982) | $ (621,834) |
State income tax benefit | (416,691) | (177,355) |
Permanent difference | 650,822 | |
Valuation allowance | 1,226,851 | 799,189 |
Income Tax Provision, Net |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | |
Commitments And Contingencies Details Narrative | |||
Monthly Rent | $ 15,043 | $ 13,328 | $ 11,884 |