QUEST RESOURCE HOLDING CORP, 10-Q filed on 11/14/2012
Quarterly Report
Document and Entity Information
3 Months Ended
Sep. 30, 2012
Nov. 9, 2012
Document and Entity Information
 
 
Entity Registrant Name
Infinity Resources Holdings Corp. 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2012 
 
Amendment Flag
false 
 
Entity Central Index Key
0001442236 
 
Current Fiscal Year End Date
--06-30 
 
Entity Common Stock, Shares Outstanding
 
8,666,488 
Entity Filer Category
Smaller Reporting Company 
 
Entity Current Reporting Status
Yes 
 
Entity Voluntary Filers
No 
 
Entity Well-known Seasoned Issuer
No 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q1 
 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
Sep. 30, 2012
Jun. 30, 2012
Cash and cash equivalents
$ 17,056 
$ 51,355 
Inventory
4,415 
7,490 
Total current assets
21,471 
58,845 
Property and equipment - net
6,301 
5,032 
Other assets
9,774 
9,774 
Total assets
37,546 
73,651 
Accounts payable and other accrued expenses
86,622 
139,674 
Accrued interest payable
5,504 
6,973 
Notes payable - short-term
6,000 
6,000 
Notes payable - related party
37,500 
37,500 
Convertible notes payable - short-term, net of discount of $52,729 and $1,357 as of September 30, 2012 and June 30, 2012, respectively
111,989 
63,643 
Total current liabilities
247,615 
253,790 
Convertible notes payable - net of discount of $9,380 and $11,120 as of September 30, 2012 and June 30, 2012, respectively
43,620 
66,880 
Total liabilities
291,235 
320,670 
Preferred stock, $.001 par value; 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2012 and June 30, 2012, respectively
   
   
Common stock, $.001 par value; 100,000,000 shares authorized; 8,681,488 and 8,604,187 shares issued as of September 30, 2012 and June 30, 2012, respectively; 8,666,488 and 8,589,187 shares outstanding as of September 30, 2012 and June 30, 2012, respectively
8,681 
8,604 
Additional paid-in capital
3,723,743 
3,505,767 
Treasury stock, at cost (15,000 common shares as of September 30, 2012 and June 30, 2012, respectively)
(26,250)
(26,250)
Accumulated deficit
(3,959,863)
(3,735,140)
Total shareholders' deficit
(253,689)
(247,019)
Total liabilities and shareholders' deficit
$ 37,546 
$ 73,651 
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICAL (USD $)
Sep. 30, 2012
Jun. 30, 2012
Discount on convertible notes payable - short term
$ 52,729 
$ 1,357 
Discount on convertible notes payable - related party
$ 9,380 
$ 11,120 
Preferred stock par value
$ 0.001 
$ 0.001 
Preferred stock shares authorized
10,000,000 
10,000,000 
Common stock par value
$ 0.001 
$ 0.001 
Common stock shares authorized
100,000,000 
60,000,000 
Common stock shares issued
8,681,488 
8,604,187 
Common stock shares outstanding
8,666,488 
8,589,187 
Treasury stock shares
15,000 
15,000 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Net revenues
$ 34,276 
$ 10,833 
Cost of products sold
7,175 
2,848 
Gross profit
27,101 
7,985 
Professional fees
81,472 
60,979 
Salaries and wages
67,518 
35,514 
General and administrative
50,331 
20,670 
Marketing
22,752 
15,976 
Softare development expense
18,536 
 
Total operating expenses
240,609 
133,139 
Loss from operations
(213,508)
(125,154)
Interest income
 
3,300 
Interest expense
(11,215)
(21,195)
Total other income (expense)
(11,215)
(17,895)
Net loss
$ (224,723)
$ (143,049)
Basic and diluted net loss per common share
$ (0.03)
$ (0.02)
Weighted average common shares outstanding - basic and diluted
8,605,192 
7,751,175 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Net loss
$ (224,723)
$ (143,049)
Amortization of debt discounts and deferred financing costs
6,419 
20,729 
Depreciation expense
331 
300 
Common stock issued for services
127,003 
48,777 
Change in Inventory
3,075 
1,486 
Change in Other assets
 
(146)
Change in Accounts payable and other accrued expenses
(53,052)
(1,606)
Change in Accrued interest payable
(1,469)
406 
Net cash used in operating activities
(142,416)
(73,103)
Software development costs
 
(18,500)
Purchase of property and equipment
(1,600)
 
Net cash used in investing activities
(1,600)
(18,500)
Proceeds from convertible notes payable
77,500 
25,000 
Borrowings from related parties
 
5,000 
Proceeds from sale of common stock
35,000 
 
Repayment of convertible notes payable
(2,783)
 
Net cash provided by financing activities
109,717 
30,000 
Change in cash and cash equivalents
(34,299)
(61,603)
Cash and cash equivalents, beginning of period
51,355 
66,264 
Cash and cash equivalents, end of period
$ 17,056 
$ 4,661 
1. Organization of Business and Basis of Presentation
1. Organization of Business and Basis of Presentation

1.  Organization of Business and Basis of Presentation

On March 30, 2010, Youchange, Inc. and BlueStar Financial Group, Inc. (“BSFG”), a Nevada corporation and publicly traded shell company at such time, completed a merger transaction (referred to as the “BSFG reverse merger” throughout this filing), which is described in further detail in our June 30, 2012 financial statements filed on Form 10-K, and resulted in Youchange, Inc. shareholders obtaining control of BSFG. The surviving publicly traded entity following the BSFG reverse merger transaction changed its name to “YouChange Holdings Corp” during May 2010.  The terms “youchange”, “we”, “us”, “our” or the “Company” refer to YouChange Holdings Corp and its consolidated subsidiary, Youchange, Inc., following the date of the merger transaction, and to Youchange, Inc. prior to the date of the BSFG reverse merger transaction. All significant intercompany balances and transactions are eliminated in consolidation. Our fiscal year end is June 30.

For accounting purposes, Youchange, Inc. was the acquirer in the BSFG reverse merger transaction, and consequently the assets and liabilities and the historical operations for periods prior to the BSFG reverse merger reflected in these condensed consolidated financial statements are those of Youchange, Inc. and are recorded at the historical cost basis of Youchange, Inc.  All shares and per share data prior to the acquisition have been restated to reflect the stock issuance as a recapitalization of Youchange.

We were organized as a software and services venture in the Green Technology (“GreenTech”) sector to develop a leading social movement to focus on the elimination of electronic waste (“eWaste”) in the United States, which includes any used, obsolete end-of-life consumer electronics and computer devices.  The GreenTech sector is a recognized business sector also known as Environmental Technology or “Envirotech”.  Companies in this sector apply environmental science in an effort to help conserve the environment and choose business approaches that are environmentally and economically sustainable. 

 

The Company’s software includes a destination website, www.youchange.com, where users can join and refer friends to learn about the problem of electronic waste through content, blogs and forums.  Site members are encouraged to take action through the turn-over and sale of their end-of-life, used or obsolete electronics, which reduces the risk of adding to the waste stream.  Members access the Youchange calculator and offer database through www.youchange.com and by answering a series of questions, may receive a real-time cash and/or reward points offer. Initially, reward points collected by members may be used to exchange for other items in the “Shop Green” area of the youchange.com website, which is an online marketplace where points can be exchanged for product. In addition to the youchange.com website, users can join and learn about local events and electronic collection drives through Youchange Facebook, Twitter and Linked-In social media pages.  The local electronic collection events play an important part of the Youchange strategy and are done in partnership with local sports teams, businesses, individuals, schools and charity groups. 

 

Youchange is developing an electronic Tracking System (“eTS”) to provide asset receiving, refurbishment and disposal recycling tracking through the complete handling cycle of all electronics collected.  In addition, the website and the eTS are expected to allow business to business activity. Businesses can dispose of excess electronics in bulk. The eTS is expected to extend past the website and electronic pricing and rewards calculator previously launched through youchange.com and is intended to be used by local retailers, electronic refurbishment centers and recyclers that may partner with youchange.  Youchange intends on generating revenue through the refurbishment, resale (“reCommerce”) and recycling of the electronics collected, thereby facilitating the sustainability objectives by extending the lifecycle of these items and keeping such items from the electronic waste stream.  Once developed and launched, the youchange eTS is expected to become part of a system that will allow Youchange to establish a reCommerce business without an investment in bricks and mortar by partnering with, and charging a management fee to, local retailers, electronic refurbishment centers and recyclers.

 

The Company has devoted its efforts to business planning and development and has allocated a substantial portion of its time and investment in bringing its product to the market and raising capital.  Effective July 1, 2012, the Company has exited the development stage.  The Company had been in the development stage since its formation on August 22, 2008.

 

These Unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and accounts have been eliminated. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) has been condensed or omitted. The accounting policies followed in the preparation of these Unaudited Condensed Consolidated Financial Statements are consistent with those followed in our annual consolidated financial statements for the year ended June 30, 2012, as filed on Form 10-K. In the opinion of management, these Unaudited Condensed Consolidated Financial Statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with our Form 10-K for the year ended June 30, 2012. Certain reclassifications have been made to the prior period financial statement amounts to conform to the current presentation.

Interim results are subject to significant variations and the results of operations for the three months ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include carrying amounts of long-lived assets and inventory, deferred financing costs and deferred taxes.

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings (loss) per share is calculated based on the weighted average shares of Common Stock outstanding during the period plus the dilutive effect of outstanding Common Stock purchase warrants and stock options using the treasury stock method and the dilutive effects of convertible securities using the if-converted method. Basic and diluted loss per share were the same for all periods reported due to the net losses attributable to common shareholders for all periods reported. As of September 30, 2012, we had convertible notes payable outstanding that, with accrued interest, were convertible into approximately 174,416 common shares.  As of September 30, 2012, the conversion ratio for these notes was lower than our closing stock price.  Convertible notes payable are described in more detail in Note 4.

Reverse Merger with Earth911

On May 21, 2012, YouChange, Earth911, Inc., a Delaware corporation (“Earth911”), and YouChange Merger Subsidiary Corp. (“YCMS”), a Delaware corporation and wholly owned subsidiary of YouChange formed for the sole purpose of completing the Merger with Earth911, entered into an Agreement and Plan of Merger, which was subsequently amended by an Amendment No. 1 to Agreement and Plan of Merger, dated as of August 22, 2012, and an amendment No. 2 to Agreement and Plan of Merger, dated as of August 31, 2012, collectively (the “Earth911 Merger Agreement”).  As contemplated by the Earth911 Merger Agreement, upon closing (i) YCMS will merge with and into Earth911 and the corporate existence of Earth911 will continue as the surviving entity and a wholly owned subsidiary of YouChange (the Merger); (ii) all issued and outstanding shares of capital stock of Earth911 will be exchanged for newly issued shares of YouChange’s Common Stock such that the former stockholders of Earth911 will own 85% of the issued and outstanding shares of YouChange’s Common Stock; (iii) the terms of each outstanding option and warrant to purchase shares of Earth911 Common Stock, will be converted into options and warrants, as the case may be, to acquire shares of YouChange’s Common Stock using the same ratio as the exchange of shares of Earth911 capital stock for shares of YouChange’s Common Stock; (iv) YouChange’s Amended and Restated Articles of Incorporation will be filed and become effective; (v) YouChange’s Bylaws will be amended and restated; and (vi) new directors will be appointed to the YouChange Board of Directors and a new chief executive officer, a new President, and a new Secretary of YouChange will be appointed.

The Earth911 Merger Agreement requires YouChange to amend and restate its Articles of Incorporation (i) to change its name from YouChange Holdings Corp to Infinity Resources Corp. (the “Name Change”); (ii) to increase the number of authorized shares of Common Stock from 60,000,000 to 100,000,000 and to authorize a total of 10,000,000 shares of Preferred Stock to be designated in series or classes and the number of each series or class, including the voting powers, designations, limitations, restrictions, and relative rights of each series or class of stock, as the YouChange Board of Directors shall determine in its sole discretion (the “Share Increase”); (iii) to provide for a recapitalization of YouChange in which each five shares of the issued and outstanding shares of YouChange’s Common Stock will be converted into one share of fully paid and nonassessable Common Stock of YouChange (a 1-for-5 reverse stock split) (the “Reverse Split”); and (iv) to divide the Board of Directors into three classes, as nearly equal in number as possible, designated Class I, Class II, and Class III, with Class I directors initially serving until the 2013 meeting of stockholders, Class II directors initially serving until the 2014 meeting of stockholders, and Class III directors initially serving until the 2015 meeting of stockholders (the “Director Classes”) (collectively, the amendments to YouChange’s Articles of Incorporation for the Name Change, the Share Increase, the Reverse Split, and the Director Classes are known as the “Amendments”).

Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease operations.  As such, the Company’s independent registered public accounting firm has expressed an uncertainty about the Company’s ability to continue as a going concern in the opinion attached to our audited financial statements for the year ended June 30, 2012.

In order to continue as a going concern, the Company will need, among other things, additional capital resources.  Management's plans to obtain such resources for the Company include (i) obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses; (ii) obtaining funding from outside sources through the sale of its debt and/or equity securities; and (iii) seeking out and completing a merger with another company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attaining profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Recently Issued Accounting Pronouncements

 

During September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment” (“ASU 2011-08”). ASU 2011-08 is intended to simplify the testing of goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test, which is currently required for all companies that report goodwill. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, although early adoption is permitted. The adoption of this guidance has not had a material impact on our financial position and results of operations.

During June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”).  ASU 2011-05 provides for the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income (“OCI”) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which format is chosen, the amendments establish a requirement for entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. The amendments in ASU 2011-05 are effective, on a retrospective basis, for public entities for interim and annual periods beginning after December 15, 2011; however, during December 2011 the FASB issued ASU No. 2011-12, which defers those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The adoption of this guidance has not had a material impact on our financial position and results of operations.

During May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”).  The amendments in ASU 2011-04 were issued in order to align the fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards.  Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements.  However, many of the amendments in ASU 2011-04 will not result in a change in the application of the requirements in ASC 820, Fair Value Measurement. The amendments in ASU 2011-04 are effective, on a prospective basis, for public entities for interim and annual periods beginning after December 15, 2011, and for nonpublic entities for annual periods beginning after December 15, 2011. The adoption of this guidance has not had a material impact on our financial position and results of operations.

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the quarter ended September 30, 2012, that are of significance, or potential significance, to us.

 

2. Stockholders' Deficit
2. Stockholders' Deficit

2. Stockholders’ Deficit

 

Our authorized preferred stock consists of 10,000,000 share of preferred stock with a par value of $0.001, of which no shares have been issued or outstanding.

Our authorized common stock consists of 100,000,000 shares of common stock with a par value of $0.001.

During the first three months of fiscal 2013, we issued common shares for the following transactions

·         During the first three months of fiscal 2013, we issued 22,893 common shares to an entity controlled by Naser Ahmad, the Chief Technology Officer of Youchange, Inc.  We expensed $30,000 as professional fees and applied $30,000 against an expense accrual for the issuance of these shares.

 

·         During the first three months of fiscal 2013, we issued 2,469 common shares to Richard Papworth, our Chief Financial Officer for services rendered.  We expensed $6,000 as professional fees for the issuance of these shares.

 

·         During the first three months of fiscal 2013, we issued 16,049 common shares to an entity controlled by Derrick Mains, our Executive Vice President of Business Development and Operations, for services rendered.  We expensed $39,000 as professional fees for the issuance of these shares.

 

·         During the first three months of fiscal 2013, we issued 8,025 common shares to Dan Fogel, our Vice President of Strategic Initiatives, for services rendered.  We expensed $19,500 as professional fees for the issuance of these shares.

 

·         During the first three months of fiscal 2013, we also issued 1,079 common shares in exchange for other professional services.  We expensed approximately $2,500 as professional fees for the issuance of these shares.

 

 

·         During the first three months of fiscal 2013, we raised $35,000 through the sale of 28,000 common shares in a private placement transaction with six accredited investors at a sales price of $1.25 per common share. :

 

 Reverse Stock Split – Subsequent to September 30, 2012, the Company effectuated a 1 for 5 reverse split that was effective on October 17, 2012 associated with the reverse merger with Earth911.  As a result of the reverse split, each five (5) shares of the Company’s common stock outstanding at the time of the reverse split was automatically changed into one share of common stock, and the total number of common stock shares outstanding were reduced from approximately 43.4 million shares to approximately 8.6 million shares post split.  The reverse stock split resulted in the same adjustment to the Company’s convertible notes outstanding.  No fractional shares were issued in connection with the reverse stock split.  Fractional shares were rounded up to the next whole share.  All per share amounts and outstanding shares, including all common stock equivalents (convertible securities and stock options) have been restated in the Condensed Consolidated Financial Statements, the Notes to the Condensed Consolidated Financial Statements and the loss per share for all periods presented to reflect the reverse stock split.

3. Short Term Note Payable To Bsfg
3. Short Term Note Payable To Bsfg

3. Short Term Note Payable to BSFG

 

On January 1, 2010, Youchange, Inc. entered into a $75,000 note payable agreement with the previous shareholders of BSFG, which, together with a $50,000 cash payment and the issuance of 291,200 common shares following the reverse merger, was used to complete the reverse merger with BSFG. The payable was due in two equal installments, which were due on April 1, 2010 and June 30, 2010.  In the event we failed to pay the first installment in full, under the terms of the agreement, the entire balance would accrue interest at 9.0% per annum retroactive from January 1, 2010. We may pay this interest penalty in cash or stock at a price of $0.25 per share, at our option.  The first payment of $37,500 was paid when due on April 1, 2010.  In September 2012, the note was sold to a third party who agreed to convert the note to shares of the Company’s common stock at a conversion rate of $1.00 per share.  As of September 30, 2012, the second payment of $37,500 has not been paid nor has the conversion of the note occurred.

4. Convertible Notes Payable
4. Convertible Notes Payable

4. Convertible Notes Payable

The following summarized the outstanding convertible notes payable activity through the period of June 30, 2012:

·         During August 2011, we issued a $25,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures two years from the date of issuance and may be extended by an additional 180 days at the discretion of the Company.  The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $1.50 per share. Based on our share price at the time the note agreement was entered into, there was no beneficial conversion feature associated with this convertible note. 

During September of 2012, $2,782 of principal and $2,267 of accrued interest was paid.

 

·         During October 2011, we issued a $10,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matured three months from the date of issuance and was extended by an additional 30 days.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $5,200 for this convertible note.  Although this note is past its maturity, the holder has verbally agreed to exercise the conversion feature.

 

·         During December 2011, we issued a $25,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matured six months from the date of issuance and was extended by an additional 30 days.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $25,000 for this convertible note.  The note has a default penalty interest rate of 12%.  Although this note is past its maturity, the holder has verbally agreed to exercise the conversion feature.

 

·         During January 2012, we issued a $25,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matured six months from the date of issuance and was extended by an additional 30 days.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $9,500 for this convertible note.  The note has a default penalty interest rate of 12%.  Although this note is past its maturity, the holder has verbally agreed to exercise the conversion feature.

 

·         During February 2012, we issued a $24,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures two years from the date of issuance and may be extended by an additional 180 days at the discretion of the Company.  The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $4,800 for this convertible note.  During September 2012, $1,368 of accrued interest was paid.

 

·         During February 2012, we issued a $24,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures two years from the date of issuance and may be extended by an additional 180 days at the discretion of the Company.  The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $6,720 for this convertible note.  During September 2012, $1,120 of accrued interest was paid.

 

 

·         During March 2012, we issued a $5,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures two years from the date of issuance and may be extended by an additional 180 days at the discretion of the Company.  The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $2,400 for this convertible note.  During September 2012, $213 of accrued interest was paid.

 

·         During April 2012, we issued a $5,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matured six months from the date of issuance and was extended by an additional 30 days.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.75 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $2,712 for this convertible note.  This note went into default on October 4, 2012.  The holder has verbally agreed to exercise the conversion feature.

 

 

The following summarizes convertible notes payable activity during the quarter ended September 30, 2012:

·         During August 2012, we issued a $10,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures six months from the date of issuance and may be extended by an additional 30 days at the discretion of the   Company.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $6,400 for this convertible note.

 

·         During September 2012, we issued a $10,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures six months from the date of issuance and may be extended by an additional 30 days at the discretion of the Company.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $8,600 for this convertible note.

 

·         During September 2012, we issued a $12,500 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures six months from the date of issuance and may be extended by an additional 30 days at the discretion of the Company.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $10,750 for this convertible note.

 

·         During September 2012, we issued a $20,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures six months from the date of issuance and may be extended by an additional 30 days at the discretion of the Company.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $12,800 for this convertible note.

 

·         During September 2012, we issued a $25,000 convertible note to an unrelated, accredited third party in exchange for cash.  The note matures six months from the date of issuance and may be extended by an additional 30 days at the discretion of the   Company.  The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor into shares of our common stock at a rate of $1.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $17,500 for this convertible note.

 

As of September 30, 2012, the convertible notes payable and associated accrued interest described above are convertible into a total of approximately 174,416 common shares.

The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion. 

5. Professional Fees
5. Professional Fees

5. Professional Fees

Included in professional fees on the accompanying Unaudited Condensed Consolidated Statements of Operations are charges relative to certain of the Company’s officers of approximately $94,500 and $48,000 for the three months ended September 30, 2012 and 2011, respectively. 

6. Commitments and Contingencies
6. Commitments and Contingencies

6. Commitments and Contingencies

Operating Leases

The Company leases approximately 6,813 square feet of office space in Tempe, Arizona.  The lease expires during June 2015 and requires rental payments of approximately $2,900 per month.

Indemnifications

During the normal course of business, we make certain indemnities and commitments under which we may be required to make payments in relation to certain transactions. These may include: (i) intellectual property indemnities to customers in connection with the use, sales and/or license of products and services; (ii) indemnities to customers in connection with losses incurred while performing services on their premises; (iii) indemnities to vendors and service providers pertaining to claims based on negligence or willful misconduct; and (iv) indemnities involving the representations and warranties in certain contracts. In addition, under our by-laws we are committed to our directors and officers for providing for payments upon the occurrence of certain prescribed events. The majority of these indemnities and commitments do not provide for any limitation on the maximum potential for future payments that we could be obligated to make.

7. Supplemental Schedule of Cash Flow Information
7. Supplemental Schedule of Cash Flow Information

7. Supplemental Schedule of Cash Flow Information

                Supplemental cash flow information is as follows:

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

2012

 

2011

Supplemental cash flow information:

 

 

 

 

 

Cash paid for interest

$  4,968

 

$   0  

 

Cash paid for income taxes

    0  

 

  0  

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and

 

 

 

 

financing activities:

 

 

 

 

 

 

 

Conversion of notes payable

 

 

 

 

 

 

to common stock

   0  

 

  109,084

 

Beneficial conversion feature

56,050

 

      0  

8. Subsequent Events
8. Subsequent Events

8. Subsequent Events

Convertible notes payable

During October 2012, we issued convertible notes to four unrelated, accredited third parties in exchange for $65,000 in cash.  The notes mature in 6 months from the date of issuance which maturity can be extended by an additional 30 days at the discretion of the Company.  The notes bear interest at a rate of 10.0% per annum and have a conversion rate of $1.25 per share.  We are still evaluating the accounting treatment of these notes.

Stock Options

                Subsequent to September 30, 2012, the Company awarded options for 200,000 common shares to Derrick Mains, our Vice President of Business Development and Operations.

Reverse Merger With Earth911

On October 17, 2012, the reverse merger with Earth911 was completed.  Amendments to the Articles of Incorporation, more fully disclosed in Note 1,  were completed and filed in Form 8-K dated October 23, 2012.

Also at the time of completion of the reverse merger with Earth911, severance agreements and a 2012 incentive plan were completed and filed with the Form 8-K dated October 23, 2012.  More detailed descriptions of these items can be found in the Form 8-K mentioned above.

1. Organization of Business and Basis of Presentation: Going Concern (Policies)
Going Concern

Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease operations.  As such, the Company’s independent registered public accounting firm has expressed an uncertainty about the Company’s ability to continue as a going concern in the opinion attached to our audited financial statements for the year ended June 30, 2012.

In order to continue as a going concern, the Company will need, among other things, additional capital resources.  Management's plans to obtain such resources for the Company include (i) obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses; (ii) obtaining funding from outside sources through the sale of its debt and/or equity securities; and (iii) seeking out and completing a merger with another company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attaining profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

1. Organization of Business and Basis of Presentation: Recently Issued Accounting Pronouncements (Policies)
Recently Issued Accounting Pronouncements

 

Recently Issued Accounting Pronouncements

 

During September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment” (“ASU 2011-08”). ASU 2011-08 is intended to simplify the testing of goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test, which is currently required for all companies that report goodwill. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, although early adoption is permitted. The adoption of this guidance has not had a material impact on our financial position and results of operations.

During June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”).  ASU 2011-05 provides for the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income (“OCI”) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which format is chosen, the amendments establish a requirement for entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. The amendments in ASU 2011-05 are effective, on a retrospective basis, for public entities for interim and annual periods beginning after December 15, 2011; however, during December 2011 the FASB issued ASU No. 2011-12, which defers those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The adoption of this guidance has not had a material impact on our financial position and results of operations.

During May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”).  The amendments in ASU 2011-04 were issued in order to align the fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards.  Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements.  However, many of the amendments in ASU 2011-04 will not result in a change in the application of the requirements in ASC 820, Fair Value Measurement. The amendments in ASU 2011-04 are effective, on a prospective basis, for public entities for interim and annual periods beginning after December 15, 2011, and for nonpublic entities for annual periods beginning after December 15, 2011. The adoption of this guidance has not had a material impact on our financial position and results of operations.

There have been no other recent accounting pronouncements or changes in accounting pronouncements during the quarter ended September 30, 2012, that are of significance, or potential significance, to us.

7. Supplemental Schedule of Cash Flow Information: Supplemental Cash Flow Information Is As Follows (Tables)
Supplemental Cash Flow Information Is As Follows:

                Supplemental cash flow information is as follows:

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

2012

 

2011

Supplemental cash flow information:

 

 

 

 

 

Cash paid for interest

$  4,968

 

$   0  

 

Cash paid for income taxes

    0  

 

  0  

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and

 

 

 

 

financing activities:

 

 

 

 

 

 

 

Conversion of notes payable

 

 

 

 

 

 

to common stock

   0  

 

  109,084

 

Beneficial conversion feature

56,050

 

      0  

1. Organization of Business and Basis of Presentation (Details)
Sep. 30, 2012
Jun. 30, 2012
Common stock shares authorized
100,000,000 
60,000,000 
Preferred stock shares authorized
10,000,000 
10,000,000 
2. Stockholders' Deficit (Details) (USD $)
3 Months Ended
Sep. 30, 2012
Jun. 30, 2012
Preferred stock shares authorized
10,000,000 
10,000,000 
Preferred stock par value
$ 0.001 
$ 0.001 
Common stock shares authorized
100,000,000 
60,000,000 
Common stock par value
$ 0.001 
$ 0.001 
Stockholders' Equity, Reverse Stock Split
Reverse Stock Split – Subsequent to September 30, 2012, the Company effectuated a 1 for 5 reverse split that was effective on October 17, 2012 associated with the reverse merger with Earth911. As a result of the reverse split, each five (5) shares of the Company’s common stock outstanding at the time of the reverse split was automatically changed into one share of common stock, and the total number of common stock shares outstanding were reduced from approximately 43.4 million shares to approximately 8.6 million shares post split. The reverse stock split resulted in the same adjustment to the Company’s convertible notes outstanding. No fractional shares were issued in connection with the reverse stock split. Fractional shares were rounded up to the next whole share. All per share amounts and outstanding shares, including all common stock equivalents (convertible securities and stock options) have been restated in the Condensed Consolidated Financial Statements, the Notes to the Condensed Consolidated Financial Statements and the loss per share for all periods presented to reflect the reverse stock split. 
 
2. Stockholders' Deficit: Share transactions during the first three months of fiscal 2012 (Details) (USD $)
3 Months Ended
Sep. 30, 2012
Shares issued to Naser Ahmad
22,893 
Professional fees related to shared issued to Naser Ahmad
$ 30,000 
Professional fees applied against an expense accrual for the issuance of shares to Naser Ahmad
30,000 
Shares issued to Richard Papworth
2,469 
Professional fees related to shared issued to Richard Papworth
6,000 
Shares issued to Derrick Mains
16,049 
Professional fees related to shared issued to Derrick Mains
39,000 
Shares issued to Dan Fogel
8,025 
Professional fees related to shared issued to Dan Fogel
19,500 
Shares issued to Other
1,079 
Professional fees related to shared issued to Other
2,500 
Proceeds from sale of common stock
35,000 
Common Stock Issued In Private Placement With Accredited Investors For Cash
$ 28,000 
Common Stock Issued To Accredited Investor Share Price
$ 1.25 
3. Short Term Note Payable To Bsfg (Details) (USD $)
Sep. 30, 2012
Apr. 1, 2010
Jan. 1, 2010
Short Term Note Payable Agreement to BSFG
 
 
$ 75,000 
Short Term Note Payable Agreement to BSFG Cash Payment
 
 
50,000 
Common stock issued for reverse merger
 
 
291,200 
Short Term Note Payable Agreement to BSFG Interest Per Annum For Failure To Pay First Installment
 
 
9.00% 
ShortTermNotePayableAgreementToBSFGInterestPenaltyOptionPricePerShare
 
 
$ 0.25 
ShortTermNotePayableAgreementToBSFGFirstPayment
 
$ 37,500 
 
ShortTermNotePayableAgreementToNoteSoldToThirdPartyForCommonSharesAtRate
$ 1.00 
 
 
4. Convertible Notes Payable (Details) (USD $)
1 Months Ended 3 Months Ended
Apr. 30, 2012
Mar. 31, 2012
Feb. 29, 2012
Jan. 31, 2012
Dec. 31, 2011
Oct. 31, 2011
Aug. 31, 2011
Sep. 30, 2012
Convertible Note With An Unrelated Accredited Third Party
 
 
 
 
 
 
$ 25,000 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
 
 
 
 
 
8.00% 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
 
 
 
 
 
$ 1.50 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyPrincipalPaid
 
 
 
 
 
 
 
2,782 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestPaid
 
 
 
 
 
 
 
2,267 
Convertible Note With An Unrelated Accredited Third Party
 
 
 
 
 
10,000 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
 
 
 
 
10.00% 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
 
 
 
 
$ 1.25 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
 
 
 
 
 
5,200 
 
 
Convertible Note With An Unrelated Accredited Third Party
 
 
 
 
25,000 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
 
 
 
10.00% 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
 
 
 
$ 1.25 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
 
 
 
 
25,000 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Default Penalty Interest Rate
 
 
 
 
12.00% 
 
 
 
Convertible Note With An Unrelated Accredited Third Party
 
 
 
25,000 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
 
 
10.00% 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
 
 
$ 1.25 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
 
 
 
9,500 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Default Penalty Interest Rate
 
 
 
12.00% 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party
 
 
24,000 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
 
8.00% 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
 
$ 1.25 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
 
 
4,800 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party
 
 
24,000 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
 
8.00% 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
 
$ 1.25 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
 
 
6,720 
 
 
 
 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestPaid
 
 
 
 
 
 
 
1,120 
Convertible Note With An Unrelated Accredited Third Party
 
5,000 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
 
8.00% 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
 
$ 1.25 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
 
2,400 
 
 
 
 
 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyBeneficialConversion14InterestPaid
 
 
 
 
 
 
 
213 
Convertible Note With An Unrelated Accredited Third Party
5,000 
 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Interest Rate
10.00% 
 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Conversion Stock Rate PerShare
$ 1.75 
 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Beneficial Conversion
$ 2,712 
 
 
 
 
 
 
 
Convertible Note With An Unrelated Accredited Third Party Common Share Conversion Total
 
 
 
 
 
 
 
174,416 
4. Convertible Notes Payable: ConvertibleNotesPayableActivityDuringTheQuarterEndedSeptember30,2012 (Details) (USD $)
1 Months Ended 3 Months Ended
Aug. 31, 2012
Sep. 30, 2012
ConvertibleNoteWithAnUnrelatedAccreditedThirdParty
$ 10,000 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestRate
10.00% 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyConversionStockRatePerShare
$ 1.25 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyBeneficialConversion
6,400 
 
ConvertibleNoteWithAnUnrelatedAccreditedThirdParty
 
10,000 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestRate
 
10.00% 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyConversionStockRatePerShare
 
$ 1.25 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyBeneficialConversion
 
8,600 
ConvertibleNoteWithAnUnrelatedAccreditedThirdParty
 
12,500 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestRate
 
10.00% 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyConversionStockRatePerShare
 
$ 1.25 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyBeneficialConversion
 
10,750 
ConvertibleNoteWithAnUnrelatedAccreditedThirdParty
 
20,000 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestRate
 
10.00% 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyConversionStockRatePerShare
 
$ 1.25 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyBeneficialConversion
 
12,800 
ConvertibleNoteWithAnUnrelatedAccreditedThirdParty
 
25,000 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyInterestRate
 
10.00% 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyConversionStockRatePerShare
 
$ 1.25 
ConvertibleNoteWithAnUnrelatedAccreditedThirdPartyBeneficialConversion
 
$ 17,500 
5. Professional Fees (Details) (USD $)
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Professional Fees To Company Officers
$ 94,500 
$ 48,000 
6. Commitments and Contingencies (Details) (USD $)
Sep. 30, 2012
Operating Leases, Future Minimum Payments Due
$ 2,900 
7. Supplemental Schedule of Cash Flow Information: Supplemental Cash Flow Information Is As Follows (Details) (USD $)
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Cash paid for interest
$ 4,968 
$ 0 
Cash paid for income taxes
Conversion of notes payable to common stock
109,084 
Beneficial conversion feature
$ 56,050 
$ 0